Henrik Zeberg: The Final Gasp of This Bull Market—and the Fragile Economic Reality Beneath It
Summary
Macro Setup: Guest frames a late-stage blowoff top in equities alongside a weakening real economy, expecting markets to rise further before a sharp downturn.
Crypto Rally: He expects a powerful near-term move in crypto, with Bitcoin finding support, Ethereum outperforming Bitcoin, and select altcoins leading in a risk-on surge.
Small Caps: Small caps are leading the rally and are poised to outperform further as investors rotate out the risk curve into the final phase of the bull move.
Precious Metals: Gold and silver may first pull back during the risk-on and a strong-dollar phase, but are set up for a major bull market in a later stagflationary regime.
US Dollar Strength: The dollar’s structural strength and safe-haven status should reassert during a deflationary downturn, with a bottom near 95–96 preceding broader market tops.
Stagflation Risk: After an initial deflationary crash and policy response, the guest foresees a shift to stagflation, historically favorable for precious metals but damaging for risk assets.
Policy and Geopolitics: Fed independence concerns, potential policy missteps, and rising geopolitical tensions are underpriced risks that could exacerbate the eventual market break.
Transcript
This is actually just the final gasp of this uh this uh major bull run we have had. This is what people do not understand. It's not like you need a big bang a big you know hammer there right in the middle middle of the you know your your eyes there before the economy falls into a recession. The thing is it's the underlying structure that becomes increasingly fragile and and that is the problem at this point here. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. Hello and welcome to Wealthon. I'm Maggie Lake and joining me today is Henrik Zeberg, macroeconomist at Swiss Block and author of the monetary house of cards. Hi Henrik, it's nice to see you again. >> Hi Maggie, good to see you also. So, a lot has happened since we last talked. A lot has happened since this year has started, even though we're only 12 days into it. What do you see when you look across the macro landscape? >> Well, I think I see a um a tale of two stories. I think I see a tale where you um or a story where you can see that the consumer is really not thriving and uh but is completely forgotten and not spo spoken about in the in the in the media or anywhere else. and in the financial world. And then you have the the markets uh where you at least have if you if you look to equities has have had a fantastic you know um run in and we have new all-time highs on small caps that we have in the S&P I think NASDAQ is going to come and also around the world and if you look to some of the indices around the world they've just been going straight up ever since uh in April where I also was very bullish and and rightly so. So I think you have that you know these two two um two tales there of of that story and I think this is very common for what we see into a very large talk that we have a situation where the real economy the real consumer um which is the 90% of the population in the in the US are not feeling you know the sensation of the economy and then you have the stock market and everything you know just you know celebrating and just going vertically higher. So I think this is uh this is what we see right now. Yeah, I mean we we talk a lot about it as a Kshaped economy. That's kind of, you know, the the the sort of general way people have been trying to describe these two realities that seem to exist. I saw you tweet out that um people ask you if you're bullish or bearish and I think people tend to think you're very bearish and you said I'm both and I think it's been hard for investors to kind of hold that for anyone really who's grappling who sees signs of both of the things you talk about. Um I'm assuming that has to do with time frame. So, sort of explain explain how you're thinking about having being in a situation where you're both bullish and bearish. How does that play out for you? >> Well, it it plays out, you know, good. I think it's more about in the communication of things. So, uh so to me, it's always important to stay on the right side of the trade, so to speak, and be bullish for and be long as long as the we can see that the market continues higher. And uh so for now there's no indications of of any kind of um of top here right here. I I mean I think at least we could go to 8,200 on the S&P now. And but um but if you look to the real economy and you look to as I said before and you look to the the structural deterioration that we have in the real economy, looking to the housing market, looking to the to the non-farm payrolls to the labor market, what I've said all along is that you're going to see that deterioration slowly coming through in the economy. you'll start to see it in what is the most risk prone or the so rate prone um parts of the economy which is the housing market. So when rates goes up you'll see that the housing market kind of slumps or or at least we have that especially in the US there and now you start to see it also in the in the labor market which is the more of the imminent or the immediate imminent economy which is the uh what I call the coincident indicators. So the the real economy is is uh deteriorating it and and in start of 25 everybody was saying oh it's a fantastic economy. The labor market is so strong. We remember pal coming out I think it was May and saying how fantastic the economy is. And guess what in October the economy lost 173,000 jobs. And if you look through August, September and October it's it's a negative all combined. And then we have the November and December we'll see about those because they also get revised. So right now you're looking at the the that the the non-farm payrolls the as 12- month average there is declining and we are actually right now at levels that are below the levels we have had going into all the recessions into the 1970s. So meaning the job creation is worse on an average level 12 month average level than it has been for the last 50 years. >> And I don't think people really understand what that means. It's it means that the people talk about a K shape yet but there is a K-shape but there's one of them that is right and I I say it's the real economy. Uh so so these are the things that is happening right now. The deterioration is not something that happens overnight. Titanic doesn't sink immediately hits the iceberg and it kind of you know doesn't think sink people think that it's going to stay afloat and then it starts to take in the water water and and we are seeing that you know very very clearly now and uh it's just a matter of time you'll have um yeah you'll see the consequences of that you'll start to see inflation coming down which is a lagging indicator on the real economy >> and I don't expect anything to pick up at this point to to at this point actually on I think you're going to see it accelerate into the first um first few months of 26 year and then you'll see that at some point the recession will be will be here and the market will realize that in a in a you know kind of a shock way shock manner I think >> so the so the real economy is pricing reality and the equity markets are not >> yeah and that's that's how we see it all the time I mean people that says well the the the markets are you know discounting everything you know you can just that that is just wrong so you go back to the NASDAQ you the bubble there. Did it discount for a recession? It did not. Did you look if you look to the nick hey back in 1989 right into that top where it went straight up like what we see in the NASDAQ right now again. Did it discount for a 20ear slump at that point? It did not. So the thing is people think that the market does that. That's not the reality of things. If you go down and you take a look at the real economy which is the unemployment level, we have clearly seen that that is now moving up and we are now past levels there as well going into the recession in 21. If you look to an unemployment level as per not per as um as a part of the labor force which is the unemployment rate but as part of the population and you'll actually start to see that we are now passing some of the past recession or the beginning of past recessions. So we are sitting there in that twilight zone where some people will say oh but things are great and the economy and Trump or whatever will be the narrative around that and then you'll actually see that this is actually just the final gasp of this uh this major bull run we have had. People need to understand it is a major bull run. I started to call it a blowoff top in in 22 and I've called it ever since. And people say yeah but do you call it for such a long time? Correct. Because if you look to it, you know, you'll see that it's actually going more or less straight up and and especially if you look since April, it's been just going straight up and also as I said in the NIK and elsewhere. So we are these developments are not something you see and they go up and it goes you know horizontal. It it they are these Eiffel Tower that we see and um people think because they believe nobody like to be the bearer of bad news or to think that things are going to unfold in a bad manner >> but unfortunately that is the that's the forecast and uh and more and more is joining in on that in terms of in terms of the bad news that we see in the uh in the economy and I I don't understand how it can be that people are just disregarding what we see in the labor market at this point. So I mean I think you know as you point out you know there when you are have some other signals it's always like what's leading and what's lagging. I think that's what's confusing, right? So, if the economy is so weak, GDP up 4.3% in the third quarter, right? And people pointed to that as we were turning the year saying, "Wow, everyone's been saying the economy is weak, but look at this GDP. Look at productivity maybe being unleashed by, you know, technology, maybe AI or not, but at least technology is really making the economy more productive." You don't you don't buy that or you think it's reflective what it's in the rear view mirror of what was the case. >> First of all, it is in the rear rear window there, rear mirror. Uh but but the second second thing is people don't look I mean there is a famous line there in the in the big short of people don't look if you look to those 4.3%. and the components of that which you obviously need to do. >> Then there is the most important component which is consumption private consumption >> that was up three 2.3% in that number. 2.3% is a great number but if you then double click on that you will actually see that it comes from insurance and healthcare >> which means that people have to pay more for insurance and healthare. These are not things that you go out and choose to pay for. These are necessities that you need to pay for. And if you then look at the the credit card balances, it actually rose by two by 2.3%. Which if you look at that in an aggregate level, you'll say it rose by 2.3% 2.3 3%. And that was actually something people needed to put on their credit card balance um you know the debt that they have in you know already. So that is not a great number. Then you go to the private investment and you'll see that was around zero. And right now if you look at as a percentage of the GDP you'll see it's actually declining. So those people saying that we actually had a great number because of investment and both that's not what the number showed us. It was around zero in contribution and actually the number now in share GDP share of GDP it's down around 17.2%. And declining which you do not want to have if you have an economy that is strengthening. want private investments to be good. >> Then you have the number from the public expenditures or the the public um yeah uh expenditure. You'll see that was around 0.4%. That is not too high. That is not too cold. It's it's all good and fine. We can leave that aside. But then you saw the other factor that really matters and you take that with the consumption plus this one that was net exports. And net exports actually if you looked into that imports and exports you could actually see that it was because imports were declining and exports were kind of stable. See that is a good thing from a trade deficit perspective but it's not a good thing for a GDP perspective. It's not doesn't mean that things are great. It doesn't show that the consumer has a lot of money to spend because they spend less on import. So this is where people are confusing terms again and saying what is a trade situation and what is a you know GDP situation. So if you add all these things up, what I just the components here to GDP, you'll actually see that it was consumption which was something that the people had to pay and they put it on their credit card balance and couldn't actually afford it and then there was no investments and actually it was because people didn't spend on imports which is also a weakness which is normally what we see into a different. So the 4.3 backwardlooking by the way first of all and secondly it's not a strong number. It's a It's a bad number when you look into it. >> If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance, at hardassallalliance.com. That's hardassallalliance.com. And it and it is, and this is this is most people look at headlines. Um, and so this is why it's super important to sort of dive underneath. Is this so in against this backdrop where every the the economy as you describe it is weakening under the hood maybe not even that far under but is weakening. we have a couple of other risk factors that are um sort of having an impact on markets but certainly on the minds of investors and I'm curious how how this is influencing how you think about this transition from this blowoff top and the the disconnect between maybe what's happening in markets with the real economy. Um and one of them is the news of a criminal probe against Jerome Powell. We know that the Trump administration and the Fed have been at odds, but now it seems to be getting more serious and at least for today the markets are paying attention. Is that important in your mind at all? Does that concern you? >> Oh, it concerns me a lot. I I mean I don't want you know it's not about politics here but when it comes to the economy there's one thing that is very you know the very foundation and especially the foundation of the US society which is the strength of the US dollar and it it is strong it's actually people saying it's declining and crashing no it's actually up since 2008 and I think it's going to be even stronger next year here in 26 but the independence of the Fed is extreme extremely important because if it's the market starts to expect market participant starts to expect that any kind of deficit current account deficit that the US might have in the future and right now it's rather big uh you know nobody else in the world is able to run these kind of deficits without seeing inflation explode if that comes out that this is now just something under the executive branch or or it'll be something what Congress is just you know using as their you know what we need this we'll just you know print the money for it then you know we are in a completely different situation you could then say well that isn't that pretty much what the Fed is already doing and I will say yeah there is something to that and I think there is a misuse of that in I mean they have misused the whole can theory you know over and over and thinking it's going to to to to last that's for another day but when it comes to the connect or the disconnect the independence of the Fed there is nothing that should come be coming coming in because that is really a threat to the to the entire system. It might not be felt today or tomorrow but in the long time frame this is something that will u rise the inflation is going to get much worse from something like that and that is going to get uh be a problem for the consumer again people with money billionaires they'll figure a way out of this and they'll make sure that they are they are fine and they'll earn money on it sorry and um but people ordinary people will see this and feel this if we start to see that infl inflation and because of there is a distrust to in the in the US um monetary system because that's what we potentially could be talking about and if you look to a very interesting chart u which is the uh you look to the S&P the S&P 500 versus gold and actually seeing what is the what is the price of S&P and gold you actually see that we have had four times in history where we have seen uh that gold is starting to outperform the S&P strongly and that we see right now we see it we saw it in 1929 9 where we had the you know we talk about this the largest bubble which actually is much smaller than what we have today but that's for another day. 1929 was speculative bubble 1971 was the next time we saw this where gold started to outperform strongly which was when Nixon came off temporarily the gold convertability. This was a mistrust or distrust it's called into the to the uh monetary system. it kind of you know with the petro dollar you know you you found a new new way there and you had a lot of demand for the dollars and and the dollar has been been strengthening then then we saw it in 2000 again when you had this huge bubble into the dot and you saw again that the gold was outperforming now this time I think you're seeing it because of two things actually both the things we've seen the speculative bubble which is much bigger than ever we have ever seen and people starting to think this can't end well you know behind again behind the curtains and then you have this where all of a sudden we're starting to question you know who is actually the one sitting there and doing the um yeah the financing of of things through do we have an independent Fed if that comes you know starts to to get shaken you're going to see that that is going to accelerate I do think it's going to accelerate to so the goal will outperform in the longer time frame here but but you don't want that you you want sound money and and this is the absolute opposite of sound money that is what we see here here there needs to be Chinese you know wall watertight to doors between uh the Fed and the um the Congress and the executive branch. >> Yeah. And there have been a lot of questions. I mean the markets certainly voting with their feet today. We'll see if that changes anything. But there have been a lot of questions about uh the separation of power in the US for the first time. We have a a very aggressive executive branch. whether you're in favor of or favor of the policies or not, it's it's something new and the Trump administration testing the limits of how far they can go. What about on the geopolitical front? Um we have seen right out of the gate in 20 uh 26 um the action in Venezuela. We have protests in Iran. We have questions over Greenland. It seems that things are rapidly changing uh in terms of the the world order as we knew it. Does that question the ability for this blowoff top to continue? Is that a market risk that's not priced in? How are you thinking about geopolitics? >> I I I don't think that the blowoff top is in danger as so many people are thinking. I mean the blowoff top is is developing because of um the liquidity that we are starting to see coming into to the system now also and I think the Fed is also going to be more dobbish and they will have to because the the economy is weakening so so I think that is not so much of a risk at this point and we actually already seeing the precursor of it because we have the small caps actually you know leading um this rally and NASDAQ is actually lacking S&P at this point which is actually a good sign for it to continue. uh we saw some of that also when we had the the decline into the April bottom and everybody saw that if actually the NASDAQ was the one that was the laggard and all of a sudden it just came and know I think you're going to see that again and you'll see that the uh the crypto also is going to follow so I don't think it's really about that and again this is where psychology and liquidity and the short-term developments in the market can stay irrational for longer than we can stay you know uh solvent and uh and that's where we need to you know not overanalyze the things that we see on a more structural level because the structural level will come through eventually >> but it doesn't may not come through tomorrow and there can be smaller drivers that can you know propel things higher which I think they will a lot higher here it's a so the thing is I I think the uh the whole situation the geopolitical situation is a problem and it's unfortunately it seems that seems like it's it's playing into that whole game I've been saying uh famously or infamously that we're going to see the first worst recession and the worst uh market crash since the 1930s. And when you look at that and the the what I'm actually implying here is that we're going to see at least a market crash of 70% on the NASDAQ, potentially higher. I think Bitcoin can get, you know, destroyed, also and all that. But a lot of these things are happening into a situation where we have a huge market uh bubble. And if you people listen to this and say, "Henry, you're wrong. There is no market bubble." I just have to say it's so obvious that if people saying there's not it's difficult to discuss because the the the data is suggesting something quite quite clear here but but and so you have a market bubble that can burst and you have the economy rolling over and moreover and this is another chart that I you know that that is extremely important if you look to the average duration of unemployment in the US and I'll get back to your question here also on geopolitics >> the average the time or the the the duration of unemployment, you'll see that that before going into the 2009 or 20079 recession, it was down at around 15 15 weeks. So people on an average level were unemployed for 15 weeks um around that level. That is quite long still, but you get back into the into the to the labor force. What you see right now is that it's actually up around 24 25 weeks at this point. So people are now more and more disconnected to the whole to the whole labor market. Uh and that is a problem because when people are getting disconnected your your capabilities doesn't really match and you know I I said this a lot on these but I'm I'm 50. I I know people at my age that find it difficult already to just follow suit in terms of you know with AI and computer you know everything. How do you because they have had an ordinary job for many years and they've done well but it's it's now you know something that makes that requires changes of them. >> Why is that important geopolitically? >> Because when these big leaps comes in in technology it's a great thing for the humanity on a long time scale. It's a fantastic thing. I think AI is going to change the world you know like one of the greatest technology leaps that we have ever seen. The problem is that there will be a marginalized group of people for a certain amount of time and these people will become discontent and they will start to feel we don't belong and that is one thing you do not want to have in a society. You don't want to have people saying we don't belong nobody can because deep down when if you're sitting there and you can't you can actually look into maybe your kids are going to be worse off than yourself you're you know that is a bad situation. So what I see also with the the bubble we have then if that bursts and we're going to get a potentially even a stackflation down the road which I could see as well then you have this situation geopolitically already where you then get a lot of people that would be discontent losing their jobs and seeing the prices of their grocery bag you know actually increasing >> that is and and potentially also their 401s actually you know losing a lot of value. If I get that right, you can see a lot of geopolitical tensions because there's one thing that I don't know why it is like that, but we always like to point somewhere else and it's easier to point to somebody else and say it's not about me, it's not my fault, it's that person's fault. And it can go in one way or the other direction and it can go also between countries. So very often you'll see that it's at least you know u more author authoritarian um that's difficult for me to say that's my second language here sorry about that >> but um but they um that they see these regimes will actually sometimes act you know need to act out and say this is you know we we do something there to to focus on something else and that can be in China that can be somewhere else it can be you know these things happen so the problem is all of these things are coming together at the same point here which is what I really think is pointing painting up the picture and there was somebody you know I can't remember the authors of it but they deserve a lot of you know uh praise for this book the the fourth turning and we're really seeing that I mean they wrote it in the late '9s and they pretty much wrote up going to have a financial crisis we're going to see all the systems that we've been building since the second world war are going to be destroyed and this is what we see every time we have these fourth turnings which you can by the way only compare to the situation just before the second world war you can compare compared to the situation in the 16 1860s and '7s and you know what that means with the civil war in the US or in the 18 around 1800 where you had the Napoleonic wars here in Europe. So these are the this is the big wheel that is is is turning right now. We we are in the big the big wheel is turning right now and it's I am a bit you know worried. I'm I'm will be a dad again here in um in in in April as a 50 one year old and >> congratulations. Thank you. And uh I'm really you know a bit worried for what what kind of world is my you know my little son there that will come uh going to live in. And uh yeah it's a it is a it is a uh times I know. Yeah it's yeah. >> Yeah it's sobering. Um you one can only hope the more we talk about it um you know the the more light you shed on it the more people are informed about it maybe there's a choice in here. I mean that that's what we have to hope for. Is this a US story or is this global? My sense is the way you're talking about it and if you're talking about fourth turning Neil Howell was the um I believe the author then you're then you're then it's global right is this a global phenomenon you're talking about? Yeah, absolutely. I think it's a global phenomenon. I mean, first of all, wherever the US goes, uh, we the rest of us will follow to a certain extent and, uh, we we're not, you know, Europe is not the way, you know, it's not setting the direction of the world and the US dollars, uh, as long as the US dollar has the, you know, the strength it has and the hag money, you will see that that's that's where everything is central around. But yeah, it is it is definitely a global thing. and uh and and again when you the the if the US steps away from some of these things on the geopolitical arena then it is influencing us also here in Europe. So >> obviously it is and and also when it comes to the whole slowdown we have seen that for quite some time. The only reason why the Europe has been able to not fall into a recession if you look to Germany hasn't been looking great for a long time. So that that has been because you have had the locomotive of the uh and the the growth in in in the US and stimul the stimulus coming out of corona after corona was so immense that it kept things going for a certain while here but we are coming to the end of that and that is going to influence the whole world so yes is the answer it's it's it's global and also it's it's also in China and and elsewhere so it's not just the US uh you probably be still be the one you know country that could stand out the strongest again because the the the the the importance of having the reserve currency is so extreme that I don't think you know that anybody really understands what the the meaning of that is or the consequence of that is. >> Uh so it's it's such a you know this sort of brings us back to this idea of holding two things in your mind because we have this sort of terrible potentially terrible downturn global depression coming if you're right and yet in the short term there's there's maybe potential huge gains if we are going to you know ride higher until until it meets how do you think about timing that or how should investors think about timing that because what's the trigger that brings the the equity markets down to reality the real economy first of all what do you think is the thing that finally triggers that >> see this is where I um often have discussions and talks with people and say, "But but we don't see the trigger of this." >> And then I always ask them, "What is the trigger of an avalanche? What is the trigger of an avalanche?" And people say, "Well, yeah, it can be something. It can be a loud bang or something like that." Yeah, but it can also just be the snow that just gently falls down and all of a sudden the the underlying structure becomes so fragile that it starts to to run or whatever it's called. It's just, you know, down down the mountain there. >> So, this is the situation for the economy. This is what people do not understand. It's not like you need a big bang a big you know hammer there right in the middle middle of the you know your your eyes there before the economy falls into a recession. The thing is it's the underlying structure that becomes increasingly fragile and and that is the problem at this point here. We are actually exactly seeing that kind of increasingly fragile structure which is the which I talked about labor market but the consumer and if you look to the consumer which is the very foundation of the structure we have then you'll see that the consumer right now is worse off than they were into the 2007 and 2009 recession worse. If you look to the number of people living paycheck to paycheck in the US, you're looking at the people who do not have, you know, enough money to simply put enough boot to get food on the table, which is a is a tragic thing. It is actually also worse than going into 2029. >> So this is the fragile structure underneath. So people saying what is it going to be? Can it be something big? Yes, it can. Just like with the avalanche, it can be something. It can be the a big bang. It can be somebody shooting it, you know, to to make it start to run or it can be the ski, you know, guy that comes down and he'll offset set it off or it can simply just do do it from a small thing. Remember the financial crisis started I think it was in a bank in was it or something where it was just one bank saying nah we don't take that as collateral any longer >> and that had then you know like a domino effect. >> Yeah. >> Yes. So when people saying what is it going to be and you know they don't understand that the the underlying structure is what is important and the underlying structure is the US consumer and the Danish consumer and the European consumer but mostly the US consumer. >> So the the that's I think that's a fantastic point. Beware the snowflake the last snowflake. But in that situation uh you can't everyone can't get to the exit at the same time. So there's that's I think that's the danger. So you know what is the preparation? So the timing maybe it's a year that we see gains and you're sitting on the sideline. Do you do you just watch from the sideline and let it go >> or do you start to prepare now for what's coming to get out in front of it? >> So I'm not on the sideline. I am probably in the most aggressive setup portfolio wise that I've ever held because I this is the time where things are going to to explode higher and there as I said there are so many of these imminent risk um indicators that I that I keep an eye on that are not simply not flashing and just simply saying there's no credit spreads right now there's no stress in the financial system the short the you look at the um the initial claims are still very very low which means that there's not a lot of laying off at this point here so yeah it's actually The problem the problem is that you are sitting there and you can be right and that was also back to my tweet. If you sit there and you see the market go up 25% and maybe that particular stock you've been looking at and think I needed to see it to dip a little and it goes up 50%. And then you say well I now I jump in. Uh you can actually do that right into the top. So this is about really that's about the people saying it's not about timing the markets about it is actually honestly about timing the markets. I mean again also if you look to uh sir Isaac Newsenten he was actually you know also a part of this where back in the Southshi bubble and the days of that he actually also at some point and he was a very clever guy. He um he he was part of the uh of this this stock and he you saw his money actually just uh uh that the stock actually just went lot lot higher. He went out he earned money and then he jumped back in right at the top and he he actually went bankrupt on that. So it's not just that you you can be the most you know intelligent person. This is really about understanding that there is a psychology behind things. It's not just about math. It's about psychology and understanding that this these things can go on for longer. So there are indications that we need to look at and these were so there are some of those that I talked about just before which are in the macro um area. When I look at the markets I look also to Fibonacci levels. I look to what I do is I do a calibration across the you know across all the the markets that I which is a lot uh so so getting you know a picture not just from one or two or five but from a hundred different indicators that in the market and saying okay are they starting to show weakness one of them would be the Singaporean index why is the Singapore index important because it's a small open economy very heavily uh uh you know dependent on trade in the in the Singapore and if that starts to put in what I think is a top which we can see another 15% before we see the do that >> well then then probably you need to start looking out for the other markets around the world as well so there are indicators it's not just about sitting there and wait because if you sit and wait for a year and a half >> you will feel the FOMO and you'll start saying oh I must be wrong and you jump in and then as Newton you'll probably jumping in right at the top >> yeah and especially for people who are going to need that money you know in the near term that I think that's that's what we all worry about >> uh does anything [sighs] come out unscathed bathed from this downturn that you let let's back up for one second. What performs best in this late stage in this maybe year that we have left of the everything rally? What does the best? >> Let's see if it's a year. I I I I'm not certain about that, but let's [laughter] see about that. But hey, yeah, I've been >> in the next three months. >> Yeah. Yeah. So, I I think you'll actually see that at this point here. And I I know that's um not what people believe and that's actually one of the reason I also see it. I think you're going to see crypto is doing you're going to have one of these runs that people are just you know falling off against uh their on on their backs in terms of of awe and of the you know the the extreme rally that you can see in some of uh in in crypto. That is not what you see in here right now because we have been in a situation where Bitcoin has been going sideways actually since yeah for more than a year if you look at it you know even though you have these big >> uh yeah uh volatility. So I think you're going to see that Bitcoin will find its feet here. You see that Ethereum will outperform Bitcoin and I think you're going to see a lot of the alts are going to to outperform these. So there will be some alts out there that will do extremely well. But also in the stock market, you'll probably see a lot of the uh of the small caps doing extremely well because there will be a rotation into the final end of this. That's also always what happens into big tops is that you see a rotation from the more secured stocks. It's always about, yeah, we trust Apple. Okay, we jump into that. And then when Apple has been going up quite a lot, you say, "Yeah, okay, this balance here thing it looks okay, we go with that." And then and then you go further and further out on the risk curve. And that's that's what we also would see. we're not there where we have been uh we've seen the top of that at all as [clears throat] I see it but um but we and there but again it can also develop really really quick and that's why I say I I don't know if it's three months or six months I know what I'm looking for and the first level I'll be looking for now is say it's 200 and then there are all the indications please know it's not just about a level there are indications saying would then that be the top and again I would be looking to to other markets so so it can be uh I think you know crypto will do fantastically well. I think you're going to see that gold and silver even though it making new high today as well uh will actually have somewhat of a um a pullback because yeah there is something happening but they have been pushing off and and normally we see those they have a kind of a spike before we see it coming into some of the riskier asset again the the rotation into riskier assets. So I think we uh we will see it coming all the way out on the you know the outer end of the of the risk curve here and uh and things that has no value also in in in cryptoland is going to be maybe have a fantastic run again not recommendation and I can be wrong but it's it's it's I could easily see that and I am positioned for something of that for that run right now even though I have this very bearish outlook on a more on a longer level on a longer time frame >> longer term. Yeah. And and and unsure of that time because I'm I'm sure the the quicker we get up and the more steam there is in that blowoff then the the riskier that we pull in the time frame of the >> Yes. >> of the >> and there will be a lot of people caught there >> if we if and once we transition into that is there any place to go for protection? Does any asset class hold in or is this something where everything sells off? See, I think u again I when I look at my charts, I then go again across the hole and try to set up these scenarios. So the scenario doesn't come first and then the charts. It's actually the charts where I >> what I see is that you're going to see a dollar that is finding its bottom in a not too distant future here. When I say that >> it has been putting in some showing some strength even though we've been around this level where we are now. >> I don't think the bottom is in for this cycle here. I think it'll be in around 95 96 when that turns then it's really the countdown for when we see a top also in the stock market and in the and the crypto market and in for a certain amount of time and this is again where it would be so nice to say yeah you just need to buy this because that would be the best way but it depends again on timeline and it depends also on how fast we can see what I think is going to be somewhat of a whipssaw >> there in 2008 you had a deflationary crash which means that um things were you know assets were losing value and what they had to do coming in trying to pump it back up. The problem is we have seen now the bad side of all this stimulus that we have se from the central banks which is inflation. >> Five six year years ago 9% in inflation would not is not something anybody would expect. 2 3% yeah but nothing more not more than that because we have been in a deflationary environment since 2000. whatever they did not didn't really you know influ in affect that so we didn't see inflation going up very much I think we had the inverted fula moment in 2020 when they did the co stimulus because what they did >> was they stimulated and when I say they I mean it's they in terms of the central banks of the world and the administrations of the world so it's not just the US all about it's I mean we are also culprits here in Denmark when it comes to that they stimulated with the most massive stimul imulous we have ever seen far out uh you know ranging the the stimulus that we had after the second world war you know the martial aid which the US paid to Europe to rebuild Europe >> we we we didn't have a situation like that at this time but we stimulated like crazy >> into a situation where people had to go home because of COVID which means the supply chains broke down first year at economic studies in in in you know you will see at the university you'll understand that price h you know comes from supply and demand and if you put in a lot of demand and people were sitting home and getting this paycheck and know this external money in their hands, they're going to spend it into a situation where there is no supply or limited supply. That is not what you want to do and they that's what they did because they over they overdid it for to put it like that. >> Um so the the thing is now inflation has come back. People actually see that inflation has can can come back up again. This is the biggest worry they have right now is inflation for a lot of people. we have and they miscon and they confuse themselves with price level and inflation because the actual inflation level right now is not so high. The price level has risen a lot which is what people are feeling still. >> Yeah. >> So the situation is right now that Mrs. Johnson there in US she sits there and she says well if they're going you know if I start to save some money on my my my mortgage loan am I going to take that $100 and go spend it immediately because that is what QE needs you to do. if you don't or is it are they is she going to save it? I think the propensity of starting to save these money because she has seen an unemployment also which is starting to move up and prices going higher and the yields and rates which she's up to the neck in well she was going to spend she's not going to spend it necessarily. She's going to save it for a rainy day. If that happens then whatever they do into this into this crash could all of a sudden make things worse. And I think this is what people misunderstand right now. They say, "Yeah, Henrik, but if there's a crash like in 2008, they're just going to come in back in again and going to stimulate." And I say, "Yes, exactly." And that is the problem because the psychology of this market has shifted. The psychology of Mrs. Johnson down to that one person has shifted from I'm going to spend to I'm going to hold on to this one. >> So you can create a hype in the market, but you can actually offset offset something that is worse if they do this and which they will. I'm not even saying if they will. which is stackflation which means the economy is bottoming out much lower and the inflation level is staying on a uncomfortably high and maybe even rising and then you had unemployment levels at 6 7 8%. If we get to that situation, that is the worst you can have. And that is actually also where I think and that's what my book is all about. That is the real endg game. That is the moment we are seeing also the first beginnings of in Japan. They're actually starting to see, oh, we can't just stimulate and just print money and now inflation is going up even though they aren't doing too much. What is it to do about it? If you stimulate more, no, we don't want that. You high rates then markets are crashing. So that's the worst situation. So I think you're going to see back to your question what to hold on to different phases the phase up into the blowoff top there'll be a crash which will be deflationary there'll be a bounce when the Fed comes in and then there'll be the stackflation which is going to be the worst in stacklation to take it from the back commodities it will be gold and silver precious metals and so on but all around in the phase before they do that their dollar will going to be a good place to be because it will be about liquidity into to a deflationary phase. It will be about people being able to pay off their debt and that is where the dollar has this tendency that when you know the world starts to decline it strengthens because most debt in the world is denominated in the US dollar >> right and people are hoarding they want they want dollars and they want collateral. Um, for gold and silver, they've had quite a run already and when I hear people who worry about gold and silver, let's just say gold, uh, they say, um, they understand the commodity, they understand that, you know, why people flock to it as a safe haven, maybe the last safe haven left, but when everything's going to bust in a in a downturn like that, in a market sell off, every they people sell their winners. they have to liquidate their winners. Does gold get taken down in that too? >> If you're looking to gold as a safe haven, is there a risk that gold declines because people have to sell it? >> Yeah, I I think that is very that's a given. And again, I I know that is where I have a um where people say, "Yeah, but that's that's different this time and so on." But of course you need to there are the fundamentals which is that if there are you know a g gaping hole gapping hole in the in the ground in terms of you know valuations just falling through the floor and people need to to find liquidity you sell you know sell off the the assets. I mean the reason why actually and this is not what people think is the reason why gold is so important is because you can always get liquidity when liquidity is needed by selling your gold. Uh so gold is actually you know performing its finest task when it's actually being sold off into the situation where liquidity can't be found because you don't sell your the house value what is that you know and that is where gold has a has a an importance so I think the runup we have seen here is the precursor of what is going to come later on but I also think that into the riskon rally that I'm talking about here I think that gold and silver may have a bad decline there first and then I think you're going to that actually as the dollar rises they're going to have even more of decline. So I think the the the move up here which looks like the left side of the Eiffel Tower I think the right side of the Eiffel Tower maybe to down to a certain level is going to come to gold and silver and then you'll see that when then the Fed comes in later as I said guns blazing and trying to fight deflation you will see that then that will be a very very big uh bottoming gold and silver and then going into the next level that's where you know stackflation is where in the if you look into the 1970s into 1980 you had gold going up five times in two and a years. >> Even though gold has done well this time, it's not up five times in two and a half years. >> So the the real bull market comes the moment when you have stlflationary development. And I think people are misunderstanding the situation we're in now because actually when inflation is moving lower here as it seems and we have an an economy that is stalling that is not a stlflationary environment. So so the run up there has been a precursor of what is coming. I didn't see it to go to this level. I I have to say that. But I I think still that these two thing, the risk on and then the the risk off in with the dollar is going to send gold lower first before you actually see that monster run that I could see I could vision envision into the 2030s. >> Yeah. It's it sounds like you're describing a time where there's going to be volatility and a time when people are you're going to have to be nimble because there's going to be different stages where assets perform very differently and you're going to need to be paying attention to your time frame during that. Um, last question. Is there anything that would change your mind about the crash coming? >> Is there any policy way to get out of this? Is there anything that would make you think, "Oh, hang on a second. Maybe this will help repair the economy that is deteriorating underneath the sort of headline. >> I would love to say yes, but it's like asking you the the captain of the Titanic, not that I'm the captain, but the you know what what can we do to to u to make so it doesn't sink and we are unfortunately at the pro the point already where the deterioration is now getting selfreinforcing. And I >> I do not know why the Fed hasn't seen this. I mean I pointed I pointed it out with my model and it's so clear as today. I mean if you look at this as I said the 12 month moving average that is deteriorating and it's doing that fast. So this about talking about inflation because they don't understand inflation is lagging. I don't understand it. But anyway [snorts] there's not much to be done at this point unfortunately. I mean the the the best thing would probably be that you you've got rates lowered. Actually I I'm on Trump's team there I have to say. uh they are way way too high, way too hawkish but monetary uh stimulus here is not going to cut it at this point here. I think the momentum is already going and uh the problem is you have so many things that are so extremely highly valuation of them is just so high that how can you have a soft landing on that is actually what we're asking and that's where I think the you can create um a feeling of wealth of of uh prosperity by doing monetary uh stimulus over the time because you should you're suppressing yields which means valuation will go and we've done that for a long time the unfortunately at some point when inflation starts to come back again you will see that that the opposite happens and that's why I I don't think there's a good outcome to it so policy-wise I would say that it would be about first of all understand the real engine of the of the US economy that is the 90% of the consumers not the 10% 10% high uh the top 10% they actually are you know doing the 50% of the consumption today but the economy cannot run without the the 90% in at the bottom. And that's why it's about understanding that they need the support to actually dare to go and and and uh and you know buy things again and take one thing that could be and I know this is not going to sound great um especially not in the US but it would be to to have some debt forgi forgiveness >> and that is actually for you know if you took the bottom floor you know of 10 20 30% of the US consumer and say well you know what this student debt or whatever you have there we'll we'll take it off your hands. We will put that we'll have to put that on somewhere else. I know that on the balance sheet somewhere, but you would actually then have the engine, you will start to say to, you know, the engine will start to say, "Okay, I don't owe that $100,000. I can now maybe spend, you know, an extra dollar every month." That would help, but that is normally not something you see before crisis come. That is something that would be a tool potentially into the crisis. But I think debt forgiveness >> to the right levels, and we're not talking the top, we're talking the bottom level there, >> would be something that could help setting that positive uh feedback loop back into it. Yeah. >> It's interesting you say that because we have midterm elections coming up in the US and the Trump administration again, the the geopolitical moves and now the Fed is grabbing the headlines. but just last week talked about buying mortgage bonds, having the government buy mortgage bonds to bring rates down and capping interest rates on credit cards, much to the shock of credit card companies, >> which is a terrible idea. >> Yeah. So, you don't see that helping consumers because it seems like they're on trying to address the affordability issues that you just brought up. >> Yeah. But the thing is if you just you know just take it out on the credit card company it's not that I I you know I would like to also to see that they take it part of that you know help bear their the burden. It's not that like that but you have to we have to understand that if you say you have a cap of 10%. There would be a lot of people out there that want to have a loan or take credit for at 15% because they want to buy something. But right now, the credit company, the credit card company's going to say, "No, you know what? Nah, because >> so that so that it won't mean more credit. It'll mean denial of credit to more people." >> It'll be more denial of credit to people. It's actually going to take credit down. It's it's a bad idea. It's really a bad idea. It it looks good because we want to, you know, stand out and fight for the for the for the >> Yeah. >> for the the ordinary man, which is good or woman for that matter. it that is that is good but it's just not what you want to do because the problem is that it's going to be denied the credit. >> So you're trying to take a have a solution here put it on and on the credit card companies but it's not like they can just say okay great then we do 10%. Guess what? They do it out because of certain, you know, calculations where they from a risk perspective say we have a group of people here. We actually do not want to lend them money. But if they pay 20%, we might have 10% of them go bankrupt. That means that you know still we'll earn money on this. If you say you can only cap it at 10%. Well then they will say no. And if you do that then the credit card then the uh you'll see that credit is actually shrinking which is another thing that can make it even worse. You don't want to do that. If you start to buy mortgage uh bonds, well that is stimulus that that can help uh for some time that is that is no doubt about that because you simply will start you make you know suppress yields but you can actually still do that on the on the Fed side which is I'm talking about a more structural thing here. The structural thing is that we're somebody needs to own this debt. These people if you want them to spend you take it off their hands. I know it's not it sounds socialistic and all that but if you want to fix this there's no easy fix to it either. you see this going to crash and burn unfortunately or you'll see that these measures are taken for sooner or later because I think you're going to see it down the road anyway. >> Yeah, if it's going to come anyway. Uh fascinating [clears throat] stuff, Henrik. Uh as always, thank you for sharing your views. It's sort of a perfect storm that you're describing coming at us, but I think it's very helpful for you to talk about some of the signals that you're looking at and the sort of time frame, the sequence because it matters, right? The sequence matters. And I think that um there are a lot of confusing what sound like confusing narratives out there um but sort of explaining them in a time frame I think really helps stack it up and gives people some information that they can use. So thank you so much. >> Thank you so much for having me on. >> Such a pleasure. Appreciate your time. Um and thanks to all of you for watching. Um we kind of know what we're in store for. If you would like to stress test your portfolio for what's ahead, make sure you're prepared. You can get a free review from one of the adviserss in the Wealthon network. Just head over to wealthon.comfree. Thanks so much. We'll see you again next time.
Henrik Zeberg: The Final Gasp of This Bull Market—and the Fragile Economic Reality Beneath It
Summary
Transcript
This is actually just the final gasp of this uh this uh major bull run we have had. This is what people do not understand. It's not like you need a big bang a big you know hammer there right in the middle middle of the you know your your eyes there before the economy falls into a recession. The thing is it's the underlying structure that becomes increasingly fragile and and that is the problem at this point here. Don't forget to sign up for a free portfolio review with one of our endorsed investment partners at wealthon.comfree. Hello and welcome to Wealthon. I'm Maggie Lake and joining me today is Henrik Zeberg, macroeconomist at Swiss Block and author of the monetary house of cards. Hi Henrik, it's nice to see you again. >> Hi Maggie, good to see you also. So, a lot has happened since we last talked. A lot has happened since this year has started, even though we're only 12 days into it. What do you see when you look across the macro landscape? >> Well, I think I see a um a tale of two stories. I think I see a tale where you um or a story where you can see that the consumer is really not thriving and uh but is completely forgotten and not spo spoken about in the in the in the media or anywhere else. and in the financial world. And then you have the the markets uh where you at least have if you if you look to equities has have had a fantastic you know um run in and we have new all-time highs on small caps that we have in the S&P I think NASDAQ is going to come and also around the world and if you look to some of the indices around the world they've just been going straight up ever since uh in April where I also was very bullish and and rightly so. So I think you have that you know these two two um two tales there of of that story and I think this is very common for what we see into a very large talk that we have a situation where the real economy the real consumer um which is the 90% of the population in the in the US are not feeling you know the sensation of the economy and then you have the stock market and everything you know just you know celebrating and just going vertically higher. So I think this is uh this is what we see right now. Yeah, I mean we we talk a lot about it as a Kshaped economy. That's kind of, you know, the the the sort of general way people have been trying to describe these two realities that seem to exist. I saw you tweet out that um people ask you if you're bullish or bearish and I think people tend to think you're very bearish and you said I'm both and I think it's been hard for investors to kind of hold that for anyone really who's grappling who sees signs of both of the things you talk about. Um I'm assuming that has to do with time frame. So, sort of explain explain how you're thinking about having being in a situation where you're both bullish and bearish. How does that play out for you? >> Well, it it plays out, you know, good. I think it's more about in the communication of things. So, uh so to me, it's always important to stay on the right side of the trade, so to speak, and be bullish for and be long as long as the we can see that the market continues higher. And uh so for now there's no indications of of any kind of um of top here right here. I I mean I think at least we could go to 8,200 on the S&P now. And but um but if you look to the real economy and you look to as I said before and you look to the the structural deterioration that we have in the real economy, looking to the housing market, looking to the to the non-farm payrolls to the labor market, what I've said all along is that you're going to see that deterioration slowly coming through in the economy. you'll start to see it in what is the most risk prone or the so rate prone um parts of the economy which is the housing market. So when rates goes up you'll see that the housing market kind of slumps or or at least we have that especially in the US there and now you start to see it also in the in the labor market which is the more of the imminent or the immediate imminent economy which is the uh what I call the coincident indicators. So the the real economy is is uh deteriorating it and and in start of 25 everybody was saying oh it's a fantastic economy. The labor market is so strong. We remember pal coming out I think it was May and saying how fantastic the economy is. And guess what in October the economy lost 173,000 jobs. And if you look through August, September and October it's it's a negative all combined. And then we have the November and December we'll see about those because they also get revised. So right now you're looking at the the that the the non-farm payrolls the as 12- month average there is declining and we are actually right now at levels that are below the levels we have had going into all the recessions into the 1970s. So meaning the job creation is worse on an average level 12 month average level than it has been for the last 50 years. >> And I don't think people really understand what that means. It's it means that the people talk about a K shape yet but there is a K-shape but there's one of them that is right and I I say it's the real economy. Uh so so these are the things that is happening right now. The deterioration is not something that happens overnight. Titanic doesn't sink immediately hits the iceberg and it kind of you know doesn't think sink people think that it's going to stay afloat and then it starts to take in the water water and and we are seeing that you know very very clearly now and uh it's just a matter of time you'll have um yeah you'll see the consequences of that you'll start to see inflation coming down which is a lagging indicator on the real economy >> and I don't expect anything to pick up at this point to to at this point actually on I think you're going to see it accelerate into the first um first few months of 26 year and then you'll see that at some point the recession will be will be here and the market will realize that in a in a you know kind of a shock way shock manner I think >> so the so the real economy is pricing reality and the equity markets are not >> yeah and that's that's how we see it all the time I mean people that says well the the the markets are you know discounting everything you know you can just that that is just wrong so you go back to the NASDAQ you the bubble there. Did it discount for a recession? It did not. Did you look if you look to the nick hey back in 1989 right into that top where it went straight up like what we see in the NASDAQ right now again. Did it discount for a 20ear slump at that point? It did not. So the thing is people think that the market does that. That's not the reality of things. If you go down and you take a look at the real economy which is the unemployment level, we have clearly seen that that is now moving up and we are now past levels there as well going into the recession in 21. If you look to an unemployment level as per not per as um as a part of the labor force which is the unemployment rate but as part of the population and you'll actually start to see that we are now passing some of the past recession or the beginning of past recessions. So we are sitting there in that twilight zone where some people will say oh but things are great and the economy and Trump or whatever will be the narrative around that and then you'll actually see that this is actually just the final gasp of this uh this major bull run we have had. People need to understand it is a major bull run. I started to call it a blowoff top in in 22 and I've called it ever since. And people say yeah but do you call it for such a long time? Correct. Because if you look to it, you know, you'll see that it's actually going more or less straight up and and especially if you look since April, it's been just going straight up and also as I said in the NIK and elsewhere. So we are these developments are not something you see and they go up and it goes you know horizontal. It it they are these Eiffel Tower that we see and um people think because they believe nobody like to be the bearer of bad news or to think that things are going to unfold in a bad manner >> but unfortunately that is the that's the forecast and uh and more and more is joining in on that in terms of in terms of the bad news that we see in the uh in the economy and I I don't understand how it can be that people are just disregarding what we see in the labor market at this point. So I mean I think you know as you point out you know there when you are have some other signals it's always like what's leading and what's lagging. I think that's what's confusing, right? So, if the economy is so weak, GDP up 4.3% in the third quarter, right? And people pointed to that as we were turning the year saying, "Wow, everyone's been saying the economy is weak, but look at this GDP. Look at productivity maybe being unleashed by, you know, technology, maybe AI or not, but at least technology is really making the economy more productive." You don't you don't buy that or you think it's reflective what it's in the rear view mirror of what was the case. >> First of all, it is in the rear rear window there, rear mirror. Uh but but the second second thing is people don't look I mean there is a famous line there in the in the big short of people don't look if you look to those 4.3%. and the components of that which you obviously need to do. >> Then there is the most important component which is consumption private consumption >> that was up three 2.3% in that number. 2.3% is a great number but if you then double click on that you will actually see that it comes from insurance and healthcare >> which means that people have to pay more for insurance and healthare. These are not things that you go out and choose to pay for. These are necessities that you need to pay for. And if you then look at the the credit card balances, it actually rose by two by 2.3%. Which if you look at that in an aggregate level, you'll say it rose by 2.3% 2.3 3%. And that was actually something people needed to put on their credit card balance um you know the debt that they have in you know already. So that is not a great number. Then you go to the private investment and you'll see that was around zero. And right now if you look at as a percentage of the GDP you'll see it's actually declining. So those people saying that we actually had a great number because of investment and both that's not what the number showed us. It was around zero in contribution and actually the number now in share GDP share of GDP it's down around 17.2%. And declining which you do not want to have if you have an economy that is strengthening. want private investments to be good. >> Then you have the number from the public expenditures or the the public um yeah uh expenditure. You'll see that was around 0.4%. That is not too high. That is not too cold. It's it's all good and fine. We can leave that aside. But then you saw the other factor that really matters and you take that with the consumption plus this one that was net exports. And net exports actually if you looked into that imports and exports you could actually see that it was because imports were declining and exports were kind of stable. See that is a good thing from a trade deficit perspective but it's not a good thing for a GDP perspective. It's not doesn't mean that things are great. It doesn't show that the consumer has a lot of money to spend because they spend less on import. So this is where people are confusing terms again and saying what is a trade situation and what is a you know GDP situation. So if you add all these things up, what I just the components here to GDP, you'll actually see that it was consumption which was something that the people had to pay and they put it on their credit card balance and couldn't actually afford it and then there was no investments and actually it was because people didn't spend on imports which is also a weakness which is normally what we see into a different. So the 4.3 backwardlooking by the way first of all and secondly it's not a strong number. It's a It's a bad number when you look into it. >> If you're looking for a simple, secure way to invest and own physical gold and silver, visit our sister company, Hardass Assets Alliance, at hardassallalliance.com. That's hardassallalliance.com. And it and it is, and this is this is most people look at headlines. Um, and so this is why it's super important to sort of dive underneath. Is this so in against this backdrop where every the the economy as you describe it is weakening under the hood maybe not even that far under but is weakening. we have a couple of other risk factors that are um sort of having an impact on markets but certainly on the minds of investors and I'm curious how how this is influencing how you think about this transition from this blowoff top and the the disconnect between maybe what's happening in markets with the real economy. Um and one of them is the news of a criminal probe against Jerome Powell. We know that the Trump administration and the Fed have been at odds, but now it seems to be getting more serious and at least for today the markets are paying attention. Is that important in your mind at all? Does that concern you? >> Oh, it concerns me a lot. I I mean I don't want you know it's not about politics here but when it comes to the economy there's one thing that is very you know the very foundation and especially the foundation of the US society which is the strength of the US dollar and it it is strong it's actually people saying it's declining and crashing no it's actually up since 2008 and I think it's going to be even stronger next year here in 26 but the independence of the Fed is extreme extremely important because if it's the market starts to expect market participant starts to expect that any kind of deficit current account deficit that the US might have in the future and right now it's rather big uh you know nobody else in the world is able to run these kind of deficits without seeing inflation explode if that comes out that this is now just something under the executive branch or or it'll be something what Congress is just you know using as their you know what we need this we'll just you know print the money for it then you know we are in a completely different situation you could then say well that isn't that pretty much what the Fed is already doing and I will say yeah there is something to that and I think there is a misuse of that in I mean they have misused the whole can theory you know over and over and thinking it's going to to to to last that's for another day but when it comes to the connect or the disconnect the independence of the Fed there is nothing that should come be coming coming in because that is really a threat to the to the entire system. It might not be felt today or tomorrow but in the long time frame this is something that will u rise the inflation is going to get much worse from something like that and that is going to get uh be a problem for the consumer again people with money billionaires they'll figure a way out of this and they'll make sure that they are they are fine and they'll earn money on it sorry and um but people ordinary people will see this and feel this if we start to see that infl inflation and because of there is a distrust to in the in the US um monetary system because that's what we potentially could be talking about and if you look to a very interesting chart u which is the uh you look to the S&P the S&P 500 versus gold and actually seeing what is the what is the price of S&P and gold you actually see that we have had four times in history where we have seen uh that gold is starting to outperform the S&P strongly and that we see right now we see it we saw it in 1929 9 where we had the you know we talk about this the largest bubble which actually is much smaller than what we have today but that's for another day. 1929 was speculative bubble 1971 was the next time we saw this where gold started to outperform strongly which was when Nixon came off temporarily the gold convertability. This was a mistrust or distrust it's called into the to the uh monetary system. it kind of you know with the petro dollar you know you you found a new new way there and you had a lot of demand for the dollars and and the dollar has been been strengthening then then we saw it in 2000 again when you had this huge bubble into the dot and you saw again that the gold was outperforming now this time I think you're seeing it because of two things actually both the things we've seen the speculative bubble which is much bigger than ever we have ever seen and people starting to think this can't end well you know behind again behind the curtains and then you have this where all of a sudden we're starting to question you know who is actually the one sitting there and doing the um yeah the financing of of things through do we have an independent Fed if that comes you know starts to to get shaken you're going to see that that is going to accelerate I do think it's going to accelerate to so the goal will outperform in the longer time frame here but but you don't want that you you want sound money and and this is the absolute opposite of sound money that is what we see here here there needs to be Chinese you know wall watertight to doors between uh the Fed and the um the Congress and the executive branch. >> Yeah. And there have been a lot of questions. I mean the markets certainly voting with their feet today. We'll see if that changes anything. But there have been a lot of questions about uh the separation of power in the US for the first time. We have a a very aggressive executive branch. whether you're in favor of or favor of the policies or not, it's it's something new and the Trump administration testing the limits of how far they can go. What about on the geopolitical front? Um we have seen right out of the gate in 20 uh 26 um the action in Venezuela. We have protests in Iran. We have questions over Greenland. It seems that things are rapidly changing uh in terms of the the world order as we knew it. Does that question the ability for this blowoff top to continue? Is that a market risk that's not priced in? How are you thinking about geopolitics? >> I I I don't think that the blowoff top is in danger as so many people are thinking. I mean the blowoff top is is developing because of um the liquidity that we are starting to see coming into to the system now also and I think the Fed is also going to be more dobbish and they will have to because the the economy is weakening so so I think that is not so much of a risk at this point and we actually already seeing the precursor of it because we have the small caps actually you know leading um this rally and NASDAQ is actually lacking S&P at this point which is actually a good sign for it to continue. uh we saw some of that also when we had the the decline into the April bottom and everybody saw that if actually the NASDAQ was the one that was the laggard and all of a sudden it just came and know I think you're going to see that again and you'll see that the uh the crypto also is going to follow so I don't think it's really about that and again this is where psychology and liquidity and the short-term developments in the market can stay irrational for longer than we can stay you know uh solvent and uh and that's where we need to you know not overanalyze the things that we see on a more structural level because the structural level will come through eventually >> but it doesn't may not come through tomorrow and there can be smaller drivers that can you know propel things higher which I think they will a lot higher here it's a so the thing is I I think the uh the whole situation the geopolitical situation is a problem and it's unfortunately it seems that seems like it's it's playing into that whole game I've been saying uh famously or infamously that we're going to see the first worst recession and the worst uh market crash since the 1930s. And when you look at that and the the what I'm actually implying here is that we're going to see at least a market crash of 70% on the NASDAQ, potentially higher. I think Bitcoin can get, you know, destroyed, also and all that. But a lot of these things are happening into a situation where we have a huge market uh bubble. And if you people listen to this and say, "Henry, you're wrong. There is no market bubble." I just have to say it's so obvious that if people saying there's not it's difficult to discuss because the the the data is suggesting something quite quite clear here but but and so you have a market bubble that can burst and you have the economy rolling over and moreover and this is another chart that I you know that that is extremely important if you look to the average duration of unemployment in the US and I'll get back to your question here also on geopolitics >> the average the time or the the the duration of unemployment, you'll see that that before going into the 2009 or 20079 recession, it was down at around 15 15 weeks. So people on an average level were unemployed for 15 weeks um around that level. That is quite long still, but you get back into the into the to the labor force. What you see right now is that it's actually up around 24 25 weeks at this point. So people are now more and more disconnected to the whole to the whole labor market. Uh and that is a problem because when people are getting disconnected your your capabilities doesn't really match and you know I I said this a lot on these but I'm I'm 50. I I know people at my age that find it difficult already to just follow suit in terms of you know with AI and computer you know everything. How do you because they have had an ordinary job for many years and they've done well but it's it's now you know something that makes that requires changes of them. >> Why is that important geopolitically? >> Because when these big leaps comes in in technology it's a great thing for the humanity on a long time scale. It's a fantastic thing. I think AI is going to change the world you know like one of the greatest technology leaps that we have ever seen. The problem is that there will be a marginalized group of people for a certain amount of time and these people will become discontent and they will start to feel we don't belong and that is one thing you do not want to have in a society. You don't want to have people saying we don't belong nobody can because deep down when if you're sitting there and you can't you can actually look into maybe your kids are going to be worse off than yourself you're you know that is a bad situation. So what I see also with the the bubble we have then if that bursts and we're going to get a potentially even a stackflation down the road which I could see as well then you have this situation geopolitically already where you then get a lot of people that would be discontent losing their jobs and seeing the prices of their grocery bag you know actually increasing >> that is and and potentially also their 401s actually you know losing a lot of value. If I get that right, you can see a lot of geopolitical tensions because there's one thing that I don't know why it is like that, but we always like to point somewhere else and it's easier to point to somebody else and say it's not about me, it's not my fault, it's that person's fault. And it can go in one way or the other direction and it can go also between countries. So very often you'll see that it's at least you know u more author authoritarian um that's difficult for me to say that's my second language here sorry about that >> but um but they um that they see these regimes will actually sometimes act you know need to act out and say this is you know we we do something there to to focus on something else and that can be in China that can be somewhere else it can be you know these things happen so the problem is all of these things are coming together at the same point here which is what I really think is pointing painting up the picture and there was somebody you know I can't remember the authors of it but they deserve a lot of you know uh praise for this book the the fourth turning and we're really seeing that I mean they wrote it in the late '9s and they pretty much wrote up going to have a financial crisis we're going to see all the systems that we've been building since the second world war are going to be destroyed and this is what we see every time we have these fourth turnings which you can by the way only compare to the situation just before the second world war you can compare compared to the situation in the 16 1860s and '7s and you know what that means with the civil war in the US or in the 18 around 1800 where you had the Napoleonic wars here in Europe. So these are the this is the big wheel that is is is turning right now. We we are in the big the big wheel is turning right now and it's I am a bit you know worried. I'm I'm will be a dad again here in um in in in April as a 50 one year old and >> congratulations. Thank you. And uh I'm really you know a bit worried for what what kind of world is my you know my little son there that will come uh going to live in. And uh yeah it's a it is a it is a uh times I know. Yeah it's yeah. >> Yeah it's sobering. Um you one can only hope the more we talk about it um you know the the more light you shed on it the more people are informed about it maybe there's a choice in here. I mean that that's what we have to hope for. Is this a US story or is this global? My sense is the way you're talking about it and if you're talking about fourth turning Neil Howell was the um I believe the author then you're then you're then it's global right is this a global phenomenon you're talking about? Yeah, absolutely. I think it's a global phenomenon. I mean, first of all, wherever the US goes, uh, we the rest of us will follow to a certain extent and, uh, we we're not, you know, Europe is not the way, you know, it's not setting the direction of the world and the US dollars, uh, as long as the US dollar has the, you know, the strength it has and the hag money, you will see that that's that's where everything is central around. But yeah, it is it is definitely a global thing. and uh and and again when you the the if the US steps away from some of these things on the geopolitical arena then it is influencing us also here in Europe. So >> obviously it is and and also when it comes to the whole slowdown we have seen that for quite some time. The only reason why the Europe has been able to not fall into a recession if you look to Germany hasn't been looking great for a long time. So that that has been because you have had the locomotive of the uh and the the growth in in in the US and stimul the stimulus coming out of corona after corona was so immense that it kept things going for a certain while here but we are coming to the end of that and that is going to influence the whole world so yes is the answer it's it's it's global and also it's it's also in China and and elsewhere so it's not just the US uh you probably be still be the one you know country that could stand out the strongest again because the the the the the importance of having the reserve currency is so extreme that I don't think you know that anybody really understands what the the meaning of that is or the consequence of that is. >> Uh so it's it's such a you know this sort of brings us back to this idea of holding two things in your mind because we have this sort of terrible potentially terrible downturn global depression coming if you're right and yet in the short term there's there's maybe potential huge gains if we are going to you know ride higher until until it meets how do you think about timing that or how should investors think about timing that because what's the trigger that brings the the equity markets down to reality the real economy first of all what do you think is the thing that finally triggers that >> see this is where I um often have discussions and talks with people and say, "But but we don't see the trigger of this." >> And then I always ask them, "What is the trigger of an avalanche? What is the trigger of an avalanche?" And people say, "Well, yeah, it can be something. It can be a loud bang or something like that." Yeah, but it can also just be the snow that just gently falls down and all of a sudden the the underlying structure becomes so fragile that it starts to to run or whatever it's called. It's just, you know, down down the mountain there. >> So, this is the situation for the economy. This is what people do not understand. It's not like you need a big bang a big you know hammer there right in the middle middle of the you know your your eyes there before the economy falls into a recession. The thing is it's the underlying structure that becomes increasingly fragile and and that is the problem at this point here. We are actually exactly seeing that kind of increasingly fragile structure which is the which I talked about labor market but the consumer and if you look to the consumer which is the very foundation of the structure we have then you'll see that the consumer right now is worse off than they were into the 2007 and 2009 recession worse. If you look to the number of people living paycheck to paycheck in the US, you're looking at the people who do not have, you know, enough money to simply put enough boot to get food on the table, which is a is a tragic thing. It is actually also worse than going into 2029. >> So this is the fragile structure underneath. So people saying what is it going to be? Can it be something big? Yes, it can. Just like with the avalanche, it can be something. It can be the a big bang. It can be somebody shooting it, you know, to to make it start to run or it can be the ski, you know, guy that comes down and he'll offset set it off or it can simply just do do it from a small thing. Remember the financial crisis started I think it was in a bank in was it or something where it was just one bank saying nah we don't take that as collateral any longer >> and that had then you know like a domino effect. >> Yeah. >> Yes. So when people saying what is it going to be and you know they don't understand that the the underlying structure is what is important and the underlying structure is the US consumer and the Danish consumer and the European consumer but mostly the US consumer. >> So the the that's I think that's a fantastic point. Beware the snowflake the last snowflake. But in that situation uh you can't everyone can't get to the exit at the same time. So there's that's I think that's the danger. So you know what is the preparation? So the timing maybe it's a year that we see gains and you're sitting on the sideline. Do you do you just watch from the sideline and let it go >> or do you start to prepare now for what's coming to get out in front of it? >> So I'm not on the sideline. I am probably in the most aggressive setup portfolio wise that I've ever held because I this is the time where things are going to to explode higher and there as I said there are so many of these imminent risk um indicators that I that I keep an eye on that are not simply not flashing and just simply saying there's no credit spreads right now there's no stress in the financial system the short the you look at the um the initial claims are still very very low which means that there's not a lot of laying off at this point here so yeah it's actually The problem the problem is that you are sitting there and you can be right and that was also back to my tweet. If you sit there and you see the market go up 25% and maybe that particular stock you've been looking at and think I needed to see it to dip a little and it goes up 50%. And then you say well I now I jump in. Uh you can actually do that right into the top. So this is about really that's about the people saying it's not about timing the markets about it is actually honestly about timing the markets. I mean again also if you look to uh sir Isaac Newsenten he was actually you know also a part of this where back in the Southshi bubble and the days of that he actually also at some point and he was a very clever guy. He um he he was part of the uh of this this stock and he you saw his money actually just uh uh that the stock actually just went lot lot higher. He went out he earned money and then he jumped back in right at the top and he he actually went bankrupt on that. So it's not just that you you can be the most you know intelligent person. This is really about understanding that there is a psychology behind things. It's not just about math. It's about psychology and understanding that this these things can go on for longer. So there are indications that we need to look at and these were so there are some of those that I talked about just before which are in the macro um area. When I look at the markets I look also to Fibonacci levels. I look to what I do is I do a calibration across the you know across all the the markets that I which is a lot uh so so getting you know a picture not just from one or two or five but from a hundred different indicators that in the market and saying okay are they starting to show weakness one of them would be the Singaporean index why is the Singapore index important because it's a small open economy very heavily uh uh you know dependent on trade in the in the Singapore and if that starts to put in what I think is a top which we can see another 15% before we see the do that >> well then then probably you need to start looking out for the other markets around the world as well so there are indicators it's not just about sitting there and wait because if you sit and wait for a year and a half >> you will feel the FOMO and you'll start saying oh I must be wrong and you jump in and then as Newton you'll probably jumping in right at the top >> yeah and especially for people who are going to need that money you know in the near term that I think that's that's what we all worry about >> uh does anything [sighs] come out unscathed bathed from this downturn that you let let's back up for one second. What performs best in this late stage in this maybe year that we have left of the everything rally? What does the best? >> Let's see if it's a year. I I I I'm not certain about that, but let's [laughter] see about that. But hey, yeah, I've been >> in the next three months. >> Yeah. Yeah. So, I I think you'll actually see that at this point here. And I I know that's um not what people believe and that's actually one of the reason I also see it. I think you're going to see crypto is doing you're going to have one of these runs that people are just you know falling off against uh their on on their backs in terms of of awe and of the you know the the extreme rally that you can see in some of uh in in crypto. That is not what you see in here right now because we have been in a situation where Bitcoin has been going sideways actually since yeah for more than a year if you look at it you know even though you have these big >> uh yeah uh volatility. So I think you're going to see that Bitcoin will find its feet here. You see that Ethereum will outperform Bitcoin and I think you're going to see a lot of the alts are going to to outperform these. So there will be some alts out there that will do extremely well. But also in the stock market, you'll probably see a lot of the uh of the small caps doing extremely well because there will be a rotation into the final end of this. That's also always what happens into big tops is that you see a rotation from the more secured stocks. It's always about, yeah, we trust Apple. Okay, we jump into that. And then when Apple has been going up quite a lot, you say, "Yeah, okay, this balance here thing it looks okay, we go with that." And then and then you go further and further out on the risk curve. And that's that's what we also would see. we're not there where we have been uh we've seen the top of that at all as [clears throat] I see it but um but we and there but again it can also develop really really quick and that's why I say I I don't know if it's three months or six months I know what I'm looking for and the first level I'll be looking for now is say it's 200 and then there are all the indications please know it's not just about a level there are indications saying would then that be the top and again I would be looking to to other markets so so it can be uh I think you know crypto will do fantastically well. I think you're going to see that gold and silver even though it making new high today as well uh will actually have somewhat of a um a pullback because yeah there is something happening but they have been pushing off and and normally we see those they have a kind of a spike before we see it coming into some of the riskier asset again the the rotation into riskier assets. So I think we uh we will see it coming all the way out on the you know the outer end of the of the risk curve here and uh and things that has no value also in in in cryptoland is going to be maybe have a fantastic run again not recommendation and I can be wrong but it's it's it's I could easily see that and I am positioned for something of that for that run right now even though I have this very bearish outlook on a more on a longer level on a longer time frame >> longer term. Yeah. And and and unsure of that time because I'm I'm sure the the quicker we get up and the more steam there is in that blowoff then the the riskier that we pull in the time frame of the >> Yes. >> of the >> and there will be a lot of people caught there >> if we if and once we transition into that is there any place to go for protection? Does any asset class hold in or is this something where everything sells off? See, I think u again I when I look at my charts, I then go again across the hole and try to set up these scenarios. So the scenario doesn't come first and then the charts. It's actually the charts where I >> what I see is that you're going to see a dollar that is finding its bottom in a not too distant future here. When I say that >> it has been putting in some showing some strength even though we've been around this level where we are now. >> I don't think the bottom is in for this cycle here. I think it'll be in around 95 96 when that turns then it's really the countdown for when we see a top also in the stock market and in the and the crypto market and in for a certain amount of time and this is again where it would be so nice to say yeah you just need to buy this because that would be the best way but it depends again on timeline and it depends also on how fast we can see what I think is going to be somewhat of a whipssaw >> there in 2008 you had a deflationary crash which means that um things were you know assets were losing value and what they had to do coming in trying to pump it back up. The problem is we have seen now the bad side of all this stimulus that we have se from the central banks which is inflation. >> Five six year years ago 9% in inflation would not is not something anybody would expect. 2 3% yeah but nothing more not more than that because we have been in a deflationary environment since 2000. whatever they did not didn't really you know influ in affect that so we didn't see inflation going up very much I think we had the inverted fula moment in 2020 when they did the co stimulus because what they did >> was they stimulated and when I say they I mean it's they in terms of the central banks of the world and the administrations of the world so it's not just the US all about it's I mean we are also culprits here in Denmark when it comes to that they stimulated with the most massive stimul imulous we have ever seen far out uh you know ranging the the stimulus that we had after the second world war you know the martial aid which the US paid to Europe to rebuild Europe >> we we we didn't have a situation like that at this time but we stimulated like crazy >> into a situation where people had to go home because of COVID which means the supply chains broke down first year at economic studies in in in you know you will see at the university you'll understand that price h you know comes from supply and demand and if you put in a lot of demand and people were sitting home and getting this paycheck and know this external money in their hands, they're going to spend it into a situation where there is no supply or limited supply. That is not what you want to do and they that's what they did because they over they overdid it for to put it like that. >> Um so the the thing is now inflation has come back. People actually see that inflation has can can come back up again. This is the biggest worry they have right now is inflation for a lot of people. we have and they miscon and they confuse themselves with price level and inflation because the actual inflation level right now is not so high. The price level has risen a lot which is what people are feeling still. >> Yeah. >> So the situation is right now that Mrs. Johnson there in US she sits there and she says well if they're going you know if I start to save some money on my my my mortgage loan am I going to take that $100 and go spend it immediately because that is what QE needs you to do. if you don't or is it are they is she going to save it? I think the propensity of starting to save these money because she has seen an unemployment also which is starting to move up and prices going higher and the yields and rates which she's up to the neck in well she was going to spend she's not going to spend it necessarily. She's going to save it for a rainy day. If that happens then whatever they do into this into this crash could all of a sudden make things worse. And I think this is what people misunderstand right now. They say, "Yeah, Henrik, but if there's a crash like in 2008, they're just going to come in back in again and going to stimulate." And I say, "Yes, exactly." And that is the problem because the psychology of this market has shifted. The psychology of Mrs. Johnson down to that one person has shifted from I'm going to spend to I'm going to hold on to this one. >> So you can create a hype in the market, but you can actually offset offset something that is worse if they do this and which they will. I'm not even saying if they will. which is stackflation which means the economy is bottoming out much lower and the inflation level is staying on a uncomfortably high and maybe even rising and then you had unemployment levels at 6 7 8%. If we get to that situation, that is the worst you can have. And that is actually also where I think and that's what my book is all about. That is the real endg game. That is the moment we are seeing also the first beginnings of in Japan. They're actually starting to see, oh, we can't just stimulate and just print money and now inflation is going up even though they aren't doing too much. What is it to do about it? If you stimulate more, no, we don't want that. You high rates then markets are crashing. So that's the worst situation. So I think you're going to see back to your question what to hold on to different phases the phase up into the blowoff top there'll be a crash which will be deflationary there'll be a bounce when the Fed comes in and then there'll be the stackflation which is going to be the worst in stacklation to take it from the back commodities it will be gold and silver precious metals and so on but all around in the phase before they do that their dollar will going to be a good place to be because it will be about liquidity into to a deflationary phase. It will be about people being able to pay off their debt and that is where the dollar has this tendency that when you know the world starts to decline it strengthens because most debt in the world is denominated in the US dollar >> right and people are hoarding they want they want dollars and they want collateral. Um, for gold and silver, they've had quite a run already and when I hear people who worry about gold and silver, let's just say gold, uh, they say, um, they understand the commodity, they understand that, you know, why people flock to it as a safe haven, maybe the last safe haven left, but when everything's going to bust in a in a downturn like that, in a market sell off, every they people sell their winners. they have to liquidate their winners. Does gold get taken down in that too? >> If you're looking to gold as a safe haven, is there a risk that gold declines because people have to sell it? >> Yeah, I I think that is very that's a given. And again, I I know that is where I have a um where people say, "Yeah, but that's that's different this time and so on." But of course you need to there are the fundamentals which is that if there are you know a g gaping hole gapping hole in the in the ground in terms of you know valuations just falling through the floor and people need to to find liquidity you sell you know sell off the the assets. I mean the reason why actually and this is not what people think is the reason why gold is so important is because you can always get liquidity when liquidity is needed by selling your gold. Uh so gold is actually you know performing its finest task when it's actually being sold off into the situation where liquidity can't be found because you don't sell your the house value what is that you know and that is where gold has a has a an importance so I think the runup we have seen here is the precursor of what is going to come later on but I also think that into the riskon rally that I'm talking about here I think that gold and silver may have a bad decline there first and then I think you're going to that actually as the dollar rises they're going to have even more of decline. So I think the the the move up here which looks like the left side of the Eiffel Tower I think the right side of the Eiffel Tower maybe to down to a certain level is going to come to gold and silver and then you'll see that when then the Fed comes in later as I said guns blazing and trying to fight deflation you will see that then that will be a very very big uh bottoming gold and silver and then going into the next level that's where you know stackflation is where in the if you look into the 1970s into 1980 you had gold going up five times in two and a years. >> Even though gold has done well this time, it's not up five times in two and a half years. >> So the the real bull market comes the moment when you have stlflationary development. And I think people are misunderstanding the situation we're in now because actually when inflation is moving lower here as it seems and we have an an economy that is stalling that is not a stlflationary environment. So so the run up there has been a precursor of what is coming. I didn't see it to go to this level. I I have to say that. But I I think still that these two thing, the risk on and then the the risk off in with the dollar is going to send gold lower first before you actually see that monster run that I could see I could vision envision into the 2030s. >> Yeah. It's it sounds like you're describing a time where there's going to be volatility and a time when people are you're going to have to be nimble because there's going to be different stages where assets perform very differently and you're going to need to be paying attention to your time frame during that. Um, last question. Is there anything that would change your mind about the crash coming? >> Is there any policy way to get out of this? Is there anything that would make you think, "Oh, hang on a second. Maybe this will help repair the economy that is deteriorating underneath the sort of headline. >> I would love to say yes, but it's like asking you the the captain of the Titanic, not that I'm the captain, but the you know what what can we do to to u to make so it doesn't sink and we are unfortunately at the pro the point already where the deterioration is now getting selfreinforcing. And I >> I do not know why the Fed hasn't seen this. I mean I pointed I pointed it out with my model and it's so clear as today. I mean if you look at this as I said the 12 month moving average that is deteriorating and it's doing that fast. So this about talking about inflation because they don't understand inflation is lagging. I don't understand it. But anyway [snorts] there's not much to be done at this point unfortunately. I mean the the the best thing would probably be that you you've got rates lowered. Actually I I'm on Trump's team there I have to say. uh they are way way too high, way too hawkish but monetary uh stimulus here is not going to cut it at this point here. I think the momentum is already going and uh the problem is you have so many things that are so extremely highly valuation of them is just so high that how can you have a soft landing on that is actually what we're asking and that's where I think the you can create um a feeling of wealth of of uh prosperity by doing monetary uh stimulus over the time because you should you're suppressing yields which means valuation will go and we've done that for a long time the unfortunately at some point when inflation starts to come back again you will see that that the opposite happens and that's why I I don't think there's a good outcome to it so policy-wise I would say that it would be about first of all understand the real engine of the of the US economy that is the 90% of the consumers not the 10% 10% high uh the top 10% they actually are you know doing the 50% of the consumption today but the economy cannot run without the the 90% in at the bottom. And that's why it's about understanding that they need the support to actually dare to go and and and uh and you know buy things again and take one thing that could be and I know this is not going to sound great um especially not in the US but it would be to to have some debt forgi forgiveness >> and that is actually for you know if you took the bottom floor you know of 10 20 30% of the US consumer and say well you know what this student debt or whatever you have there we'll we'll take it off your hands. We will put that we'll have to put that on somewhere else. I know that on the balance sheet somewhere, but you would actually then have the engine, you will start to say to, you know, the engine will start to say, "Okay, I don't owe that $100,000. I can now maybe spend, you know, an extra dollar every month." That would help, but that is normally not something you see before crisis come. That is something that would be a tool potentially into the crisis. But I think debt forgiveness >> to the right levels, and we're not talking the top, we're talking the bottom level there, >> would be something that could help setting that positive uh feedback loop back into it. Yeah. >> It's interesting you say that because we have midterm elections coming up in the US and the Trump administration again, the the geopolitical moves and now the Fed is grabbing the headlines. but just last week talked about buying mortgage bonds, having the government buy mortgage bonds to bring rates down and capping interest rates on credit cards, much to the shock of credit card companies, >> which is a terrible idea. >> Yeah. So, you don't see that helping consumers because it seems like they're on trying to address the affordability issues that you just brought up. >> Yeah. But the thing is if you just you know just take it out on the credit card company it's not that I I you know I would like to also to see that they take it part of that you know help bear their the burden. It's not that like that but you have to we have to understand that if you say you have a cap of 10%. There would be a lot of people out there that want to have a loan or take credit for at 15% because they want to buy something. But right now, the credit company, the credit card company's going to say, "No, you know what? Nah, because >> so that so that it won't mean more credit. It'll mean denial of credit to more people." >> It'll be more denial of credit to people. It's actually going to take credit down. It's it's a bad idea. It's really a bad idea. It it looks good because we want to, you know, stand out and fight for the for the for the >> Yeah. >> for the the ordinary man, which is good or woman for that matter. it that is that is good but it's just not what you want to do because the problem is that it's going to be denied the credit. >> So you're trying to take a have a solution here put it on and on the credit card companies but it's not like they can just say okay great then we do 10%. Guess what? They do it out because of certain, you know, calculations where they from a risk perspective say we have a group of people here. We actually do not want to lend them money. But if they pay 20%, we might have 10% of them go bankrupt. That means that you know still we'll earn money on this. If you say you can only cap it at 10%. Well then they will say no. And if you do that then the credit card then the uh you'll see that credit is actually shrinking which is another thing that can make it even worse. You don't want to do that. If you start to buy mortgage uh bonds, well that is stimulus that that can help uh for some time that is that is no doubt about that because you simply will start you make you know suppress yields but you can actually still do that on the on the Fed side which is I'm talking about a more structural thing here. The structural thing is that we're somebody needs to own this debt. These people if you want them to spend you take it off their hands. I know it's not it sounds socialistic and all that but if you want to fix this there's no easy fix to it either. you see this going to crash and burn unfortunately or you'll see that these measures are taken for sooner or later because I think you're going to see it down the road anyway. >> Yeah, if it's going to come anyway. Uh fascinating [clears throat] stuff, Henrik. Uh as always, thank you for sharing your views. It's sort of a perfect storm that you're describing coming at us, but I think it's very helpful for you to talk about some of the signals that you're looking at and the sort of time frame, the sequence because it matters, right? The sequence matters. And I think that um there are a lot of confusing what sound like confusing narratives out there um but sort of explaining them in a time frame I think really helps stack it up and gives people some information that they can use. So thank you so much. >> Thank you so much for having me on. >> Such a pleasure. Appreciate your time. Um and thanks to all of you for watching. Um we kind of know what we're in store for. If you would like to stress test your portfolio for what's ahead, make sure you're prepared. You can get a free review from one of the adviserss in the Wealthon network. Just head over to wealthon.comfree. Thanks so much. We'll see you again next time.