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The Contrarian Investor Podcast Posts

What’s Got the Fed Spooked?

This blog post is an amended version of the Daily Contrarian from July 10, 2024.

Federal Reserve Chair Jerome Powell in his Congressional testimony yesterday again put forward the case for rate cuts. “Elevated inflation is not the only risk we face,” Powell said. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”

It may not sound like much, but this is some of the most dovish commentary we’ve gotten from Powell since before his 2022 Jackson Hole speech. It begs the question whether the economy is really in as dire enough shape to where rate cuts become necessary, presumably as soon as the FOMC meeting on Sept. 18.

Existing economic data doesn’t exactly shout slowdown, much less recession:

  • Job production is still plentiful. Jobless claims are up a bit, but that’s from a low base.
  • Retail sales may not be growing as much as they were early in the year, but are holding steady at a very high plateau.
  • The housing market has slowed in certain parts of the country, but that might be more due to overbuilding than broader macroeconomic forces.

Conspiracy theories aside, it’s hard to see how the Fed could legitimately have an ulterior motive for cutting rates early. Either Jay Powell & Co are just stupid and reckless, or they’re trying to get ahead of things. Perhaps there’s a third alternative, which is that they’re setting the market up for rate cuts just in case they need them?

Come to think of it, even that gets into conspiracy territory. They probably are just concerned about the trajectory of the economy based on labor data and the housing market. Whether that is justified is another question entirely.

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The ‘Stoic Investment’ Primer (Szn 6, Epsd 11)

With Darius Foroux

Darius Foroux, author of the upcoming book ‘The Stoic Path to Wealth,’ joined the podcast to discuss his, well, stoic approach to investing.

This podcast episode was recorded on Tuesday, June 25, 2024 and was made available to premium subscribers the following day — without ads or announcements. For more information on premium subscriptions, visit our Substack.

Content Highlights

  • How interest in philosophy rekindled his interest in investing after the great financial crisis (1:32);
  • A brief introduction to stoicism, a 2,300 year-old philosophy that is distinct from cynicism (4:08);
  • How to apply this to investing (6:14);
  • Isn’t investing in indexes just the best way to go? (12:38);
  • The ’90/10′ portfolio allocation: 90% in the S&P 500, 10% in individual stocks (17:24);
  • The Dutch Stripe, trades in Amsterdam and on Pink Sheets (18:06);
  • Background on the guest (28:54);
  • The guest’s second individual stock holding. Listeners will have heard about this one (33:01);
  • How does a stoic combat FOMO (41:41).

More Information on the Guest

Quick Video Highlights From Our YouTube Channel

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US Economy Too Strong for Fed, Where to Invest Now (Szn 6, Epsd 10)

With Leo Schmidt, River Eddy Capital

Leo Schmidt, founder of family office River Eddy Capital, rejoins the podcast to discuss his views on economy, markets, and where to invest capital in what may be a ‘stagflation lite’ environment.

  • “Labor markets are way too hot.” There will be “no landing” (1:48);
  • Non-farm payrolls came out much stronger than anticipated. What this says about the labor market (4:59);
  • ‘Stagflation lite’ (8:31);
  • Our views of credit creation are outdated. The shadow banking system has replaced commercial banks as the primary source of credit. What this means (11:59);
  • The Federal Reserve probably needs to raise rates. Could they? Probably not — this year (22:21);
  • What does an investor do now? First up: Stocks that are AI/Nvidia (NVDA) plays. Celestica (CLS), Flex (FLEX), Sanmina (SANM), Jabil (JBL) (27:51);
  • Pharma spin-outs: Haleon (HLN), Kenvue (KVUE), Organon (OGN), Viatris (VTRS) (31:54);
  • Dollar stores, especially Dollar Tree (DLTR), are poised to outperform once there is an economic slowdown (39:07);
  • The bullish case for pipeline companies (46:59).

Quick Highlights From Our YouTube Channel

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