The Big Quake is Coming

Interview by Christoph Gisiger
From The Market NZZ

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Interview with Larry McDonald

Larry McDonald, founder of the investment research service The Bear Traps Report, expects that the ongoing rotation out of tech stocks will cause tectonic shifts in global financial markets. He is betting on the comeback of value and commodity stocks.

The mood is testy. Yields on Treasuries are rising, the dollar is trending stronger, and major tech stocks are under pressure. Accordingly, tensions are high when the Federal Reserve decides on the future course of its monetary policy this Wednesday.

«The Fed has its back against the wall,» says Larry McDonald during a conversation via Zoom. The internationally renowned macro strategist and former senior trader at Lehman Brothers warns that the Federal Reserve has little time to mitigate the explosive situation in the bond and currency markets. Otherwise, he says, the global economy is at risk of another crisis.

Since last spring, the founder of the independent investment advisor The Bear Traps Report has been recommending investments in the commodity sector, where he believes a new super cycle has begun. He reiterated his recommendation during his last conversation with The Market in late 2020. Today, his call for a big reflation trade has become the consensus on Wall Street.

In this new interview with The Market/NZZ, which has been edited and condensed for clarity, Larry McDonald tells why he expects the Federal Reserve to resort to yield curve control fairly soon and what that will mean for gold and silver. He also explains why the rotation into commodities and value stocks is only just beginning and where he currently sees the best opportunities for investments.

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