MacroVoices #392 Jesse Felder: Questioning the Soft Landing Narrative
Jesse Felder challenges the soft landing narrative, arguing that equity markets are overvalued and vulnerable to a recession that should materialize by year-end due to monetary policy lags. Eric Townsend proposes an ambitious nuclear waste recycling trade involving sovereign governments acquiring nuclear startups and charging storage fees to eliminate global nuclear waste.
Summary
Jesse Felder returns to MacroVoices to question the prevailing soft landing narrative in markets. He argues that while many expected a bear market resumption, the current rally resembles someone falling off a skyscraper saying 'so far, so good' - the impact of monetary policy tightening hasn't fully materialized yet due to long and variable lags. Felder points to a 'liquidity hole' concept from Bridgewater, where positive liquidity effects from regional bank rescues and Treasury General Account drawdowns masked the underlying tightening, but this is now reversing. He presents the Buffett yardstick showing equity valuations remain elevated despite rising interest rates, with stocks never more overbought relative to bonds. His macro earnings model suggests corporate profits will face significant pressure over the next two years based on rising interest rates, oil prices, and dollar strength. Felder highlights concerning signs including a 40% gap between S&P 500 earnings and government-reported NIPA profits, indicating companies are using accounting maneuvers to inflate earnings. He shows that small speculators have gone massively long again, similar to 2021 peaks, suggesting excessive bullishness on the soft landing narrative. The 'Magnificent Seven' tech stocks now trade at 60 times free cash flow, double their historical average, making markets vulnerable to any growth disappointment.
In the second segment, Eric Townsend presents an unconventional commodity trade proposal involving the complete elimination of global nuclear waste for profit. He calculates that 250,000 metric tons of stored nuclear waste contains about $26 billion worth of recoverable uranium, but traditional reprocessing only becomes economic above $600/pound uranium. His key insight is that current waste holders pay substantial ongoing storage costs for hundreds of years, so they might pay several years of storage fees upfront to permanently eliminate the waste problem. Townsend argues this requires advanced 'burner reactors' that can consume the remaining 5% of concentrated waste after reprocessing, truly eliminating rather than just concentrating the problem. He suggests sovereign actors like Saudi Arabia or UAE could acquire nuclear startups, fast-track burner reactor development, and market this as solving the world's nuclear waste problem while generating massive PR value and profits. The trade would involve acquiring advanced nuclear companies, building reprocessing capabilities, and positioning as the global solution provider for nuclear waste elimination.
About this episode
MacroVoices Erik Townsend and Patrick Ceresna welcome Jesse Felder to the show. They discuss the many reasons Jesse is questioning the soft landing narrative and expecting more turbulence for the stock market. Then Erik shares his exciting commodity trade idea before moving onto postgame with Patrick. https://bit.ly/45I2ysd Download Jesse’s charts: https://bit.ly/3Eu9PQt Download Big Picture Trading chartbook 📈📉 https://bit.ly/3RbCyRu ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/2JjZR7J Please visit our website https://www.macrovoices.com to register your free account to gain access to supporting materials
Key Insights
- Felder argues the current market rally resembles falling off a skyscraper while saying 'so far so good' - monetary policy impacts haven't fully materialized due to long lags that should kick in by year-end
- Bridgewater's 'liquidity hole' concept explains why expected market weakness was delayed - regional bank rescues and Treasury account drawdowns created positive liquidity effects through mid-2023
- The Buffett yardstick shows stocks have never been more overbought relative to bonds, with equity valuations failing to adjust to the rise in 10-year yields from 0.5% to over 4%
- Felder's macro earnings model predicts significant corporate profit pressure over the next two years based on rising interest rates, oil prices, and dollar strength
- A 40% gap between S&P 500 reported earnings and government NIPA profits indicates companies are using accounting maneuvers to inflate earnings, historically signaling recession
- Small speculators have gone $40 billion net long in S&P futures for the first time since 2021, suggesting excessive positioning on the soft landing narrative
- The Magnificent Seven tech stocks now trade at 60 times free cash flow, double their 10-year historical average, while facing slowing revenue growth and massive AI infrastructure spending
- Townsend calculates that 250,000 metric tons of global nuclear waste contains $26 billion worth of recoverable uranium but traditional reprocessing only becomes economic above $600/pound
- Nuclear waste holders could be persuaded to pay 10 years of storage costs upfront to eliminate waste permanently, making the trade highly profitable if combined with burner reactor technology
- Townsend argues burner reactors that consume concentrated nuclear waste represent the key to truly solving rather than just concentrating the waste problem
- Saudi Arabia and UAE could acquire the entire advanced nuclear startup industry for a few billion dollars and establish dominance over next-generation nuclear technology
- Townsend criticizes Middle Eastern nuclear strategies focused on conventional light-water reactors instead of advanced molten salt reactors better suited for desert environments
Topics
Transcript
Thank you. Eric Townsend and Patrick Ceresna. Macrovoices episode 392 was produced on September 7th, 2023. I'm Eric Townsend. Jesse Felder returns as this week's feature interview guest. We'll discuss the many reasons Jesse is questioning the soft landing narrative and expecting more turbulence for the stock market. And I've got a commodity trade I'm pretty excited about, but it's much bigger than I could ever put on myself. It involves ridding the entire... planet of nuclear waste and making a considerable profit from doing that. I'm going to lay out the entire trade for you right here on Macrovoices after the feature interview with Jesse Felder. And I'm Patrick Ceresna with the Macro Scoreboard. Week over week, as of…
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