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Could the Next Crypto Bull Market Arrive Sooner Than Expected? — Transcript

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0:03Michael Howell is one of my favorite
0:05macro analyst. He's the author of
0:07Capital Wars and [music] the Capital
0:09Wars Substack of which I am a proud
0:11subscriber. Love it. Read every post. He
0:14is the person I think most of finance
0:16and macro quotes when they talk about
0:19global liquidity and they say those
0:20words. Welcome back to Bankless,
0:23Michael. How are you doing?
0:24>> I'm doing very well. Very good to be
0:25here.
0:26>> Okay, so Michael, you were last on
0:28Bankless about a year ago. This is
0:30November 2025 and uh I talked to you. At
0:32that time you said liquidity growth it
0:34seemed like it was peaking, at least the
0:36growth side of things, that crypto was
0:38late cycle. Uh that proved right. That
0:41proved prescient. Crypto indeed was very
0:43late cycle at the end of 2025. And then
0:46I followed your work for the past year
0:48or so and you've said we were in the
0:50speculation era, but we are moving
0:53closer and closer to late stage of
0:56speculation. I know you have four eras.
0:58We'll get to those a little bit later,
0:59but the speculation era is ending. That
1:01turbulence is coming. That global
1:04liquidity it won't fully bottom until
1:06the second half of 2027.
1:09And then I saw this post. That has been
1:11your base case. And then I saw this post
1:14on Friday of this week where you took
1:16kind of a second look at Bitcoin as an
1:20asset. And I know in the past you've
1:21called Bitcoin a bellwether asset for
1:24global liquidity. So it's an important
1:26indicator as well as a kind of a, you
1:29know, an asset in and of itself. And you
1:31said this, that Bitcoin may be an early
1:34warning that the liquidity tide is
1:36beginning to turn. In your post Friday
1:40and with everything that's happening in
1:42Bitcoin right now, some of that price
1:44recovery, what do you think Bitcoin is
1:47telling us?
1:49>> Well, I mean I
1:50>> [clears throat]
1:50>> I have to say that it's it's actually
1:52signaling an upturn in liquidity cuz I'm
1:54not sure that it is, but I'm not 100%
1:58sure of that. And what I was trying to
1:59argue in that post was that liquidity
2:03drives Bitcoin, but there are clearly
2:04feedback effects, and it may well be
2:07that we're getting information
2:09from the stability of Bitcoin that's
2:10telling us a lot about the liquidity
2:12environment. Now,
2:14the question is does that help? Well, it
2:17does help because liquidity tends to
2:18move in clear cycles, and it tends to
2:20move in cycles of maybe 5 to 6 years.
2:23So, the plain fact is that, you know, if
2:26you've got a turn in the liquidity cycle
2:28that other data is maybe not fully
2:30reflecting yet, but Bitcoin is,
2:33Bitcoin could be saying, well, actually
2:35we're entering now the early stages of
2:37what will turn out to be,
2:39you know, another 2 to 3 year bull
2:41market. So, we've got to be alert to
2:43that possibility. Now, I raise that
2:45point really with the
2:48with the with evidence of what the
2:50Federal Reserve is doing. And
2:53the problem with judging the Fed is that
2:55so many people judge the Fed
2:57in a sort of textbook way of maybe with
3:00a looking through a pre-2008 GFC lens.
3:04So, it's all about, in most people's
3:07estimation, setting Fed funds rate, and
3:09that clearly is not the case, and it
3:11hasn't been the case for the last 15
3:14years, and it's not the case going
3:15forward. And what I was also trying to
3:17add in that piece is that maybe Kevin
3:20Warsh has actually rethought
3:22policy as well, and we're actually
3:24entering
3:26not a new regime, but actually a new new
3:28regime. That this is actually an
3:30evolution from the post-2008
3:34environment, where the where the Fed was
3:36using QE quite actively. What they're
3:38doing now is they're basically acting
3:41alongside the Treasury.
3:43They're actually trying to manage
3:45explicitly manage the repo collateral
3:47markets. And if you listen to some of
3:50the statements that Warsh has made,
3:52particularly in the presser
3:54after [clears throat] the last
3:55the last
3:56FOMC meeting,
3:58he was pretty explicit that they want to
4:01maintain an ample reserve environment
4:05for the banks. Now, I think you got to
4:07put that in context and you got to look
4:10back and say, "Well, when did they make
4:11a big error last?" And the big error
4:14they made was was almost exactly a year
4:16ago when they basically decided they
4:18wanted to shrink the balance sheet. And
4:21the Federal Reserve went ahead and
4:23slashed bank reserves. Now, you've got
4:25to remember in the uh in the sort of the
4:27whole equation of central banking, the
4:29one number that the that the Federal
4:31Reserve and central banks control uh
4:34exactly is the level of bank reserves,
4:36okay? They have some control over
4:38interest rates at the short end of the
4:40market, but they have precise control
4:42over the level of bank reserves. And if
4:44they uh decide to slash bank reserves,
4:47in other words, to reduce the overall
4:49level of money market liquidity, um then
4:52you will see a fallout in other areas of
4:54the market. And maybe they weren't
4:56expecting the scale of the fallout that
4:58we saw. And what you if you recall, uh
5:02repo spreads, in other words, uh SOFR
5:05less uh Fed funds target, for example,
5:08uh spiked significantly saying there
5:10were shortages of liquidity in money
5:11markets during that period. The Fed
5:14blinked, and it blinked quickly and
5:16acted. And what they did is they they
5:19introduced yet another acronym, um RMP,
5:23reserve um management purchases, which
5:26is another form of QE, uh quantitative
5:29easing. I mean, of course they say it's
5:31not, but I mean, it plainly is. You
5:34know, if it's yellow and quacks, it's a
5:35duck, and this is a duck, for sure. Uh
5:38and they basically again boosted the
5:40level of bank reserves. Now, if you look
5:42at the data, and this is a sort of
5:44long-winded answer to your question, but
5:46if you look at the data over recent
5:47months and weeks, um bank reserves, i.e.
5:50money market liquidity, have pretty much
5:52flatlined. And this is telling us that
5:56the Fed looks to be pretty closely
5:57managing that. And I think on the other
6:00side,
6:02looking at the collateral markets, so
6:04you've got repo, uh in other words, what
6:07the what the what the amount of
6:08liquidity in money markets
6:10reflected in repo rates. And then you've
6:12got on the other side what's happening
6:13to the collateral markets, the stability
6:16of collateral. And it seems to me that's
6:18exactly what the Treasury is trying to
6:20fix. And everything that Bison is doing,
6:24contrary to what the media
6:26suggest. I mean, the media are well off
6:28track on what he's doing, but he's not
6:31trying to
6:32push down the level of yields
6:33necessarily. He's trying to reduce
6:35volatility in the market. And generally,
6:37Bison's doing a great job because he's
6:40retiring what are called off-the-run
6:41Treasuries, in other words, stailly
6:43liquid Treasuries, often at 60 cents on
6:46the dollar, which is a great deal for
6:47the US taxpayer, and replaces those
6:50those with some shiny new
6:52debt. And that debt tends to be shorter
6:54duration.
6:55And overall volatility in the system is
6:58being contained. But I think that what
6:59you've got is that you've got two
7:01targets there. Number one is low bond
7:04volatility, and number two is basically
7:06keeping bank reserves at at ample
7:09levels.
7:10Now, that is being played out against
7:12the backdrop where the bond markets want
7:15or expect Fed funds to rise.
7:18Kevin Walsh is giving them that. He's
7:20throwing meat, you know, at the bond
7:22markets in that regard, but at a
7:24relatively slow pace. So, the scale of
7:26tightening that you've been seeing in
7:28the in the system is nothing like as
7:30pronounced or as rapid as we saw under
7:32the Powell Treasury. I should say under
7:34the Powell the Powell Fed.
7:35>> So, here's how I read your post on
7:38Friday, the answering the question like
7:40what could Bitcoin be telling us. And
7:42this is just a possibility, and I don't
7:44even know if you it's your base case
7:45now, Michael, but you do indicate that
7:48it's a possibility. It seems like
7:50Bitcoin could be telling us that we
7:52might have a shorter, more shallow
7:55turbulence period, and that the rebound
7:59period might actually occur a little bit
8:02faster than you thought. I think you had
8:04targeted this rebound period to sometime
8:06in the second half of 2027, but Bitcoin
8:10could be telling us that Fed and
8:13Treasury interventions mean that rebound
8:17happens actually a bit sooner than that.
8:20And you said that you were looking at
8:22the price of Bitcoin in
8:25the 70k number. If Bitcoin can hold 70k,
8:29that might be meaningful towards the
8:31case that
8:33you just illustrated. Is that the
8:35correct way to interpret this and is
8:37this kind of
8:37>> 100% correct, but I would say it's not
8:40it's not my base case.
8:41>> It's not your base case. All right.
8:43>> I think the base case is still where we
8:45said. What I'm saying is that this is
8:46something we this is a cause for
8:48rethinking and one has to monitor these
8:51things. If you get
8:53you know, if you get Bitcoin holding
8:55above 70,000, if you see more evidence
8:58that bank reserves are being managed and
9:01maybe even being pushed up, then I would
9:04happily change my view and
9:08expect to see liquidity picking up. I
9:10think the other thing that you've got to
9:11factor in is why is liquidity really
9:14falling in the system right now? And I
9:17mean, make no bones about it, is
9:19you know, financing has become a lot
9:21tougher for
9:22many institutions wanting to raise
9:24money. The yield curve is flattening
9:27despite the fact that I think the
9:28consensus view, the 100% consensus view
9:32at the beginning of this year was that
9:33the yield curve would steepen. It's
9:35actually been flattening as we much as
9:37we thought because of this this turn.
9:40And you've got, you know, evidence of
9:42credit spreads beginning to blow out.
9:44The Russell 2000 is probably in a bear
9:46market as we speak. So all these things
9:48are telling us that liquidity conditions
9:50are tightening, okay? But it's not that
9:52tightening not because not because
9:55central banks are tightening
9:57particularly aggressively. I mean, there
9:58are clearly steps in that direction. But
10:00as I've tried to suggest,
10:02you know, what
10:04Kevin Walsh is doing is probably doing
10:06tightening at half pace in many cases.
10:09The reason that liquidity is going down
10:11is because the economy is growing so
10:13fast and you've got to
10:15align that up with what the bond markets
10:17are saying and the bond markets are
10:19clearly yields are rising
10:21um in response
10:23to fast nominal GDP growth, not to any
10:26deterioration of fiscal finances as much
10:28of the media, ill-informed media, seems
10:31to be suggesting. This is all a growth
10:33story.
10:33>> We'll get back to Bitcoin cuz there's
10:35more to discuss there, but since you
10:36brought up bonds, maybe let's turn
10:38towards bonds for a minute and
10:41um explain yields to us. Why are long
10:45duration yields on bonds going up?
10:48Because I've heard multiple explanations
10:51for this, including the popular
10:53explanation that this is debasement,
10:56that this is the US's fiscal situation
10:58finally catching up to it. This is bond
11:01vigilantes saying enough is enough and
11:04they're driving up long duration yields.
11:07Why do you think yields are going up?
11:08>> Well, let let me answer the question. I
11:10mean, I I put a slide up to try and um
11:12understand this.
11:14And what it does, I mean,
11:16let me just say preface that by saying,
11:18look, once we start talking about bond
11:20markets, a lot of people's eyes glaze
11:22over and it becomes it becomes very
11:25wonky stuff. So, I'm going to try and
11:26make this as straightforward as I can.
11:28>> You know what? Before you do, Michael, I
11:30just want to pause and ask listeners to
11:32pay particular attention to what Michael
11:35says with bond markets because I would
11:37would have agreed with you that bond
11:40markets seem very wonkish, seem very
11:42esoteric, outside of the the the main
11:45character feature of of most markets and
11:48what investors care about. This year,
11:50though, I would argue that bonds are
11:52kind of the main character.
11:53>> Bonds are at the center.
11:55>> And they're at the center. I mean, we
11:56we're talking about it uh so much on a
11:58crypto podcast. So, if investors are
12:00going to pay attention to bonds,
12:02probably the year 2026 is the year to
12:04pay attention to them. So, listen to
12:06what Michael says very carefully. Take
12:08this let's take
12:09>> Okay, yeah. And the other thing that I
12:11would say is as a no another preface to
12:15this is that um Bitcoin is a very long
12:19duration asset, okay?
12:22And that means it's very sensitive to
12:25changes in uh in in treasury yields.
12:28So, if you start to see treasury yields
12:30stabilizing or coming down, you would
12:33expect to see uh Bitcoin doing very well
12:35for
12:36for one reason apart from other reasons
12:38it may do well as well. So, that's why
12:40it's important. Now, what you can see
12:42here is uh the US Treasury yield broken
12:46down into its two main components. The
12:48black line is looking at rate
12:50expectations as measured by the implied
12:53terminal policy rate that is embedded in
12:56the term structure.
12:58The orange line is something called the
13:00term premium, which is the key way to uh
13:03evaluate bonds, which is looking at the
13:05risk premium that is attached to bonds
13:09uh and compensates investors for holding
13:11duration risk, i.e. interest rate risk,
13:14over the term or horizon of the bond.
13:16Now, what I've tried to argue is that if
13:19you look at what's driving yields
13:21higher, it is the rising black line, uh
13:24not the orange line. The orange line for
13:27much of the last couple of years has
13:28kind of gone sideways. There's been
13:30volatility recently, but you can't say
13:33that there's an upward trend in term
13:34premium. Uh what there is an upward
13:36trend in is rate expectations. Now, the
13:39question to ask is what in turn drives
13:41rate expectations, and rate expectations
13:44tend to be driven by the underlying
13:46level of nominal GDP growth. Now, what
13:48I'm going to do is to go on to uh
13:50another chart, but just before I do
13:52that, I'm going to show you a second
13:54one, which is um this chart, which is
13:57looking at bond term premium across the
14:00world. Now, the other thing to scotch is
14:03the whole idea that what's going on in
14:07the US is a big deterioration uh in US
14:11fiscal health. Uh I mean, oh sorry, let
14:13me correct that. There's a big There's a
14:15the bond markets are picking up a big
14:17deterioration in US fiscal health.
14:21There may well be a deterioration, but
14:22the bond markets are not that worried
14:24about it, certainly at the moment. And
14:26what this chart is indicating is what's
14:28happening to term premium across the
14:30world. And the bright red line is
14:34looking at what's happening in the US.
14:36And US term premium, rather like Bund
14:40German Bund term premium, and rather
14:42like Chinese government bond term
14:44premium, are basically low and if
14:46anything falling, not rising. The rising
14:49term premium in areas like Japan,
14:52Britain, and in France. And if you look
14:54at the headlines in France, there's
14:55little reason to doubt why they've got
14:58rising term premium. But it's certainly
15:00not the case in the US. So this is not
15:01about any deterioration in fiscal
15:04finances or any loss of
15:06faith in the Trump administration or
15:08investment or whatever. This is all
15:10about strong economic growth. So let me
15:12just try and show that chart. The chart
15:16that I'm just putting up now is
15:17comparing nominal GDP growth in the US,
15:21which is a four-quarter moving average
15:24of NGDP growth, and 10-year
15:28risk-adjusted Treasury yields. That is
15:31basically the interest rate component,
15:34the black line in the earlier chart,
15:36graphed against the underlying growth
15:39rate, nominal growth rate in the
15:40economy. Those two lines match almost
15:43exactly.
15:45What they're telling us
15:47is that yields are high simply because
15:49underlying interest rates or policy rate
15:51expectations are high, and that's high
15:54because of a strong economy. So this is
15:56the This is the question that is really
15:58driving
16:00bond markets and bond investors right
16:01now. It's not any concern about fiscal
16:04finances.
16:06In France it may be, in Britain it may
16:08be, in Japan it may be, but in America
16:10it's not yet.
16:11>> Can you tell me, Michael, why people
16:13frequently say that there just isn't
16:17demand at the Treasury auction. Because
16:20what I'm hearing from you is that that's
16:21simply just not true whatsoever. But I
16:23mean I've been hearing it across
16:25Twitter, financial markets commentary,
16:28even debates with Secretary Bessant when
16:32he gets interviewed that like the demand
16:35for bonds for US bonds at the auction is
16:37very very weak.
16:38Why are people saying this if what
16:40you're saying is that the demand is
16:41actually very very strong?
16:42>> Well, I'm not saying that demand is
16:43strong. What I'm saying is that it's not
16:45a factor that is deter that is causing
16:47yields to deteriorate
16:49or to yield yields to rise.
16:51Term premium
16:53are basically compressed flat and if
16:55anything falling. Now that's not to deny
16:57the fact that if you look at the bid to
16:58cover ratios, they're falling in in the
17:00auctions. I mean that's for sure, but
17:02they'd previously been very high.
17:05But you know,
17:06there may well be fewer buyers out
17:08there. And you know, what we know is
17:10that a lot of those buyers are
17:12concentrated among hedge funds anyway.
17:14So you may have a concentration
17:16of demand.
17:19I can't argue against that. But I don't
17:21think the evidence is there that you're
17:22seeing a big deterioration in term
17:24premium. I mean if you were seeing a big
17:26deter big deterioration in term premium,
17:30measures like straightforward measures
17:32like the 10 5 spread
17:35in in the bond markets would be going up
17:37not falling. And that's it's fall
17:39moment. So that's telling you that term
17:41premium are going down.
17:42>> Another question that I have is that
17:43with the rise in yields with the with
17:47the bond yields going up, this means
17:48that the debt that the United States
17:50government has to pay is more expensive,
17:52more expensive debt. Does that
17:54accelerate debasement in in the future
17:58because the debt is has a higher
18:00interest rate? Does that mean that the
18:01United States government is going to
18:02have to
18:04print more, issue more, debase more in
18:05order to eventually pay their debts?
18:08>> 100% correct, yeah.
18:10I mean it will.
18:10>> And
18:11>> Um
18:11>> Yeah, and will that flow in how how will
18:13that come back into liquidity? Or is
18:15that just like
18:17something that just doesn't really
18:18actually show up acutely in the market?
18:20>> Well, no. I think it does it does it
18:22does show up and I think one of the
18:23things you've got to start thinking
18:24about is
18:25uh you know, what is liquidity? How can
18:27you define liquidity in a practical way?
18:30And the way that we tend to think about
18:32it is if you think of a of a ratio if
18:35you say liquidity is approximately equal
18:37to
18:38net assets divided by their duration.
18:41In other words, if you see an increase
18:43in the net asset holdings of the private
18:45sector because of government issuance of
18:48debt and you're issuing at a lower
18:52average duration, then you're going to
18:54be seeing a liquidity expansion. And
18:57that's pretty much what's going on. So,
18:59what you're seeing in the system going
19:00on going forward or even now and going
19:02forward is that government debt is
19:05government debt issuance is increasing.
19:07A large part of that is at the short end
19:10of the market. So, there is deliberate
19:12rationing by best end of longer dated
19:14coupons and the average duration because
19:16it's a bill not a longer dated coupon is
19:19falling. So, that liquidity quotient if
19:21you like is getting juiced from top and
19:24bottom. You're seeing lower duration and
19:26a bigger increase in assets. So, it's
19:28clearly liquidity positive. Now, what I
19:30would argue is that a large part of that
19:32is actually going into the real economy
19:34right now
19:35because it's funding government
19:37spending. But it's still liquidity it's
19:39still liquidity expansion.
19:41What we from the experience that we've
19:43had
19:44and this is sort of treading relatively
19:46new ground because this is these are new
19:48features. But what we can see is that
19:50does have or has had a positive impact
19:53on Bitcoin
19:54itself.
19:55>> I want to contrast your take on bonds
19:58with a piece I read recently from Ray
20:00Dalio. He wrote a piece last week
20:01published on LinkedIn called the numbers
20:03behind behind the bond bear market. And
20:07I think he makes this case. Basically
20:08his his summary is that 2027 is going to
20:13be a bad year for bonds. I believe you
20:16are starting to you know, take take the
20:18opposite on that view. He said this,
20:21"The bond bear market probably has a
20:23long way to fall still. 2027 looks more
20:26concerning than 2026 and 2028 looks
20:29riskier still." And his case was this,
20:31if I understood him correctly, Michael,
20:33that there's just a lot of supply coming
20:36on the market when you take a look at
20:38kind of the rolled over rollovers of of
20:40long duration
20:42converting to that shorter duration.
20:45When you look about at all of the
20:46treasuries and and
20:48that need to be issued and all the bonds
20:50that need to be issued and also the
20:52hyperscaler bonds and capital competing
20:55against treasuries that have to be
20:57issued. And then you take all of that
20:59supply that's coming in the market in
21:012027 of new debt, US denominated debt.
21:05And then you take a look at the demand
21:06sources, which is like traditionally
21:08we'd have foreigners buying large
21:10quantity of bonds. And he makes the case
21:12that demand is actually going down as
21:15well. And so if you have more supply,
21:19decreased demand for bond purchases
21:22among investors, then you're going to
21:24get yields rising in 2027.
21:28Now, I'm trying to understand like your
21:31case versus his case cuz I think at some
21:33point you might both converge on the
21:36idea that yes, debasement is the
21:39long-term future, but there's some
21:40disagreement as to what happens more in
21:43in the short-term, 2027 and 2028. Eric,
21:47can you clear this up? Like what do you
21:48think you believe differently than say
21:51someone like Dalio making the supply
21:52demand case?
21:53>> Well,
21:54I would just say the market is still
21:55moving straight lines and I I'm
21:57definitely there in the long term. I
21:59think bonds are an unattractive
22:00long-term asset for investors, but I
22:02think in the short term they're actually
22:04a maybe a safe haven
22:06if this liquidity downswing continues,
22:08okay? Now,
22:10I haven't read Ray Dalio's piece.
22:13I would imagine that what how he's
22:15getting there is by saying that number
22:18one, there's more of an inflation
22:19problem than we envision in the economy
22:23and that nominal GDP growth is not
22:25simply going to
22:26stay where it is elevated, it's going to
22:28accelerate more, but that's really
22:31driven by faster inflation. I don't know
22:33if that's his argument, but it could
22:34easily be.
22:36I I disagree, but you know,
22:39we'll see what happens. The second
22:41factor is that he's arguing that
22:43probably implicitly arguing, I don't
22:45know, that the US or US Treasury assets
22:49and the US dollar are no longer safe
22:51havens.
22:52>> Mhm.
22:52>> I would disagree with that very strongly
22:55because I think what is the alternative?
22:56[clears throat]
22:57I mean, do you want to put money in
22:59you've got you've got basically,
23:01you know, two two other choices possibly
23:04three if you include Chinese government
23:06bonds, but let's make that that's too
23:08complicated. So let's not go there.
23:10Japanese government bonds or European
23:13government bonds.
23:14I'm I'm including that both France
23:17French and German bonds.
23:18Do you really want to risk putting money
23:20into the euro given you know, what's
23:23happening on the streets right now? I
23:25>> I don't know if he would say this
23:26Michael, but I think his alternative
23:27would be a debasement hedge, something
23:29like a gold maybe in some small portion,
23:32maybe a Bitcoin would be the alternative
23:34to this.
23:35>> fair enough. But I mean, let's be
23:36realistic. I mean, the bond markets are
23:38massively bigger and if you if you're
23:40going to make asset allocation shifts,
23:42you simply can't put that amount of
23:43money into Bitcoin. It would be
23:45wonderful if you could or into gold.
23:49The fact is you've got to deal with the
23:51bond markets. The bond markets are
23:52massive, they're very very liquid and if
23:55investors want to shift asset allocation
23:57into safe assets, they have no
23:59alternative. I mean, the reason that you
24:01know, you come back to another point
24:03which is maybe a different rabbit hole.
24:05The reason that the US has a whopping
24:07great trade deficit is not because US
24:09industry is uncompetitive, it's the fact
24:11that US finance is so super competitive.
24:13It's that everyone wants to use US
24:15financial markets to put their put their
24:17investments. And this is the reality.
24:20You've got no alternative. You simply
24:22can't put money in many other places.
24:24It'd be great to put it into Swiss
24:25francs, okay? Fortunately, it's a tiny
24:28little market. It'd be great to put more
24:30into gold. Again, illiquid. You can't
24:32really do it. You've got to The US
24:34Treasury market is the is the main
24:36vehicle, the main sink for these funds.
24:38I mean, look at China Look at China's
24:40whopping great trade trade surplus. No
24:42one's going to convince me they're not
24:44putting money into Treasuries. They may
24:45be doing it surreptitiously through you
24:48know, offshore agencies in Belgium or
24:50wherever, but they're definitely buying
24:51government bonds because they they can't
24:53put it anywhere else.
24:54>> Now, does your outlook with value, would
24:56you say, tend to converge on longer-term
24:59time frames? So, if we stretch beyond,
25:01say, the the one to three year and the
25:03five year, and we get to something like
25:05the the multi-decade long, would you
25:07would would you sort of agree, yeah, you
25:09know, debasement hedge, gold, something
25:11like that. Why Why own any bonds?
25:13>> Yeah, I think that I mean, I'm sure
25:15that's the I'm sure it's a similar
25:17argument. I haven't I haven't read I
25:18haven't read his piece, but you know, I
25:19think it makes absolute sense. I mean,
25:21you just go look at the period of I
25:23mean, we talk about debasement, but you
25:25know, broadly speaking, I mean, ever
25:27since you know, Richard Nixon closed the
25:30the gold window back in 1971,
25:33you've effectively had free-floating
25:35currencies and ongoing debasement
25:37or certainly accelerated debasement,
25:39maybe one one would say.
25:41And if you look over that period,
25:43basically
25:44um
25:45Treasury debt, federal debt has
25:47increased at an annual clip of about 8
25:49and 1/2% okay?
25:51If you look at global liquidity, that
25:54has increased at an annual clip of a tad
25:56over 8 and 1/2%
25:58if you look at the gold price, the gold
26:00price has gone up a tad over 8 and 1/2%
26:03okay? So, all these things kind of line
26:05up. The S&P has delivered a return a
26:07little bit better than that. Maybe
26:08nearer 9, 9 and 1/2.
26:10I accept, but look at bonds,
26:13you're looking at returns of
26:14significantly less.
26:16You know, 10-year Treasuries have
26:18basically given you a
26:20return of nearer six and five-year
26:22Treasuries nearer five. So, you know,
26:25they're they're a long way short and
26:26this is compounding rates per annum,
26:29okay? So, you know, why is the why is
26:32the future going to be different from
26:33the past? All these politicians are
26:35doing is kicking the can down the road.
26:37Uh we're not talking hyperinflation
26:39here. We're talking about inflation
26:40rates that are a few percentage points
26:42above where policy makers are targeting.
26:45And after all, you know, when was the
26:47last time the Fed hit its 2% inflation
26:49target? More than 5 years ago. You know,
26:51let's get realistic here.
26:52>> I've been trading crypto for almost a
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28:48>> Do you think the uh the government
28:49inflation numbers are actually accurate
28:52to what reality says that they are? Like
28:54is is there a gap between real inflation
28:57and government reported inflation?
29:00>> Well, I would have thought so. I mean,
29:01my personal inflation rate um although I
29:03live in Europe is way above where the
29:06official numbers are. And it
29:08it is and it always has been. So, I
29:10don't know how I don't know
29:11>> account for that? Why why is that true?
29:13>> Well, because I think that I mean, I
29:14think there was a deliberate bias in
29:16these in these figures anyway. I think
29:19it's in their interest to keep obviously
29:21to keep inflation low. I mean, once you
29:22start to target something, I mean, the
29:24the targets become meaningless. I mean,
29:27that was something I think was called
29:28Goodhart's law, wasn't it? Um and
29:30probably is the is the reality. So, I
29:33think that that may be an explanation.
29:35But, you know, you've got I mean, again
29:37without being uh you know, too too
29:39disparaging, I mean, if you look at
29:41Kevin Warsh's committees uh and the idea
29:43of looking into the CPI stats is another
29:46way of fogging the whole question, I
29:48think. But, you know, let's see.
29:51>> Do you have like an actual measure for
29:53real inflation in the United States?
29:58>> Uh I'd say that the real measure is the
29:59consumer confidence survey. I mean,
30:02that's what
30:03low consumer confidence is telling you
30:05inflation's a problem.
30:06>> Yeah. I I think a a lot of people are
30:09freaking out because of the rising
30:11rates, rising bond yields that have
30:14we've just haven't seen these level of
30:15bond yields in 20-plus years. And I
30:18think when you compare bond yields to
30:20the reported inflation numbers, like we
30:22have 5 and 1/2% bond yields, but you
30:24know, reported 3.5% inflation, maybe
30:27that seems high.
30:29But, the there's a an account on Twitter
30:31that I follow which posts uh the price
30:33of a ribeye steak from their local
30:35butcher and they have so like every
30:37single month for the past like 10, 15
30:39years.
30:40And if you look at if you look at
30:41inflation there, it's upwards of 10% in
30:44in America. Now, if that was the real
30:46reported rate, we don't really know what
30:48the real numbers are, but comparing the
30:50bond yields of 5.5%
30:53compared to like potentially real
30:54inflation of 8 to 10%. All of a sudden
30:56bond yields don't look so scary anymore.
30:58>> Yeah, I think that's true. And I think
30:59if you start to look at the tips market,
31:02where the inflation-protected securities
31:04are yielding 3%. I mean, that's that's
31:08not a bad deal, actually. It's very,
31:10very rare that you can make 3% real in
31:12financial markets over the long term,
31:14and the US government is underpinning
31:15it. So, that's not a that's not a bad
31:17deal to take, I think. Uh you don't want
31:19to put everything in tips, but I mean,
31:21it's not a bad hedge. Uh I'd be looking
31:23at that. I mean, I have looked at that.
31:24>> I would love your take on the current
31:27economy. Like just a a level set,
31:30because
31:31uh I'm hearing a lot of different
31:33voices. Look at this exact same numbers,
31:35exact same economy, and come away with
31:38different conclusions. So, if somebody
31:40were to ask me kind of, you know,
31:42what are the highlights of the economic
31:45situation today? And you know, in 30
31:47seconds, 90 seconds, I would say
31:48equities running hot. I would say high
31:50inflation. I would say nominal GDP is
31:54also hot. I don't know, 5, 6%. I would
31:58talk about long-term bond yields
32:00continuing to rise. Uh I know you've
32:02compared this to a period in the the
32:041980s of uh nominal economic growth. Um
32:09but if you were to give a 90-second
32:11drive-by of this economy, what what
32:13would you say? What would the highlights
32:15be?
32:15>> Well, you you can't dispute the fact
32:17that there was a K-shaped economy, okay?
32:19That that's for sure. There's a lot of
32:21people who are being left behind, but
32:23that's true, not just in America, that's
32:25true globally, okay?
32:27But if you look at the drivers of what's
32:29happening to growth,
32:30um the big fiscal deficit and the AI
32:33CapEx spend are clearly big drivers of
32:36America right now.
32:38Now, what I've done is I've put on uh
32:39the screen a chart which basically looks
32:42at the evolution of the business cycle
32:45and of the liquidity cycle. And if you
32:47look at the comparative data, you get a
32:50pretty good sense as to where we are to
32:52position ourselves and maybe why this
32:54economic data is doing what it's doing
32:57and where we are in that cycle. Now,
33:00what this diagram is basically
33:01illustrating is the red line is looking
33:04at the notional liquidity cycle. Um the
33:07or the yellow line is looking at where
33:09the real economy is and you can see that
33:12this is sequential that the liquidity
33:14cycle leads the real economy uh by
33:17roundabout on average maybe 18 months.
33:20Now,
33:21um what tends to
33:23coincide is when the liquidity cycle is
33:26going down, which is what we argue right
33:29now, what you also see is a real economy
33:32that is accelerating. So, in other
33:34words, as the red line drops, the yellow
33:37line starts to go up. And that's telling
33:39us these cycles are moving differently.
33:41They're virtually anti-cyclical. And
33:45what that really tells us is the simple
33:47fact that all money that is anywhere
33:50must be somewhere. So, if it's in the
33:51real economy, it's not in the financial
33:53markets. And if it's in the financial
33:55markets, it's not in the real economy.
33:57Well, let me evidence uh in this
33:59upcoming chart um
34:01what that really looks like. And what
34:03you can see on this chart are two lines,
34:07an orange line which is measuring our
34:09global liquidity cycle and the black
34:12line, which is the world business cycle.
34:15And what you can see is first of all,
34:16they're completely opposite. So, when
34:19the liquidity cycle goes uh is high, the
34:22real economy worldwide is in a slump.
34:26And similarly, vice versa, when the real
34:28economy is booming, uh liquidity is uh
34:30is very tight. And that's what we're
34:32basically looking at now. The liquidity
34:34cycle is going down while the real
34:36economy is picking up. And it may it may
34:40not feel to certain area in certain
34:41areas that that's the case, but you
34:44know, that's what the economic data is
34:46saying. Uh that's what business This
34:48data here is business conference data.
34:50That's what business conference data is
34:52saying. And you know, it's difficult to
34:54dispute that. Uh even though I know part
34:57J, you know, what consumers are feeling
35:00um that it doesn't always feel like a
35:01strong economy.
35:02>> So, how would you map that to your four
35:05different regimes? So, if we're in an
35:07era where liquidity is going down, at
35:09least the growth of liquidity, because
35:11if you look at the the global liquidity
35:12watch chart where you you plot it. It's
35:15It's up only, of course. So, the thing
35:16that kind of the It sometimes it's down,
35:18I should say that. But, the thing that
35:19changes is really the rate of growth.
35:22And so, if we're we're in a regime where
35:23global liquidity is the rate of global
35:25liquidity change is going down, but then
35:28also the economy is running hot. So,
35:30Main Street is running hot. What does
35:33that imply across your four different
35:35regimes? So, you have rebound, calm,
35:39speculation,
35:40and turbulent. That puts us in what era?
35:44Is that the speculation type era? Are we
35:46late in the speculation phase? Are we
35:48moving towards
35:50turbulence? And what assets are key in
35:53in this era? And we you know, will um
35:57will be the assets really to hold across
35:59these these these phase changes?
36:01>> Again, uh with a caveat that um the
36:04liquidity cycle may be
36:06um
36:08may have a a a a a lesser cyclical
36:11downturn this time than maybe we've seen
36:13historically. With that caveat, and I I
36:15say I'm still on the fence on that, so
36:17I'm not I'm not sure myself. But, if you
36:19look at what we're seeing, um you have
36:22these four regimes. Um turbulent,
36:25rebound, calm, speculation. I mean, the
36:27names give you some
36:29generic idea about what goes on in each
36:32phase. But, if you align on the diagram
36:35that I'm showing right now of the two
36:36cycles, the theoretical liquidity and
36:39the theoretical real economy cycle. Uh
36:41if you're in the turbulent phase, that
36:43tends to coincide with uh basically very
36:47fast economic growth or even the peak in
36:49the economic cycle.
36:51The rebound phase uh for liquidity um
36:54and that is a phase when equities
36:56generally do pretty well. I mean, to be
36:58clear, the upswing of the liquidity
37:00cycle, equities normally do very well.
37:02They outperform all other asset classes.
37:04Um and typically um you would see um
37:09things like technology really being a
37:11very strong performer uh in the early
37:13stages of that. Now, that rebound tends
37:16to occur uh when you start to see a very
37:19noticeable loss of economic momentum.
37:22Not yet recession. Um the calm phase,
37:25the next up in the liquidity cycle,
37:27ironically or paradoxically is the phase
37:30of the liquidity cycle uh you know,
37:33where you're uh where you're actually
37:34looking at recession or coinciding with
37:36a recession.
37:37Uh and then you get speculation, which
37:39is the phase that we've been in for
37:41many, many months, and we may may now be
37:44ending. Uh but let's see on that. The
37:46evidence would have to be, you know, the
37:47evidence is a little bit mixed. Uh but
37:49if I go back to the uh
37:52chart that I just put up on the actual
37:55data you'll see there that in that
37:57orange line the global liquidity cycle
38:00there is the latest data, which is end
38:02September, picks up. Now, that pickup is
38:05almost entirely due to what the Federal
38:07Reserve did in September, okay? So, what
38:10I was saying earlier on is it looks as
38:13if the Federal Reserve is deliberately
38:14targeting money market liquidity. This
38:17may be um you know, uh uh a temporary
38:21effect.
38:22We don't know.
38:23But it's already a question of watch
38:25this space. Now, which asset classes
38:27should you own in these regimes? To go
38:29back to the traffic light diagram that
38:32I'm putting up now, this is basically
38:34illustrating ideal asset allocation.
38:38Asset cho- classes are shown on the
38:40left.
38:41Industry groups are shown on the right
38:42of the chart. The traffic lights
38:45tell us you know when to invest and when
38:48not. You read them as green go,
38:50red stop, and amber proceed with
38:53caution. And what it says is in the
38:55rebound area, you want to take a little
38:57bit of risk, uh but you want equities
38:59and credits predominantly. In calm,
39:03which is what we were in for much of the
39:05last 2 years, uh you want equities, uh
39:08you want commodities increasingly, uh
39:11you don't want bond duration at all, and
39:12you want to be taking some money out of
39:14uh credits. In speculation, which is the
39:17phase that we're either in or is just
39:19ending, it's dominated by commodities.
39:21You don't want credits, uh and you
39:23basically are top slicing equity
39:25exposure, and maybe putting a toe in the
39:27water in terms of bond duration. Uh and
39:30then turbulence, which is the upcoming
39:31phase in all likelihood, because this
39:34thing tends to be move clockwise, you
39:36tend to find uh that you only want bond
39:39duration,
39:40uh and you want to be you can move back
39:42into
39:43credits when the yields look attractive,
39:46but you don't want commodities, and you
39:47don't want equities. And then you look
39:49at industry groups, which are shown on
39:50the right-hand side of that diagram. Uh
39:52technology is the winner in the upswing.
39:55Uh financials around uh late cycle.
39:58Um energy commodities generally issue
40:00peaking in doing the immediate
40:02downswing, and then defensive through
40:04most of that downswing period. Uh and so
40:07therefore, that would be my asset
40:08allocation. And again, if you look at um
40:11small cap large cap, uh small cap tends
40:14to be one in the upswing, uh and large
40:16cap tends to outperform in the
40:18downswing. So, that's how I basically
40:20argue it.
40:21>> And how about crypto assets across these
40:23regimes?
40:24>> I think that crypto I think you've
40:25you've got to take into account that
40:27crypto is both um um
40:30a real asset, um in other words, it it
40:33will relate to what happens in the real
40:35economy, and a monetary inflation hedge.
40:37Um so, you know, a pure monetary
40:40inflation hedge would presumably be
40:42Bitcoin, but then the rest of the crypto
40:44universe is going to be much more like
40:47uh a real economy asset, and probably
40:48would move more like technology stocks.
40:51So, I think that you would I mean, I
40:52would say therefore that Bitcoin should
40:55outperform crypto in the downswing of
40:57the liquidity cycle, but the rest of
40:59crypto, uh, altcoins, or whatever, would
41:01be performing outperforming Bitcoin in
41:03the upswing. So, maybe you just do that
41:05with an Ethereum Bitcoin spread or
41:07something.
41:07>> Now, if I've read your work, Michael,
41:09uh, correctly over the last year or so,
41:11you you seem to have indicated that this
41:13speculation phase has lasted a little
41:16bit longer than you thought it it would
41:18originally. And I'm wondering if that's
41:21the case, and if so, why? And maybe you
41:25could give the case for why it could
41:27persist even further. For instance,
41:30we'll contrast kind of some of your
41:31position with uh, the AI bulls out there
41:35who will tell you and will say that AI
41:38is still just getting started. We're
41:40still early. They're still
41:42>> great great point. I mean, I wouldn't
41:44say the speculation has lasted uh,
41:47longer or less than normal. I mean,
41:49we're basically coming up to the normal
41:51time
41:52uh, time span for a speculation zone.
41:54>> Which is about 12 months or so?
41:56>> Yeah, about between 9 and 12 months. So,
41:58it's about that that's sort of normal
41:59phase.
42:01I think that what we've got is the is
42:03the response of equities to that has
42:05been unusual. And if you look at the
42:07chart that I just put up, what I'm
42:08showing here is world PE multiples and
42:12reported earnings per share, okay?
42:14The earnings per share data is lagged
42:16slightly, so they coincide with um,
42:19what's happening to world PE. And the
42:21world PE is shown as a change on 12
42:24months earlier. Now, if you look at what
42:26is going on in
42:28bond markets, bond markets are
42:30responding, I would say, in an
42:31absolutely normal orthodox way to the
42:34liquidity cycle. It doesn't look any
42:36different from normal or standard cycle
42:38in terms of bonds. Commodity markets are
42:41performing exactly as you'd expect
42:43relative to where we are in the real
42:45economy cycle. And so, you know, to be
42:48out of bonds this year and in
42:50commodities was a fantastic trade. So,
42:52that that particular element has worked.
42:55What has been a lot more difficult has
42:58been the equity play, the equity
43:00element, which is the transition phase.
43:02And if you look at this diagram, what
43:04it's showing is what happens to PE
43:06multiples. PE multiples tend to come
43:09down,
43:10um
43:11basically, at the end of the cycle, not
43:13surprisingly. And that's largely because
43:16bond yields go up, right? So, in other
43:18words, the PE multiples are responding
43:22in the same way the bond markets are
43:23responding to declining liquidity. So,
43:26that tick that box, that looks very
43:28normal.
43:29What is not normal is if you look at the
43:32dotted line, as best I can, I've tried
43:34to show that the dotted line, and this
43:37is purely for world earnings per share,
43:39so it's not specifically US, which is
43:41even more exaggerated, is that the
43:44earning cycle has come through later and
43:47in bigger size than normal.
43:49Uh and [clears throat] that is the
43:51anomaly. Now, the question to raise, and
43:54for so, for example, to be specific, if
43:57you look at technology, technology has
43:58had two legs. It's had the first leg
44:01when it was acting like a long duration
44:02investment. So, as bond yields were
44:04falling and liquidity was being
44:06injected, long duration investments like
44:09tech outperformed early in the cycle.
44:11That bit was clear. But what you're now
44:13getting is a second leg where, although
44:15PE multiples are coming down in tech,
44:17what you've got also got is a huge
44:20earnings kicker. Now, the question to
44:22ask, and I'm not next but good enough to
44:24answer this, is that is that dotted line
44:27increase, uh simply an anomaly, so it's
44:31out of step temporarily, or we going to
44:33see
44:34permanently high or sustained high
44:37growth in earnings over the next few
44:39years? I can't answer that question, but
44:41I would say everything else in this
44:44framework is working like clockwork, um
44:47but that's the anomaly. And that's why
44:49equity markets have maybe gone on longer
44:51than we would suspect, have suspected,
44:53and particularly why the big cap tech
44:56stocks have basically lifted the market.
44:58Outside of that, you you kind of
45:01struggle to find
45:03you know, strong outperformance.
45:05A lot of international markets are doing
45:07pretty much what the Russell 2000 is
45:08doing and entering bare market
45:10territory.
45:11>> I see. So you're saying that that PE
45:13compression that you'd expect to see
45:15according to the cycles is playing out
45:16exactly as you would expect to see it.
45:19The difference here is the earnings. The
45:21the PE is far higher and that that PE
45:24being far higher is like mag seven
45:26allocated. It's tech allocated profits
45:29for sure. So there's some huge
45:30outperformer there.
45:32Another question I think that has
45:33plagued AI bull investors is this idea
45:37that rising yields on treasuries could
45:40increase the cost of capital and pop the
45:44AI bubble. You know, if we want to use
45:46the the bubble term for instance. So
45:49we had a a CoreWeave scare last week
45:52which is kind of a neo cloud provider
45:54and some bond investors were pricing a
45:5750% probability that CoreWeave could
46:00default on some of its debt over a
46:02five-year period of time. So things like
46:04this start to scare AI debt markets
46:08particularly as yields continue to rise.
46:11Now I guess that's not your base
46:12forecast that yields will continue to
46:14rise that much more in the months to
46:17come or into 2027. But do you think that
46:19this is a catalyst that could prick the
46:22AI bubble? How how much are you paying
46:24attention to this?
46:26>> Well, I mean almost certainly it's a
46:27it's a risk. Because if you've got a lot
46:29of funding to do and you've got a
46:31background where funding is becoming
46:33more difficult, then you know,
46:36as um
46:38the famous Warren Buffett saying is when
46:39the when the liquidity tide goes out,
46:42you see who's swimming naked. And this
46:44is you know, the reality that it tends
46:47to be high yield borrowers that often
46:48get
46:49squeezed in this environment and that's
46:51that's the reality. Now, it's not only
46:54the fact that you've got
46:56a lot of
46:58tech debt issuance to come.
47:01You've also got government issuance,
47:02which is, you know, pretty hefty.
47:05And it's not just the new issuance, it's
47:08the gross book the government's got to
47:09refinance and put strain on markets,
47:12which is telling. Add to that, and you
47:15know, without being too overly
47:16pessimistic, you've got the debt
47:18maturity wall aspect, which is the
47:21debt that was turned out during the
47:24COVID years
47:25coming back into the market. And that
47:27was a result of near-zero interest rates
47:30that were set by policy makers
47:31foolishly, in my view.
47:33That encouraged a lot of borrowers not
47:35just to take up new debt, but actually
47:37to turn out the existing debt into the
47:39back end of the of this decade. And
47:41that's now coming back into the system.
47:43So, there's an awful lot of funding
47:44demand. So, absolutely that's the case.
47:46But to return to the Ray Dalio point, my
47:49argument would be is if you're getting
47:51these financial stresses,
47:53the asset to own is government debt. And
47:55that's what um, you know, it may be that
47:57spreads widen, credit spreads widen, but
48:00that's both the combination of
48:02government yields
48:04falling or staying where they are, and
48:06corporate yields blowing out.
48:08>> There's a conversation out there that
48:10um, is another question that is plaguing
48:12AI investors. And because AI has gotten
48:14so big, it's kind of impacting anyone
48:16who invests, which is how big of a deal
48:20is AI from the perspective of the
48:23investor.
48:24>> So, every once in a while he wins find
48:26this technology that
48:28breaks things, breaks breaks rules.
48:30Now, we know that AI is at least a
48:31little bit of a deal. It's at least a
48:34little bit of a deal. It could be a
48:36very, very, very big deal. And it's a
48:38such a big deal that it just breaks all
48:40investment models because the returns on
48:43AI, the revenue generated by some of the
48:45leading AI companies, the economic
48:48economic boom because of the AI
48:50technology is just so large that all
48:52previous models just just don't break.
48:54Now, at some point, you know, finance
48:56has gravity. There are laws of physics
48:58here. We can't just go up forever.
49:01What are you paying attention to,
49:02Michael, to like kind of give you
49:04grounding as to how big of a financial
49:08anomaly the AI investment cycle is?
49:11>> Well, it it clearly is an anomaly. Um
49:14it's equally the case that it's a it's a
49:16revolution.
49:17Um AI is going to transform the world
49:19economy. There's no question about that.
49:21I think if you look back at history,
49:22there are very few
49:24uh of these sort of major sea changes
49:28uh in terms of the impact that um
49:30technology will have. I mean, one can
49:32look back and say, well, you know, the
49:34the internal combustion engine was
49:36clearly one. Uh I mean, air travel would
49:39be another, jet engine. Uh the washing
49:41machine, curiously, was actually a huge
49:43productivity uh booster. The invention
49:45of glass, all these things. And I think
49:47AI is sort of in that realm. Uh we're
49:50looking at a a major change uh to the
49:52the whole dynamics and growth of the
49:54world economy. But that's very different
49:56from saying the financial markets will
49:58benefit from that. And I'm always um you
50:01know, thoughtful about what happened
50:03when we saw
50:05uh fiber fiber optic cable, the boom in
50:07that, about whatever it was, 20, 25
50:10years ago, uh with a company called
50:11Global Crossing, uh that was uh the
50:14darling of Wall Street at the time. It
50:15was a major, major new issue
50:17uh that uh yeah, they hit the street
50:19around about the the start of the
50:21millennium, if I remember rightly. And
50:23what you saw within 5 years, um Global
50:26Crossing was in chapter 11.
50:28And the reason being is that fiber optic
50:30prices collapsed by 80%, and that was
50:33not envisioned uh in terms of their
50:35original prospectus. But that's what
50:37happened. That's competition. That's
50:38capitalism uh writ large, um you know,
50:41roaring uh you know, roaring tooth and
50:43claw, or whatever.
50:45Uh and we saw that process
50:48uh unravel, or the whole in the whole
50:50capital market process unravel. Uh but
50:53the fiber optic cable is still there in
50:55the ground. We're still great
50:56beneficiaries of that. And I think the
50:57same with AI. That's the risk that you
50:59run.
51:00Um and you know, competition not just
51:02from other, you know, US AI producers,
51:06uh, there's also competition with China.
51:08>> We've talked around this earlier in the
51:09conversation, Michael, at the at least
51:11you brought it up and and you're talking
51:13about kind of Bessant and and Warsh and
51:16sort of how they were managing things.
51:18Um, there's been this term called
51:20Treasury QE. I know you've discussed it.
51:23And, uh, there's also, of course,
51:25Bessant has been,
51:26uh, doing some bond buybacks lately. So,
51:30um, that's been a force in the market. I
51:32think there was a quote out there he
51:33recently called himself the house. I
51:36don't know uh, if you agree with that or
51:39how accurate that is, but I'm trying to
51:41get a sense of what Bessant and Warsh
51:45are doing. Maybe whether it's makes more
51:47sense to view them as a a
51:50a system, uh, both of them interacting
51:52together or as independent entities, but
51:55what is this idea of Treasury QE? And
51:58what is the whole Fed and and Treasury
52:01system, what are we driving towards? And
52:04is this actually money printing or is
52:07that to come later?
52:08>> Short answer is that it is money
52:09printing, so it's here and here and now.
52:12Um, the way to think about this is that,
52:14you know, people raised the question
52:15about are we looking at fiscal
52:17dominance?
52:18And I would say, to be more accurate,
52:20this is not really fiscal dominance,
52:21it's what you would call Keynesian
52:23dominance. And if you go back to, um,
52:25Keynes's general theory and a lot of the
52:28arguments that were uh, so that
52:30surrounded the general theory when it
52:32was first published in 1936, it was a
52:34Keynes himself said, "These are policies
52:36that are best suited or well suited to
52:39totalitarian regimes, okay?" Now,
52:42without necessarily trying to make that
52:43association with the US, what I'm really
52:45saying is that what we're looking at is
52:48is economics for big state uh, state-run
52:51uh, economies. And, you know,
52:53paradoxically,
52:55um, the US is moving more towards the
52:57Chinese model than maybe many people
52:59would like. Uh, and this is this is big
53:02government, big state. Now, I appreciate
53:04the fact that we are in a capital war
53:06uh, with China. It doesn't mean a
53:08kinetic war. I mean, this is more like
53:09the Cold War where there's a lot of
53:11little proxy engagements going on, but
53:13hopefully it doesn't turn into a kinetic
53:15war between the major players. But
53:17nonetheless, we've got a capital war and
53:19America cannot lose that capital war.
53:23And that's really the key the key point.
53:26You know, I mean my my you know, one of
53:28my analogies is to say look back at
53:30American history and look at Washington
53:31and Grant, the two greatest generals.
53:34One of the things that they learned was
53:35not to lose. And this is what basically
53:38the Trump administration and others have
53:40got to try and recognize. You cannot
53:41lose this game. It's It's absolutely
53:43critical. And so, what needs to be done
53:46is the economy needs to be supported as
53:48best it can through the Treasury and the
53:50Fed. And they are operating in accord at
53:53the moment, in my view. And this is what
53:55I've done Treasury QE. Now, what that
53:58means is that basically government
53:59procurement spending or government
54:01spending writ large is basically being
54:03funded through the bill markets. And the
54:06attraction of that is
54:09that the banks are ready buyers for
54:11bills. Okay, there's a huge demand for
54:14short-dated Treasury paper, be it bills
54:16or short-dated notes. And it's very easy
54:18for Bessen to sell that stuff. And that
54:21is what's going on. If the banks buy
54:23government debt of any shape or size,
54:25that is monetization.
54:27And this is what's happening in the
54:28system right now. Now, it's not going to
54:30be hyperinflation. It may be an extra 1
54:342% on mainstream inflation. That's for
54:37sure. But you know, what you got to do
54:39in this world is to basically buy
54:40monetary inflation hedges. That makes an
54:42awful lot of sense. But ultimately, what
54:45what we're looking at here is a very
54:47different economic model.
54:49A A more state-run economy or
54:51state-directed economy
54:53that is being funded jointly by the
54:55Federal Reserve and the Treasury. And
54:57what Bessen and Awards I think are
55:00doing, this is purely my interpretation.
55:01It may be completely wrong. So, let's be
55:03clear on that. But I I would argue that
55:05there are three dimensions of monetary
55:07policy now. There's Fed funds rate,
55:09which I think is the lesser of the
55:11three, and the other two are number one,
55:13managing money market liquidity.
55:15Uh you know, if you're doing a lot of
55:16bill issuance, you clearly need to make
55:18sure that that
55:20um that um
55:21markets are liquid. And then secondly,
55:24the whole repo collateral complex is
55:26dependent on low volatility of
55:28collateral. And that is what Bessant, in
55:31my mind, is doing. So, he's pushing more
55:34and more issuance into bills, which
55:36don't have much volatility compared to
55:39a 10-year or 30-year Treasury.
55:41Um and what's more, he's doing buybacks
55:44of Treasuries. And you know, the whole
55:46idea that, you know, I as I think it may
55:48be the Financial Times or the Journal,
55:50you know, poured scorn on him by saying,
55:51you know, is this man so ridiculous that
55:53he does a $6 billion buyback in a $40
55:55trillion debt market and thinks it's
55:57going to make any difference? Oh, come
55:58on.
55:59You know, I mean, Bessant is is much
56:01cleverer than this.
56:02>> [laughter]
56:02>> He's had a lot of experience in bond
56:04markets. And what he's doing is not
56:07trying to alter the yield
56:09backdrop. He's trying to reduce
56:10volatility in the market, making the
56:12making the Treasury market more liquid.
56:14And the New York Fed itself has said
56:16this is a very important consideration
56:18in our policy debates of having a liquid
56:21Treasury market. And this is what
56:22Bessant's doing. As I said, if he's
56:24retiring
56:25you know, US government debt at 60 cents
56:27in the dollar, it's a great deal for
56:29American taxpayers, period.
56:32>> this instead of yield curve control,
56:33you've called this yield volatility
56:35control as
56:36>> Exactly, yield volatility control.
56:37>> Is it Also, is this also why
56:40the MOVE index has in you know, received
56:43such emphasis in some of your writing
56:45and your indicators? Because the MOVE
56:47index is an indicator of bond
56:50volatility.
56:52>> Correct. Correct. It's a it's a great
56:54index to watch. And the reason is that
56:56if you look at how collateral is used
56:59or is applied,
57:00if you post collateral with a dealer
57:03bank, the dealer bank will give a
57:05haircut against that collateral. So, you
57:08may be able to borrow, you know, 95
57:10cents on the dollar or 99 cents or
57:12whatever it may be, but that would be
57:14effectively turned by the level of
57:16volatility in the in the collateral
57:18markets. If you have a lot of
57:20volatility, they will post a higher or
57:23demand a higher haircut, and that higher
57:25haircut will mean that the collateral
57:27multiplier, the amount of reuse or use
57:29of the collateral diminishes, and
57:31therefore you get a much smaller
57:33liquidity multiplier.
57:34>> So, because of your encouragement, I
57:37I've been increasingly adding the MOVE
57:39index to sort of my key economic
57:42indicators. How should How should I use
57:43that? So, when MOVE is going up, like
57:46what are the key key numbers to watch
57:48here, and how do you look at the MOVE
57:50index? What What does it tell you when
57:51it when it goes up, and what does it
57:53tell you when it settles back down?
57:55>> Okay, well, the the key I mean I look at
57:57key thresholds.
57:59Uh there's a normal zone for
58:02um for the MOVE, which is really
58:03centered around 70 on the index.
58:06Now, very crudely, and this is not
58:08necessarily how it's designed, but very
58:10crudely, I interpret a 70 level for the
58:12MOVE as being 7% annualized bond
58:15volatility across the curve, okay? If it
58:18goes to 100, my take is that's about 10%
58:21bond volatility across the curve. That's
58:23uh a rule of thumb, it's not precise at
58:26all, but it's a good way of interpreting
58:27it. Now,
58:29my estimates would suggest that if you
58:32get um above 90 on the on the index, it
58:36impairs um liquidity creation. So,
58:39anything above 90 basically means that
58:42you get a fall in the collateral
58:43multiplier. That's That's my take.
58:46If you get above 135, it's almost always
58:50consistent with recession in the real
58:52economy. We're not there yet, obviously.
58:54We're We're We're close to that on the
58:56former, nowhere near on the latter. But
58:59bond volatility is spiking, and there
59:01are attempts to reduce it, and the test
59:03of my thesis would be if you start to
59:06see um more volatility and Treasury
59:09buybacks increase in frequency and in
59:11size, um then I think case proven.
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1:00:19>> Some exciting news. We are launching a
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1:00:23the crypto cycle, how to navigate it.
1:00:24The best crypto cycle investor I know,
1:00:26his name is Michael Nadeau. He runs The
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1:01:00wherever you get your podcast, YouTube,
1:01:02[music] Apple, Spotify, or find a link
1:01:04in the show notes. There's a new episode
1:01:05waiting for you now.
1:01:06>> Let's talk about the debasement hedges,
1:01:08then, if that is the direction of
1:01:10travel, which uh it seems to be for
1:01:12certain. Um maybe gold first.
1:01:15I think you wrote recently the case for
1:01:17gold. You said this, China has to print
1:01:19money and the Chinese love gold. That's
1:01:21all you need to know.
1:01:22Um
1:01:23in the past I think you've talked about
1:01:25gold as being sort of China's primary
1:01:28debasement uh hedge. And in fact,
1:01:31Chinese markets and Chinese liquidity
1:01:33was really driving gold more than Fed
1:01:36markets and and Fed liquidity. Can you
1:01:39talk about gold as a debasement hedge
1:01:42and and how that sort of fits into a
1:01:44strategy?
1:01:44>> Okay, this chart is now looking at um
1:01:48PBOC, People's Bank of China liquidity.
1:01:51So, this is the amount of liquidity uh
1:01:54that PBOC has injected uh into the money
1:01:57markets as a stock.
1:01:59Uh it's currently uh just shy of 40
1:02:01trillion yuan.
1:02:03And alongside that, I've shown uh gold
1:02:06bullion prices in US dollar terms.
1:02:09Now, when the bullion market began to
1:02:12pick up, that was really around um the
1:02:15early part of 2022. A lot of people have
1:02:18ascribed the move in uh gold,
1:02:21the rising gold to sanctions against
1:02:23Russia, um you know, and that was
1:02:26something that scared a lot of central
1:02:28banks and pushed them into buying gold.
1:02:30And then on top of that, there's been
1:02:32this argument, the so-called great
1:02:33debasement uh that is going on
1:02:36explaining why gold is going up. I don't
1:02:38think that's correct. Uh I mean, I'm not
1:02:40going to argue against the fact that
1:02:42central banks are buying and the
1:02:44sanctions against Russia were harmful.
1:02:46That's true, but it wasn't really the
1:02:47big catalyst. If you look at this chart,
1:02:49what it tells you, uh it seems to me
1:02:51what it tells you is that you've got a
1:02:53big increase in the amount of liquidity
1:02:55that China was pumping into its markets
1:02:57from early '22, and that ultimately led
1:03:01to a rise in the gold price. And that
1:03:03gold price basically moved up until it
1:03:05didn't. And when it inflected, that
1:03:07coincided pretty much with uh China
1:03:10slowing down liquidity expansion at the
1:03:11beginning of this year. Uh why did China
1:03:14do that? I don't know. Uh nobody knows,
1:03:17but my view is that was connected with
1:03:19the Iran tensions and they didn't want
1:03:20to
1:03:22goose the economy too much in case it
1:03:24spiked oil prices and that would be you
1:03:26know deleterious to the world economy
1:03:28and China depends on the world economy
1:03:30on a economy and they're very thoughtful
1:03:32about these sort of things. So I think
1:03:34that would be my explanation. Now people
1:03:36may say well of course this is spurious
1:03:38correlation. I mean it may be, but then
1:03:40I showed the following chart which I've
1:03:42just put up which is showing very
1:03:44short-term changes which is 6-week
1:03:47changes in both the price of gold in
1:03:49dollars and PBOC liquidity and I've
1:03:52advanced PBOC PBOC liquidity by a couple
1:03:55of months to try and show that it
1:03:56predicts. Now that chart is not perfect
1:03:59and you know I'm not going to not going
1:04:01to win the
1:04:02Nobel Prize for Economics by putting
1:04:04this chart up, but what it does show is
1:04:07that the correlation is sufficiently
1:04:08close to make it you know
1:04:11sit up and make people sit up and think
1:04:13well maybe we ought to watching what
1:04:14China's doing.
1:04:15>> So what's your outlook on gold at you
1:04:17know today's prices? We did see a run
1:04:19obviously earlier this year. I think we
1:04:21we had
1:04:22all-time highs at least denominated in
1:04:25dollars. I know part of your argument is
1:04:27maybe denominate some of this in RMB and
1:04:30see what the difference is, but gold
1:04:32right now 4100 per ounce something or
1:04:35along those lines. Is gold fairly valued
1:04:39according to global liquidity or is it
1:04:41undervalued? Is it overvalued? What you
1:04:43know what's what's kind of your your
1:04:45price point for the the fair market
1:04:47entry into gold?
1:04:48>> Well I think the fair the fair value
1:04:50entry point is that if gold goes down by
1:04:52more.
1:04:53I mean the fact is that liquidity is
1:04:55moving up over the long term.
1:04:57You could have made you could have
1:04:59finessed this point about gold
1:05:02you know over the last 25 years, but
1:05:04generally gold has compounded at such a
1:05:06rapid rate as I say over 8 and a half
1:05:09percent. It's more than matched the
1:05:11increase in federal debt. If you believe
1:05:13that federal debt is going to slow down
1:05:15its growth
1:05:17and you know there's going to be some
1:05:19renaissance where
1:05:21you know Besant pulls a rabbit out of a
1:05:22hat and suddenly manages to pay back
1:05:24debt.
1:05:25Yeah,
1:05:26ignoring that that remote possibility,
1:05:29I think federal debt's going to compound
1:05:30at at a equal 8 to 9% rate over the
1:05:33medium term, pretty similar to what it
1:05:35did over the last 25 years or so. And
1:05:38that would mean that gold does exactly
1:05:39the same thing. And you got to remember
1:05:41that if something is growing at just
1:05:42over 7% per annum, it doubles every
1:05:45every 10 years. So, you're looking at a
1:05:47more than doubling in the gold price.
1:05:49So, I think to buy it
1:05:51on a 10-year view, I think to buy it
1:05:53weakness makes a lot of sense. And I
1:05:55think it's not just federal debt in the
1:05:57US that's going up, it's basically
1:05:59Chinese monetization which is going to
1:06:01be forced as well. And for that matter,
1:06:03everybody else. We're all in the same
1:06:04boat. I mean, no one's going to tell me
1:06:06that the the ECB in Europe is not going
1:06:09to print money to try and bail France
1:06:11out of its current difficulties. Sure as
1:06:13eggs are eggs, it's going to do that.
1:06:15Remember the same whatever it takes?
1:06:17Yeah, how many again?
1:06:19>> We we started this episode talking about
1:06:21Bitcoin and maybe we want to conclude
1:06:23this episode talking about Bitcoin. I
1:06:25think in the past you've indicated that
1:06:28as sensitive as gold is to global
1:06:30liquidity, and I don't recall the
1:06:31sensitivity is it 20 25%?
1:06:35Bitcoin is even more sensitive. I think
1:06:37you you've tracked it as 40 to 45% of
1:06:40Bitcoin's drivers are actually global
1:06:44liquidity. So, that would make it almost
1:06:46like a a high octane gold. Again, you
1:06:49know, Bitcoin does not have decades and
1:06:52centuries of
1:06:54price. So, this is you know,
1:06:56much shorter
1:06:57time horizon. But high octane gold, 5x
1:07:00gold, Bitcoin's track record you've
1:07:02written so far is shorter, but its
1:07:05sensitivity to the global liquidity has
1:07:07recently been approximately five times
1:07:10greater than gold. And you talk about
1:07:13adding even 5% of crypto assets like
1:07:16Bitcoin to your portfolio can make a
1:07:19massive difference. So, let's talk about
1:07:22Bitcoin again as we end this episode. Do
1:07:25you expect that to continue to be the
1:07:27case that Bitcoin is the best way maybe
1:07:33or one of the best ways to
1:07:37have a hedge against the global
1:07:39liquidity continue to increase for the
1:07:40foreseeable future?
1:07:43>> Well, if it was if it was the best way
1:07:45and I was sure of that, I'd be a very
1:07:46wealthy person. So
1:07:48>> [laughter]
1:07:50>> I think the fact is that it is a way.
1:07:53It is demonstrably a way in the last 15
1:07:55years. Gold has a track record that goes
1:07:58back, you know, more than 5,000 years or
1:07:59whatever. So we know that gold works as
1:08:01a monetary inflation hedge. That's for
1:08:04sure
1:08:05unless governments try and stop it. And
1:08:06I think unlike the early 1930s with you
1:08:09know, the the gold act when
1:08:12you know, Roosevelt bought in forcibly
1:08:13bought in gold.
1:08:15You know, that ain't going to happen
1:08:16again because it's gold is too widely
1:08:18dispersed and you've got ETFs and
1:08:20whatever else in different countries. So
1:08:22it's very very difficult to control
1:08:24that. So in that unless that you know,
1:08:27nightmare happens and I don't think it's
1:08:28practical to do that.
1:08:30Gold is going to be a very good hedge.
1:08:32Now, what I would be doing would be
1:08:34saying, well, okay, we don't know which
1:08:36is going to be the the best of the two.
1:08:38They both work.
1:08:39Why don't you just own both but you you
1:08:42wait the portfolio
1:08:44based on volatility. So Bitcoin is
1:08:47clearly way more volatile than gold. So
1:08:48you got to have more gold relative to
1:08:50Bitcoin to give us
1:08:52an average average out that volatility
1:08:54differential.
1:08:56But over time as Bitcoin becomes more
1:08:58institutional, its volatility will come
1:09:01down and therefore you can increase your
1:09:03waiting over time. But I still think
1:09:05that it is worth buying these assets on
1:09:07weakness.
1:09:08There may well be further weakness in
1:09:10coming months. That that's for sure.
1:09:12As I say, I draw the
1:09:14I draw out the the other sort of
1:09:16qualification which is saying that you
1:09:18know, maybe Bitcoin is telling us a
1:09:19little bit about the change in the
1:09:20monetary environment. So you've got to
1:09:22be alert to looking at the chart points
1:09:25per only it doesn't go below 70,000. But
1:09:28That would be you know that that would
1:09:29be a
1:09:31a game-changer for me, but I'd certainly
1:09:32be thinking about buying in on weakness
1:09:35and gold too. And I think gold is going
1:09:37to go up because of what China's doing
1:09:39and I think Bitcoin's going to go up
1:09:41because the liquidity cycle is going to
1:09:43turn.
1:09:43>> So let's chart this then and talk about
1:09:46the liquidity cycle turning. So I mean
1:09:48you are famous for your global liquidity
1:09:51index and I think global liquidity at
1:09:54the time of recording about a year ago
1:09:56was 185 trillion on your marker. Right
1:09:59now I think it's about 196 trillion
1:10:04and I don't know if that's rising or
1:10:06falling, but the long-term forecast or
1:10:07even the medium-term forecast for you is
1:10:10that it continues to rise. You noted
1:10:14this in a July 28th note, a 1% change in
1:10:18global liquidity is associated with an
1:10:2111% change in the best basket. The best
1:10:25basket is Bitcoin, Ethereum and Solana.
1:10:28So it's not just Bitcoin, I believe it's
1:10:30a composite of those three assets
1:10:32together.
1:10:33Bitcoin being kind of a liquidity
1:10:35sponge. So
1:10:37>> Right.
1:10:37>> if we're to forecast global liquidity,
1:10:40let's say, you know, 195
1:10:43trillion and we bring you on next year,
1:10:45we bring you on the year after that.
1:10:46Let's say we bring you on annually,
1:10:48Michael.
1:10:49And you know, we're talking about three
1:10:51years from now or five years from now,
1:10:53what would you approximate global
1:10:55liquidity to be and how will that relate
1:10:59to something like the best index if that
1:11:0111% change, you know, for every 1% in
1:11:05global liquidity continues to be the
1:11:08case?
1:11:09>> Okay, well I mean the starting point is
1:11:11that
1:11:12and what I've put up on this
1:11:14on this chart is our global liquidity
1:11:17cycle. This is shown as an index.
1:11:20It's basically an index of the
1:11:21underlying momentum of global liquidity.
1:11:23So this is the underlying growth rate
1:11:25and you You that it moves in
1:11:27four in five to six year spans or
1:11:30cycles, okay?
1:11:31Um we're moving down at the moment, as
1:11:34you rightly say. Late last year, Q4 last
1:11:36year, there was a peak and liquidity
1:11:38started to come down. Now,
1:11:41what you see in the world economy is
1:11:43that debt grows exponentially,
1:11:46but liquidity has
1:11:48a large cyclic cyclical element to it as
1:11:50well, okay? That is why you get
1:11:53financial crises because liquidity and
1:11:55debt uh don't match. And that's why you
1:11:58get asset bubbles because the upswings
1:12:00of the liquidity cycle, that money is
1:12:03more than is required for debt
1:12:04refinancing, and therefore you get uh
1:12:07the ventis higher asset prices. So,
1:12:09that's already the mechanism. Over the
1:12:11long term, debt and liquidity must move
1:12:14in harmony, and the ratio between debt
1:12:16and liquidity must form an equilibrium.
1:12:19Therefore, if you believe that debt is
1:12:21rising at an average clip of let's say
1:12:24circa 8% therefore, you've got to
1:12:26believe that liquidity is rising at
1:12:28around uh 8% too per annum. That is the
1:12:31That is also, as it happens, by
1:12:34coincidence, the history of the last 25
1:12:37years.
1:12:37>> Wow.
1:12:37>> going to continue, right?
1:12:39Now, if that's the case, as I said, if
1:12:42something grows at a rate of over 7% per
1:12:45annum is over 7% per uh per annum, it
1:12:47doubles every 10 years. So, the stock of
1:12:50global liquidity will easily be double
1:12:51what it is now in 10 years' time. And
1:12:54that would mean that the response of
1:12:55monetary inflation hedges would move
1:12:57similarly. Now, I would suspect that
1:13:00you're going to be If you look at the
1:13:01multipliers, and I come back to the
1:13:03point that uh your point earlier on,
1:13:06that if you look at the multipliers,
1:13:07Bitcoin is a lot more sensitive um
1:13:10than gold to global liquidity. And if
1:13:12you look at the multiplier for for um uh
1:13:15gold, it's about 1.25. So, in other
1:13:17words, that's the elasticity. So, if you
1:13:20get a 10% rise in global liquidity, you
1:13:23get about a 12 to 15% in fact rise in
1:13:27the gold price. Uh Bitcoin is a lot more
1:13:29than that, but the but the sensitivity
1:13:31is coming down over time. I mean, that's
1:13:32for sure. The more institutional it
1:13:34becomes, the less it becomes sort of you
1:13:36know, a new kid on the block and it gets
1:13:39more absorbed and that ratio tends to
1:13:41fall. So, let's not be too optimistic,
1:13:43but the fact is that it's easily Bitcoin
1:13:46Bitcoin over that period is easily going
1:13:47to double.
1:13:49So, you know, that maybe is all you need
1:13:51to know.
1:13:52But, the fact is that the liquidity
1:13:53cycle ultimately will turn a higher.
1:13:56It's not as we speak, but I'm watching
1:13:59the the the chicken bones.
1:14:01>> As
1:14:02as this plays out over and over again,
1:14:04this the full cycle, the global
1:14:05liquidity cycle each time, my my my big
1:14:08question as we end this episode is like
1:14:10thinking about your work and what you've
1:14:12been doing to track it, how many more
1:14:15turns of the wheel do we actually get?
1:14:17So, you said in 10 years this is going
1:14:19to double. You 10 more years it it it
1:14:22doubles yet again. I mean, can we just
1:14:25continue to keep on this pace or does at
1:14:28some point something break? I mean,
1:14:30global liquidity right here is
1:14:31denominated in dollars.
1:14:33In previous eras it's been denominated,
1:14:35let's say, in other currencies. Maybe if
1:14:37we looked at this in, you know, the year
1:14:391900, it would be the pound sterling. Um
1:14:43does something eventually break in this
1:14:46chart or do we just continue to turn the
1:14:49wheel? Do you expect in the decades to
1:14:51come we're just going to keep cranking
1:14:52the wheel and we're just going to the
1:14:55chart is going to continue to go up into
1:14:57the right.
1:14:58>> Well,
1:14:59on the basis that we continue to operate
1:15:01in a credit money economy,
1:15:03the answer is that that there's no
1:15:05alternative. This is what's going to
1:15:06happen. It may well be that the names
1:15:08change.
1:15:09It's entirely possible that I mean, you
1:15:11know, God forbid that we we we're
1:15:13trading the Chinese yuan, not the US
1:15:15dollar.
1:15:16Everything's denominated in that.
1:15:18That might not be a great world to be
1:15:20in, but you know, never say never, of
1:15:22course. But, what we're looking at is
1:15:25broadly speaking a paper money a paper
1:15:27money world
1:15:28in all those paper credit. That's what's
1:15:30driving everything. And basically,
1:15:32politicians, policy makers, et all kick
1:15:35the can down the road. I mean just look
1:15:36at the value of the dollar
1:15:38you know in in what 1900 okay so we're
1:15:41talking about 125 years ago. I mean to
1:15:43compare to today
1:15:45the dollar would you know be worth that
1:15:47dollar would be worth what?
1:15:49I mean
1:15:50whatever it is 11 cents or whatever the
1:15:51number is maybe even less than that. So
1:15:54you know as the years go by the value of
1:15:56the dollar gets eroded more and more and
1:15:57more. And that's what we got to we got
1:16:00to expect but that's true of every
1:16:01currency. Hopefully it doesn't derail
1:16:05like you know nobody talks about the
1:16:07Hungarian pengo anymore that was a
1:16:09hyperinflationary currency or the
1:16:10reichsmark or whatever it may be. These
1:16:14things
1:16:15these things do skyrocket in terms of
1:16:16their loss of value. But you know
1:16:18hopefully providing that President Bush
1:16:21at all
1:16:22you know keep moderate monetary
1:16:24inflation going
1:16:26all we need to do is to be alert to
1:16:28where we allocate our assets.
1:16:30>> Any final words for investors looking to
1:16:322027? What would be your sort of parting
1:16:35words to everyone listening for what to
1:16:37look out for in 2027 how to prepare?
1:16:40>> Buy the dips buy the bigger dips harder.
1:16:43And what we're in is a cyclical world.
1:16:47But a cyclical world dominated by debt
1:16:50unless you think that those parameters
1:16:52change you've got to be invested in
1:16:55things like gold Bitcoin and monetary
1:16:57inflation hedges.
1:16:59>> I think listeners are used to hearing
1:17:00those words buy the dips.
1:17:02Michael Howell thank you so much for
1:17:04joining us for everyone listening I've
1:17:06got to highly recommend Michael Howell's
1:17:09Substack. I am a paid subscriber it's
1:17:11fantastic. One of the voices in macro
1:17:13that I always find has signals for me.
1:17:16People can find his work at
1:17:18capitalwars.substack.com.
1:17:21Michael thank you so much for joining us
1:17:22today it's been a pleasure.
1:17:23>> Great pleasure guys enjoyed it thank
1:17:25you.
1:17:25>> Got to let you know of course none of
1:17:26this has been financial advice crypto is
1:17:28risky you could lose what you put in but
1:17:30we are headed west. This is the frontier
1:17:32not for everyone but we're glad you're
1:17:34with us on the Bankless journey. Thanks
1:17:35[music] a lot.
1:17:41>> [music]

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