Episode 87: Macro Financial Markets Outlook with Peter Harlin

Ben Lakoff, CFA
October 3, 2022
Listen to this episode on your favorite platform!

Peter is one of those rare individuals that keeps pretty close tabs on a number of financial assets and markets. He’s my go-to guy for insight into where financial markets could be moving, and what sorts of things might be worth looking into a bit more.

Macro is tough to forecast, but I always enjoy talking to sharp thinkers like Peter to help provide a bit more clarity. Markets have a tendency to humble investors, but I still think that ideas like Peter's can provide tremendous benefits.

Listen on your Platform of choice:

Check out for all the listening options (Spotify, Apple, etc.)

Show Notes

0:00:00 Welcome and context

0:01:17 What is your background?

0:02:37 What is happening right now?

0:04:35 What are the general themes going forward?

0:09:20 What are your views on inflation?

0:14:19 What's happening with gold?

0:17:05 What are the things that keep you up at night?

0:21:11 What kind of assets do you expect to perform well in these types of markets?

0:25:00 Why you'd say that real estate is underperforming right now?

0:30:45 What are some of the emerging markets?

0:32:02 What contrarian opinions do you have on some common narratives?

0:33:05 What kinda cracks are you watching for when it comes to currencies?

0:35:00 Where can people find out more about you?

Show Links

Episode 3 with Peter

Connect with Peter on LinkedIn

Helpful other Alt Asset Articles

Episode Transcript

[00:00:00] Ben: Welcome to the alt asset allocation podcast, exploring alternative investment opportunities available to the everyday investor. Here's your host Ben Lakoff. 

Hello and welcome to the alt asset allocation podcast. Today's interview is with Peter Harlan. Peter is one of those rare individuals that keeps pretty close tabs on a number of financial assets and markets.

In fact, he's my go-to guide for insight into where financial. Could be moving. And what sort of things might be worth looking into a little bit more macro is complicated, but I always enjoy talking to macro thinkers like Peter to help provide a bit more clarity, either way the markets tend, have a tendency to humble investors.

But I think that thinking bigger picture, like some of these conversations can provide tremendous benefits. All right. Peter Harlan on the macro picture of financial markets. Enjoy Peter. Welcome to the alt asset allocation podcast. Good to see you. Good to see you.

[00:01:03] Peter: Ben always dude.

[00:01:05] Ben: Episode three. So this was August 15th, 2020.

So now this is mid July, so more than two years. And, and honestly we probably recorded that in June or July of 2020. Yeah. So middle of the pandemic, lots of people said very, very good things. So we covered all things macro and let, in case people. Heard that one, let's just do a quick overview of who you are and what you're doing professionally, and then we'll jump right into the markets.

[00:01:33] Peter: Sure. So I've appreciate you having me, Ben always. It's good to see you. I have always worked in financial markets at big banks. I've. Worked at JP Morgan now Wells Fargo for about a decade. So working with clients predominantly ultra high out worth clients just kind of advising and, and monitoring and working with clients across, you know, all kinds of public and private assets and, and businesses, and really all types of people.

So also have a little bit of crypto experience as well with Ben, which I which has been fun to do. 

[00:02:05] Ben: Great. You're a humble man, but. Peter's big, big shot and deals with a lot of different asset classes and can speak very, very clearly and intelligently across all of these asset classes, which is why I always benefit.

And I know my listeners will as well, kind of talking, having you talk through this, so let's jump right into it, man. mid-July let's talk about them. Macro world. There's. Lot of fear out there. A lot of chop, a lot of yeah. So if crypto markets are down like 70% since their highs let's kind of paint me the picture of what's going on macro right now.

[00:02:37] Peter: Sure. I mean, I, I think at a macro level I mean a few things, just not only like fact check or facts, bring up facts up speed. Worst half of a year in equity markets through June. Since the seventies, early seventies Also within the last half, you know, the first half of this year, we saw the worst quarter for bonds broadly that we'd ever seen, you know, the aggregate bond index down double digits which is almost unheard of when you see bond prices coming off peak heels.

But I mean, the big story really to me, is a reduction of liquidity in a less easy monetary environment. What's interesting to see, and we can talk about more. Things is the interplay between central banks and the fact that we're actually in a slightly diverging central bank policy situation. And you're starting to see that play out across currencies and then throw commodities in the mix there too, which have reawakened.

And you've got just such an interesting, it's almost three dimensional. Way of thinking about prices where your base currency, if you wanna think about your base as crypto or as gold or as real estate or all these different things or the Euro, or, I mean, just depending on where you base from almost shades your view of how things are going in the world and how it's re-pricing.

So it's kind of real time. I think in our last interview, as I recall, a couple years ago, I don't recall a lot of things and I don't wanna fact check a lot of it, but I probably. Go back and see what I said back then. But I think one of the things we did talk about was sort of how wealth and, and currencies play into wealth.

And, and I we're witnessing it right now. I mean, with the geopolitical situation, et cetera. So. 

[00:04:07] Ben: Yeah. I remember from all those macro talks in 2020 kept saying like unprecedented time with the, the monetary, a actions that were happening. And now we're starting to see kind of the ramifications of a lot of.

That easy monetary policy. But so right now you deal with a lot of clients positioning their portfolios, like to make those tactical moves. Now you kinda have to have a, a, a clear picture of where, where you think the world is gonna play out. From where we are now, what are kind of the, the general themes you're thinking about going.

[00:04:47] Peter: That's a great, great question. And so I'll just kind of ramble for a bit here and try to stay on track, but broadly and no offense to anyone else, but it seems to me that the us is still pretty much the strongest player around the world. You look to other comparables down the top. Five or so five or seven GDPs around the world.

And the us just seems utterly dominant still. For a variety of reasons you look at sort of. Stability and wealth and ability to navigate. And you have to look at natural resources. You have to look at demographics. You have to look at technological superiority. You know, agriculture perfect example is unfortunately Europe right now in a severe situation where they're forced to buy from, you know, sort of the most dangerous person or, or country right across their border there.

And basically forced. You know, support their currency, support their economy while we're all trying to do the opposite thing in a way. And so it's a perfect example of how natural resources are currency and ultimately the, you know, the base export is what you have as natural. You know, resources versus domestic currencies, domestic currencies is more a reflection of that.

So you know, a couple big picture items, obviously the year of inflation when people sort of have awakened to the, the thought that in inflation can actually occur. A little bit of a view there. Many people think that it's purely and rightfully so. I mean, it's, it's no one will know for sure.

Who's right until five years from now probably. But I think a lot of people have moved toward the camp and certainly a lot of people have come out of the world would work who for the last 12 years have said it's inflation as a result of monetary supply increasing and the expansion of M two which effectively went from 15 trillion.

Close to 20 trillion in the matter of really just several months or a year after COVID. But combined that with, we had a massive supply shock that we haven't seen. I mean, it was a war like supply shock to supply chains to commodities exportation and all of those things. When COVID locked the world down.

I mean, that's a, to me, it's a supply shock, almost like having a world war because it is the same effect when you don't have people going across borders and you have people locked in their houses hiding effectively. So that type of supply shock is, is gonna take a while. So when you combine the two, here we are.

All eyes right now are on sort of when and where is peak inflation. So when is that sort of peak number gonna be posted? At least in the us, I'm saying a lot of things, us centric, understanding that there's a global audience ne in most cases, but so anyway, looking across the PTED to Europe, I, I worry for them because of their disadvantages with energy and obtaining steady energy, specifically natural gas I look over to Japan and I worry about the same thing.

And you see, you're starting to see some things you haven't seen in 15, 20 years where the euros, a parody or the Yen's about to touch 140. And you know, meanwhile, the, the Japanese central bank is, is. Sort of committed to yield yield curve control. And it seems like the currency market is, is sort of losing some faith there.

So those to me are the really big events. I worry about, you know, a deep depression in Europe and the possibility for a currency, a top three currency, like the end to, to sort of blow up. You know, the, the yen is, or the Japan is a top three GDP in the world. So I, I worry a bit about those sorts of things.

I do think inflation will cool because there's a variety of, of, of things. In my, my opinion that make us make it quite a bit different than what we saw in the, the seventies, where, where it got wildly out of. 

[00:08:16] Ben: Okay. So I'm just showing this M two monetary supply, which is like the chart is insane.

Yeah. And then obviously we talked about the Euro to dollar. Yeah. It's just it is highly favorable for those wanting to travel to Europe. Right. Not, not good timing for me last summer kind of transferring a portion of my net worth into euros. So that was a. Got a nice 20% haircut on that in FX swings.

And then the, the yen, obviously just being ugly. So let's talk about your views on inflation, because it seems to be, I mean, like you said, the year, year of inflation, all of the Bitcoin guys have been calling for this for, for a long, long time because of monetary policy, you know? Right. But yeah, let's, let's hear your views on it.

[00:09:03] Peter: Yeah. So I, you know, I think most people, and I would say I was probably pretty much in this camp too. And I'll tell you why I've drifted just a little bit from it, but most people sort of believed, especially post eight, you know, post oh eight crisis where central banks went in and printed a bunch of money that sort of immediate inflation would.

It didn't, and it really didn't until, you know what we're seeing last year, year or so, maybe a year and a half now. But because sort of, we didn't have the supply shock side to, to really put that immediate squeeze on prices upward. I tend to think that monetary supply definitely matters. But what matters more is how much money flows directly to the consumer.

So sort of that credit expansion function you can print a bunch of money, but if you also simultaneously make bank reserves a lot tighter, which is effectively what's happened over the last decade than. That money really doesn't go anywhere. And so it's out there sort of the gross, it's almost like gross and net exposures for hedge funds.

I mean, you can have massive gross exposures, but if your net exposure doesn't change, then you know, it's not a directional portfolio that you have in your hedge fund. So I just, I think of. Sort of inflation as that kind of that net number. It, it, the credit expansion has to go to the consumer in order for that, that inflation to really kick hard in my opinion.

So that's where I think it was more of the fault of the fiscal side of things over the last year or two which is government spending versus the monetary side of things, which is controlling the, the money supply. So, but regardless of all of that looking at king dollar, basically destroy everything.

It reminds us of a couple things. One is liquidity rules, everything over the short term without a doubt. And so when people need liquidity, everything sort of gets cashed in. But two the dollars, you know, had an unbelievable run against the other major currencies around the world. And then . Sort of, I mean, I think we need to sit back and, and you know, I, I'm a big fan of cryptos.

I'm a big fan of gold. You still have to sit back and ask yourself why I do. Why has gold not performed at all for a couple years now? You know, the Bitcoin one to me is a little easier to explain because you know, it's all about flow there. And if, you know, once it gets going and some things unwind, you know, it's, it's, it's gonna get hurt.

I, on gold though, it just is interesting to me that central banks don't seem to be piling up a ton. And they don't seem to be leaving the us dollar despite everything that the us government has done to be irresponsible. So I kind of step back and I say, my observations from that are. Us is still the best shirt in the closet, on the monetary side.

And the world still believes in it. And, and I, sometimes I laugh at how at the moment, but because if you're a country where your currency's depreciated 10 or 15% and oh, by the way, oil's gone up 70% in the last year. And it's priced in dollars. I mean, that is just constricting. So the other, probably the third leg of, of what I worry about, I start to look at is, you know, you see little signs of unrest in places like Sri Lanka and people will put up with a lot of things, but when it comes to food, that's when people really You know, we'll lose their minds and to you can't blame 'em.

So that's kind of where we could see some unrest and possibly unrest in what we think of as pretty civilized areas of the world. So I worry about that. So that that's, that's kind the concern, you know?

[00:12:31] Ben: Yeah. Feels like a powder keg, always like when talking about these things, right? Like grow, growing wealth inequality, and then food scarcity, energy concerns.

Like these, these things start, start touching on a lot of the the road towards pitch forks and torches, as I say, often on this, but is let's, let's stick into gold a little bit because this is like this is kind of an interesting one, right? Like Flight to quality global inflation, everything like the Fiat monetary system, looking like a little fragile in places yet.

Gold is just kind of stubbornly sitting along. Yeah. Talk, talk to me about gold. 

[00:13:10] Peter: Yeah. I mean, I kind of grasp at everything when gold hasn't moved, you know, a couple years ago I was watching and participating some in, in crypto's rising. Not enough. I, I wish I had had more at the time, but You know, I wondered if maybe gold was picking up some of the incremental flows from Bitcoin.

I mean, cuz at the end of the day, there's some use for gold, but a lot of it to me is money flow and you know, where's the, which where's the bid. And so I feel like that's a real possibility. But it has certainly hasn't caught any of the outflow in, in Bitcoin at all and has had a bad year so far you know, I, I still think gold is, is enduring.

I think honestly we can't underestimate the power though of the Fiat system that sort of developing to what it is when you. You look back and you kinda laugh because, you know, we were back by gold, then we were loosely back by gold. Then it was like, well, there's no gold anymore behind any of it. And when you have enough decades where that's the case and nothing like literally explodes, I mean, go talk to people on the street and ask 'em if they care, if there's gold back in their dollar or not.

And so I don't, I don't think the prevalent, there's not sort of this retail panic away from the dollar. And I think that's maybe what it would take. To push gold way higher. And so if there's one thing that the us federal reserve has done well is I guess when they needed to they've proved that the dollar is still the number one currency, cuz I mean, no one is paying.

I mean, that's the one thing I can, even if you talk about clients and working with, with clients which I do on a daily basis you know, I, I, I do remind him here in the. Which I couldn't, if I were a European based advisor with European based clients that the dollar's winning right now. And so it's a little bit easier for me.

It is an element of, of, of what we talk about that that makes it a bit easier cuz the dollar looks good. Yeah. 

[00:15:04] Ben: It, no, it certainly does. I mean, it's King dollar let's. Let's talk about like, things that keep you up at night. I mean, for, for me, like sovereign debt is just insane. The levels globally, it's kind of tough to like continue kicking the can down the road when it hits the sovereign level, but you yeah.

Would be interested kind of what, what things kind of out there keep you up at night and yeah. Were you for your your, your four small children, right. And the life that they're, they're going to. 

[00:15:33] Peter: Well, I, I do I worry about all those things. I, I think macro countries that. Have natural resources will be okay.

You know, Fiat currencies. And a lot of what we talk about are just sort of a unit of account for all of that. So if there was some large reset, you just kind of reset to what those natural research are. So from a personal standpoint, I like owning, you know, some land and, and I'd like to have some more real estate, obviously love to have you know, public securities too.

But what worries for me worries me. In general I've I've thought this for a long time is a, a sort of reset on the currency side, because it's so devastating when people think about, you know, if you think about people fleeing out of risk assets into an asset that carries sort of this. A noble risk itself, then that is really concerning because people, you know, to me, the default right now, when I talk to a client is, is you know, the risk, most risk free position is going to cash.

I mean, that's just, that's it. But when cash is a problem, what do you do with that? So to me, I do think a Canary is it. If and when gold. Substantially starts dominating all currencies. To me, it's almost more concerning than you know, being happy if, if I happen to be in that heavily with clients at the time in 10 years or, or if, and when that happens.

But to me that would be a sign of, of Fiat you know, struggling. I worry about what's what I see in Japan, because I do think as a country that, like you said, they're probably the worst in terms of debt to GDP. They're trying to control their yield curve, effectively keeping their debt servicing costs slower.

But at the same time, the yin is slipping to me that says what you're doing is not working and it's gonna break. I worry about that one quite a bit. If that happens, I think it's a, it's over the short term, except for the global financial risk and financial side, but for the us dollar. It's fine. I mean, a lot of money will float to the us dollar and effectively strengthen it.

But then the question is. What if that starts to happen in the us eventually. And then that's sort of the, the death nail there right now. We're still strongly in this game of alternatives, in my opinion. Or, or choices, you know, you, you, you go from one or the other, it's a relative game. So if the whole game stops, then that that's the problem.

So that's, that's what I worry about the worst over the. Time period. You know, I, I don't worry too much about it. And then I kind of step back and, you know, if you, I just I'm playing things out well beyond, I mean, this is the, the true sleeping that you're at night, you know, thinking about things, you probably shouldn't, it's got getting too crazy there, but you know, if you really play it all out, then you kind of go back to the fact that in the us.

Massive land mass, you know, the top three or four landmass. So those are the types of things you have to think about. If you're an individual living in a very small country with very little domestic natural resources, it does mean that you're more of a derivative or a, a smaller you, you're more reliant on a lot more things from other places and you, your country will not be able to look inwardly for everything.

It needs to maintain the same standard of living. If there's a massive reset. I think those countries or countries that aggregate together properly, cuz which Europe very well can do will be, will be okay, but they'll have to, you know, navigate the, the change of all that. So yeah, no, 

[00:18:58] Ben: I, I think doesn't makes a thing is like, no, it does make sense.

And this is the thing is like you go down these. Dark kind of paths, but in reality, if there's gonna be a great reset sort of thing, E everything fails, everything is like going zero basically. And it said it, it is a pitch forks and torches sort of situation. Yeah. So you have to just make the assumption that the game keeps on playing.

Right. And kind of figuring out how to position accordingly. So. On the position accordingly, you talked a bit about real estate mm-hmm what, what other kind of assets would you like in these sorts of markets or, or, or assuming that's kind of the way that 

[00:19:34] Peter: we're going? Yeah, I think as a base safe asset, in a way we're probably the best hedge to To Curr.

What, what the government does with currencies is, is real estate. I mean, and probably, and I, and when I say real estate, let me define actually, that's a great thing. One, obviously, you know, it's a great doing a home just for most people. It's a, that's a good deal to do. And primarily, not necessarily, cuz you'll make a killing on it, but one, you really saving yourself some rent money that you be otherwise paying somebody else.

That's kind of a good just cash flow tool to break even over time and, and your housing. But outside of that, on the pure investment side, I do like some, I, I like raw land, you know, I, I think it's good now. It doesn't cash flow very well. Hardly, even if you put ag on it. In, in my experience, ag is a, is also a tough game.

So, so you can't think of it as a cash flowing prop, but I do think you can solidly think of it as going to keep up with whatever happens to inflation and currency and not be devalue. I do not. So that that's a good one. I think the cryptos can be good. But from that standpoint, really just Bitcoin to be a bit of a maxi or whatever, but I, I, from a pure inflation or, or a, you know, value hedge would be that one, but It's gonna be massively affected by inflows and outflows, so way more so than, than land, but obviously more liquid.

So that's good. Other parts of real estate, I, I like commercial real estate. I would just think about real estate and where you own in my opinion, on 10 year basis of, of. Forces about population trends. To me, it's pretty simple. If people are moving to an area over the long term, your prices are gonna be stabilized, period, because if you're in commercial in pretty much any sector of commercial, If one industry that's dominant in that area goes down.

Well, again, you got that flow of people coming in, which means new businesses, which means new industries popping up. So in the us, I think there's pretty big trend right now. I mean the simple one, I mean the simple move of New York to Miami, it seems like New York. Not as favorable on owning New York commercial real estate, as I would be of Miami, because I feel like there's just sort of this demographic.

I mean, I don't feel like it it's happening. There's a demographic uplift there. So it kind of feels like you're not gonna go wrong in that type of area. So cash flowing commercial real estate is good. It's hard to own direct. I mean, you're gonna. To have big numbers, especially in the bigger Metro it's a little bit easier.

I live in the middle of the country a bit more. So price points are a little lower here. But otherwise you have to look at some sort of LP vehicle in all likelihood. I'm not a fan of publicly traded rates. I mean, look at this year, for example, most people had direct ownership in real estate or are pretty much flat or maybe even a little bit up on the year in their real estate.

Even with the slowing and home home mortgage lending and, and the increased cost there. I expect housing to hang in pretty well, just because it's been pretty undersupplied over the last 10 years. But it publicly traded res are down as much as equities. So I don't public res to me while they can make money at times are not in they're they're in the public equity bucket, in my opinion.

So I, there are some. Traded res from some of the big real estate you know, investment companies. So you could look at a Blackstone or a Starwood and just look, look up nonpublic res and kind of take a look at some of the research there. And, and those, those are. About as close as you can get for a small bite size of something that's not a public common equity of a REIT and should perform more like direct ownership in a, in a individual building.

[00:23:01] Ben: Yeah. No, and that's, that's good stuff. I mean, so the, and the theory with. Real estate is protect against devaluation, prepare for inflationary times. But I'd be curious because I mean, seriously for two years on this thing, it's like rubbing it in my face that I don't own enough real estate, but yeah.

you know, everybody's beating the real estate drum. Yeah. You with your financial markets knowledge kind of more broadly speaking, what situation happens within broader financial markets that real estate actually significantly underperforms or does poorly. 

[00:23:34] Peter: Yep. I think that's a great, that's a great question.

That's a great question. So I would say I would divide it. I almost always divide it in two camps because who are the players in that market? You know, what is the market construct? So you've got home and residential, so I'll just start with that really quickly. To me home and residential is all driven off of where mortgage rates are.

And so when mortgage rates were down two or 3% for the 30 year fixed you know, massive inflow of money there just made it so easy for people to buy. But now we've got the double whammy of. Home ownership costs on the interest rate side have doubled or close to it. The benchmark 30 year for conforming is about 5, 7, 5 0.7%.

And it was around three just a year ago. So that's gonna slow things. And additionally, the price increases over the past couple years. Haven't quite come off yet. And so right now, today is a tough time for the. You know, smaller end home buyers. Therefore prices will pool somewhat. In my opinion, I don't know that they'll crash.

And the main reason, I don't think the indivi, the residential housing market will massively crash is because I think much of the leverage created. In fact, the numbers back this much of the leverage created over the past few years has been fixed rate leverage. And why not? When you can get three or two and a half percent 30 year fixed.

Most people didn't say I'll also try to save a quarter of a percent and get the five one resetting, you know, the, the, the arm product as we call 'em adjustable rate mortgage. So I think that we're gonna see sort of more homeowner strength, even if prices decline, they've got their payment fixed, so they don't have to bail in their home.

And I've also seen lenders just so much more stricter. So I think that the money has not gotten quite Asate in residential as it could have been on commercial side. You know, I think what would make areas of a crash. And I was really concerned about this was something like a, a a office, you know, space, just really getting crushed.

What I see in a lot of commercial has been a lot of sort of redesign of certain structures. And so I'm seeing, for example, Buildings that might have gotten sold at lost by somebody that were all class, a office in downtown, you know, top five Metro or something. And instead, now they're gonna put retail on the bottom.

They're gonna put office in the middle or two thirds, and then they're gonna put some, some downtown housing in the top part. So some of those trends I think, are, are being mitigated by that. I mean, ultimately a, a large crash in real. He's gonna be triggered by the need for liquidity. I mean, that's just always how it is.

And so rates moving up where they have on the commercial side. I don't think he's gonna cause that inherently. We have to remember obviously tons of you know, commercial debt is, is. Sold away through CMBS. You know, non-agency CMBS for the most part. And there could have been a massive event in that two years ago.

I mean, there, there really almost was. But I haven't seen that occur. So I would say, you know, if there's a bad refinancing cycle where sort of the big lending money you know, gets really negative on a certain area that could start the trigger I mean, other than that, I, I think some of it's just overpriced a little bit here.

Cap rate's got just way too low. And so I guess the simplest and purest answer is if the 10 year treasury went to 6%, for example, all real estate would have a substantial reset. So, yeah. But outside if rates hang in, I think we'll be. 

[00:27:04] Ben: Yeah. And I mean, it's important to note that like real estate is, is kind of not even a real thing, right?

Because like the real estate market in your town versus LA beach versus some other place these are all very, very different. And then thinking globally, like yes, perhaps the mountain towns in Bulgaria are, are as screaming deal right now. Yeah. You know? 

[00:27:26] Peter: No, that's you're right. You said it right. If there's riots in the streets of your city, I mean, that's gonna be a tougher place to, to sell your real estate.


[00:27:35] Ben: Good luck with your commercial building. Nobody's buying lattes 

[00:27:38] Peter: when that riots, you know, oh, it's a great point, Ben. 

[00:27:43] Ben: Yeah. Well, on, on that, like I was looking through the show notes from our last talk and we talked a bit on emerging markets. Mm-hmm so I know. Probably got about 10 more minutes.

Yeah. But let's talk briefly about like emerging markets given the talk about the dollar strength and kind of where you yeah. Where you sit with with emerging markets. 

[00:28:03] Peter: If I were gonna say what asset class given our environment has underperformed the most relative to what you would've thought.

In my, in my view, or at least the most difficult area to manage it would've been bonds, anything, bonds, I mean, even the safest of bonds, you know, moved down two or 3% and you're just the duration move was just massive. You can't under rate what happened in bond markets. If I said, what may have outperformed the most versus Everything else going on, it could be emerging markets because emerging markets, you've got a, a large slug of China.

You've got some Russia. You've got this group of countries that has absolutely struggled from the currency standpoint. Be it the Ms. C I emerging markets through June was actually ahead of the S and P I mean, in terms of the loss by about 3%. So kind of a shocker there. I like emerging markets, long term.

I. Probably the country I'm most interested in within emerging markets is India. Possibly Brazil in there. If I just think about large land mass countries, so lots of favorable, you know, demographics and things in their favor. But India possibly will surpass China and population here pretty soon.

If they haven't already it's, it's hard to say from numbers you look at, but. I think that's a, that's a really interesting one. In portfolio construction, I typically, as a us investor, I'm gonna be predominantly us and really have been, especially lately very, very heavy us centric. But instead of going toward developed XUS countries like Europe, Japan, Australia no disservice to 'em, but.

They're probably similar to us and I think we have some advantages. So to get some real diversification, I typically barbell my allocation. Em, which is absolutely the, the riskier part of, of XUS equities. So I like emerging markets. They're still strongly tied to the dollar in many cases, cuz they issue a lot of their debt in us dollar.

And so, you know, I, I. I always have some concerns or some worries about some of their currencies, because on a micro scale, you see those things play out. Argentina blew up just a few years back and, and that example of as a us investor, you own an Argentina bond. And in about two weeks, their currency had come off by a.

Oh, 25% at least probably cruising toward 50%. And those bonds start pricing in default that maybe, and so they're try trading 50 cents on dollar. That's the type of, sort of multiplier to the downside you can experience if you're in the wrong emerging market country. But I think that we will probably see in our lifetime, whether it's China and China very much has, but maybe even another China.

Emergence because my main thesis for why that could occur and occur rapidly, more rapidly we've seen in the past is I think about it. You know, one of the wonders of life I'm digressing a little bit here is when a child is born, it's basically a full reset, right? And so everything we have to teach 'em like the over the whole scale of humanity is, is a lot But our inner, our, our information transfer and ability to share information is so much greater.

I mean, I just think about all the kids from these different countries around the world that can go back to their country and just, or just stay in tune with what's going on in the us or other countries that are a little more organized that can happen. And I think it will happen at a little faster rate.

So I'm very positive on emerging markets. 

[00:31:21] Ben: Happen, potentially at a very much faster rate. I mean, I think of like RA Paul with the exponential age and it's, everything's moving so much more quickly because of the interconnectedness and mm-hmm yeah. It's, it's very interesting. Also what you said about India, have you read biology's new book, the network state by any chance?

No, very good. A link it in the show notes. He did really, really good, but he's okay. Super, super bullish. Indians like the Indian people and less so on the Indian government. He's like, if the government could get a shit together, like, like India would just be crushing, but you have some, some headwinds there.

I'd be curious. What, what kind of contrarian opinions do you have or, or things that, you know, the common, common narrative that exists that you disagree with? Looking for hot takes here. and obviously none. None of these are like financial to advice or opinions right. Of, of your Wells Fargo. They're they're your own, you know, that whole disclaimer, but yeah, lay it on me.

[00:32:19] Peter: Well, I mean, one hot take, I stole I'll just say, which is funny is, and not funny, but one hot take would be to say. Russia is almost better off than they were before they entered Ukraine, despite all the financial sections. I'm sure you've heard that one before and you kind of think about it. It's kind of interesting.

So, which is crazy, crazy. Probably contrarian, you know, and, and this may not be a super hot take, but. I think tech comes back the, you know, especially the larger tech companies, a lot of the fraud does not. I don't think you're gonna see a Rian trade at a hundred billion market cap for a long time, but will Facebook and some of the other bank stocks, you know, possibly lead us out here.

And that's on the back of maybe a bit of a hot take here, cause I'm not quite as depressed about. You know, inflation and where we're headed as the market seems to be. When you look at all these confidence numbers I do think we've been here and maybe we trade sideways and it may take us a couple years to claw back toward all time highs.

But I don't think we're gonna go below 3000 borrowing the big events I talked to you about where I, or I think if, if Japan or Europe really blew up or something like that, then that, that could take us there, but. Just looking at, at the orderly market we've pretty much had, I think we could just be sideways to, to hire from here for, for a little while.

[00:33:35] Ben: Yeah. And just last question is on the like Europe or either the Euro or the yen blowing up, what kind of canaries in the coal mine, or what kind of cracks in the system are you monitoring that you would be watching for like the average listener to kind of protect or think about these, like.

Existential risks to all markets. 

[00:33:57] Peter: Yeah. Well, I think the basic sort of groundwork for the game, if you will, or the, you know, being in financial markets is watching the dollar and how it reacts to various commodities. I think a Canary could be something like the yen blowing out. I mean, if you see one 70 or 200 on the Y.

That's gonna have some ramifications. And, and it doesn't necessarily mean the S and P 500 goes down or whatnot, but it, it means that things are changing in Fiat world. So that's really what I'm looking for. What are the signs that things are changing in the Fiat world? Another one is how much us dollar denominated debt is being issued around the world.

That's a large reason why the us dollar has such a vice grip on things. So watch sort of that ratio and then also. You know, to me watching the trend of sort of isolationism and, and those sorts of things. If, if. Country kinda looks inward, then there's a very real chance that everything costs more and we have less of it because trade does beget allows people to use their natural strengths to sort of make each other's lives better.

That's part of, sort of the contract. So I don't know if that helps exactly. I don't have. One indicator to look at. 

[00:35:06] Ben: I don't, there's a lot of interconnected, all of these things. It's tough to look at one particular thing. I think that de globalization and kind of the ramifications of that is really, really interesting.

And I mean, all of this, it's like a big, crazy experiment in real time. So we'll see how it goes, but Peter always appreciate having you on man. You're like, you, you, you can. Speak through all of these different asset classes, which I very much appreciate where can my listeners find out more about you? What would you like to leave them with?

[00:35:36] Peter: Sure. Yeah, just everybody, you know, I think stick to your long term game plans. Definitely keep your, keep your cash on liquidity levels at a, at a good, good pace here and be safe. And yeah, I, I feel free to connect with me on LinkedIn and you know, wish everybody the. Awesome. And I'll link those 

[00:35:54] Ben: Peter.

Great to see you. Thank you so much. 

[00:35:56] Peter: Sounds good. Thanks Ben. Appreciate you. Good to see you. Good. See you there. You have it.

[00:36:01] Ben: Thank you for listening. I really appreciate your support. Show notes, transcript links, and more can be found on our [email protected]. If you'd be so kind, please share this with anyone you think might be interested or get some value from this conversation.

If you have any questions or comments, please reach out. I'm always happy to hear. Lastly, if you're on YouTube, please like the video or subscribe to the channel. If you're listening to the audio version of this, please subscribe to the podcast and, or leave a review. This really helps more people find the podcast.

And I really appreciate it. Thanks again, and hope you have a fantastic day. Happy investing.

Ben Lakoff is an entrepreneur and finance professional. He has developed strong global finance experience through 10 years of international assignments in the US, Brazil, Afghanistan, Southeast Asia, Czech Republic and through the award of his Chartered Financial Analyst (CFA) certification.