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The Contrarian Investor Podcast

Nov 16, 2021

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This episode originally aired for premium subscribers on Nov. 11, the same day it was recorded, without ads or interruptions. To become a premium subscriber and gain access (as well as take advantage of a host of other benefits, including the Daily Contrarian briefing and podcast), sign up through Substack or Supercast.

Emma Muhleman of Ascend Investment Management joins the podcast to make the contrarian argument that inflation is overrated, will not cause the Federal Reserve to raise interest rates, and that deflationary forces are the bigger worry for global financial markets.

These deflationary forces are both short term (slowdown in China) and long term (demographics in the developed world). Much of the discussion centers around the former.

Muhleman's comments are her own and not a reflection of her employer. Nothing here is intended as investment advice.

Content Highlights

(Spotify listeners can click on the timestamp to link to the start of the segment)

  • The market is pricing in a series of interest rate hikes for the coming 24 months. But the Fed has backed off of a tightening schedule before (2:18);

  • Bonds have been selling off, but investors will find themselves on the wrong side of this trade when Fed backs off of tapering (4:07);

  • Inflation is a supply-side problem that the Fed doesn't have control of. Markets are too fragile to handle rate hikes (5:06);

  • The latest FOMC meeting where tapering was announced "was probably the most dovish taper you could come up with" (9:20);

  • Deflationary forces, starting with China, are a major issue the market is overlooking. This despite the best (non-publicized) efforts by the Chinese government (10:49);

  • It's not just China though; demographics and debt are part of the longer-term trend toward deflation (19:19);

  • Background on the guest (22:33);

  • What about potential headwinds, from China or elsewhere? (24:58);

  • Unwinding Evergrande: Where is the exposure? (29:05);

  • How much longer can the Fed taper before their hand is forced to back off? (31:17);

  • What indicators should investors keep an eye on to monitor this situation? (34:35).

More Information on the Guest

mployer. Nothing here is intended as investment advice.