Summary of Is There A Bull Case For Markets? | Michael Gayed

00:00:00 - 00:55:00

This video discusses the potential for a market crash, and how it is binary - either the market will continue to decline or volatility will dissipate. Michael Gayed argues that, in order to restore the inverse correlation between stocks and treasury bonds, a systemic event must happen. He also points out that while the Federal Reserve may be forced to change course, the bond market owns the Fed, so it is up to the market to determine when it is appropriate to invest in risk assets.

• 00:00:00 The three most influential macro hedge funds told Michael Gayed that the U.S. unemployment rate will go above seven percent by the end of 2023, bond volatility is about to calm down, and market makers can quote tighter institutions more risks as the base of the pyramid stabilizes. Andrea Stainless, the host of this show, says he's been to London recently and it was "basically uh...the good old days you know you go there and you meet macro hedge funds, there are now clients in some cases." He says he has to agree with one of the theories, that the housing market is a good gauge of upcoming labor market trends, and that he thinks China is deliberately not ending the permanent lockdowns to contain inflation.
• 00:05:00 The author discusses the possibility that the unemployment rate will rise next year as a result of the number of job openings being greater than in 2008.
• 00:10:00 The guest speaker on the trading floor, Michael Gayed, discussed the correlation breakdown among assets, and how this year has been a nightmare due to stock market volatility not being correlated with Treasury rates. He explained that this could be indicative of a possible regime change, in which different assets become more correlated with each other.
• 00:15:00 Michael Gayed provides historic data on stock market crashes and Treasury yields to show that correlations between stocks and Treasury bonds are not holding over time. He argues that this is a regime change, and that investors should be prepared for the future.
• 00:20:00 The video discusses the risk of markets deteriorating further given the increasing volatility in government bonds. If this volatility continues, it may be the end of the world for investors. Michael Gayed argues that, in order to restore the inverse correlation between stocks and treasury bonds, a systemic event must happen.
• 00:25:00 Michael Gayed argues that although the UK market has been affected by Bank of England intervention, the situation is not isolated, and that we could be seeing similar problems in the U.S. bond market. He also points out that while the Federal Reserve may be forced to change course, the bond market owns the Fed, so it is up to the market to determine when it is appropriate to invest in risk assets.
• 00:30:00 Michael Gayed discusses the idea that overconfidence can cause market turmoil, and how it's manifested in the stock market and in the bond market. He also discusses the relationship between retail investors and fund managers, and how this dynamic could lead to a housing market downturn.
• 00:35:00 The interviewer discusses the potential for a market crash, and how it is binary - either the market will continue to decline or volatility will dissipate. He also warns listeners about the potential for a sovereign debt crisis, as the strong dollar may lead to a default by a foreign entity.
• 00:40:00 Michael Gayed, portfolio manager for ETFs, presents a bullish case for markets, citing decreasing correlation between stocks and real rates and the potential for a relief rally following a bear market.
• 00:45:00 Michael Gayed, an economist, discusses the correlation between the stock market and the bond market, and how this correlation breaks down in case of liquidity events. He also provides a history of core inflation in the United States. Gayed argues that unless inflation slows down all the way to 3.7-4%, the negative correlation between stocks and bonds will continue.
• 00:50:00 The video discusses the possibility of markets being "bull case" or not, and argues that the European Central Bank (ECB) had to react to high inflation in Europe caused by low natural gas prices. The presenter also discusses the Danish liquidity package for energy suppliers, and how it helped to reduce liquidity risks.
• 00:55:00 This video discusses whether or not there is a bull case for markets, and provides examples of ideas that are both actionable and ideas from both the sub-stocks of the host's own portfolio and Michael Gayed's sub-stock.