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The Contrarian Investor Podcast Posts

Optimism on Wall Street: A Contrarian Indicator, though not the Mother of All Contrarian Indicators

This is an amended version of today’s Daily Contrarian. This briefing and accompanying podcast are made available to premium subscribers every market day morning before 0700.

What will 2024 bring? Last year at this time we were all preparing for imminent recession. This year things are far more optimistic. The venerable Wall Street Journal yesterday reported how “optimism abounds on Wall Street.” That’s the kind of thing that gives The Contrarian cause for concern.

It’s not the mother of all contrarian indicators though. Yeah, Wall Street analysts have horrific records at predicting, well, anything. But the mother of all contrarian indicators, if you must know, is the mother in law indicator.

It doesn’t have to be your mother in law (parents, taxi drivers, baristas, high school classmates, cousins, gym buddies, etc. all work), the key is for it to come from somebody who is a complete novice at investing and has zero clue about stocks or bonds — or for that matter even knows the difference between the two (or that there is a difference). When these people come out of the woodwork asking for “stock tips” then the bull market is truly on its very last legs.

We aren’t there yet. We could get there in a couple of months if the buying continues. But then, why should it? The prevailing reason provided is that the Federal Reserve is about to cut interest rates. While this would indeed provide a short-term boost to stocks, the bigger gains would likely come in the bond market.

And that’s assuming the Fed can cut rates to begin with. Remember that the Fed needs the annualized CPI to be at 2% or lower before it can declare victory over inflation. At its current level of 3.1%, it’s still a ways off. Until you get to 2% (or ideally below), the Fed runs the very real risk of igniting inflation anew — and destroying whatever is left of its credibility with it. Remember, too that Fed rate cuts are intended as economic stimulus. One could argue that they should be reserved only used in such instances. Judging by labor markets and consumer behavior, the economy is a long way from needing any kind of stimulus.

So be careful what you wish for. Yes, the economy still looks fine and that should be a positive where corporate earnings are concerned. But without a clear turn for the worse in the economy, the Fed runs a very real risk of causing all kinds of problems should it still decide to cut rates. Not just inflation, but very real concerns with the Fed’s credibility.

Listen to the audio here, courtesy of our YouTube channel:

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Risks Point to Downside in 2024 (Szn 5, Epsd 29)

With Kyrill Asatur, Centerfin

This podcast episode was recorded Dec. 20, 2023 and made available exclusively — without ads or announcements — for premium subscribers that same day. This is just one of the benefits of becoming a premium subscriber. The others are detailed on our Supercast or Substack pages.

Kyrill Asatur, co-founder and CEO of Centerfin, re-joins the podcast to discuss his views going into 2024 and the likelihood there won’t be a ‘soft landing’ for the economy next year.

Content Highlights

  • Consensus estimates for 2024 are going to be wrong, just like they were for this year and every year before it (2:12);
  • Coming in to this year the banking sector was a concern, though as it turned out for the wrong reasons (4:39);
  • The catalyst for the reversal this fall and the new, dovish Fed (7:26);
  • The contrarian call is that they’re won’t be a soft landing — or a stock market crash (11:44);
  • Possible explanation for the ‘Fed pivot’ (16:48);
  • How the guest is allocating assets going into 2024 (23:56);
  • Artificial Intelligence (AI) discussion (29:02).

More on the Guest

This podcast is for informational purposes only. Nothing here is intended as investment advice. Do your own research, make your own decisions.

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Short-Term Treasuries: The Place to Be (Szn 5, Episode 28)

Feat Jared Dillian, Daily Dirt Nap

This podcast episode was recorded Nov. 29, 2023 and made available to premium subscribers the following day. To become a premium subscriber, sign up through our Substack or Supercast.

Jared Dillian of the Daily Dirt Nap joins the podcast to discuss his bullish views on short-term Treasuries and less optimistic outlook for the US economy. He also discusses his work as an author and views on disparate issues facing society. 

Note: The podcast episode contains some mature language.

Content Highlights

  • The ‘soft landing’ scenario appears to have become the base case. Dillian doesn’t quite buy that (1:37);
  • To be bullish on short-term Treasuries one needs to believe the Fed is going to cut rates. That is imminent (4:26);
  • Addressing the inflation bogeyman. The risk has maybe receded over the short term, but what about a return over the medium term? There is historical precedent for this from the last time inflation was a serious force in the US… (9:37);
  • Background on the guest and a broad discussion of his time at Lehman Brothers (including its downfall), working on Wall Street, career paths, education, and more…(15:48)

More About the Guest

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