Top Three Videos – September 2, 2023

Pomboy believes the market is overvalued by 40-50% or more, and advises to reduce holdings in equities, consider investing in longer-term US treasuries, and allocate a portion of assets to gold and silver.

Quick Summary Bullets:

Market Correction Predictions

• Pomboy predicts that a significant market correction, or “haircut,” is necessary to revert to normal valuations, indicating a potential major downturn in the stock market.
• She highlights the potential deflationary pressures caused by debt and demographics, which could lead to a major market correction and lower inflation in the long run.
• “I wouldn’t be touching any risk asset with the 10-foot pole…my core positions continue to be cash and gold.” – Stephanie Pomboy suggests avoiding risk assets and sticking to cash and gold as core positions in the current market.
• Pomboy suggests that the Federal Reserve may need to resort to quantitative easing (QE) and potentially bail out public pension funds, leading to a significant increase in the Fed’s balance sheet.
• “I’ve been impressed with [gold’s] performance in the face of unprecedented tightening by the Federal Reserve…if you had told me they were going to do that and the golden would have been essentially unchanged over the year that they did that, I would have viewed that as an incredibly impressive performance.”
• The speaker expresses a sense of hopelessness in the current market, suggesting that it may be overvalued by 40-50% or more.
• The market may be overvalued by 40-50% or more.
• The potential overvaluation of the market by 40-50% or more raises concerns about the stability and sustainability of current market levels.
• “If you got twice as much debt and you’re raising rates twice as fast, it’s probably not going to be good.”
• The current market bubble has lasted longer and reached higher valuations than any other bubble in our lifetimes, creating a sense of permanence and fatigue among investors.
• Stephanie Pomboy predicts negative returns and a potential drop of 50 to 70 percent in the stock market over the next decade.
• The speaker suggests that the current market is overvalued by 40-50% or more, questioning the narrative of a permanently high plateau and highlighting the artificial nature of the money system.
• Stephanie Pomboy suggests that being careful, patient, and holding cash, gold, and silver is the right approach in the current market.

Social Fracturing and Wealth Gap

• The fault lines and fracturing of the status quo are leading to a shared hopelessness, which is driving social unrest and a real rift in our social cohesion.
• Social fracturing is increasing between the haves and the have-nots, highlighting the need to address the obscene wealth gap and potentially leading to redistributive policies.

Concerns about Inflation and Debt

• The focus on inflation numbers by the Fed may be seen as absurd, as it only slightly slows down the increase in the cost of living for the average American, causing continued pain and squeezing them higher and higher.

Transcript Summary:

• 00:00 The market is overvalued by 40-50% or more, a significant correction is expected, and it may be wise to reduce holdings in equities and consider investing in longer-term US treasuries.
  • The market is overvalued by 40-50% or more and a significant correction is expected, potentially leading to a major recession.
  • Secular deflation driven by debt and demographics is the bigger issue, and while there may be cyclical inflation in the short term, a significant market correction of 40-50% or more is likely, leading to lower inflation in the long run.
  • Pomboy suggests that given the current market conditions, it may be wise to reduce holdings in equities and consider investing in longer-term US treasuries.
  • The market has held up well despite high T-bill yields, and it is more advantageous to invest in six-month bills rather than investment grade bonds due to low equity premiums and the risk of downgrades.
  • She suggests considering longer dated treasuries as an entry point in the near future due to a potential economic downturn and a shift in indicators such as gasoline prices and consumer sentiment.
  • Investors should avoid risk assets, such as equities and junk bonds, and instead consider holding cash or gold, as the market is overvalued and there is little downside to waiting for more clarity before making investment decisions.
• 10:49 Pomboy maintains a favorable stance on gold due to the potential increase in the Federal Reserve’s balance sheet and the weakening dollar, while expressing concern about the worsening economy and the potential for societal breakdown due to the growing wealth gap and sense of hopelessness among Americans.
  • Pomboy confirms that their favorable stance on gold has not changed.
  • She believes that the Federal Reserve will have to resort to quantitative easing and potentially bail out public pension funds, leading to a significant increase in the Fed’s balance sheet, and in this environment, owning gold is preferable to other assets as the dollar is nearing its end, although there has been a lag effect on gold’s price increase despite the Fed’s balance sheet expansion.
  • Gold has performed the same as the stock market since 2007, and while disappointed with the lack of a rise in gold alongside quantitative easing, the speaker is impressed with its performance in the face of tightening by the Federal Reserve.
  • Pomboy predicts that the Federal Reserve will have to intervene and lower interest rates due to the worsening economy, but they also express concern that the breaking point may not be financial or economic, but rather social, as the majority of Americans are facing increasing struggles with stagnant wages and rising living costs.
  • The growing wealth gap and sense of hopelessness among people can lead to societal breakdown and bad consequences, as seen in the viral song “North of Richmond.”
  • Pomboy discusses the increasing fault lines and fracturing of the status quo, driven by shared hopelessness, which may lead to a dangerous social rift and loss of social cohesion, as evidenced by the rise in shoplifting and disregard for decorum.
• 19:53 Pomboy highlights signs of a weak economy, expresses concern about social issues, and calls for a reset towards traditional values and responsible policy to address wealth inequality and potential negative impacts on pensions and jobs caused by reckless speculation and greed encouraged by the Fed.
  • There is a sense of hopelessness, but the speaker is generally optimistic and avoids dwelling on negative things, preferring to watch Real Housewives instead.
  • Pomboy highlights signs of a weak economy, such as retailers setting aside money for shoplifting losses, and criticizes the focus on inflation numbers, which only slightly decrease the increasing cost of living for Americans.
  • The extreme political partisanship and hatred between sides is worrisome, especially considering that the hard part has yet to come, although the 2008 financial crisis was entered into in a better place psychologically and societally.
  • The increase in suicides and drug deaths reflects a society in a dark place.
  • Pomboy believes that there is a stark contrast between the optimistic narrative presented by media outlets and the reality of the economy, and hopes for a reset towards more traditional values and priorities that prioritize the people over Wall Street and big Pharma, even if it requires some pain to get there.
  • The speaker expresses concern about the reckless speculation and greed encouraged by the Fed, resulting in bubbles, zombie corporations, and potential negative impacts on pensions and jobs, emphasizing the importance of responsible policy and addressing social fracturing and wealth inequality.
• 27:43 The market is overvalued by 40-50% or more, potentially leading to pension fund collapses, taxpayer-funded bailouts, reduced purchasing power, and a potential increase in low quality borrowers in the housing market.
  • The concern is that the mismanagement of pension funds may lead to their collapse, requiring taxpayer-funded bailouts, which could cause social unrest and resentment among those who are financially struggling.
  • The government may indirectly bail out certain assets through programs funded by the Federal Reserve, potentially resulting in reduced purchasing power for individuals and a potential haircut for pension holders.
  • Stephanie Pomboy’s consistent analysis of data provides confidence that the market is overvalued by 40-50% or more, despite changing headlines.
  • She believes that the market is overvalued by 40-50% or more, and although it takes time for the consequences to become clear, they predict that the math will become relevant in the next few months.
  • Corporations’ vulnerability to rising debt service costs is a concern that is finally being acknowledged by Wall Street, as seen with the Fitch downgrade and its impact on federal deficit financing.
  • Housing market may not be able to sustain mortgage rates at current levels, as Zillow’s offering of a one percent down payment mortgage suggests a potential increase in low quality borrowers and possible earnings disappointments in the future.
• 35:27 The market may be overvalued by 40-50% or more, as signs of slowing consumer spending and increased borrowing at higher interest rates suggest the impact of interest rate increases and the end of stimulus measures on the economy.
  • Follow Stephanie Pomboy on Twitter at s pomboy or visit her website macro mavens.com for more information on her work.
  • Stephanie Pomboy reaffirms herself as being in the recession camp and discusses the lag effect of many things going through the economy.
  • Interest rate increases and the end of stimulus measures are starting to impact the economy, with signs of slowing consumer spending and increased borrowing at higher interest rates, suggesting that the market may be overvalued.
  • Pomboy discusses the recent decline in employment data and the surprising lack of impact on the stock market despite rising interest rates, predicting that this situation will likely change in the near future.
  • The convergence of divergent data points, particularly in the job market, is indicating a closing of the gap between job openings and applicants, which was historically high when the Federal Reserve started its tightening campaign.
  • Pomboy discusses the potential overvaluation of the market, the impact of the Fed’s policies on the jobs market, and the possibility of a prolonged swing in the opposite direction.
• 44:06 The market may be overvalued by 40-50% or more, with the Fed likely to lower short-term rates in response to market crises, and the stock market’s reliance on twisted logic and reckless intervention has led to a prolonged bubble with extreme valuations, causing psychological stress and the existence of zombie companies, while gold and silver are predicted to perform well and it is advised to allocate 5-10% of investable assets to bullion and 10% to precious metal mining stocks.
  • Pomboy discusses the potential overvaluation of the market by 40-50% or more, the likelihood of the Fed lowering short-term rates in response to market crises, and the convoluted logic of the stock market in response to weak jobs data.
  • The market perceives a lower probability of the Federal Reserve raising interest rates in the September meeting, but still expects a quarter point raise in the November meeting, with little chance of lowering rates in the future.
  • The market’s reliance on twisted logic and the Fed’s attempt to create a wealth effect through reckless intervention has led to a prolonged bubble with extreme valuations, causing psychological stress and the existence of zombie companies, and while the ultimate pivot may bring pain, the catalyst for it is unknown.
  • The stock market is predicted to provide negative returns over the next decade with a high chance of a significant drop, while silver and gold may experience a bullish trend if they break above certain levels.
  • Gold and silver are expected to perform well, with potential for gold to reach $2500 if it breaks above $2100, and mining stocks may catch up; overall, it is advised to be patient and allocate 5-10% of investable assets to bullion and 10% to precious metal mining stocks.
  • The importance of patience and resisting the urge to take action is emphasized, as many people interviewed on the channel agree with this perspective.
• 55:07 Investing in short-term U.S. treasuries is attractive, while the long end of the treasury curve is uncertain; long-term treasuries are not recommended, and commodities and real assets are seen as more constructive for the future.
  • Investing in short-term U.S. treasuries is currently attractive and sensible, offering a good risk-return ratio and real yield, while there is disagreement about the long end of the treasury curve, with some believing the Fed will be forced to lower interest rates and others arguing that attempts to stimulate the economy will raise the price of oil and keep bond yields high.
  • Pomboy discusses their position in long-term treasuries and emphasizes the importance of considering the overall portfolio when making investment decisions.
  • She discusses their position in long-term treasuries, having hedges in place, and the attractiveness of long-term bonds in a potential recessionary phase.
  • Japan’s yield curve control is a good risk-reward trade for a client portfolio, but long-term treasuries are not a recommended passive investment due to the history of declining yields, and instead, commodities and real assets are seen as more constructive for the next decade or more.
  • Mike and John will be joining the speaker at the wealthy on Fall conference, which has a discounted price for early bird registration and additional discounts for previous conference attendees, and the lineup includes Lacey Hunt discussing macro outlook and Fed policy, and James Grant discussing interest rates.
  • Stephanie Pomboy will provide an update on inflation and deflation, Kyle Bass will discuss geopolitical risks, Ivy Zelman will talk about the housing market, and other speakers will cover topics such as bonds, natural resources, and nuclear energy.
• 01:05:30 Being cautious and holding cash, gold, and silver is advised as the market is overvalued by 40-50% or more, and treasury bills can provide a return of 5-5.5%.
  • Being careful, patient, and holding cash, gold, and silver is the right message, as treasury bills can provide a return of 5-5.5% and 40% of the model is invested in them.