Today’s FOMC Decision: Will the Fed Cut Rates? (w/Mark Yusko)


So today we have a special episode of trade ideas Ahead of the big Fed announcement Rick Benson your of the Benson your group is going to find out how Marc usko of Morgan Creek Capital is making sense of markets and how he’s taking advantage of the current setup. Please enjoy Hi everyone, I’m Rick Benson. You are CEO of Benson New York investment strategies And today we have the pleasure of talking to Marc usko of Morgan Creek capital So Marc, thanks for coming with us today man to be here sharing thoughts We’re going into a really big Fed meeting tomorrow The world is kind of real is waiting for this markets have quieted down for the last two weeks There’s a ton of emphasis on what the feds going to do. Yeah, what do you think? Mr Powell is gonna send as a message. Yes. I think it’s gonna be one of those very anti climactic events I think he is gonna cave to the political pressure to cut even though I think it’s a huge mistake I think it’s been a mistake since day one to take interest rates down this low given all the you know positive You know We’re in the greatest economy ever according to our tweeter and chief if that were true Then then we clearly don’t need an interest rate cut 25 basis points does nothing right that doesn’t change anything economically you and I don’t borrow. No at Fed Funds, right? So it’s just a it’s a to waste people’s time and energy. He’s not gonna cut 50 basis points I don’t think I certainly not gonna cut 100 basis points like our president would love him to And low interest rates don’t solve economic problems. If they did then Japan would be rocking which is your mode be rocking Yeah, which they’re not so I think it’s all Kabuki theater back in May couple months ago. You aren’t CNBC and you said that you were we’re already in a bear market. Yeah Alright, so since then the S&P is up almost I know close to 6 percent or so Which in the grand scheme is not a big move away from where you said there’s a bear market But we’re virtually on all-time highs. We’re yeah, not even 1% in the SP terms yet away from all-time eyes So going into this Fed meeting If the market comes out bullish Li from here at what point you say, you know, well, let me ask you this Yeah, why are we in a bear market breath shows that this is not a Fang led rally. We have great participation across The universal investing space. Yes. Yeah well It’s not breath. You have you’re virtually on all-time highs. It’s very much tracking the S&P So there’s nothing bad going on in the breath since the only thing that’s really lagging or small cap names. Yep, okay The SP is a percent from all-time highs. Yep. Where’s the bear market? This goes all the way back something really to May I mean, may I reiterated what I said in September and then what I said a year ago in January and actually what I wrote in November of the previous year was that when Trump got elected I called it. Welcome to Hooverville, right? He’s Herbert Hoover Reborn the only third president with no experience to get elected and I thought the same thing would happen We have this big rally to around 2,800. That would be the peak. I thought it would happen in kind of September of 17 I was early euphemism for wrong. It really happened in in January 18 We got to 28 50, right and we’re basically flat since then we’re up 6% since then right and that’s you know Three points of inflation and three points of basically dividends and so we’re basically flat. Okay, so I could say I’m wrong You want me to say I’m wrong find him wrong, but I’ll say him early We did basically flat for 18 coming up on 19 months weren’t second-most overvalued in history of markets, correct And so if people get excited about the Fed cutting 25 basis points tomorrow And they think that matters in the big scheme and markets rally. I’ll to sell more. Okay, I’ll get more short Look, I’ll argue over the next decade from here from this point and actually from 18 months ago So I’ll take credit for the full 18 months from 18 months ago for 10 years You can have a negative return on the S&P. So why would you want to own that? There are so many other things around the world that you can own that you’re going to make far superior returns bitcoins Just one of them lots of things that you can own that are going to do my Bennet’s such as Besides cryptos Oh, which have had a really tough time. You know, we’ve had a good rally this year. Yeah and recently I think we got close to a 14th hour. So in bitcoins actually the best performing asset this year Yes over one year, but over two years over three years or four years over five years over ten years now, really? But other than that, yeah Oh way better. Yes. Yes, you’re right, but it is very lucrative. Yeah, very small portunus billion market cap I am so far away from recommending to institutional clients to play crypto Another topic for another day what to buy today? I’ll call it the hash tag China playing go trade Everybody thinks we’re when in the trade war we are being crushed In the trade war why China’s so far ahead of us? There are three moves ahead They’re playing a different game. The China. They’re playing go while team Trump argues about how to set up the checkerboard They’re not even playing the same game. There was a deal that Three or four months ago that China would have signed. Mm-hmm Okay, and then Trump at the last minute came in and said no. No, you have to admit wrongdoing. They’re like go away Going so there’s not gonna be a deal. There’s no deal coming though. He said this morning that everything’s going well No, it’s not. No. There’s no deal. There’s not gonna be a deal China’s killing us Okay, there’s no incentive for either China or Trump to make a deal happen right now The meetings that are starting right now are really not gonna progress in effect Today another $7 because Trump saying there really is no reason to rush through this and it certainly politicized You know He’s starting November starts his year into the the next election and if he wants to China deal to happen It would certainly be more beneficial to him to have something happen during the election season To say this is another thing we’ve accomplished so four months and it could easily be six to twelve months He doesn’t need this deal – we can’t vanquish the enemy until it’s important and makes a splash in the in the press So we always the anatomy right? He’s crazy. He creates enemies to topple. Okay, there aren’t enemies right? There was no problem with North Korea It hasn’t been a problem with North Korea for decades But he creates a problem and then goes over it doesn’t get a solution and then moves on to the next thing So now it’s Cold War 2.0 and Huawei This whole thing about what ten years ago the US and China had to make a decision. What were they going to support? Technologically we supported the fangs. So we are the world leader in social media. We’re awesome They decided to back AI and 5g So there are the world leaders in 5g right you get off the airport get off the airplane in Mexico City Plaster billboards there where you can see 5g from Huawei go to France whole buildings draped in that fabric that says 5g from Huawei They’re killing us in 5g rollout. And so we had to Demonize them and create this cold war kind of russki kind of enemy The reality is China’s just doing what they do. They’re leading in technology. They’re filing more patents They’re graduating more engineers. They’re building better companies and look at 10 cent in Alibaba again, eating our lunch So the great trade is long China particularly a shares and short the SP That’s interesting because I got clients back into China early this year. Yeah, we had a big move We actually sold out and came back in in June Awesome loved it. So that was a better trade than my trade because I’ve been long all year, but you had better trade Yeah, your trader. I’m investor. Yeah, so I agree with you that China is a place now Would I buy China and be short the u.s I don’t know because the SP is seemingly the only place to be that continuously makes money and With all-time highs. Well, the tena trade I think is so Overdone and and we said the SP is basically flat for last 18 months. Okay, after dividends and inflation Earnings are collapsing right horrible earnings season more horrible earnings this morning bad earnings So we’re gonna have two consecutive down quarters of earnings. I Believe we’re actually gonna be in recession sometime over the next four quarters But when I say recession, I don’t mean like a collapse like global financial crisis I mean kind of 2001 kind of 1% average growth over the four quarters. That’s a recession Shallow, but still a recession, right? and I think that you know The SP is gonna follow and look I said last October that the SP would fall 44 0% to get to fair value Well, I’m only wrong in the sense that is not down 40 now It went down 20 as rally back to even about where it was last September October But we’re not wrong until we’re at the end of the period. Right, right So I mean half year to be wrong December. We got down an SNP I think was twenty three fifty give or take couple points You know we significantly from them. Yeah by early January. I told my institutional clients that that low was not only a good trading low, but the cyclical low So I’ve been in the camp that we will not go down to that level again. It will not be tested What do you think? I don’t want to debate right here, but we could we could but not I I like your perspective But I think we’re gonna go lower. Well within December’s low I do I I think that was halfway. Mm-hmm I think we’re going all the way to fair value I think just like in 2000 2001 2002 and the way I thought about it was it who would play out in exactly that way from September of last year? To September two years, hence. So September 2020. I thought we would have down single-digit in 2018 Down double-digit this year, okay and then down twenty plus percent when the credit crisis really hits in 2020 just like it did 2002 because remember in 2000 the market was really overvalued but people didn’t really get Unhappy with the market until 9/11 it was really, you know, 2000 down 9% 2001 was up for most of the year until 9/11 and it was only in 2002 when people realized that all this telecom Companies were really fake Enron world calm etcetera and there are a whole bunch of companies that shouldn’t exist One-third of the Russell 2000 don’t make any money right the only reason they exist because of these Artificially low interest rates if interest rates were where they should be short interest rates for over a hundred and forty years have been equal To nominal GDP today nominal GDP around three and a half percent. That’s where interest rate should be but we’re keeping Mart officially low because that enriches the people at the top of the pyramid and if you believe back to our original Conversations that’s why the Fed exists then good. That’s what they’re doing So before I let you go I want to talk to you about something that’s near and dear to me Which is trading oil and that’s a market. You have a lot of interest in I Traded almost daily and I will tell you that from somebody who’s traded commodity markets almost 40 years It has become one of the most difficult markets to trade it moves a dollar like nothing. Yeah You you hit a bit in the moment, you hit the bed. It’s 25 cents against you. The machines have taken over I’m so glad to hear you say that because I probably haven’t been this frustrated about a market in my whole career either in the sense that We do a lot of work on the oil space because we have a lot of private investments you know in the best basins around the world and so we have really good insight and could Knowledge on what’s happening and the supply of oil is off the charts particularly in the u.s Particularly the Permian and so the price should not be strong this year and there’s been this crazy Rebound very similar to 2016. Remember 2016. We’re down to $20 a barrel It was going down rule was that saying it was going to $10 everybody Barisal and literally on a dime On February 11th he turned and went up. It was only a quarter later We found out why was the Chinese were buying huge amounts of oil futures to basically be able to market? They pumped a trillion dollars and chilling with the tea. Remember? That’s a dollar a second 430 1710 years trillions a big number but it pumped a trillion dollars to save the world in 2016 and yet small cap rally and then the market rally and everything everything was glorious and and we solved the the recession that we Were in the PM eyes were although well now oil Prices were rallying straight story straight stirring up and then boom they fell off a cliff right before the midterm election shocking I know Got low oil prices because you know, there’s this funny Correlation between price of gasoline and presidential popularity. It’s a perfect inverse correlation And so what was interesting was that fall then went out of control to your point about just being crazy is it crashed right through 50 right through you know, let’s $42. Yeah, what’s going on? And so then this just again v-shaped bounce? But when we looked at the supply, you know US production hit 12 million barrels a day Which five years ago people said was impossible and so it just didn’t make any sense to us But then you start looking at the futures market again And there was this money some of it Chinese but some of it come faces I don’t understand because I’m not in a day to day last fall oil peak to just under 70 $70 a barrel in the front month and two weeks later is on Bloomberg TV being interviewed that I said that high is Not just the high near term. It’s a sick cyclical. If not secular high Yeah, and the feedback I got was your office Hours, what do you think is are we gonna revisit that is there a good likelihood because the bounce off of 42 got to 66 And changed we’re sitting around 58 bucks today to protect I think you’re so wise on that because at that point not only was everybody talk about triple digits. There are some people talking about $300. Yeah that there wasn’t me this super spike If the Strait of Hormuz was shut down which now we’re talking about maybe happening now if that were to happen Right if there is a conflict Which is being created I think artificially probably to prop up oil look there’s one group in the world that needs triple digit oil prices the Saudis and We will do or say anything to help them as we’ve proven they can do anything they want Irregardless of law or you know ethics and we will support them So they want to get a Ramco public they need high oil prices to get a high price for Ramco so I wouldn’t be surprised if Suddenly another drone gets shot down or something happens And you know I left I love the headline about the Iranian seizing a British tanker Know the British seized two Iranian tankers in the morning and they just retaliated So let’s get the whole story, but I do think there’s risk of a super spike, but I think the secular peak of 77 I’m right with you. Now. Look we are awash in oil. It’s not as bad as kind of the 98 cover The Economist magazine Where you know oil was gonna go to $5 and The Economist actually says someday it might be free Okay, that was a little extreme, but we have so much production capacity in the United States because of fracking technology and this is a great example where Technology has taken a commodity and made it ubiquitous. Right we didn’t think for years In fact, I just tell the story that we had all this oil size of Saudi Arabia in Midland Texas or on underman the text if you can see the airport you got great oil but you had to drill a Mile deep insert a tungsten steel rod and heat it to 700 degrees Celsius I said that just seems expensive but then fracking came along we didn’t have to do that anymore So now we can get this oil out of the ground and that’s pretty amazing so supply really- for oil prices demand now we’re not going to have everyone have electric cars next year, but electrical fish and that terrific ation is going to continue to go on and that’s another bad thing for demand, but Urbanization will counter a lot of that you got, you know, 10 million people year urbanizing in China You got a big urban ization in India, and you got affluence increasing So that’ll increase the demand for oil So I don’t think the demand side is gonna collapse like some people think no, so I don’t think so either I think we’re gonna range 40 to 60 anytime. You get low 40s, then we’re gonna help prop it back up to help the Saudis the other thing that we could spend all afternoon talking about is What’s happening in the global reserve currency? Right 1971 we go off the gold standard we go to the Fiat standard We really go to the oil standard so we cut a deal with Saudi who say we’ll protect you if you price all oil transactions in dollars then what happens anyone who threatens that disappears Libya says We’re gonna price in gold Qaddafi gone Iraq says we’re gonna price in Euros the same gone Now if you’re Russia or China, you say we’re gonna price and remand be a ruble Well, I can’t get rid of those guys because they got nukes. So we’ll just negotiate it We’ll try to make petrodollar standard better. But the petro dollar standard is now going away because the u.s. Is Exporting oil which decreases the demand for dollars. Yeah. So we’ve got this really interesting dynamic and there’s a lot of There’s a lot of things that are making your and my job really tough in the oil market Earlier this year and I’d say it’s probably the homerun trade of the year that I’ve had a bad senior investment strategies in February We went along the solar ETF tanned and shorted xop oil and gas names against it nice, it’s worth over just about 35% on a pair trade so I’m a big believer that The future in the energy space. And by the way, if you look at XL e the energy space versus the SP Yeah this past week again. We made new relative flows for 2019 and We’re on the lowest lows in 19 years You have to go back to 2000 2002 see the last time exhale. He SP y is at this level have the last 10 years Xle vs Has people I peaked in 2010 only to Atta less nine years has the energy space outperformed It’s been a disastrous long-term by now You can make money on individual names, but you could have gone in any other sector of the market done better Yeah, well bring it all back – we came in to talk about the Fed it’s because of the Fed right the reason that the energy business has become such a sucky technical term business is Because of free money, yeah, so free money low interest rates all these companies levered up. They can’t generate cash flow So they’ve got all this demand from the market from Wall Street to put up production numbers They’re producing more negative free cash flow. So they’re just burning through cash Well, if you can borrow for free then you would keep doing that But now with the threat of people saying oh that’s to be disciplined in the markets You’re starting to see some of those companies go out of business So XLE and xop some of those companies are in big trouble and what’s eventually going to happen is a massive wave of consolidation There’s going to be a great Opportunity on the long side at some point to buy up all the small companies there you get folded into the big companies but long term that trade of long solar short oil is a good trade and You know, that’s why your tactical approach with this fundamental approach is really good more. Thanks so much for joining us today It’s been a real pleasure and always great the insights from you All right, who’s really fun to talk about long term stuff short term stuff tactical trading investing really great to be here with you Well have you back again Thanks You

37 thoughts on “Today’s FOMC Decision: Will the Fed Cut Rates? (w/Mark Yusko)”

  1. liquidity will be sucked-up further. Connect gold to the dollar. Gold is the yardstick, it's money and not a commodity like oil. We will see more Decembers 2018. Gold and Bitcoin makes sense versus fiat, printed paper. 2020 China deal is his ticket. Imagine 5G running on a Billion new cheap devices doing business on Alibaba and elsewhere using Crypto. Solar in Africa, you can power the whole of Africa and Africa cannot afford mining gold anymore

  2. Bensignor, you're an idiot. ONLY reason stocks are at ATH is because of the Fed's (and ECB) actions/verbiage! It's certainly not because of fundamentals/earnings, etc

  3. China is getting hammered by the trade war, also banks are failing in the country. I would not go long China, at least not yet

  4. No problem with North Korea? They were literally testing ICBMs. This guy thinks the S&P500 is too high with no justification other than "earnings are terrible"?? Lets look at the largest companies in Q2. Apple beat, Facebook beat, Google crushed it. MSFT beat. AMZN missed. 4/5 crushed it, just 1 missed. This guy is off his rocker lmfao. The S&P is priced for ~4% annual returns over the next ten years, so yeah its high but that's what happens when the alternative is low interest rate 2% bonds. Still very unlikely its down in ten years unless the fed really starts raising rates which clearly isn't happening as the fed is cutting lol. Such bad analysis.

  5. RE: 7:36 – What problem does 5G solve? No one has really even studied the long-term effects of 5G radiation. I'll stick with my 4G and less cancer risk.

  6. He has the best information possible on oil but he doesn't know it only took the end year crash for the rigs to drop , going on for half a year now. What about the shitload of cheap money needed to start up a well that produces a lot of cheap gas too and gets totally depleted in 3 years. A worldwide (economic, not stock market) recession is a much bigger risk for the price of oil than the "neverending" shale production. Also it's funny how so called oil experts always see oil in a tight range, if you zoom out 30 years you can't find one, it's always been terribly volatile.

  7. Want to invest well? Do the complete opposite of Mark. This guy is fucking clueless. For years he's been calling for the collapse of the dollar, buying Deutsche bank stock, and long Chinese stocks since 2016. If he says it will be a gorgeous day out, bring an umbrella.

  8. China is killing the US? Is that a joke? Their house of cards paper economy is falling apart. Major firms are hemorrhaging money and there are lots of banks that are becoming insolvent there. Their central bank is scrambling to buy up all kinds of toxic assets to maintain the illusion of strength but they are done for. Their currency scam is up and now we'll see what their real economy is made of. Did everyone honestly think that in 2 decades thousands of Chinese could become millionaires over night legitimately? If it was that easy why doesn't everyone do it?

  9. Your predictions failed to capture the volume, the quantity, and the catalyst for decline and you lump that garbage dice roll of a prediction into the "I got the timing wrong" category. Lmao.

  10. I think he gets it wrong on Saudi's wanting >100$ oil price. Sure, they benefit from higher oil prices, but who benefits more from the oil price going from $50 to $100?… the country that has a $10 cost of extracting a barrel (Saudis) or the country that has a $50 cost of extracting a barrel of oil (Russia). The Saudis are going to get rich either way. But the more expensive producers are the ones who are enabled by higher prices.

  11. Hot and extremely informative…..A lot of People who are land locked in America cannot see the whole picture The way this guy is spelling it out.

  12. This is full of it to say that North Korea has been an issue for decades!
    He's also arrogant and ignorant about the real issue with Huawei with built in Communist Party Surveillance.

  13. You might want to catch an interview done on you tube channel Epoch Times with General Robert Spalding regarding China and in particular 5G .Spalding served as main advisor to Chiefs of

  14. This guy (Yusko) REEKS of progressive, liberal democrat political bias……which clouds much of his opinions/theories/projections. Haven't seen him in awhile on talking head shows (tho' i dont listen to that noise much anymore…) but this guy talks more like a lackey economist (who are USUALLY WRONG) than a CEO/CIO of a fortune 500 company. You'd think he'd "know better" & show some class as a multi-multi millionaire, but no, he's quite enamored with himself….which IRONICALLY, puts him in the same category as one he despises so much, (read Yusko's tweets; its all there) our very own vociferous POTUS Trump. 😂😂😂

    Please Real Vision. Don't bring him back…to do a strawman/i told ya so video after the inevitable corrections &/or Bear-Mkt we always get at some point in time. Bring him back instead, to eat crow, although you'll need a security detail/panel to "work it out" of him most likely. (Notice his, "i'm not wrong here…." in video)

  15. 💚💙💛🧡 Noone and i mean absolutely noone on this earth can snort a line of cocaine like Mark Yusko. he's one of the biggest and baddest boys from Main Street. my boy 💚💙💛🧡

  16. China is filing more patents??????!……. So China flagrantly absconds, rips off, steals, and bogarts legitimate patents from the USA and the rest of the world… and They file their own patents?? WTF!!!! China is one big country that's getting rich being resourceful thieves…..

  17. Your channel is incredibly engaging! With the fluctuation of the price of bitcoin, it is still set to see new highs in the next couple of days as we are obviously out of the long dip. Consistency really pays and being consistent with the anticipation of what lies ahead, is what laid out a whole new level of bitcoin, moving in the purchasing power of most people. The best option especially for starters is trading. I stumbled upon a few traders lately and I learnt to trade by following their guidance. I have before now hodl a certain amount of bitcoins while trading but without good profit. Among the few traders I met was Gérard Barrientos. My most preferred trader who has given me a good kick-start with most of his programs, trading patterns and guidance. I am glad to have made over 3 times my investment which amounts to 8 Bitcoins already. To seek Gérard's help, you can e-mail him on gerardbarrientos6672 @ gmailcom. This man is a true trade genius.

  18. I'm blown away by the flaws in interviewers these days! Many interviewers feel the NEED to be heard and don't know how to ASK QUESTIONS (and then STFU and allow their guests to share their knowledge and opinions)!.

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