Michael Drury on China's Trillion Dollar Secret and Why The U.S. Is Not Headed Imminently Into A Recession
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We are joined by Michael Drury, chief economist at McBain Trading, one of the, if not the largest cattle traders in the world. And and, Michael so people, I think, trash and they poo the wealth effect. And they say, oh, just because the Federal Reserve is raising interest rates and just because the stock market's down a little bit, that doesn't mean the economy is weak. But what I hear you say that the 1987 stock market crash, which on an intraday basis was probably the worst in history, in my definitely American history, caused cattle futures to go limit down. You think of the stock market an
So the unwinding of the Japanese carry trade in Japan a week ago had that same impact. That's why you see vol go through the roof. Because I mean, there are guys who know they're in trap position. They know that they gotta do something about it. So they buy vault at any price out the door, then they puke. Then whole market explodes and they get back some of their money, then the Vault market. But, I mean, they play these games, and now they're played so fast by the algorithms that, I mean, crashes that took weeks to roll through the regular stock markets now roll through in 3 or 4 days because
The stock market down 7% is not a financial crisis and nowhere close to to merit a response with the Federal Reserve. And
not to say that that doesn't look at threats volatility. I mean, the 25% sell off in early 2022 was stocks and bonds. And it was a sell off in bonds that was dangerous because that got into the banking system where the bank, you know, banks have a lot of treasuries and it exposed the whole SBB issue and etcetera. So you just don't know. I mean, each one is an individual event and has to be evaluated on that basis. I mean, we've got flash crashes. Nobody says Vince got eased for flash flash. You know what I mean? So this was a flash crash. I mean, it sound like the Japanese haven't been telling
was gonna say How do they know that? I
don't know. How do they know? Maybe they knew who isn't Trump. Maybe they know the guy who was really in in a bad place. But they can also tell just from market volatility, vol came back in. We're back under 20 again, etcetera. So, I mean, it's not just the vol indicator. It's the VVIX. It's the options on the options, that kind of stuff. So, I mean, the there's a lot more signals now as to the mechanics of what's going on in the financial markets. And so it's it's not the old days when Paul Volcker raised rates and you didn't know. Yeah.
Or you just observed it in the markets. Yeah. Yeah.
And that's how you observed it. Just wait a minute. The market's trading. Alright. Did the Fed tighten? You know, maybe. And you didn't know until days later. And they never admitted it. I mean, it came out in the minutes or something like that, weeks later. I
didn't know they never admitted it.
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