Gold Collapse?! YOU Should Be Laughing Too! | Daniel Lacalle
Summary
Gold: The guest views the selloff as a liquidity event, with fundamentals intact due to strong central-bank buying, constrained supply, and hedging demand. He sees deeper dips toward support as clear buying opportunities and notes gold’s strength can logically coexist with a strong dollar during fiat rebalancing.
US Dollar: Despite de-dollarization headlines, BIS/IMF/SWIFT data support the dollar’s continued reserve dominance and usage in cross-border flows. The dollar’s strength reflects relative weakness in the euro and yen and improving US growth expectations.
US Equities: He argues valuations are not excessive relative to money supply growth and better-than-expected earnings, suggesting a bullish trend with potential year-end melt-up. Corrections are seen as buying opportunities as debasement supports risk assets.
Technology Leadership: Tech benefits most from liquidity and debasement, supported by superior margins and cash generation versus European peers. Concentration in megacaps will persist, but there are attractive opportunities across the other S&P names.
AI and Market Momentum: Nvidia’s surge toward $4T underscores persistent AI momentum despite bubble concerns. The guest frames this within broader tech strength rather than an imminent bubble burst.
Fed Policy: An expected 25 bps cut aids leveraged investors and restores credit access for consumers and SMEs, moving gradually toward neutral. Further cuts are likely as month-on-month inflation pressures remain subdued.
Trade and Geopolitics: US-Japan agreements reducing reliance on Chinese rare earths and stronger tech alliances point to a likely, monitored US-China deal. The US is strategically positioning for tech leadership, reinforcing dollar resilience.
Inflation Watch: Elevated money supply with low velocity keeps near-term inflation pressures muted, but a velocity uptick is the key risk. Monitoring a 2022-style flare-up is essential for risk management.
Transcript
The US president is touring in Asia. The Fed is meeting as we speak. The S&P 500 is at an all-time high. And uh we we're laughing off the gold collapse. I think uh lots of topics to discuss this week. Lots of macro news uh reigning upon us this week. Earnings on top of it as well. Lots going on. I've invited a fantastic guest to discuss and maybe try to understand what is happening in the world a of macroeconomics but also in the markets. His name is Daniel Lai. He's the chief economist over at Treses. Runs a phenomenal YouTube channel and definitely somebody you should follow if you don't do already. But before I switch over to my guest, hit that like and subscribe button. Helps us out tremendously and we much appreciate it. Now, Daniel, it is a great pleasure to welcome you back on the program. It's good to see you again. >> A great pleasure to be here again. Thank you very much, Kai. >> Daniel, I'm having a hard time putting uh you know, focus on on all the topics that are sort of raining upon us this week. Um I mentioned in the intro we got the Fed decision just a mere what is it 6 hours away now uh as we record this we got the APEC meeting happening but we also have earnings raining earnings season going on but I want to start with gold which is a bit atypical for us here uh and I caught a title of of an interview you've done recently you said the gold collapse makes you laugh um let's talk about that um as we know gold corrected quite a bit what do you what do you make of it >> well I was laughing because they asked me about the gold collapse after a 50 odd uh increase in in the price in the last year. No. Um uh so obviously what we have seen is something that is quite significant. No, it's it's it's a liquidity event is that [clears throat] investors are facing that uh at least wall of maturities in a lot of the leverage bets that have uh been in place since the beginning of the year particularly and many investors were using hugely leveraged bets on gold using a US dollar that they expected to weaken quite quite significantly. So suddenly you get the dollar that stabilizes and strengthens. Second you get a lower level of liquidity and higher cost of renewing margin calls etc. So suddenly quite a few investors had to sell the uh trades that actually had made them uh significant profit and gold was one of them. No. So that's why we've seen this this correction from 4,300 and change to 4,000. But I think that the the fundamentals of gold have not changed at all. No, the demand from central banks continues to be at around 1,000 tons a year. Uh the demand from investors to hedge themselves against monetary destruction is obvious and remains one of the key elements. Uh and finally there is a significant challenge in terms of supply relative to demand. So all of the fundamentals uh are intact and obviously uh things don't go up forever. But it's interesting how the narrative was one seemed like there was a desperate in need to see gold correcting in order to create this headline. No, absolutely. And a lot of our a lot of investors, my myself included, of course, we've been in this bare market, especially on the mining stock side, of course. So, we're always very cautious uh because it feels like a game of whack-a-ole whenever we stick our head out and we get a little excited. We usually get whacked on the head, right? Yeah. And that's sort of what we expected. But do you think the correction is over now? Where do you see it correcting to perhaps? Um >> uh I don't you never know where it's going to correct. What I do see is that it it at around 4,000 uh central banks all over the world start to uh increase and accelerate their purchases. No, because many of those central banks remember they're purchasing but they have a target. They want to reach at least 25 30% of their reserves in gold. If they're currently at 10 12 obviously there's plenty of room to go. So um so I would say that uh if gold was to correct to 3,200 3,500 which would be a very very clear support that would be the clearest buy in the planet. Uh it may be difficult to reach that level. No >> no fair fair enough. And uh I I think we all can agree that it was overbought at least temporarily but as you said I think the trend is intact. That's why I I don't see any need to panic here. Uh and I do appreciate you saying that as well. It puts a little gives me a little more comfort of course. Um but but Daniel, you also mentioned something that is quite intriguing that we need to discuss and which ties into the bigger picture as well is that the that of the strengthening dollar um because it hasn't gone down um with gold like you you would expect gold up, the dollar goes down, but it hasn't happened. Gold actually went up not not by much to be honest, but it went up alongside gold. Um what do you make of that? what is driving uh dollar uh these days? What is making it stronger? >> Yeah. Well, it's it's it's a it's almost a tale of the uh tallest small person. No, what we're seeing in fiat currencies is more the weakening of the yen, the weakening of the euro relative to the US dollar. Uh there was a very aggressive carry trade. It's actually if you think about this the the strengthening of the US dollar is also uh a liquidity event coming from a lot of investors that had taken very very aggressive bets on Euro, Japanese, UK less but I would say euro in particular assets uh with a short position or or at least a source of funds position in the US dollar. The moment that the incredible problems of France started to be headlines all over the place and the uh information about the incredible increase in debt that Germany wants to undertake while other Euro area members are only reducing debt by uh uh using the denominator of the of the ratio no GDP plus plus inflation. So in essence what what is happening is that a lot of people suddenly realize oh my god Japan and the euro area are not as strong as they expected. Furthermore they are much weaker than the United States. At the same time you have United States growth projections going from recession to plus 1.5 plus 2.5 plus 3%. So very significant increases in the expectations of US growth and although not as aggressive as one would like to no the deficit reduction in the United States has also been evident. No. So those all those things basically show that being too positive on the yen and the euro was a very aggressive and risky bet uh considering what is happening in France, in Germany and in Japan. It brings me an interesting thought or it brings an interesting thought to mind here Danielle is that the US dollar a lot of people are calling it it's dead already or a dying currency right um but putting it in the broader context maybe that's the segue to also the APE meeting uh that is happening in in South Korea right now it seems like and and that's my impression by the way like that the US and President Trump perhaps is managing to position the US in in a way strategically economically and strategically that it remains relevant moving forward, meaning AI supremacy, chip supremacy. Um, we don't even have to talk about military supremacy at this point because I feel like this is more secondary. Um, and and that's why the dollar has gained some strength as well. So, I'm curious um what your opinion is on that especially in light of the discussions that are happening in Asia right now. Yeah, it's it's a it's a very important point is that investors that started the year thinking that the US was isolating itself that uh this was some sort of Monroe protectionist administration obviously uh based on nothing. No suddenly see that there are trade agreements. The trade agreement with with Japan is going to reduce dependency on Chinese rare earths all these things. No. So I think that that is is a very very good point. know is that uh people finally realized and you have now the bank of international settlements figures of October 25, the IMF figures of September 25, the Swift figures, they all show that the US dollar remains the world reserve currency in reserves in uh transfers and in crossber payments. And at the same time that the United States policy is not a policy of of isolation, but a policy of reaching long-term trade agreements that would be beneficial for everybody. No. And I think that that that sort of I call it the the the tariff tantrum. No, the tariff tantrum has passed and people are suddenly realizing that this is a negotiation process and that things are not moving to the sort of ddollarization that some people expected. We may have seen some uh correction in the dollar index but not a change in the percentage of reserves, percentage of use in transfers and percentage in crossber payments at all. >> So, so are you are you saying maybe in that the world is gaining confidence in the US dollar again? And uh may maybe because sorry I'm getting ahead of myself. too many conflicting thoughts in my head here, Daniel. But also with with the gold price rallying, of course, people are saying, "Well, something is a miss here. Something is not right." Um, so we can throw gold back into the mix here. Um, the US dollar is here to stay. I think we can agree on that at least for a little bit longer. >> Yeah. >> Um, but how do you connect it now back with gold perhaps? >> Yeah. I think that what we're seeing is the uh separation of two systems. No, the western system and the system that is around China. China is trying to reduce its dependency on the US dollar by purchasing gold. So are other central banks all over the world. But they're not just reducing their exposure to to to the United States dollar. They're also reducing the exposure to the euro particularly. They actually started by reducing the exposure to euro assets. No. So it's a what we are seeing is lower confidence in fiat currencies as a concept no the US dollar the euro and the yen and but within the you those within those uh fiat currencies the US dollar remains king you see what I mean and why because I said it before is the is the tallest uh short person is is that it's it's it has tremendous number of challenges the United States dollar but compared with the enormity of the unfinanced and committed liabilities of the yen and the euro. It's not even it's not even a discussion. No. So I think that that is what's happening is that is that the world has stopped using as its only reserve asset in the balance sheet of central banks globally the US dollar and euro assets. Uh and they're purchasing more gold. But that is a rebalancing of the asset base. It's not a ddollarization which is a different concept. Ddollarization would have happened if with a declining the use of the US dollar for crossber for transactions for um uh for reserves. You would have seen a dramatic and equivalent increase in another currency because everything is relative isn't it? No. And we haven't seen that. What we have seen is a is what we are living uh is the gradual loss of reserve status of fiat currencies globally. No. And I think that that comes from the fact that Japan, the UK, the Euro area, the United States, all of them have stopped being that asset that generated stability, real economic return and strength to other count's currencies. That's why they are they are purchasing gold. So, interestingly enough, the strengthening of the US dollar relative to other fiat currencies is completely logical and uh coherent with a strengthening of gold in uh in a world in which the rebalancing of the asset base of central banks is shifting toward uh a real reserve of value item as as obviously gold is. >> Yeah, that that's a fantastic explanation, Daniel. That makes a lot of sense. Uh we can understand that all the fiat currencies are rubbish, but uh this is maybe the the shiniest paper in the waistbin or whatever you want to call it. You know, you can come up with any, right? Uh or the fastest horse in the groove factory or something like that, right? There's always great euphemisms like that. Um staying on the Asia meeting, the APEC meeting in Asia right now, lots of interesting news of course coming out out of there. President Trump is speaking very actively with the journalists and reporters. seems like the mood is very uplifted uh in in Asia right now. Uh based on the footage I'm seeing, there's constant laughing going on. Uh jokes are being cracked left, right, and center. Um but what I want to focus on is really the conversation with China and it seems to be a very positive one. Uh, President Trump just last night apparently on board of Air Force One said, "Well, I'm bringing Blackwell into the discussion." And I don't we don't need to uh, you know, um, dissect the technology, but I think the meaning of it and one phrase I heard this morning was, "Well, we're trying to get China addicted to our technology." Um, what do you make of that, Daniel? And how is that shift maybe the momentum in the tariff discussions? You may remember uh that the UK trade deal was the factor that suddenly made the European Union and many other countries wake up and accelerate the uh negotiation of a trade deal themselves. No, what has happened in Asia is quite similar is that once the other countries have seen that Japan is reaching a very significant trade deal that the dependency of the United States on Chinese rare earth has been diminished with the agreement in Japan etc. Then uh everybody starts to understand what in in essence or at least I certainly was very sure of was which is that there would be inevitably a trade agreement between the United States and China. What is what the agreement with Japan has achieved is the uh is is to make people realize that the technology alliances of the United States with its partners are much stronger than what than what people expected or at least than what the narrative of the tariff tantrum created. No, I think that it was pretty evident to be fairly honest. So what I think is there will be an agreement with China. It will be a complicated agreement because a lot of things will have to be monitored on almost a monthly basis. Origin washing uh intellectual property uh respect uh legal security so many things. No. Uh but there will be an agreement. And I think that what the world has also realized is that this magical idea that China can exist without any type of trade relationships with the United States has completely been debunked. No. So, we're gradually going to a more uh to to to the widespread perception that there will be a strong trade agreement in which the position of the United States is a bit stronger than what the media uh was at least portraying and the position of China is more accommodative than what the same media was was actually uh showing in its in its headlines. Yeah, it's an interesting topic because it's moving markets quite quite frankly. Nvidia is about to become a $4 trillion company. Uh seems like the naysayers have or have been wrong, meaning everybody's like saying, "Well, there's too much momentum. The the AI the AI bubble is about to burst." Um maybe that's the segue to to the markets here as well. Like how does that tie in now and what we're seeing? and you know valuations flying high, expectations are being off the charts of course going into earnings season now. What what do you make of market valuations in general here? >> Uh I always say that you have to look at market valuations compared with something because market valuations when I read the S&P 500 today is at 25 times PE and it was at 16 times PE uh X years ago. Well, compared to what? compared to the amount of money to me the S&P 500 and the NASDAQ are not expensive or or or stock markets for that matter. Why? Because what they're basically reflecting is the destruction of the purchasing power of the currencies in which they're denominated. No. So it's not just the earnings which are actually much better than what people expected and that is another factor that has let's say destroyed a few of the of the bears. No. Uh earnings have been better. Yes. The economy is doing better than what a lot of people expected a recession etc. Absolutely. But the overriding factor is the amount of money is that what we have seen in 2025 is a massive and abrupt increase in the uh in the global money supply more than 12% year to date and that obviously inflates risky assets globally. So uh so for me the S&P 500 is not that expensive especially when you look at it sector by sector. No, if you look at technology relative to uh European technology, it's not particularly more expensive and obviously they're global leaders with much better margins and more importantly much better cash generation. No. Uh if you look at other sectors like consumers, industrials, uh oil, so many others, utilities, they're actually not trading at a significant premium to Europe. No, for example. So I think that the the the premium that the United States which is a liquidity margin and adherence to the the interests of of minority shareholders all of those remain obviously and the US purchases uh buys back stocks while Europe mostly doesn't. So in in essence, I don't see markets that expensive unless one believes that there will be a significant correction in money supply growth and that governments are going to cut spending and deficits aggressively. The uh the debasement of fiat currencies is going to continue and it's likely that stock markets may be volatile. That is absolutely true. But the trend remains remains bullish and also the the concentration which is probably what we would be discussing afterwards is that concentration is going to continue to be a very important element. >> I was going to say concentration is interesting because I was watching Bloomberg this morning. I think a number I picked up is that yesterday, while it was a green day, I think the fourth or fifth positive day for the S&P 500 um in in a longer time. Um only out of the S&P 500, which is obviously 500 companies, but 398 of them were negative. >> Yeah. >> Yesterday, but we closed up, right? Yeah. So, let's talk about that concentration like who's actually benefiting from what is happening in the markets in the economy right now. Oh, it's clearly benefiting obviously more money supply, higher money supply growth and uh debasement of the fiat currency benefits the companies that have the largest net present value of their short-term earnings. Technology companies, the ones that grow faster, have higher margins, higher cash generation, and and negatively impacts the defensive sectors as you have just just shown. But what's interesting about what you just said is that for a prudent long-term investor, the fact that out of the S&P 500, 400 companies have barely moved uh is a great valuation opportunity is that there are a lot of companies out there that are doing well, that are having good earnings growth, good consumer uh spending, uh leading their their their margins, etc. and that uh don't have demanding multiples. So if you're scared about the multiples of the S&P 500 because of the magnificent four, it's not even the magnificent 7 anymore because of the magnificent four, look at the other 497. There's there's plenty of great companies that are doing really really well that are purchasing stock that are uh generating good returns and that uh and that are not demanding in terms of valuation. So I I think that it's interesting because this is a very expensive index market with very good value opportunities within that that let's say universe. >> Yeah. Um so we talked gold, we talked APE mating, we talked earnings in the market a little bit. Let's see if we can make a segue over to the Fed. Um cuz of course that we're recording this interview 6 hours before the Fed decision is announced, but uh the CME Fed Watch tool gives me a 99.9% certainty that we'll see a 25 basis point cut in about 6 hours time. Um what what do you make of the the Fed and the Fed's involvement maybe in the stock market moves right now as well? How much is the stock market also profiting uh from expected cheaper money? Um is that even having an impact? uh is that tied together or is that completely separate? >> No, it is important. It is important. Margin debt is at uh uh five sevenyear highs if I'm not wrong. That means obviously that a 25 basis points cut is going to go directly uh to as a as a as a tailwind to investors that are taking lever positions. Um but the Fed's uh decision to cut rates finally is also likely going to be a very very significant boost to the American consumer families and small and medium enterprises because those are have been the ones that have been obliterated by the Fed's policy in the past. first by the enormity of the inflation that the Fed created and ignored and then by a number of massive rate hikes that have basically uh demolished the access to credit of small and medium enterprises and families. A lot of people ask, why do you care about 25 basis points? That's not going to move the needle. Of course, it does. A family in the United States right now finds a mortgage at 6% 25 basis points cut in the reference rate means that these families can actually receive mortgages first that they can receive a mortgage uh uh offer and second that they can receive a mortgage offer at a more sustainable and and affordable rate. No, which would be obviously significantly lower than than 25 basis points. It's it's it it multiplies up and it multiplies down. >> Now, it's interesting because we we need to also maybe take into account like what the Fed might be saying and what what the direction here is as well uh towards a neutral rate perhaps. Where do you see that neutral rate Daniel? And do do you see further rate cuts in the future? Yeah, I think that they are basically they remain around 100 basis points above the neutral rate, which is obviously even the Federal Reserve of Minneapolis estimates that if you stay for a year above 100 basis points above the neutral rate, it destroys a million jobs in the United States. The theme job creation is is is destroyed. No. Uh so I think that there are there will be further rate cuts because as we progress um month by month and we see that tariffs are not causing inflation that inflationary pressures are uh behind although there is obviously inflation but it's mostly because of what I me mostly it is because of money growth um but if we look at that what we can see is that the Fed is going to be confident to cut rates also because the base effect stops working. You see a lot of the estimates of the Fed are [clears throat] penalized by not understanding that the base effect has generated part of the of the uh increase in annualized inflation. But the month-on-month inflationary pressures are in existence. And I think that that's where the Fed is likely to be a little bit more uh decisive about cutting rates and bringing it back to back to neutral. >> Yeah. No. Um it's interesting because I'm curious uh also the the dot plot. We're not getting one today. Um but how you know the Fed govern what do you call the Fed governance sort of develops because we will get a new Fed share eventually here in May next year which is coming up rather quickly now. And uh coming back to the jokes and the laughter uh on the Asia trip, but uh uh Trump was pushing Bent to like, hey, why why don't you do why don't you do it? And uh I think we got the best candidate sitting right here and uh Bent was just laughing it off, right? So a lot of jokes being cracked around the Fed in general. Um Daniel, maybe last few minutes, give our audience a bit of an an outlook. What do you expect uh from the markets uh until maybe year end and maybe until the end of the first quarter next year? We're likely going to see a significant move melt up into the end of the year because of all these uh headwinds uh have been abandoned or at least forgotten or at least uh debunked. No, the tariff increase in inflation, the disaster for the economy and all those things. So I think that a lot of investors that have stayed in cash, we have so many clients in cash that it's insane that we had to beg them to put at least put the money in money funds so that they would get some kind of return. No. Um so I think that we may have a significant meltup considering the rate cuts, considering the uh the the the positive uh signals coming from the economy and from earnings and that we may have some uh correction either at the very very end of this year or at the beginning of last year of next year. But ultimately 2026 is going to be a year in which the concerns about a global recession are going to be very very limited. Concerns about the impact of tariffs and trade are going to be way way way behind and in which we need to concentrate all our uh attention is on whether inflation accelerates or decelerates. No, I think that that is the key element. Will we have another 2022? That is the risk. No, I don't think that that is the case. But it's something that we need to monitor because money supply growth is very elevated right now. Money velocity is not rising. Therefore, inflationary pressures are very low. But if money velocity starts to rise, then we need to pay quite a bit of attention to that risk. So it's a it's an environment in which corrections are buying opportunities. >> Fantastic. Awesome. Daniel, really appreciate you joining us. It was really insightful. We covered a lot of ground, I think, within a short period of time. Much appreciate you joining us. Like where can we send our audience to follow more of your work. I mentioned your YouTube channel earlier uh as well. >> Yeah, thank you very much. I have a YouTube channel in English, Daniel Laya in English. It's self-explanatory. And uh Twitter account in English. uh and uh and my website is also has all my articles in in English and in Spanish as well. So uh looking forward to joining the conversation with all of you. >> Fantastic. Awesome. Daniel, thank you so much for joining us. It was it was really great. We'll have to do this again soon. Maybe do a bit of an outlook for 2026, maybe late December, early January. So thanks so much for doing that. And everybody else, thanks so much for tuning in. Really insightful discussion. Of course, a lot of make macro news uh raining upon us today. We got the Fed meeting. We have the APEC meeting happening. We got earnings season upon us as well. So, lot lots to discuss. I hope we helped you make a bit of more sense of what is going on in the background here in the markets while we're watching the S&P 500 rally higher and higher on a daily basis. So, thanks so much for tuning in. Hit that like and subscribe button and we thank you for that. Take care out there. Be safe.
Gold Collapse?! YOU Should Be Laughing Too! | Daniel Lacalle
Summary
Transcript
The US president is touring in Asia. The Fed is meeting as we speak. The S&P 500 is at an all-time high. And uh we we're laughing off the gold collapse. I think uh lots of topics to discuss this week. Lots of macro news uh reigning upon us this week. Earnings on top of it as well. Lots going on. I've invited a fantastic guest to discuss and maybe try to understand what is happening in the world a of macroeconomics but also in the markets. His name is Daniel Lai. He's the chief economist over at Treses. Runs a phenomenal YouTube channel and definitely somebody you should follow if you don't do already. But before I switch over to my guest, hit that like and subscribe button. Helps us out tremendously and we much appreciate it. Now, Daniel, it is a great pleasure to welcome you back on the program. It's good to see you again. >> A great pleasure to be here again. Thank you very much, Kai. >> Daniel, I'm having a hard time putting uh you know, focus on on all the topics that are sort of raining upon us this week. Um I mentioned in the intro we got the Fed decision just a mere what is it 6 hours away now uh as we record this we got the APEC meeting happening but we also have earnings raining earnings season going on but I want to start with gold which is a bit atypical for us here uh and I caught a title of of an interview you've done recently you said the gold collapse makes you laugh um let's talk about that um as we know gold corrected quite a bit what do you what do you make of it >> well I was laughing because they asked me about the gold collapse after a 50 odd uh increase in in the price in the last year. No. Um uh so obviously what we have seen is something that is quite significant. No, it's it's it's a liquidity event is that [clears throat] investors are facing that uh at least wall of maturities in a lot of the leverage bets that have uh been in place since the beginning of the year particularly and many investors were using hugely leveraged bets on gold using a US dollar that they expected to weaken quite quite significantly. So suddenly you get the dollar that stabilizes and strengthens. Second you get a lower level of liquidity and higher cost of renewing margin calls etc. So suddenly quite a few investors had to sell the uh trades that actually had made them uh significant profit and gold was one of them. No. So that's why we've seen this this correction from 4,300 and change to 4,000. But I think that the the fundamentals of gold have not changed at all. No, the demand from central banks continues to be at around 1,000 tons a year. Uh the demand from investors to hedge themselves against monetary destruction is obvious and remains one of the key elements. Uh and finally there is a significant challenge in terms of supply relative to demand. So all of the fundamentals uh are intact and obviously uh things don't go up forever. But it's interesting how the narrative was one seemed like there was a desperate in need to see gold correcting in order to create this headline. No, absolutely. And a lot of our a lot of investors, my myself included, of course, we've been in this bare market, especially on the mining stock side, of course. So, we're always very cautious uh because it feels like a game of whack-a-ole whenever we stick our head out and we get a little excited. We usually get whacked on the head, right? Yeah. And that's sort of what we expected. But do you think the correction is over now? Where do you see it correcting to perhaps? Um >> uh I don't you never know where it's going to correct. What I do see is that it it at around 4,000 uh central banks all over the world start to uh increase and accelerate their purchases. No, because many of those central banks remember they're purchasing but they have a target. They want to reach at least 25 30% of their reserves in gold. If they're currently at 10 12 obviously there's plenty of room to go. So um so I would say that uh if gold was to correct to 3,200 3,500 which would be a very very clear support that would be the clearest buy in the planet. Uh it may be difficult to reach that level. No >> no fair fair enough. And uh I I think we all can agree that it was overbought at least temporarily but as you said I think the trend is intact. That's why I I don't see any need to panic here. Uh and I do appreciate you saying that as well. It puts a little gives me a little more comfort of course. Um but but Daniel, you also mentioned something that is quite intriguing that we need to discuss and which ties into the bigger picture as well is that the that of the strengthening dollar um because it hasn't gone down um with gold like you you would expect gold up, the dollar goes down, but it hasn't happened. Gold actually went up not not by much to be honest, but it went up alongside gold. Um what do you make of that? what is driving uh dollar uh these days? What is making it stronger? >> Yeah. Well, it's it's it's a it's almost a tale of the uh tallest small person. No, what we're seeing in fiat currencies is more the weakening of the yen, the weakening of the euro relative to the US dollar. Uh there was a very aggressive carry trade. It's actually if you think about this the the strengthening of the US dollar is also uh a liquidity event coming from a lot of investors that had taken very very aggressive bets on Euro, Japanese, UK less but I would say euro in particular assets uh with a short position or or at least a source of funds position in the US dollar. The moment that the incredible problems of France started to be headlines all over the place and the uh information about the incredible increase in debt that Germany wants to undertake while other Euro area members are only reducing debt by uh uh using the denominator of the of the ratio no GDP plus plus inflation. So in essence what what is happening is that a lot of people suddenly realize oh my god Japan and the euro area are not as strong as they expected. Furthermore they are much weaker than the United States. At the same time you have United States growth projections going from recession to plus 1.5 plus 2.5 plus 3%. So very significant increases in the expectations of US growth and although not as aggressive as one would like to no the deficit reduction in the United States has also been evident. No. So those all those things basically show that being too positive on the yen and the euro was a very aggressive and risky bet uh considering what is happening in France, in Germany and in Japan. It brings me an interesting thought or it brings an interesting thought to mind here Danielle is that the US dollar a lot of people are calling it it's dead already or a dying currency right um but putting it in the broader context maybe that's the segue to also the APE meeting uh that is happening in in South Korea right now it seems like and and that's my impression by the way like that the US and President Trump perhaps is managing to position the US in in a way strategically economically and strategically that it remains relevant moving forward, meaning AI supremacy, chip supremacy. Um, we don't even have to talk about military supremacy at this point because I feel like this is more secondary. Um, and and that's why the dollar has gained some strength as well. So, I'm curious um what your opinion is on that especially in light of the discussions that are happening in Asia right now. Yeah, it's it's a it's a very important point is that investors that started the year thinking that the US was isolating itself that uh this was some sort of Monroe protectionist administration obviously uh based on nothing. No suddenly see that there are trade agreements. The trade agreement with with Japan is going to reduce dependency on Chinese rare earths all these things. No. So I think that that is is a very very good point. know is that uh people finally realized and you have now the bank of international settlements figures of October 25, the IMF figures of September 25, the Swift figures, they all show that the US dollar remains the world reserve currency in reserves in uh transfers and in crossber payments. And at the same time that the United States policy is not a policy of of isolation, but a policy of reaching long-term trade agreements that would be beneficial for everybody. No. And I think that that that sort of I call it the the the tariff tantrum. No, the tariff tantrum has passed and people are suddenly realizing that this is a negotiation process and that things are not moving to the sort of ddollarization that some people expected. We may have seen some uh correction in the dollar index but not a change in the percentage of reserves, percentage of use in transfers and percentage in crossber payments at all. >> So, so are you are you saying maybe in that the world is gaining confidence in the US dollar again? And uh may maybe because sorry I'm getting ahead of myself. too many conflicting thoughts in my head here, Daniel. But also with with the gold price rallying, of course, people are saying, "Well, something is a miss here. Something is not right." Um, so we can throw gold back into the mix here. Um, the US dollar is here to stay. I think we can agree on that at least for a little bit longer. >> Yeah. >> Um, but how do you connect it now back with gold perhaps? >> Yeah. I think that what we're seeing is the uh separation of two systems. No, the western system and the system that is around China. China is trying to reduce its dependency on the US dollar by purchasing gold. So are other central banks all over the world. But they're not just reducing their exposure to to to the United States dollar. They're also reducing the exposure to the euro particularly. They actually started by reducing the exposure to euro assets. No. So it's a what we are seeing is lower confidence in fiat currencies as a concept no the US dollar the euro and the yen and but within the you those within those uh fiat currencies the US dollar remains king you see what I mean and why because I said it before is the is the tallest uh short person is is that it's it's it has tremendous number of challenges the United States dollar but compared with the enormity of the unfinanced and committed liabilities of the yen and the euro. It's not even it's not even a discussion. No. So I think that that is what's happening is that is that the world has stopped using as its only reserve asset in the balance sheet of central banks globally the US dollar and euro assets. Uh and they're purchasing more gold. But that is a rebalancing of the asset base. It's not a ddollarization which is a different concept. Ddollarization would have happened if with a declining the use of the US dollar for crossber for transactions for um uh for reserves. You would have seen a dramatic and equivalent increase in another currency because everything is relative isn't it? No. And we haven't seen that. What we have seen is a is what we are living uh is the gradual loss of reserve status of fiat currencies globally. No. And I think that that comes from the fact that Japan, the UK, the Euro area, the United States, all of them have stopped being that asset that generated stability, real economic return and strength to other count's currencies. That's why they are they are purchasing gold. So, interestingly enough, the strengthening of the US dollar relative to other fiat currencies is completely logical and uh coherent with a strengthening of gold in uh in a world in which the rebalancing of the asset base of central banks is shifting toward uh a real reserve of value item as as obviously gold is. >> Yeah, that that's a fantastic explanation, Daniel. That makes a lot of sense. Uh we can understand that all the fiat currencies are rubbish, but uh this is maybe the the shiniest paper in the waistbin or whatever you want to call it. You know, you can come up with any, right? Uh or the fastest horse in the groove factory or something like that, right? There's always great euphemisms like that. Um staying on the Asia meeting, the APEC meeting in Asia right now, lots of interesting news of course coming out out of there. President Trump is speaking very actively with the journalists and reporters. seems like the mood is very uplifted uh in in Asia right now. Uh based on the footage I'm seeing, there's constant laughing going on. Uh jokes are being cracked left, right, and center. Um but what I want to focus on is really the conversation with China and it seems to be a very positive one. Uh, President Trump just last night apparently on board of Air Force One said, "Well, I'm bringing Blackwell into the discussion." And I don't we don't need to uh, you know, um, dissect the technology, but I think the meaning of it and one phrase I heard this morning was, "Well, we're trying to get China addicted to our technology." Um, what do you make of that, Daniel? And how is that shift maybe the momentum in the tariff discussions? You may remember uh that the UK trade deal was the factor that suddenly made the European Union and many other countries wake up and accelerate the uh negotiation of a trade deal themselves. No, what has happened in Asia is quite similar is that once the other countries have seen that Japan is reaching a very significant trade deal that the dependency of the United States on Chinese rare earth has been diminished with the agreement in Japan etc. Then uh everybody starts to understand what in in essence or at least I certainly was very sure of was which is that there would be inevitably a trade agreement between the United States and China. What is what the agreement with Japan has achieved is the uh is is to make people realize that the technology alliances of the United States with its partners are much stronger than what than what people expected or at least than what the narrative of the tariff tantrum created. No, I think that it was pretty evident to be fairly honest. So what I think is there will be an agreement with China. It will be a complicated agreement because a lot of things will have to be monitored on almost a monthly basis. Origin washing uh intellectual property uh respect uh legal security so many things. No. Uh but there will be an agreement. And I think that what the world has also realized is that this magical idea that China can exist without any type of trade relationships with the United States has completely been debunked. No. So, we're gradually going to a more uh to to to the widespread perception that there will be a strong trade agreement in which the position of the United States is a bit stronger than what the media uh was at least portraying and the position of China is more accommodative than what the same media was was actually uh showing in its in its headlines. Yeah, it's an interesting topic because it's moving markets quite quite frankly. Nvidia is about to become a $4 trillion company. Uh seems like the naysayers have or have been wrong, meaning everybody's like saying, "Well, there's too much momentum. The the AI the AI bubble is about to burst." Um maybe that's the segue to to the markets here as well. Like how does that tie in now and what we're seeing? and you know valuations flying high, expectations are being off the charts of course going into earnings season now. What what do you make of market valuations in general here? >> Uh I always say that you have to look at market valuations compared with something because market valuations when I read the S&P 500 today is at 25 times PE and it was at 16 times PE uh X years ago. Well, compared to what? compared to the amount of money to me the S&P 500 and the NASDAQ are not expensive or or or stock markets for that matter. Why? Because what they're basically reflecting is the destruction of the purchasing power of the currencies in which they're denominated. No. So it's not just the earnings which are actually much better than what people expected and that is another factor that has let's say destroyed a few of the of the bears. No. Uh earnings have been better. Yes. The economy is doing better than what a lot of people expected a recession etc. Absolutely. But the overriding factor is the amount of money is that what we have seen in 2025 is a massive and abrupt increase in the uh in the global money supply more than 12% year to date and that obviously inflates risky assets globally. So uh so for me the S&P 500 is not that expensive especially when you look at it sector by sector. No, if you look at technology relative to uh European technology, it's not particularly more expensive and obviously they're global leaders with much better margins and more importantly much better cash generation. No. Uh if you look at other sectors like consumers, industrials, uh oil, so many others, utilities, they're actually not trading at a significant premium to Europe. No, for example. So I think that the the the premium that the United States which is a liquidity margin and adherence to the the interests of of minority shareholders all of those remain obviously and the US purchases uh buys back stocks while Europe mostly doesn't. So in in essence, I don't see markets that expensive unless one believes that there will be a significant correction in money supply growth and that governments are going to cut spending and deficits aggressively. The uh the debasement of fiat currencies is going to continue and it's likely that stock markets may be volatile. That is absolutely true. But the trend remains remains bullish and also the the concentration which is probably what we would be discussing afterwards is that concentration is going to continue to be a very important element. >> I was going to say concentration is interesting because I was watching Bloomberg this morning. I think a number I picked up is that yesterday, while it was a green day, I think the fourth or fifth positive day for the S&P 500 um in in a longer time. Um only out of the S&P 500, which is obviously 500 companies, but 398 of them were negative. >> Yeah. >> Yesterday, but we closed up, right? Yeah. So, let's talk about that concentration like who's actually benefiting from what is happening in the markets in the economy right now. Oh, it's clearly benefiting obviously more money supply, higher money supply growth and uh debasement of the fiat currency benefits the companies that have the largest net present value of their short-term earnings. Technology companies, the ones that grow faster, have higher margins, higher cash generation, and and negatively impacts the defensive sectors as you have just just shown. But what's interesting about what you just said is that for a prudent long-term investor, the fact that out of the S&P 500, 400 companies have barely moved uh is a great valuation opportunity is that there are a lot of companies out there that are doing well, that are having good earnings growth, good consumer uh spending, uh leading their their their margins, etc. and that uh don't have demanding multiples. So if you're scared about the multiples of the S&P 500 because of the magnificent four, it's not even the magnificent 7 anymore because of the magnificent four, look at the other 497. There's there's plenty of great companies that are doing really really well that are purchasing stock that are uh generating good returns and that uh and that are not demanding in terms of valuation. So I I think that it's interesting because this is a very expensive index market with very good value opportunities within that that let's say universe. >> Yeah. Um so we talked gold, we talked APE mating, we talked earnings in the market a little bit. Let's see if we can make a segue over to the Fed. Um cuz of course that we're recording this interview 6 hours before the Fed decision is announced, but uh the CME Fed Watch tool gives me a 99.9% certainty that we'll see a 25 basis point cut in about 6 hours time. Um what what do you make of the the Fed and the Fed's involvement maybe in the stock market moves right now as well? How much is the stock market also profiting uh from expected cheaper money? Um is that even having an impact? uh is that tied together or is that completely separate? >> No, it is important. It is important. Margin debt is at uh uh five sevenyear highs if I'm not wrong. That means obviously that a 25 basis points cut is going to go directly uh to as a as a as a tailwind to investors that are taking lever positions. Um but the Fed's uh decision to cut rates finally is also likely going to be a very very significant boost to the American consumer families and small and medium enterprises because those are have been the ones that have been obliterated by the Fed's policy in the past. first by the enormity of the inflation that the Fed created and ignored and then by a number of massive rate hikes that have basically uh demolished the access to credit of small and medium enterprises and families. A lot of people ask, why do you care about 25 basis points? That's not going to move the needle. Of course, it does. A family in the United States right now finds a mortgage at 6% 25 basis points cut in the reference rate means that these families can actually receive mortgages first that they can receive a mortgage uh uh offer and second that they can receive a mortgage offer at a more sustainable and and affordable rate. No, which would be obviously significantly lower than than 25 basis points. It's it's it it multiplies up and it multiplies down. >> Now, it's interesting because we we need to also maybe take into account like what the Fed might be saying and what what the direction here is as well uh towards a neutral rate perhaps. Where do you see that neutral rate Daniel? And do do you see further rate cuts in the future? Yeah, I think that they are basically they remain around 100 basis points above the neutral rate, which is obviously even the Federal Reserve of Minneapolis estimates that if you stay for a year above 100 basis points above the neutral rate, it destroys a million jobs in the United States. The theme job creation is is is destroyed. No. Uh so I think that there are there will be further rate cuts because as we progress um month by month and we see that tariffs are not causing inflation that inflationary pressures are uh behind although there is obviously inflation but it's mostly because of what I me mostly it is because of money growth um but if we look at that what we can see is that the Fed is going to be confident to cut rates also because the base effect stops working. You see a lot of the estimates of the Fed are [clears throat] penalized by not understanding that the base effect has generated part of the of the uh increase in annualized inflation. But the month-on-month inflationary pressures are in existence. And I think that that's where the Fed is likely to be a little bit more uh decisive about cutting rates and bringing it back to back to neutral. >> Yeah. No. Um it's interesting because I'm curious uh also the the dot plot. We're not getting one today. Um but how you know the Fed govern what do you call the Fed governance sort of develops because we will get a new Fed share eventually here in May next year which is coming up rather quickly now. And uh coming back to the jokes and the laughter uh on the Asia trip, but uh uh Trump was pushing Bent to like, hey, why why don't you do why don't you do it? And uh I think we got the best candidate sitting right here and uh Bent was just laughing it off, right? So a lot of jokes being cracked around the Fed in general. Um Daniel, maybe last few minutes, give our audience a bit of an an outlook. What do you expect uh from the markets uh until maybe year end and maybe until the end of the first quarter next year? We're likely going to see a significant move melt up into the end of the year because of all these uh headwinds uh have been abandoned or at least forgotten or at least uh debunked. No, the tariff increase in inflation, the disaster for the economy and all those things. So I think that a lot of investors that have stayed in cash, we have so many clients in cash that it's insane that we had to beg them to put at least put the money in money funds so that they would get some kind of return. No. Um so I think that we may have a significant meltup considering the rate cuts, considering the uh the the the positive uh signals coming from the economy and from earnings and that we may have some uh correction either at the very very end of this year or at the beginning of last year of next year. But ultimately 2026 is going to be a year in which the concerns about a global recession are going to be very very limited. Concerns about the impact of tariffs and trade are going to be way way way behind and in which we need to concentrate all our uh attention is on whether inflation accelerates or decelerates. No, I think that that is the key element. Will we have another 2022? That is the risk. No, I don't think that that is the case. But it's something that we need to monitor because money supply growth is very elevated right now. Money velocity is not rising. Therefore, inflationary pressures are very low. But if money velocity starts to rise, then we need to pay quite a bit of attention to that risk. So it's a it's an environment in which corrections are buying opportunities. >> Fantastic. Awesome. Daniel, really appreciate you joining us. It was really insightful. We covered a lot of ground, I think, within a short period of time. Much appreciate you joining us. Like where can we send our audience to follow more of your work. I mentioned your YouTube channel earlier uh as well. >> Yeah, thank you very much. I have a YouTube channel in English, Daniel Laya in English. It's self-explanatory. And uh Twitter account in English. uh and uh and my website is also has all my articles in in English and in Spanish as well. So uh looking forward to joining the conversation with all of you. >> Fantastic. Awesome. Daniel, thank you so much for joining us. It was it was really great. We'll have to do this again soon. Maybe do a bit of an outlook for 2026, maybe late December, early January. So thanks so much for doing that. And everybody else, thanks so much for tuning in. Really insightful discussion. Of course, a lot of make macro news uh raining upon us today. We got the Fed meeting. We have the APEC meeting happening. We got earnings season upon us as well. So, lot lots to discuss. I hope we helped you make a bit of more sense of what is going on in the background here in the markets while we're watching the S&P 500 rally higher and higher on a daily basis. So, thanks so much for tuning in. Hit that like and subscribe button and we thank you for that. Take care out there. Be safe.