Episode summary
Cem Karsan: "The Fed Is Preparing to Print Again" with Ash Bennington
Summary
Cem Karsan argues the Fed’s current hawkish posture is largely a credibility exercise ahead of a much larger intervention at the long end of the Treasury curve. In his view, the real issue is not whether the Fed raises or pauses by 25 basis points, but that pressure in long-term Treasuries will force the central bank into a facility that is effectively QE to hold down yields. He says the administration and the Fed are preparing for this with policy moves and signaling, while the market is being conditioned to accept the coming shift.
Key takeaways
- Cem Karsan says the Fed’s hawkishness is mostly theater meant to rebuild credibility before a larger QE-style response to long-end Treasury pressure.
- He expects the Fed will not deliver the additional 25 basis point hike being discussed and will move toward cuts before the next rate increase.
- Karsan argues structural inflation is being driven by populism, fiscal spending, protectionism, and geopolitics, not just cyclical price pressures.
- He says the 60/40 portfolio is historically an anomaly and that bonds may no longer diversify equities when interest rates rise.
- Karsan recommends managing to sortino and using hedges as “brakes,” not as return drag, in a more volatile regime.
Notable quotes
“I believe we're about to embark on a massive, meaning in Q1 of this year, massive money printing, you know, at the long end of the curve”
“the only thing that really matters is not this front end of the curve and whether they're raising 25 basis points or not or pausing in a hawkish pause, yada yada”
“What matters is the long end of the curve. And the bond market has after you know, outside of this this flight to quality pullback that we've seen is a one-way train”
“Millennials are at 45% of the wealth creation household formation of baby boomers at this time”
“There is almost zero diversification benefit of bonds relative to stocks. That's what the numbers and data tell you”
How the episode opens
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Welcome back to Real Vision. I'm your host Ash Bennington. Today I'm joined by the one and only Jim Carson, founder and CIO of Kai Wealth and Kai Asset Management. Jim, always great to have you with us. — Wonderful being back. Good to see you, Ash. Been a little bit.
A lot to talk about here. We've got Fed news, we've got geopolitics, we've got cyber incidents happening out there. I mean, let's get started here with the Fed. Your take on Mr. Warsh's, Chair Warsh's moves.
Yeah, I have a bit of a different take here. My view is that the primary goal for Warsh since he's started is to to create credibility for himself and to create credibility for the federal reserve writ large. I believe we're about to embark on a massive, meaning in Q1 of this year, massive money printing, you know, at the long end of the curve.
I think we are going to have a facility, essentially QE, to hold down the long end of the curve. That's a view I've had for some time. I believe it's coming.
I'll get into that a little bit later in the show. Given that and and the necessity for that, I believe right now the Fed, the Fed's most important thing is to at least show a sign that they care about inflation a little bit, like to be.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- fed qe expectations
- treasury market stress
- structural inflation
- fiscal spending
- portfolio risk management
Watch the episode
Watch “Cem Karsan: "The Fed Is Preparing to Print Again" with Ash Bennington” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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