Steve Hanke Predictions

[3:20] I anticipate that they're going to if they want to keep it stabilized, they'll have to intervene again. That's that's that's my guess. I don't I don't think it's got to I I think it's an unstable equilibrium right now, as they say in economics. and and and and the the shorts will keep pounding it and it will go down because the only way you can change the course of a currency is to change the fundamentals and they're not changing the fundamentals of anything.

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[13:14] I I think that the the 30-year can at least go up 50 basis points from where it is now.

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[13:34] And and it's also a headwind for precious metals which which incidentally look like go gold gold is has you know finished its consolidation and it's going up.

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[13:50] the secular bull market in gold that we talked about many times on the program and I happened to be on on board with the secular bull story in gold and I indicated I think the first time I ever did it in public you twisted my arm so hard that I had to confess that I I thought it would peak I peak out at $6,000 an ounce which I'm still holding to

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[1:41] the the inflation genie is out of the bottle and and they're not going to be putting it back anytime soon in in my view.

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[31:07] I I think the bond market is going to call call a tune. And and one thing we know, we we know the stock market's in a bubble... higher interest rates you usually are associated with bubbles popping.

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[31:22] we we know the stock market's in a bubble. Any measure of bubbles, throw the thing up as a bubble. No matter what, no matter you you take your measurement, you take your gauge, they all say bubble... higher interest rates you usually are associated with bubbles popping.

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[23:01] The the economy is still in the doldrums because the the money supply is growing at a at a rate that's lower than the inflation target of 2%... the money supply is just simply not growing fast enough to accommodate that 7% target. they they won't hit the target.

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[14:57] I think the fundamentals point to more yen weakness that that's where the fundamentals come into the thing.

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[18:37] the sequence is this money supply growth with a lag will affect inflation. And we know I said the inflation rate's 1.6%. the year-over-year inflation rate in Japan. So that that suggest yields follow the inflation rate and that suggests that what that the yields are going to come down not keep keep going up.

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[44:55] they'll keep going up. You you don't want to be long you long long bonds, those interest rate those interest rates will go up and and that means what? If the interest rates go up, the price goes down.

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[10:37] I've always anticipated that later this summer, and we're getting now towards August, that that we could very easily see a pretty good spike in the price.

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[26:09] maybe the one way to go long is is just go long the majors if the the majors are very very the prices are very low now. So So that might that might be the easiest way for the the average person who who's not in commodity markets

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[28:08] The bull market I I from my point of view is still intact and will will peak out probably around $6,000 an ounce.

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[31:59] I think we'll re the inflation genie will remain out of the bottle in the United States.

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[42:00] deficit bullish?

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[42:29] Yes. Going up, deficit.

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[37:48] as as we get a deglobalization going on that that that structural change will be very bullish for commodities because instead of trading freely in commodities, you you you'll basically need lots more inventory.

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[2:05] it's pretty clear Iran will control it going forward.

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[7:47] I think I mentioned on the show before, the last time we talked, that I thought we'd run into shortages by the end of the summer and early fall as the inventories did just completely dried up. And it looks like that's happening.

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[36:06] So do you think the the yen will continue to depreciate against the dollar? >> Yes.

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[36:25] It It that the strength will continue. >> Okay. >> At least At least in the short run, that's the The dollar's very very strong

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[33:46] inflation's going to come down because the money supply isn't growing. And inflation comes down, interest rates will come down. That's that's what's going to happen. In- inflation isn't going to go up. It's going to come down.

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[34:03] And if inflation goes up, bond yields will come down. They won't go up. So, everybody's just got it all wrong.

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[37:11] Oh, yeah. It's going to take longer to hit the target. That's of 6,000, but we we we will hit it. The headwinds are uh as you say, you that chart that you had up there about the Fed funds rate, that that's a key thing because if if interest rates go up, the opportunity cost of holding gold, that goes up.

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[5:52] I my my base line case is probably around $85$90 a barrel. That wouldn't surprise me whatsoever.

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[25:42] I I I would I would say that the chances of them lowering that, meaning gooseing in in their eyes is pretty low. Well, as you saw in the chart, I think it's non-existent.

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[11:11] I I think they probably will be forced to tighten up and the reason for that is that the inflation genie is out of the bottle it's at 4.2% 2% now and I and and the target is 2%. That's over double a target. It's not even close to the target. So, it's very hard to argue against not squeezing and tightening things down with with when you have inflation running over double its target rate.

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[43:06] It will be o open in quotes, but it it will be one way or another controlled by Iran going forward. That was not the case before.

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[48:51] we're running a deficit in oil probably through the end of the year and and and you you have to run a surplus of course using the surplus to add to the inventory.

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[6:49] you said aluminum may the next commodity squeezed by the Hormuz crisis. Well, uh be because you've got a lot of aluminum production in in in uh the uh in in the Gulf nations. So at at the margin it it makes a big difference.

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[10:52] the inflation genie is out of the bottle in the United States and it's not going to be put back anytime soon. Th this will be with Trump and one of Trump's big Achilles heels throughout uh at least in the foreseeable future. So that means maybe throughout a big chunk of his second term, he he's going to have this inflation problem around his neck.

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[19:01] no recession in the immediate outlook. All the data look okay. The money supply is being gooseed. Everything is being pumped up.

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[19:29] especially after the the the USIsraeli attack on Iran and the closure or functional closure of the straight of Armuse that that is has caused actually in the last few months real weight just adjusted for inflation have have actually gone negative. They're not flat, they're actually negative, they decreased.

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[25:22] I think there'll be revisions downward in the growth projections

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[25:55] I I don't think that's in the cards quite frankly because you you've you've got a a spoiler in the mix and that's Israel. Israel doesn't want does not want the thing to be resolved... So So that's why I'm quite skeptical that there'll be any uh reasonable resolution to the to the war that the US and Israel started.

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[32:49] Y, yeah, yields are going up. Yields are going up anyway because the interest rate is a function of the inflation rate... And I think that I think they'll remain elevated. And that's why you've got the 10year at uh you know, almost 4 and a.5%.

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[17:32] So, so, so we can we can see more of what we've been seeing recently, and that is uh elevated trade deficit numbers, which of course will aggravate Trump to to no end and and uh it probably motivate more threats about tariffs and trade policies from the Trump administration.

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[0:19] I think the secular bull market is still in place and gold secular bull will probably peak out at $6,000 to $7,000 an ounce.

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[30:50] I think we'll see inflation moving higher simply because the money supply has been accelerating. So, so we got two two different things going on. And the causality in inflation runs from changes in the money supply to changes in inflation.

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[37:18] The 30-year is is almost up of it's just right under 5%. So when when that goes over 5% this is going to be big political problems. The the 30-year going over 5% which which I think it will do short shortly.

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[35:00] even though I think the stock market's in a bubble, usually bubbles only collapse when monetary policy tightens up. So, so what this means is that well, okay, we're in a bubble. Maybe the bubble isn't going to pop because the money the the monetary policy it's not tightening doesn't appear to be in the cards.

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[39:31] I think the Chinese Juan is is undervalued right now by a considerable amount. Uh so that's that's that's that's a plus. If if you're in in China, you're going to you're going to see not a depreciating but an appreciating currency.

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[31:37] we are entering a super cycle in commodities and commodity prices will be going up but that that that is not going to be the cause of the inflation going up. It's the money supply.

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[19:09] So So what it means is lower oil prices at at some point. Not not right now, by the way. Not right now. Right. Right now, you want to be long because there'll be more spikes as the straight remains shut.

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[24:02] you want to be long in the short and intermediate run because we we have had the the straight shut off but what's going on is pretty simple economics we've we've had a loss of about 14.5 million barrels a day that that don't that are not coming through, but the demand destruction due to the fact that the price has gone up is has not been that great. And the and the reason that the demand destruction isn't that great is that the price elasticity, the sensitivity of the demand, the quantity demanded of oil to prices is is is pretty sticky. It isn't very sensitive. Price goes up and demand goes down a little bit because of the price movement. You destroy a little demand but not very much. And as a result the you can see this by the way because the inventory drawd down is is about 11 to 12 million barrels a day. So in for in fact the demand destruction because of the price increase has only been about 2 and a half to three and a half million barrels a day. And and and to reach equilibrium they have to be about 14 12. It's it's only about two and a half to three and a half. So what's going to happen? We we're drawing down in price goes up that destroys a little demand and we live off declining inventories. We suck down inventory. Suck down in what happens when the inventories go up. The price jumps up. So we're going to see some price spikes coming. That's why you want to be long oil because because of the inventory draw down.

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[30:06] By the by the end of the year, it's going to be higher than it is right now. it it it might not hit hit the six to $7,000 range because yeah that that would that would require the kind of fantastic increase we had in the past which I don't know if we'll see again but yeah we're going bank we're going up

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[23:03] I I I think lithium will make a another big run.

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[23:06] And I another one I think is venadium.

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[29:01] The money supply acceleration M2 will continue and they will not be able to contain and get the genie back in the bottle

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[32:11] by the way, a third of the world's fertilizer comes through the straight of Hormuz. Well, it hasn't been coming through. And fertilizer prices are through the over 50% increase in those. So, farmers aren't aren't buying fertilizer. We're going to have food problems. Food prices will go up.

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[34:20] the inflation expectation on that chart by the way is coming down. I think that's a false signal that'll that'll start going up though. There'll be a convergence of those two things, David.

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[40:42] I think the the US continues to deteriorate and I and I I think it will continue to it's been deteriorating for some time and I think it will continue to deteriorate.

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[36:24] you've got about 80 refineries that have been damaged. A third of them have been damaged but severely. and and it t it's going to take about two years just to repair those facilities.

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[10:29] They're not going to crush Iran. Point number one and Iran will in with a high probability continue to control the strait and and that means that functionally it'll it'll be closed.

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[21:33] I think this could be the death nail for sanctions. I think the sanctions regime will start coming off.

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[8:33] the stock market is in a bubble. It's in bubble territory and and it wasn't in bubble territory in 1978. The the PE ratio was eight. Now it's you know up in 29 28.

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[27:39] We've already said that the price of gasoline has gone up about 50 cents on average in the United States in the last few weeks and and it will go up. It'll continue to go up because as you just said, we had a West Texas Intermediate crude hit a hit a 52- week high today.

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[45:53] the American public is very negative on this and I think the Republicans led by Trump will take a real beating in the in the midterm elections so there's a political the political fallout will be big

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[25:54] I don't think the Fed is going to be able to put that genie back in the bottle. meaning what what's that 2% or less? I don't think it's going to 2% or less.

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[32:41] I think it's going up. I think I think it's going it's going it's going up. It's going to it's going to drift up.

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[35:29] 92% no change. Okay. So that's that's where I am. I'm I'm with the market. I'm with the market.

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[32:43] I don't think this loosening will allow the Fed to get back the genie of inflation back in the bottle and get down to the target of 2%. I think that's the real problem and that's going to be a big problem for Trump

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[39:39] with all this pressure Trump is putting on them, the Fed has pivoted towards loosening. And that means that the stock market bubble will probably stay with us.

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[38:43] that's good for hard commodities. So, keeps a secular bull market going in gold, silver, copper, platinum

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[9:55] So the the calls outnumber the puts by about a 2:1 margins and and that suggests that the consolidation around 4,000 it it's it's going up not not going down. It'll it'll hold at 4,000 and probably go up. The the options market is betting uh that it's going up from 4,000.

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[18:31] I think the this secular bull market and gold that we've been in, David, will maybe end up at $6,000 an ounce, not 5,000.

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[37:50] Dollar is going to keep keep weakening and and get into my the the key the key dollar price is a dollar euro rate and and I think the fair value is 120 to 140 and and we're at about uh let's just look. look around 11718... So I think that the dollar will slip into the fair value range. It will it will go from 117 to weaken to 120 and and further into that range.

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[3:59] We are still in a downward trajectory for inflation and the reason for that is that inflation is always an everywhere a monetary phenomenon. So you have to look at what was going on a couple years ago with the money supply to get some idea of what's going to be happening with inflation today or tomorrow. And since the money supply two two and a half years ago was actually contracting, it would indicate that we'd stay on this downward trajectory.

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[28:31] So in the next year we shouldn't be concerned about doubledigit inflation or high single not double digit inflation maybe high singledigit inflation coming back. You know people have painful memories of 2020 and 2021. So

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[47:07] Now the real interest rate actually has gone up to about 1.7% or something like that. And I I think I think it probably will go up to, you know, like two and a half or 3% something in that zone.

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[17:20] I think the regime uncertainty will lead eventually to what? Looking ahead, it'll lead to a more serious slowdown and a recession in the United States. And with a recession, of course, you have topline revenues going down, margins going down, profits going down, and and you know, the stock market that the pees are going to come down.

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[0:15] What we're seeing is the onset of a slowdown that will eventually lead to a recession late in the year.

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[16:44] I think it it might even hit the Fed's target at 2% or maybe even a little below this year

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[29:43] Do you think that the worst is behind us for equities volatility? Oh, no. I I think things things are just warming up

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