Lead-Lag Live
Welcome to the Lead-Lag Live podcast, where we bring you live unscripted conversations with thought leaders in the world of finance, economics, and investing. Hosted through X Spaces by Michael A. Gayed, CFA, Publisher of The Lead-Lag Report (@leadlagreport), each episode dives deep into the minds of industry experts to discuss current market trends, investment strategies, and the global economic landscape.
In this exciting series, you'll have the rare opportunity to join Michael A. Gayed as he connects with prominent thought leaders for captivating discussions in real-time. The Lead-Lag Live podcast aims to provide valuable insights, analysis, and actionable advice for investors and financial professionals alike.
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Lead-Lag Live
Mish Schneider on CPI Manipulation, Commodity Trends, and Future Market Dynamics
Can the manipulation of CPI numbers really shape our financial future? Join us as we sit down with Mish Schneider, the chief strategist for marketgage.com, to dissect this provocative question and more. Mish takes us on a journey from her early days on the commodities floor to her current expertise in equities, offering deep insights into the factors driving today's economic landscape. We dig into the undervaluation of commodities pre-COVID, explore the lasting inflationary pressures from the pandemic, and analyze key indicators like gold, silver, oil prices, and the national debt.
Our exploration doesn't stop at domestic markets. We shine a light on global commodities, focusing particularly on China's economy and the implications of the Baltic Dry Index. Mish challenges the narrative of China's economic struggles by pointing out a thriving middle class and robust demand for bulk commodities. We also scrutinize lagging inflation indicators such as the CPI, PPI, and PCE, and their inability to fully capture current economic trends. Through a closer look at agricultural commodities, we identify cycles and geopolitical factors that may drive future price increases, using the significant rise in sugar prices since COVID as a case in point.
In the final part of our conversation, we explore the future of markets and commodities, zeroing in on the intersection of electric vehicles (EVs), infrastructure, and raw materials. We discuss the potential for widespread EV adoption by 2025, the critical need for infrastructure investments, and why stocks like Tesla and Rivian are catching bullish sentiments. Mish also provides her take on post-COVID consumer behavior trends and the emerging influence of obesity drugs across industries. With a thorough analysis of technical tools and key commodity indicators, we wrap up by assessing the risk-reward profile for long-duration bonds and their impact on market sentiment. Don't miss out on this comprehensive discussion loaded with expert insights and forward-looking perspectives.
The content in this program is for informational purposes only. You should not construe any information or other material as investment, financial, tax, or other advice. The views expressed by the participants are solely their own. A participant may have taken or recommended any investment position discussed, but may close such position or alter its recommendation at any time without notice. Nothing contained in this program constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any securities or other financial instruments in any jurisdiction. Please consult your own investment or financial advisor for advice related to all investment decisions.
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And we walked into a soap store just buy little light things, souvenirs to bring back, and we got into a conversation with the guy who ran the store. Turns out the guy was working for the New York Board of Governors and his job was to crunch the numbers. He was an accountant Crunch the numbers for the CPI, and he told us that if they didn't like the number he came up with, they would tell him go back and do it again. And so if there's any question that these numbers are manipulated and massaged and presented to us as the public as something that we can find palatable, he confirmed it In fact. I said, well, did you go on camera and say that? And he said, yeah, meanwhile the guy lived in Honduras, right, so he kind of escaped the whole thing.
Speaker 2:I am excited to talk to Ms Schneider, who a lot of people have been tracking and know her work over the last many years when it comes to markets and investing. I had a nice dinner with her many, many years ago. It's been a while since she and I have done something visual like this, have done spaces in the past. Let's get right into it, folks, because there's a lot of interesting things to talk about. My name is Michael Guyatt, publisher of the Lead Lag Report. Joining me for roughly 40 minutes is Mish Schneider.
Speaker 1:Mish. For those who don't know your background, introduce yourself. Who are you, what have you done throughout your career and what are you doing currently? Well, right now I am the chief strategist for marketgagecom, which means that I am basically doing discretionary trading. We have an RIA called MGM LLC and many different blends, one of which, as the most aggressive, includes my discretionary trades. But I also do all the content writing, except for one day a week when we have an outlook written by Don Goodman, and I also obviously appear with wonderful people like Michael throughout the week. Everything from Fox Business to Business First, am and, in between, yahoo, et cetera, et cetera.
Speaker 1:But my background really started in commodities. I went down on the floor many, many, many, many years ago working for Conti Commodities and I became a member of Coffee, sugar, coco. Conti Commodities kind of blew up with the whole silver debacle, so that got me really basically spread out from there to Comex. So I trained at the metals. I wound up on the Merck, which was the oil and gas that I did probably for the longest part of my career, but then moved into financial futures. Really basically right after the market crash in 2008, I entered the world of equities, which is where I have been ever since.
Speaker 1:I wrote a book called Plant your Money Tree A Guide to Growing your Wealth. I really like technical analysis a lot, but I find that it works the best when you have a fundamental story to accompany it. So you might have your story, but it's really the charts that have helped time my way in and, of course, also established risk parameters. You know, I live in Santa Fe, new Mexico, which is why Michael and I don't get to see each other very often. I'm in New York more occasionally, but that is my hometown and, yeah, life is good.
Speaker 2:So let's start off with a very easy question Is the inflation cycle dead or is it about to come back? Because in the last year or so everyone's been saying you're going to have another wave of inflation. And now, with the Fed seemingly wanting to cut rates and a lot of the disinflationary pressures may be getting more and more entrenched, I don't see that near to me. Where are we on that?
Speaker 1:Obviously, you have to wait for the evidence. I mean, to have a theory is wonderful and that's, of course, what makes us all very interesting to talk to and always have different ideas, but you need to see really the evidence of it. So this whole idea started out. Obviously I saw commodities had been so undervalued compared to equities as we were going into the period of COVID. Of course, we could have never guessed that COVID would have happened at that point. We kind of knew and even I wrote about it in Commodities and Stocks magazine was that at the end of 2019, that historical ratio between stocks and commodities was unsustainable. You just don't know what's going to make that bubble burst. And of course, there we were and inflation went crazy.
Speaker 1:Since COVID we've had a lot of things come down, which makes sense because that was a complete shutdown. That was an aberration that we hopefully never see again in our lifetime. But at the same token, we've seen a lot of other commodities really hold up, maybe sold off from their highs, and obviously CPI over 8% now what they're saying here much lower at around 3%, but nonetheless there are areas that we have to watch for that have not resolved in a way that makes me feel that we're going into a disinflation or even, at some people say, a deflation. You know, let's count them, michael. Number one is let's look at the prices of gold, and I know gold is somewhat of a flight to safety, but there's an inflationary situation there. Silver even though it's come off the highs, it's still much higher than it was for the last many years. Oil that's become such a political football that it's really hard to say that that's any kind of inflation measure. But we'll see what happens going forward.
Speaker 1:And then on top of that, you've got the dollar declining. On top of that, obviously, you have the debt, which nobody really can figure out how to fix, I mean, unless we cut spending by about $12 trillion or tax the shit out of everybody. And then government spending, which I don't care who's in office as we get into next year. Both parties love to spend money. They have to spend money, otherwise they can't really justify their existence as government leaders, because it means that this economy is so based on government spending.
Speaker 1:You put all of those together, you have food prices in July were still the highest they've been in a long, long time. And then, you know, have some of the other more industrial type metals which could really get even more inflationary because of the mining centers which keep increasing that use raw materials. So all of those are the reasons why you can see, like if you look at inflation inside of a circle, and all of these things are the bullet points around the circle, you have to say what's the catalyst and what would prevent it from happening. I'm not really sure the answer to which is going to be the catalyst or what could prevent it, but right now you show that overlay chart there. I see it on your screen.
Speaker 1:This is exactly what happened in the 70s is that we had that spike in CPI after the war in the Middle East with oil, we came down. We went into a brief recession. Monetary policy eased that's another thing. We came down. We went into a brief recession. Monetary policy eased that's another thing. By the way, we haven't mentioned interest rates, which are about to go down. The Fed's about to start putting more money back into the system. They've already been doing it, but like literally, and then in 77, it kind of truffed, and then 78, we started to see the CPI pick up. 79, of course, and 80 was the big inflation years and if you look at the overlay, it's exactly what's happening now. 2022 was our peak. We started to go down. Cpi has now sort of troughed here in 2024, which tells me 2025, especially with a new administration. That's where we could start to see the pickup inflation again.
Speaker 2:That's a mouthful, sorry, no, no that's where we could start to see the pickup in inflation again. That's a mouthful Sorry, no, no, that's good and actually it's an interesting amount. I look at this chart. I say to myself that looks like a bottom right in commodities. Now the thing there is you mentioned we don't really know what the catalyst is going to be. The most obvious catalyst when people talk about commodities is China. From an industrial usage perspective at least, I happen to think that China probably has bottomed economically and or might be about to pick up, and I think the equity markets there are somewhat confirming that right and you're seeing some interesting divergences, I think, take place. How important is China to that story? Because I do think there is a case to be made that commodities could be entering an upcycle. There's a case to be made that if you have a recession and China can't get out of its own way, it could stay depressed, yes, and we know that the antidote for inflation is recession.
Speaker 1:So I don't think we're anywhere near that yet in this country, even though people are screaming that. Talking about China, it's interesting. I have several things to say about China. Number one is China is definitely leading the march towards BRICS right, and yesterday the big story was Turkey is now requesting to join BRICS and even though many, many analysts will poo-poo the idea of BRICS taking form and the dollar at any kind of threat as the world's reserve currency, I don't think that we can basically just dismiss that and totally ignore it as no way. So that's one way that China can basically just dismiss that and totally ignore it as no way. So that's one way that China can really lead, and if you want to hurt this country financially, obviously that would be the way to do it.
Speaker 1:In terms of China itself, one of my best sources of information that I get is from my friend who lives there and goes back and forth to this country and that country. She's a scholar and she's a professor there, and basically what she tells me, and her family's lived there, obviously, forever. She says that the reports of China's economy being in such disarray are exaggerated in this country and that most people in China are very happy. The middle class has expanded and people are spending money and getting rewarded for, I mean, that's the whole meritocracy system that they supposedly have there, which they need to have. So what she's saying is is that that country is going to continue to expand and we can already see they're ahead of us in terms of alternative energy uses in the EV car space we can talk about that later here in this country and in terms of their need for raw materials.
Speaker 1:China has been buying property anywhere they can that grows stuff, because they know that they're going to need it. They're 1.4 billion people. We do not believe that that country is anywhere near over, and you mentioned that it might've bottomed here if you're looking at it from a technical standpoint. Yeah, because you're looking at Alibaba, which has come up from its lows, and now I'm watching FXI, which I think it's trading at around 2610 right now. I think it can get back over 27, maybe even give it a little room 2750. That confirms a bottom and we would definitely be a buyer at that point.
Speaker 2:Let's go through like a checklist of things that are inflationary versus disinflationary or deflationary from a technical perspective. You had noted to me the Baltic Dry Index. You had reposted from Tavi Costa who I had on this podcast three weeks ago a chart that he put up that looked at the Baltic Dry Index.
Speaker 1:So for those that are listening, watching, first of all explain what the Baltic Dry Index is and why that's one of those things that you should watch out for. Well, it measures really basically the containers for getting shipping out things like iron ore and grain and basic commodities. Right, and, by the way, there's a couple of stocks that also you could look at like that too, one that is specifically crude oil, which would be TK Company, which is a Canadian company. But all of these things are looking pretty firm right now, which means that if the Baltic Dry Index is going up, that means that goods are being delivered more in terms of these bulk items, these dry goods.
Speaker 1:If you will Like, let's use iron ore, because that's the first one that comes to my mind and so that definitely means not recession, not deflationary and not disinflationary, means demand is much more robust than what we get hearing from different reports. And, specifically, you know CPI, ppi, pce, which people keep thinking is the gospel for inflation, and I think it's not at all anywhere near it. It's lagging, not leading, let's put it that way.
Speaker 2:One part of the commodity space which has not gotten anywhere near as much attention as it did about a year and a half, two years ago is the ag side, the soft commodity end of things. There's been a lot of carnage in the prices of grain corn in general. Same time analysis. Does that look like that's starting to turn from your perspective?
Speaker 1:As a former commodities trader, what really intrigues me is the cycles, and so this is what happens. You know let's not forget to talk about EVs, because that's a perfect and classic example of cycles when what happens is this is that you get priced. That's the whole reason why commodities, the whole futures exchange, was invented For farmers to control the price of corn. They had a harvest crop. What they would do is they would know the prices would go down, so they would sell it in the futures exchange and if they had a bad crop, they would buy it in the futures exchange. Very simple, economics 101. But on the other flip side, the producers would stop growing corn so much corn because they wanted the higher prices, right? Essentially, that's what we saw.
Speaker 1:Covid is a great example of the extreme because producers had stopped producing massive quantities of so many commodities because prices were so low that they got caught short with not enough supply, and then, of course, the supply chain and everything else that happened. And so that's kind of what we can see potentially happening here again right now is that we're out of the growing season. Number one, Of course we've harvested. So now, in terms of the plantings for next year, will they plant as much? Probably not, because wheat, corn, soybeans, they've all come down in price, which means now there'll be less. If there's any weather problems, if there's any geopolitical problems, any of the problems can reemerge to bring those prices to go back up. And of course, you mentioned China, Michael. China would be another one in terms of how much they decide to import in terms of grain, and not just from the US, obviously from Brazil which, by the way, has been having a drought. So India, which produces sugar.
Speaker 1:Let's talk about sugar for a second, because that's my key barometer. Very few people talk about it. Sugar before COVID was trading at about 4 cents a pound. After COVID it went up to 28 cents a pound. It's currently trading at around 19 cents a pound. So even though it's way down from the highs, it's still triple excuse me, quadruple where it was before COVID. So there's a classic example. Right, If sugar starts to move up like it did in 1979, that to me is an insidious factor that we've got to see another elevation of inflation, particularly in the food prices, which of course will impact everything in the grains. Does that make sense?
Speaker 2:Got a chart on the screen of the two cream sugar fund ETF, cain, cna, and it's not dragging exactly spot right, it's using the futures. But yeah, you can make an argument that that looks like it wants to maybe turn around here.
Speaker 1:Absolutely, and they have traded down to about 18 cents a couple of times and has bounced, and this morning, right now, it's down a little bit, but it's still over 19 cents a pound. Everything seems to be like lying in wait. It's kind of like how gold was. It was lying in wait, and every time it sells off it's a buy opportunity, and so that's. I'm feeling the same way about sugar, and although the grains have gotten super beat up, at this point we're starting to see them turn around a little bit. I mean natural gas. We haven't even mentioned that. That thing got murdered, but now, all of a sudden, it's also starting to bottom. And, by the way, natural gas is a huge component of building data centers.
Speaker 1:So I think, in terms of what it needs, I think there have been pockets that have been telling us that commodities are not dead. If you look at South Africa, which is one of the hugest mining countries, that ETF EZA, has really rallied a lot. It's out there. It's just a matter of when the herd mentality shifts. That's what I think and, like you said, what's the catalyst on? That? Could be China, could be war, could be anything for that. It could be the dollar collapse. It could be so many different factors.
Speaker 2:One thing that is not dead is manipulation. So there's a comment from X I'll show here, which is interesting. Actually, I think I had heard of this and I verified it before showing this here. How does this is from Connect the Dots, which I think is appropriate. How does Biden's administration removal of coffee from the CPI affect any of this discussion? There's widespread manipulation of the government numbers going on. First of all, I don't think that's an unpopular opinion, as I like to show on X or say on X, but it is interesting, right, because it does seem like the definition of CPI and what goes into it changes based on optics.
Speaker 1:Well, that is such an interesting question, so I'll tell you a quick little story. Keith and I went down to Honduras last year and we walked into a soap store just by little light things, souvenirs to bring back and we got into a conversation with the guy who ran the store back. And we got into a conversation with the guy who ran the store. Turns out the guy was working for the New York Board of Governors and his job was to crunch the numbers. He was an accountant, crunch the numbers for the CPI, and he told us that if they didn't like the number he came up with, they would tell him to go back and do it again. And so if there's any question that these numbers are manipulated and massaged and presented to us as the public as something that we can find palatable, he confirmed it In fact. I said, well, did you go on camera and say that? And he said, yeah, Meanwhile the guy lived in Honduras, right? So he kind of escaped the whole thing.
Speaker 1:To answer the question on the Biden's administration removal of coffee yeah, coffee prices skyrocketed and they've come off from the highs too. But between Vietnam and Brazil and their weather issues, first there was frost, then there was drought. That's a classic example of we don't want people to know how expensive coffee is, so we're just going to take it out.
Speaker 2:I haven't heard you talk about treasuries and duration in particular, because if we're going to be talking about another wave of cost push inflation potentially coming, you'd think that that would be negative on the long duration end of things. I am amazed at how everybody seems to think that long duration yields will never fall again, and they have been falling. I've made this argument that the reverse carrier trade would spark the return of the flight to safety trade, which seems to be happening. You're seeing these down days on markets, on equities result in, on the same day, long duration yields falling, long duration bond proxies going up in price. What's the short, intermediate, long-term view on duration?
Speaker 1:Well, you know, I know, Michael, that you've been calling for the big event is going to be the main event to be a little bit the main event, okay, and I believe you, I pay attention to that because I've been watching that very carefully myself and I'm actually long PLTs, by the way, so I bought that a few dollars ago. You know what's so curious right now, before we get really into that long bonds and the duration, we have to look at the fact that the junk bonds has been diametrically opposed to whatever's happening or could be happening in the long bond situation. And the relationship between the two is very important, because if the long bonds are outperforming the junk bonds generally, that's risk off. But if the junk bonds are outperforming the long bonds, that's risk on. And even with the big crash that we had yesterday and now, by the way, the market's green everywhere, at least in the indices the junk bonds have not really sold off very much. So there's still a tremendous appetite for high yield, high debt companies, right. So I think it's important to mention that because how that is going to impact the long bonds If and when maybe the long bonds actually start to outperform the junk bonds, that's when we have a couple of potential really blaring situations to be concerned about.
Speaker 1:One, of course, would be express train to recession, but I'm not seeing signs of that yet and the other would be more of what I consider to be more of a stagflation environment, and that would be where you see the long bonds actually rally and the yields start to fall, which of course, would induce inflation but not necessarily do very much for the economy, because it would have to be a massive amount of reduction and even that could be more dangerous than anything else. So the long story very short. To me. All I need to do right now is focus on that relationship between the long bonds and the junk bonds, and right now I'm not seeing anything that's making me terribly nervous about recession or risk off thing that's making me terribly nervous about recession or risk off. But the long bonds are holding up good here and all we need is that to flip. And let's say, take out 100, which I think is a really big level in the TLTs, and maybe we start to see a different story in that kind of main event you're talking about.
Speaker 2:Let's talk about that from the standpoint of seasonality a bit. September tends to be, on average, the worst month. Everyone remember thinks of October as crash month and also bottom Starting in September kind of scary. Markets are rebounding. I always go back to generally this is why shorting is so hard Big downs tend to be followed by big ups, followed by big downs. That's why it's difficult to really properly trade a downtrend, because the trend ends up looking much more volatile versus an uptrend where it's smoother. Do you think we're going to kind of have this sort of historical pattern play out where September ends up being among the weaker or maybe losing months of the year?
Speaker 1:Not necessarily, and you know it's interesting. Last night I listened to Ed Yardani. I mean, if you really want to get the most bullish case, listen to him. But a lot of the things he said I actually personally agreed with. That's why my economic modern family by the way, it's something when I introduced myself I didn't talk about, but that is what I created years ago it's really essentially a family of images based on the US economy that include the small caps as the grandfather, the retail sector as the grandmother, and then the kids would be transportation, semiconductors, biotechnology, regional banks and Bitcoin. By the way, who's my tween in the family? And I'm bringing this up because what he said is being supported right now on what I'm seeing on the charts in the modern family.
Speaker 1:Transportation, which, by the way, looked like crap for most of 2024, was so underperforming the growth stocks. Transportation, which, by the way, looked like crap for most of 2024, was so underperforming the growth stocks I was nervous about it, has completely flipped and yesterday, while everything was selling off, the transportation sector was actually holding, and not just holding, but holding above the July calendar range. We use two six-month ranges, the January to July and July to December. By the way, just to mention, the January calendar range in an election year after an election is usually the most powerful to follow. Anyway, it was doing really well. Yesterday Granny retail, I call her she fell, but still holding on a weekly chart very, very important levels and the small caps. They just get tossed around a lot, but they haven't really broken down, so what he was saying is nothing that happened yesterday as we started.
Speaker 1:September changed in terms of the overall US economy to any great extent. That shows the consumer is dead, just changing his spending habits, or that people aren't still out there not only buying, but that people are still traveling and things are still moving in the economy, in spite of what you're seeing with like ISM numbers and things like that. I tend to agree with that, and now, with the Fed coming in and lowering even though you and I both know that could be dangerous at this point it's being perceived as positive. So I think it was just herd mentality yesterday. Oh, it's September, let's just sell everything. And one thing we haven't talked about yet, though, is also Japan. I think that's maybe a little bit nerve wracking for people right now.
Speaker 2:And the Nikkei was down, I think, over 4% yesterday. It seemed like a lot of the selling pressure. I mean it was on small caps as well, but from an industry sector perspective it was really on semis, in particular NVIDIA, and I think maybe this is your viewpoint that semis are rolling over, that they might be now in a downtrend. Can the market rally without semis taking the leadership role? Because it hasn't really for some time.
Speaker 1:Well, there's semis, basically stalling and treading water, and then there's semis collapsing. Semis collapsing would not be good. There's no way. Because so much of our growth is based on the tech sector and because let's just take a look at NVIDIA, which, of course, the Department of Justice now isn't going after them for antitrust Shocker, shocker. Nancy Pelosi sold all of her shares of NVIDIA before that story came out, but that's a whole other story.
Speaker 2:I got to get Nancy on this podcast. I'll be the most popular podcast and probably most profitable.
Speaker 1:Yeah, well, right, I mean well, she gets inside information. So I don't know if I necessarily would say she's the greatest trader, but she certainly knows how to trade on the inside info. But getting back to NVIDIA, I mean really, as chip technology is in everything, I mean pretty much anything and everything technology is in everything, I mean pretty much anything and everything. Nvidia is the best chip. So this Department of Justice thing is really kind of scratching my head a little bit on it, because it's not like they're forcing people to use NVIDIA chips. They just happen to be superior to every other company out there and therefore in everything and therefore financed enough to be able to continue to innovate and improve.
Speaker 1:Right, if that stopped, if NVIDIA really crashed from here, that would be concerning. However, if you look at valuations, I was reading that the stock itself really around $90 a share is more in line with its current valuation. Where is it trading right now? 105, 108. I can't really see without my glasses. So it's getting closer to its proper valuation. All it has to do now in here is sit and these other areas of the market can take over, just like we were talking about here. Let's watch these inside sectors the retail, the transportation and the small caps and see what they do, and then I think we'd have a better idea.
Speaker 2:All right, so you've been teasing the EV side. Let's talk about that. Tesla is always an interesting company to talk about when it comes to EVs, obviously, and I haven't really sort of actively tracked the stock recently but what's your take on EVs? Why are you bringing it up so much?
Speaker 1:I keep bringing it up because A as a commodities trader and everything we talked about before, how things cycle. We're starting to see evidence where a lot of people, a lot of car companies, were cutting back on their EV production and we know that EV used cars were piling up in inventory because people were getting rid of their EV cars and then nobody was buying them. That has all shifted In the last month. The number of EV cars used that are being bought are increasing, surpassing the number of used gas operated cars. So I think that's kind of telling you right now that people will buy EVs if they're priced right. It is not a political thing. Most people like the fact that the EVs will save them on gas, and the other big part of that, of course, has been infrastructure, which, once the government takes over we talked about, the government needs to spend money, but then, once they take over something like infrastructure for old energy and EVs, they screw it up because they're not business people, but nonetheless, it's really going to, I think, merge together in 2025, where EV prices will come down.
Speaker 1:We don't know what's going to happen with oil, but we have mass adoption already, so we just had this big dip. Infrastructure could continue to improve. And looking at Tesla, which is now trading at 220, which I wanted to buy today so I've been obviously distracted I think Tesla stock looks great. I would say I'm very bullish in it, believe it or not. I'm very bullish in Rivian, even though compare the price to Tesla's trading at 220, rivian's trading at like 1350. But nonetheless it's an American car company that I believe in. As a future, I think 2025, we're going to see people going back into EVs. There'll be more and more, I think, just logic in terms of how to get people to have access to infrastructure.
Speaker 2:Yes, I may note saying. One thing that you think is important to stress is that trading relationships change. Old adages tend to be dangerous. What relationships are changing from your perspective in this current cycle that maybe traders are falling for when they have to be a little bit more?
Speaker 1:careful. Well, commodities, I think probably would be the biggest area, right, the fact that the commodities are dead. We went back to a ratio that we know is unsustainable, of commodities to equities. Once again, just like that overlay chart, the CPI has fallen, but we've already established that those numbers are cooked and of course, they don't also include oil and food or energy and food. So I think commodities are probably the biggest opportunity, and that's why I include EVs in that too, by the way, because I think if they can keep those costs down by the way, they use a lot of raw materials as well silver this is where I think the opportunity is the biggest.
Speaker 1:But in terms of other trends, we mentioned EVs. The other big trend is, if you think about it logically, when we came out of COVID, people spent money like crazy because they were in jail, essentially, and now they were free and so people were buying everything and traveling and going to restaurants and getting out and doing all they could to go back to enjoy life, and I think what's happened now is another major trend is I do believe that that could dissipate more and more, especially with rising costs. We're already seeing that Consumer staples have well outperformed discretionary, but I have been also really interested in the trend of the obesity drugs. Now, michael, you lost that weight without having to do anything like that. Your discipline is amazing. Most people's discipline is not.
Speaker 1:So these diet drugs Ozempic, glp-1, et cetera. I've been reading about this little town in Kentucky where there are 75,000 people and 4% of the population are already on these diet drugs. I think that that's going to bring in more and more as the prices get easier for people to afford into the mainstream, which, of course, is going to change consumer habits tremendously because it's going to bring out I think we have a 38% obesity rate in this country, even if it goes down by 10% over the next year I think about 10% of the population consuming things now that they didn't consume before because they always had an obesity problem Hair, makeup, skincare, cosmetic surgery, and then work your way down Athletic clothes, going out for walks, less costs in medical care, because it decreases diabetes and heart disease, maybe less junk food, more healthier food, more whole foods again leading to commodities and grains. So that's the other thing I'm looking at.
Speaker 2:One thing I don't think you and I have ever talked about is, from a technical perspective, what indicators you tend to gravitate towards and which ones you just ignore altogether, that maybe other people focus on. I'm just curious about your style. What do you like to look at?
Speaker 1:Well, in terms of the risk. We have our big view, product measures, our risk parameters, using a few things that I really really like. So one is I've already talked about, which is the relationship between the jump bonds and the long bonds. That's number one. Also, the relationship of the long bonds versus the SPY, that's another one. So those two things tell me a lot about risk on or risk off, and right now we're still seeing risk on right. Even yesterday when the market crashed, the TLTs didn't go on that much to change that relationship.
Speaker 1:I also really do like to watch what I just mentioned is my economic line family and I'll look at that from basically a phase Where's the price relative to two different moving averages, the 50 and the 200 day moving averages. The 50 is above the 200 and the price is above, that's bullish. If the 50 is below the 200 and the price is below that, that's bearish. And then we have these sort of intermediary phases recuperation, accumulation. So I look at those and see where the phases are in them, and I look at the dollar and I look at gold and I look at oil and I look at sugar and I look at silver. I have my key commodity indicators, what I call my trisector of inflation, when it's really out of control, which would be oil, silver to gold ratio, and then, of course, the price of sugar, and that's really basically. I mean, obviously I like to look at different stocks all over the place, different areas. I'll find things that I find interesting, but that's my main measure of how we look at things.
Speaker 2:Joe, a comment from YouTube from Andrew going back to that. Adages, old adages, circling back to treasuries are investors not overestimating the risk reward profile of long duration bonds? Are there reasons to reject conventional wisdom this cycle?
Speaker 1:Okay, let me see if I understand this question. Circling back to treasuries, are investors not overestimating so in other words, they're not underestimating the risk-worth profile of long duration bonds? I'd say very possibly. I mentioned before full disclosure I'm long the long bonds. I believe that inflation will be coming because the Fed will misstep. They waited way too long to lower the rates and now they're going to have to lower rates Probably. They're staying up to maybe 200 basis points as we get into the end of this year, into next year, which I think is highly inflationary, and I think it'll be quite the time before they realize what they're doing and then start raising, hiking those rates again.
Speaker 1:I have felt for months and months and months that the rates had peaked, the Fed funds had peaked and they were not going up again. So obviously, if they're not going up again, that probably means a direction after higher for longer has sort of played itself out is going to be lower. So yeah, Now, in terms of the worry on that, the conventional worry would be recession, but, like I mentioned before, I'm not so worried about that right now. I would be much more worried about what I'm saying, this stagflation, which means the long bonds can go up, the market may not necessarily crash. The economy may just sort of churn for a while and there'll always be pockets that are interesting.
Speaker 2:Mish as we wrap up here. For those who want to track more thoughts, more your work, get access to some of your more premium research. Where do you want to do it?
Speaker 1:Well, I'm very, very active on X, so that's at Market Minute. You can always find me there and I'm pretty good at really basically answering anybody's questions. I'm happy to do that. Marketgaugecom is our company, so you can always go on our website. We have a lot of different material, both from the free standpoint all the way on up in our funnel. You can buy my book, which will give you a whole lot of information about how I look at the markets. It's very well written. That's Plant your Money Tree, your Guide to Growing your Wealth, and you buy it on our website. You get a bonus video on these phases I was talking about, and I'm on LinkedIn. I'm pretty much everywhere. If you want to email me, it's mishatmarketgagecom, so it's not too hard to find me if you're looking.
Speaker 2:All right, please make sure you give Mish a follow. Appreciate those that watch this live stream. I have, I believe, one more podcast later in the day, so stay tuned for that. And, as always, thank you to Mitch for being on the show.
Speaker 1:Thank you, Michael, for having me. It was such a pleasure to see you.
Speaker 2:Cheers everybody.
