Will Rhind, CEO of GraniteShares, joins Cheddar News' Closing Bell, where he says he believes the Fed's plans of increasing rates is taking its toll on some of the more speculative stocks and the technology market. 

Closing Bell

Stocks Close Sharply Lower, Dow Ends Week 1,600+ Points in Red

going back to the major averages joining us now to talk about this is Bill Ryan ceo of granite shares. Now will another rough day on Wall Street, The NASDAQ falling by more than 2% your thoughts from today's session? Yeah, I think to echo some of the comments that you've just made, I mean, it was a very difficult day for the market really, I suppose an extension to some of the activity that we've been seeing over the last few days. And I think, you know, this is really about, you know, investors abandoning some of the more speculative names in the market. So With the impending interest rate rises from the Federal Reserve, that's having a knock on effect on some of the more speculative and particularly on the technology market, which has been reflected in some of the falls that you've just talked about the Dow finishing the week down more than 1500 points. So I want to talk about netflix and peloton each being dealt a blow yesterday for different reasons. How does your firm's large capital have approached companies in a situation like this? Yeah, that's a great question. So, you know, we have a strategy, um, and an E. T. F. That really is kind of unique in the sense that what we try and do is avoid losing companies as opposed to pick winning companies. I know it might sound counterintuitive, but if you think about it, you know, the vast majority of investors are trying to pick winners. That's very, very difficult to do statistically, and therefore we try and turn that process on its head and say what if it's actually easier to identify losing companies or companies that are likely to underperform and leave them out. So a good example of this is one of the largest companies that we have not held. Certainly the last quarter is Disney and of course with the news about netflix. Yes, that's very specific obviously to netflix as earnings, but it's really a streaming story. And so it had a knock on effect on companies like Disney as well who are also battling for market share within the streaming space. So, a slowdown in terms of subscribers, streaming subscribers is bad news, not just for netflix, but it's bad news for the competitors as well, then it shows that market is becoming a bit more crowded and therefore perhaps not as lucrative as it was. Certainly at the height of the pandemic. Netflix had the worst day since 2012 and 2012 was a good year. The Dark Knight rises. That movie came out was a blockbuster. Another factor impacting the markets is the 10 year treasury bond, which retreated below 1.8% earlier today. So what should investors be aware of here? And how can they generate positive real income in this environment? Well, that that's incredibly difficult to do. You know, when we have an environment with inflation running as high as it is right now and arguably the highest that we've seen since the 70s. And so when you have interest interest rates as low as they are not a real perspective, that's once you added inflation, you have negative real interest rates. It's very very difficult to get yield now for the bond market. That's very very challenging because even the junk bonds or the riskier end of the corporate bond market Are yielding around four or 5%. So after inflation you're you're getting negative returns. Um So really investors are having to look to the equity market, the stock market for income at this point real income. And really the only places are going to find that are areas such as dividend paying stocks and some of the dividend paying stocks are in the energy sector, for example, quite attractive. But outside of that, what we focus on is a firm is a sector of the market called Pass through Securities. Pass through securities are securities that don't pay corporate tax, so they pass on their income to investors. So there's a few things like reits, real estate investment trusts, mlps of master limited partnerships, business development companies and closed end funds package those together to offer a strategy. The CTF ticket called his hips H. I. P. S. And that can generate an income right now around 8% per annum. So that's really just because we're investing in this sector of the market which not a lot of people are focused, on but it's enabled to give a positive real income or real yield at this time, which is important for people now, the managing director of the International monetary fund says that interest rate hikes by the Fed could quote throw cold water on already weak economic recoveries in certain countries. Do you agree with this? And what must be done now to avoid more losses in the coming weeks and months? Well, I absolutely agree with it. And I think what they're referring to is countries that have borrowings and dollars, so not their local currency and therefore borrowings of dollars. The interest rates go up. That makes servicing that debt more expensive for those countries. And that was obviously has always been a problem in the past where you have an environment where the dollar's strengthening. Um and that puts stress on these countries that have a large amount of foreign denominated debt by us dollars. So absolutely. That's an issue for countries that have that particular situation. Obviously being able to manage the interest rates on behalf of the Federal Reserve is crucially important kind of in that environment. And making sure that that the interest rises, interest rate rises happen in a sort of normal effect. And certainly you don't want the market or the interest rate rising environment to come too soon or at least unexpected moves that may impact some of these, some of these foreign denominated debt holders. So while some analysts had considered crypto a hedge against inflation that clearly has not worked out at least lately. So what strategies do you have for investors who are looking to successfully combat inflation? Yeah, I think on, on crypto the story is really just, it's too soon. Um you know that it sounds good to say it's a hedge against inflation and you know that there's not a narrative there which you can, you know, ostensibly make some sense. However, we just don't have the data to support that just hasn't been around long enough. And so on days like today, where you have a huge selloff across from the all cryptocurrencies, um it's proof yet again that it's probably too soon to say that it's a hedge against anything, um let alone inflation specifically. You know, look at the gold market, that's historically always been a place where people look to when you have times of stress in the stock market, gold market held up very well today, it was roughly flat by the end of the day. Broad commodities as well have been performing very strongly in this environment, particularly as we sort of ease out of this pandemic. But I think really people are looking at the short end of the Treasury market again was bid as another safe haven assets. So it's really those classical safe havens that people look to and I think those, particularly with gold and short term treasuries is something that people will start to look at more closely if this volatility continues well, Ryan ceo of granite shares will appreciate your time and your expertise on this. Thank you for guiding us through it.