Reflections On The Global Macro Environment

Audio Length: 00:53:48

On last week’s podcast, I had the opportunity to interview Jared Dillian, author of the professional investing newsletter “The Daily Dirtnap” and a writer for Mauldin Economics, as well as Marc Chandler of Brown Brothers Harriman (BBH), a specialist on currencies.

First, before I get to the discussion with the two guests: We heard from our co-host, Professor Jeremy Siegel, who was surprised that U.S. Federal Reserve (Fed) Chair Janet Yellen was giving the all-clear that the Fed would raise interest rates ahead of March 10’s key employment rate figure. He speculated that Yellen had received a preview that the data would be strong. The only worry on Professor Siegel’s mind regarding the current market environment was a drop in oil prices last week.¹ If market participants worry that the Fed might be tightening too fast, he said it could show up in commodities and oil prices first, and weakness in oil this week was a troubling sign to him, if it were to continue.

We then covered a number of topics with Dillian, including:

Why he thinks the Fed is way behind the curve in hiking interest rates and is likely to do three to four hikes in 2017.

His case for being bullish on financials over the longer run—even after the big moves after Donald Trump’s November 8, 2016, election victory.

Snapchat’s initial public offering—that came with no voting rights—which to Dillian is like high-yield bonds with no covenants for protecting bond holders; he thinks that is a sign that technology stocks are a part of the market that he wants to be short.

His case for the Toronto real estate market being a bubble and why he is short both the Canadian dollar as well as the shares of Canadian banks.

Why he thinks Brexit will be positive for the United Kingdom over the longer run and he is surprised the pound has not risen.

Why he still likes the BRIC countries in emerging markets, even after strong gains last year.

A discussion of his first Bloomberg View article, where he defends hedge funds against plain index funds due to the hedge funds’ lower volatility approach keeping investor emotions in check during bear markets by keeping people invested throughout drawdowns.