Here's The Latest Outlook From Lacy Hunt, Lyn Alden, Stephanie Pomboy + A Dozen Other Experts
What this covers
BUY THE REPLAY of the full Thoughtful Money conference here at https://thoughtfulmoney.com/conference
Well, the Fall Thoughtful Money conference was held online this past weekend and I’m delighted to say the event was a real success.
That was due primarily to the amazing line-up of speakers who presented and took live audience Q&A throughout the insight-packed 10-hour day.
Lacy Hunt delivered the keynote, followed by Stephanie Pomboy, Fred Hickey, Thomas Hoenig, Danielle DiMartino Booth, Darius Dale, Michael Pento, Michael Lebowitz, Steven Bavaria, Brent Johnson, Lyn Alden, Melody Wright, Rick Rule, Lance Roberts, New Harbor Financial and Jonathan Wellum.
For those of you who didn’t attend, I thought you’d enjoy hearing some of the conference highlights.
And for details on the New Harbor event in Concord, MA on Oct 24th, go to https://newharborfinancial.regfox.com/the-new-harbor-summit-new-england
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Thoughtful Money's fall conference presented multiple expert perspectives on concerning macroeconomic imbalances—particularly money supply/GDP inconsistencies, consumer weakness, and AI investment returns not materializing—suggesting elevated risks of economic underperformance and asset price corrections despite near-term Goldilocks conditions.
- Major inconsistency between money supply and GDP growth threatens economic underperformance and disinflation/deflation risks
- Consumer balance sheets are spent up and lent up, with discretionary spending collapsing while necessities crowd out purchases
- Generative AI spending continues rising (Google +91% YoY) despite 90% of experiments failing to leave the lab and no monetizable returns after two years
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Despite two years of massive capital inflows and continued high spending (Google spending up 91% year-over-year), generative AI is not generating monetizable returns: 90% of AI experiments do not leave the lab due to accuracy and reliability issues, productivity gains in coding are not as substantial as initially thought with increased bugs in AI-generated code, and companies are beginning to demand that AI vendors prove returns rather than continuing to fund experimentation.
“there was a VP of AI on data bricks it's a cloud company and he said that 90% of gen AI experiments uh aren't making it out of the lab right and the problem is accuracy and reliability”
There is a major historical inconsistency in the current economic environment: monetary contractions typically bring the economy down first and then reduce the price level, but the US is now experiencing reduction in inflation without commensurate weakness in GDP, while this pattern does not hold in major economies outside the US, which historically has not been the case, indicating elevated risk of underperformance and deflationary pressures.
“we have a major inconsistency in the way in which the world has historically work monetary contractions bring the economy down first and then the price level now we're having a reduction in inflation without the uh commensurate weakness in GDP but that is only true for the United States it's not true for the major economies outside of our country and that historically has not been the the message nor the experience which tells me that the risk remain that we're going to have underere economic performance and more disinflation and the risk of deflation”
The consumer balance sheet has become over-leveraged and over-spent to the point where it is starting to buckle, with all growth in consumer spending driven by non-discretionary items (food, energy, housing, insurance) that crowd out discretionary purchases, and retail sales have been negative in inflation-adjusted terms for three years and getting worse.
“so spent up and lent up that it's starting to buckle so clearly we have reached that point where the consumer is Lent up and on the spent up side”
Monetary policy that monetizes debt directly or indirectly eventually affects the economy in an inflationary manner, and the effects of such monetary accommodation have redistributed wealth, created social unrest, and represent a high price to pay for excessive accommodation beyond immediate crisis needs despite longer-term risks.
“when you monetize debt directly or indirectly it eventually affects something in the economy in an inflationary Manner and that's what I think is is we've seen the effects of that and I think it's redistributed wealth in this country it's created uh social unrest in this country and I think those are a high price to pay for what I call excessive accommodation beyond the immediate crisis need”
Just because the Fed is cutting rates does not automatically mean the dollar will fall; it's a relative game where currency strength depends on comparative monetary policy across major economies and geopolitical safe-haven flows.
“now like I said at the beginning in general If the Fed is cutting that's a Tailwind it all else equal it the dollar should fall on that but we just don't live in a world where all else is equal um with all the problems going on in the Middle East with all the problems still going on in Eastern Europe with the war with Ukraine you know China's doing their biggest military drill I think in two or three years around Taiwan right now um there's a number of things that could that could make the dollar rally just on a safe haven trade”
Despite historical underperformance, longer-duration treasury bonds are still expected to underperform scarce assets going forward because the Congressional Budget Office projects $20 trillion in new treasury issuance over the next 10 years even with no recessions forecasted, creating structural supply pressure that will erode purchasing power in the currency in which treasuries are priced.
“bonds with duration treasury bonds with duration have already underperformed practically everything else you'd want to own over the past several years and while going forward it might not be at the same rate that we saw over this period like that was a pretty dramatic period of underperformance because you're starting at near zero yields um I I think there's still going to be basically bleeding purchasing power versus more scarce things when we look at the Congressional budget office for example they project no recessions in the next 10 years and yet they still project about 20 trillion in new treasury issu hitting the market over the next 10 years um and you know who buys that will vary over time sometimes the foreign sector sometimes the uh US banking sector sometimes the US non-bank um uh sector sometimes the the Central Bank um you know they'll it'll rotate over time but basically that's a that's a very large amount of Supply coming to Market uh and they can't really afford that to be kind of like structurally um retaining its purchasing power”
The current narrative that sustainable, viable market growth comes from government stimulus spending and debt is fundamentally incorrect; sustainable growth comes from low taxes, low interest rates, low inflation, and government stability, whereas stimulus can only generate temporary economic boosts while burdening the economy with excess debt, stagflation risk, and productivity kills that damage the private sector long-term.
“the Zeitgeist of today is that growth and sustainable viable markets come from how much stimulus a government is willing to commit so you know people are saying China come on let's get on with it let's just add trillions of dollars in stimulus and the Federal Reserve we need 50 basis points not just once but we need it multiple times and that's where growth comes from growth comes from not low taxes low interest rates low inflation stability in governments it comes from how much the government is willing to spend and go into debt”
The dollar will not necessarily fall just because the Federal Reserve is cutting rates, because currency movements are relative and determined by comparative monetary policy across major central banks; the ECB is also cutting, China is doing massive stimulus, and Japan has been strengthened, so Fed rate cuts alone do not determine dollar direction.
“I think there's a lot of people who think that now that the FED is cutting everything is okay and the dollar is sure to fall but but you have to realize just because the FED is cutting does not mean the dollar will fall because it's a relative game the ECB is now cutting they're probably going to cut again this week right you know and China obviously is and China's you know they're doing a tremendous amount of stimulus you know J Japan has part of the reason that the dollar was falling also was Japan had been strengthened in the end but but how long can how long can they actually do that”
Companies have moved from fun experimentation with generative AI into a phase where they now demand proof of returns, and after two years there are no significant returns being shown, which is a critical problem for sustaining elevated AI-related spending and stock valuations.
“companies have had fun experimenting with AI and now now they have to show the returns we're two years into this and no one's showing any returns”
Despite recent run-ups in long-end treasury yields, inflation is working its way lower and both the long end and short end of the yield curve will follow, based on what history has taught for decades.
“there's things that can happen that could change my mind I'm not you know I don't have blinders on I know it's a pretty Dynamic world we live in and the economy is extremely Dynamic but right now everything we know and what history has told us for decades tells me that inflation is working its way lower and with it both the long end and the short end of the Curve will follow”
Higher yields today make income-generating assets more attractive as an investment opportunity, and CEOs have significant skin in the game that motivates them to preserve their companies through difficult periods, making corporate debt and high-dividend equities attractive bets on management competence and commitment.
“CEOs have incredible skin in the game more than they probably should but it makes me feel that I can invest in Corporate America the debt of corporate America especially knowing that CEOs and the people that work for them are gonna just do whatever it takes to keep their companies alive through thick and thin no matter what happens and that's essentially what I'm betting on uh when I'm doing credit or or you you know really solid equity and high dividend payers you're just betting that these people are going to keep things going no matter what kind of no matter what hits the fan in the future”
A bull market in commodities is underway, but investors should expect significant volatility and must employ a 5-10 year time horizon; gold prices will move higher over 5-10 year timeframes (not straight up), oil and natural gas will be substantially higher, and copper will be higher, but committing a short-term 6-month trading strategy to these longer-term narratives will derail the strategy.
“to the extent that I talk about the fact that a bull market is underway that doesn't mean for your listeners that we're experiencing stair steps to Heaven that there will be an untrammeled experience HED that won't challenge their patience won't challenge their psychological stability this is a volatile sector it's a risky sector in particular Adam it's a sector where people buy into narratives that require time and when people employ a six-month strategy to a five-year narrative they derail the whole strategy”
Wall Street analysts gloss over concerning consumer spending data details, focusing on headline numbers while missing the underlying weakness that comes from mandatory spending crowding out discretionary purchases.
“you get punished for actually going through the details because again Wall Street doesn't care about it they glow under the headline and run away with this idea that the data is strong”
Home prices are likely to decline significantly more than seasonal norms over the coming months and into year-end due to accelerating layoffs and bankruptcies, combined with sales volumes that are worse than normal and home price declines that are already larger than average.
“we're seeing way worse sales than normal we're also seeing um you know a kind of acceleration and home price declines that are kind of are bigger than the average that you would see um and we're seeing accelerating layoffs and bankruptcies and so what I believe will happen is that you've got that um those layoffs bankruptcies happening and that's going to push us and we're going to see a much larger drop in home prices than we're used to seasonally and so uh throughout the end of the year”
Michael Pento's model is forecasting reflation in the short term, but the current economic sugar high from rising liquidity should not be relied upon for much longer.
“Michael Pento also shared the latest Outlook his model is forecasting which is reflation in the short term but he took pains to note that the current Sugar High the economy is experiencing from rising liquidity shouldn't be counted on for much longer”
As of September 17th, 2024, the market regime shifted from a hybrid oil/deflation characterization to Goldilocks, and based on fundamental research, Goldilocks conditions are likely to persist over the medium term.
“since September 17th specifically we no longer were in this sort of hybrid goil loocks with deflation characteris as Market regime our Market regime now casting process completely pivoted us into Goldilocks and we've been in Goldilocks ever since and our general expectation based on our fundamental research views is that that Goldilocks is likely to persist over the medium term”
The conference replay video is available for purchase at thoughtful money.com/conference for those who did not attend the live online event.
“if you're wishing you'd attend to the conference but for some reason didn't don't worry you can purchase the replay video of the entire event all the presentations and all the live Q&A sessions simply by going to thoughtful money.com conference”
Adam Tager is also appearing at a New Harbor Financial advisers event in Concord, Massachusetts on October 24th to discuss financial planning and strategy.
“and now that the conference is over I'm hopping on a plane to join the team of financial advisers from new Harbor Financial for their upcoming one if you're going to be anywhere near conquered Mass this Thursday October 24th come join us I'll put the link to their event in the description below this video”
The conference successfully delivered 10 hours of actionable insights from expert speakers across multiple domains including macroeconomics, consumer health, artificial intelligence, monetary policy, bond markets, fixed income, currency strategy, housing, and commodities.
“well thoughtful money's fall Conference was held online this past weekend and I'm delighted to say that the event was a real success that was due primarily to the amazing lineup of speakers who presented and took live audience Q&A throughout the Insight packed 10hour day”