This is a special edition of Macrovoises with hedge fund manager Eric Townsend.

The premier financial podcast targeting professional finance, high net worth individuals, family

offices, and other sophisticated investors.

Now for this special edition of Macrovoises, here's hedge fund manager Eric Townsend.

Macrovoises All Stars Episode 46 was recorded on August 15th, 2019.

I'm Eric Townsend.

All-Star Professor Steve Keane is back with us today.

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Steve, in our earlier All Stars interviews, you said that you were not expecting the US to enter a recession.

But now that the yield curve has inverted all the way out to 30-year bonds, and that's been in the past at least a very reliable indicator of recessions.

Have you changed your mind?

I've not changed my mind. I've gone back to one of the earlier arguments I had, which was that I saw the Fed be causing the ups and downs of the economy.

I think that's what's actually happening.

But in terms of the yield curve, it's been a very reliable indicator in the past.

But what it's normally been telling you is that market participants are getting edgy.

They're running out of finance. They're getting into the long security of long-term bonds and so on.

This time round, the Fed's been pushing up the short end and a bit like Keane's old expression of pushing on a string when he described monetary policy back in the 1930s.

Same sort of story. They haven't made the rest of the market respond. They haven't seen the inflation they are expecting.

And they're now going into retreat, but they've already increased the debt service ratio of corporations quite a bit in the meantime.

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