Original subtitles

What what I'm really saying is that the

odds of the S&P being at current levels

by the year end I think are low. Uh in

other words, I think that it's going to

be I think the market's going to be

lower by the year end. Uh my view is

that uh the assets that are very much

out of favor now are the ones that are

going to come back into favor.

[Music]

Welcome to thoughtful money. I'm

thoughtful money founder and your host

Adam Tagert. welcoming you here for a

very special discussion with Mr.

Liquidity himself, Michael How, founder

and CEO of Crossber Capital, which is

now rebranded as Global Liquidity Index.

Michael, thanks so much for joining us

today.

>> Well, great pleasure to be here, Adam.

Happy New Year for everybody. Let's uh

let's hope it's a good one, but I fear

there's challenges ahead.

>> All right. Uh All right. Well, we'll

we'll we'll pick up on that thread

immediately. Challenges ahead very

quickly. Happy New Year to you. Hope

you're staying warm. I see you've got a

nice uh turtleneck on, so hopefully it's

not too cold in the UK right now.

>> Yeah. Well, it's pretty cold. It's about

minus 5, which is uh pretty cold for the

UK.

>> Oh, yeah.

>> Snow everywhere. So, there we are.

>> Okay. Well, all right. Well, hopefully

we can generate enough heat with this

discussion that that we can warm you up.

Um All right. So, uh we're going to get

to the your latest slides uh that you

kindly prepared for us in just a second,

Michael. Um but as I recall, you have

your your global liquidity cycles that

your firm um has identified and in our

you know previous conversations over the

past couple years if I remember

correctly uh you had forecasted the

current cycle to to kind of peak out at

the end of 2025, beginning of 2026. Uh,

is that still your expectation or have

there been any developments like the Fed

kind of returning to QE even though

they're not calling it QE that might be

pushing the duration of the cycle out

further?

>> Yeah, all the evidence seems to show

that the liquidity cycle is peaking

pretty much around the time we said. I

mean the uh we're still getting data

coming in for the end of the year you

know obviously but it looks as if the

peak in liquidity probably occurred

sometime around about Q4 maybe early Q4

or there thereabouts um and that's you

know despite the fact the Federal

Reserve as you said has kind of moved

back to a more benign liquidity posture

they were kind of forced to do that uh

because of the tensions in repo markets

but what the Fed is really doing is

basically um you know doing uh doing the

sort of minimum necessary I would say.

Uh they're sort of putting a a put uh

under the repo markets and that's

probably enough to to keep tensions away

there, but it's not really enough to

keep the bull market in stocks going

through the year and I think the

monetary policy the Fed is operating is

probably uh at best uh good enough for a

rangebound market this year. It may not

be even enough for that but we'll see.

So you know our view is that the year is

going to be challenging. liquidity is

not the force that it was. Certainly if

you look at the the major advanced

economies I think China may be a

different story which we can get into

and you know one of the things that

we're bringing out very clearly this

year is that there is a significant

divergence between what's going on in

the US liquidity cycle and in the

Chinese liquidity cycle but that's a a

later story I think.

>> Okay. Well I look forward to getting

into all of that. Um I just had a

conversation yesterday that I'd love to

get your thoughts on. Um and it's about

the guidance that US Treasury Secretary

Scott Bessant has been giving in terms

of the criteria of what the

administration is looking for in the

next Fed head. And uh Scott Besson is

kind of leading that search. Um and he

he's he's essentially said, you know, we

we want a Fed that is is quick to

respond to issues, but one that doesn't

give too much uh persisting uh stimulus.

And he cited, you know, things like the

Fed buying mortgage back securities for

like, you know, years after they

probably should have stopped and housing

prices were, you know, zooming to new

highs and things like that. Um, do you

take that into consideration at all in

your forecasting?

>> 100%. I think that's it's a key point

and I think Scott Besson's been very

clear. Uh, the Federal Reserve has sort

of been operating an unguided hose. Uh,

it's basically pushed liquidity out,

lots of liquidity out to many pockets,

uh, not just in the US economy and US

markets, but worldwide. Uh, and that

really has come at a cost of what you

may call the K-shaped economy. And I

think that's what he wants to get away

from. And therefore what we what we've

been arguing over the last 12 months is

there's a very distinct shift away from

what we can term Fed QE towards Treasury

QE. Now Treasury QE is more subtle but

it basically is saying that uh liquidity

is being uh injected directly uh into

the real economy rather than uh

willy-nilly into financial markets. it's

directed is going into things like

government procurement uh you know

defense spend critical minerals uh these

sorts of areas uh and it's been funded

at the front end of the curve through

the bill market uh and that has an

effect on liquidity but it's liquidity

it's creating liquidity but it's

creating liquidity which is being used

in the real economy not in financial

markets and although the Federal Reserve

in our view is unlikely to be tightening

through this year uh it may conceivably

is I mean I doubt that but it's

possible. Uh the fact is that a strong

real economy is going to absorb a lot of

liquidity out of financial markets. And

the more one looks around the world, the

more evidence there is that fiscal

policies are uh uh stimulatory. Um that

real economies are starting to pick up.

Uh you know, after what has been

probably two years of monetary stimulus

generally, it's about time they did and

they're beginning to get some traction.

And that by itself will actually absorb

a lot of the liquidity that's washing in

financial markets. And therefore with

even without central bank tightening,

the liquidity cycle is going to start to

dip down. And that really is the the

main factor driving our view of the

markets.

>> Okay. So it it sounds like what you're

saying is that the administration, at

least here in the US, um may kind of

start making good on their promise that

it's Main Street's time over Wall

Street. Um because what I sort of hear

you saying and tell me if this is too

simplistic is the liquidity uh

environment is shifting now to basically

uh instead of assets over paychecks it's

now going to paychecks over assets.

>> 100% true that that's the way we see it.

Yeah. Uh it's it's Main Street's term.

Scott Besson has been very clear about

that. He keeps saying that, keeps

reiterating that and that's the way that

we see it. uh the US economy in our view

is going to be pretty decent next or

this year uh I apologize this year and

you know it's being driven by strong

capex particularly in AI and persistent

government spending uh the consumer you

know may be slightly sort of on the back

foot but generally speaking uh two major

engines of the US economy look pretty

robust

>> okay and so um we can we can pull up

your slides here if you like uh Michael

but I I I think it's important to remind

people and you

opine on this any way you like that uh

the economy and the stock market while

we we tend to think of them as being

really tightly correlated, they are two

different things. And you can have a

year with a strong economy but a a

underperforming stock market. Um and it

sort of sounds like you think that

actually might be the tenor of this

year.

>> Uh I think it's very much the tenor of

this year, Adam. uh strong economies

don't always have strong financial

markets. Uh and that's really the the

the key observation and I think if we we

sort of go go through some of these

slides uh maybe start with this one. Uh

this is looking at the average gain in

the S&P uh each year of a presidential

term. In other words, taking uh 2025 is

year 1, year 2 is 2026, etc. So this is

the uh average performance in each of

the four years of a presidential term

since 1970. Now what you can see there

is that uh year 1 is pretty decent. Um

years three and four are pretty decent

but year two not so good and there's a

very clear dip. Now we get a lot of push

back by disoffering this observation. Uh

and clearly it's not set in stone but

it's something that one has to ponder

and take into account. um we get a lot

of push back because people say, "Well,

the economy is going to be really

strong. You've got strong earnings. Uh

that's going to mean the stock market

keeps going up, uh etc." But then just

take a look at that. That's the

corresponding slide for earnings per

share growth on the S&P index companies,

uh each year in a presidential term. So,

it's not unusual that the second year is

a very strong year. In fact, the

strongest year for earnings out of the

four and still the stock market goes

down. So what you typically see in year

two of a presidential term, this is a

clearly we're playing with averages

here, is you get P multiple compression

and that's one of the things that we're

concerned about because what's going to

what's driving that is liquidity

conditions are likely tightening and

it's not necessarily because the Federal

Reserve is uh tightening. It's much more

about the real economy is absorbing

liquidity uh from financial markets. uh

all you know all liquidity uh that's

anywhere must be somewhere and if it's

not in financial markets it's in the

real economy and vice versa and that's

what we're pretty you principally saying

so this is the concern we've generally

got and I think if you sort of you know

plow on and take a look at this slide

which uh you know I I I took the the

pink uh press cutting from Twitter I

can't quite read the source but it looks

given the fact that it's pink. It

probably came from the Financial Times

in London.

>> But what that shows is a series of

bubbles and you can pretty much make

them out going all the way back to the

mid 1970s. The red line that you can see

put on top overlaid on top is our

liquidity cycle uh our global liquidity

cycle. And what that principally says is

that almost every bubble that you can

see there has been inflated by uh some

prior pickup in liquidity conditions.

Now if liquidity conditions are

inflecting

then we may have a problem and that's

pretty much as as we see it. We think

that there's an inflection going on and

therefore u a lot of these gains uh that

we've seen are likely to uh uh you know

stop or potentially reverse in some

cases and you know what I can do is

maybe demonstrate this is showing uh the

track of global liquidity. This is

weekly data and it basically goes uh

back or starts in 2022 and you can see

on the left hand scale that that is

measured in trillions of dollars. So

we're sort of touching around $185

trillion of global liquidity. The thin

line on there is an estimate that we uh

that we uh basically put together very

quickly which comes out within a few

days uh after the end of each week and

it's what we call our flesh flash

estimate. It's not a full sample

estimate. It's a best guess uh with the

data we get. And I've just put that on

the same chart to kind of show that uh

the full data when it comes out is the

solid line. Uh the flash estimate is is

what we basically report uh very quickly

to our clients. but it pretty much

tracks the same thing. And what you can

see is that liquidity conditions are

flatlining. Uh there may be a little bit

of a of a sort of flicker up in the

latest week or so, but generally

speaking, it's plateauing. Uh it's not

falling yet. There's no question about

that, but it does seem to have lost its

upward momentum, and that clearly is

something of concern. So that's one of

the factors that we put into account

when we make an assessment of what the

market's doing. liquidity conditions

which are a major driver are looking as

if they're beginning to slow down and

all our work on global liquidity

particularly the global liquidity cycle

is measuring the momentum uh of this

aggregate this uh this global liquidity

total. Now the other thing to take into

account is how liquidity uh sits

relative to asset markets and one of the

best gauges of whether we're in a bubble

or not and what the risks are

particularly in equities is to look at

the uh the ratio as we show here between

all equity holdings worldwide and that

pool of global liquidity. So what you

can see is the data going all the way

back to 1980. I've tried to make sense

of different periods of that where you

see for example in the uh the first

maybe 15 years of the of the chart a

period of financialization when uh

following the sort of the um the high

inflation era of the 1970s. Investors

moved back into financial assets and

demographics were clearly leaning uh

behind them as well and that was helping

to push more and more people into

equities and risk assets. Then you see a

sort of period of speculation uh around

uh you know Y2K and taking into account

the the GFC in 2008 2009 and then you

see a period which is uh more of a

flatlining which you know I think is is

very well explained by Mike Green um

who's talked about sort of passive

accumulation and the fact that you know

asset allocation is maybe not uh what it

used to be. In other words, there are

not the big swings now. uh a lot of

money is basically uh you know uh is

going into asset classes in fairly fixed

uh regimented amounts and you can see

that what we're doing right now is

breaking out of that channel into a

somewhat higher level of uh if you like

equity holdings to liquidity and that's

getting back to

previous periods of sort of speculation

that we saw back in 2000 or 2008 and you

know that's clearly worrying uh by

itself. itself. The other thing that one

needs to take into account is the risk

behavior of investors. Now what I've

shown on this slide which is actually

very similar data is to actually put

this together uh in terms of a portfolio

to say how are portfolio allocations

uh being expressed. And this chart is a

measure. It's actually a zcore uh under

underlying uh the numbers here. But what

it's showing is how much people are

skewing their portfolios towards risk

assets. And that's if you move up to a

higher positive number or they're

skewing the portfolio towards safer

assets like government bonds. Risk

assets are things like equities,

corporate debt, emerging markets, uh,

etc. Whereas safe assets are cash or G10

government bonds. And that's pretty much

what you see here is we're seeing this

cycle of risk appetite if you like or

risk exposure which is looks to me as if

it's beginning to go down. So in other

words, investors are becoming uh a a lot

less risk seeking uh maybe than they

were. So if you've got two, if you like

two parts uh of a of a pair of scissors,

two blades which are now starting to

move pretty much uh in the same

direction, liquidity going down and uh

risk exposure going down, the backdrop

for financial markets is going to be

problematic to say say the least. And

that's pretty much how we see the coming

year.

>> Okay. And when you say problematic,

what is your forecasting telling you?

Um, does that mean more volatile? Does

that mean more flat? Or does that mean,

you know, prepare for some sort of

substantial correction?

>> Well, I think that I always uh sort of

push back against the volatility idea

because I always think volatility is a

bit of a copout because, you know, you

can you can be right and you can be

right and wrong at the same time with

volatility. What what I'm really saying

is that the odds of the S&P being at

current levels by the year end, I think,

are low. Uh in other words, I think that

it's going to be I think the market's

going to be lower by the year end. Uh my

view is that uh the assets that are very

much out of favor now are the ones that

are going to come back into favor like

government bonds and maybe the US

dollar. Uh that's very much a contrarian

view, but that would be pretty

consistent with what we're seeing in

terms of the uh the late cycle flavor of

what we're detecting here in terms of

the data. Now, bear in mind, we're not

looking here at economic uh indicators.

uh we're looking purely at liquidity

flow and we're looking at how investors

are positioning their portfolios uh in

terms of asset markets and it's those

factors which are telling us that it's

late cycle but then I'd have to say that

if you look back over the last few years

those have actually been pretty good

handles on uh uh on prediction. The real

economy has not been a particularly

great guide to asset allocation over the

last couple of decades.

>> Okay. Um

so uh

well um you

mentioned here that you know you you you

actually think the peak might might be

behind us now. Um I mean I I'll I'll

give you a little more time just in case

the data bounces around here, but um if

indeed we have peaked in Q4 of 2025,

what is your projected or expected

length of the down cycle?

Well, it's an interesting question. I

mean, the fact is that if you look at

this chart, this chart is is identifying

uh the cycles. This is for the advanced

economies. I should stress it takes

China out. Uh the reason for taking

China out is that China is or certainly

lately has been highly volatile and it's

distorted the picture. This is the major

advanced economies worldwide, exchina.

And what you can see is that the cycle

length has been a pretty standard uh 65

months over that long period going back

to the mid60s. Uh we think that that is

all to do with a debt refinancing cycle

that financial markets are very much

about u refinancing debt rolling over

existing debts. Uh they're not about

raising new capital uh for new for for

new green field projects which is what

textbooks tell us. Those days have long

gone. It's all about rolling over debt

and the refi cycle is basically um a

five to six year cycle that repeats and

we seem to be peeking out now in terms

of of uh that cycle. Now if it's true to

form uh I mean you're looking at um uh a

downswing which could easily be lasting.

I mean clearly these things vary but but

on average you could be looking at

something like a u you know a 35 month

or 30 35 month downswing. I mean that's

that's entirely possible. Uh you can see

historically that some of those

downswings have been rather sudden. Um

and therefore it may be over quickly but

that that will be a short sharp shock.

Uh and all I'm saying is that we've got

to be cognizant to these risks. Uh

nothing is certain uh in liquidity nor

in life as we know. Uh and it may well

be that the current sort of sawtooth uh

picture we're seeing at the peak uh is

something which is you know going to

persist for several months. So it may it

may be that you get a blip up in the

next month and uh blip down the

following month. It's quite possible

because you can see that pattern

historically.

But it does seem as if we're seeing this

inflection pretty much about when uh you

know it was originally uh if you like

envisioned um which is late 2025.

Everything seems to be lining up. Now

the other thing that I think is worth

stressing is that if you look at the

average length of the cycle uh we seem

to be fulfilling that criteria more or

less exactly. So this is looking at the

average cycle length since 1970 as the

dotted line and the latest cycle is sort

of put on uh in context. So it looks you

know more or less as if we're moving

down the same track. And then how do we

express this in terms of asset

allocation? Well, this diagram is the

one that we use. And what this

illustrates is on the left hand side of

the diagram, we uh we we depict various

phases of the cycle into sort of generic

names to give some flavor like calm,

speculation, turbulence, rebound. And

then on the right hand side of the

diagram, we then uh try and associate

that with asset performance. And that's

done uh through uh experience and data

and looking at how markets have

performed historically. But what you can

say from this is that typically the

upswing of the liquidity cycle is a

risk-on phase. It tends to be that you

favor equity markets first of all,

particularly during the long upwave.

Commodity markets tend to do well about

the peak. In the downswing, you want to

be holding more cash. And then by the

time you get to the trough of the cycle,

you really want to be loading up heavily

with government bonds, longer duration

bonds, and then the cycle will restart

again and you'll go back to a risk-on

environment. Now, if you look at this

particular cycle and you look at the

evolution, and we can go on to that in a

in a moment. Basically, what it's what

it's uh telling us is this is isn't this

exactly how markets have performed over

the last three or four years? Yeah,

>> it's not been about e economies at all.

It's been about a fairly standard

liquidity asset allocation cycle. And

you know, this following chart embroers

that a little bit more by looking at

different types of uh of equities uh

whether it be cyclical value, cyclical

growth, defensive value, defensive

growth and then looking at different

phases of the yield curve which we can

come on to in a few moments. And that

particular articulation seems to be

unfolding almost exactly. Now this

reference slide here is looking at

business cycles. And what I've done is

to look at various uh various measures.

Um one is uh a straightforward uh

average of all world business confidence

surveys which is the orange line the

solid solid orange line which is labeled

world business cycle. So that's things

like the US ISM, the you know the

purchasing managers index. It's things

like the tankan in Japan. It's things

like the EPO survey in Germany, the CBI

survey in Britain, etc. And those are

weighted by GDP and put together as that

orange line. The dotted uh line is the

JP Morgan S&P World PMI index that they

independently create. And the black line

is an AI projection which is using uh is

an algorithm that basically looks at

things like commodity prices, uh

currencies of trade sensitive economies,

uh credit spreads, etc. And that infers

from that data what the economic tempo

is on all three of those measures which

pretty much seem to concur. What we've

had is a flatlining of best in economies

since the end of end of COVID. Okay,

there's been no cycle but still you've

had a very pronounced cycle in terms of

uh asset markets uh and financial

liquidity and that has been you know

that has occurred despite flatlining

economies and you've had a very normal

progression and this traffic light

diagram pretty much confirms that by

saying that if you run through those

traffic lights assets are on the left

industry groups are on the right what

it's telling us is that you know you in

the rebound area uh you want to take a

little bit of risk. I mean take these as

traffic lights. So amber means proceed

forward with caution. Green is go, red

is stop. Uh you wanted in that rebound

to have a little bit of positive

exposure to markets. Uh you wanted

full-on equities, full-on credits, no

commodities, no bond duration. Uh as you

move to calm, you wanted more equities,

uh a little bit less credits. Certainly

more commodities, no bond duration,

speculation where I would say the US

market is now. Um, you want to be

getting a little bit more cautious on

equities. You still want commodities.

You're going to put a toe in the water

in terms of the bond markets. Uh, Europe

and emerging Asia we think are in the

lake calm stage of markets. US is more

advanced in speculation and it may well

be that China which we're going to come

on to uh in a moment is probably in a

much earlier phase potentially in the

rebound area but that's you know another

question if you look at the industry

groups uh interestingly what that says

in rebound you want full-on technology

uh you maybe want a little bit of

financials by calm you want full-on

technology full-on financials fullon

commodities uh by speculation you want

to be taking uh you want to be out of

technology, you want to be, you know,

neutral to slightly positive financials

but still full-on energy commodities. Uh

you know, we've be we told our clients

to move to energy recently, but you

know, fortuitously maybe without without

predicting the Venezuela situation, but

I mean generally you would expect to see

energy beginning to perform at this

stage of the cycle. Uh and then you

start to get more evidence of defensive

groups beginning to perform. Um so you

know it looks as if you know as they say

if it's if it's yellow and quacks it's a

duck and it looks as if this is sort of

you know at the moment still quacking.

So uh let's let's listen.

>> So that's the asset allocation backdrop.

>> Yeah the these asset charts that you

have are I just find them so helpful.

They're such a great service. Um so a

couple things. one. Um, I guess I should

say, Michael, you've been kind enough as

usual to send me the slides. Um, folks,

as usual, the slides will be made

available uh to our premium Substack

users. So, you can just go to

thoughtfulmoney.com/substack

if you don't already subscribe to it and

subscribe to it there. Um, Michael,

could you go back just very quickly to

the the asset cycle chart that that you

had? Yeah. Um, so, uh, commodities have

have really caught fire, uh, in the past

six months. Um, and I'm trying to get a

sense for where are we between

speculation and turbulence here? Um, how

close are we to the the the black line

there where you switch from speculation

and go into risk off uh, on turbulence?

kind of what I'm asking is is for those

folks that are in commodities right now,

how much time do they have to still be

long that space before they need to

start to lighten up?

>> Oh, I think that they I I think you can

stick with commodities for for some

while yet. I mean, in our view, what's

happening is the performance is moving

away from financial assets more towards

tangible assets.

>> Okay. So, so out of tech into

commodities.

>> Yeah. Yeah. I think that's that's the

obvious trade for me. I mean that that's

we've been that's one we've been

favoring for for a few months now. But I

think that that's you know that's

something which is still going to run as

far as I can see. Uh and I think the

commodity space has still got further

you know further to push to push

forward. So I'm still optimistic on

commodities not least because we think

the real economy is going to keep going.

So that's or certainly pick up

accelerate. So I think that that's uh

you know that's a fact in terms of uh

you know quickly on on what does it mean

for returns. I mean if you look at the

liquidity cycle I mean I'd stress at the

moment u you know we don't see a

negative print on liquidity okay uh as

as yet u you know this is our projection

of global liquidity as the dotted line

uh the orange dotted line there uh going

into into uh 2026. So, you know, we

think there's a there's a slowing down.

Uh we're not confident we're going to

see a absolute drop yet, but that

inflection may be important and it may

be putting a lot of pressure on uh on

financial assets. The black line is all

wealth. It includes precious metals. It

includes um bonds. It includes equities,

liquid assets, it includes residential

real estate, etc. All these factors are

thrown into that portfolio. But it shows

how sensitive those asset classes are to

changes in the tempo of global

liquidity, which is what we we show

there. What's also sensitive are things

like uh cryptocurrencies. Uh I've shown

this before, but this bees dollar uh

symbol is actually Bitcoin, Ethereum,

Salana uh in a 60 30 10% waiting. And

this basically shows their movement

versus global liquidity. They're very

much a short-term indicator and a lot of

use our data to try and you know try and

manage their portfolios but this is

looking at uh the performance of uh that

basket in orange. Uh we look here at six

week changes uh in um uh in that basket

and we show that against global

liquidity uh the dollar amount growth

rate. uh but we've advanced global

liquidity here by 3 months 13 weeks to

show that it does predict forward uh

that uh that constellation. Um the other

thing

>> sorry to interrupt but that that I

presume then your outlook for Bitcoin

and the cryptocurrencies

not super positive for the next couple

years.

Yeah, I think that I I think that in you

know my view about I mean all these

monetary inflation hedges is that

generally speaking I think that they're

good because what we've got is an

environment where there is plainly

monetary inflation going on in the world

economy. This is this is the plain fact

that's staring us, you know, in the face

that governments uh need to spend money.

Uh they've basically taxed us out now.

There's no you we're on the wrong side

of the laughter curve. uh there's not

much more they can do that way. Um and

bond issuance is kind of difficult. Um

so they're going to have to print money

and that's monetary inflation. I think

the the question is and the hard

question is does that come through to

Main Street uh or is that just an asset

market phenomenon? And you know my view

is probably a little bit of both. But,

you know, I'm I'm tending to on turning

towards the view that main street

inflation this year may be more subdued

than people think for a variety of

reasons. Uh, but generally speaking,

monetary inflation over the medium-term

still maintains. So, I'd still have

these monetary inflation hedges in

portfolios, but I think the sort of the

the the fact is you don't want to chase

them. and I'd be buying them more on

weakness rather than, you know, trying

to uh uh buy into momentum right now.

The reason for that is that if you look

at this chart here,

which is an attempt to try and measure

uh what I call true US inflation and I

think one of the difficulties is that

there's a lot of distortion going on in

the Treasury market really because of

the nature of funding in the US uh in

the US markets and this big skew towards

bill finance which is actually part of

this whole narrative of Treasury QE that

I alluded to earlier on. And what the

Treasury is doing is funding uh a lot of

the deficit at the short end of the

market. Now that has pluses and minuses.

The pluses are that you know it's

probably cheaper and if they get the

right guy in the Fed, they can control

that cost obviously by keeping rates

low. Uh the downside is that uh it's

basically inflationary in the long term

and so we've got to be watchful at that.

Generally speaking in the short term uh

it it has a distorting effect and that

distortion is shown in the uh orange or

orange yellow line which is basically

the implied break even inflation rate

that is evident from the uh from the

fixed income markets. This is the

straight uh you know measure that comes

from the tips market the treasury

inflation protected security market and

that shows kind of a flatlining and no

inflation problem. The dotted line is uh

a deeper dive into the data that

basically says well okay if the treasury

market is distorted maybe other markets

like the MBS market is less distorted

and if we try and get an equivalent

gauge of inflation expectations from

that what is that showing and that gives

us a much more uh pronounced pick up at

inflation over the previous two or three

years as you can see from that red

dotted line but even that's coming back

and then the other measure is looking at

University of Michigan expect an

inflation uh which is what you know

consumers are telling uh surveyors what

they uh uh what they think inflation is

going to be that clearly has been

bumping around and you can see the big

spike uh you know over the last 12

months or so uh that too is coming down

so it may well be that in the short term

the need for need for these hedges is

not as great as maybe people are

thinking and if you look at this chart

this is Another one maybe to sober

people up a little bit. Uh and you know

this is really under the uh under the

label trees don't grow to the sky. And

what it's showing is

5year average U US CPI inflation which

is the black line. Now what we've done

to be clear here is to get future 5-year

inflation we've extrapolated the latest

rate of inflation forwards. So we get a

5-year uh you know figure. Um, so you

know there's obviously some bias there

and you may want to put that raise that

black line a tad but the point being is

that it looks as if that's inflecting

downwards. And you can see with the

orange line that's uh basically crypto

uh the universe of crypto and gold. In

other words, monetary inflation hedges

relative to the pool of global

liquidity. Now what that's trying to say

is that when you get uh a big pass

through of uh a liquidity surge into

inflation, you want to buy monetary

inflation hedges. And they perform

strongly as that chart says,

particularly, you know, evident in the

1970s. Uh and is again been evident

recently when they they've surged. If

you're getting an inflection in

inflation, are they the best thing to

hold? And that's really a question that

we've got to start posing. And in my

view, this is the thing to start

thinking about seriously, which is a

very counterintuitive thought. And this

kind of goes against most of the

consensus view uh I think on the street

at the moment. Now, this is looking at

uh global liquidity. And this is getting

slightly wonkish in the weeds when we

start to introduce concepts called term

premier. Now, term premier are the way

that if you're a fixed income analyst,

you'd really analyze government debt.

And this is looking at the premium that

people uh are or that investors demand

uh to hold uh a fixed income security uh

over and above expected interest rates.

So it's the if you like the risk premium

bit. Now the interesting point is that

that cycle in term premier and this is

the change in term premium I should

emphasize

matches almost exactly the global

liquidity cycle. Okay, they're two

completely different sets of variables.

Global liquidity is a measure of flow uh

monetary flow. Uh it's a rate of change

indicator. Whereas if you look at that

world term premium, it's simply a spread

uh that we uh that we calculate from uh

the term structure around the world. Now

what this basically is saying is that

when liquidity turns down, term premier

start to drop. Now that's a really

really important fact. uh it's

completely contrary to what central

banks uh tell us. Uh they tell us rather

the opposite. Uh but the fact is the

plain fact is that when you see

declining liquidity, what you tend to

find is falling term premium. And the

reason for that is because in a lower

lower liquidity environment, default

risks in the system are heightened. And

with heightened default risks, you want

to hold you want to take less credit

risk and you want to be holding more

safe assets. and government debt,

particularly longerdated government

debt, is a very good hedge against those

credit risk uh features. And so that's

where investors tend to go. So as

liquidity conditions drop,

the risks of default or credit risk

increase and the demand for government

bonds tends to increase. And that's why

term premier are paired lower as you can

see here. Now if term premier are coming

down what's going to happen to the bond

market and the interesting point to to

note to associate is here is the chart

for the US which is looking at the

average yield curve slope. Now the

reason for doing this is slightly

technical. Um why don't I look at a 102

spread or a 101 spread or a 51 spread or

whatever. The reason being is that pe

different people have different

preferences and this is really a catch

all for saying let's just look at the

area under the yield curve which is a

average of all those spreads uh to be

completely you know unambiguous

and let's chart that against US

liquidity and what you can see is a very

very close relationship and you know

back in the in the days a long time ago

now that I was at Salomon Brothers this

is what we used to look at very closely

to understand yield curve movements. And

what it shows is during periods of

expanding liquidity, what you find is

the yield curve tends to steepen because

term premier are going up. And when you

start to see an inflection in liquidity,

you get falling term premier and an

inflection in the yield curve. And the

lead time is about 9 months. So what

this should be telling us if this is

true to form is you should be getting

some inflection in the yield curve

around the middle of this year and that

is a completely non-consensual view. Um

we get push back and people say well of

course you've got a strong economy

inflation expectations are going to pick

up the yield curve is going to ste keep

steepening. The fact is that if you look

at the data uh the yield curve normally

starts to inflect lower during a period

of rising economic activity. Uh in other

words, you tend to find that the peak of

the liquidity uh sorry the peak of the

uh of the yield curve is not far away

from the trough in the real economy

traditionally. And that's maybe what

we're seeing once again. So that would

tend to suggest that you want to be

thinking about bonds. And this chart

which I'm not going to go into now is a

statiscll exercise that was done uh

almost 10 years ago which was saying

that's the relationship

between the yield curve and liquidity.

It looks robust. It was estimated over

that period uh you know that long

period. We've had at least 10 years out

of sample now where exactly the same

thing has happened. So it looks a pretty

robust relationship. And therefore

that's saying here is the 10year

treasury yield. Are you going to get the

yield the yield spiking dramatically

higher? No. I just think it's probably

rangebound and maybe bonds are not a bad

uh bet in portfolios. I probably tend to

lean towards the 5-year buying a 5-year

bullet. Uh but you know that that would

be I think a fairly prudent uh position

to take in a portfolio with the

uncertainty around this year.

>> Okay. Um, just to make sure I'm

remembering your previous charts

correctly, um, while bonds may start

performing better later this year,

that's probably going to be the path to

get to that state is probably going to

go through a point where you're going to

want to hold cash because uh,

we're going to switch to a riskoff

environment.

>> Yeah. Yeah, I mean what I'm saying is I

mean a 5year bullet, a fiveyear bond is,

you know, pretty cashlike, right? You

haven't got much duration risk in that

and you may want to go shorter term. But

I think, you know, the fact is that we

can't predict who is going to be the

next Fed chair and it's entirely

possible that um uh the president

decides to choose somebody who is going

to cut rates more than the market

currently thinks. I'd be surprised by

that, but you know, never say never,

>> right? Never say never. Okay. Uh so

fiveyear right now. Now potentially

you're back on this program in 9 months.

Things go the way that your cycle

predicts. At that point you might start

saying you might want to get some longer

duration bonds.

>> Yeah, I think that's right. But I mean

you know there again out you got to you

got to remember that you know investment

is all about anticipating what the world

looks like in 9 months time or so not

what it looks like now.

>> Um and that what we should be preparing

for that period by things that are kind

of out of favor right now. Uh, and

that's what I'm saying. I mean, it's a

it's a it's a non- consensus view. It's

very contrarian, but this is the way

that we see it. We may be completely

wrong. Uh, hands up. I mean, it's not

the first time.

>> And I will say you're not alone out

there given the wide spectrum of folks I

interview, but you definitely are in a

minority with that call. Um, but for all

the, you know, that you you've presented

all the reasons and logic why you you

believe that's the case. Um,

just two assets I want to ask you about

real quickly. So, you showed the chart

there of um uh I think it was the

Bitcoin and precious metals index uh

which had been performing very well of

late um but we're now having an

inflection as your chart showed um uh

with inflation expectations. Um

gold and gold's done great this year. Um

silver's done bonkers this year. Um, you

just said, you know, your job is to

anticipate and you want to kind of buy

the things that are out of favor in

anticipation of them being in favor.

What is your opinion right now on gold?

Has it run so far so fast that this is

the time to start taking pro uh profits

in anticipation of the next phase or do

you think it has more room to run for,

you know, more structural reasons?

>> Well, I think it has more room for to

run for structural reasons for sure, but

I wouldn't be chasing it right now. Uh

and I think the same with silver. I mean

I'm optimistic about these metals in the

medium term because I think we're in a

world where we've got monetary

inflation. I mean my my point uh you

know consistently is this is not about

financial repression. I don't believe in

a world of financial repression because

government doesn't have agency to

actually control things. I mean if they

could control interest rates and GDP

growth as people who advocate financial

repression say why don't they always do

that? It it would be make common sense.

What they do have agency over is

monetary inflation. They can print money

and that's what they're doing. Uh and

they're going to have to do that because

as I said, we're on the wrong side of

the LFA curve for taxes and bond markets

can't absorb the degree of spending that

they're in that governments envision.

So, we're going to have to have

monetization and that means you want

these monetary inflation hedges in your

portfolio. But don't chase them now when

there's a lot of momentum in them. um

you know start to wait till they cool

off and then buy them on on dips and you

know as I've said to people in the

Bitcoin space or even in gold. I mean if

you if you're buying these assets you

know when they're one standard deviation

or so below their trends that's a pretty

decent investment strategy as far as I

can see. I mean that might mean you buy

them 20% 25 30% below uh you know trends

but that's what I'd be looking for.

>> Okay. All right. And that's where I was

going to go like you'd say with Bitcoin.

you're recommending folks buy that on

weakness. Sounds like you're saying the

same thing with the precious metals.

>> Yeah.

>> Um and then real quick, because they

they are included in some of your

metrics of wealth here. Um

just curious how you expect housing to

fare uh during a liquidity cycle

downturn.

Well, I think the I mean the answer is

that the in the US it may well be that

housing is a is is a different question

that we've got uh we've got downward

pressure on house prices. I I think

that's seems to be the case. Uh and that

that may well be something we observe

over the next couple of years. I think

if you start to look in Asia particular

if you look at China you may be seeing

exactly the opposite. And what I can do

if you want I I was going to talk about

the risks to uh to to debt and liquidity

on this slide but what I can do is turn

if you like to China and maybe try and

bring China into this picture and then

>> that was my next question for you. So

yeah please

>> let let me do that and I'll come back to

uh this chart. This is all about the US

what's happening in US financial

markets.

So let let's begin with the China story

and let's look at this slide. So this is

looking at liquidity cycles. Uh and what

I've got here is the US cycle and the

Chinese cycle. Now um both are

calculated in exactly the same way. You

can see the Chinese uh cycle is choppier

although it does seem to follow a sort

of cyclical pattern to some extent. Um,

the reason it's it's choppier is that

Chinese markets are not so welldeveloped

and you tend to get sort of lurches and

it's much more difficult to fine-tune

these things. But you can sort of

discern a cycle evolving and it's fair

to say that if you go further back in

time um certainly before 2000, but it's

also evident in the 2000 to 2005 period,

there was much greater correlation

between the US and the Chinese liquidity

cycles. what you're looking at now is

almost completely out of step movements.

They're desynchronized. They're very

much out of step. And that's an

important consideration because it looks

as if the US cycle is peaking and

dropping. Uh whereas the Chinese cycle

may be bottoming. And so that bottoming

up process is something that we need to

consider because it may give us a

further opportunity in Chinese stocks

which you know have had a pretty decent

year. If I recall, they're up about 25

26% over the last year. Uh that's

probably besting Wall Street, but you

know, it it's not a bad place to be and

it could continue. Now, the reason it

could continue

is explained in this chart. And what I

may have to do is just to explain this

chart by going back in the slide deck to

actually an earlier one that I was going

to show regarding uh more general or

generic points about debt and liquidity.

So just let me dip back and I'll come

back to that chart. Uh and what I need

to do is to look at this chart. This

chart is trying to put in context um the

problem or the cycle uh in financial

markets worldwide. And what it looks at

is a metric that we favor which is the

debt to liquidity ratio. Now many

economists contrawise look at debt to

GDP.

You know, I'm cynical enough to say, you

know, they do that because they can. Uh,

it's easy to do. Okay, debt and GDP can

be measured and so it's a nice ratio,

but it doesn't tell us anything. All it

does is trend from bottom left to top

right. So what? Uh, you know, Japan is

400% or whatever it may be. The US is

200%. Does that tell us anything? No.

What you need to look at is the debt

liquidity ratio. Why? Because debt needs

to be refinanced. it needs to be rolled

over and you need balance sheet capacity

and therefore if you look at this chart

it's first of all mean reverting it's

stable if you like it runs from you know

left to right flatlining pretty much but

there's a cycle and what you see is

periods where the debt liquidity ratio

is extended I've annotated where you get

financial crisis and the reason you get

financial crisis is you get refinancing

tensions in markets when there's

insufficient liquidity to roll the debt

over. Now, my claim is rightly or

wrongly that every financial crisis that

we've seen over the last two or three

decades has first and foremost been a

refinancing crisis. And therefore, you

need to look at this relative ratio

between debt and liquidity. If you go on

the other side of the divide there, the

dotted line, when there is too much

liquidity relative to debt uh needs, you

get asset bubbles. We've just come

through the biggest one of those called

the everything bubble. And that's

because you had two things going on

simultaneously. Number one, you had

policy makers throwing huge amounts of

liquidity into their markets after the

GFC and after COVID. Every problem is

addressed by more liquidity. I mean,

even just take the latest episode with

the Federal Reserve and the repo

problems in the US. What have they done?

More liquidity. And the other thing that

happened is that interest rates were

slashed to zero which encouraged a lot

of borrowers to turn out their debt uh

into the late 2000s. And what you're

seeing is that debt liquidity ratio

rising a because liquidity is slowing

down and b because there's a lot of debt

coming back into the system to be

refinanced viz here. And that's what the

red lines are showing. Now with that,

>> sorry to interrupt, just super quick

question. Given the fact that the bubble

blown this time was the biggest in the

data series, do you expect a correlating

largest amount of refinancing tensions

to ensue?

>> Well, the answer would be naturally yes,

unless the policy makers are alert to it

and they respond by adding more

liquidity, which in my view that have

to, but it's a question of learning by

doing. So they're going to make mistakes

from root which is why I think that if

you start to see an inflection in

liquidity we've got to be cautious. Um

but then you know I must admit that I

was pleasantly surprised by the elacrity

and the size by which the Federal

Reserve addressed the repo crisis in the

US in the last few weeks. Uh whereas I

thought it would take some time to get

there. They seem to have got there and

they've actually done it in decent size.

So, you know, uh, one has to say that

maybe they're adapting to events, but

generally speaking, uh, you know, we're

looking at the world here, uh, you know,

are other policy makers, particularly

those in Europe, really as as adept as

the Federal Reserve? I don't know. I

think that's an open question. We may

have to see. Now, with this chart in

mind and this relationship, let's go

back to Asia and look at the problems in

Asia. Now here you see the debt

liquidity ratios for Japan and China.

Don't worry about the percentage levels.

That's not important because that really

reflects the maturity structure of debt

in each economy.

>> But look more about the current levels

relative to history. And if you look at

Japan, which is the black line,

what happened in Japan is the debt

liquidity ratio in Japan rocketed

higher. uh as you can see on that left

hand scale from about 100% to about

300%. So there was a tripling in the

debt liquidity ratio. Now we might say

that what is a a decent level for Japan

maybe it's certainly not 300 maybe it's

150 or thereabouts they could cope with

but basically what you've got is uh a

problem of a too high debt liquidity

ratio which is strangling the Japanese

economy and causing a lot of problems

the the lost decades as we know what

Japan has done in the last 10 to 15

years is address that through the policy

of abonomics which has recently been

continued by the new prime minister. And

what they've done is they've tried to

monetize debt. If you've got a debt

liquidity ratio that's too high, you can

get it down in two ways. You can default

your debt. That's impossible because

debt is collateral for the banking

system. Or what you can do is print more

liquidity. And the route uh you know,

spoiler alert, the route that everybody

takes is they print more liquidity. And

that's monetary inflation. Look at China

and you've got on almost exact copy of

the Japanese chart but 15 years later

101 15 years later and China is

struggling under this debt burden and

that debt burden is clearly big. It's

causing it's strangling the economy and

China is having to get out of that by

basically uh monetizing debt. Now you

could equally say that the US had a

similar problem maybe not to the same

extent uh with the real estate problems

in at the time of the GFC. What did the

US Treasury and Fed do at the time? They

printed huge amounts of liquidity and

they got out of the problem very very

quickly. But it did take a weaker dollar

and a lot of uh financial market uh uh

you know a lot of bubble creation if you

like in financial markets. But China is

has got to do the same thing. Japan has

done the same thing. This is the this is

the the this is the solution. And if you

look at this chart, it's showing net

liquidity injections by China. And you

it's it's hard to read or to measure the

Chinese financial system because it's

there's a lot of uh different pockets

where liquidity can come from, but we

think we get most of those. And what

this is showing is the year-on-year

change. Um this is actually daily data

but we basically illustrate uh the the

year-on-year changes in Chinese

liquidity injections. Uh this goes back

to 2020 and you can see China didn't do

anything during the COVID crisis

particularly uh unlike uh other other

central banks. But what it's been doing

more recently particularly uh from late

2024 onwards is injecting a lot of

liquidity in markets. Now what China has

done effectively is over the last 12

months it's injected between 7 to 8

trillion yuan into their financial

markets. That's just uh just shy of $1.1

trillion. In my view they've got to do

at least the same again this year. So I

think this is going to continue and

therefore I'm encouraged to see I mean

this thing clearly cycles that latest

uptick. So it looks as if they're

pushing more liquidity into markets and

that clearly is a good thing. Now what

is the evidence elsewhere that they're

doing that? And I would site the this

piece of evidence. Number one, this is

what's happening to the Chinese bond

market.

So if you start to see a lot of

liquidity being pushed into financial

markets in China, what you would expect

term premium to do, you'd expect term

premium to start to rise. In other

words, rising liquidity, increasing term

premier, increasing bond yields, and

that's what we're beginning to see. So,

tick that box. It looks as if this is a

confirming sign. The other thing is

looking at the yuan gold price. Now,

there's an awful lot going on in as

regards China's currency, but there's

also a lot of, if you like,

misunderstanding about what China needs

to do. If you were looking at China's

trade surplus, you'd have to say, you

know, taking your standard economic

textbook that with a trillion dollar or

in excess of a trillion dollars of trade

surplus,

the yuan, the remn should be revalued

higher. Okay? And that's clearly what

the consensus view seems to be saying.

And all the media are saying China's got

to revalue its currency. That's not the

answer because if China revalued its

currency, it would just throw it into a

pit of debt deflation. It would be the

end of the Chinese economy. It would

not, in my view, survive that. It would

be mass defaults. They can't do that.

They actually need the opposite. They

want a weaker currency. And that weaker

currency is necessary because they've

got to devalue debt and they've got to

get the paper yuan higher. So in my

view, you shouldn't be looking at uh

what may be a uh uh let's say a

manipulated number which is the yuan US

dollar cross rate because that can be

manipulated in a number of ways. You've

got capital controls. You've got a lot

of intervention potentially by the

Chinese authorities. You've got

state-owned banks and large Chinese

corporations which are probably told to

keep those proceeds in dollars and not

convert them back into yuan. Uh there

may be out of that buying of gold

directly rather than investing in US

treasuries all these sorts of things.

But the thing to look at is if they're

devaluing the yuan by printing money the

yuan gold price is going to go up. Okay.

And we said uh about 18 months ago that

what you'd expect to see, what we you

should expect to see if China is going

to scratch the surface on debt

devaluation is a yuan gold price of at

least 24,000 yuan.

And that would be the start. And we've

hit that and we've gone up higher. And

you can see the chart, the direction of

the chart. Now, I don't know where it's

going to, but I can extrapolate and I

say maybe they're going to at least

35,000. But you get the drift here is if

the yuan US dollar cross is not going to

change that much for political reasons,

but the yuan gold price does change,

then you're looking at a significantly

higher dollar gold price. And that's why

I'd still keep a serious toe in the

water when it comes to the bullion

market.

>> H really interesting. Okay. Um so I was

just about to ask you kind of a very

general question which is sort of why

should the regular western investor care

about what's going on here with Chinese

liquidity? Obviously it has implications

for gold. Um, but I'm sure it's got

bigger ones as well, like it China kind

of healing itself obviously will be

supportive of the global economy, I

imagine. Right.

>> Yeah. I mean, China needs to heal

itself, but it needs China's got serious

problems. I mean, I'm skeptical about

the ability of the Chinese economy or

the current Chinese economic model to

actually to actually grow itself or

would create decent GDP growth over the

next two or three decades. I think it's

very difficult uh given the economic

policy mix they've got. They've got to

do something. They need much deeper and

more robust financial institutions.

Okay, there's an awful lot of the work

the Chinese need to do. I think they've

been spooked by the threat of stable

coin. And I think that, you know, in

financial markets, there's no unrelated

events. And I think that you know part

of the spur for them to actually expand

liquidity and try and get the debt

problem solved is they see a big threat

from stable coins to the uh integrity of

the Chinese yuan and the Chinese

financial system because the fact is

that you know at the moment the Chinese

financial system just does not have the

capacity to uh absorb all this liquidity

they're creating through the trade

surplus and it has to they have to rely

and lean heavily on the US financial

system uh and that's clearly from a

political point of view not what they

want to do. Now that will be even that

will be underscored several times if

you've got stable coin because it gives

a lot of Chinese ex exporters a very

obvious avenue to go down and you know

the alternatives are you either put your

money in the western banking system and

risk being sanctioned in the event of uh

of some kinetic engagement or whatever

it may be or you put it back into the

domestic uh financial system and you get

sanctioned or whatever by the PRC.

So you're you're damned if you do and

you're damned if you don't. So holding

the stable coin seems to be a pretty

obvious thing. And I'm sure the Chinese

authorities are spooked by the idea that

they may be losing even greater control

over their financial markets.

>> And do do they have does the Chinese

government have any means to to try to

staunch the flow of liquidity in chi

domestic liquidity into stable coins?

>> As far as I know, not. I mean, you know,

to the extent that this is in the hands

of the stateowned banks or stateowned

corporations, they can clearly have some

control, but you know, I I don't think

so. Um, they may try, but you know, if

those if those dollars are offshore, um,

there may be a certain amount of agency

on the part of Chinese private companies

to actually stock up on stable coin, I

wouldn't be surprised. That's what I'd

be doing.

>> Okay. So, so in your mind, it is a real

threat to them. I think it's a serious

threat. Yeah. I think this is what has

actually spurred them to action. In

fact,

>> all right. Well, look, Michael, we're

coming up on the hour here. This is as

always just super um not only

information dense and insight rich, but

just super fascinating. Um is there

anything that that's really burning

brightly on your radar that I just

haven't been smart enough to ask you

about yet?

I think we've covered pretty much

everything, but I'd say that, you know,

the the the point that we're that we're

already making is that, you know, number

one, you've got an inflection in the

global liquidity cycle likely. It may

have happened or it's about to happen,

but we're pretty much there. The the the

markets are reflecting that because

commodities typically perform strongly

at the peak and they're doing that. uh

equities I would argue are sort of

laboring a bit and the early cycle

equity areas uh are becoming more more

volatile particularly things like

technology later cycle areas are

beginning to uh you know to hold to to

to get momentum so that's all

corroborating that fact what what this

is being driven by is not Fed tightening

or central bank tightening it's really a

redirection of the hose away from

financial markets towards the real

economy so this Treasury QE idea is

becoming real. Uh that is driving the

real economy stronger. China is doing

much the same thing and the PBOC matters

more to the world real economy than

really to Chinese financial markets. So

that's going to I think underpin

commodities. Um so generally speaking I

think you've got a stronger world

economy this year. And if that's the

case and financial markets get squeezed,

then you've got an environment where I

think lends itself to these contrarian

views which says you probably are

looking at a yield curve flattening at

some stage through the year uh later

this year and you're also looking at

potentially a stronger dollar or at

least a firm dollar and not the weak

dollar that many people uh you know can

continue to project. So, I think that,

you know, we're out of consensus or in a

small minority, but that's because we

look at different things, one of those

being liquidity.

>> Well, you make a super compelling case

for for those arguments. Um I I guess

the only other thing I I I just will ask

you to help me clarify here is given all

that it sounds like you know a message

for the average investor here is

uh if we are indeed going through a a

down cycle in liquidity there is a

certain amount of pain uh that that one

would expect to be taken in the

financial markets during that down

cycle. Um, and on average that pain is

spread over around three years. So, kind

of mentally gird yourself that it it

could be that long of a not fun time in

the markets. Now, it could be a lot

shorter,

>> but the trade-off there is it's more

violent, more painful. So just again as

an investor who's had a really good time

>> uh over the past three years, you know,

20 plus percent returns more or less for

the past three years in a row, you would

say, hey, don't expect that for the next

three years.

>> Yeah, that that would be my view. I

mean, I'm not going to put my neck and

say out and say three years, but I think

for for the for the foreseeable future,

I'd be cautious. And also stress that

I'm I'm I'm not that I'm not always

bearish. In fact, far from it. I we've

been very bullish since uh you know,

late 2022. Uh you know, urging people to

get into markets despite uh you know,

similar sort of contrarian uh feelings

elsewhere.

>> And you were really at that point, sorry

to interrupt, but I mean, you were

really early and really in a minority

then. And you were really really right.

>> Right. Well, that's gratifying to hear.

Yeah. And I I think now we may be wrong,

of course. I mean, you know, as I say,

never say never, but we've got to follow

our, you know, our methodology, and our

methodology is saying that there is a

cycle, and that cycle may be losing

momentum right now.

>> All right. Well, look, um, again, what I

really appreciate about your work,

Michael, is not only is it sort of, you

know, educating and helping us track

what you think is the true reality of

what's going on, but it's very

prescriptive. uh you know you've got

those those um asset charts that you

showed earlier about what to hold at

each phase and whatnot. And so to your

point, you know, you can be optimistic

because your your framework basically

gives us a play in every cycle of of the

every part of the cycle here of the

liquidity cycle.

Yeah, it's it's a cycle and I think you

know if you come back to investing uh

bull markets are about trends and themes

and bare markets are about cycles and

we've got to be cognizant of that of

that cyclical downturn.

>> All right. Well, look, Michael, can't

thank you enough. Most important

question for folks who would like to

follow you and your work before your

next appearance here on Money, where

should they go? Well, I think the

easiest way uh is to look at our

Substack which is called Capital Wars.

Uh I mean we write um you know a number

of pieces every week about what's

developments in markets and provide data

some data. Uh there's an institutional

service which is basically uh available

either via crossborder capital.com or

glindexes.com.

Uh that's the the new rebranding as you

kindly pointed out. uh and there's a lot

of data available uh to people uh

through API feeds or um um Excel or

whatever form you want very data

intensive.

>> All right. Uh they are all fantastic

resources and as a subscriber to Capital

War Substack I cannot recommend it

highly enough. Um so Michael when I edit

this um I will put up the URLs to those

resources that you just mentioned so

folks know exactly where to go. Folks

the links will be in the description

below this video as well. Again, a

reminder, um, if you want to get access

to Michael's charts here, uh, just sign

up for our Substack. Uh, it's going to

be available to the premium members. To

do that, just go to

thoughtfulmoney.com/newsletter.

Um, and if you could please folks, um,

express your gratitude along with mine

for Michael for coming on and just being

so generous and all the analysis that he

shares with us, um, please show him that

by hitting the like button and then

clicking on the subscribe button below,

as well as that little bell icon right

next to it. And if you've really um been

motivated to take action in your own

personal portfolio based upon Michael's

work here um and you're you're you'd

like to get some professional help in

trying to figure out how to position

for, you know, the the different types

of plays in the cycle that that Michael

has shared here. If you don't already

have a good professional financial

adviser advising you on how to do that,

consider talking to one of the ones that

Thoughtful Money endorses. These are the

firms you see with me on this channel

every week uh to schedule one of those

consultations. As a reminder, they're

totally free. Uh just go fill out the

very short form at thoughtfulmoney.com.

And uh these, as I said, these are

totally free. There's no commitment uh

involved here. It's just a service these

firms offer to help as many people as

they can. Michael, uh I can't thank you

enough. Um I'll give you the last word

here as we head into 2026, which again,

as we just said, might be a different

kind of year than what folks have been

used to for the past 3 years. Do you

have any kind of parting bits of advice

for the average investor who's watching

this video?

>> I just say watch the cycle. It's going

to be, you know, strong economy, um,

potentially weaker financial markets,

and that's the difference from what

we've seen for the last two years.

>> All right. Well, thanks for being so

clear and so direct, Michael. It's so

appreciated. Again, I just so value you

coming on this channel and your uh your

partnership here. Um, best of luck in

what I think is going to be a very

interesting year.

>> Great. Thank you, Adam. Same to you.

>> Thanks. And everybody else, thanks so

much for watching.