Lighthouse Market Signals in a Fog of Debt & Currency Risk

By Matthew Piepenburg

Partner

October 11, 2023

In his latest (two-part) conversation with Wealthion founder, Adam Taggart, Matterhorn Asset Management partner, Matthew Piepenburg addresses the broader global risks as well as specific market signals to make the complex simple for global investors.

In short, Piepenburg separates the media fog from the clear lighthouse signals of historically unprecedented and unsustainable debt levels. Those who follow the lighthouse, he maintains, are better equipped to make it safely to shore.

Piepenburg discusses the importance of employing empirical facts to make sense of otherwise “Truman Show-like” attempts by global policy makers to replace hard evidence with empty platitudes. In particular, Piepenburg addresses the string cite of data points which show that not only are US and global markets far from a “soft landing,” but already deeply careening into a hard-landing, the ignored evidence of which is literally all around us.

Toward this end, Piepenburg touches upon the sin, as well as orchestrated strategy, of deliberate omission used to hide disturbing market and economic indicators, all of which support inevitable stressors in risk assets as well as Main Street unrest. Piepenburg reminds that such fact-based realism can no longer be disregarded as mere “gold bug” cynicism.

Piepenburg opens with a sober assessment of unsustainable and ever-climbing debt levels at the home of the World’s reserve currency. The mismatch between increasing UST supply (and debt levels) and declining trust and demand for the same points toward greater pressure on falling credit markets, rising bond yields and unpayable (rate-driven) debt costs. In the end, Piepenburg sees an unavoidable reversion to inflationary money creation to monetize sovereign bonds following a deflationary/recessionary fall in global markets. Ultimately, central banks will be forced to chose between saving their “system” or sacrificing their currency. Piepenburg concludes that history, without exception, tells us the last bubble to pop is always the currency.

The conversation eventually turns to declining trust in political and financial leadership as markets, bonds and currencies limp toward a fiscal cliff which can no longer be blamed on a pandemic, Russian bad guy, global warming or little green men from Mars. This leads toward a deeper dive into inflationary/deflationary forces, currency direction, de-dollarization and, of course, physical precious metals. Here, Piepenburg speaks to the obvious implications of the record-breaking stacking of physical gold by global central banks as both a symptom and solution to growing global distrust in fiat money and unloved, over-issued sovereign bonds.

In Part II of this conversation (released tomorrow), Piepenburg then speaks to portfolio and investor responses/solutions to these increasingly difficult macro conditions.