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MishTalk TV Episode #3: Lacy Hunt Still Bullish on Treasuries

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8 comments on MishTalk TV Episode #3: Lacy Hunt Still Bullish on Treasuries

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Discussion Topics

  • Milton Friedman’s Famous Statement on Inflation
  • M2 Money Supply
  • Reverse Repos
  • Velocity
  • Government Spending Net Negative for the Economy
  • Debt
  • Fed Rate Hikes 
  • Slowing Economy

In Mishtalk TV #4 I again meet with Lacy.

Topics For Episode #4

  • Inflation Expectations 
  • Economic Models
  • GDP Expectations
  • Rate Hike Expectations
  • Margaret Thatcher Quotes

We filmed both episodes on Monday noting the slowing economy and expected negative real final sales for the third quarter.

Today’s Third-Quarter Advance GDP numbers did show negative real final sales and the report was weaker than the consensus.

Bottom Line

The Hoisington Management 2021 Third-Quarter Review contains more detail on some of the things we discussed. 

Lacy is still bullish on US treasuries and positioned accordingly for his bond fund. 

I will post MishTalk TV #4, also with Lacy, early next week.

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Mike Shedlock

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8 Comments
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Intelligentyetidiot
Intelligentyetidiot
4 years ago
Lacy is a great guy.
But I dont buy his take about Friedman, he might not have known about the money velocity in 1970 but he died in 2006 and never made amendments to his theory. I dont think the velocity of money is well understood by the economics profession other than a mathematical variable. 
Plus, if more debt results in less growth and lower rates, why do countries like Japan with debt to gdp of 240% have low interest rates whereas Venezeula with debt to gdp of 215% has hyperinflation?
Why is Turkey with debt to gdp 30% has 16% interest rates and high inflation or Brazil with debt to gdp of 90% has 6% interest rates whereas USA with debt to GDP of 110% has 0% interest rates?
Friedman was a no nonsense guy and I think his statement “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output” is still valid but the Fed and government define inflation two narrowly which creates a lot of confusion on purpose I think.
 
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Mish
Mish
4 years ago
Reply to  Intelligentyetidiot
My own view is velocity is a byproduct not a determinant. It has no independent life of its own. 
Mathematically, It can rise or fall whether prices are rising or falling or whether GDP is rising or falling.
Where I agree with Lacy is government debt is highly likely to reduce velocity and so does QE.
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Cocoa
Cocoa
4 years ago
Reply to  Mish
Velocity will decline with the increase of supply, right? More dollars chasing less transactions
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Christoball
Christoball
4 years ago
Reply to  Intelligentyetidiot
Debt money is generally used less efficiently than money earned. Throw in government use of debt money and it gets worse. It has some of the same qualities as inherited money or lottery money. Easy come easy go. The individual stability of a nation, quality of human resources, technical know how, industrial infrastructure, and culture are variables that affects the examples you sited. Perhaps culture is the most important. You could plop the Japanese culture anywhere in the world and they would succeed.
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Scooot
Scooot
4 years ago
That was interesting Mish, look forward to the next episode. I note they’re positioned for the long term, not sure how long that is, and a lot can happen in the short term. I noticed Crescat Capital has the opposite view on treasuries in their October research letter, and is also very persuasive, it would be interesting if they were both in the same interview.
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Mish
Mish
4 years ago
Reply to  Scooot
We were both talking at the same time – I believe he said 20 years 
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Scooot
Scooot
4 years ago
Reply to  Mish
I wasn’t referring to his duration but by when he thought yields would fall, he commented it was his long term view not short term.  No matter, it was an interesting. 
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Bam_Man
Bam_Man
4 years ago
Lacy is THE MAN.
I am also long Treasuries in my IRA (zero coupons) maturing in 2028. Been trading in and out of the same CUSIP for almost ten years.
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