Michael Howell: Markets On “Nervous Knife-Edge Equilibrium" As Global Liquidity Momentum Has Peaked

Later on, you'll hear more about the Fund Rise Income Fund and why sophisticated investors are turning to higher yielding assets like private credit. But for now, let's get into today's interview. Join today by Michael Howell of the Capital Wars sub-stack and global liquidity indexes. Michael, great to see you. Welcome back to monetary matters. Well, great to be here, Jack. There's a lot going on in markets as always. There is what is going on right now and how does it relate to the work that you're doing on global liquidity? What are you seeing in markets? Well, what we're seeing is a sort of peak in the global liquidity cycle. I mean, that's not an absolute falling liquidity, but it's basically a slowing in the growth momentum. The cycle is turning down pretty much on cue. I mean, we've been saying that it was likely around about the end of 2025 and it's basically turned out to be there. But the ball market, remember, has been going on for almost three years. I mean, actually, almost exactly three years. And then we began in around October of 2022 and it pretty much stopped around that time last year. So we've had a peak in liquidity. Liquidity momentum is now slowing down and that is putting pressure on financial assets, particularly risk markets. And we're beginning to see that in evidence. There is a narrative out there, which I think is a fake narrative, but basically attributes the surging gold to a sort of general debatement, the great debatement trade. I just think that's wrong. It's not that's not what's explaining gold. Gold is being explained by a very specific factor, which is what the Chinese are doing. And I think that particular fact and the fact that it's not a general debatement is something which is particularly relevant right now, because it obscures the fact that the global liquidity cycle itself is peaking. China is doing something very different. It's decoupled. Going to get into China and it's impact on the gold price. But the first Michael, what other headwinds are you seeing for asset markets, risk assets, broadly, other than the peak in Federal Reserve liquidity as you measure it? Because by a lot of people's metrics, not your metrics, but a lot of people's metrics, the Fed's balance sheet has been declining for almost four years now. Are there other headwinds you see or is this mostly coming from the Fed? Well, I remember that the Fed balance sheet is not the appropriate metric. It's the one that obviously policymakers want us to focus on, but it's not a measure of the liquidity that the Federal Reserve is putting into markets. What you've got to look is you've got to drill down into the balance sheet. You've got to take out elements that are not liquidity creating. And if you focus on the liquidity creating components of the balance sheet, you find the balance sheet has basically been expanding over much of the last three years, but it now is beginning to roll over. Now, that statement is slightly problematic because the Fed was forced into another round of QE in inverted commas. In other words, what we were called not QE QE because I would deny it was really QE, with these reserve management purchases at the end of last year, when the repo markets began to derail. And what we found is a little pick up in Federal liquidity over the last few weeks, but generally speaking, my view is that Federal liquidity through this year will have best flatline. It may have been declined. So what you've got as a backdrop, which is saying the Fed is one of the other headwinds, I think you've got to start thinking about. And there is renewed uncertainty there, really because of the incoming Fed chair, you know, presumptive chair Kevin Warsh is, he's been saying he wants to shrink the balance sheet. I think that, well, not only the only thing he can't do that, but I think it's madness to try and do that because, you know, the Fed has got a big footprint in markets for a very good reason. Michael, you've long been saying that interest rates don't matter that much when it comes to liquidity and financial conditions. What really matters is the Fed's balance sheet. Now you have this guy, Kevin Warsh, who's going to be the next Fed chair. I shouldn't say this guy. And he has made comments that are wildly hawkish on the balance sheet that the Federal Reserve should not be in this business of basically having a large balance sheet at all. And presumably he's going to be quite dovish and accommodate the President Trump's desire for lower interest rates. But on the balance sheet, he appears to, you know, a decent chance that he's going to be extremely hawkish. How are you assessing the likelihood that he actually is going to be this hawkish? And, you know, is he going to reduce the balance sheet by two trillion, three trillion? Will this be via active sales as opposed to just roll off, which is kind of what we've had? And if this very hawkish scenario comes to pass, what does that mean for markets, the treasury markets and other markets? Well, this evidence what happened at the end of last year, when there were attempts to actually pull the Fed balance sheet down slightly. And that was really because of fluctuations in the treasury of general account. That's one of the elements that is quite volatile with the balance sheet. And it tends to see a lot of movement, particularly around fiscal year end and whatever else. And what we saw was the changes in the treasury of general account, and actually absorb liquidity from markets. And that drain caused the repo markets in other words, sofa rates to actually spike higher relative to Fed funds targets. And the Federal Reserve was clearly uncomfortable by that. They let it run for a few weeks, but they couldn't do it for much longer. And then they introduced this new QE program or not QEQE program, as you might like to call it, the Reserve Management purchases. And that has actually lifted liquidity, Federal liquidity over the last few weeks. And that is running at a rate of about 40 billion a month, so that it's quite sizable amounts. So you've got to think about that fact in relation to what Kevin Walsh is really talking about. Now, the fact is that there's a whole lot of many dimensions that one can actually tackle to argue why the Fed balance sheet shouldn't be diminished at all. One of those is just the evidence from the repo markets. It's very difficult for the banking system to actually accept significantly lower liquidity, lower reserves. And the reason for that is if you go back to the post-GFC environment with the Basel regulations, then you're around the Basel regulations and liquidity coverage ratios. Those liquidity ratios basically made Fed reserves, bank reserves at the Fed, the sort of par excellence reserve asset, all liquidity asset. And basically banks need that. So there is some attempt to get that threshold down by deregulation. But I think they've got to do a lot of deregulation to actually get any sizeable shift. So in other words, what we're stuck with is a level of reserves that I would say probably are where we are now at about 3 trillion. In other words, what you've seen over the last few weeks is some attempt to get the threshold down. So the minimum eye reckon around Q3 was about 3.25 trillion. It's now probably nearer about 3 with some deregulation. And the Fed has actually stepped up the plate and pushed reserves back to this threshold. So at the moment, we've got an equilibrium, the repo markets are back in some sort of harmony. So that's one dimension. And the other one is that you've got to look at the Treasury market and just think how big the Treasury market is now, how much it's increased since the global financial crisis. I mean, you're looking at something like if my numbers are correct, something like about a five-fold increase in the size of the Treasury market. Now, over that period, a primary dealer capacity, depending on the measure as one looks at, are probably halved. So the capacity of the banking system to act as primary dealers is diminished at a time when the Treasury market is hugely bigger. So what that spells is imbalances mean more volatility. But what you've got to have is a Fed sitting there in the backdrop in the background, quite prepared to come in quickly and smooth over any tensions in the software and debt market. And believe me, that is their primary goal. We can debate inflation, we can debate employment. But at the end of the day when push comes to the sharl, central banks are in the business of maintaining the integrity of their software and bond markets. And if there are problems in the Treasury market, just watch with the electricity that the Fed will come in and smooth things over. And in terms of actually trading Treasuries, banks have pulled out massively. And that's been replaced by non-bank players, like hedge funds who are involved in the so-called basis trade, that basis trade where they own cash Treasuries and short Treasury futures demands an incredibly large amount of leverage, which is the software market. We saw the so-for-market seize up during the fall. It has since eased what's your outlook on that? And do you think that the Federal Reserve's actions, actions in December of stopping quantitative tightening are necessary for that? To ease that? Or do you think that more stimulus is needed? And the Federal Reserve will eventually get back into the business of quantitative easing? Which the next Fed Chair Kevin Warsh, I mean, that would be the most about-face turn of that anyone has ever done. In the history of 180-degree turns, two extended balance sheet for him. Yeah, I accept all that. I mean, we're in a sort of nervous, knife-edge, like equilibrium right now. We saw what happened to the so-for-rates in the repo market late last year when liquidity was tied. But let's put this into perspective. I mean, you were looking at not a great shortfall in reserves, in bank reserves. But you saw some quite sizable blowouts in the so-for-spritz. So it is a nervous market. The Federal Reserve has to be there, essentially backstopping it. And the whole thought about trimming bank-reserve, not just trimming, but actually slashing bank reserves significantly as Warsh is talking about. I just think it's wholly unrealistic. It simply can't happen. I mean, not only can it not happen, I mean, it's an imprudent thing to do because the Federal Reserve will have to come back with some alacrity every time there's a crisis and every time the Fed comes back, it puts its credibility on the line and that can't be good for central banking. So I think what they've got to do is they've got to live with a Fed's footprint in markets is bigger than it was basically before the GFC. But in a way, if you look at it, that's actually quite acceptable on what you'd expect because what evaporated the time of the GFC was the interbank market and you could really argue that the interbank market was actually put back onto the Fed balance sheet. So, you know, by definition, the Fed's balance sheet should be bigger, a lot bigger than it was before the GFC and so it is. Now, why are they wanting to shrink it back? Is it nostalgia? I don't know. But it's madness from an economic management or financial management point of view. They simply can't do it. And I think we've seen evidence of that. And if they try, you risk heightened volatility in the treasury market, which is clearly what nobody wants. So my view would be is that what they're more likely to do is to allow bank reserves to really chug along or flatline through this year around about current levels. And they can talk boldly about, you know, reducing or wanting to reduce the balance sheet size. And they can try and derecolate and actually get the threshold down, maybe a tad. But I think they've, you know, the fact of the matter is that private sector banks are now way too small in the context of the size of the treasury market to act by themselves. We need the Fed, which means a big Fed footprint. So there's no way that he can realistically slash the balance sheet along the lines he is suggesting. And that maybe, you know, that may be a problem for Kevin Ward simply because he's trying to trade off a smaller balance sheet for some Fed funds rate cuts. Now you said right at the beginning that I don't believe that Fed funds rates matter a lot. I think that, you know, they matter in certain elements. I think they matter for the mortgage market. I think they probably matter for the currency. But I don't think they're particularly, you know, if you cut Fed funds, are you really stimulating the economy? I mean, that's really a puzzle that, you know, I've mentioned before, it's a sort of gray area. And you think when you've got a situation where the federal government is, it pays huge, a huge interest bill on that interest bill represent a transfer payment into the private sector. So if they can't interest payments, the size of interest payments, the private sector loses income. Now that's not an easy, that's a tightening. So the whole area is pretty gray, I think here. And I don't think interest rate movements have a particularly material effect on the economy outside the two countries that I mentioned. Right. Michael, you talked about how what drives financial crises is refinancing and refinancing not being able to happen. And on the opposite side, what drives extremely easy financial conditions is refinancing being extremely available. Wouldn't you say that when interest rates are cut that that allows corporations, not even allows, corporations go out and refinance all their debt at lower interest rates. And wouldn't you say that that is somewhat a form of easy money? Well, in the sense that that's true. I mean, it changes the the pattern, if you like, of issuance. So there's a lot more refinancing. But that refinancing basically has to keep has to come back again. There's an echo effect in the data. And then you think if you go back to the example of the COVID crisis where interest rates were slashed in zero, what you saw were two things happening simultaneously. One was that debt increased significantly because debt was really cheap. And people just took the advantage of borrowing because it was virtually free. And what's more, they could roll over existing debts. So if you had a high coupon debt, you could basically start to roll that you could you could sorry, turn that out into the back end of the 2020s. And that's what many people did. Now, you know, I'm going to sit here and say that lower interest rates are necessarily a good thing when you start to look at debt. We've got way way too much debt. And this is why the financial system is, you know, it has become difficult to manage. And this is why maybe we've got an economy that's struggling under the weight of debt. And the US is doing a lot better than many other economies in this regard. But you know, China as we'll turn to later on is really being overwhelmed by its debt burden. And it has to dig its way out. Europe is not much better. And Japan, when we know Japan is, you know, is trying desperately to get out of that debt burden from two decades ago. Michael, what when you look at where we are in your framework, we got four phases for markets, rebound, comm speculation and turbulence. Where are we now? What does that mean for the different assets, equities, high beta credit commodities, bonds, et cetera? I might add precious metals and Bitcoin. Well, I think what we've seen is a cycle that is unfolded pretty much on track. I mean, this is an extremely normal cycle, despite what many economists would argue. But from an asset allocation and liquidity perspective, it's a really normal cycle. And what you're seeing now is a peaking of the liquidity cycle. Around the peak, you would typically see commodity markets exploding upwards, which they're doing. Resource stocks, energy stocks outperforming, beginning to see some evidence of utilities beginning to outperform and invests a starting to reach towards stable demand consumer, stable stocks. And that seems to be happening. And what you're seeing are things like technology, which would be in the leaders through the bull market, really, really strongly. That's quite normal. So if you start to pinpoint exactly where we are, we would say that the US markets in speculation, the European markets are probably around about late-car maybe just moving into the speculations that phase. Emerging Asia is maybe a tad behind that still in calm, but it's beginning, we're getting late in that cycle. But the interesting one is China, which is already in the rebound in the early phase. And that really is the anomaly. What I can do is I can turn to some slides and evidence that. So this is looking at the liquidity cycle. Now, let me just emphasize again what this is showing. So the black line is a measure of the underlying momentum of liquidity, which is passing through world financial markets. This is not M2 or M3 or any monetary aggregate people are familiar with. This is basically a measure of savings and credit flows that are moving through financial markets. And what this is illustrating is a rate of change. So it's actually a normalized index of underlying momentum across many, many different subsectors within each economy. So we look at what central banks are doing. We look at what Shadow Banks are doing. We look at what traditional high street banks, main street banks are doing commercial banks. We look at the repo market, cross border flows, etc. So this is a big aggregate. It totals around about $190 trillion now. So it's basically something like one of the three quarter times world GDP. And you can see that the cycle stems to fluctuate within that sort of sign wave that we put on top, which is a 65 month cycle. In other words, five to six years, why is it five to six years? Well, my view is because that seems to be the average term of debt, the average maturity of global debt. And this, therefore, is a debt refinancing cycle. We've given the data to an independent organization, which is the foundation for the study of cycles. They've done their own independent work using, I'm sure, much more sophisticated algorithms we use. And they've come out exactly the same answer. There's a 65 month cycle in this data. So we're reassured by that. And it seems to be, if you like, panning out that way, the cycle bottomed almost exactly where it should have done in late 2022. It's been moving up ever since. It's peaking around about the same phase that you'd expect around end of third quarter of last year. And it's been, been moving down. This, let me stress, is the advanced economies. It excludes China, and it excludes China for a good reason, which will come on to later. But it looks as if that cycle is now losing momentum. Now, if we drill into the various subcomponents, this is looking at US liquidity. Again, US liquidity seems to follow that same 65 month cycle. And you can see where it hits and where it misses, but it's generally not bad in terms of how the cycle unfolds. And again, we seem to have peaked and were coming down. So the US cycle looks to be in that speculation phase. Here is Eurozone, which again, you know, broadly seems to fit. It may be a little bit more of a mismatch, but generally speaking, that seems to follow a pretty similar cycle. I think the Eurozone cycle is maybe a tad longer. Maybe it's near 70 months, but it's around that phase. And therefore, you can see right now that we look as if we're making that peak in the Eurozone, but again, the bottoms were more or less on track. Here is Asian emerging markets. So I said, so this is things like Singapore, Korea, Taiwan, etc. And what this is basically showing is again, that cyclical movement. You know, it's not again, there are probably a few mismatches there, but generally speaking, this cycle is approximately right. And what it seems to be showing is we've yet to hit the peak, but we're moving somewhere close to that. So this explains why you've had some stunning performance out of Asian emerging markets of late. The cycle, as you can see here, compared with a normal cycle, which is shown as the dotted line, looks to be more or less on track. The red line is the current cycle, zero that we put in the middle of that diagram. is the trough of the cycle. So the black dotted line is the average cycle from 70 to 2025. And you can see that we're basically exhausting that normal upswing. And so that's charge shows that we've had a noticeable decline in the global liquidity cycle for past six months. Well, maybe a bit less than six months, but the peak was around about September October of last year. But liquidity leads, and the point being is liquidity leads around about nine months. So you'd expect things to begin to be happening. And maybe they are already. I mean, Bitcoin may well be the, you know, the canary and the coal mine there. This is another example. This is another measure of liquidity. We track, which is looking at market depth in financial markets as an indication of whether underlying liquidity is deteriorating. And this is basically showing a daily track, a daily liquidity track. So this is really measuring things like, you know, a bit off the spreads, transactions size, etc. And this tends to follow the liquidity cycle. And you can see that that's happening. We've actually got further evidence of that here, where you've gain have got that market liquidity index in orange. And the black line is a new data series that we've started to produce, which is a daily now cost of liquidity. So we basically run our systems now every day to create this, this index. And this is showing the how liquidity is declined. So this is just a daily equivalent of what we were looking at earlier on. Now we can keep on. I'm going to come onto the asset allocation in a second. But just one other thing this to emphasize this. This is an interesting addition that we've just produced for the research, which is again, a daily flash estimate. And what we've looked at here is what the central banks are doing. So this is daily activity from central banks. And this is shown as an index. But what it's trying to show is what their liquidity operations are doing. And trying to get some sensors to that to get direction. And what you can see is generally in the last, maybe a few weeks, central banks generally have actually been adding a little bit more liquidity. Now that's partly because the Fed has come back with these reserved management purchases. But it's also because if you look at what China's doing, China is actually also adding quite a lot of liquidity. And that's a very interesting point to follow up later with the actions of the PBLC. Now, together on to what I was moving towards, which is the asset allocation cycle. So if you think about this earlier cycle here, or here or here, what we can do is to put this into a framework. For asset allocation. And this is how we have always thought about it. So happens this time. It's working almost like clockwork, which is unusual, but it seems to be the case. What you've got is an up swing of the cycle. As you can see on the left hand side, which associates positions in the cycle with asset allocation choices. And what it's saying is in the up swing, when the cycle is moving risk on, you want equities. And that's been a pretty fair choice in the last two or three years. Around the peak, you want to be thinking much more about commodity markets. And that seems to be fulfilled right now. As the cycle starts to move down, you then start to get more defensive. And you move into cash, which will give you probably potentially the best absolute return. And then around the trough of the cycle, you then switch into long duration government debt. Which then tends to benefit significantly around the trough of the cycle. Now, let me stress, this is the liquidity asset allocation cycle. It is not the real economy cycle. The real economy cycle follows this by around about something ranging from about 15 to 18 months. Or that sort of timeframe, which is almost one half segment of the cycle. So if you look on the right, we've got calm speculation turbulence rebound phases. The economic cycle is around about one of those segments displaced. So in other words, the real economy is following. So when we're in speculation, when we're moving into speculation in liquidity, we're moving probably out of rebound towards calm in economic terms. So think of it in those ways. We've also got pinpointed here what type of sectors industry groups tend to perform. So you tend to find in the rebound phase, you want cyclical growth, things like tech, consumer discretionary, financials. Those have all been pretty decent performers, particularly financials in the last 12 or 18 months. Then you start to shift towards cyclical value around the peak, which are things that resources energy. When it looks as if resources play a big move energy, it seems to be getting traction now. And then as the cycle rolls over, you want to be inching towards defensive value, things like consumer staples and maybe utilities. And then at the bottom of the cycle, you then move towards defensive growth, things like food drug companies. So that's how the cycle evolves. And you've also gone on there, we show where the yield curve tends to move, best-eapening, bare-flatening, etc. So where a market generally, this slide basically shows that the percentage of markets that are in risk on, which is the rebound or calm phase. And you can see that that is now equally split 50/50. This is based on record as you momentum. And it looks as if you extrapolate or eyeball that, it looks like it's going down or going up. So that would suggest to us that risks are clearly building. And that's how we see it. The traffic lights are just another way of sort of summarizing the picture. And what it's saying is left hand side asset allocation, right hand side, industry groups. You want to be, you know, in rebound, you want to be taking a little bit of risk. These are traffic lights. So just reap them as they signal say. So you, Amber, you want to proceed with caution. The calm is green. Go. Speculate. Speculation again, Amber. Thurbulence is red, red is stopped by definition. And then if you're in the rebound area, it's equities and credits that look good. In calm, you want equities commodities. In speculation, you want to be trimming equities out of credits. And basically full on commodities. And then turbulence, it goes towards long term, long duration. And they're just your groups are pretty much for sure that they're ready. But it's technology on the way up, you know, risk on his technology. You can start to migrate towards financials, mid cycle, energy commodities, late cycle. You know, obviously if I put in here, large cap, small cap, it would be a small mid cap later in the cycle. Speculation energy commodities. And then you want defensive groups as you move into the risk off base. So that seems to be, you know, as I say, the road map seems to be working pretty much now. If you look at this chart that I just put out, that is looking at the performance of cyclicals versus defensives against the business cycle. So the orange line here is the world business cycle. And the cyclicals defensives are MSCI categories within the world market of cyclical stocks versus defensive stocks. This is something that Stanley Dyerkamele, sort of the great investor in the US, you know, pulls the internals of the market. And he always claims this is much, much better than economic forecasting. It looks like it's, it's one out again. And what the chart shows is that cyclicals are outperforming defensives in a manner that should indicate that the business cycle around the world is very robust. But you're not seeing that. And the world business cycle now is picking up, but it is slow. Interestingly, guys, that's indexed from zero to 100. So that makes me think it may be a PMI isn't the world business cycle a little bit stronger than 46 or wherever that is. I mean, well, this is this average we put together. This is not the S&P version. This is a version where we've just indexed various subindexes. So we look at the US ISM. We look at the Tancan in Japan. We look at the EFPO survey in Germany, the FBI survey in the UK, the INSEL in France, et cetera. And then just put them together into an index. And that's what this shows. So it's pretty much the same thing. There's a little bit more more cycle of movement in our index, I think, when the S&P, but generally speaking, you can see this movement. Now, the point that is worth noting is this one. And this is something that is really what should be focusing the mind right now. And this is saying that strong economies don't have strong financial markets always. And the reason is that if you look at the business cycle, and you look at the liquidity cycle, and I've cheesed a little bit by pushing the business cycle forward by six months, but you can see generally what happens is that strong economies tend to absorb liquidity. And weak economies tend to release liquidity. So it's not all about what the central banks are doing. It's also what is happening the tempo of the real economy. And you've got to think about these sort of two silos of liquidity, financial sector liquidity and real economy liquidity, that's being very separate. And it's another way of saying all money that's anywhere must be somewhere. And if it's in the real economy, it's not in financial markets and vice versa. But what we're seeing now is the real economy is starting to grab more. Hence rising commodity prices. That's working capital. Look. is demanded and that working capital will be taken out of the financial markets. And that's, I think, what we're seeing. So it's not the central banks of tightening. I sort of alluded earlier on to saying, maybe they're creating a little bit of slack near term. But the real problem is that real economy is beginning to pick up and they will absorb liquidity. And the real economy is borrowing lots of money and demanding lots of liquidity. And that is a good thing for economic growth. That's kind of what's needed, but it's just that the supply of liquidity is not there to match it. That's your point. Exactly. It may be that what's happening, I mean, the evidence one clear fact, look at the big AI companies in the US. I mean, okay, they're borrowing or some of them are borrowing. But they're also running down their cash balances quite aggressively. And that's basically funding for other areas of the financial economy. So if they're taking it, they're running down their treasury deposits. That's a problem. It's causing money to shift from the financial markets in the real economy. And tell us about on the global liquidity index, what exactly the peak means? Because some people think it may mean the peak of actual level of liquidity, but no, it indicates the rate of change of liquidity, right? Absolutely. 100%. It's not about the level. It's about the momentum, the rate of change. And it's a straightforward, yeah, market's a price at the margin. 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But I guess it was just that it was so high in 2003 and coming out of the, you know, 2001, 2002 recession and that by 2005, the marginal percentage increase just wasn't that high. Yeah, I think exactly right. Now, you know, another test is looking at this one. Now this is a bit wonkish and I probably, I'm not going to trade too much into the weeds here. But this is another way of looking at it. And this is, I mean, I think, you know, maybe because I wear a bond hat often, but I think this is particularly relevant information, particularly important information. This is looking at the global liquidity cycle again. But what we've done is we've put on that same chart, the changing world term premier. Now term premier are the, you know, the extra yield, the bond investors demand for investing in bonds. So it's like a risk premium if you might have bonds, if you're taking interest or a risk over the term of bond. And what this basically shows is that when you've got abundant liquidity, you tend to find the term premier rise. And when you get falling liquidity, you tend to find term premier fall. Now, the reason that that term premier indicates high term premier means a steeper yield curve, low term premier, you know, flat or perhaps even inverted yield curve. Exactly. And the reason for that is that, you know, the term premier at the front end of the curve is diminimists. And the term premier at the back end of the curve is very significant. So if you have a rising term premier, it's more likely as you correctly say, Jay, that the yield curve will be steepening. So you can also think about this as the yield curve or some proxy for the yield curve. Now, what this is basically showing is a very strong co-movement between these two factors. And what it's suggesting is that when liquidity expands, there is less systemic risk in the system. In other words, the companies can always find financing, debtors can roll their debts, etc. quite easily. There's no tension in markets. But when you see the reverse, you tend to see tensions. And when you get tensions in financial markets, investors want safe assets. So they start to shift out of risky stuff into safe government bonds. And as they shift into safe government bonds, so the term premier on a government bond tends to be paired down as the bond price rises. And that's exactly what you're seeing here. Now, the thing that ought to wake us up, if this is correct, but it's certainly a signal that's worth paying attention to, I think, is that if you look at the latest data, what it's showing is it looks as if the term premier data series has peaked and it's coming down. Now, you know, one thing I've got to stress is that if you look at this as a year or a year change, so it's still true that the term premier is rising from a year ago, but it's starting to inflect downwards. And if you extrapolate that, we think by the middle of this year, you will start to see that term premier series probably going negative. And that would suggest that you're about to see an inflection in the yield curve. Now, that is not on the cards, anyway. Everyone is still talking about steepening yield curves and actually even steeper yield curves through, you know, as far as the eye can see, I just think that's wrong. And it may well be that the narrative in the very, very long term is that we've got monetary debatement and that may be an investment theme that carries on over the next two or three decades, but the trouble with these themes is that they ignore cycles and investors are often skewed by a down cycle when liquidity turns down. And that spoils, you know, what has been a lot of gains that you've made through the initial uptrend. So in other words, trends are important, but cycles can be crucial. And we've got to understand that cycle and that cycle looks to me like it's turning down. And that's what we've been warning about. I hope we're wrong, but, you know, in many ways, we wouldn't like to make money on a nice poor market, but it may not be that easy. And if you want sort of further evidence of that, here is the US yield curve, which is basically here from 1990, I haven't cheated because this goes all the way back to 1970s. Maybe something, it was a tool we used to use at Salomon Brothers quite often to actually understand how the fixed income markets move. And what this is showing is liquidity inflows into, this is US liquidity inflows in orange. And the black line is the slope of the yield curve. Now what we've done is to push on the liquidity index by nine months. And what you can see here is the movement in the average yield curve slope. So that's basically saying that we're in partial between whether it's the two, ten, whether it's the one twenty, whether it's the three five or whatever it may be, this is the area under the yield curve. And what it's showing is that you get an increasing slope in the term structure unambiguously within nine months of a pick up in liquidity and equally you normally get a flattening nine months after an inflection in liquidity. And that's what we've got to think about. So if the yield curve inflakes downwards and starts to flatten, I would say that's definitive to be a risk of period and everything else we've looked at is telling us that's what's going on. So you expect the yield curve to flatten as the Federal Reserve is going to continue to cut interest rates. Does that mean Michael that you are bullish on bond duration as we approach the turbulence phase? And that's significant, Michael, because for as long as I've known you, I've never known you to be bullish on bonds. But why is this time different? Well, I think the first thing I'm going to pick you up about is you said with the Fed County interest rates. Now, has the Federal Reserve got scope to cut interest rates? Clearly, that's what they are saying they want to do. One would imagine that Kevin Warsh may have got the job because he's promised President Trump that's what he's going to do. But I think the reality is, if the economy is doing what we think he's doing, the scope for rate cuts is actually quite limited. And they may be able to sneak one or two in, but not really a lot. And I think the point is that if the bond markets, you know, the bond markets face declining liquidity, then they're going to act with their feet and basically yields will start to come down. So I think you could see potentially here, you know, the risk of a bullish flattening if I can put it that way. I think the odds are not bad for that, but that's completely off the cards according to most people's projections. Yeah, I mean, everyone has a steeper. Everyone has a steeper on whether it's a call or an actual trade on. I'd say the vast majority of institutional investors are, you know, the bank, I think most bank reports are looking at a steeper, very few people are talking about a flat-net. Yeah, I mean, I mean, I come quietly for the next two or three months, but I think by mid-year you want to be changing time. And, so Michael, where does this leave this just on the stock market? And talk about timing, because just because you are seeing your measure of liquidity start to flag down, just how cautious is that making you, or just how bearish is that making you? Because, you know, I think a lot of people watching this, I know from experience as well, like selling stocks and nailing the top is actually not good unless you catch the bottom as well, or eventually get back in. And, you know, so I think, just talk about, yeah, just talk about like where you think we are timing wise and your view on particularly like global equities or US equities. Yeah, I mean, I think we were lucky to say that to catch the bottom exactly. You know, I'm not particularly good at catching tops, so this could clearly be wrong. But I think that what you've got to do, as I, you know, keep stressing in terms of investment asset allocation, this is a long-term game or short-term tactical game. I think what you've got to do is to basically plan in that way. So, you know, our argument over the last few months to our clients is don't chase markets, you know, start to get more defensive. You don't have to press the button and jump out immediately, you can go 100% cash, but basically start to, you know, become more prudent. And I think that's what we see it. You know, I'm not saying what we are definitely going to see a major collapse in markets. My best guess is that what we're seeing is probably a range-bound market at best this year. I mean, stress as best, at best. We could be seeing downside. That's possible. I don't think yet there's a major downside because I don't see the Federal Reserve tightening or other central banks tightening. However, there are straws in the wind. I mean, Japan has tightened. Reserve Bank of Australia has tightened. I mean, Australia is an often a leader in some, in some ways here. So I think that, you know, you've got to be prudent in this regard. The chart that I put up is one to think about. And this is another way of sort of thinking about valuation in terms of what the markets are doing. Now, I've been the sort of, you know, maybe foremost in saying, you don't use P multiples to assess markets. In other words, you can look at them for stocks, but at the market level, they're absolutely meaningless. You know, it's been one of the worst, worst guides to asset allocation to basically say, you know, this market's on a low P therefore buy it because you've been buying the European stock market every year since 1980 and your performance versus the US would have been miserable. So, you know, that just doesn't work. What you've got to look at is other metrics and what we look at are liquidity metrics. And what this is basically showing is the ratio of all equity holdings worldwide to the pool of global liquidity. This is not a bad metric and what it shows is excesses where you can see particularly in Y2K and at the time of the of the of the crisis in the GFC in 2008. Nine. You can see what we are now and that looks extending. We're back to GFC like extensions in terms of the ratio of equity holdings to liquidity. And what that's really saying is a little bit like looking at I suppose equivalent to looking at a high P multiple to say you've got to have the earnings growth coming through to sustain those high P's right here. You've got to have the liquidity growth coming through to sustain the high equity liquidity ratios. And I don't think it's coming in that size. So that's what makes me nervous. Now, if you start to look at the US market then deep breath because that does look extended and you know, I mean, I know we could have said at any time in the last probably what 12 18 months that the US market looked extended. And I you know, I set that US liquidity was pretty decent. The momentum was strong and it was holding the market up. Now you've got an inflection liquidity. There was a risk of this of this ratio coming down. This is another measure which may be a more appropriate one generally, which is looking at equity holdings to underlying collateral in the financial markets. This is another metric and alternative one. It's not liquidity, but it's the collateral base that drives liquidity. And even that looks stretched. So I think we've got to start to be a little bit prudent here in terms of holdings of risk assets. And that's what I'd say. So if you drill back to where we were in terms of this cycle, I mean, look, cycles of cycles, they go up and they come down. I think we're moving into a downswing. I just hope I'm wrong, but that's what the data is telling us. And you know, we watch the data and let by the data. So what that's telling us is you've got this backdrop. It seems as if yield curves and term premium are kind of telling the same story. It seems that the real economy is telling the rich same story. It seems that industry group rotation is telling the same story. So, you know, that takes a lot of boxes. And therefore, I would start to say that you've got to follow the asset allocation that we suggest here, which is basically saying you've got a trim your equity exposure. You've got to get out of credits, stick with commodities for the time being. Maybe put a toe in the water in terms of getting some bonds, go for mid-generation bonds. And then in industry groups within the market, I would be out of technology. You know, until the next time, I would be probably beginning to trim some financial holdings on the basis that financial scale a lot of their gas from from steeper yield curves. And so if that's we're near the end of that, that's something to bear in mind. Energy commodity still running energy stocks in particular. And then I would start to think about defensive. And I mentioned already utilities, which seem to picking up a bit. Although it can be an estatoric sector. And start to think about consumer staples that have been pretty much out of favor. So that's how I would start to be doing in terms of asset allocation. And then you've got another dynamic, which is the precious metals. What do you do there? That's a whole other story. That is, I'll get into precious metals like commodities in a second, but Michael, your reading of global liquidity, inflecting lower. Roughly, you know, how much of that is fed liquidity versus other central banks versus the other two things other than central bank liquidity, which is private market liquidity and cross border flows. You know, I know, you know, from your work and I believe this is correct that this all of this sector dispersion stuff of financials versus technology. That is an output from your process, not an input to your process. Yeah, exactly. Yeah. The evidence of what central banks are doing, this started looking at both account in terms of the black dotted line and a volume measure or value of liquidity injected. This is showing central bank liquidity injections going back to year 2000. Again, you can see it's a cycle. You can see the response to the COVID crisis pretty clear. The black dotted line is a counter percent and on the right hand scale and you can see 80% of central banks were one and we cover about 100 central banks worldwide. Currently, easy. Okay. That looks like it's topping out. And you know, I've evidence that you've probably got a couple you've got Australia and you've got Japan that are beginning to raise rates already. But we're looking here at the liquidity flow, not understanding the orange line is looking at that by value. So it's in the word size weighted and that again seems to be topping out. It may not be definitively topping out yet, but it's beginning. It seems that it's not going to make a further high. And that may be rolling, but it's absolutely definitive that none of these central banks are, you know, we're not in tightening phase yet, which is basically below 50. And, you know, we're maybe approaching that. But if that when that starts out and I'd be getting a lot more negative, we're not there on that. It's all about the private sector liquidity, which is being absorbed by a stronger real economy. So what my best guess is, as I said, is that at best we see a range bell market this year. It may be some downside. I don't think we're in a situation where you can see bigger games. And I think that's more or less the message that's coming up of what the Fed is doing. This chart, by the way, is looking at financing demands on US capital markets. So this is looking at what the Treasury is needing and what the private sector, the corporate sector in particular is needing. And what we've factored in here is some assessment of AI capital spend. So you can see that, you know, there's maybe pronounced demands on capital markets and the dotted line is just sort of help the eye. But that's the liquidity cycle, you know, inverted. So that basically is trying to illustrate that you've got greater demands. What's the Fed doing? Let me just illustrate the Fed. This is looking at a concept I call Fed liquidity. Federal liquidity is the active part of the balance sheet. In other words, it's what the Federal Reserve in June. into money markets. If you want the definition or how it's calculated and whatever, I wrote this up in a book called Capital Wars that we mentioned before. And what this is basically illustrating is the red line is looking at federal equity. If you look at the last few weeks, you can see that there's a sort of dog leg in that chart. And what that chart shows is a big drop around the back end of last year, which is the problem that led to reserve management purchases. And the red line is subsequently picked up again. And my expectation is that the dotted line is what happens now under new Fed Chair Kevin Warsh. And with the approval of Treasury, it was actually the best. That's what I think they want. They want to kind of flat lining in federal equity. That's not a dramatic fall, but it's basically, you know, it doesn't change the picture dramatically from where we are now. But it really is consistent with a sideways movie market. The risk that you've got is if you eyeball the chart, you will see that periods when federal equity goes down significantly are periods of weakness or volatility in the market. And that's what I'm conscious of. So, you know, that's why I think that we've got a problem. Now, one of the things that I would argue that Kevin Warsh is approving or basically going along with is this idea that we put here, which is something that we, that we analysed about a year ago, brilliant the wake of what Janet Yellow has been doing with the Treasury with issuing huge amounts of bills. Now, this is slightly sprung into the into the sort of the weeds of wonkishness again, but let me try and, and try and explain this. If you think of liquidity, what liquidity is, liquidity is basically, uh, the liquidity of an asset is the asset size divided by its duration very approximately. So, if you change the average duration of outstanding assets, you change the liquidity. So, if you shorten duration of the outstanding stock, liquidity must, by definition, improve. And what this is basically illustrating is that process. The black area is the impact of changes in the average tenor of Treasury issuance. Okay. So, the fact that they've gone from issuing longer dated debt towards issuing bills means that that black area is positive, and if they issue a lot more bills, then by definition, they get a lot more stimulus coming out, potentially. And the reason for that is that who buys the bills tends to be the banks. So, if banks by government debt, what you find is that is called monetisation. And monetisation is printing money, and it's a direct monetary stimulus. The orange and red are, uh, respectively, what I've called not QE QE, uh, plus, uh, traditional balance sheet expansion by the Fed. So, the orange and red are the Fed QE elements, and the black is basically what the, uh, the Treasury is doing. And you can see what happens in 2026 is that the stimulus that there is is dominated by the black area, which is Treasury QE. So, I think the whole game here is to say that we're removing, we're taking away the Fed's access to the liquidity hose. We're giving it to the Treasury. The Treasury is much, much better at guiding that into the real economy through critical mineral purchases, through, uh, defense procurement, through strategic stakes or whatever it may be. The Treasury can do that much more effectively in the Federal Reserve can. Uh, it helps Main Street over Wall Street, which is again, a part of the remit that I think Walsh and Bessent want. Uh, and as you can see from that little insert chart, uh, which outlines the, um, the, it was the outline of that sort of stimulus. You can see that it basically proceeds, proceeds the black line, which is the change in the US ISM index. So, that should be suggesting that we're getting a stronger economy, uh, through this year, which is what all the indications are, uh, pointing to anyway. So you think that the Treasury, uh, easing by funding itself with shorter term instruments rather than longer term instruments, it's looking like that has continued with the first year of the Trump administration and it's going to continue in 2026 as well. That's what you're saying. Correct. Absolutely. Correct. And that, and that's what the, you know, the, uh, the calendar, the scheduled calendar, uh, the quarterly refunding process basically outlines. And Michael, roughly, is it just as much as is a, uh, uh, Bessent's, Bessent's easing just as much as Yellen's easing? Is it slightly more or is it slightly less? But, uh, uh, you know, how does it roughly compare? Well, you look at the, look at the black area and you can see the, the, the, I mean, Yellen, uh, Yellen in 2023, 24, um, that jump, uh, was what Yellen was doing and what Scott Bessent's doing is, um, um, is exactly the same thing. Exactly the same comparable size. Right. Um, so Michael, so far, you, you talked, I think we just threw the central bank liquidity channel. What about the other two channels you focus on? So private sector and, and cross border? Well, at the, at the macro level, uh, or the general level, cross border flows kind of wash out. So we've got to look at that sort of specifically and I can come on to that in a second. But the, uh, in terms of private sector, I mean, I've sort of alluded to that by saying that, you know, all money that's anywhere must be somewhere. So if it's, uh, if it's going into the real economy, it's being drained out of financial markets, which is saying that the private sector is, uh, private sector liquidity is under a cloud, um, in terms of, you know, what we're seeing, um, in US and general financial markets worldwide. Uh, and that, that's the case. If you're spending money on cafes, you're not basically keeping in treasury buying, uh, bonds or buying, um, whatever it may be, you're, you're, you're in need, you're issuing corporate debt, you're basically draining the financial sector of service funds. And that's what's going on. Right. And can you just explain, like a few of the inputs into that, just, you know, we've done many interviews over the years. I'm lucky to say. And I think you talked about fixed income volatility being quite important to that. But yeah, sorry, that, that, let me be clear. That, the, I grew up and I'm talking about does not include fixed income volatility. That's a result. That's not a, that's not an input into our, into our models at all. That is an outcome, not an input. The inputs are purely constructive variables. So what we're looking at are things like, um, you know, deposits of corporations, treasury holdings, uh, activity in the repo markets. Um, these are the factors that tend to impinge, uh, on, on, on those, on private sector liquidity balances. So, so fixed income volatility is an output, not an input. Oh, yeah, absolutely. There's, there's absolutely no question about that. Got it. That makes sense. And then you're saying that the cross-border flows tend to net out. But, uh, what do they, they choose capital inflows into the US? Yeah. I mean, that, I mean, this is the other thing that I think that one would say is that if you look, and I, I'm going to chart for the US, but I can, uh, try and illustrate what's happening in terms of Asia. This chart here is looking at Asian capital outflows. Now, I put this in basically to say, uh, you know, they're, they're in a problem in Japan. Uh, you're not going to see a sudden halt to the yen carry trade, because there's anything that's any like as big as people make out. Uh, and what this is looking at is Asian capital flows outflows. In fact, now what I've illustrated is the total all Asia, which is the black line. And then I tried to disaggregate the rest in terms of what is Japan and what is China, uh, Pacha, Euro, Euro, Euro, and all Europe, which is basically, uh, beginning to see something of some inflows I, I accept at the moment that they're relatively small. This, uh, this outflow from Asia is really the inflow into the US. You think of it that way. So money is still going into the US. And the whole idea that China is going to turn away forever from US assets is, is, is pulling nonsensical. Uh, the margin, they may be buying less, they may be directing their purchases more commodities and more gold, but the whole depth of US financial markets are a reality that we've got a face. And you know, the Chinese will still be buying US treasurer as a holding US US dollars. They may not want to, but they've got really no choice. And what this is, what this chart is trying to illustrate is if you go back to the early 1980s, as we show at the beginning of the chart, it was Japanese capital outflows that were huge in terms of percentages of US liquidity. Uh, the reason it's a negative is that that's, it's a capital outflow of Asia. So if you want to look it from the US perspective, change to that negative side depositive. And you can see that the red area for Japan has been eclipsed by China, uh, really from about 2015 onwards. And you've seen huge capital outflows coming from China largely into dollar assets. And that is the, you know, that's the reality. So if China gets a bigger and bigger trade surplus, um, not necessarily from the US, but from, uh, it's all its activities. It is going to have to make a decision about what it does with that. And in every city, a large part of that is going to go into the dollar. So, you know, I'm not going to say I'm super bullish dollar near term because I think the administration is trying to talk the dollar lower, but I think the second half year may surprise us in terms of some firmness in the dollar. If you look as we as we move through this year, I think that the dollar in the needs term, you know, may be soft because the administration is trying to talk it down, and I accept that. But as we move through year-end, where you've got the risk of liquidity tightening and it's moving into a risk of environment, then I think the dollar will get a bit again. Michael, you say that as the front page of the Financial Times says, "Fund managers take the most bearish stance on the dollar for a decade." So you say that those bets could work out for six months, but ultimately they won't. Just flesh out your views a little bit more on the US dollar, but then also, Michael, tell us about your view of global equities, non-US equities, what we in the US would call foreign equities versus the US. Well, I think that, okay, I mean, the first thing to say is, if it's in the press, it's in the price, okay? So that's the first thing I think we've got to acknowledge. And I think particularly within the FT is definitely in the price. I mean, the FT's track record of predicting US financial markets and the dollar is abysmal, and they're always pouring school on US markets, but that's their stance. So I wouldn't believe that at all. I wouldn't take any credibility from that. I think that, you know, generally speaking, my view would be that the dollar would firm up in the second half year. I mean, partly because I think the scale of flows moving towards the dollar will still be significant. And I think the other thing is, is that if we're moving to a risk of environment, investors will like the comfort of USA's assets. And I think that's, you know, that's the reality. Now, you know, I'll be the first to say, and I have been saying this at some time, that the long term outlook for government debt is not good. That's true, but we live in a world of cycles as well as trends. And sometimes the cycles come back to skewer you. And I think 2026 is one of those years. And that's why I think you want to be defensive. And in the international context, the dollar is a defensive asset. And a lot of reporting, not just from the financial times, but you know, the bank financial settlements and other agencies that have very, very talented researchers, that the hedge ratios of foreign inflows into the US increase. So the US foreigners are still pouring money into US financial markets. But on the margin, they are hedging that currency risk a little bit more. And that could be responsible for some of the dollar weakness. What do you think about that? Yeah, entirely plausible. I mean, you know, you've got to, these things are sort of quite normal anyway, Jack, not now. I mean, late in the cycle, you get diversification. The US is always a leader in financial markets. And as the cycle would choose, you start to get diversification into international markets. And lo and behold, that's what we've been seeing. And it's nothing unusual about that. I mean, it began this time last year. It's continuing. You know, Eurozone and emerging Asia as identified following in the cycle. And the other one to think about is China. China's a lot earlier. And I think the, you know, the reality is that China's got a big trade surface already. Will it get bigger? Well, I mean, nobody really wants it to get bigger. But the fact is that China has huge, huge problems that we can't, you know, we can't dismiss. We've got to accept. And they're undertaking a policy now to try and dig themselves out of those problems. But that is a monetary stimulus. And that could actually mean, in fact, that the Yuan weekends question about against what, though, and that could mean flows into the dollar. Michael, tell us, tell us your views on gold. It's taken a little bit of a pullback, but the price in dollars, you know, over $5,000, the price in Yuan over $30,000 Yuan. What's going on here? What's responsible for this rise? Do you think it can, it is going to continue? Yes. It will. And if you look at some, if you look at this chart, this really explains what I think is going on. So what you've got here is the debt liquidity ratios of China and Japan. So this is basically telling us how easy it is for Chinese or Japanese debt issuance, debt issuance to roll over their debt. Now debt always has a term. And debt is never repaid. It's only ever rolled. And you need liquidity or balance sheet capacity to roll. So I prefer this ratio than debt to GDP. I don't think debt to GDP tells us anything in particular, but debt to liquidity does. And what you can see with Japan in the early part of the chart is the debt liquidity ratio of Japan rose. And that put huge, huge problems on Japanese financial markets. And it caused the economy to struggle. We then saw abonomics come in. And as part of the abonomics framework, the bank of Japan started to buy aggressively. Japanese government bonds. In other words, it was monetizing debt. It was creating liquidity. And as a result of that liquidity, the yen has tumbled not surprisingly. And what you have seen is a fall in that ratio, quite significant fall evidenced by the red line coming down on the right hand side of the chart. China is about 15 years behind Japan. It has exactly the same problems. It has a huge real estate problem. Real estate value is a fallen. Debt is impaired badly. China can probably provide solvency for that debt, bail it out. But you still need liquidity to basically diminish the value of the debt or the burden of the debt. And facilitate it is rolling over refinancing. Therefore, China is embarking on exactly the same policy. It is printing money. And it is trying to get its debt to liquidity ratio down. Now, here is the evidence of that, which is looking at daily liquidity injections by the people's bank of China into its money markets. These are changes on a year ago. And what it tells us is that the people's bank basically have injected over the last 12 months about 1.1/1.2 trillion US dollars into their financial markets. As a benchmark, America did 2 trillion after the GFC. China will have to do the same or equivalent. And so you have got to expect at least another trillion dollars equivalent coming out of China. So in other words, you are talking about 7 trillion yuan of stimulus, probably in the next 12 months or so. So that is the scale of it. Now, what is the evidence that that is happening? Look at the bond market. Bond market is always tell the truth. In the environment of expanding liquidity, you would expect term premium rambons to start rising. The gray line at the bottom is showing that most of the movement in the Chinese government bond, the orange line is coming through rising term premium. Investors don't want to hold bonds that are moving into risk assets. Shanghai stock market up 25 to 30% over the last 12 months outpacing Wall Street. Here is the yuan gold price. This is what I think they are targeting. And this is what they are driving as the print money the yuan gold price goes up. Bear in mind that the Chinese are not allowed to buy crypto, things like Bitcoin, they can buy gold. They can't export gold, they can buy gold. That is exactly what they are doing. As that money comes into the system, it is going into risk assets and it is going into gold as a monetary inflation hedge. So that line likely is going higher. Many people cite this chart and say, "Look, something auto went on around 2024-2025, where you can see this huge dislocation between the gold price in US dollars in orange and the black line which is inverted real interest rates using the US tips market." So typically, economists will tell you that the gold price moves inversely to real interest rates. So when real interest rates fall, the opportunity cost of holding gold is diminished and therefore people buy gold, they hold more gold. Gold price goes up. And similarly vice versa, that relationship broke down around 2024-2025. That is the evidence. It is clear. Why did it do that? Well, people talk about the great monetary debatement and that is what was going on in the West. I do not think that is the case. That is the answer. Here you have got PBOC liquidity and you have got the gold price. It seems to me that is the story. So what's driving the gold market is China and Asian buying. And that's what we seem to be seeing. The Shanghai gold exchange is leading now. It is maybe smaller in size in commercial and London exchange, but it's the marginal price. And China is trying to get all the gold it can. Now we've written also on this in terms of a broader point about the international monetary system. When we think of the international monetary system is cleaving into two parts. One, which is the Chinese yuan-based system, a closed system, there was a further evidence of that in a notice that was issued, I think it was notice number 42 by the PBOC about 10 days ago, which doubled down on banning crypto and anything, any type of at a digital asset. And what they're really emphasizing is commodity-based money, if you like, or commodity backing. And effectively the yuan system, I think will be a partial gold back system. Not a gold standard, absolutely not a gold standard, but they'll have some ability to transact in gold. For example, they could do oil-gold swaps selectively for the Saudis, whoever, who may want them to give them some credibility. And then you've got on the other side, the US dollar system, which is increasingly a digitally based system, but I think that is using US treasuries to back it, as it has before, but in the form of stablecoin, that increases the reach of the US dollar and enhances the value of treasuries. And I think that is something we've got to think about seriously. So you've got these two assets, if you like treasuries and gold. And that's what we're going to start thinking about the world in terms of those two pieces of collateral. But gold is critically important here. China wants the gold price up. America probably wants the value of the treasury bond up in price terms. And it wants the gold price probably lower because that gives it an edge over China. Michael, we've been talking about this since when the gold pressing you on was something like 12,000. And you said that China looking to devalue the yuan, maybe you can't do it against the dollar. So it's looking to do it against gold. And that's pretty much what happened. We have the gold priced in yuan at 32, 33,000. Do you think that they are intentionally trying to weaken the yuan in order to stimulate its exports and its manufacturing? Or is it something else? I think you've got to start thinking about currencies more and more in gold terms. And maybe that's the right way of thinking about them rather than looking at cross rates. In other words, don't look at Remembe or yuan, US dollar. Think about independently dollar gold or Remembe gold. What I think is China is deliberately trying to do is to is effectively and that they're trying to create a closed monetary system. Clearly, they've got capital controls as well. But they're printing money domestically and that money is if you like a sink, which is going into domestic Chinese assets. So it's going into gold, which can be Chinese citizens can buy and hold but not export. It's going into Chinese stocks and it's coming out of Chinese bond markets. And at some stage, it's going to lift real estate prices, not right now, but it will take time to drill through. I mean, evidence to Japan on that score, it takes some time to get over that, you know, the excess, but that's really the direction. And China has to get real estate prices up ultimately. And this is the only way they can seriously do that. So they're basically printing money. Now, in a normal situation, that would evidence itself in terms of a weaker pay per unit against the US dollar or against the euro or sterling or whatever it may be. But that's not happening because China's got capital controls. What's more, if you look at China's trade surplus, a lot of it is denominated in dollars. So they actually have control over a lot of control over the yuan US dollar cross rate. And rather like Japan in the 1980s, they're really controlling or dictating it. So they can, you know, it's an easier fix for them. So I think that's a political rate that they don't really want to alter very much, but they are changing the yuan gold price. Now, under normal arbitrage, if this, you know, it works in this world, then you're going to have a higher dollar gold price too. It's not going to go up in a straight line. It's going to be cyclical. It's going to come back. And it will be under pressure of liquidity in the West starts to come down. But notwithstanding the trend is absolutely upwards. No question. Michael, you talked about how gold had been rallying despite real interest rates rising when you'd expect gold to fall during that. So that correlation historically had been breaking. It kind of sounds like if you anticipate the global liquidity cycle to have already peaked and to have, you know, or already begun declining, you might expect gold as a liquidity sensitive asset to decline as well. Are you saying that you think that gold's historical correlation with your liquidity cycle is going to break in the same way that it has broken with the traditional model of gold relationship with real interest rates? I think we're going to start thinking about how what, you know, what drives the world? And traditionally it was the US. The US economy was clearly a giant. US liquidity still is massively important. World financial market still synced, still sort of dancing to the tune of the dollar. All these things are clearly very relevant. But we've got as a new actor, which is China. And China in liquidity terms is vast. Not in terms of cross border liquidity yet. It's got a clearly got a footprint. But domestically it's huge. You know, Chinese banks are still some of the biggest in the world. You know, they were arriving in what the Japanese banks throw, you know, maybe that unfortunate parallel. We're doing it in the 1980s. But, you know, China has got a huge banking system, a huge liquidity pool. Where does the evidence itself? In evidence itself in terms of the commodity markets and the real economy. Because what China's monetary system is already doing is it is changing the cycle, the industrial cycle within China. So in other words, if the PBOC is injecting lots of liquidity in the system, you would expect as a natural corollary that the Chinese economy gets quite a lot of upward momentum because of that. And it starts to demand more commodities. Commodity prices go up. And what's more gold, you know, as a corollary to that will also benefit. So I think that, you know, the dynamics, maybe for commodity markets, maybe people have already realized that the dynamics for commodities rest increasingly with China because it's huge industrial footprint. And I think you also got that case now in gold. That who is controlling the gold prices China. And if China wants an international monetary system that will rival the US dollar, it has got to have some sort of credible backing. And you know, it has not got an international bond market like the US treasury market. You know, you haven't got that credibility to think about what Chinese bonds are doing as a source of collateral. So you need another form of collateral and that accepted collateral must be gold or commodities in general. But I think gold is the obvious one. So gold is decoupling from the US liquidity cycle, but not from the Chinese or Asian liquidity cycle. Does that mean that the Asian liquidity, you know, and US liquidity, Western liquidity have decoupled? And if so, does it no longer make sense to talk about a global liquidity cycle? Yeah, I think they, I think you raise a very good point that, you know, you are seeing this decoupling. And this is showing in evidence here in terms of US and China liquidity cycles. Now, the orange line is the Chinese liquidity cycle. The black line is the US liquidity cycle. If you go right back to year 2000, or there are thereabouts, you know, rather period where China came into the World Trade Organization, WTO, the cycles of US and Chinese liquidity were pretty much running instead. I mean, China was a tad more volatile. Okay, but they were trying to control their monetary system at the time. And you can see that it was moving remarkably closely to the US, rather than to about 2012. And then you start to see diversions and that divergence was very evident through the period of, you know, maybe the last decade, we're trying to plan down on liquidity. It kept monetary conditions very tight. It's strung, or if you like, the Chinese economy of credit, but he was trying to destroy what was, what had been a big boom that had sort of launched around the time of the GFC when it stimulated this economy at that time. And you saw the real estate boom. So they were trying to climb down on that and that created, you know, that was a tight liquidity environment. What we've seen in the last, what, five, six years cycles that are evolving between China and the US, they're completely out of step. So whenever the US has tightened China, resist, whatever the US is China seems to have tightened. And it's happening again. And that may just be coincidence, but the reality is we've got to face up to that as investors. And if you've got an expanding Chinese liquidity cycle, it is going to propel commodities probably further. It is going to underpin the gold market. And whereas the US liquidity tightening is OK, taking is detracting to some extent from gold. Otherwise, if you obviously if US liquidity was going up as well, it would be even better. But that's not the case. But, you know, maybe the US liquidity tightening is not enough to dent significantly or take the shine off the gold market generally. But you've got to be worried about risk assets in the West because what you see in the US is going to be increasingly copied by Eurozone and emerging Asia, which are the other two big areas. Michael, what about Bitcoin, which is down about 40% from its highs the last time we spoke in the fall? That's the canary in the coal mine. Here is this is a very short term chart, but this looks at six week changes in global liquidity. It shows BES, which is Bitcoin and Ethereum, Salana, and that's with a waiting of 60, 30, 10. In other words, Bitcoin is 60, 60% of this. And what we've done is we've, we've advanced the global liquidity black line by 13 weeks or three months to show that the two line up pretty well. It's not exact, but it's not bad. And what you can say is that the liquidity cycle is driving Bitcoin. We've done independent research digging deeper into the relationship and shown that Bitcoin is one of the is probably the biggest systematic, sorry, liquidity is the biggest systematic influence on Bitcoin. It accounts for about 40 to 45% of variation in the Bitcoin price. Clearly other things go on as well, such as investor sentiment or whatever it may be, but it's clearly the most identifiable factor. And what you can see lately is it seems to have explained quite a lot of the variation in the Bitcoin price. Now, notwithstanding the fact that you may get, you know, but the time this goes up, a pick up in Bitcoin is possible. But I think that the trend in that black line is still downwards. And we like to see much smaller peaks in liquidity and actually this is, as I said, on six-week changes and actually probably a general flatline or slightly negative trend. And that would not be great for Bitcoin through this period. Now, my strategy has been to say to people, look, with these assets, Bitcoin, gold, these long-term monetary inflation hedges, since I'm aware it's the whole thesis that we're in a world of debt and rolling over debt where you need more and more liquidity, it's a monetary inflation world. We've got to invest accordingly. But we've got to remember there are cycles. We've got to avoid, OK. And those are the sort of the fast cars you've got to step out of the whale. And for all the portfolio strategically in Bitcoin and gold makes sense. But therefore you buy in Bitcoin when it's probably something like one standard deviation or more below its trend, which was on my calculation around about the sort of high 60,000. And that's pretty much where it is now. So, you know, I would have no difficulty in buying Bitcoin now. I haven't gone back in. I came out, but I haven't gone back in. But I mean, these are levels that I would think are pretty reasonable from a long-term standpoint to buy. You don't want to make money tomorrow, well, unlikely, no guarantee, obviously. But I think on a medium-term view, you probably will. And the same with gold. But gold hasn't pulled back yet to the sort of levels where I'd be comfortable going back in. But I will get back in when you start to see a more meaningful pool back. I mean, that might mean the gold price has to go down to about four eight or there about. But we're talking about those sort of levels. Well, Michael, help me understand that because I thought that you were saying that the liquidity cycle had already peaked and that, therefore, that, you know, it's quite a bearish indicator. So why are you saying that, oh, okay, it's okay to go back in at Bitcoin even in the 60,000 level, if, you know, I mean, we're only like 3% off the highs in the S&P 500. Yeah. I think you make a fair point, but I think you've got to distinguish, you know, for the core investment, I think you want to be thinking about, you know, when do you buy it? And I think you buy core investments. And when they're about one standard deviation or more below their trends. And you know, that takes away timing, I agree. And you can do better than that, almost certainly if you try and finesse that even more. But then you may, there may be a sudden shot that you didn't anticipate on the upside as well as the downside. So you would be your timing will be further out. So all I'm saying is without thinking about the timing aspect or the tacticalness of looking at the liquidity cycle every twist and turn, a pretty good rule of thumb is to buy an asset if you're below one standard deviation or certain trend. That's all I'm saying. So I'm not suggesting people rushing now, but I'm saying it's not a bad long term area to buy into. And it may be one of those things. You know, how'd you bought gold at 3000? You'd have been saying, well, why didn't I buy more? You know, hindsight's a wonderful thing as we know. Sure. I guess when you bought in golden at 3000, it probably wasn't one studio deviation off its highs. I imagine it was at all time highs. Michael, I'm saying if we are looking at every twist and turn of the liquidity cycle, which you know, you're the guy out of anyone in the world to do it. What does that indicate for Bitcoin's near term, six months, 12 months, 18 months? Well, I think you know, you put it in on the spot. I mean, I don't mean it looks, it does look great. Sure. But I mean, it's a liquidity barometer. I mean, that's how it's showing up. It's the canary in the coal mine, but it's warning us about other things. And I think what you've, you know, what we have said in the past is that Bitcoin is probably the most liquidity sensitive asset on the planet. And if you get liquidity trending lower, Bitcoin is clearly the suffer. And there's no question about that. Okay. I'm bullish about it long term, but I've got to accept the fact that in the short term, it won't be a great performer. But as I say, it's the canary in the coal mine. And now what you've seen, subsequent to Bitcoin, underperforming or falling, you'll see US tech stocks coming under pressure. You're seeing the market generally, you know, failing to meet new highs or it's struggling to meet new highs. And you look at your evidenceing very clear rotation from early cycle to late cycle sectors when the market. Right. Why is it that financials and cyclicals and commodity type stocks as well as commodities do rally more in the late cycle? Why is that? I think that it comes back to two things. One is duration and one is, which I suppose is the other, which is connected, which is basically where they get their impetus in terms of their earnings kicker from. And a lot of those later cycle areas are area are sectors or companies that get a lot of their traction from a strong real economy. Whereas if you think about the ones at the front end of the cycle being very long duration like technology, they're not going to be influenced by the market. By the business cycle, they're going to be influenced by interest rates or liquidity because they're basically a very long duration stock. Michael, you've got a chart of the maturity wall of corporate debt ahead of us as well as the change in that corporate debt by year. It's really interesting. And I just was looking at, you know, the most recent figures from S&P Global, which is a credit rating agency and Moody's as well. And it's interesting because, you know, these stocks are selling off 25, 30 percent over the past months, which for them is a lot on fears that their analytics and data business is going to be disrupted by AI. And in particular, I think, you know, andthropics, cloud tool, which is interesting. But, you know, just looking at this chart, Michael, it appears to me like there's a lot of guaranteed or semi guaranteed revenue and operating earnings ahead just from these companies that are ratings, ratings businesses. So just in terms of the annual stock of debt ahead, what are you seeing on this chart here and what does that mean for assets? And I guess, you know, we can break it down to the investment, you know, the investment grade bonds, the high yield bonds, and then the bank loan market and then private credit, which I don't know if is, you know, can be measured as well. Yeah, well, actually, let me just step back to say what the reason for this chart is. This is looking at the debt liquidity ratio worldwide. We looked at Japan and we looked at China earlier on. This is the world overall. It's dominated by the US and by Europe, by definition. And what it shows is there is an equilibrium debt to liquidity ratio. There is no equilibrium debt to GDP ratio, country, water, communomists have claimed, but there is a very clear equilibrium, mean reversing equilibrium between debt and liquidity, because debt has to be rolled over. And what this basically shows is that equilibrium working out. It's cyclical. When you get excessive debt versus liquidity, you get refinancing tensions and you see financial crises, which are annotated and equally on the downside when there is a lot of excess liquidity. In other words, the debt liquidity ratio is low. In that period, you get asset bubbles because asset markets tend to be the vent for that surplus liquidity. We have been through the most unbelievable form in the debt liquidity ratio. Currency of one central banks responding to every financial crisis by injecting liquidity, by doing QE. This is clearly what Scott Besson and Kevin Moore are reigning against. But the problem is that, as I say, it's not that easy to correct this problem. And also by zero interest rates, which didn't help at all. And what you're now seeing is a recovery or rebendment in that ratio. It was leaving the everything bubble behind and it's moving into a regime where liquidity is going to be tighter relative to debt. Now, the reason for that is that debt in the period from around COVID in particular was termed out later into the decade. And you can see the evidence here. This is looking at the debt maturity, in other words, the amount of debt that needs to be refined all the amount of debt coming back, including refinancings year after year. So that debt maturity wall starts to climb. So this is the amount of debt, gross debt, that has to be refinanced every year in the world economy, measured in trillions, sorry, measured in billions. So you're talking here about, by 2030, $45 trillion. So big numbers. And it's more pronounced in this chart, which is the year on year change. And you can see the very clear bite out of the chart in 2021, 22, 23, when zero interest rates encourage a lot of borrowers, household and corporates and governments to turn out their debt into the back end of this decade. And that's what you're seeing coming back. in. 25 was a sizable year, 26 maybe, tad less, but you get the idea that you've got a lot of demands out of financial markets coming through. Difference was the 2025 was actually a year of quite good liquidity and there wasn't a lot of financing demands coming out of industry, but 26 is a year of title liquidity, a lot bigger financing demands for capital. That makes sense and again for you, this is actually a modest negative for financial assets, right? Because it requires all of this money from the financial system to be injected towards the real economy. I spoke to someone you know, Andy Constant, he had a similar view and you two veterans of both who worked at Solblown Brothers at different times though, you guys know a lot more than I do, but can you explain just why is like Google or meta issuing tons of debt that is going to be rated investment grade and bought by pension funds and then deploying that into building out data centers, which is going to cause GDP to grow up incomes to rise, the construction companies to go up. Why is that bearish short term and specifically why are the bearish outcomes of you know, it requires liquidity to fund this? Why is that greater than the bullish outcomes of incomes arising and profits arising and GDP is going to go up because of the spending? Well it's good, you've got bullish from Main Street, there's no question about that, but it's not good for Wall Street because the money is coming out of Wall Street to fund Main Street and that it's that sea soul which is really important to understand. And that's really what I'm saying, I guess through this presentation is that that sea soul is now you know, was tilted very much in favor of Wall Street when the economy was very sluggish, when economists were talking about or fearing recession or recession never came, the economy was at a low-ed and it wasn't demanding a lot of liquidity. Okay, if an economy picks up you need more liquidity for cash flow, for working capital, for capital, for capital and what we're seeing now is evidence that a lot of the AI companies and other firms as well are actually stepping out their cap ex, I mean that's a pretty good thing in the context of the US real economy, you know, you would expect that underlying productivity would be favorably impacted by that, but it does mean that you've got less money in financial markets or money that's anywhere must be somewhere and if it's in Main Street it's not in Wall Street, it's really as simple as that. And so the fact that this is extremely good for at least on paper, profits GDP, etc. I'm not saying that you know everyone, every citizen in America is going to be doing great financially because data centers are really built, but you know by, by no means am I saying that, but it is going to make the statistics look very, very good. Are you based on that Michael? Can you can you say that you expect kind of the financial punditry and certain commentators to look at the very high profit growth that we're going to see in the S&P 500 and yet they're going to see the S&P, you know, maybe flat to down or perhaps up, you know, single digits this year based on what you're saying. And can we see people being like, I can't believe profits are up so much. How come the S&P isn't up in the same way, maybe those same people in 2020 or 2021 were saying, why is the stock market up so much? These earnings are horrible. Yeah, it makes sense. I mean, you might know mistake. I mean, the economy I think is in a pretty decent position in the US, you know, which I could say that about Europe, but we can't. If you look at the year to end much quarter this year, it's likely the US economy in real terms will grow by about 4.5%, which is a pretty decent rate of growth. And you know, look at the latest Atlanta Fed GDP now estimates. I mean, they're there are similar magnitudes. So, you know, the other way I mentioned the economy looks pretty decent, despite what many people say. It may well be a K-shaped economy, but the fact is that it's an economy that's growing pretty well on average. So I think you've got that backdrop. Will earnings be good this year? Yes, undoubtedly. Is that something that we should be expecting or factoring into the market outlook? Yes. But let me just say this as a fact, and I haven't got a chart to demonstrate that, but I think it's well accepted that in the second year of a presidency, the market is generally weakest of the four. So in other words, take the four years of a presidency, year one and years three and four are good, year one I think being the best, year two is undoubtedly the weakest year. And if you look at that same analysis for earnings, you find that year two is always the strongest year in a presidency for earnings, for poor earnings growth. And that's what we're going to see this year in the world likelihood. And it's underpinned by everything we've been saying about the pick-up in the economy, increase cap X, et cetera, et cetera. But in other words, the markets get deurated. And that's the that's the worry that deurating is because liquidity is tightening. My God, I asked you earlier, but it's about, is there any regions where you're particularly bullish, whether it's China or India or Europe, Japan, elsewhere? China? No question. China looks good on my estimation. I mean, there's no, there's there should be no, also no doubt that the Chinese economy is in a par of state. I mean, that's almost goes what I'm saying. It's, you know, it's, it's got a huge debt burden and American tariffs have clearly hurt China enormously. So the economy is in a bad situation. But, you know, if you go back to some of the wise worlds words again, which I quote from Stanley Druckermelner, the best time to invest in the market is when you've got a sluggish economy that the authorities are trying to goose. And that is what you're seeing in China right now. Not only they're trying to goose the economy, they're trying to eliminate the debt burden as well. So you're going to sort of double whimming coming through. And that should be a good recipe. So, you know, the thing to look at are things like Chinese technology stocks. I mean, they should be the ones out performing the early cycle bit. That should be moving. And, you know, I think it is. I mean, Chinese markets have been pretty strong. So that's why I'd be looking at looking at rotation, you know, both sector wise and geographically. Europe, I think, is, you know, we're talking about months behind the US. There may be a bit of traction there. And again, with emerging Asia, similar sorts of things. But that's what I would be looking at. But I wouldn't be, you know, chasing stock markets right now. I'd be, you know, keeping a foot in the door in commodities. But I'd be starting to, you know, hold a bit more cash than normal. That's for sure. And, you know, maybe thinking about putting some money into mid-geration bonds. So in terms of assets, your bullish on your bullish on Chinese technology stocks, you're also bullish on gold. It sounds like most every other risk asset you're relatively cautious on. You like cash which is new for you. And you also like to, how you know, mid-geration, as you say, mid-geration bonds, which is also new for you. So it sounds like you're, you are, you're, you're quite cautious. Correct. Absolutely correct. The whole cycle is turned. What would you have to see in order to change your view to make you bullish again on those risk assets that you're currently cautious on? What would you have to see, Michael, to accelerate your bearish view and say, actually, I'm doubling down. I don't think, you know, I, I, something I put on the S&P, likewise. What are you going to be paying attention to? What would change my view is there was some event that caused central banks to throw more liquidity into markets, you know, obviously led by the Fed. But I can't see that happening, particularly given the debate we were having earlier on about what Kevin Moosh wants to do with a balance sheet. So I just don't see that. It's possible, never say never, but that was what would change my mind. What would make me even more negative would be signs that central banks generally are tightening if Kevin Moosh went through with his threat of reducing the balance sheet size significantly. And, you know, I would say that, you know, in order to get appointed, he may be using that, you know, that talk in front of Congress. So, you know, that's what he may be playing to the crown in that regard. But that may be, you know, something to watch out for because the market might take that quite badly if it sees, you know, wash going back to a significant QT stance. So that would be one factor. And the other would be just generally a generally much stronger economy. So one central banks tightening to much stronger economy. And the meat in the sandwich is wall street or financial markets. And so much stronger economy would lead you in with traction. Barrage. Barrage. Because if money is in the real economy, it's not in the financial markets. That is interesting. And so he's tell us what has Worsh indicated recently. I know a while ago when he wasn't going to be fed chair, he was talking a big game about selling mortgage-backed securities and being very active. Now he's talking about Treasury Fed accord 2.0. Exactly. What does he mean by it? And how does that accord with your own view? Well, you know, I agree with this. I mean, there has been mission creep by the Fed. And you know, there's been mission creeps across all central banks. And they need to be paired back and disciplined again in my view. And I think that, you know, I fully support what Scott Besson and Kevin Warsh are saying. My only point is that mechanically, it's really difficult, if not impossible, to actually get the Fed balance sheet down. I think what you need to do is to control the Fed as an institution, but basically be realistic about the size of the balance sheet. The balance sheet clearly has had an effect in the inflating wall street and it's had a bigger effect on the K-shaped economy because it's led to an enormous wealth of mine, which I think is unacceptable for most, you know, in most economies. And that's something which needs to be corrected. And I think the administration wanted to correct that. But realistically, what does it really mean looking out? I think that the best case for the market is the Fed liquidity flatlines through this year. I cannot see it going up. I simply can't see it coming down a lot. So I think the best case is a flatlining, which is basically not the backdrop for a surging bull market in equities. The best case I could come up with is that the market ranges, but I think it may be drifting lower. Drifting lower and yet at the same time, you don't sound wildly bearish. You're not predicting a crash, are you? No, because I don't think there's the stretch in the system. We haven't got to that. You know, if you look at, if you go back to my diagram here, we haven't quite got to the period where you would see on the right hand side, particularly elevated debt liquidity ratio. We're really getting there. We're marching in that direction. I mean, that's uncomfortable. And it's possible that we could see, you know, we could see a correction. But I think what that would take would be a monetary tightening by the Fed. We're not seeing that yet, but clearly never say never. And if central banks started to jump on the on the brake pedal, then there'll be a lot, a lot more bearish. I mean, just look at that chart, look at the annotation that you saw around the Y2K crisis. I mean, that didn't have a particularly big extension of the debt liquidity ratio. But it was the case that central banks were tightening very sharply after the big liquidity injections that they put in before the Y2K date. Similarly, if you look at the time of the Lehman crisis back in 2008, there was, you know, a spike up. And then suddenly, they pushed loads of liquidity back into the system very quickly. And of course, that ratio to come down again. But there was the initial spike, which was a problem. Michael, could you summarize your views for us? It's all about rotation. The liquidity cycle is peaking. You could have started moving asset allocation towards more defensive areas. We're not risk off yet. We'd go risk off significantly if you saw a situation where central banks were tightening or the real economy is stronger. But we're basically moving in that direction. So our view is you've got to start pairing down excessive exposure to risk assets like equities. You've probably got to get out of technology. You've probably got to shift towards utilities. Stay with energy. Keep holding resource stocks. Hold commodities if you hold physical commodities. Start to think about mid-generation bonds and start to put a little bit of money to work in stable growth. Consumer stable companies. It's rotation that's key. And China will be the only bull market that would be convinced of this year. And Michael, the, when you say what would cause you to be even more bearish is a strong economy, that, you know, it does sound very, very counterintuitive to me. But then I do think of 2022 when nominally things were very, very strong. It just was inflationary. And I can wrap my head around. So would you see, you know, a quote, unquote, strong economy of nominal spending, nominal investment being very robust, but just being caused by high inflation? Equity markets, financial assets in general don't like inflation. There's no question about that. There's not an inflation problem in the US right now. 2027 may be a different question. And you'd expected the economy was strong in 26 that you would see that coming through in faster inflation next year. So I think that's possible. And then the federal, the Fed may well have to act. And I would be surprised given his, his pedigree, the Kevin Walsh doesn't act in that situation. I think we have to. And what's more, you know, if the Republicans wanted to win the subsequent presidential, I think that have to give an everything they've said, and particularly everything Scott best in the seven of the past, they would have to get their hands around the inflation problem. That makes sense. Michael, we'll leave it there. People can find you on X at cross-border capital. Tell us about the work that you do at Capital Wars sub-stack. Yeah, we have two channels, if you like. What is our institutional service, which is pretty much predominantly by data supply and drilling deeply into this liquidity data through sort of narratives and deeper, deeper reports. Sub-stack is something which is designed more for maybe a lighter read without the detail, but probably, you know, a equivalent narrative. And it's something which is focused very much on people that want an idea of what's going on in financial markets, how to do some asset allocation. That goes under the title of Capital Wars. That is named after a book I wrote about five or six years ago with that same title. And what that book was explaining was the rise of global liquidity and the coming Capital Wars, particularly between the US and China. I'm not a big believer necessarily in trade wars, so I think that's just the veneer. I think the real question is, whose capital is dominant? Is it America or is it China's? And that's what the underlying battle is about. And that's what we tackle in Capital Wars. Both are excellent. We encourage people to check it out. Thank you, everyone, for listening. Please leave a rating and review for monetary matters on Apple podcasts or Spotify. It really helps the show also subscribe to the monetary matters YouTube channel. Thanks. Great. Thank you. Thanks for watching. Interested in the Fundrise income fund? Click the link in the description to learn more. Until next time.