Larry McDonald: Upcoming Rate Hikes will Inflict more Pain than Normal

Tom welcomes a new guest to the show, Larry McDonald. Larry is a New York Times bestselling author, CNBC contributor, and Political Risk Expert. He created The Bear Traps Report, a weekly independent Macro Research Platform focusing on global political and systemic risk with actionable trade ideas. Larry discusses how bad leverage has become in the markets today. Small rate changes now create huge amounts of interest payments. The Fed will be unable to hike rates for long and that will be bullish for metals. The Fed is very far behind the curve. Many foreign countries including Poland, Brazil, and Russia, have hiked rates several times, while the Fed has yet to take any action. Credit markets are weakening quickly, particularly in Europe, and inflation is becoming rampant. The yield curve could soon become inverted. Companies like Costco do well in recessions and are now outperforming.Larry explains how the dollar desperately needs another 'variant' crisis to save the day. This is due to the economics of capital flows moving outside of the U.S. economy. Today's media complex needs shock to capture the public's attention. We've seen an incredible tailwind for stocks, bonds, and growth stocks. He explains the effects of risk on with miners and notes that silver can underperform gold in certain situations. Most economists have no understanding of risk management. Any shift from a hawkish to a dovish stance by the Fed can cause silver to outperform. Tesla and other electric car companies are seeking ten-year contracts for certain commodities like magnesium, silver, and copper. These are not unlike the typical uranium contract. From here, silver miners could easily have 7x upside potential. Their economic model helps them find the capitulation lows. Larry notes that we're currently approaching peak market exhaustion. Holding metals for long periods is often a poor strategy. The early parts of a commodity cycle are going to be key for investors. Currently, aluminum equities are crushing gold in performance terms. There is little room for error in the oil markets. Should demand spike and ESG continue to constrain the industry, we could see a large price shock. The energy demand alone from places like India and China will surprise in the coming years. ESG and Covid have crushed capital investment in energy and it's going to take time to turn this capital deficit around. Lastly, Larry examines the relationship between the VIX and Bitcoin. Bitcoin gets hit hard when risk enters the markets. Time Stamp References:0:00 - Introduction1:16 - Market Risks Today4:45 - Rates & Inflation6:58 - Bond Markets12:00 - Dollar Problems16:06 - Miners Outlook18:48 - Silver Mis-Priced24:55 - Platinum Fundamentals27:40 - Miners & Timeframes30:36 - Buying Right34:30 - Taking Profits37:54 - Oil & Demand43:36 - Bullish Action46:58 - VIX & Bitcoin49:23 - Wrap Up Talking Points From This Episode * How excess leverage is cornering the Fed and the possibility of a recession.* Why the dollar thrives on crisis.* His expectations for silver to outperform.* Energy and why he expects further supply shocks. Guest Links:Website: http://thebeartrapsreport.comTwitter: https://twitter.com/convertbondAmazon Book: https://tinyurl.com/2p93wy9x Larry McDonald is a New York Times bestselling author, CNBC contributor, and Political Risk Expert. He is also the creator of The Bear Traps Report, a weekly independent Macro Research Platform focusing on global political and systemic...