McClurg Warns on Bonds, Sees Opportunity in BTC

0:00Joining us now is Stephen McClurk, who's the CEO, Canary Kapital. Stephen, thank you so much for joining us. I've just been reading through your notes, and you've been talking about seeing oil, higher, seeing yields higher, but stocks just bouncing around. I'm just wondering, with the first two in mind, it feels like stocks would no doubt pull back. Could you just walk us through what your expectations and outlook are here? Yeah, absolutely. So a lot of the stock market right now is really bouncing around in a very high volatility range, and it has to do with certain uncertainty. And that certain uncertainty is, you know, one day we're going to pull out of Iran the next day we're not, one day we have tariffs, one day we're not. It's a really interesting trade that's been happening where it is very range bound, but at the same time, a lot of comments made by the current administration is causing volatility

1:01in the markets. But a lot of traders are holding tight, and they're trading around that, they're utilizing a basis trade. But generally, the certainty that's happening is that there's still a lot of positive activity in the market, and we're pretty close to a bottom, in my opinion. Okay, how far do you suspect we have to go? Well, it's what's really difficult here is, is the oil trade, and I do expect oil to stay high for a long period of time. It's very difficult to get oil and gas to come back down once it's gone up, and a lot of that just has to do with consumer behavior and corporate behavior. In the long run, stocks, I do believe they're continuing to go up, even if we do go into a recessionary state, and a lot of that has to do with the Fed being forced to lower rates later this year, once a new Fed shares in place, and that is really what's holding all

2:07risk assets up at the moment. So what's the playbook then in this current environment, do you think, Steven? Yeah, I mean, look, we run a private fund, and we've been risk off for the last six months for the most part, but the way that we're taking advantage of this trade is we are slowly going into risk assets for a long-term setup, but trading basis. So we're employing a cover call strategy and other types of derivative strategies to earn income in a very dynamic way as the markets are volatile. Okay, and so as far as the strategy, I mean, you advise clients to hold on to cash. Are you looking to play areas at this market when, quite frankly, a lot of it is on sale? And is there any trade right now that you would not like to be, and I know, obviously, this is investing 101, that you would not like to be on the wrong side of, I mean,

3:09particularly when you look at, say, energy, for instance. Yeah, well, really the trade that I'm most concerned about is actually fixed income, particularly on the long end. I do expect to see the two's to 10 part of the curve to continue to go up, which means that that part of the curve will probably go down in price. So we're on the short end of the curve for our fixed income side, but anything beyond two, we're very negative on. And we're also pretty negative on mortgages. As the tenure continues to go up, I do expect to see the tenure go as high as 5%, which will cause mortgage rates to go up with it. The other thing that I'm extremely concerned about is high yield debt and private credit. Private credit's already in the news. We don't want to be a debt horse, but really on the on the junk bond private credit side part of the fixed

4:09income spectrum, a lot of it has to do with the two year and the five year treasuries. And I do expect that to continue to go higher and yield, putting a strain on the debt service for companies that are issuing that debt. And what about Bitcoin then, Steven, because obviously we'd seen some momentum gaining off the back of the start of this conflict. And there were perhaps a few reasons for that. Even when we saw risk off in equities, but now it seems to be just stuck south of that 70k mark. I'm just wondering, you know, whether you'd be calling or seeing a bottom there, and if this takes another leg higher at some point, what the catalyst would be. Yeah, look, we call the top of the Bitcoin market back in October. And that that trade seemed to work out, but we've been very bearish on Bitcoin and other cryptocurrencies since October. It does look like it has come to a bottom. We're really forming a good bottom pattern here.

5:14People are starting to shift over into risk assets again. And of course, cryptocurrencies are some of the the riskiest of assets. But we are stuck in this range in what works in this range. And this has happened almost every cycle, every four years cycle in cryptocurrencies. So the last few cycles that I've been involved in is that it will chop around for quite a long period of time until we begin to see a rally again. And the best way to trade that really is a basis trade on various cryptocurrencies. But we are becoming a bit more happy about where Bitcoin is right now. So we are beginning to buy more here. Okay, good opportunity to step in, risk your assets, certainly getting a bid today. Steven, really appreciate your thoughts. Thanks so much for joining us today. Steven McLaughth, the CEO of Canary Capital, coming up.