Last updated on September 17, 2020
Nathaniel E. Baker 0:36
David Hunter, Chief macro strategist at contrarian macro advisors. You were on the show last summer in August if memory serves, and you told listeners about your idea that there would be a dramatic melt up that would be caused by central bank liquidity, injections and other measures. And anybody who’s been paying attention to markets in the last couple of weeks, could reasonably point out that this is exactly what’s happened here with the Fed, and other central banks, mainly the Fed, stepping in to combat the coronavirus impact, and unleashing all kinds of liquidity. So, I guess that would be the first question for you is where we stand with this. And if this is indeed the start of this melt up?
David Hunter 1:37
Sure. Yeah, I think this is definitely the start of what I think will eventually become a parabolic melt up into a secular top. And in all honesty, when we talked last, I guess, late August, I didn’t anticipate the coronavirus by any means and didn’t anticipate that we’d get down under 2200 on the S&P, I thought we might in fact in January, February, March. I was talking about January, February, early March, I was talking about a correction back to 3000, maybe 2900. But I certainly didn’t see the the cascade that we we got. So, you know, the coronavirus certainly affected the path. But my target of 4000 plus on the S&P, which I had last summer is still my target today. We had another leg down. It took us down to a deeper bottom. But I think it didn’t change the fact that we are going to have this final melt up into a secular top, a top that I expect to be the high watermark for decades to come.
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Nathaniel E. Baker 2:51
Wow. Yeah. Okay. Right. I mean, I guess you you you mentioned there that Coronavirus has impacted everything and it’s actually nice to you admit that you didn’t call it a lot of people who were bearish last year are claiming that everything happened exactly as they predicted, including the coronavirus. But obviously I don’t I don’t think anybody could could have predicted this. Nevertheless, the response from the central bank is pretty much what you predicted. Do you think that this response was adequate, was in reasonable in light of the threat that coronavirus posed to the economy?
David Hunter 3:30
Yeah, I’ll take it back even farther. Well, before we talked, but over the last several years, I have talked about a coming global deflationary bust and I started using those three words in a combination way back as early as 2013. And it’s now kind of common lexicon out there, but, but back then, nobody was using those three words in combination. But I’ve been talking for many years about when this cycle ended, it would end in a global bust, the likes of which we had not seen before. And I use the term bust, to describe something that is probably on the magnitude of a depression. What happens in a much faster, more concentrated period of time. So, as opposed to a recession, it’s steeper and steeper, as opposed to a depression. It’s not drawn out like the Great Depression was so. So that’s my people throw around the term bust. And I think too often, the term is misused, but that’s my definition of what a bust is. And that’s what we’re seeing right now. I would say that when I start talking about this, I said it’ll end in massive quantitative easing across the globe. You will see every central bank throw money into the system, unlike ever before. And so that’s what we’re getting now. I think this is the front edge of that bust. I think you get the final run up into a secular top in spite of the fact that we’ve started the bust because of all of that liquidity that’s being pumped. And then unfortunately another shoe drops and we have a much steeper deeper part of the bust, probably late this year and first half of next year. You know, that’s kind of how I see it. I obviously, the coronavirus, speeded things up a bit, but it was the massive leverage in the system that caused me to say that when this cycle ends, you’re gonna see something we’ve never seen. Basically, I’ll use the term Ponzi scheme for what has developed over the last four decades. We have just debt beyond anything we can ever manage. And you when you get these surprises, that leverage really exacerbates whatever downturn you get.