"Very Rough Times Ahead..." - Stephanie Pomboy

追加: 2026-05-07

[00:00:00]The hard asset story for me was always about a current and [music] accelerating currency debate basically.

[00:00:07]So not just here in the US but globally especially in the major industrial countries that are the world's reserve currencies. So that has always been sort of my main interest in hard assets was as a way to preserve capital at a time when I thought that the dollar not only was being debased but that [music] was just barely getting started that need to print money would just expand geometrically and I think the war actually underscores that point by president came out and said I want another $1.5 trillion for defense spending. So any idea that we were going to somehow [music] restrain spending and try to bring our runaway debt and deficits into some kind of universe where we could slowly start to grow into them just went right out the window.

[00:00:58]I think you'll recall when we had the conference in St. Pete, Tom Hunik was talking about the idea that we'd have this Fed Treasury Accord and that the objective would be to get [music] Congress to slow the rate of spending.

[00:01:11]so that the Fed would have the ability to, you know, slowly shrink the balance sheet without creating some unoured situation in the bond market. And I think we all kind of laughed thinking, [music] yeah, so we're relying on Congress to slow spending. That seemed like a crazy, but [music] now this war obviously just kind of increases the likelihood that the deficit is absolutely never ever ever going to go lower. or quite the contrary, it's probably going to go higher irrespective of how quickly the US economy is growing. So [music] that's sort of I would answer both of those questions in that way. Well, I guess the question all depends on how long oil prices stay at this level and to what extent they need to continue to, you know, liquidate other dollar positions to siphon money toward oil. But honestly, in the scheme of [music] things, it seemed like the Turkish central bank was a little bit the exception to the rule in that, you know, broadly speaking, other central banks have largely just continued to accumulate gold, albeit probably at a slower pace. But I also think you had in general, I think about it as just like you talked about the margin call, but not just for central banks, but for a variety of players. And you did see Chain Street, for example, that has a big player in markets that are related to more financial stuff, you know, private credit, etc., had apparently a huge exposure to precious metals via various ETFs. And so, you know, if they're forced, we saw this conccommatant situation where you had the strains [music] in private credit really starting to intensify and gold selling off at the same time. And I don't think that was coincidental. This is why I'm so focused on the public markets. I'm aware of the problems and fully on board with the idea and have been for a long time. I think before a lot of people really thought it was a problem that private credit is far weaker than it's been held out as this miraculous combination of tremendous [music] yield but safety and you know it just none of it really added up. So, but if you can't get your money out of a vehicle that's locked up in these private assets, you have to sell publicly traded securities to raise that money. [music] And so, I think that's why we saw that the public markets will be foggged for the [music] private market sins just because there is no other way to raise capital if you need it. And gold turned out to be in that basket. You know, it had been sort of last in first out. So people had just kind of all the Johnny come lately had rushed into gold once it broke 5,000 push it immediately up to 5500 and then when they needed some money all of a sudden you know it was a no-brainer to just cut and run from there. So then just to continue on this path, if you go back and look at how gold performed ahead of and during [music] the great financial crisis in 2007 8 and 9, I think you're seeing a very similar behavior. And I think this is kind of what you see in most of these financial crises, not just the 2007 89 one, but just going back through history that gold anticipates the crisis. So it rises well in advance of people recognizing there's a problem. Then when it becomes clear that there's a problem, this unwinding of leverage and the flights, the panicked liquidation of positions leads gold to get dumped in the process.

[00:04:40]So it then, you know, gives back some of the gains, not all of the gains that it logged on the way up and then it takes off on the policy response, numb [clears throat] the pain of the financial crisis. So, we've seen one, we're in the early phases, I think, of two. And [music] as that credit crisis starts to intensify, the question is, does gold get foggged even farther, or have we reached the point where now the pain will be felt in areas that are more immediately impacted by what's happening with the private credit stresses? Um, but long-term, you know, it's the policy response that is really what's going to drive gold. As for oil, I agree that there's a near-term inflation impulse from that, but [music] it's due to the tax refunds in my view. Like, normally, if you were to have this kind of shock where one of the things that people absolutely have no choice but to spend money on went up this far, this fast, gasoline prices are up since the war began. So what we've seen shockingly is that weekly retail sales have not only remained robust but have actually [music] picked up. So the consumer apparently has the wherewithal to both fill up his gas tank and buy discretionary items. And so that speaks to me to the strength of the tax refunds. And we have seen an increase.

[00:06:04]Obviously if you look at the numbers year, you're seeing a [music] pretty significant increase. not, you know, we're still waiting for the big month to unfold, but so far we're running about 40 billion ahead of last year. So, it's not an insignificant amount of money.

[00:06:18]And I think that ability to absorb the higher gasoline prices, therefore allows for [music] it to be more inflationary than it otherwise would be when it would normally crowd out other consumption. I would agree with Lacy's sense that in the near term you could have an inflation shock, but the give back on the other side when the tax refund [music] season ends if these gasoline prices haven't come down and come down materially will be a problem. But the other side of it is sort of what it's doing to the credit market and the outlook for rates. I mean, I was looking at this morning before the war, the market was pricing in essentially two Fed rate cuts this year. It's now pricing in a 50% [music] chance that we get one. So basically it's got 12 basis points of cuts between now and year end.

[00:07:03]So essentially nothing. Yields are still extremely elevated and relatedly mortgage rates are up. Both investment grade and high yield bond yields are up.

[00:07:14]And so to me [music] that's the bigger problem is who knows how quickly the headline oil price number comes down.

[00:07:21]But the relief at the pump and the relief on the interest rate front is going to be far slower to materialize if it ever materializes on the interest rate side. And I'm not fully convinced that it will. We're not in a crisis [music] right now in terms of people's hair are on fire and they think, you know, it's we're selling everything. We're in a panic and you're seeing spreads and yields blow out. There's no question that there's tremendous stress in the credit markets that's being sort of artificially subdued [music] by gating these funds and that if they actually had to mark these assets to [music] market they'd be getting pennies on the dollar that were it to come to light would create the hair on fire thing. So the [music] question is is there a point at which this issue that's happening behind the curtain with private credit actually devolves [music] to the broader market and there are two avenues through which that could happen are pensions and insurers and both of those entities require a steady stream of income with which to run their various business. you know, if you're a pension, you got to pay out pension payments. And if you're insured, you're making annuity payments.

[00:08:32]And if you don't have the income stream with which to do that, you got a problem. So, it could very quickly devolve. And the insurers are the obvious area. I've been tracking MetLife CDFs and it exploded on these private credit problems. And in the last week as [music] the markets have rallied and you know everyone's concluded everything's fine the CDS [music] has cost of insurance against default on Metife has come down barely but still extremely elevated. So we're by no means out of the woods on this. And again the entire private credit problem and the problem for credit markets more broadly is that they've been waiting for four years for the Fed to cut rates and we're now talking about no rate cuts this year. at what point can they not continue to string this along and we're really pushing it obviously. So, and when we came into 26, the expectation, as I said, was there was relief coming, but now it's gone out the window. And even Scott Bessant, he doesn't think the Fed should cut rates. So now, do you need to raise rates? No. But clearly, he didn't think it would be appropriate. And I agree when you've got all this tax refund stimulus coming out and all you're doing is monetizing the increase in inflation if you were to do something like that. Well, I think that all comes down then to the employment market because right now you're totally right.

[00:09:54]The tax refunds are supporting the consumer at a time when otherwise the gasoline price would have knocked them out cold. So that is sustainable only as long as the tax refund season continues.

[00:10:06][music] And then after that, we're really left looking at the employment market for clues. And you and I have talked about the labor market at length.

[00:10:14]The University of Michigan survey came out and it hit an all-time low. And the immediate headline and reaction was it's just Democrats, so it's nonsense. Don't look at that number. And you know, was it Michael Jordan who said Republicans buy sneakers, too? So ultimately, I'm very reluctant to throw these [music] indicators out. And the employment components of both the University of Michigan survey [music] and the monthly conference board puts out are the weakest we've [music] seen almost ever in many cases worse than CO. And so the consumer is telling you that the BLS statistics are [music] not reflecting their reality. And it could be due to two things. It could be that the BLS is counting the number of jobs correctly.

[00:11:02]Maybe it doesn't appear that they are given the massive revisions we see every month. But the quality of jobs is abysmal and that actually is reflected in the employment data we see where multiple job holders is near all-time record highs. So you see people who used to be able to work one job and support their families are now working two or three jobs. So that could be it. Or it could be that the numbers are just straight up completely wrong. And the University of Michigan asked people, "What is your expectation that your income will outpace inflation?" And if you overlay their answers to that with the unemployment rate, you find out that when they think their income is unlikely to outpace inflation, the unemployment rate is generally going up. You can look at these [music] two and the connection between the two of them, the correlation is mind-bogglingly precise. So either they have a totally unrealistic expectation about what their income is going to be or the unemployment rate is wrong. And honestly, I think I'd take the consumer's view about, you know, the future of their pocketbook over the BLS's statistical massaging nonsense. So this suggests to me that the perception of the labor market, as bad as it is, is still wildly more sanguin than the reality on the ground. And if that's the case, we're talking about a setup where these tax refunds are the life support for consumers. And as we get into the second half of the year, it becomes challenging. [music] The question then is, do companies suddenly decide after we get out of the war, okay, now we can hire, now we can increase wages. Now maybe, but time will tell on that.