So yes, three bubbles, stock market bubble, I think it's undeniable. The pessimism bubble and finally, a nominal growth bubble. These are conditions that we observed before every major revolution in history. Rapid technology will change, acceleration of nominal growth, and at the same time, a sense that things are unraveling. I mean, the current conditions kind of remind me of the late 1999 or 2000. So we could have this kind of inflationary acceleration, which makes me quite. Before we get started, a quick reminder that Blockworks' premier institutional conference, the Digital Assets Summit, is returning to New York City this March 24th to 26th. This year represents more than $4.2 trillion in assets under management with 150 speakers and 750 institutions attending. Speakers include SEC Chair Paul Atkins, CFTC Chair Michael Selleig, Fed Governor Stephen Moron, and Tedder CEO Paulo Argonio. 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Do your own research. Hello, everybody. Welcome back to another episode of Ford guidance. Joining me this week is repeat guest Vincent Deloard, director of Global macro at StoneX. Vincent, it's been about 10 months. It's our last conversation. Get the heavy back on. Yeah, not much has happened. So, I'm sure it's be a brief episode here. Yeah, nothing to talk about. No craziness to say the least. No, yeah, the complete opposite. Yeah, what a 10 months. Crazy, crazy times. Yeah, let's start off things. I would love to hear a bit about how you're thinking about 2026, because I think you have some out of consensus views, especially in light of, if we rewind to late fall, October, November, the government shutdown was happening. We were seeing some pretty sketchy headlines and numbers coming out of the labor market. And seems like a lot of people were talking a bit about either near recession or at least that's very least a growth slowdown. And you came out with some work back then talking a bit about how one of your your highest conviction trades was around the energy complex. And I think that can, we'll get into that in a minute, but I think one of the big themes that's associated with that is you have this framing of an initial growth free acceleration in early 2026 that could end up becoming a second big inflationary wave. So, yeah, just walk us through the thesis of how you're thinking about 2026. Yeah, it was only partially joking when I said not much has changed since that month ago. I mean, I feel like every episode I go to, I'm still fighting the same windmills, you know, like Don Quixote and the the Seventh Death movie. So that the windmills are these imaginary sessions that seem to come back like like reruns of the screen movie. And every time I tend to be skeptical on it, I generally maintain my kind of great reset idea that we have this high growth, higher rate, higher productivity, higher inflation, higher deficits. And that until proven otherwise, these kind of growth scares are to be faded. The main way I check that is now with official data. I'm convinced that we have, we've always had structural issues with the establishment survey or the household survey. Now, we're not even able to get the data or if we do get the data and the data doesn't please the super meter. The data collectors get fired. So I think it's quite important to look at things that actually tell the reality, which is tax collections. And that's that's one of the reasons for my calls that we would not have a recession in 2022 in 2023, in 2024, 2025, and now's 2026 because I could see tax collections where generally increasing between 5 and 10%. For last year, we were at about 8%. Now you can argue that there are some deterioration issues. There may be some inflation, there may be some bracket creep, yada, but you know, it's still extremely strong nominal growth. So I go into 2026 to the same outlook with maybe one added worry is that this growth story might even get too hot. I don't think people realize how quickly the US economy is growing in nominal terms. I'm not necessarily buying the view that we have this amazing productivity boom. I mean, or I can see now is nominal incomes are growing very rapidly. Tax collections so far this year, I have by more than 10% on personal income. And starting now, we're going to get massive refund checks. So the one beautiful bill is retroactive so people overpay the taxes in 2025. So in the next four weeks, we're going to get about $200 billion in tax refund checks that are going to hit. And then most economic studies show that it's kind of like you win the lottery, right? When you have a win fall gain, you just can't get right away. So that's the first part of the stimulus. And then after that, I'm a believer that we have a very difficult political equation for the administration. We have a lot of things coming up lately that make not just administration, but a lot of people look pretty bad. And we badly need something to distract so that something could be a wall, which is quite expensive. But I would also think that something would be checks. I mean, obviously, let's see, simplest solution to the fully crisis is, you know, we're not going to fix the healthcare system. We're now going to get government spending. Send people checks is the easiest way. And again, because of that boom in tax collection, there's a lot more fiscal room than people, but there is. I mean, it's not for fiscal virtue. Obviously, spending is very high, but because tax collections are so strong and tariffs spend about $300 billion a month and non-unit LGBT is exploding, we actually have a fiscal room for significant stimulus in 2026. That's a great overview. And yeah, the geopolitical and political games leading into the midterms. We'll get into in the second half of the conversation. But I do want to, you mentioned there about tax collections. And I really want to just emphasize that. Now, unpack that further because you wrote that actually tax collections, which is direct data from the daily treasury statement that the treasury publishes is up 24% in January year over year. And I would just love for you to really explain to the audience why this is the indicator that you believe so strongly in because I think people that will listen to these macro podcasts and start to try to analyze the data themselves that will quickly get overwhelmed by looking at, okay, ISMs are saying this thing. And then the seasonally adjusted labor data saying this thing. And then the non-seasonally adjusted data saying this other thing. And they just get very whipsawed around and confused. And it doesn't help that now we don't even get the data sometimes in general. So I'm just curious, like, could you really emphasize and explain why tax collections as a metric is so powerful with that context? I mean, on our personal level, I was meant to work for the French Ministry of Finance. And I that's where my fascination with taxes came because that's what the French Ministry of Finance does. It's a heavy taxis population. That's your job. And I always thought, like, okay, if you, you know, that tax collection are the most natural measure of economic activity. I mean, especially that we've held in employment income tax. I mean, for those who are not Americans, so when I get paid from from SONEX every two weeks, there's about 25% from my paycheck that doesn't even go to my bank account and goes straight from from SONEX to the treasury. And that's to pay basically my taxes. And then when I profit income, we can't adjust. But that number, assuming there is no change in the tax code, is in the excellent proxy for how much income there is in the economy. And it's reported daily. And of course, you have all sorts of quirks, right? People get paid around the first and the thicteen. It's Monday, Friday, Thesson, things like that. So you kind of need to be careful with the day-trane when you look at this data. And that's why that 20% figure in January means probably excessive. I mean, I'm not, I have more data. It's more around like 12, 13%, but it's still remarkable. So that's one bucket. And when I think about it, I think about that with our data as an proxy for the formal economy people who have a job at a big corporation with benefits and foreign care and so forth. And that's going fine. I mean, actually very rapidly. Now the part that's even more interesting is this
none with the individual income category, which is around 1.2 trillion a year in taxes. And that's basically two buckets. One is capital gains. And of course, because we have an everything bubble, we have massive capital gains and every year more and more. And that's part of the story for 0.46. By the way, people will pay the capital gains in a rear. So the treasury will get that, our money that in my opinion, would fund more spending. And then the other part is around 1 trillion, from that 1.2 trillion bucket. And that's all income that does not come from capital gains or your primary job. And that's what I see as a proxy for the gig economy. And that's really, to me, it's the greatest story never told of American capitalism, prima shins the invention of the iPhone in 2007. And then you had all the development of the apps, the Uber, the door-ashed, the YouTube, the only fans, the Instagram. That started to go very rapidly. Then you had COVID when people were from home and suddenly realized, you know, if you work at them, the marketing department of a large firm like, hey, probably have a couple hours a day that you could dedicate to something else and your primary job. So you have the technology, you have the incentive, you have the cost of living shock. So that really took off since 2020. And now we're looking at close to a trillion dollar in tax collection from that category. Now, assume a 20% tax rate that means the underlying tax base is around 5 trillion dollar. And that's going by 10% a year. So that's basically twice the economy of Brazil. Growing up China-like rates of growth. And I think that's the category that all these official statistics, you know, if you eat. I mean, what's the PMI, you know, EE? You sound like 50 people, how do you feel today? You know what they'll tell you? How do they feel? Sentiment. Based on the stock price, OK? And you try to predict the stock price or the stock price, basically. Or, you know, when you do the households or then, you try to reach people on the phone. No one picks up the phone these days. And you ask them, is somebody who has for working? Wes, work, Wes, all these things that become brewery. So that's why-- and also there is the issue that I think we're going to talk later about this weird kind of pessimism bubble these five sessions, where people are actually doing good. But for all different set of reasons, their reported happiness or their reported sentiment is much lower. All these issues are taken care of with tax collections, right? I mean, no one happily pays taxes. Has to be read income, it's cash. It's in real time. You just have to be aware of quirks in the data and changes in tax rates. But once you do that, I think you have a fantastic barometer of the economy. And again, this is something that, you know, it kind of brings me back to this idea that the US is kind of moving back towards the kind of emerging market. Like if you want to like a lesser advanced economy, that's what you would use as an economy. So I think it kind of makes sense, given everything that's happening in the US to think of the US as a larger emerging market. If you're thinking about buying crypto, but don't want the headache of setting up wallets or new accounts, GraceGale makes it simple. For over 10 years, GraceGale has helped investors gain secure, regulated exposure to crypto without the hassle of self-custody or opening new wallets. With over 30 investment products from Bitcoin and Ethereum to diversified and thematic crypto baskets, GraceGale makes it easy to build a crypto allocation that fits your portfolio. Whether you're using a regular brokerage account or investing through an IRA, many of GraceGale's products are available right where you already invest. Investing involves risk, including possible loss of principle. For more information and important disclosures, visit GraceGale.com. Yeah, yeah, that makes sense. I'm a big fan of that metric as well. It's hard data as it gets, really. Just money in, money out. Okay, so based on what it's saying, it seems like the economy's doing a lot better than what a lot of pessimists are saying. And I'm curious about how you're thinking about the other growth levers that could lead to this second wave. I imagine one of them, as you've hinted at so far, is the fiscal impulse. And we can start there. And I'm just curious about, it seems like most analysts, when they look at the impact on the big beautiful bill, you can see that most of the tailwinds are coming in the first half of 2026. And their opinion is that most of that is already baked in and well known. You'll just lead to some tax refunds and that sort of thing. Do you see some of the fiscal impulse coming from that, or do you really that there's going to be an additional fiscal stimulus coming on top of that for 2026 in the lead up to the midterms and that's part of their clear? Yeah, both. Yeah, I think most banks have come up with estimates for the tax refunds that are close to what I had six months ago, about 200 billion dollars in additional tax refunds. I mean, it's huge. I mean, it's gonna hit in a couple of weeks. So even though we know that, you know the train's gonna hit, I mean, it still hurts. So I think there will be some immediate, and you'll see that in services in people either the restaurant, take the vacation. So that's the first hit. And then yes, I expect more fiscal in the second half of the year. The tariff checks are kind of held up with the Supreme Court. My understanding is that it may not come until late March, that verdict, but as soon as that's clear and my expectation is that, you know, the more time passes, the harder this becomes, this is one line. And in general, I don't think the Supreme Court, we will wise for them to die in the battle of tariff. I mean, there are so many constitutional battles to pick. So I think they'll be, you know, probably like do a little something, but by and large, the tariff money will be there. And the political incentive to spend it will be very, very large. I mean, the closer we get to the midterm, the larger the risk, really, of impeachment, maybe criminal persecution against both Trump and his family. So you really want to get, avoid that outcome and then we see plenty of these attempts. So it could be tariff dividend checks. We hear, so I force myself to listen to pretty much every interview that Kevin Worsh is given. - I was about to bring that up. The relevance is that at all to you. - Yeah, and the past, now that, you know, I mean, he, he's, he's very smart. He's very charismatic, very good to be good. And then he's, once in a while, it's like a Easter egg in video games where he drops something and he's like, kiwi for the people, like, what do you mean? Fed Treasury Accord, main, like, who knows? They may be something that we're not thinking of. But my general idea is that, yes, fiscal will have to be run extremely loose. The economy is already going very fast. The Fed is going to cut to the extent that there is such thing as a neutral rate. I think it's higher than the current level of the Fed fund rate. So we are simulating. We have a banking deregulation, especially if we shrink the Fed down sheet. We certainly need to put these Treasury somewhere else. So we'll have to basically bribe the banks into taking them. And the way you bribe banks is by only to take up more leverage. So we could have this kind of inflationary acceleration which makes me quite bullish for now on stocks. All the way, I think we are seeing signs of the market is turning that volatility is picking up. And that, you know, I mean, the current conditions kind of remind me of late 1999 or 2000. When we're still momentum was slowing, but you're still making new highs. The leadership was shifting on the surface and then volatility was re-rising in higher segments of the market blowing up. And that would fit nicely into this pattern where we see the market kind of growing higher on higher volatility until the summer. And then by the summer, we get the stimulus, we get the rate cuts. Not that we get great earnings, obviously, because earnings will benefit from this Treasury boom, but there won't be that much new fuel to power the advance. And then we have to start conquering the, I think the high chance, if the election is held in the fair conditions that the Democrats win landslide and then we have divided government and then we get that shift towards populism on the left that would pave the way for what I expect to be a secular bear market in the late 2020s or early 2020s. Okay, lots to unpack from that. I wanna get your perspective on that worst point and this new framework for the Fed monetary policy because you've been a pretty stern critic of the relevance of monetary policy after the last year's, like I think our last interview was the day after the Fed meeting or something else is like, would you think of the Fed meeting? I don't know, I skipped it. It's been mostly just semantics and the whole press conference thing. And I'm just curious, [BLANK_AUDIO]
that is that perspective changing as wars comes in and brings in these new ideas because if you're talking about inflationary impact from monetary policy, I imagine that's slightly different from what we've been over the last decade or so. Yeah, well, part of my skepticism over the Fed meetings and Doc Blas and then Ford guidance comes from getting wars. I mean, he is, he's amazing interviews, you know, where he just rips the Fed of Ford and he is good at it. I recommend people, it's the over institute, like listen to Kevin Warch, because he's also funny and he speaks well, he writes well, his op-eds are pretty good and he hits them ad. Ultimately, you know, I'm skeptical that I think institutions frame leaders rather than leaders frame institutions and I think that's a pattern we see in this administration is, you know, you get cash per tell to the DFBI, right? So you get the Epstein 5 guy to cover up the Epstein 5s. You get Tulsi Gabbard at intelligence and then you organize a coup in Syria and you bomb Iran. And I could keep, you get, you know, RFK for health and human services without, so it's a pattern of this administration to put people to do the exact opposite of what they said they were going to do before getting the job. It's, it's, you know, kind of makes for great TV, as you would say, on the apprentice. And I think Kevin Warch is a smart man, obviously, he's a political agent. He's very creative with arguments and he's basically found a breach, right? So he had for, what, 15 years now, he had this demonstrably false model of balance sheet policy. He keeps, you know, he was part of this. The QE is going to be in fashionery, you know, there was this op-ed in the 2010s with very smart people on it saying that, you know, Bern Bernanke was going to, you know, like, ruin the dollar and and that was just not true. I mean, we have like two decades of QE in Europe, in the US and Japan, that shows that it's non-fascionary. But what he figured out now is that he can change that. He would say, well, if the fed balance sheet, growing the fed balance sheet is in fashionery, then shrinking, it must be defationalary. And if I shrink the balance sheet, which we could argue for moral reason, it's probably a good idea, then that gives me room to give great cuts. So you can twist it his argument into something that would appeal to the new administration, that and the fact that it looks good on TV, he got in the job. So I don't think he's going to be as hawkish as a market thinks. Again, another example of someone who does the exact opposite of what he says is from his approach is conversant. His conversation was a ferocious critic of Yelene for Yeleneomics. Yeleneomics active stretch issuance, shifting to the format. What does it be as soon as he gets in? That's why I'm not convinced that Kevin Worson going to be the hawk that is room to be. I also think the window for rate cuts is quite low, quite short. It may be passing as we speak. Now we still have this kind of tailwind from the lagging rants in the moral. That means that CPI is going to be hopefully somewhat contained. But the more time passes, the harder it will be to maintain the lie. And you can see the like crack. People know that inflation is not 2.5 percent or whatever it's going to be at the next release. So you really have to do it now before the lie becomes too obvious. So I think we'll get the cuts. And I think eventually, yeah, I mean, it would be crazy for Worsh to not have had the rates conversation with Donald Trump before he was appointed. I mean, that's the condition to get the job. He's Yulka, right? Yeah, I think the thing is, and this ties back to what I was getting at that, you know, we have a thread here in terms of what we've been talking about. But okay, you think, you know, growth re-acceleration in 2026, we talked about the fiscal part. And then I feel like that the other big component to discuss here and it leads into where I want to go with this, which is around AI, AI, Catholics and productivity boom. So, you know, what's underwriting, I think the worst thesis there for more rate cuts is that we're going to see a huge productivity boom. And therefore we need to cut rates a bunch. And also for Hawker from the balance sheet, like those two together, we got to get rates way down. So there's that dynamic that would love to hear your perspective on. And then also just the impact of all that AI Catholics on the economy. I mean, we're seeing over the last week we had the max seven earnings come out and each of them their estimates for Catholics are like, blowing through the roof of like top line estimates. I mean, we're getting close to a trillion dollars in Catholics just from them in 2026. And that's going to have a pretty positive impact on the economy. Yeah, how do you think about those two components of the AI play? Let me first on some wars and then on the economic impact of the Catholics boom. On wars, yeah, that's basically talking point from the Trump administration, assets, you know, the on CNBC all the time making that same point. And again, I think wars is kind of you know, jumped on the Benwagon there. The growth story or this is, you know, kind of a green span thread, right? We're green span. So the put supposedly so the potential of the internet boom and kept rise lower and after great moderation in 1990s. I think there's a lot of issues in area. If I think a lot of the great dissent facial 1990s had to do with China had to do with high immigration things that are globalization things that we're not having today. It was not just, you know, people buying stuff or, you know, chatting on a well chat rooms and buying stuff on eBay. But so I am somewhat skeptical both of the the narrative and and this inclusion. I mean, for all his professional life, Kevin Worsh has defended a monetarist view of inflation, right? The famous government are very always in a very monetary phenomenon. So if you buy by this theory, things like productivity or government deficits or should matter. So again, we see the same kind of committee on nature where it grabs something that because it's politically expedient for him to use that. I mean, the bottom line is we don't know the effect of AI and on productivity. That's why I go back to the tax collection and this idea that all we know is income. Income is growing. Now is it inflation? Is it growth? Is it productivity? I don't know. What's our productivity right now? We could argue that it's very high, right? I mean, 10 years ago, we couldn't do this podcast. But we could argue also that, you know, our is the US economy really that much richer because of our conversation like how do you measure productivity? I'm very skeptical of this. Again, all we can see at any given time is income. And what I know is nominal incomes are growing. That's why I keep talking about this nominal growth boom. I'm open to the possibility that there is indeed a productivity component. I mean, of course, I like everybody I use AI and I'm amazed by some of the things that it does. I'm also worried by many of the things that it does. I think with technology, it's always about adoption and more so than the technology itself. And we don't know what effects it's going to have. So I would leave that in the to be seen time with the out of category. Now, your second question was the impact of the campaigns boom and there we know, right? We don't know what the AI return will be in 15 years in whether the projection that these people make in terms of like GPU lifespan and how quickly they can monetize. But we know that when you build, I mean, some of these data centers are bigger than Manhattan. So you're just going to have to dig, hold in the ground, take beams of steel, and that was part of my case for energy, even old school energy, like not just that gas. I mean, the idea that data centers will be powered eventually by renewable and nuclear and then that gas is going to be the bridge energy. I would even owe those because the actual process of building these fields. And again, these things are massive. They're not regular industrial structure where it's basically just an empty shed where you have these rows of servers, much more cooling, much higher wall to floor ratio. So the more energy intensive to build them. So yeah, obviously that contributes to the infatulatory boom of 2026. I mean, if we think about the main sectors of the economy, you have your government sector where I expect we already have five, six percent deficit of GEP and I expect more impulsors. We get the checkbook policy out. Then the private sector is increasing the balance sheet. That's what you do when you invest. You go to the balance sheet. And your households like the savings are extraordinary low. So all this to me point to an economy that's accelerating and possibly overeating. If you're thinking about buying crypto, but don't want the headache of setting up wallets or new accounts, great.
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Yeah, I think a lot of the qualities of being a good macroevalist comes from being able to hold two contract, two contract, contract, dictionary thoughts and you have at the same time. And now be overwhelmed by the cognitive dissonance that comes from it. And it's very uncomfortable, right? Because the mind likes structure and culinary, even in reality, the world is complex and every action creates a reaction. So you can always move to something that's moving around direction and this and that. So that's where I'm going. So I talked about this kind of nominal growth bubble. At the same time, we have a pessimism bubble. If you look at sentiment surveys, I mean, we are at levels not seen since last COVID. If you ask people about the direction of the country or if you ask young people about how they feel about the future, if you ask people who want to buy home, I mean, not in recent time we've never seen such pessimism. Well, arguably, you know, this is the best of time. I mean, it's almost it kind of reminds me of the Dickens quote in the tale of three cities. You know, it was a time of light, a time of darkness. It was a season of hope, a season of despair. And interestingly, what is doing there is describing revolutionary France. And I think there's a nice power out there when we are about to experience revolutionary change. And I believe we are. We have this kind of technological revolution. And we see the institutions crumble around us. You see both the light and the darkness at the same time. And that's I think the cognitive insulin that it generated contributes to this nervousness that we can feel in the energy. So yes, three bubbles, stock market bubble. I think it's undeniable that this part of stock market started bubble kind of volatility that we see the valuations that we see are trying to hide. pessimism bubble and finally, a nominal growth bubble. Again, these are conditions that we observed before every major revolution in history. Rapid technology will change, acceleration on nominal growth. And at the same time, the sense that things are unraveling and that contributes to this sense that the world is going to burn. I love that framing. And it's interesting because when you look at those consumer sentiment surveys, it's so political. These days, you can see that during the Biden administration, it was the Republicans who consumer sentiment was in the dumps and Democrats are happy. And now these days, it's a complete opposite. Republican sentiment is up here. Medium sentiment is like. With a lower baseline. That's part of my thesis. What you say is true. You could also look at it in terms of people who own assets versus people who don't, K-shaped, like wealthy folks are doing better than poor people. The older are doing better than young. The Republicans are more optimistic than the Democrats, but all of them are training down. The Republican confidence has never matched. I mean, Trump ran, you know, was looking back. There was kind of a gold economy golden age to some level. This personal approval rating was never very high around four because of who he is, but the confidence in his ability to manage the economy was very strong throughout the term. We are now seeing that this time, even with Republicans, and of course, independencies can fall in with all the EPSC revelations. So it's a case of gray, but I think this pattern of falling confidence is observed across the rich, the poor, the Republicans, the Democrats, the young and the old, just at varying speeds. Yeah. How do you think this all resolves itself? Does it just keep getting worse until it gets so bad that it just has to improve or do you adopt some of the framings that Savory Dahlio has where he talks about, you know, there's a few ways out of this. It's either a deleverging. It's going to grab all the money from the rich people and wealth distribution, or maybe we get a beautiful deleverging. Like, yeah, how do you think about how this all ends up? Yeah, generally, I subscribe to the fourth turning, that cycle, redalio, Neil Howe analysis. I would rebound on the idea that the beautiful deleverging, which I think is a bit of a, not a misnomer, because if you read redalio, he actually mentions all the elements. Well, also, he loved the idea of the beautiful deleverging because he, of course, the Freedon tries that all we have to do is basically run G, nominal growth, hot, and then suppress R, the cost of capital with financial repression. So, you know, the idea is we, you know, let me walk back a little bit on this death cycle. As this is, you know, as you have peace and prosperity, economies expand, rich people get richer, poor people get somewhat poorer, and you reach another breaking point, right? Because at the end of the day, the rich people make money from the poor people, and the poor people are too poorer. That's very simple simplified Marxist Marxism 101 for you, but that's, that's a general idea. So, you need somehow to kind of rebalance, right down the value of the debt, which is the asset of the rich people, the liable, the poor people, and redalio is his concept of beautiful deleverging, which I think is generally the policies that the Schrammer administration is trying to achieve. I'll give them credit for actually stacking the problem. I mean, okay, we're going to suppress R, we're going to have the fed, you know, care rates, and we're going to tilt leverage ratios to, you know, create demand for treasuries, we're going to force foreigners to buy them, whatever. And at the same time, we're going to have massive growth to, massive shock to, to grow for within rules on investment, fiscal stimulus, and so forth. Now, the problem with that is, is as you do this, as you shrink, suppress R, and boost G, what goes up is asset prices. I mean, remember, again, I'm sticking with finance 101 here. The value of a stock is equal to its future cash flow divided by the difference between the cost of equity, by the R minus G. So, if you increase the difference, multiples go through the roof, and you get back to you kind of affordability issue inequality. So, you can't really get out of this by the beautiful delivery simply by kind of arbitrage in this R minus G. What you need is what Red Alia writes about, and I think what it feels is this very active redistributive policies, basically higher tax rate on the top income, higher corporate income tax rates, and a shift in the way you share economic value added. I mean, you've seen in search in the share profit and contract and share wages, you need that to move the other direction to complete the beautiful delivery. So, my idea, if we think this is depth cycle idea is, as a process, we are the beginning of the process. We are at middle, that shrinking R, boosting G, then phase two, which I think would happen either after the midterms or more like in next sectoral cycle, will be actually redistributive policies. We had after the New Deal in the 50s, we had not margin-only income tax rate in north of 70% of the US and 90% in some countries in Europe. And we had very strong on-titrust enforcement, also at the end of the progressive era. So that's the missing link, if you will, of this beautiful delivery drink that we have not completed.
complete it, we will not get out of it. So if you ask me how it ends, it ends with a shift towards more these really policies. Now, whether that's going to come from a, you know, left leaning kind of mondarmly type of government or nativeist populist, JD dance administration, I don't know, but that's where the boy is going. Yeah, regardless of both go there. Yeah, it makes sense. And okay, so that's that's the domestic situation. And I think what is so insane about these days is that you also have the entire geopolitical situation on top of this and what's been going on there. And you've been writing quite a bit about it in terms of, you know, it's interesting that I believe a lot of your thesis came from back in the fall, they, the Trump administration released their national security playbook effectively. And it was all, it was all written out there exactly what they're going to do. And like all you have to do is read it and you would have came to the conclusions about Venezuela and that happened and you were writing about that to your credit back in early, early December. So yeah, we'd love you to see here, but how does the geopolitical dynamics stack on top of everything we just talked about? I think that they contribute to this multifaceted crisis, right? You had the technical change, you have the geopolitical change. We see this post-war war to post-coronial architecture is blowing up. We see the US making major threats against NATO allies. You see now, five years of war in Eurasia, very, very high death rates. So it's part of it, right? And obviously you see the US, I think a lot of what we experienced is a contender realization that the US does not have the industrial base to support its military and Germany. That was the, the forced in bargain of globalization. It's like what we'll open up, we'll get richer. But as we do that, the US did industrialized, which means that its ability to maintain that global order goes away and it needs to share this power. And now whether that power sharing will happen peacefully or non-peacefully remains to be seen. But yeah, it is definitely part of the story and it was part of my call for energy. In, you know, late 2025 energy was really the most hated asset. It reminded me of Mehta in 2022 or Google in 2024 Chinese stocks in 2020. You know, it's uninvestable. It's permanently broken. And in reality, energy is not the best performing sector in the S&P 500. And it's still, I would say it's one of the few cheap assets in the US equity market. The other dynamic, of course, is what's going on with tariffs and how that affects balance of payments. And then therefore, capital allocation and the bid for US assets. And I'm curious how getting a bit more tactically here on the market allocation. What does that do to the steady bid into to US risk? Because you're talking about, okay, we're going to have this run at hot mentality for the US economy in 2026 and equity should do well up until probably we see a rate hike up until then. You're probably, I imagine in the clear, that's kind of how I felt like the experience of 2022 taught us. But then you also have this dynamic of rest of the world and how it's performing. And whether there is that continued bid into US equities, if we're not seeing as many dollars flow out for the rest of the world because of tariffs and what we're trying to do with the balance of payments, how do you think about those capital flows and whether to be exposed to the US or rest of the world? So I've been kind of an international bull and not not bare in US, but I have recommended people allocate more to, I mean Latin America was dramatically on the road for the past three years. It's starting to be better. Europe looked fantastic. Last year we had a cheap euro, foreign inflation, government stimulus. Some of these things are a bit less attractive today, but in general, yes, I would be, I would maintain this overweight on international assets also because in general, I think Americans are just excessively overweight the domestic stocks. Like you look your average target date from portfolio or your vanguard. So your black rock firms, I mean, that really is just so unlike, you know, 80% equities and within these 80% equities, it's 80% US stocks and within this US stocks leave, it's 50% of that is in the max seven. So it just seems that there is a bigger world out there than just these seven stocks and the biggest risk to anybody's portfolio, I think, is from the so-called exposure. And one way to diversify it is to warm air if you had bought Chinese internet stocks last year. I mean, that's done pretty well. Brazilian or miners have done really well. Peruvian gold miners have done fantastically well. European banks have been amazing. And I keep going down the list. I think we have this tendency to really be obsessed with seven stocks when the world is in a much country space. Now in terms of flows, yeah, I'm, I'm, I'm, I'm, I'm a South America up is a bit too much, but there's the idea of the South America trade, right? One from the Paris in April. And that has not happened at all. If you look at the Fed Z1, the flows of firms, you see that firms actually bought two trillion in US stocks in the past year. What may have happened is that they started hedging the dollar. So this was kind of a, you know, I hate the currency better of the stock because, yes, if you're in Europe, you don't have, you know, AI plays. And so there's no tech sector to speak off in Europe. So I think that was the phase one of that trade. I, I worry that, you know, with the green learning sanity and let's take over Canada stuff. And now we move to phase two, where it's not just the currency that we hedge, but the European Canadian, Australian, Latin American, pension firms, I mean, many of them are clients are starting to look at the US as as a source of risk and start to, to de-risk the portfolio as we bring money back in Europe, in Japan, I mean, Japan, we only have years of multi-generational highs. That reinforces itself, right? You bring the money back, then put the output pressure on the currency, means that the yen return of the S&P 500 or the Euro return of the S&P 500 are really negative. And then bringing this capital back, especially in Europe, where in many cases you have invested for 20 years, boost growth. So you have this kind of self-fulfitting virtuous cycle, where currency is growth and asset returns all more in the same direction. They basically that will be the exact opposite of the 15-year cycle of US outperformance we're coming from. Yeah, and then lastly, how does commodities and precious metals fit into that framework? Because when I hear your thoughts about this big economic re-exceleration and that it's not showing up in the soft, noisy data, but it's showing up in cyclical commodities and precious metals have been ripping. Like, there is a lot of allitation and the price action going on right now. I'm just curious, how do you take that? I'll be with great play-up. It's been a good year. For what it's worth, I mean certainly in the case, Silver exceeded my expectation. I remember buying physical Silver almost 10 years ago when I was 15 thinking I'd never sell it. This was something I thought I would give my kids. I actually ended up selling it. This probably was the only one time in my life where I. I sold the top. Nailed it. But it also made me realize how crappy. Like, if the Bitcoin or Gold Dugs or Silver Dugs people are right, why a crappy world, this is going to be. This is really. I mean, I had to sell a 20% discount to the spot price to mail the thing. I'm still waiting to be paid. I hope we can have a better way to settle from the action and exchanging metals because it's not a very pleasant experience. Again, my idea was that I would never sell it, but the price was so insane that I thought it was in made sense. Now, long-term, everything that we talk about, I think, supports a large allocation to the market. I think that's a big deal. I think the market is a big deal. can fool your cycle fears. But yeah, it would make sense. Again, I hope I both crypto and precious metal, I think, are transition solutions. They're not great. This is not an optimal solution. At some point, we should be able to figure out a better way to solve trading balances. I like the idea of this Mar-a-Lago record. I mean, obviously, we're never able to put it together, but once the crisis grows enough, once we've reset prices correctly, I mean, we do have these global currencies like that. Yeah, the Chinese currency is too cheap and that's making life in the rest of the world very difficult. It's destroying European industry, it's causing this massive deficit in the US. So we need some sort of the global settlement where we agree on how we're going to do things going forward. I hope that would happen, you know, probably in the mid-2030s, but in the meantime, until we have a proper efficient, my showy system, then you'll have these imperfect substitutes. And I think they've been long in investor's portfolio. It's impossible to say, you know, is it overvalued? Is it undervalued? Yes, I mean, I look at it, you know, chart of goal. I'm worried. But, you know, what's the proper multiple on it? I mean, there is no earnings. There's no cash flow. So it can keep going higher. Yeah, yeah, you just never know. Also, Vincent, always great to have you on. Great updates there. Congrats again on some of those excellent calls on an energy and all of that. And yeah, working folks go if they want to see your work and get in contact with you. So the best place is X. My handle is @vincent.grd. You can also find me on LinkedIn, Vincent. Derriard. Please send me DM me. Are you in May? I mean, I'm going to give my my my son X, him, our @
[email protected]. That's probably the best way. Now, the research is institutional, but I'm always happy to, you know, have conversation with smart people, share some of the reports I write every week. And yeah, I'm excited. Like this is this is both scary and exciting time for global macro. And I think this is going to be another year where, you know, we'll have a lot to talk about in 10 months when we speak again. I agree. Yeah, on the roundup, we've been calling it the World Series at global macro these days. It's just so much happening. Awesome. Thanks Vincent. All the best. [BLANK_AUDIO]
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