Steven Van Metre on bonds, gold and the 2020 stock market

0:01i'm ashton addison from eventchain for investmentpitch media and fintech news network and today on blockchain interviews we have stephen van meter macromoney manager and the inventor of portfolio shield steven welcome to the show and thanks for taking the time to be here hi ashton thanks for having me you're very welcome before we dive into the markets i'd love for you to just give a

0:20little bit on your background on yourself and your recent focuses and investing philosophy sure i'm a certified financial planner i'm also a money manager and the way i approach the markets is on a very long term scale so when i say i'm a manager or i'm interested in macro my time rises three to five years when i'm looking at taking a position and that

0:42that very long uh considering i like to say that most investors today have uh investment um oh i forget um what i was going to say um anyways let's say it's like 80d investment uh with investments yeah yeah okay so the um you know i i know what you mean because right now the stock markets

1:09have been really hot and it gets people you know retail investors and dumb money jumping in with you know little goggles on that just have them looking at the next day right and when you're a macro money manager it's a whole other story right you're looking at the long term trends and right now there are a lot of people jumping into the stock markets

1:27you know with with the lockdowns people sitting at home and looking for other ways to make money uh the stock market's been really exciting but i know that you know you're considered the bond king and you focus on bonds a lot as well and that's actually a really important part of managing the economy so could you talk a little bit about you know why are bonds so important and

1:46i know people aren't talking about them because they're not as exciting but i think it's a really crucial point to get across right because the balls are macro and so if you want to know what's going on the economy you look to the bond market it tells you the truth you know i look at the equity market and you know it's very enthusiastic about lots of things and the bond market

2:05again it's the sayer of truth so you want the economy is growing well the bond market should tell you that when interest rates are rising the economy doing poorly well then interest rate or even falling and you can even use it you know as an arbiter of truth for you know say post march everyone thought that stimulus and quantitative easing were going to be inflationary well

2:26the bond market gives you that answer so it's not as sexy and as exciting as certainly you know the latest tech stock but it does tell you a lot of truths definitely and you know you mentioned that you see you have three to five year time horizons and a lot of these robin hood traders that have jumped in you know they haven't even looked at the the market for for a

2:46year um so what but the market has definitely changed since last year or at least it seems so would you agree with that and did you see through the bond market changes in the market happening you know before march of 2020 not so much i just you see a lot of speculation in the equity market a lot of you know small traders are using call options to to trade and they don't understand the

3:11risk of that because you mentioned they haven't been investing long enough to know and the bond market really kind of shrugged a lot of that often as noise and it's kind of been more of an alarm to say hey yeah the equity mark it's enthusiastic but hang tight you know i'm telling you it's it's not as great as you might think and that's what we look like it again

3:33for a little bit of truth and would you recommend people that are invested in the stock market or even that are doing swing trading and have just jumped in to open their ears to the bond market and see you know the correlation and and how that's determining the actual economy well i i think it's important as an investor to do it as a swing trader as a day trader it really doesn't matter

3:58you know i look at the bond market as more of you know what our lives are like we live in a macro world for some reason you put a trade screen in front of people and macro becomes like you said two weeks long you know we don't a life like that where we're constantly making trades and changes so you can look at these short-term investors and maybe over the course

4:18so they'll have a lot to say about it maybe they'll make some money but in the end it's those who take that longer focus specialize on their research and are willing to wait and go through those undulations that usually get the biggest payoff yeah that's that's really great advice and you know to just go back to the stock market the story of 2020 at the stock market is

4:39it's you know a little crazy you know crash v-shaped recovery on the way to the election seems like we're above all-time highs even though the economy isn't really equating to to the markets what's your take on the markets right now you know they continue to go up it doesn't look like there's any crashing but they also have been pushed up by by dad and stimulus

5:01do you think the people should be approaching this cautiously or are you still optimistic that you know the trend is your friend well i mean the trend is your friend and unfortunately the us equity is not function on reality it's it's a large momentum trade we see that with all the computer algorithms we see that with all the computerized trading strategies

5:21not and i'm not talking about small strategies i'm talking about large insurance companies and large money managers are using computer traded programs that just look at trend following so what you've seen is this year especially since the pandemic as you mentioned earlier people are at home and they have this belief that stimulus is stimulative they have the belief that qe creates

5:42inflation worse they believe that quantitative easing actually causes acid prices to magically rise for some reason and so they're just taking incredible amounts of risk with their money thinking they can't lose and that's always a dangerous proposition when the moment you think you can't lose well be careful because the other side of the shoe is about to come

6:03definitely stephen and you know dave portnoy says it best with his billion followers on twitter most of who have just jumped in based on the hype that that stonks only go up right and he he had actually jumped into the blockchain industry and invested in bitcoin but the next day that he invested it went down and uh and that wasn't you know that didn't make sense

6:21in his mind because he's been making so much in the stock market this year as it seems to only be going up he jumped out and bitcoin is what went down after he sold but now it's above where he sold you know if he would have had that that foresight but you know for these other people that are following traders like daveydaytrader and just looking at stocks on twitter

6:43um i'm guessing that you know you would say take a step back and sort of look at the macro trends and and don't base in trading off emotion and what other traders are just posting on social media would you agree well i would say the trading is just that i mean people that trade they have the need to move their positions around constantly the you know what i like to think is

7:05when you start investing the best thing that can do is to lose money right away the sooner you lose money and this and the more you lose the better off you'll be and i think what's going to happen you know even though i believe we are in a recessional the stock market certainly wouldn't indicate that but at some point the other economy will continue to head lower the stock

7:24market we'll figure that out and there's going to be a substantial loss taken by a lot of small people and rather than a positive experience where they go hey you know what i made some mistakes i could have learned from this it's going to sting so bad that it might come from coming back to the market for a while we kind of we saw that with real estate after the great

7:43financial crisis we saw it with stocks after the great financial crisis so yeah all this day trading to me is is not the best way to approach it i think people should have a small portion if they want to trade of their money they should do that and then they should look at the macro picture and then trade the bulk of their as soon as they trade invest most of

8:01their money with a long-term focus and let it right mm-hmm that's great and we talked about the fed you know they've been printing there's been qe the interest rates uh are are low and the fed has announced that they're going to keep them low you know at first it was 2022 and now it's 2026 and and who knows it could be forever you know what what do you think of

8:21these low interest rates and what who will be impacted the most in america from this well the first misconception is as you probably know is the fed isn't actually printing money that is a big misconception all the fed is doing is a reserve swap with the large commercial banks whip swapping treasury securities and mortgage-backed securities for a reserve asset at the

8:44fed while it sounds like money printing and everyone wants to believe it's money printing no actual new money is created but as far as who's going to be hurt by low interest rates the most well initially it's going to be the baby boomers that are in or at or near retirement because they're now being when they have been forced to actually take risks in the equity market

9:03which isn't the best place to be as you get older you want to move more into fixed income the problem is there's not a lot of yield there so they've had to go to corporate and high-yield bonds which generally don't perform well during recessions as far as everyone else was that hey if you're a gen xer or a millennial this is going to be great because you're

9:22going to be able to borrow at low interest rates well one of the problems with that is that low interest rates also lead to a weak economy and fewer jobs so on the at the onset younger people i think this is great as they get older and find out that the labor market isn't that conducive to new jobs it's gonna be a lot harder than they think and they won't know

9:44that it's being caused by low interest rates yeah and it seems like such a major shift going on right now especially with this technological revolution the acceleration of ai and technology through the pandemic as well and i think that you know the labor market in the job markets is going to shift dramatically and you know in the next 10 years it will look a lot different

10:03so that's super interesting and you know i was also looking at your recent content and one thing that just came out was the international monetary fund they you know the imf is talking about a bretton woods moment you know bretton woods 1944 is pretty much over 75 years ago now when they uh were talking about recreating a new uh world dollar that was backed by gold

10:25and they although they didn't mention anything in there about creating a new dollar or changing anything they just said it was a moment and it seemed interesting that they would put that out you know what was your take on the imf's message and do you see in the near future because of the acceleration of the pandemic you know a central bank digital currency

10:45with or without potential blockchain technology as well being released soon yeah i i thought the whole speech about the bretonwood moment was really blown out of proportion and you put brentwood's in front of anything and i think people stopped listening to whatever is following that and i perhaps it was a poor choice by the high enough to use that as an example

11:07but if you actually read the speech which isn't a really long one all they talk about is the need for world to come together and use their fiscal and monetary policies as a cohesive group with certain countries in certain areas needing more or less than others they also talked about you know the money needing to go actually to the people which you know that seems pretty

11:29logical place for it should go and then they kind of ended with saying well what we're going to do is loan more money to emerging market which tells us kind of something we've been very suspicious about and largely know for a fact that there is a global dollar shortage out there and who would need those dollars while it's going to be the emerging market

11:47countries who are really hurting from these lack of trade due to the pandemic as far as seen as this is an excuse to move to a completely digital currency you know i i don't see that although that's kind of the narrative right now is this is what the imf is suggesting to the central bankers of the world as we need to move down to a digital currency and i've been thinking a lot about that

12:10and i really don't subscribe to that view because there's still too many people not only in the united states but around the world that use paper and coin currency i mean as far as their daily life for some people that jobs are completely wrapped around being paid in these currencies and a lot of americans since the great financial crisis just still don't trust the banks and they

12:33don't even have bank accounts so the whole idea that we can you know go to some digital currency making an overnight switch and everyone's just going to say hey well i think it's going to take a lot longer than people think now does that mean that we can't start that process and we know from the fed that they are and that it may be blockchain based or

12:50some other form well absolutely i see that but the idea that you know we're going to just magically wake up and paper currency is going to be outlawed it's going to say go down to the bank and turn it in yeah i don't see that happening yeah i agree it's not going to be an overnight change but and there will definitely be a transitioning period you know where at

13:09least p if that did happen people would be able to turn in their coins uh to to get some value out of that and it's interesting that the pandemic has also caused a you know coin shortage in some areas and and people are also afraid to use bills so they're trying to recommend uh you know debit and credit um and and it just seems very timely that all of this is sort of happening at

13:29the same time wouldn't you agree i do and i think all the pandemic did was just kind of wake up central bankers who are very um reactive that we know proactive to the fact that hey you know what we're doing in the paper and coin is fine now but it requires the economy to requires a velocity of money to be higher and the reality is you cannot respond quickly

13:52to these shocks to the system simple of money that they can just move out into the economy but with a digital currency they couldn't expand that to meet the needs of people who do need it and then they could contract it back very easily so i think this was a big eye-opener format and hope it encourages central bankers to put a lot more time and effort into it

14:14than perhaps they have in the past yeah and speaking of digital currencies you know bitcoin but also gold and silver as hedged assets have done really well throughout 2020 and you know a lot of investors have been recommending to have a diversified portfolio that isn't 100 in the equity market what's your take on gold and silver and bitcoin rising this year and

14:35the value that they have in a different fed portfolio well there's no doubt that we've seen gold and silver rise as an inflation hedge because people believe inflation is coming and part of that is substantiated by the fact that real yields or inflation adjusted yields have been falling now i think we're going to see real yields rise and that's going to mainly

14:52be due to i believe the consumer price index is going to head a lot lower when we see a big rally in the dollar as far as say bitcoin being ahead you know that's a it's i looked at it on chart many times and sometimes it's a risk asset sometimes it's safe assets sometimes it's an inflation-sensitive asset sometimes the deflation says you really don't know

15:14and yeah i like to say that we'll learn a lot about bitcoin and other crypto currencies when we actually see a real bear market as far as using it as a head sure i mean if someone feels comfortable using gold and silver and bitcoin as a head i would absolutely encourage that but do keep in mind that if real yields rise as i think they will and that they're they expect a pullback

15:35in both the metals and potentially in bitcoin as well yep good advice and we're running out of time steven but uh one last question is you know what advice or suggestions would you have to people that are in america that aren't necessarily investors but they may have started becoming interested in investing and preserving their wealth throughout 2020 now and are looking to

15:56learn more information well the best thing i can advise people and is true whether they're investing in the stock market bond market or the real estate market or anything in general is don't buy high and so if you believe prices are high in the equity market then the smartest thing you can do right now is just build up your cash and wait and waiting is the hardest part that most

16:16investors have to do but those who have made the most money and created the most wealth for themselves and their family are those who are patient and wait for the opportunities to come to them they don't force the opportunity just because they have a little money in their pocket definitely that's great advice don't buy high buy low sell high i like that

16:33all right steven if their viewers are looking to learn more information about your content and your work what's the best way for them to follow along the easiest way to find me ashton is at my website stevenvanmeener.com and they can also find me on youtube and just put my name in the search engine and you'll find that i do uh three macro shows a week and a chart show on the

16:53weekend and of course i'm on twitter uh at metra stephen it's spelled a little different than it's pronounced awesome thanks steven i will leave those links in the description box below for the viewers as well all the best moving forward and let's follow up in the near future great thanks ashton i appreciate you having me on your show and i appreciate

17:11your viewers watching you