The Grant Williams Podcast Ep. 108 - Larry McDonald

**Grant Williams** (0:10)
Before we get going, here's the bit where I remind you that nothing we discuss should be considered as investment advice. This conversation is for informational and hopefully entertainment purposes only. So while we hope you find it both informative and entertaining, please do your own research or speak to a financial advisor before putting a dime of your money into these crazy markets. We are about to listen to a special preview edition of The Grant Williams Podcast, featuring my very special guest and my good mate Larry McDonald, author of The Bear Traps Report and the terrific book How to Listen When Markets Speak. We talked about an awful lot of things, his framework, how he uses his dashboard of proprietary indicators to figure out what the hell is going on in markets. We talked about the AI bubble, we talked about gold, we talked about energy, we talked about the dollar, an awful lot of stuff here that you're going to enjoy digging into. Every episode of The Grant Williams Podcast, including The End Game, The Super Terrific Happy Hour, The Narrative Game, This Week In Doom, Shifts Happen, Chaos Theory and The Hundred Year Pivot is available to Copper and Silver Tier subscribers at my website grantwilliams.com. Copper Tier subscribers get access to all the podcasts, while members of the Silver Tier get both the podcasts and my monthly news set of Things That Make You Go Hmmm. So if you enjoy what you're hearing on the show, and you'd like more high quality content like it, then please make your way over to grantwilliams.com and join our excited community today. And with that, on with the show.
Larry, welcome to the podcast, Long Overdue. I'm delighted to have a chat with you, and hopefully give a little second wind to your terrific book, How To Listen When Markets Speak. So, welcome to the podcast.

**Larry McDonald** (1:54)
Oh, Grant, thank you so much, and a huge fan, and just a big admirer of what you've built, and the first mover advantage for you, my friend. God bless.

**Grant Williams** (2:03)
That's very kind of you, thank you. So listen, we could start in any number of places, but I think what I'd like to do, if it's okay with you, is to start with the book, so we can use that as a framework. I'll give the floor over to you. Give us a sense of what it was that drove you to write the book and what you were setting out to try and achieve in writing it.

**Larry McDonald** (2:20)
I was a trader at Lehman Brothers, and the first book was a New York Times bestseller. It was published in 12 languages, and it's a former Lehman trader. I used to tell my wife once a month at Sunday Branch, I'd say, honey, if we sell a million books, we'll break even on our Lehman stock. I started getting some comments because I did a lot of media. I built a business called The Bear Traps Report, but I started to get a lot of comments. So you're a one-hit wonder type thing, right? And I just wanted to create a second book that tied the fiscal and monetary response to Lehman. It was about $4 trillion from, say, 2009 to 2014 $4 trillion bucks, fiscal and monetary juice coming into the system. But when we started to do the math in 2020, 21, 22, 22 when writing the book, the fiscal and monetary response to COVID, the regional bank crisis, the 23, and Team Biden trying to juice up the fiscal into the election, which both parties would try to do, not being politics here, no politics. But if you add that up, $16 trillion.

**Grant Williams** (3:28)
It's wild.

**Larry McDonald** (3:29)
And Janet Yellen was saying, we gotta go big, remember? Postcode, we gotta go big. Now, this is hubris, and I can see why, because for 20 years in Japan and the United States, nobody was able to really, no country was able to create inflation. We're in a disinflationary cycle. And it was really starting to pick up some massive dangerous speed in 2020 So I see why they did it. But at the end of the day, if you're in a new inflation regime with higher rates, then you need a whole new portfolio construction. And that's the foundation of the book.

**Grant Williams** (4:02)
But you go through the kind of the old world before the stimulus. And it's interesting because I've been thinking a lot about this recently. And this path to the current normal, or what you could call the book the old normal, that path is pretty clear. But I think because it's been the water we've swum in for 40 odd years, people don't necessarily spend any time joining those dots, whether it's globalization or these decades of disinflation and the way that monetary policy has shaped that. So perhaps you could just give us as a background your thoughts on how we ended up with this need to come up with a new normal.