MacroVoices #376 Tian Yang: When the Recession Becomes Obvious
Tian Yang from Variant Perception discusses the long-awaited U.S. recession that may finally be arriving, predicting a final flush in equity markets when the Fed cuts rates. He also presents a contrarian view on gold, identifying it as being in a bubble that may be ending, despite strong fundamentals.
Summary
In this interview, Tian Yang, CEO of Variant Perception, analyzes the current economic landscape and argues that the U.S. recession many have been anticipating is finally approaching. Yang emphasizes the importance of focusing on leading rather than coincident indicators, noting that classic lead indicators like building permits and ISM manufacturing have been signaling stress, with the missing piece being initial claims data. He argues that the final leg of the equity sell-off will occur when unemployment and employment data deteriorate, making the recession unequivocal.
Yang draws parallels to the 1969-70 inflationary recession, suggesting the Fed will cut rates later rather than earlier due to inflation concerns. He warns that when the Fed does cut, it may actually be bearish for equities because it will be reactive rather than preemptive, indicating that recessionary feedback loops are already underway. For fixed income, Yang expects limited protection from bonds due to structurally higher inflation and yields over the next 2-3 years.
Regarding China, Yang notes that their recession model only switched off in April, suggesting the reopening trade was premature but may now be setting up favorably. He sees selective opportunities in emerging markets, particularly Brazilian debt due to collapsing inflation indicators. On the U.S. dollar, Yang identifies conflicting forces and prefers to wait for clearer recession signals before taking a strong position.
Yang describes commodities as being in a 'super cycle intermission' where structural bullishness remains valid but cyclical headwinds persist. Most notably, he presents a contrarian view on gold, identifying it as being in an LPPL (log periodic power law) bubble that predicted an end date of last Friday, suggesting a significant tactical flush may be coming despite excellent fundamentals.
About this episode
Erik Townsend and Patrick Ceresna welcome Variant Perception CEO Tian Yang to the show to discuss the long-awaited U.S. recession, and the final flush in U.S. equity markets, which Tian says is still to come. Tian will also share a non-concensus view on Gold and much more. https://bit.ly/424aoKl Download Tian's charts here: https://bit.ly/3Oo0AaO Download Big Picture Trading chartbook 📈📉 https://bit.ly/3Oo0Ma2 ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/2JjZR7J Check out Nick's YouTube channel: https://www.youtube.com/c/Optionfinity Join OptionFinity discord: https://discord.gg/Rvnsv6Y Please visit our website https://www.macrovoices.com to register your free account to gain access to supporting materials
Key Insights
- Yang argues that classic leading indicators like building permits and ISM manufacturing have been signaling recession stress, with initial claims data being the final missing piece that has now aligned
- He predicts the final equity market flush will occur when the Fed cuts rates, because cuts will be reactive to bad data rather than preemptive, indicating recessionary feedback loops are already underway
- Yang draws parallels to the 1969-70 inflationary recession, arguing the Fed will cut later rather than earlier due to inflation concerns, making any cuts bearish rather than bullish for markets
- He warns that bonds may provide limited portfolio protection this time due to structurally higher inflation and yields over a 2-3 year horizon, unlike typical recessions
- Yang's China recession model only switched off in April, suggesting the reopening trade was premature at the beginning of the year but may now be setting up as an attractive contrarian opportunity
- He identifies Brazilian debt as particularly attractive due to Brazil inflation lead indicators collapsing to historical lows, favoring a strong easing cycle
- Yang describes commodities as being in a 'super cycle intermission' where structural bullishness remains intact but cyclical headwinds need to clear before resuming the uptrend
- He uses LPPL (log periodic power law) analysis to identify gold as being in a bubble with a predicted end date of last Friday, suggesting a significant tactical flush despite strong fundamentals
- Yang argues that gold's recent price action represents classic bubble behavior with increasingly disorderly buying and desperate speculative participation
- He predicts the banking crisis was fundamentally inevitable due to capital cycle models showing banks have been capital abundant since Q4 2022, leading them to take excessive risks
- Yang notes that underneath market indices, there's significant damage in small caps, international markets, and individual stocks, with headline indices hiding the underlying weakness
- He emphasizes that his firm has developed a new investment portal allowing institutional clients direct access to their leading indicators and models rather than just research interpretations
Topics
Transcript
Thank you. Eric Townsend and Patrick Ceresna. Macro Voices episode 376 was produced on May 18th, 2023. I'm Eric Townsend. This episode of Macro Voices was made possible by Respect Energy, a leading European trader of renewable energy and a one-stop shop for all green energy investors. Variant Perception CEO Tian Yang returns as this week's feature interview guest. We'll discuss the long-awaited U.S. recession, and the final flush in U.S. equity markets, which Tian says is still to come. Tian will also share a non-consensus view on gold, which I think you'll find very interesting. And I'm Patrick Ceresna with the Macro Scoreboard week over week as of the close of Wednesday, May 17th, 2023. The S&P 500 was…
Full transcript available for MurmurCast members
Sign Up to AccessMore from Macro Voices
MacroVoices #554 Yasir Arafat: Mass Manufacturing Nuclear Power Plants
Yasser Arafat, CTO of Allo Atomics, discusses the company's plans to mass-produce advanced nuclear reactors at scale, arguing that cost-competitive nuclear energy (cheaper than coal and gas) could be achieved within years, not decades, by leveraging manufacturing principles similar to Tesla's approach. He addresses fuel supply chain constraints, nuclear waste recycling potential, and competitive threats from China while outlining a pathway to transition global energy systems away from fossil fuels.
MacroVoices #553 Brent Johnson: Disparate Housewives
Brent Johnson discusses the dollar's breakout above 102, analyzing why the greenback continues strengthening despite expectations for decline, while also exploring the deepening coordination between the Federal Reserve and Treasury Department in what he calls the "Disparate Housewives" framework. He argues the US remains positioned to weather higher rates better than other economies, and frames the current geopolitical environment as analogous to the early Cold War era with China rather than a replay of the 1970s.
MacroVoices #552 David Rosenberg: Navigating The Noise
David Rosenberg argues that inflation concerns are overblown despite recent energy price spikes, contending that without wage pressures entering the labor market, price shocks will remain transitory. He identifies the November 3rd midterm elections and November 4th Treasury refunding announcement as pivotal catalysts that could trigger significant bond market rallies and economic slowdown as fiscal stimulus ends and gridlock returns.
MacroVoices #551 Michael Every: Decoding The Global Geopolitical Puzzle (Part 2)
Michael Every from Rabobank discusses the interconnected geopolitical tensions between the U.S. and China, analyzing how conflicts in Ukraine, the Middle East, and potential Taiwan invasion scenarios serve as strategic moves in a broader great power competition. He examines emerging policy shifts including potential diesel export bans, AI arms races, and nuclear escalation risks while arguing that national security concerns are overriding traditional free market economics.
MacroVoices #551 Michael Every: Decoding The Global Geopolitical Puzzle
Michael Every of Rabobank discusses interconnected geopolitical crises spanning Iran, Ukraine, and the Middle East, arguing that oil prices don't reflect true disruption risks and that energy will increasingly become a tool of statecraft. The conversation covers potential diesel shortages, U.S. policy responses, the Greenland-Denmark security deal, and China's strategic positioning amid global instability.