Carry as the casino edge

Alex Gurevich, founder and Chief Investment Officer of HonTe Investments, a Bay Area-based investment management firm, and the author of The Next Perfect Trade and Wall Street Journal bestseller The Trades of March 2020, returns to The Julia La Roche Show. In this episode, Gurevich discuss his updated thesis on interest rates, deflation, and the forces shaping markets. He argues that zero interest rates are "not off the table" — and that the probability is far higher than the market is pricing. He sees labor market deterioration happening quietly under the surface, warning that "the less visible it is, the worse it's probably going to be" because policymakers won't act until it's too late. Unlike the consensus worried about inflation, Alex is firmly in the deflation camp, though he notes any deflation can be countered by fiscal stimulus — he just doesn't think the government will act aggressively enough given how burned they were by the post-COVID inflation. He also discusses his newly released second edition of "The Next Perfect Trade," explaining why he kept the original text intact to maintain intellectual honesty about what worked and what didn't over the past decade. He declares the 40-year bond bull market "definitively over," shares his framework on carry as an underappreciated edge, and offers a fascinating take on AI's future energy demands potentially exceeding the output of the sun.

Links:

Book: https://www.amazon.com/Next-Perfect-Trade-Magic-Necessity/dp/1544550014/

X: https://x.com/agurevich23

Website: https://honteinv.com/

0:00 Welcome and congratulations on the second edition

1:19 The Next Perfect Trade — second edition out now

2:01 Setting the table: The macro view today

3:30 All the fireworks have been in precious metals

4:08 Interest rates are "pinned in confusion"

4:45 Alex's view: Leaning toward zero rates

5:40 Labor market deterioration — the less visible, the worse it will be

7:20 The behavior of rates during Fed cutting cycles

8:58 What zero rates would mean for the economy

9:36 The relationship between stocks, jobs, rates, and growth is broken

11:30 Could we have strong growth and weak jobs simultaneously?

13:13 Deflation, not inflation

14:10 The pendulum: Deflation, then too much stimulus, then inflation again

15:25 Recency bias from COVID stimulus keeping government cautious

16:02 Precious metals: What does the move signal?

18:41 Why the second edition? Intellectual honesty

20:29 Admitting mistakes: "It was arrogant of me"

23:12 Growth as a trader — recognizing your weaknesses

24:08 The one chart to rule them all — is the 40-year bond bull market over?

25:41 Bull markets break up before they break down

27:19 The 2020 bond breakout should have been a warning

29:47 The underappreciated power of carry

32:04 Be the casino, not the gambler

33:30 The corporate borrowing rate indicator

36:27 Why the indicator broke down in 2021-23

38:26 Has the macro investing world changed?

39:52 The most underappreciated force in macro right now

42:46 AI's energy demand will overwhelm all sources — even fusion

45:18 Is energy the trade?

46:55 The perfect trade: Japan is getting interesting

48:40 Where to find Alex and parting thoughts