Trapped by Liquidity

Published on
December 31st, 2018
Topic
Macro, Monetary policy, Global Outlook
Duration
46 minutes
Asset class
Currencies, Bonds/Rates/Credit

Trapped by Liquidity

Skin In The Game ·
Featuring Daniel Lacalle

Published on: December 31st, 2018 • Duration: 46 minutes • Asset Class: Currencies, Bonds/Rates/Credit • Topic: Macro, Monetary policy, Global Outlook

The outlook for 2019 looks increasingly uncertain. In the midst of rapidly fluctuating markets, central banks will step in if asset prices decline too far, according to Daniel Lacalle, chief economist at Tressis Gestion. However, he also believes that central banks will be powerless to stop a contraction in earnings multiples, and that the injection of additional liquidity will exacerbate the disinflationary trend. Despite this, the nimble investor can find many exceptional buying opportunities throughout 2019, Lacalle argues in this interview with Roger Hirst. Filmed on December 7, 2018 in London.

Comments

  • DS
    David S.
    6 January 2019 @ 12:55
    Internet and brick-and-mortar retail stores' sales may be up according to US credit card information, but earnings can still be down. Big discounts started before Thanksgiving and accelerated into the New Year. We will see how the mix ended up in 4Q2018 earnings. How about other parts of the world? DLS
  • so
    steve o.
    3 January 2019 @ 15:54
    What's the point of this silly game they're playing? Just a distraction? The guests and their viewpoints are sufficient. No need for this game.
  • RK
    Roger K.
    2 January 2019 @ 22:22
    Very good one , thank you guys!
  • PG
    Philippe G.
    2 January 2019 @ 18:20
    Very pleased to see Mr. Lacalle back!
  • PU
    Peter U.
    1 January 2019 @ 14:58
    excellent
  • LJ
    Lucille J.
    1 January 2019 @ 14:17
    Markets crash(capitalism) Central Bank step in and save(ponzi scheme)
    • DW
      Daniel W.
      9 January 2019 @ 17:26
      I support this comment.
  • AC
    Andrew C.
    1 January 2019 @ 04:27
    I know this isn't a popular view on here, but.... I just get the feeling that predicting the future (12 months) is a lot more difficult than Daniel makes it appear. I heard no probabilities or the like, perhaps I missed it? There are two types of forecasters: those who are wrong and those who know they are wrong (H. Marks)
    • CL
      Cyril L.
      1 January 2019 @ 14:45
      That seems a bit unfair. He doesn't mention any specific probabilities, but I don't think he's making any specific forecast either. The words "likely", "unlikely", "in my opinion", etc. come back a lot, so clearly he seems to be in a probabilistic rather than deterministic framework.
    • CM
      C M.
      1 January 2019 @ 22:23
      He said US equities will do better than expected. He likes consumer goods and defense stocks. LIkes investment grade bonds. Large, boring multinationals. Avoid Japan, though Yen will strengthen against the dollar. This is all around the 42 minute mark. Broader forecast: lots of ups and downs. Sees disinflation. Sees a contraction in earnings PE. Banks will not be able to manipulate markets as in the past. Overall, thought it was a good interview with some specific suggestions.
  • RR
    Rex R.
    1 January 2019 @ 04:22
    If the guy loses the vertical strategy game -- as here-- and if he in fact, if he makes the absolute worst possible initial tactical move-- as in placing a coin the far right slot instead of in the middle, when he has the first move-- how can we trust his judgment?
    • DS
      David S.
      3 January 2019 @ 06:59
      Mr. Lacalle is a recognized expert in analyzing and understanding world markets. That is why he is on RVTV. The game is to add fluff for those that need fluff. I listened to this video four times and learned something or understood something better each time. DLS
  • gg
    georgy g.
    31 December 2018 @ 22:28
    Excellent piece. Tend to agree with conclusion, but one caveat. I do not believe the cycle in the USA is over. Valuations are too low. Based on fcf yield you could get in high quality companies. China and USA will reach a trade deal.
    • LJ
      Lucille J.
      1 January 2019 @ 14:10
      Valuations have not matter in 30 yrs- it is all about printing money. everyone is blaming Jerome Powell
  • bm
    brian m.
    31 December 2018 @ 19:27
    Music and connect 4, all we need now is a cooking segment
  • JH
    Jesse H.
    31 December 2018 @ 18:52
    Excellent stuff - thank you, Daniel. Very interesting (and troubling), and very clearly explained.
  • HJ
    Harry J.
    31 December 2018 @ 18:02
    Daniel, 7% is the number that provides the current yield needed for older retirees to keep living standards and safety values reasonable. Where can one find that level without risking everything?
    • DS
      David S.
      31 December 2018 @ 20:38
      7% assumes you retain the same level of spending. If you can reduce your spending, you also reduce the return necessary to keep on track without the biggest risk of all - leverage. DLS
    • DR
      David R.
      31 December 2018 @ 22:54
      If you have a lot of capital and of course don't pay any rents (own your own primary and vacation homes in a no-tax or low-tax jurisdiction overseas in a tax haven like myself and Raoul of RV), then you don't need anywhere near 7%. Just 1% above the real rate of inflation will do great. Of course, interest rates throughout DM are below that. But there do exist some better real returns in strong select markets offshore with gov't surpluses, higher growth rates, good demographics and rising fx.
  • BV
    Brad V.
    31 December 2018 @ 15:31
    Another outstanding interview with strong opinions and sound reasoning. If one has a will to do the work and get better at this game then there is a manifesto of market know how spreading across this site. Super stuff and thank you gentlemen.....
    • MS
      Matt S.
      2 January 2019 @ 22:41
      please explain the market manifesto....
    • BV
      Brad V.
      3 January 2019 @ 12:43
      Hi Matt, across RV I am seeing investors and traders declare their intentions, beliefs and on certain pages they provide details on what they are aiming to do. It is a manifesto of market know how. As for Daniels interview the topic suggested macro, monetary policy and a global outlook and for my own learning it delivered in spades. It went straight to my watch list. Anyhow, I found this interview very useful, along with many across the site, in that they help me draw my own conclusions based on my own investing and trading style. My will to do the work is the determining factor going forward. Thumbs up to RV for setting the stage alight and making A class material accessible to the common bloke, which is me....Best of luck diving into the market manifesto
  • RM
    Ron M.
    31 December 2018 @ 13:17
    Daniel, that was really insightful - a lot to think about. The Bank of Japan seems to have been "successful" with all of its helicopter money shenanigans (bond and ETF purchases), in Europe less so though they seem to have sovereign debt yields cornered for the moment. As Powell does appear to have slightly more backbone, won't the Fed will unleash yet another round and form of QE that will juice equity markets in the US? Is that partially why you are relatively more optimistic on the US equity markets?

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