ALERT: Liquidity Has Peaked & That Means Lower Stock Prices Ahead | Michael Howell

Summary

• Liquidity Cycle: The guest sees the global liquidity cycle peaking and inflecting lower, implying a tougher backdrop for financial assets and likely S&P downside into year-end.
• Commodities: He favors a rotation toward tangible assets, staying long commodities as real-economy strength and policy support shift liquidity from markets to Main Street.
• Precious Metals: Medium-term bullish on gold and silver as monetary inflation hedges, but advises buying on weakness rather than chasing recent momentum; yuan-gold dynamics support higher dollar gold.
• Government Bonds: Expects term premia to fall as liquidity softens and the yield curve to inflect flatter; prefers 5-year Treasuries now with scope to extend duration later in the year.
• Cryptocurrencies: Positive medium-term as monetary inflation hedges but recommends accumulation on dips; short-term performance tied to liquidity momentum.
• China: Sees a desynchronized upturn in Chinese liquidity with large injections continuing, supportive for Chinese equities and global commodities; stablecoin dynamics and yuan policy are key macro drivers.

Transcript

What what I'm really saying is that the odds of the S&P being at current levels by the year end I think are low. Uh in other words, I think that it's going to be I think the market's going to be lower by the year end. Uh my view is that uh the assets that are very much out of favor now are the ones that are going to come back into favor. Welcome to thoughtful money. I'm thoughtful money founder and your host Adam Tagert. welcoming you here for a very special discussion with Mr. Liquidity himself, Michael How, founder and CEO of Crossber Capital, which is now rebranded as Global Liquidity Index. Michael, thanks so much for joining us today. >> Well, great pleasure to be here, Adam. Happy New Year for everybody. Let's uh let's hope it's a good one, but I fear there's challenges ahead. >> All right. Uh All right. Well, we'll we'll we'll pick up on that thread immediately. Challenges ahead very quickly. Happy New Year to you. Hope you're staying warm. I see you've got a nice uh turtleneck on, so hopefully it's not too cold in the UK right now. >> Yeah. Well, it's pretty cold. It's about minus 5, which is uh pretty cold for the UK. >> Oh, yeah. >> Snow everywhere. So, there we are. >> Okay. Well, all right. Well, hopefully we can generate enough heat with this discussion that that we can warm you up. Um All right. So, uh we're going to get to the your latest slides uh that you kindly prepared for us in just a second, Michael. Um but as I recall, you have your your global liquidity cycles that your firm um has identified and in our you know previous conversations over the past couple years if I remember correctly uh you had forecasted the current cycle to to kind of peak out at the end of 2025, beginning of 2026. Uh, is that still your expectation or have there been any developments like the Fed kind of returning to QE even though they're not calling it QE that might be pushing the duration of the cycle out further? >> Yeah, all the evidence seems to show that the liquidity cycle is peaking pretty much around the time we said. I mean the uh we're still getting data coming in for the end of the year you know obviously but it looks as if the peak in liquidity probably occurred sometime around about Q4 maybe early Q4 or there thereabouts um and that's you know despite the fact the Federal Reserve as you said has kind of moved back to a more benign liquidity posture they were kind of forced to do that uh because of the tensions in repo markets but what the Fed is really doing is basically um you know doing uh doing the sort of minimum necessary I would say. Uh they're sort of putting a a put uh under the repo markets and that's probably enough to to keep tensions away there, but it's not really enough to keep the bull market in stocks going through the year and I think the monetary policy the Fed is operating is probably uh at best uh good enough for a rangebound market this year. It may not be even enough for that but we'll see. So you know our view is that the year is going to be challenging. liquidity is not the force that it was. Certainly if you look at the the major advanced economies I think China may be a different story which we can get into and you know one of the things that we're bringing out very clearly this year is that there is a significant divergence between what's going on in the US liquidity cycle and in the Chinese liquidity cycle but that's a a later story I think. >> Okay. Well I look forward to getting into all of that. Um I just had a conversation yesterday that I'd love to get your thoughts on. Um and it's about the guidance that US Treasury Secretary Scott Bessant has been giving in terms of the criteria of what the administration is looking for in the next Fed head. And uh Scott Besson is kind of leading that search. Um and he he's he's essentially said, you know, we we want a Fed that is is quick to respond to issues, but one that doesn't give too much uh persisting uh stimulus. And he cited, you know, things like the Fed buying mortgage back securities for like, you know, years after they probably should have stopped and housing prices were, you know, zooming to new highs and things like that. Um, do you take that into consideration at all in your forecasting? >> 100%. I think that's it's a key point and I think Scott Besson's been very clear. Uh, the Federal Reserve has sort of been operating an unguided hose. Uh, it's basically pushed liquidity out, lots of liquidity out to many pockets, uh, not just in the US economy and US markets, but worldwide. Uh, and that really has come at a cost of what you may call the K-shaped economy. And I think that's what he wants to get away from. And therefore what we what we've been arguing over the last 12 months is there's a very distinct shift away from what we can term Fed QE towards Treasury QE. Now Treasury QE is more subtle but it basically is saying that uh liquidity is being uh injected directly uh into the real economy rather than uh willy-nilly into financial markets. it's directed is going into things like government procurement uh you know defense spend critical minerals uh these sorts of areas uh and it's been funded at the front end of the curve through the bill market uh and that has an effect on liquidity but it's liquidity it's creating liquidity but it's creating liquidity which is being used in the real economy not in financial markets and although the Federal Reserve in our view is unlikely to be tightening through this year uh it may conceivably is I mean I doubt that but it's possible. Uh the fact is that a strong real economy is going to absorb a lot of liquidity out of financial markets. And the more one looks around the world, the more evidence there is that fiscal policies are uh uh stimulatory. Um that real economies are starting to pick up. Uh you know, after what has been probably two years of monetary stimulus generally, it's about time they did and they're beginning to get some traction. And that by itself will actually absorb a lot of the liquidity that's washing in financial markets. And therefore with even without central bank tightening, the liquidity cycle is going to start to dip down. And that really is the the main factor driving our view of the markets. >> Okay. So it it sounds like what you're saying is that the administration, at least here in the US, um may kind of start making good on their promise that it's Main Street's time over Wall Street. Um because what I sort of hear you saying and tell me if this is too simplistic is the liquidity uh environment is shifting now to basically uh instead of assets over paychecks it's now going to paychecks over assets. >> 100% true that that's the way we see it. Yeah. Uh it's it's Main Street's term. Scott Besson has been very clear about that. He keeps saying that, keeps reiterating that and that's the way that we see it. uh the US economy in our view is going to be pretty decent next or this year uh I apologize this year and you know it's being driven by strong capex particularly in AI and persistent government spending uh the consumer you know may be slightly sort of on the back foot but generally speaking uh two major engines of the US economy look pretty robust >> okay and so um we can we can pull up your slides here if you like uh Michael but I I I think it's important to remind people and you opine on this any way you like that uh the economy and the stock market while we we tend to think of them as being really tightly correlated, they are two different things. And you can have a year with a strong economy but a a underperforming stock market. Um and it sort of sounds like you think that actually might be the tenor of this year. >> Uh I think it's very much the tenor of this year, Adam. uh strong economies don't always have strong financial markets. Uh and that's really the the the key observation and I think if we we sort of go go through some of these slides uh maybe start with this one. Uh this is looking at the average gain in the S&P uh each year of a presidential term. In other words, taking uh 2025 is year 1, year 2 is 2026, etc. So this is the uh average performance in each of the four years of a presidential term since 1970. Now what you can see there is that uh year 1 is pretty decent. Um years three and four are pretty decent but year two not so good and there's a very clear dip. Now we get a lot of push back by disoffering this observation. Uh and clearly it's not set in stone but it's something that one has to ponder and take into account. um we get a lot of push back because people say, "Well, the economy is going to be really strong. You've got strong earnings. Uh that's going to mean the stock market keeps going up, uh etc." But then just take a look at that. That's the corresponding slide for earnings per share growth on the S&P index companies, uh each year in a presidential term. So, it's not unusual that the second year is a very strong year. In fact, the strongest year for earnings out of the four and still the stock market goes down. So what you typically see in year two of a presidential term, this is a clearly we're playing with averages here, is you get P multiple compression and that's one of the things that we're concerned about because what's going to what's driving that is liquidity conditions are likely tightening and it's not necessarily because the Federal Reserve is uh tightening. It's much more about the real economy is absorbing liquidity uh from financial markets. uh all you know all liquidity uh that's anywhere must be somewhere and if it's not in financial markets it's in the real economy and vice versa and that's what we're pretty you principally saying so this is the concern we've generally got and I think if you sort of you know plow on and take a look at this slide which uh you know I I I took the the pink uh press cutting from Twitter I can't quite read the source but it looks given the fact that it's pink. It probably came from the Financial Times in London. >> But what that shows is a series of bubbles and you can pretty much make them out going all the way back to the mid 1970s. The red line that you can see put on top overlaid on top is our liquidity cycle uh our global liquidity cycle. And what that principally says is that almost every bubble that you can see there has been inflated by uh some prior pickup in liquidity conditions. Now if liquidity conditions are inflecting then we may have a problem and that's pretty much as as we see it. We think that there's an inflection going on and therefore u a lot of these gains uh that we've seen are likely to uh uh you know stop or potentially reverse in some cases and you know what I can do is maybe demonstrate this is showing uh the track of global liquidity. This is weekly data and it basically goes uh back or starts in 2022 and you can see on the left hand scale that that is measured in trillions of dollars. So we're sort of touching around $185 trillion of global liquidity. The thin line on there is an estimate that we uh that we uh basically put together very quickly which comes out within a few days uh after the end of each week and it's what we call our flesh flash estimate. It's not a full sample estimate. It's a best guess uh with the data we get. And I've just put that on the same chart to kind of show that uh the full data when it comes out is the solid line. Uh the flash estimate is is what we basically report uh very quickly to our clients. but it pretty much tracks the same thing. And what you can see is that liquidity conditions are flatlining. Uh there may be a little bit of a of a sort of flicker up in the latest week or so, but generally speaking, it's plateauing. Uh it's not falling yet. There's no question about that, but it does seem to have lost its upward momentum, and that clearly is something of concern. So that's one of the factors that we put into account when we make an assessment of what the market's doing. liquidity conditions which are a major driver are looking as if they're beginning to slow down and all our work on global liquidity particularly the global liquidity cycle is measuring the momentum uh of this aggregate this uh this global liquidity total. Now the other thing to take into account is how liquidity uh sits relative to asset markets and one of the best gauges of whether we're in a bubble or not and what the risks are particularly in equities is to look at the uh the ratio as we show here between all equity holdings worldwide and that pool of global liquidity. So what you can see is the data going all the way back to 1980. I've tried to make sense of different periods of that where you see for example in the uh the first maybe 15 years of the of the chart a period of financialization when uh following the sort of the um the high inflation era of the 1970s. Investors moved back into financial assets and demographics were clearly leaning uh behind them as well and that was helping to push more and more people into equities and risk assets. Then you see a sort of period of speculation uh around uh you know Y2K and taking into account the the GFC in 2008 2009 and then you see a period which is uh more of a flatlining which you know I think is is very well explained by Mike Green um who's talked about sort of passive accumulation and the fact that you know asset allocation is maybe not uh what it used to be. In other words, there are not the big swings now. uh a lot of money is basically uh you know uh is going into asset classes in fairly fixed uh regimented amounts and you can see that what we're doing right now is breaking out of that channel into a somewhat higher level of uh if you like equity holdings to liquidity and that's getting back to previous periods of sort of speculation that we saw back in 2000 or 2008 and you know that's clearly worrying uh by itself. itself. The other thing that one needs to take into account is the risk behavior of investors. Now what I've shown on this slide which is actually very similar data is to actually put this together uh in terms of a portfolio to say how are portfolio allocations uh being expressed. And this chart is a measure. It's actually a zcore uh under underlying uh the numbers here. But what it's showing is how much people are skewing their portfolios towards risk assets. And that's if you move up to a higher positive number or they're skewing the portfolio towards safer assets like government bonds. Risk assets are things like equities, corporate debt, emerging markets, uh, etc. Whereas safe assets are cash or G10 government bonds. And that's pretty much what you see here is we're seeing this cycle of risk appetite if you like or risk exposure which is looks to me as if it's beginning to go down. So in other words, investors are becoming uh a a lot less risk seeking uh maybe than they were. So if you've got two, if you like two parts uh of a of a pair of scissors, two blades which are now starting to move pretty much uh in the same direction, liquidity going down and uh risk exposure going down, the backdrop for financial markets is going to be problematic to say say the least. And that's pretty much how we see the coming year. >> Okay. And when you say problematic, what is your forecasting telling you? Um, does that mean more volatile? Does that mean more flat? Or does that mean, you know, prepare for some sort of substantial correction? >> Well, I think that I always uh sort of push back against the volatility idea because I always think volatility is a bit of a copout because, you know, you can you can be right and you can be right and wrong at the same time with volatility. What what I'm really saying is that the odds of the S&P being at current levels by the year end, I think, are low. Uh in other words, I think that it's going to be I think the market's going to be lower by the year end. Uh my view is that uh the assets that are very much out of favor now are the ones that are going to come back into favor like government bonds and maybe the US dollar. Uh that's very much a contrarian view, but that would be pretty consistent with what we're seeing in terms of the uh the late cycle flavor of what we're detecting here in terms of the data. Now, bear in mind, we're not looking here at economic uh indicators. uh we're looking purely at liquidity flow and we're looking at how investors are positioning their portfolios uh in terms of asset markets and it's those factors which are telling us that it's late cycle but then I'd have to say that if you look back over the last few years those have actually been pretty good handles on uh uh on prediction. The real economy has not been a particularly great guide to asset allocation over the last couple of decades. >> Okay. Um so uh well um you mentioned here that you know you you you actually think the peak might might be behind us now. Um I mean I I'll I'll give you a little more time just in case the data bounces around here, but um if indeed we have peaked in Q4 of 2025, what is your projected or expected length of the down cycle? Well, it's an interesting question. I mean, the fact is that if you look at this chart, this chart is is identifying uh the cycles. This is for the advanced economies. I should stress it takes China out. Uh the reason for taking China out is that China is or certainly lately has been highly volatile and it's distorted the picture. This is the major advanced economies worldwide, exchina. And what you can see is that the cycle length has been a pretty standard uh 65 months over that long period going back to the mid60s. Uh we think that that is all to do with a debt refinancing cycle that financial markets are very much about u refinancing debt rolling over existing debts. Uh they're not about raising new capital uh for new for for new green field projects which is what textbooks tell us. Those days have long gone. It's all about rolling over debt and the refi cycle is basically um a five to six year cycle that repeats and we seem to be peeking out now in terms of of uh that cycle. Now if it's true to form uh I mean you're looking at um uh a downswing which could easily be lasting. I mean clearly these things vary but but on average you could be looking at something like a u you know a 35 month or 30 35 month downswing. I mean that's that's entirely possible. Uh you can see historically that some of those downswings have been rather sudden. Um and therefore it may be over quickly but that that will be a short sharp shock. Uh and all I'm saying is that we've got to be cognizant to these risks. Uh nothing is certain uh in liquidity nor in life as we know. Uh and it may well be that the current sort of sawtooth uh picture we're seeing at the peak uh is something which is you know going to persist for several months. So it may it may be that you get a blip up in the next month and uh blip down the following month. It's quite possible because you can see that pattern historically. But it does seem as if we're seeing this inflection pretty much about when uh you know it was originally uh if you like envisioned um which is late 2025. Everything seems to be lining up. Now the other thing that I think is worth stressing is that if you look at the average length of the cycle uh we seem to be fulfilling that criteria more or less exactly. So this is looking at the average cycle length since 1970 as the dotted line and the latest cycle is sort of put on uh in context. So it looks you know more or less as if we're moving down the same track. And then how do we express this in terms of asset allocation? Well, this diagram is the one that we use. And what this illustrates is on the left hand side of the diagram, we uh we we depict various phases of the cycle into sort of generic names to give some flavor like calm, speculation, turbulence, rebound. And then on the right hand side of the diagram, we then uh try and associate that with asset performance. And that's done uh through uh experience and data and looking at how markets have performed historically. But what you can say from this is that typically the upswing of the liquidity cycle is a risk-on phase. It tends to be that you favor equity markets first of all, particularly during the long upwave. Commodity markets tend to do well about the peak. In the downswing, you want to be holding more cash. And then by the time you get to the trough of the cycle, you really want to be loading up heavily with government bonds, longer duration bonds, and then the cycle will restart again and you'll go back to a risk-on environment. Now, if you look at this particular cycle and you look at the evolution, and we can go on to that in a in a moment. Basically, what it's what it's uh telling us is this is isn't this exactly how markets have performed over the last three or four years? Yeah, >> it's not been about e economies at all. It's been about a fairly standard liquidity asset allocation cycle. And you know, this following chart embroers that a little bit more by looking at different types of uh of equities uh whether it be cyclical value, cyclical growth, defensive value, defensive growth and then looking at different phases of the yield curve which we can come on to in a few moments. And that particular articulation seems to be unfolding almost exactly. Now this reference slide here is looking at business cycles. And what I've done is to look at various uh various measures. Um one is uh a straightforward uh average of all world business confidence surveys which is the orange line the solid solid orange line which is labeled world business cycle. So that's things like the US ISM, the you know the purchasing managers index. It's things like the tankan in Japan. It's things like the EPO survey in Germany, the CBI survey in Britain, etc. And those are weighted by GDP and put together as that orange line. The dotted uh line is the JP Morgan S&P World PMI index that they independently create. And the black line is an AI projection which is using uh is an algorithm that basically looks at things like commodity prices, uh currencies of trade sensitive economies, uh credit spreads, etc. And that infers from that data what the economic tempo is on all three of those measures which pretty much seem to concur. What we've had is a flatlining of best in economies since the end of end of COVID. Okay, there's been no cycle but still you've had a very pronounced cycle in terms of uh asset markets uh and financial liquidity and that has been you know that has occurred despite flatlining economies and you've had a very normal progression and this traffic light diagram pretty much confirms that by saying that if you run through those traffic lights assets are on the left industry groups are on the right what it's telling us is that you know you in the rebound area uh you want to take a little bit of risk. I mean take these as traffic lights. So amber means proceed forward with caution. Green is go, red is stop. Uh you wanted in that rebound to have a little bit of positive exposure to markets. Uh you wanted full-on equities, full-on credits, no commodities, no bond duration. Uh as you move to calm, you wanted more equities, uh a little bit less credits. Certainly more commodities, no bond duration, speculation where I would say the US market is now. Um, you want to be getting a little bit more cautious on equities. You still want commodities. You're going to put a toe in the water in terms of the bond markets. Uh, Europe and emerging Asia we think are in the lake calm stage of markets. US is more advanced in speculation and it may well be that China which we're going to come on to uh in a moment is probably in a much earlier phase potentially in the rebound area but that's you know another question if you look at the industry groups uh interestingly what that says in rebound you want full-on technology uh you maybe want a little bit of financials by calm you want full-on technology full-on financials fullon commodities uh by speculation you want to be taking uh you want to be out of technology, you want to be, you know, neutral to slightly positive financials but still full-on energy commodities. Uh you know, we've be we told our clients to move to energy recently, but you know, fortuitously maybe without without predicting the Venezuela situation, but [laughter] I mean generally you would expect to see energy beginning to perform at this stage of the cycle. Uh and then you start to get more evidence of defensive groups beginning to perform. Um so you know it looks as if you know as they say if it's if it's yellow and quacks it's a duck and it looks as if this is sort of you know at the moment still quacking. So uh let's let's listen. >> So that's the asset allocation backdrop. >> Yeah the these asset charts that you have are I just find them so helpful. They're such a great service. Um so a couple things. one. Um, I guess I should say, Michael, you've been kind enough as usual to send me the slides. Um, folks, as usual, the slides will be made available uh to our premium Substack users. So, you can just go to thoughtfulmoney.com/substack if you don't already subscribe to it and subscribe to it there. Um, Michael, could you go back just very quickly to the the asset cycle chart that that you had? Yeah. Um, so, uh, commodities have have really caught fire, uh, in the past six months. Um, and I'm trying to get a sense for where are we between speculation and turbulence here? Um, how close are we to the the the black line there where you switch from speculation and go into risk off uh, on turbulence? kind of what I'm asking is is for those folks that are in commodities right now, how much time do they have to still be long that space before they need to start to lighten up? >> Oh, I think that they I I think you can stick with commodities for for some while yet. I mean, in our view, what's happening is the performance is moving away from financial assets more towards tangible assets. >> Okay. So, so out of tech into commodities. >> Yeah. Yeah. I think that's that's the obvious trade for me. I mean that that's we've been that's one we've been favoring for for a few months now. But I think that that's you know that's something which is still going to run as far as I can see. Uh and I think the commodity space has still got further you know further to push to push forward. So I'm still optimistic on commodities not least because we think the real economy is going to keep going. So that's or certainly pick up accelerate. So I think that that's uh you know that's a fact in terms of uh you know quickly on on what does it mean for returns. I mean if you look at the liquidity cycle I mean I'd stress at the moment u you know we don't see a negative print on liquidity okay uh as as yet u you know this is our projection of global liquidity as the dotted line uh the orange dotted line there uh going into into uh 2026. So, you know, we think there's a there's a slowing down. Uh we're not confident we're going to see a absolute drop yet, but that inflection may be important and it may be putting a lot of pressure on uh on financial assets. The black line is all wealth. It includes precious metals. It includes um bonds. It includes equities, liquid assets, it includes residential real estate, etc. All these factors are thrown into that portfolio. But it shows how sensitive those asset classes are to changes in the tempo of global liquidity, which is what we we show there. What's also sensitive are things like uh cryptocurrencies. Uh I've shown this before, but this bees dollar uh symbol is actually Bitcoin, Ethereum, Salana uh in a 60 30 10% waiting. And this basically shows their movement versus global liquidity. They're very much a short-term indicator and a lot of use our data to try and you know try and manage their portfolios but this is looking at uh the performance of uh that basket in orange. Uh we look here at six week changes uh in um uh in that basket and we show that against global liquidity uh the dollar amount growth rate. uh but we've advanced global liquidity here by 3 months 13 weeks to show that it does predict forward uh that uh that constellation. Um the other thing >> sorry to interrupt but that that I presume then your outlook for Bitcoin and the cryptocurrencies not super positive for the next couple years. Yeah, I think that I I think that in you know my view about I mean all these monetary inflation hedges is that generally speaking I think that they're good because what we've got is an environment where there is plainly monetary inflation going on in the world economy. This is this is the plain fact that's staring us, you know, in the face that governments uh need to spend money. Uh they've basically taxed us out now. There's no you we're on the wrong side of the laughter curve. uh there's not much more they can do that way. Um and bond issuance is kind of difficult. Um so they're going to have to print money and that's monetary inflation. I think the the question is and the hard question is does that come through to Main Street uh or is that just an asset market phenomenon? And you know my view is probably a little bit of both. But, you know, I'm I'm tending to on turning towards the view that main street inflation this year may be more subdued than people think for a variety of reasons. Uh, but generally speaking, monetary inflation over the medium-term still maintains. So, I'd still have these monetary inflation hedges in portfolios, but I think the sort of the the the fact is you don't want to chase them. and I'd be buying them more on weakness rather than, you know, trying to uh uh buy into momentum right now. The reason for that is that if you look at this chart here, which is an attempt to try and measure uh what I call true US inflation and I think one of the difficulties is that there's a lot of distortion going on in the Treasury market really because of the nature of funding in the US uh in the US markets and this big skew towards bill finance which is actually part of this whole narrative of Treasury QE that I alluded to earlier on. And what the Treasury is doing is funding uh a lot of the deficit at the short end of the market. Now that has pluses and minuses. The pluses are that you know it's probably cheaper and if they get the right guy in the Fed, they can control that cost obviously by keeping rates low. Uh the downside is that uh it's basically inflationary in the long term and so we've got to be watchful at that. Generally speaking in the short term uh it it has a distorting effect and that distortion is shown in the uh orange or orange yellow line which is basically the implied break even inflation rate that is evident from the uh from the fixed income markets. This is the straight uh you know measure that comes from the tips market the treasury inflation protected security market and that shows kind of a flatlining and no inflation problem. The dotted line is uh a deeper dive into the data that basically says well okay if the treasury market is distorted maybe other markets like the MBS market is less distorted and if we try and get an equivalent gauge of inflation expectations from that what is that showing and that gives us a much more uh pronounced pick up at inflation over the previous two or three years as you can see from that red dotted line but even that's coming back and then the other measure is looking at University of Michigan expect an inflation uh which is what you know consumers are telling uh surveyors what they uh uh what they think inflation is going to be that clearly has been bumping around and you can see the big spike uh you know over the last 12 months or so uh that too is coming down so it may well be that in the short term the need for need for these hedges is not as great as maybe people are thinking and if you look at this chart this is Another one maybe to sober people up a little bit. Uh and you know this is really under the uh under the label trees don't grow to the sky. And what it's showing is 5year average U US CPI inflation which is the black line. Now what we've done to be clear here is to get future 5-year inflation we've extrapolated the latest rate of inflation forwards. So we get a 5-year uh you know figure. Um, so you know there's obviously some bias there and you may want to put that raise that black line a tad but the point being is that it looks as if that's inflecting downwards. And you can see with the orange line that's uh basically crypto uh the universe of crypto and gold. In other words, monetary inflation hedges relative to the pool of global liquidity. Now what that's trying to say is that when you get uh a big pass through of uh a liquidity surge into inflation, you want to buy monetary inflation hedges. And they perform strongly as that chart says, particularly, you know, evident in the 1970s. Uh and is again been evident recently when they they've surged. If you're getting an inflection in inflation, are they the best thing to hold? And that's really a question that we've got to start posing. And in my view, this is the thing to start thinking about seriously, which is a very counterintuitive thought. And this kind of goes against most of the consensus view uh I think on the street at the moment. Now, this is looking at uh global liquidity. And this is getting slightly wonkish in the weeds when we start to introduce concepts called term premier. Now, term premier are the way that if you're a fixed income analyst, you'd really analyze government debt. And this is looking at the premium that people uh are or that investors demand uh to hold uh a fixed income security uh over and above expected interest rates. So it's the if you like the risk premium bit. Now the interesting point is that that cycle in term premier and this is the change in term premium I should emphasize matches almost exactly the global liquidity cycle. Okay, they're two completely different sets of variables. Global liquidity is a measure of flow uh monetary flow. Uh it's a rate of change indicator. Whereas if you look at that world term premium, it's simply a spread uh that we uh that we calculate from uh the term structure around the world. Now what this basically is saying is that when liquidity turns down, term premier start to drop. Now that's a really really important fact. uh it's completely contrary to what central banks uh tell us. Uh they tell us rather the opposite. Uh but the fact is the plain fact is that when you see declining liquidity, what you tend to find is falling term premium. And the reason for that is because in a lower lower liquidity environment, default risks in the system are heightened. And with heightened default risks, you want to hold you want to take less credit risk and you want to be holding more safe assets. and government [clears throat] debt, particularly longerdated government debt, is a very good hedge against those credit risk uh features. And so that's where investors tend to go. So as liquidity conditions drop, the risks of default or credit risk increase and the demand for government bonds tends to increase. And that's why term premier are paired lower as you can see here. Now if term premier are coming down what's going to happen to the bond market and the interesting point to to note to associate is here is the chart for the US which is looking at the average yield curve slope. Now the reason for doing this is slightly technical. Um why don't I look at a 102 spread or a 101 spread or a 51 spread or whatever. The reason being is that pe different people have different preferences and this is really a catch all for saying let's just look at the area under the yield curve which is a average of all those spreads uh to be completely you know unambiguous and let's chart that against US liquidity and what you can see is a very very close relationship and you know back in the in the days a long time ago now that I was at Salomon Brothers this is what we used to look at very closely to understand yield curve movements. And what it shows is during periods of expanding liquidity, what you find is the yield curve tends to steepen because term premier are going up. And when you start to see an inflection in liquidity, you get falling term premier and an inflection in the yield curve. And the lead time is about 9 months. So what this should be telling us if this is true to form is you should be getting some inflection in the yield curve around the middle of this year and that is a completely non-consensual view. Um we get push back and people say well of course you've got a strong economy inflation expectations are going to pick up the yield curve is going to ste keep steepening. The fact is that if you look at the data uh the yield curve normally starts to inflect lower during a period of rising economic activity. Uh in other words, you tend to find that the peak of the liquidity uh sorry the peak of the uh of the yield curve is not far away from the trough in the real economy traditionally. And that's maybe what we're seeing once again. So that would tend to suggest that you want to be thinking about bonds. And this chart which I'm not going to go into now is a statiscll exercise that was done uh almost 10 years ago which was saying that's the relationship between the yield curve and liquidity. It looks robust. It was estimated over that period uh you know that long period. We've had at least 10 years out of sample now where exactly the same thing has happened. So it looks a pretty robust relationship. And therefore that's saying here is the 10year treasury yield. Are you going to get the yield the yield spiking dramatically higher? No. I just think it's probably rangebound and maybe bonds are not a bad uh bet in portfolios. I probably tend to lean towards the 5-year buying a 5-year bullet. Uh but you know that that would be I think a fairly prudent uh position to take in a portfolio with the uncertainty around this year. >> Okay. Um, just to make sure I'm remembering your previous charts correctly, um, while bonds may start performing better later this year, that's probably going to be the path to get to that state is probably going to go through a point where you're going to want to hold cash because uh, we're going to switch to a riskoff environment. >> Yeah. Yeah, I mean what I'm saying is I mean a 5year bullet, a fiveyear bond is, you know, pretty cashlike, right? You haven't got much duration risk in that and you may want to go shorter term. But I think, you know, the fact is that we can't predict who is going to be the next Fed chair and it's entirely possible that um uh the president decides to choose somebody who is going to cut rates more than the market currently thinks. I'd be surprised by that, but you know, never say never, >> right? Never say never. Okay. Uh so fiveyear right now. Now potentially you're back on this program in 9 months. Things go the way that your cycle predicts. At that point you might start saying you might want to get some longer duration bonds. >> Yeah, I think that's right. But I mean you know there again out you got to you got to remember that you know investment is all about anticipating what the world looks like in 9 months time or so not what it looks like now. >> Um and that what we should be preparing for that period by things that are kind of out of favor right now. Uh, and that's what I'm saying. I mean, it's a it's a it's a non- consensus view. It's very contrarian, but this is the way that we see it. We may be completely wrong. Uh, hands up. I mean, it's not the first time. >> And I will say you're not alone out there given the wide spectrum of folks I interview, but you definitely are in a minority with that call. Um, but for all the, you know, that you you've presented all the reasons and logic why you you believe that's the case. Um, just two assets I want to ask you about real quickly. So, you showed the chart there of um uh I think it was the Bitcoin and precious metals index uh which had been performing very well of late um but we're now having an inflection as your chart showed um uh with inflation expectations. Um gold and gold's done great this year. Um silver's done bonkers this year. Um, you just said, you know, your job is to anticipate and you want to kind of buy the things that are out of favor in anticipation of them being in favor. What is your opinion right now on gold? Has it run so far so fast that this is the time to start taking pro uh profits in anticipation of the next phase or do you think it has more room to run for, you know, more structural reasons? >> Well, I think it has more room for to run for structural reasons for sure, but I wouldn't be chasing it right now. Uh and I think the same with silver. I mean I'm optimistic about these metals in the medium term because I think we're in a world where we've got monetary inflation. I mean my my point uh you know consistently is this is not about financial repression. I don't believe in a world of financial repression because government doesn't have agency [clears throat] to actually control things. I mean if they could control interest rates and GDP growth as people who advocate financial repression say why don't they always do that? It it would be make common sense. What they do have agency over is monetary inflation. They can print money and that's what they're doing. Uh and they're going to have to do that because as I said, we're on the wrong side of the LFA curve for taxes and bond markets can't absorb the degree of spending that they're in that governments envision. So, we're going to have to have monetization and that means you want these monetary inflation hedges in your portfolio. But don't chase them now when there's a lot of momentum in them. um you know start to wait till they cool off and then buy them on on dips and you know as I've said to people in the Bitcoin space or even in gold. I mean if you if you're buying these assets you know when they're one standard deviation or so below their trends that's a pretty decent investment strategy as far as I can see. I mean that might mean you buy them 20% 25 30% below uh you know trends but that's what I'd be looking for. >> Okay. All right. And that's where I was going to go like you'd say with Bitcoin. you're recommending folks buy that on weakness. Sounds like you're saying the same thing with the precious metals. >> Yeah. >> Um and then real quick, because they they are included in some of your metrics of wealth here. Um [clears throat] just curious how you expect housing to fare uh during a liquidity cycle downturn. Well, I think the I mean the answer is that the in the US it may well be that housing is a is is a different question that we've got uh we've got downward pressure on house prices. I I think that's seems to be the case. Uh and that that may well be something we observe over the next couple of years. I think if you start to look in Asia particular if you look at China you may be seeing exactly the opposite. And what I can do if you want I I was going to talk about the risks to uh to to debt and liquidity on this slide but what I can do is turn if you like to China and maybe try and bring China into this picture and then >> that was my next question for you. So yeah please >> let let me do that and I'll come back to uh this chart. This is all about the US what's happening in US financial markets. So let let's begin with the China story and let's look at this slide. So this is looking at liquidity cycles. Uh and what I've got here is the US cycle and the Chinese cycle. Now um both are calculated in exactly the same way. You can see the Chinese uh cycle is choppier although it does seem to follow a sort of cyclical pattern to some extent. Um, the reason it's it's choppier is that Chinese markets are not so welldeveloped and you tend to get sort of lurches and it's much more difficult to fine-tune these things. But you can sort of discern a cycle evolving and it's fair to say that if you go further back in time um certainly before 2000, but it's also evident in the 2000 to 2005 period, there was much greater correlation between the US and the Chinese liquidity cycles. what you're looking at now is almost completely out of step movements. They're desynchronized. They're very much out of step. And that's an important consideration because it looks as if the US cycle is peaking and dropping. Uh whereas the Chinese cycle may be bottoming. And so that bottoming up process is something that we need to consider because it may give us a further opportunity in Chinese stocks which you know have had a pretty decent year. If I recall, they're up about 25 26% over the last year. Uh that's probably besting Wall Street, but you know, it it's not a bad place to be and it could continue. Now, the reason it could continue is explained in this chart. And what I may have to do is just to explain this chart by going back in the slide deck to actually an earlier one that I was going to show regarding uh more general or generic points about debt and liquidity. So just let me dip back and I'll come back to that chart. Uh and what I need to do is to look at this chart. This chart is trying to put in context um the problem or the cycle uh in financial markets worldwide. And what it looks at is a metric that we favor which is the debt to liquidity ratio. Now many economists contrawise look at debt to GDP. You know, I'm cynical enough to say, you know, they do that because they can. Uh, it's easy to do. Okay, debt and GDP can be measured and so it's a nice ratio, but it doesn't tell us anything. All it does is trend from bottom left to top right. So what? Uh, you know, Japan is 400% or whatever it may be. The US is 200%. Does that tell us anything? No. What you need to look at is the debt liquidity ratio. Why? Because debt needs to be refinanced. it needs to be rolled over and you need balance sheet capacity and therefore if you look at this chart it's first of all mean reverting it's stable if you like it runs from you know left to right flatlining pretty much but there's a cycle and what you see is periods where the debt liquidity ratio is extended I've annotated where you get financial crisis and the reason you get financial crisis is you get refinancing tensions in markets when there's insufficient liquidity to roll the debt over. Now, my claim is rightly or wrongly that every financial crisis that we've seen over the last two or three decades has first and foremost been a refinancing crisis. And therefore, you need to look at this relative ratio between debt and liquidity. If you go on the other side of the divide there, the dotted line, when there is too much liquidity relative to debt uh needs, you get asset bubbles. We've just come through the biggest one of those called the everything bubble. And that's because you had two things going on simultaneously. Number one, you had policy makers throwing huge amounts of liquidity into their markets after the GFC and after COVID. Every problem is addressed by more liquidity. I mean, even just take the latest episode with the Federal Reserve and the repo problems in the US. What have they done? More liquidity. And the other thing that happened is that interest rates were slashed to zero which encouraged a lot of borrowers to turn out their debt uh into the late 2000s. And what you're seeing is that debt liquidity ratio rising a because liquidity is slowing down and b because there's a lot of debt coming back into the system to be refinanced viz here. And that's what the red lines are showing. Now with that, >> sorry to interrupt, just super quick question. Given the fact that the bubble blown this time was the biggest in the data series, do you expect a correlating largest amount of refinancing tensions to ensue? >> Well, the answer would be naturally yes, unless the policy makers are alert to it and they respond by adding more liquidity, which in my view that have to, but it's a question of learning by doing. So they're going to make mistakes from root which is why I think that if you start to see an inflection in liquidity we've got to be cautious. Um but then you know I must admit that I was pleasantly surprised by the elacrity and the size by which the Federal Reserve addressed the repo crisis in the US in the last few weeks. Uh whereas I thought it would take some time to get there. They seem to have got there and they've actually done it in decent size. So, you know, uh, one has to say that maybe they're adapting to events, but generally speaking, uh, you know, we're looking at the world here, uh, you know, are other policy makers, particularly those in Europe, really as as adept as the Federal Reserve? I don't know. I think that's an open question. We may have to see. Now, with this chart in mind and this relationship, let's go back to Asia and look at the problems in Asia. Now here you see the debt liquidity ratios for Japan and China. Don't worry about the percentage levels. That's not important because that really reflects the maturity structure of debt in each economy. >> But look more about the current levels relative to history. And if you look at Japan, which is the black line, what happened in Japan is the debt liquidity ratio in Japan rocketed higher. uh as you can see on that left hand scale from about 100% to about 300%. So there was a tripling in the debt liquidity ratio. Now we might say that what is a a decent level for Japan maybe it's certainly not 300 maybe it's 150 or thereabouts they could cope with but basically what you've got is uh a problem of a too high debt liquidity ratio which is strangling the Japanese economy and causing a lot of problems the the lost decades as we know [clears throat] what Japan has done in the last 10 to 15 years is address that through the policy of abonomics which has recently been continued by the new prime minister. And what they've done is they've tried to monetize debt. If you've got a debt liquidity ratio that's too high, you can get it down in two ways. You can default your debt. That's impossible because debt is collateral for the banking system. Or what you can do is print more liquidity. And the route uh you know, spoiler alert, the route that everybody takes is they print more liquidity. And that's monetary inflation. Look at China and you've got on almost exact copy of the Japanese chart but 15 years later 101 15 years later and China is struggling under this debt burden and that debt burden is clearly big. It's causing it's strangling the economy and China is having to get out of that by basically uh monetizing debt. Now you could equally say that the US had a similar problem maybe not to the same extent uh with the real estate problems in at the time of the GFC. What did the US Treasury and Fed do at the time? They printed huge amounts of liquidity and they got out of the problem very very quickly. But it did take a weaker dollar and a lot of uh financial market uh uh you know a lot of bubble creation if you like in financial markets. But China is has got to do the same thing. Japan has done the same thing. This is the this is the the this is the solution. And if you look at this chart, it's showing net liquidity injections by China. And you it's it's hard to read or to measure the Chinese financial system because it's there's a lot of uh different pockets where liquidity can come from, but we think we get most of those. And what this is showing is the year-on-year change. Um this is actually daily data but we basically illustrate uh the the year-on-year changes in Chinese liquidity injections. Uh this goes back to 2020 and you can see China didn't do anything during the COVID crisis particularly uh unlike uh other other central banks. But what it's been doing more recently particularly uh from late 2024 onwards is injecting a lot of liquidity in markets. Now what China has done effectively is over the last 12 months it's injected between 7 to 8 trillion yuan into their financial markets. That's just uh just shy of $1.1 trillion. In my view they've got to do at least the same again this year. So I think this is going to continue and therefore I'm encouraged to see I mean this thing clearly cycles that latest uptick. So it looks as if they're pushing more liquidity into markets and that clearly is a good thing. Now what is the evidence elsewhere that they're doing that? And I would site the this piece of evidence. Number one, this is what's happening to the Chinese bond market. So if you start to see a lot of liquidity being pushed into financial markets in China, what you would expect term premium to do, you'd expect term premium to start to rise. In other words, rising liquidity, increasing term premier, increasing bond yields, and that's what we're beginning to see. So, tick that box. It looks as if this is a confirming sign. The other thing is looking at the yuan gold price. Now, there's an awful lot going on in as regards China's currency, but there's also a lot of, if you like, misunderstanding about what China needs to do. If you were looking at China's trade surplus, you'd have to say, you know, taking your standard economic textbook that with a trillion dollar or in excess of a trillion dollars of trade surplus, the yuan, the remn should be revalued higher. Okay? And that's clearly what the consensus view seems to be saying. And all the media are saying China's got to revalue its currency. That's not the answer because if China revalued its currency, it would just throw it into a pit of debt deflation. It would be the end of the Chinese economy. It would not, in my view, survive that. It would be mass defaults. They can't do that. They actually need the opposite. They want a weaker currency. And that weaker currency is necessary because they've got to devalue debt and they've got to get the paper yuan higher. So in my view, you shouldn't be looking at uh what may be a uh uh let's say a manipulated number which is the yuan US dollar cross rate because that can be manipulated in a number of ways. You've got capital controls. You've got a lot of intervention potentially by the Chinese authorities. You've got state-owned banks and large Chinese corporations which are probably told to keep those proceeds in dollars and not convert them back into yuan. Uh there may be out of that buying of gold directly rather than investing in US treasuries all these sorts of things. But the thing to look at is if they're devaluing the yuan by printing money the yuan gold price is going to go up. Okay. And we said uh about 18 months ago that what you'd expect to see, what we you should expect to see if China is going to scratch the surface on debt devaluation is a yuan gold price of at least 24,000 yuan. And that would be the start. And we've hit that and we've gone up higher. And you can see the chart, the direction of the chart. Now, I don't know where it's going to, but I can extrapolate and I say maybe they're going to at least 35,000. But you get the drift here is if the yuan US dollar cross is not going to change that much for political reasons, but the yuan gold price does change, then you're looking at a significantly higher dollar gold price. And that's why I'd still keep a serious toe in the water when it comes to the bullion market. >> H really interesting. Okay. Um so I was just about to ask you kind of a very general question which is sort of why should the regular western investor care about what's going on here with Chinese liquidity? Obviously it has implications for gold. Um, but I'm sure it's got bigger ones as well, like it China kind of healing itself obviously will be supportive of the global economy, I imagine. Right. >> Yeah. I mean, China needs to heal itself, but it needs China's got serious problems. I mean, I'm [clears throat] skeptical about the ability of the Chinese economy or the current Chinese economic model to actually to actually grow itself or would create decent GDP growth over the next two or three decades. I think it's very difficult uh given the economic policy mix they've got. They've got to do something. They need much deeper and more robust financial institutions. Okay, there's an awful lot of the work the Chinese need to do. I think they've been spooked by the threat of stable coin. And I think that, you know, in financial markets, there's no unrelated events. And I think that you know part of the spur for them to actually expand liquidity and try and get the debt problem solved is they see a big threat from stable coins to the uh integrity of the Chinese yuan and the Chinese financial system because the fact is that you know at the moment the Chinese financial system just does not have the capacity to uh absorb all this liquidity they're creating through the trade surplus and it has to they have to rely and lean heavily on the US financial system uh and that's clearly from a political point of view not what they want to do. Now that will be even that will be underscored several times if you've got stable coin because it gives a lot of Chinese ex exporters a very obvious avenue to go down and you know the alternatives are you either put your money in the western banking system and risk being sanctioned in the event of uh of some kinetic engagement or whatever it may be or you put it back into the domestic uh financial system and you get sanctioned or whatever by the PRC. So you're you're damned if you do and you're damned if you don't. So holding the stable coin seems to be a pretty obvious thing. And I'm sure the Chinese authorities are spooked by the idea that they may be losing even greater control over their financial markets. >> And do do they have does the Chinese government have any means to to try to staunch the flow of liquidity in chi domestic liquidity into stable coins? >> As far as I know, not. I mean, you know, to the extent that this is in the hands of the stateowned banks or stateowned corporations, they can clearly have some control, but you know, I I don't think so. Um, they may try, but you know, if those if those dollars are offshore, um, there may be a certain amount of agency on the part of Chinese private companies to actually stock up on stable coin, I wouldn't be surprised. That's what I'd be doing. >> Okay. So, so in your mind, it is a real threat to them. I think it's a serious threat. Yeah. I think this is what has actually spurred them to action. In fact, >> all right. Well, look, Michael, we're coming up on the hour here. This is as always just super um not only information dense and insight rich, but just super fascinating. Um is there anything that that's really burning brightly on your radar that I just haven't been smart enough to ask you about yet? I think we've covered pretty much everything, but I'd say that, you know, the the the point that we're that we're already making is that, you know, number one, you've got an inflection in the global liquidity cycle likely. It may have happened or it's about to happen, but we're pretty much there. The the the markets are reflecting that because commodities typically perform strongly at the peak and they're doing that. uh equities I would argue are sort of laboring a bit and the early cycle equity areas uh are becoming more more volatile particularly things like technology later cycle areas are beginning to uh you know to hold to to to get momentum so that's all corroborating that fact what what this is being driven by is not Fed tightening or central bank tightening it's really a redirection of the hose away from financial markets towards the real economy so this Treasury QE idea is becoming real. Uh that is driving the real economy stronger. China is doing much the same thing and the PBOC matters more to the world real economy than really to Chinese financial markets. So that's going to I think underpin commodities. Um so generally speaking I think you've got a stronger world economy this year. And if that's the case and financial markets get squeezed, then you've got an environment where I think lends itself to these contrarian views which says you probably are looking at a yield curve flattening at some stage through the year uh later this year and you're also looking at potentially a stronger dollar or at least a firm dollar and not the weak dollar that many people uh you know can continue to project. So, I think that, you know, we're out of consensus or in a small minority, but that's because we look at different things, one of those being liquidity. >> Well, you make a super compelling case for for those arguments. Um I I guess the only other thing I I I just will ask you to help me clarify here is given all that [clears throat] it sounds like you know a message for the average investor here is uh if we are indeed going through a a down cycle in liquidity there is a certain amount of pain uh that that one would expect to be taken in the financial markets during that down cycle. Um, and on average that pain is spread over around three years. So, kind of mentally gird yourself that it it could be that long of a not fun time in the markets. Now, it could be a lot shorter, >> but the trade-off there is it's more violent, more painful. So just again as an investor who's had a really good time >> uh over the past three years, you know, 20 plus percent returns more or less for the past three years in a row, you would say, hey, don't expect that for the next three years. >> Yeah, that that would be my view. I mean, I'm not going to put my neck and say out and say three years, but I think for for the for the foreseeable future, I'd be cautious. And also stress that I'm I'm I'm not that I'm not always bearish. In fact, far from it. I we've been very bullish since uh you know, late 2022. Uh you know, urging people to get into markets despite uh you know, similar sort of contrarian uh feelings elsewhere. >> And you were really at that point, sorry to interrupt, but I mean, you were really early and really in a minority then. And you were really really right. >> Right. Well, that's gratifying to hear. Yeah. And I I think now we may be wrong, of course. I mean, you know, as I say, never say never, but we've got to follow our, you know, our methodology, and our methodology is saying that there is a cycle, and that cycle may be losing momentum right now. >> All right. Well, look, um, again, what I really appreciate about your work, Michael, is not only is it sort of, you know, educating and helping us track what you think is the true reality of what's going on, but it's very prescriptive. uh you know you've got those those um asset charts that you showed earlier about what to hold at each phase and whatnot. And so to your point, you know, you can be optimistic because your your framework basically gives us a play in every cycle of of the every part of the cycle here of the liquidity cycle. Yeah, it's it's a cycle and I think you know if you come back to investing uh bull markets are about trends and themes and bare markets are about cycles and we've got to be cognizant of that of that cyclical downturn. >> All right. Well, look, Michael, can't thank you enough. Most important question for folks who would like to follow you and your work before your next appearance here on Money, where should they go? Well, I think the easiest way uh is to look at our Substack which is called Capital Wars. Uh I mean we write um you know a number of pieces every week about what's developments in markets and provide data some data. Uh there's an institutional service which is basically uh available either via crossborder capital.com or glindexes.com. Uh that's the the new rebranding as you kindly pointed out. uh and there's a lot of data available uh to people uh through API feeds or um um Excel or whatever form you want very data intensive. >> All right. Uh they are all fantastic resources and as a subscriber to Capital War Substack I cannot recommend it highly enough. Um so Michael when I edit this um I will put up the URLs to those resources that you just mentioned so folks know exactly where to go. Folks the links will be in the description below this video as well. Again, a reminder, um, if you want to get access to Michael's charts here, uh, just sign up for our Substack. Uh, it's going to be available to the premium members. To do that, just go to thoughtfulmoney.com/newsletter. Um, and if you could please folks, um, express your gratitude along with mine for Michael for coming on and just being so generous and all the analysis that he shares with us, um, please show him that by hitting the like button and then clicking on the subscribe button below, as well as that little bell icon right next to it. And if you've really um been motivated to take action in your own personal portfolio based upon Michael's work here um and you're you're you'd like to get some professional help in trying to figure out how to position for, you know, the the different types of plays in the cycle that that Michael has shared here. If you don't already have a good professional financial adviser advising you on how to do that, consider talking to one of the ones that Thoughtful Money endorses. These are the firms you see with me on this channel every week uh to schedule one of those consultations. As a reminder, they're totally free. Uh just go fill out the very short form at thoughtfulmoney.com. And uh these, as I said, these are totally free. There's no commitment uh involved here. It's just a service these firms offer to help as many people as they can. Michael, uh I can't thank you enough. Um I'll give you the last word here as we head into 2026, which again, as we just said, might be a different kind of year than what folks have been used to for the past 3 years. Do you have any kind of parting bits of advice for the average investor who's watching this video? >> I just say watch the cycle. It's going to be, you know, strong economy, um, potentially weaker financial markets, and that's the difference from what we've seen for the last two years. >> All right. Well, thanks for being so clear and so direct, Michael. It's so appreciated. Again, I just so value you coming on this channel and your uh your partnership here. Um, best of luck in what I think is going to be a very interesting year. >> Great. Thank you, Adam. Same to you. >> Thanks. And everybody else, thanks so much for watching.