October 28, 2025 • 18 mins
In this episode of Lead-Lag Live, I sit down with Jay Hatfield, CEO of Infrastructure Capital Advisors, to discuss why he believes the Fed’s latest dovish pivot was inevitable — and what it means for investors heading into 2025.
From housing to money supply and the AI-driven growth cycle, Hatfield breaks down the data points that actually matter — and why he sees zero risk of recession, but a real chance of an economic boom.
In this episode:
– Why the Fed’s “weak labor market” narrative hides a deeper policy flaw
– How housing and money supply remain the only leading indicators that count
– Why the risk of a boom is higher than the risk of a bust
– How AI momentum could supercharge growth in 2025
– Where Jay’s 7,700 S&P target comes from — and why it’s not irrational
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive #JayHatfield #Fed #InterestRates #HousingMarket #AI #Economy #Investing #Markets
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:00):
Everyone gets too excited about, you know,
particularly billionaires andtheir opinions, we should ask,
okay, well, that's aninteresting opinion, but what
are your facts?
So in this case, the facts arethat next year's earnings.
So when you're coming up with atarget for the end of this year,
you look at the following year,we're carrying about 305 for the
SP.
The reason for the upgrade is wethink with lower rates, you can
(00:22):
justify and higher growth fromAI.
You can justify a 23 multiple,which is historically high, but
it's important to keep in mindwe had a huge corporate tax cut
in 2017.
So you should only look reallysince then.
SPEAKER_00 (00:51):
Now, U.S.
stocks are stabilizing afterlast Friday's big sell-off.
We're trading near all-timehighs, but that move needs
digestion.
Meanwhile, gold continues topush into record territory, a
vivid signal that risk andrefuge are dancing together in
this market.
My guest today is Jay Hatfield,the CEO of Infrastructure
Capital Advisors, a guy I knowyou trust when it comes to
(01:14):
navigating income, credit, AI,and macro cycles.
Jay's recently adjusted his SPtarget higher based on
conviction in the AI cycle andhis read on where the Fed is
going.
Let's stay in deeper.
And Jay, thank you so much forcoming back.
SPEAKER_01 (01:29):
Thanks, Melanie.
It's great to be on.
SPEAKER_00 (01:31):
So first up, the the the Fed.
They've taken on a more dovishtone lately.
What stood out to you in recentcommentary and what does that
signal for markets and for ratecuts?
SPEAKER_01 (01:42):
Well, thankfully, the Fed has reacted exactly as
we've been projecting really thewhole year.
And that is that keep in mindthat the majority of the core
Federal Reserve Board, sothere's seven members, right
now, four are Democrats, whichare primarily follow
Keynesianism.
(02:02):
So they're labor market focused.
So we had expected,notwithstanding the fact that
they're pretty hawkish oninflation and super negative
about tariffs, which we think iswrong.
But we did think that they wouldcapitulate when they saw this
slowness in the labor market.
Finally, the BLS got around tofiguring that out.
(02:25):
And so uh it's it's reallybullish.
In fact, the Fed chair mentionedcontinued weakness in the labor
market.
So that's the core that's goingto hold this Fed together, where
the Democrats and Republicanscan agree to cut, is when
there's a weak labor market.
So that's really what to focuson.
(02:47):
And that's really the key riskfor this market is the Fed
pauses, long-term rates go up,and the housing market goes into
a full-blown recession versusjust slowing down.
SPEAKER_00 (02:58):
Yeah.
So I mean, you've been quitecritical of a Fed policy in the
past.
Do you believe that we're nowseeing that the central bank
catching up, or is it stillbehind the curve with inflation
money supply macro risks?
SPEAKER_01 (03:10):
Well, they have three fundamental flaws.
Their target rate is completelyarbitrary and too low.
Should be 2% to 3%.
2% inflation is super terriblefor the middle class.
Um, and it's impossible to landthe um 747 on the aircraft
carrier.
Should have a wider rangebecause otherwise you're going
(03:31):
to just overshoot on both sides.
That's the the one of thebiggest flaws.
The second is they use uh theBLS's numbers for inflation,
which are even worse than theiremployment numbers.
They're delayed by two years.
So that's why the Fed's alwaysbehind the curve.
(03:52):
And then thirdly, they'reterrible at forecasting because
they don't use the money supplyand they don't look carefully
enough at the housing sector.
Those are the two leadingindicators of the economy.
So we still think the Fed isfundamentally flawed, needs to
be reformed.
We're just lucky that we havethis weak labor market, which is
(04:12):
getting them to do the rightthing for really the wrong
reasons.
SPEAKER_00 (04:17):
Yeah.
So uh coming back to the to thestock market, you've raised your
SP 500 target from 6,600 to7,000, citing the AI boom and
better visibility uh on rates.
Can you walk us through that andwhat gives you the confidence?
SPEAKER_01 (04:32):
Absolutely.
And I would just reiterate whatI always say is focus on the
facts and not the opinions.
Everyone gets too excited about,you know, particularly
billionaires and their opinions.
We should ask, okay, well,that's an interesting opinion,
but what are your facts?
So in this case, the facts arethat next year's earnings.
So when you're coming up with atarget for the end of this year,
(04:55):
you look at the following year,um, is we're carrying about 305
for the SP.
And the reason for the upgradeis we think with lower rates,
you can justify and highergrowth from AI, you can justify
a 23 multiple, which ishistorically high, but it's
(05:15):
important to keep in mind we hada huge um corporate tax cut in
2017.
So you should only look reallysince then.
And there's a lot of distortionbecause of the pandemic.
So we do think with lowcorporate taxes, low rates, a
more rational Fed and AI, themarket can support this 23
(05:36):
multiple.
Uh, and we're just projectingfor next year, the end of next
year, a 7,700 target, but that'sall from earnings growth.
So we're not expecting an ear amultiple expansion.
But the real point about bubblesis that it's great if we're in
the early phase of a bubble.
(05:57):
So probably the risk of our toour target is more higher than
lower.
So maybe we end the year 25times.
We can't come up with a DCF tojustify that.
But that's kind of the upside ofbeing in this potential bubble
market is you get thisovervaluation, and that can be
(06:17):
fantastic if you're in themarket.
SPEAKER_00 (06:19):
Yeah, so Jay, on uh on small caps in a rate cut
environment, you lean towardsvalue strategies.
What's fueling your thesis onsmall caps and how do you uh
steer away from money losers?
SPEAKER_01 (06:32):
So actually, right now you might want to be in the
money or losers because you'replaying.
If you want to look for bubbleright now, it's in these money
losing companies.
So if you've been in those, Godbless you.
But we think it's better to bein GARP comp what we call GARP
type companies.
So you get growth at areasonable price.
(06:54):
It can be a pretty highmultiple, but you should better
have growth to justify that.
The market peg, what's calledPEG ratio PE to growth is about
two times.
So we're looking for companiestrading below two times.
And that way you stay up awayfrom blowups.
Like everybody had moved intoKava, which is you know small
(07:16):
cap stock.
It's trading at 110 timesearnings.
They stumbled and they went down35%.
So we want to avoid blowups.
Um, we have less volatilestocks.
So we're more in the value/slashGARP segment of small caps.
We think there's enough riskwith small caps already.
So it's better to be, and alsocompanies that pay a dividend,
(07:38):
our small cap fund, Nest Cap,pays a substantial dividend over
6%.
And so we'd like dividend-payingcompanies.
We have some preferred stocks aswell that enhance dividend.
We do write a small amount ofcall options.
So if you're going to play smallcaps, we think it's good to be
conservative, get some income,give money-making companies
trading at reasonable multiplesrelative to their growth rate.
SPEAKER_00 (08:00):
Yeah.
And I mean, in the income spacewith preferred stocks that you
just mentioned and calibablebonds, how do money managers
identify opportunities toharvest these gains?
Perhaps buying calls near part,as you mentioned.
And how do they tilt a portfoliointelligently as rates trend
downwards?
SPEAKER_01 (08:17):
So what we do constantly model or monitor
rather for all the companies inall of our portfolios, ICAP,
SCAP, AMZA, on the equity side,is that peg ratio.
And we also include yieldbecause we have a lot of
dividend paying stocks.
And we do think that's also agood quality screen is have a
(08:37):
dividend-paying company.
So almost all of our funds arealmost exclusively
dividend-paying companies.
But so include the yield becausethat's part of the growth.
Um, so reasonable uh peg-wideratio, so PE to growth plus
yield.
And though you can use it to buystocks that are cheap, but also
when these companies get closeto a market peg-wide ratio, then
(09:03):
we will trim them andor sell theentire position.
So we use it both as a buysignal and a sell signal.
And again, when you trim thesewinners, like if you we're not
in them, but if you're in somemoney-losing company that's up
100%, maybe you don't sell thewhole thing, but you better trim
it.
You should definitely trim it.
(09:23):
So we just do that with lowerrisk companies.
But by doing that, you reduceyour risk because you're in
fewer companies that are fullyvalued and more companies that
are undervalued.
So even if they missexpectations, your loss,
potential loss is way lower.
SPEAKER_00 (09:39):
Okay, and I I mean credit markets have been rattled
by bankruptcies at tripolar, forexample.
You've called the panicoverdone.
Where are you seeing mispricingor opportunity in credit right
now?
SPEAKER_01 (09:50):
Well, certainly, you know, in two of our funds, PFFA
and BNDS, they are so far awayfrom auto uh secured asset-based
lending, it's not even can'teven describe it.
So nothing to do with thatwhatsoever.
But yet those um stocks and bondand BNDS is obviously a bond
(10:12):
fund, have weakened up a little.
They haven't really collapsed.
But so we think there that's agood buying opportunity because
we think it's a total panic.
And keep in mind Jamie Diamondcalled it cockroaches, but he's
always way too negative.
He's running a big and big thebiggest bank in the United
States.
So he has to be, it's basicallypiloting an aircraft carrier.
(10:35):
So he has to assume there's riskaround every corner because he
can't be nimble.
But if you really analyze it,it's a pretty niche market.
These are really low qualitycompanies.
There's no reason to believethere's systemic fraud in the
auto finance market.
So KKR is the easiest way toplay that.
Stock's way off.
(10:56):
It's only 10% in asset-basedlending.
It's other people's money.
So if there's losses, it's nottheirs.
Of course, they don't want tolose other people's money, but
it's not direct loss.
It's not like a bank that lentthe money.
And we think they have a veryhigh-quality portfolio with
great counterparties, not thesesuper low-quality roll-ups type
(11:17):
companies, you know, doingaggressive lending, like
subprime auto lending.
So tend to be much higherquality companies that are their
counterparties that are they'rethey're lending money to them
and their receivables.
So we don't think there's goingto be any losses.
If they were, they wouldn't bematerial.
(11:39):
If and also if they're losses,it wouldn't impact their net
capital.
So great buying opportunity of afantastic company, probably the
best brand in the world forfinancial services is KKR.
SPEAKER_00 (11:53):
Jake, KKR is held by iCAP.
Can you walk us through some ofthe holdings and talk a bit
about those funds?
SPEAKER_01 (12:00):
Yes, so ICAP's our large cap dividend fund.
Um, so every company payssubstantial dividends.
Um, but we when we do see theseopportunities with super high
quality companies like KKR, wewill include them in ICAP.
And the great thing about ICAPas well is we can, we're not
going to do it right now atthese levels, but if it rallies,
(12:21):
we can write short-term coveredcalls, great strategy, can keep
your exposure to the market andrealize gains on positions that
have appreciated and are closeto target.
So KKR is a major holding ofboth ICAP and also our macro
edge fund.
SPEAKER_00 (12:37):
Okay.
And I again, I we we touched onit at the beginning of the
interview.
I I want to pull back again tomacro.
It's as you've mentioned,slowing global growth tariffs
and what your thoughts are onthat.
Meet jobs political risk.
Where do you see recession risksheading into 2026?
SPEAKER_01 (12:52):
Well, so we don't do probabilities, we do
predictions.
So our recession risk, I mean,de facto, obviously there's
always some probability, but iszero.
But what that does assume, soit's good to do
conditionalities, notprobabilities.
That assumes the Fed does cutrates so that they don't get
(13:14):
cold feed.
You know, maybe the labor marketstrengthens up a little bit, but
they keep cutting down to theneutral rate, which is somewhere
between 275 and three.
And then the housing market willstabilize and probably start to
expand.
Because keep in mind,housing'cause caused 12 out of
the 13 post-World War IIrecessions.
(13:37):
And so that's the key indicator.
The Fed tends to ignore it.
But and that was weakening, itwas almost to our level of
indicating recession, 1.1million, we were 1.3 million,
and the trend was down.
It should improve, at leastbottom out, but probably improve
with rates in the low sixes.
But that rate is 100% dependenton the market's current
(14:01):
assumption that the Fed's goingto cut rates down below 3% next
year.
The 10-year trade is 100 basepoints almost exactly over the
terminal rate or the that finalrate that the Fed's going to cut
to.
So that's the risk.
But if that doesn't happen, wesee absolutely no recession.
In fact, we would it'd be betterto talk about the risk of a
(14:23):
boom.
So we see a high risk of a boom.
So boom being 3% to 4% growth,you know, with AI continuing.
But now with tailwinds, ishousing and construction start
to positively contribute,employment picks up, cement
sentiment picks up.
So we think we're headed into aGoldilocks market where you have
(14:46):
lower rates and good economicgrowth and good earnings growth.
And that's really reflecting themarket.
You can see that even a tradewar can't really dull it, derail
this market.
It is making it more volatile.
You know, we were up uh, youknow, 35 points higher.
We're lower by 20 points.
(15:08):
The market is gyrating aroundmore than it usually would
during rain season.
So volatility is up, but wedon't think it's significant
risk.
We think trade war is going tobe averted eventually.
It's going to be more negotiatepublic negotiation, which will
scare people.
But we think investors shouldstay invested and try to look
(15:30):
through the trade war uhconversation and focus on the
Fed and this AI momentum.
SPEAKER_00 (15:39):
You offer amazing thoughts all the time.
You pu you publish a lot ofinformation.
Where can our listeners go tofollow more of your research and
connect with your team?
SPEAKER_01 (15:48):
Uh so at infraCafunds.com.
And I would look at the databecause the reason we've had
good calls is we're looking atthis great data.
So look at the housing data,very proprietary.
Look at the money supply.
We have that on our website.
You can see this historical dataabout recessions being caused by
(16:09):
investment, uh, not consumption.
So you can really make your ownforecasts if you just look at
the data that we provide.
So that's what you want.
You don't want to just say, oh,Jamie Diamond told me to sell
all my BDCs and you sell them,and then it turns out they
didn't really have any problems.
So, uh but if there's data hecan provide, say, well,
(16:31):
actually, you know, we looked inour portfolio and there's 35
other companies we're nervousabout.
Well, that's interesting.
But he didn't say that.
It just said there was going tobe more cockroaches.
So look to the data and not theopinions.
SPEAKER_00 (16:43):
I always appreciate your time.
Thank you so much for joiningme.
Thanks, Bonnie.
It's great.
Appreciate the questions.
Thanks to everyone for watching.
Be sure to like, share, andsubscribe for more episodes of
Beat Live Live.
Everyone gets too excited about, you know,
particularly billionaires andtheir opinions, we should ask,
okay, well, that's aninteresting opinion, but what
are your facts?
So in this case, the facts arethat next year's earnings.
So when you're coming up with atarget for the end of this year,
you look at the following year,we're carrying about 305 for the
SP.
The reason for the upgrade is wethink with lower rates, you can
(00:22):
justify and higher growth fromAI.
You can justify a 23 multiple,which is historically high, but
it's important to keep in mindwe had a huge corporate tax cut
in 2017.
So you should only look reallysince then.
SPEAKER_00 (00:51):
Now, U.S.
stocks are stabilizing afterlast Friday's big sell-off.
We're trading near all-timehighs, but that move needs
digestion.
Meanwhile, gold continues topush into record territory, a
vivid signal that risk andrefuge are dancing together in
this market.
My guest today is Jay Hatfield,the CEO of Infrastructure
Capital Advisors, a guy I knowyou trust when it comes to
(01:14):
navigating income, credit, AI,and macro cycles.
Jay's recently adjusted his SPtarget higher based on
conviction in the AI cycle andhis read on where the Fed is
going.
Let's stay in deeper.
And Jay, thank you so much forcoming back.
SPEAKER_01 (01:29):
Thanks, Melanie.
It's great to be on.
SPEAKER_00 (01:31):
So first up, the the the Fed.
They've taken on a more dovishtone lately.
What stood out to you in recentcommentary and what does that
signal for markets and for ratecuts?
SPEAKER_01 (01:42):
Well, thankfully, the Fed has reacted exactly as
we've been projecting really thewhole year.
And that is that keep in mindthat the majority of the core
Federal Reserve Board, sothere's seven members, right
now, four are Democrats, whichare primarily follow
Keynesianism.
(02:02):
So they're labor market focused.
So we had expected,notwithstanding the fact that
they're pretty hawkish oninflation and super negative
about tariffs, which we think iswrong.
But we did think that they wouldcapitulate when they saw this
slowness in the labor market.
Finally, the BLS got around tofiguring that out.
(02:25):
And so uh it's it's reallybullish.
In fact, the Fed chair mentionedcontinued weakness in the labor
market.
So that's the core that's goingto hold this Fed together, where
the Democrats and Republicanscan agree to cut, is when
there's a weak labor market.
So that's really what to focuson.
(02:47):
And that's really the key riskfor this market is the Fed
pauses, long-term rates go up,and the housing market goes into
a full-blown recession versusjust slowing down.
SPEAKER_00 (02:58):
Yeah.
So I mean, you've been quitecritical of a Fed policy in the
past.
Do you believe that we're nowseeing that the central bank
catching up, or is it stillbehind the curve with inflation
money supply macro risks?
SPEAKER_01 (03:10):
Well, they have three fundamental flaws.
Their target rate is completelyarbitrary and too low.
Should be 2% to 3%.
2% inflation is super terriblefor the middle class.
Um, and it's impossible to landthe um 747 on the aircraft
carrier.
Should have a wider rangebecause otherwise you're going
(03:31):
to just overshoot on both sides.
That's the the one of thebiggest flaws.
The second is they use uh theBLS's numbers for inflation,
which are even worse than theiremployment numbers.
They're delayed by two years.
So that's why the Fed's alwaysbehind the curve.
(03:52):
And then thirdly, they'reterrible at forecasting because
they don't use the money supplyand they don't look carefully
enough at the housing sector.
Those are the two leadingindicators of the economy.
So we still think the Fed isfundamentally flawed, needs to
be reformed.
We're just lucky that we havethis weak labor market, which is
(04:12):
getting them to do the rightthing for really the wrong
reasons.
SPEAKER_00 (04:17):
Yeah.
So uh coming back to the to thestock market, you've raised your
SP 500 target from 6,600 to7,000, citing the AI boom and
better visibility uh on rates.
Can you walk us through that andwhat gives you the confidence?
SPEAKER_01 (04:32):
Absolutely.
And I would just reiterate whatI always say is focus on the
facts and not the opinions.
Everyone gets too excited about,you know, particularly
billionaires and their opinions.
We should ask, okay, well,that's an interesting opinion,
but what are your facts?
So in this case, the facts arethat next year's earnings.
So when you're coming up with atarget for the end of this year,
(04:55):
you look at the following year,um, is we're carrying about 305
for the SP.
And the reason for the upgradeis we think with lower rates,
you can justify and highergrowth from AI, you can justify
a 23 multiple, which ishistorically high, but it's
(05:15):
important to keep in mind we hada huge um corporate tax cut in
2017.
So you should only look reallysince then.
And there's a lot of distortionbecause of the pandemic.
So we do think with lowcorporate taxes, low rates, a
more rational Fed and AI, themarket can support this 23
(05:36):
multiple.
Uh, and we're just projectingfor next year, the end of next
year, a 7,700 target, but that'sall from earnings growth.
So we're not expecting an ear amultiple expansion.
But the real point about bubblesis that it's great if we're in
the early phase of a bubble.
(05:57):
So probably the risk of our toour target is more higher than
lower.
So maybe we end the year 25times.
We can't come up with a DCF tojustify that.
But that's kind of the upside ofbeing in this potential bubble
market is you get thisovervaluation, and that can be
(06:17):
fantastic if you're in themarket.
SPEAKER_00 (06:19):
Yeah, so Jay, on uh on small caps in a rate cut
environment, you lean towardsvalue strategies.
What's fueling your thesis onsmall caps and how do you uh
steer away from money losers?
SPEAKER_01 (06:32):
So actually, right now you might want to be in the
money or losers because you'replaying.
If you want to look for bubbleright now, it's in these money
losing companies.
So if you've been in those, Godbless you.
But we think it's better to bein GARP comp what we call GARP
type companies.
So you get growth at areasonable price.
(06:54):
It can be a pretty highmultiple, but you should better
have growth to justify that.
The market peg, what's calledPEG ratio PE to growth is about
two times.
So we're looking for companiestrading below two times.
And that way you stay up awayfrom blowups.
Like everybody had moved intoKava, which is you know small
(07:16):
cap stock.
It's trading at 110 timesearnings.
They stumbled and they went down35%.
So we want to avoid blowups.
Um, we have less volatilestocks.
So we're more in the value/slashGARP segment of small caps.
We think there's enough riskwith small caps already.
So it's better to be, and alsocompanies that pay a dividend,
(07:38):
our small cap fund, Nest Cap,pays a substantial dividend over
6%.
And so we'd like dividend-payingcompanies.
We have some preferred stocks aswell that enhance dividend.
We do write a small amount ofcall options.
So if you're going to play smallcaps, we think it's good to be
conservative, get some income,give money-making companies
trading at reasonable multiplesrelative to their growth rate.
SPEAKER_00 (08:00):
Yeah.
And I mean, in the income spacewith preferred stocks that you
just mentioned and calibablebonds, how do money managers
identify opportunities toharvest these gains?
Perhaps buying calls near part,as you mentioned.
And how do they tilt a portfoliointelligently as rates trend
downwards?
SPEAKER_01 (08:17):
So what we do constantly model or monitor
rather for all the companies inall of our portfolios, ICAP,
SCAP, AMZA, on the equity side,is that peg ratio.
And we also include yieldbecause we have a lot of
dividend paying stocks.
And we do think that's also agood quality screen is have a
(08:37):
dividend-paying company.
So almost all of our funds arealmost exclusively
dividend-paying companies.
But so include the yield becausethat's part of the growth.
Um, so reasonable uh peg-wideratio, so PE to growth plus
yield.
And though you can use it to buystocks that are cheap, but also
when these companies get closeto a market peg-wide ratio, then
(09:03):
we will trim them andor sell theentire position.
So we use it both as a buysignal and a sell signal.
And again, when you trim thesewinners, like if you we're not
in them, but if you're in somemoney-losing company that's up
100%, maybe you don't sell thewhole thing, but you better trim
it.
You should definitely trim it.
(09:23):
So we just do that with lowerrisk companies.
But by doing that, you reduceyour risk because you're in
fewer companies that are fullyvalued and more companies that
are undervalued.
So even if they missexpectations, your loss,
potential loss is way lower.
SPEAKER_00 (09:39):
Okay, and I I mean credit markets have been rattled
by bankruptcies at tripolar, forexample.
You've called the panicoverdone.
Where are you seeing mispricingor opportunity in credit right
now?
SPEAKER_01 (09:50):
Well, certainly, you know, in two of our funds, PFFA
and BNDS, they are so far awayfrom auto uh secured asset-based
lending, it's not even can'teven describe it.
So nothing to do with thatwhatsoever.
But yet those um stocks and bondand BNDS is obviously a bond
(10:12):
fund, have weakened up a little.
They haven't really collapsed.
But so we think there that's agood buying opportunity because
we think it's a total panic.
And keep in mind Jamie Diamondcalled it cockroaches, but he's
always way too negative.
He's running a big and big thebiggest bank in the United
States.
So he has to be, it's basicallypiloting an aircraft carrier.
(10:35):
So he has to assume there's riskaround every corner because he
can't be nimble.
But if you really analyze it,it's a pretty niche market.
These are really low qualitycompanies.
There's no reason to believethere's systemic fraud in the
auto finance market.
So KKR is the easiest way toplay that.
Stock's way off.
(10:56):
It's only 10% in asset-basedlending.
It's other people's money.
So if there's losses, it's nottheirs.
Of course, they don't want tolose other people's money, but
it's not direct loss.
It's not like a bank that lentthe money.
And we think they have a veryhigh-quality portfolio with
great counterparties, not thesesuper low-quality roll-ups type
(11:17):
companies, you know, doingaggressive lending, like
subprime auto lending.
So tend to be much higherquality companies that are their
counterparties that are they'rethey're lending money to them
and their receivables.
So we don't think there's goingto be any losses.
If they were, they wouldn't bematerial.
(11:39):
If and also if they're losses,it wouldn't impact their net
capital.
So great buying opportunity of afantastic company, probably the
best brand in the world forfinancial services is KKR.
SPEAKER_00 (11:53):
Jake, KKR is held by iCAP.
Can you walk us through some ofthe holdings and talk a bit
about those funds?
SPEAKER_01 (12:00):
Yes, so ICAP's our large cap dividend fund.
Um, so every company payssubstantial dividends.
Um, but we when we do see theseopportunities with super high
quality companies like KKR, wewill include them in ICAP.
And the great thing about ICAPas well is we can, we're not
going to do it right now atthese levels, but if it rallies,
(12:21):
we can write short-term coveredcalls, great strategy, can keep
your exposure to the market andrealize gains on positions that
have appreciated and are closeto target.
So KKR is a major holding ofboth ICAP and also our macro
edge fund.
SPEAKER_00 (12:37):
Okay.
And I again, I we we touched onit at the beginning of the
interview.
I I want to pull back again tomacro.
It's as you've mentioned,slowing global growth tariffs
and what your thoughts are onthat.
Meet jobs political risk.
Where do you see recession risksheading into 2026?
SPEAKER_01 (12:52):
Well, so we don't do probabilities, we do
predictions.
So our recession risk, I mean,de facto, obviously there's
always some probability, but iszero.
But what that does assume, soit's good to do
conditionalities, notprobabilities.
That assumes the Fed does cutrates so that they don't get
(13:14):
cold feed.
You know, maybe the labor marketstrengthens up a little bit, but
they keep cutting down to theneutral rate, which is somewhere
between 275 and three.
And then the housing market willstabilize and probably start to
expand.
Because keep in mind,housing'cause caused 12 out of
the 13 post-World War IIrecessions.
(13:37):
And so that's the key indicator.
The Fed tends to ignore it.
But and that was weakening, itwas almost to our level of
indicating recession, 1.1million, we were 1.3 million,
and the trend was down.
It should improve, at leastbottom out, but probably improve
with rates in the low sixes.
But that rate is 100% dependenton the market's current
(14:01):
assumption that the Fed's goingto cut rates down below 3% next
year.
The 10-year trade is 100 basepoints almost exactly over the
terminal rate or the that finalrate that the Fed's going to cut
to.
So that's the risk.
But if that doesn't happen, wesee absolutely no recession.
In fact, we would it'd be betterto talk about the risk of a
(14:23):
boom.
So we see a high risk of a boom.
So boom being 3% to 4% growth,you know, with AI continuing.
But now with tailwinds, ishousing and construction start
to positively contribute,employment picks up, cement
sentiment picks up.
So we think we're headed into aGoldilocks market where you have
(14:46):
lower rates and good economicgrowth and good earnings growth.
And that's really reflecting themarket.
You can see that even a tradewar can't really dull it, derail
this market.
It is making it more volatile.
You know, we were up uh, youknow, 35 points higher.
We're lower by 20 points.
(15:08):
The market is gyrating aroundmore than it usually would
during rain season.
So volatility is up, but wedon't think it's significant
risk.
We think trade war is going tobe averted eventually.
It's going to be more negotiatepublic negotiation, which will
scare people.
But we think investors shouldstay invested and try to look
(15:30):
through the trade war uhconversation and focus on the
Fed and this AI momentum.
SPEAKER_00 (15:39):
You offer amazing thoughts all the time.
You pu you publish a lot ofinformation.
Where can our listeners go tofollow more of your research and
connect with your team?
SPEAKER_01 (15:48):
Uh so at infraCafunds.com.
And I would look at the databecause the reason we've had
good calls is we're looking atthis great data.
So look at the housing data,very proprietary.
Look at the money supply.
We have that on our website.
You can see this historical dataabout recessions being caused by
(16:09):
investment, uh, not consumption.
So you can really make your ownforecasts if you just look at
the data that we provide.
So that's what you want.
You don't want to just say, oh,Jamie Diamond told me to sell
all my BDCs and you sell them,and then it turns out they
didn't really have any problems.
So, uh but if there's data hecan provide, say, well,
(16:31):
actually, you know, we looked inour portfolio and there's 35
other companies we're nervousabout.
Well, that's interesting.
But he didn't say that.
It just said there was going tobe more cockroaches.
So look to the data and not theopinions.
SPEAKER_00 (16:43):
I always appreciate your time.
Thank you so much for joiningme.
Thanks, Bonnie.
It's great.
Appreciate the questions.
Thanks to everyone for watching.
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