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Risk/Reward Still Skewed Toward Risk: Mike Singleton, Invictus Research (Szn 5, Ep 9)

Published April 11, 2023

This podcast episode was recorded on Thursday, April 6, with an actionable highlights clip previewing the following day’s non-farm payrolls released to premium subscribers that same day. The full podcast episode was then released to premium subscribers a day later. To get early access to podcast recordings and take advantage of a host of other exclusive benefits, sign up to become a premium member at our Substack or Supercast.

Mike Singleton of Invictus Research rejoins the podcast to discuss his pessimistic outlook for the economy, why he’s concerned about credit risk, and why the Federal Reserve should end up cutting rates before too long.

Content Highlights

  • The outlook for risk assets is still not constructive (2:40);
  • Fed rate hikes are very close to a peak, if not there already (4:43);
  • Economic conditions point to stubborn inflation (7:09);
  • Inflation may not need to return to the Fed’s 2% target for there to be rate cuts (11:00);
  • The outlook for commodities prices is not particularly constructive either (15:59);
  • What to make of the banks? (21:14);
  • One leading economic indicator that Invictus likes, which is overlooked (or ignored) by the market at large (22:30);
  • The backdrop is still positive for short-term bonds (24:28);
  • Leading indicators for the yield curve include bank lending standards, which right now suggest a steepening… (26:13).

More About the Guest

Not investment advice.

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MoreRisk/Reward Still Skewed Toward Risk: Mike Singleton, Invictus Research (Szn 5, Ep 9)
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Assessing the new ‘Recession Fear’ Narrative

Published December 8, 2022

The following is an amended version of the Dec. 8 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack or Supercast.

The emerging narrative this week is concerns about recession and interest rate hikes. These have been voiced from authoritative sources, including from two major Wall Street bank CEOs: Goldman Sachs’s David Solomon and JPMorgan’s Jamie Dimon. The former spoke at a conference about a slowing economy and the latter went on CNBC to talk about how inflation would erode consumer confidence next year. Dimon also expressed concerns about geopolitical issues.

"It could be a hurricane" -- Jamie Dimon
Jamie Dimon, JPMorgan CEO, on economic pressures facing markets next year

Dimon is certainly one individual worth listening to when it comes to economic forecasts. As the CEO of the country’s largest lender he will be keenly aware of the kinds of issues that consumers in particular might have to deal with. Some context is necessary here as Dimon did hedge his comments (watch the video).

MoreAssessing the new ‘Recession Fear’ Narrative
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Crypto’s Great Unwind and Risks to Financial Markets

Published November 10, 2022

The following is an amended version of the Nov. 9 Daily Contrarian. This briefing and accompanying podcast are released to premium subscribers each market day morning by 0700. To subscribe, visit our Substack or Supercast.

These are difficult times in cryptocurrency markets. The industry is dealing with unfolding fallout from the FTX meltdown and digital currencies are tanking. Bitcoin has dropped by about 20% so far this week.

Crypto bros' hypocrisy: 'Have fun staying poor' in 2020 vs 'don't dance on graves you POS' in 2022
Source: Author’s work, inspired by actual tweets. Created on IMGflip.com

There is plenty of Schadenfreude (a German word you should be familiar with) to go around over this crypto meltdown. It’s been a long time coming. Some of these crypto bros have been so obnoxious on the way up (and continue to be annoying AF with their denial on the way down) that you can’t help but root for the entire industry to incinerate in a giant mushroom cloud.

That’s all fine and good, but there could (and likely will) be second-order effects that transcend the goofy world of cryptos. That’s the concern, that this could lead to a liquidity event in other asset classes. So far stocks are holding up fine. But it’s early days as they say. You figure somebody somewhere is going to take a massive markdown on their crypto portfolio that will require selling in other assets. Moves like this are very rarely contained.

Remember that investors hate uncertainty more than they hate bad news. So far all the uncertainty has remained isolated to cryptos. At current levels, that may even be justified, but does anybody think $16k is the bottom for Bitcoin? A drop of 20% is nothing for an ‘asset’ with no intrinsic value that is backed by nothing other than an algorithm and the seemingly blind faith of its adherents. So yeah, the risk that crypto just dies is real, as Noah Smith writes here.

To summarize: It’s hard to see how the crypto damage is a) contained and b) over. But that’s just one person’s opinion. Do your own research. Make your own decisions.

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