Is The 40 Year Bond Bull Market OVER? Jeffrey Gundlach & The Acid Capitalist Discuss.

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제임스 그랜트가 말한 40년 채권 강세장 종료가 실현될 수 있으나 시간이 오래 걸린다는 논지. 다음 경기침체 때 과도한 통화 발행으로 인플레이션 재가속 후 채권금리가 오를 수 있으며, 침체가 깊어지면 금리가 하락하며 채권이 급등한다고 봄. 미 국채 10년 금리는 장기적으로 4~5%대 이상 고점 가능성 언급. 중국 위안화(CNH) 디플레이션 리스크와 연준의 재정우위(fiscal dominance) 압력도 언급.

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01. so I was randomly thinking about who was I randomly thinking about it um James James Grant I've got a story about him and he said his work that he sees us now the bond market rather us Bond Market has just entered into a secular be Market that can last up to four decades I got to tell you when he said it I kind of brushed it off since then it feels like maybe he's right it well it could be and it might but it might transpire in a way that is contrary to what people might expect I the end of the bond market the end of the not the end of the bond market I mean maybe um got to get those taxes paid got to get those deficits down um nothing wrong with deficits But Rising deficits when the economy is hot to drop not so good but um the bond boo Market this 40-year plus phenomenon coming to an end prophesized by uh Mr James Grant um but we it's how we get there don't tell me the destination tell me how we kind of get there and as I like I love actually that Jeff is picking up on this I like Jim Grant I respect him a lot I'm a paid up subscriber to his service I read his essay that just that came out in the middle of July that spoke to that bare market and he's so self-deprecating that's one thing I like about uh Jim Grant he's so brilliant he is so self-deprecating about it but he you wasn't so self-deprecating with me um I I had lots of lovely Charming um encounters with James I had the great honor of presenting at his interest rate Observer conference both in New York and the the inaugural one in in London but I do recall writing in my my eclectica monthly um it was when I was rejecting all this name calling and moral izing um all of the um the the noise in my mind that was preventing me from managing other people's money and and I was kind of did I lash out but I mentioned James um Albert Edwards um and probably a few others but including myself um the Bears if you will and I was overcoming my beish disposition I was saying most likely that the move in mocus was higher um Bo did I get a pretty unpleasant email from Mr James Grant but anyway James I love you I oh I think I'd never forgiven him for um I think in the summer of 2008 and the guy who knows more I thought that was interesting the guy who knows more see how my mind I'm doing it again kind of what I doing I'm just being annoying I am um two steps ahead of every sentence it's a clotted mind um the summer of 2008 um and so the guy who has this encyclopedic knowledge and understanding of the bond market to the ninth Nth Degree and there you are in the summer of 2018 I want to say the 10year Bor year was 4.2% and in James in interest rate Observer l u the guy who knows everything about bonds he says and kind of quoting the language of um Buffett and what Benjamin gri at 4.2% the yield on the 10 year does not offer a margin of safety to protect the conservative investor Preposterous statements I never read but um James forgive me but he acknowledged in that essay in a self-deprecating manner that he wrote essentially the same essay about here comes a 40-year bare Market in 2014 so uh it can take a long time that's one of my number one pieces of advice to people about Investments is it takes a lot longer than people think now what I'm saying it takes a lot longer note to all of you people on twitters who keep saying Are We There Yet TT was a call option on the joh 25 2025 what's the time what's the time Mr Wolf which where's my calendar we're presently in the year 2023 things take very long time to unfold a boom Market of such preposterously long magnitude such as the treasury 40 years plus um I don't think it's going to end without a buying buying Wars an body Invasion from out of space and 10 your yield hit the floor you know we're done at 46 basis points um and maybe I'm greedy maybe maybe that was it I just don't know so I I'm looking for the most Preposterous drama and the most Preposterous conversion of deep-seated beliefs now what I'm saying about there could be a a lengthy painful bare Market in bonds it's not really the next move in the chess chess game the next move in the chess game you see Jeff Jeff just gets I'm got to use a thousand um exalted exalted I've got I've got to strangle and rest so my mind is not working very well tonight let's go I think it might happen because of the response to the next recession which could be very inflationary we've seen we've SE seen the Playbook right when we had the global financial crisis there was tons of money Printing and quantitative easing and we kept at it and then we had the pandemic and it's tons of money Printing and quantitative easing and the fiscal response keeps getting bigger so I think what might happen is Don luskin may be right and that the FED in their resolution to get inflation down towards or to two% will probably overshoot just like it overshot on the upside they wanted to get inflation higher than two my suspicion was they wanted to get it to four back in 2021 20 early 22 not only did it go to four of course it went to nine and the PPI went to double digits and Import and Export prices went to over 15% year-over-year basis so if we've already fallen from nine back down to three but now we're going back up a little bit again on the CPI right and that I think is going to keep the FED uh constantly Resolute about things but once the economy rolls over which I think is going to happen with this uh Confluence of tax have to be paid uh rent has to be paid student loans have to be paid credit card bills are getting very expensive and getting very large you know I I I think that what we'll end up doing is having the inflation rate go down ultimately when the recession comes to 2% but probably then head in temporarily into deflation and um so the sky mind is a lot of uh fixed income money and he mights a lot of AUM is under management um and he believes that prices could actually the rate of change in prices could actually turn NE and that will end up causing a reactionary response that will be highly inflationary I think in the next recession the thing that will be so confounding to people is that bond yields once we get deeper into the recession Bond yelds will actually start to go up because of excessive um money Printing and monetary response hallelu in the next and let's not get this wrong profound recession um during the recession bond prices will turn will take flight and prices will start falling uh and that will be the demarcation line uh recording the end of perhaps the greatest buo Market in any asset class so was the buo market in the risk-free rate uh the boom Market will come to an end during the next great economic downturn which is likely uh to be revealed likely started now likely to be revealed in all it shock and and awe next year but then I think the economy is going to hit a wall in the next six or six or eight months or so and there's going to be a a real shutdown in consumer activity due to all of these interest payments that have to be made and of course one thing thing that I always want to talk about is the government has a very onerous and increasing debt burden of course too and I think the FED in the back of their mind realizes that when the next recession comes the amount of borrowing is going to be so enormous that uh it's going to be a really bad idea to have interest rates Jeff's just going is Hing this really good point about fiscal dominance that with the Quantum of debt outstanding the FED is either under its own poers vestages coming to recognize that you can't put 5% five and a half% six 697 you cannot put these interest rates uh as a charge onto the US Treasury I to blow it up and so the FED actually kind of needs the cover doesn't need it but it needs to cut rates is higher than five and a half% with five and a half% interest rates and the Federal Reserve is in no hurry to cut interest rates and therefore this economy is going to go down it's going to go down heavy and it's really heavy and when the stock market's down 40% you'll be squealing squealing to buy those treasury bonds and you the TT down at 95 I traded almost 185 um it's going to go 110 at 110 the chart's going to be giving you chart point to buy we're going to buy a lot it's going to go to 120 probably going to go to 140 probably will exceed 140 um we probably go somewhere 140 in that range 140 to 180 guess what I'll be doing I will be selling it I will be buying longterm again long term long term two years trying to roll into three years into four years I'll be buying pure options on the price and of those bonds because we have to is8 again or 2007 2008 Redux um you have to create the most profoundly awful deflation and if and the deflation I'm talking about is China and the currency the C the C give me a c the N the H the cnh H trading at nine that's what it traded it's what they devalued to uh in the wake of the naft agreement in 1994 at the amount of commercial price this inflation that brings on the rest of the world will be intense um and you will have further radicalization of the US government and we will be very much at that point accelerating into the demise of the monetary system that we recognize today and the demise will be at the behest of the US who will have to say this has got an end this is killing us and that will not it will not be asset price friendly to any asset class um it will not be it will be particularly severe severely unpleasant for the fixed income Mar any Jeff Jeff stop me from talking in 2007 I wrote to my clients if you think the future is inflationary yeah go to buy the 30-year Bond uh again um the deflation that we that was a reality in the US hosing Market in 2007 um was the thing that was going to bring interest rates to the floor it was the thing that was going to be the Advent of quantitative easing we got that right and it looks like Jeff's arguing that we're going to go into that world again so remember if you think the world is inflationary by bonds that's what that's what Jeff say oh