This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Dr. Lacy Hunt, executive vice president of Hoisington Capital Management.

Among the topics covered:

Hunt and his partner Van Hoisington have correctly remained steadfastly bullish on long-dated U.S. Treasurys ([[TLT]], [[TBT]]) through multiple inflation scares over the past few decades. They remain bullish today despite some scary recent CPI prints, continuing to point out the clear evidence that over-indebtedness in the U.S. will act as a deflationary force.

This doesn’t mean there won’t be quarters of speedy economic growth and occasional gains in inflation, but once the high of whatever government stimulus du jour wears off, economic sluggishness and a pullback in inflation will reassert. Hunt expects the just-passed $1T fiscal stimulus bill to be yet another example - a short bout of higher growth, but ultimately even worse economic performance down the road thanks to the boosted indebtedness.

Turning to monetary policy, Hunt notes that growth in the money supply has begun to slow even prior to the Fed’s taper, suggesting a coming slowdown in both the economy and inflation. How could this be given that the banks have nearly $1.5 trillion more in reserves than they did a year ago? Banks, Hunt says, are not able to put those reserves to profitable use, so they remain on account at the Fed earning a handful of basis points.

As for yesterday’s hot retail sales report (for October), Hunt believes a lot of folks - reading stories about the possibility of bare shelves come Christmas-time - pulled their buying forward. More interesting to him is last week’s plunge in consumer sentiment, with the sub-index of durable goods purchase expectations falling to one of its lowest reads ever. It suggests to him a serious lack of confidence in the economy. He also takes note of the poor approval numbers for the current administration - prints one would never see were there not major economic concerns.

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