The Market’s Late-Cycle Indicators

Featuring Alex Gurevich

Alex Gurevich, CIO of HonTe Investments, has developed a framework of timing signals during a twenty-year global macro trading career. Now he says that a late-cycle signal has recently been triggered. And upon further investigation, he has found a pattern of confirmation that provides sufficient reason for him to adjust his investment outlook. Filmed on April 19, 2018 in San Francisco.

Published on
25 April, 2018
Topic
Investment Framework, US Dollar, Recession, Macro
Duration
30 minutes
Asset class
Equities, Bonds/Rates/Credit
Rating
31

Comments

  • BK

    Brian K.

    6 7 2018 20:30

    0       0

    Why would it be hard to stop QT?

  • nF

    nicholas F.

    30 6 2018 01:45

    0       0

    Alex, thank you for taking the time to share your view and thought process. Can you shed any more color on the Libor/OIS spread? I've been hearing nothing but technical reasoning behind the spike from the street and would love to dig into the mechanics a bit more. thanks!

  • BK

    Brian K.

    5 6 2018 18:38

    1       0

    6 month confidence very low ?

  • DC

    Dan C.

    21 5 2018 19:32

    0       1

    There is no dollar shortage. The demand for USD is met with instant supply. Learn MMT basics that debunk what most hedge funds think they know. The USD is going down and gold will rally. Rate hikes are price increases. The demand for USD creates inflation yet the Feds think they are stamping it out with rate hikes. Madness.

    • JO

      Jens O.

      24 5 2018 14:30

      0       0

      May be, you like to replace "USD shortage" with "thightening USD liquidity" or "USD affordability" ... One would not think that all our creditor friends from Argentina or Turkey have had all their "demand for USD met" already one or two months ago, right?

  • JD

    Jonathan D.

    12 5 2018 08:40

    1       2

    More bear food. Yet stocks remain in bull market till they stop.

  • RP

    Raoul P.

    5 5 2018 23:08

    11       0

    I 100% agree with alex's analysis and have been writing similar in GMI. The parallels with 2000 is very similar indeed.

  • MM

    Michael M.

    5 5 2018 17:56

    2       0

    Alex summed it up best at 12:44 "... of Fed reducing the BalanceShit and sucking" His words not mine but I'm not sure I've ever heard it put so well. :)

    Seriously, much respect Alex.

  • JH

    Jesse H.

    3 5 2018 23:53

    4       0

    Like Alex's style and careful thought process. He is historically focussed, generally rigorous and totally easy / non-dogmatic / humble. He is pragmatic and non-ideological -- something I appreciate when there are so many talking heads out there (and very occasionally interviewed on RV). Great interview - thank you RV.

  • MM

    Michael M.

    3 5 2018 16:27

    0       0

    actionable research. love it

  • OD

    Orin D.

    3 5 2018 12:19

    2       0

    That is about as good as it gets. Alex is a phenomenal thinker and I value his opinion up there with the Dalio's/Gundlach's of the world.

  • JD

    Joe D.

    2 5 2018 16:59

    1       0

    Didn't grasp the point about EURO vs. interest rate at the 2:20 mark. any help?

    • OD

      Orin D.

      3 5 2018 12:22

      4       0

      You can lock in a EURUSD 10y forward circa 1.50, spot was around 1.22 at time of interview. What he is saying is interest rate differentials are very favorable and thus EUR needs to rally over 2% a year for you to lose money and at the same time many fundamental indicators are suggesting US dollar could benefit over the next 12 mths and it just so happens EURUSD broke lower shortly after this interview.

    • JD

      Joe D.

      5 5 2018 22:11

      0       0

      Thanks

  • NH

    Neil H.

    29 4 2018 17:23

    1       0

    excellent video and very well articulated. whether you agree or disagree with Alex's conclusions it is hard to punch any wholes in his thought process.

  • MK

    Mike K.

    28 4 2018 15:14

    4       1

    Antonio Banderas dropping serious late cycle knowledge!

  • ml

    michael l.

    28 4 2018 01:25

    5       0

    Great presentation, Alex. Strongly agree with your view on where we are in the cycle. Fed will keep raising until forced to stop, and QT only compounds the rate hike tightening effect ... and QT is only getting started (balance sheet reduction is ~ 2% in total over the initial 8 months of QT)!

    Something is going to have "give" here in the next 6 months or so...either growth takes a step-function up, aided by the tax cuts and higher govt spending, and that higher growth "overwhelms" continued financial tightening, or the Fed is going to be confronted with a flat yield curve and an equity market well into correction territory. Equity bulls will point to historical patterns and correctly note that a recession lags an inverted yield curve by roughly a year and that may well hold again this time (who knows), but I suspect that the equity market will "adjust" down further in advance this time...simply because investors learned the value of front-running the Fed during QE and will apply the lesson in reverse as well get further into this tightening cycle.

    • ml

      michael l.

      28 4 2018 01:26

      0       0

      correction toward the end ..."as WE (not well) get further into this tightening cycle."

  • ZC

    Zachary C.

    26 4 2018 13:28

    1       0

    OK. I’m confused and maybe I’ve been wrong all along. Does increased treasury issuance via larger budget deficits increase demand for dollars? does it suck dollar liquidity from the system like QT? I always assumed the opposite. I think Alex implies the former. Can someone help me on this? Thanks.

    • JQ

      JACK Q.

      27 4 2018 04:37

      0       0

      It does because when you issue treasuries, you recieve dollars for that -> in turn means they're sucking up dollar supply, less supply means higher dollar ... if that makes sense?

    • YG

      Yelian G.

      25 5 2018 11:58

      0       0

      I still struggle at times with these issues or phenomena! I think ultimately the real answer is 'it depends'. Nothing happens in isolation (although we often tell ourselves that just so we feel like we understand something, economists are GREAT at this!). Larger budget deficits really do increase demand for USD however that may or may not lead to a higher USD (it ain't that simple). Higher issuance of treasuries WOULD reduce dollar liquidity and the velocity of the USD globally IF the U.S government were to issue treasuries then take the USD received from the market/bond holders and then DESTROY those dollars...but that is not what the government does, it then spends those dollars on goods and services and those dollars get recycled back into the system. This is one of the reasons 'crowding out' has not ever been an issue in modern monetary history (another useless theory put forth by economists who fail to grasp complexity theory as applicable to the macro-economy)

  • TT

    Timothy T.

    26 4 2018 09:38

    1       1

    Can't say I agree but I understand where he is coming from. The question is whether the scale of government and corporate debt and how the Fed has wedged itself between a devil and the deep blue sea will affect how they will react to higher inflation, and lower equity markets. I have my doubts on the ability of the Fed to continue to raise rates in the face of rising US deficits.

  • FC

    Fractal C.

    26 4 2018 01:10

    1       0

    Wow - awesome job Alex. I will watch this interview 25 times at least.

  • JM

    Jeff M.

    25 4 2018 23:44

    11       0

    Loved this video. One of my favorites in some time. I like his style because he's not dogmatic, just lays out thoughts / why he's thinking that way.

  • EH

    Edwin H.

    25 4 2018 22:41

    7       0

    Alex, this was a great video! Great methodology here! Everyone can learn from this video. Really hope they do a follow up with Alex down the road! Bravo!

  • JC

    John C.

    25 4 2018 12:32

    9       0

    Excellent video. Always interesting to hear Alex's views.

    At this point I think we might be in a situation where we see Treasurys, the USD and even gold rally for a bit in tandem. I know that's counter-intuitive in some ways but given that we're on the precipice of recession (let's say 6-9 months or a year away) it could easily happen. Good time to be in cash/liquid as well, but I for one like being in something like TLT right now where you're earning a little and can benefit from any 'flight to quality' (which so far hasn't happened, but I think will).

    • EH

      Edwin H.

      25 4 2018 22:44

      1       0

      Hello John, I am watching TLT very closely here, Looking for it to bounce off support in the 116.50 rage. If that does not hold, could see a sell off to mid 90's. Important test at hand!!

    • JM

      Jeff M.

      25 4 2018 23:44

      0       0

      I'm long TLT. I think it will work out, but getting a little nervous as it marches down.

  • NR

    Nuno R.

    25 4 2018 10:46

    7       0

    "I don't like to fight the carry trade..." ; that's so true Alex.

  • TJ

    Terry J.

    25 4 2018 10:05

    4       0

    I always value Alex's views and insights. His current thoughts on where we are in the economic and market cycles seem very similar to the recent observations of Lakshman Achutan in another recent RVTV video. It was most interesting to see the similarities to the run up to the 2000 and 2008 bear markets, that Alex's various signals are currently showing. His arguments that we are probably in the late (and possiibly very late) cycle are very persuasive, and I shall watch this again to ensure I don't forget these potential danger signals!

  • Nv

    Nick v.

    25 4 2018 09:35

    15       1

    Excellent. Thanks Alex