ACG's McDonald on Central Banks: Witnessing Pure Evil (Audio)

point five seven percent while some investors did. This morning, we're gonna be talking about negative bond yields and US tenure bond yields falling to a near record load. That's coming up. Larry McDonald, he covers the bond market very very closely. We're gonna find out if he's worried or happy about this gigantic bond rally. Well, I know what

I am now, I'm happy. Going to Charlie pell news room, Boobermberg Business Flash, and I thank you very much, Kathleen Anky him, the DAL, the SMP nezdak all declining twenty nine minutes to go ahead of the close on this Tuesday, And we're brought to you by Sector Spider E. T F. S why buy a single stock when you can invest in the entire sector. Visits sector sp d r S

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with Kathleen Hayes and Pimpbox on Bloomberg Radio. The yield on the benchmark US government note fell to a near record low today, as the yield on Germany's ten year debt fell low zero for the first time on record. Here to tell us more about the bond market is Larry McDonald. He is Managing Director ahead of Global macro Strategy at a CG Analytics, and he is also the author of the book A Colossal Failure of Common Sense, The inside story of the Collapse of Lehman Brothers. And

he is also the editor of The Bear Trap. Larry McDonald, thank you very much for being with us, wondering if you could just tell us your thoughts about the record low yields. What are the implications for this near negative rate on many sovereign bonds? Well, thanks very much, FIM. I think we are within a few days of a classic blow off top in bonds. What's happening around the world is is pure evil. This is pure We're literally

witnessing pure evil. Central bankers are putting forcing capital into places it just shouldn't be. We've gone from one trillion of of negative yielding bonds a year ago to probably over eleven trillion today. And the thirst for yield, the reach, the reach, reach, reach for yield is creating a so much systemic risk globally, uh that I think the near term run Uh, it will will end here sometime in the next hours. Why the next forty hours. It's been

going on for months. Well, we saw this last thanks Kathleen. We saw this last We saw this on Sebruary eleventh, We saw this last April, and we also witnessed this on October four in two thousand fourteen. And Uh, when you have a rush into bonds like we've seen that's so far and so fast and so violent, uh, you it gets overdone and it's too many people are on

one side of the boat, Kathleen. The bottom line is the central bankers have kept interest rates so low that there's hundreds and hundreds of hedge funds, acid managers thirsting for some type of alpha, thirsting for it, so that the student body goes left, the student body goes right, and and then what's happening is too many people are on one side of the boat chasing this yield, and they're gonna get whipside back out as they as we

witnessed on October fourteenth, two thousand fourteen, as we witnessed on February and leventh of this year. It's just too many people on one side of the boat and it's not going to take much to get to to really capsize the vessel. Alright, what if you could comment on inflation? Do you believe that it is already with us? Well, we're I think I think we're in a we're obviously in a global deflation deflationary cycle that is starting to reverse itself here in the United States a little bit.

But we globally were in disinflation. Uh. Evidence of real inflation in the United States is very suspect. And uh, there's just too many people because of these developed markets have aging populations, right number one? Uh they two number two democracies, Republican republic democracies have promised so many goodies to so many different people that the amount of people that are sitting at home not working in the developed markets is our proportions that we've never seen our lifetime.

And so we have young people to fifty the most in thirty years in the United States that are not working that they're just sitting at home. God knows what they're doing, but they're not working. And that's that's not creating. That's not creating. I think that hilaria is that so many people are saying with the central banks have done wrong is take all the way to the world on their shoulders, and we need physical action and the government's giving both people money to stay home, and that's that

is not working either, is what you're saying. Now. Are when you said that this will be over, this this super nova of a bondmark rally in four eight hours, do you just mean a little crack back up and we'll see the tenure German buon back above in positive territory for a while and maybe the tenure known in the US s to one seventy or so, and then the rally continues. Well, many people are saying, you know, one fifties easy, one point to five on the US

ten years entirely possible. We'll keep in mind you're on the phone with one of the biggest bond bulls on Wall Street that's been around for the last I've been one of the biggest bond bulls. It's two years ago. People were laughing at me when we were calling for one forty on the tenure. So the entire street told us two years ago that we would be at three and a half on the tenure. The entire street of the street told us two years ago we would be

at three to three and a half. We have to get we have to get ready for life after lift off. They lectured us hours and on end it was they were all the wrong. The entire street has been wrong. So I think to your point, yes, I think it's going to be a vicious sell off, but once again, it probably lasts a month or two. And I don't think it's the coupe data in the moment of the great reversal in the bond market. That's probably six to

nine months away. But I don't think it's happening next month. Well, you know what also is about maybe six months away, is a new president in the United States. Do you think that politics is playing a role in this. Well, that's the thing exactly, tim is is that we talked.

We talked about this on our Bear Traps report, on on Twitter, our handles at Convert Bond, and we we just did a report last week with our team in Washington and it was very well received by You're right, the deficit spending Reagan type programs are coming out of Trump in terms of stimulus, and that's going to increase the depth sit and that's when you're get to get a reversal in bond. Derry McDonald had a global macro

strategy at a CG Analytics. He's editor of the Bear Transfer for report, and you may recall that he's the author of a colossal failure of common sense. This is Bloomberg Radio. Coming up on taking Stock. We're gonna be speaking with Larry Rosenthaal. He helps manage more than six hundred million dollars at Rosenthaw Wealth Management Group. What's he telling his clients to do with their money? That's next