Henrik Zeberg: Everything Bubble Bust Coming After Final Blow-Off Top

Summary

• Market Outlook: Henrik Zeberg predicts an imminent recession, citing the largest market capitalization to GDP ratio ever seen and a slowing economy with rising delinquency rates.
• Zeberg Business Cycle Model: The model indicates we are in phase two, late expansion, with a recession (phase three) expected soon, despite current market exuberance.
• Central Bank Influence: Zeberg criticizes central banks for their inability to prevent economic downturns, arguing their interventions often lead to unintended consequences like inflation.
• Investment Strategy: Despite predicting a blow-off top, Zeberg remains invested in the market, expecting further upside in indices like the S&P 500 and NASDAQ before a significant downturn.
• Gold and Crypto: Zeberg sees gold as overvalued in the short term but a good long-term investment, while predicting a final rally in Bitcoin before a major correction.
• Everything Bubble: Zeberg warns of a widespread bubble across various asset classes, driven by years of low interest rates and speculative investments.
• Consumer Impact: The disconnect between financial markets and the real economy is highlighted, with Zeberg emphasizing the struggles of average consumers amid rising costs and stagnant wages.
• Future Inflation: Post-recession, Zeberg anticipates a stagflationary environment as central banks' attempts to stimulate the economy could reignite inflationary pressures.

Transcript

So just ask yourself maybe this time when we also actually have the largest market capitalization to GDP we have ever seen, do we think with the slowing economy and the consumer being underwater as they are and we start to see delinquency rates also moving up quite strongly. Do we think that the NASDAQ is telling the truth or do we think that maybe NASDAQ is becoming a little exuberant here or a little froy? I I go with the last. Henrik Zeberg, head macroeconomist at Swiss Block and also author of the new book, The Monetary House of Cards: The Bust of the Everything Bubble Caused by Central Bank Hubris. It is so wonderful to welcome you back to the show. We are thrilled to have you as always, Henrik. Really appreciate you taking the time. It's it's me who says thank you. Thank you for having me on again. Well, wonderful. And I got to tell you, I've had a lot of requests to have you back on and more regularly. So, I'm really excited to share with the audience that Henrik is going to be joining us every quarter from now on. So, we're just thrilled to have his expertise. And gosh, Henrik, you and I are just chatting. I was reading your new book yesterday. I'm not finished yet, but I've spent several hours digging into it, and a lot of that framework that you're talking about, I feel like it's starting to play out now. So maybe for folks who aren't as familiar with your work, let's kind of start with the big picture, that macro view, the framework that you use to look at the world and where you see things headed. And one of the things about this program, Henrik, you can take all the time you need to set the table when it comes to that big picture, more of that macro. Excellent. Well, so I um we all like to look at markets, obviously. We all like to put our money into to to uh invest our money and then see a good return. But it's really about where the macro is going. And I think there are long time frames where macro doesn't matter. And then there are the one the moments where it's the only thing that matters and I think we're getting to a point where it's the only thing that matters very soon. Um for a long time within the cycle and this is best back to my framework. uh when you look at the large picture you have business cycles and there are a lot of people out there trying to to uh to you know do and have their own analysis of how to to look at the business cycles. uh we know there is a cyclicality to things and uh and we have of course central banks and uh administrations that will try to interfere with that but in the general picture you have these ups and downs in the economy and basically um what you can look at is you say on a long time frame you have a long-term growth rate but what you always will have is that that sometimes the economy is growing more than the average long-term growth rate and increasing and sometimes it'll then be you know topping out there and then starting to still grow above it but then uh start to decrease but still be above the uh the long-term growth rate. Later you'll see that it crosses over that line and say now we we no longer grow as fast as the long term and then we have the wave three and then we have wave four when it again starts to come up again. Wave three or the not wave three of the phase three is where we see the uh the recession setting in and what we have seen now is that uh and this is back to the to the framework or to my my Z business model is that the economy is slowing down like what we have seen we saw it into 2007 uh into uh 2001 and also in previous times this model has never been wrong. So on a quarterly basis it has when it has generated on the leading indicators a uh a signal. It has never been wrong. It's like Titanic hitting the iceberg it's going to sink. It may be that everybody thinks oh nothing is happening. I don't want to put on my life jack jacket or I don't want to go to the lifeboat and I rather go and have another you know drink at the bar and and and and hear the music play. And it may well be that for the next hour on the boat there on Titanic that that's all that's that's correct. And that is what also what the model gives us actually that in November 2006 we had the crossover of the leading indicators in my model. But it took a year before the coincident indicator which is the one that really tells us now is the time and it actually crossed in November of 2007. So just one month a month earlier than the recession set in. And we are now there where we have the leading indicator has been has crossed over already in November of 2024 which is also why I've said that for a long time we I could see the deterioration on this but the real the break of that came in November last year but I also knew that it would take time that's why I kept saying blowoff top blowoff top it's going to be there's going to be a drink at the bar and another you know dance maybe with the music and everybody will think that this is this is a nothing but it actually is and the the problem that people think that the economy kind of reacts immediately to tariffs and to whatever it is. It's not like that. We know it from you and I you know ourselves that even when now POW comes out and adjusted rates by and cut by 25 basis points. It's not like you and I go out the next morning and say hey you know what we are going to save this much hence we're going to go and spend that money today. That's not how the real economy works. It may work a few months down the road when we can look at our mortgage uh payments and rent and then say, "Oh, actually looks like I've saved some money. Maybe I could spend a little extra." But that's with a lack. So the thing is that it things people have thought that we have had this the bad things is already over. It's actually the bad things that we have seen so far has been the beginning of what is going to be the next phase which is going to be an outright recession. It's not right here right now. And there are things that need to be to to we need to see in terms of my with my model also there the credit spreads are not not rising at this point. That's one of the things that's telling me there's no no stress in the in the financial system at this point. Uh we still don't see the real the spike of the the the yield uh spreads um at this point either. Another thing and we don't see it in the labor market really on the initial claims which we should also start to see spiking up. We don't see that. Hence, we still have time and these are the ones that I call the imminent recession indicators. They tell us that we have a structural problem which is the housing market in the US is the consumer that is deeply underwater and you live there so you probably know better than I do but I've seen I I just study the numbers and and you can see how deeply underwater the consumer is and that is the problem and then you have the whole financial world who say oh no forget about that Henrik because you got AI and you got crypto and you got stable coins and you got and you come up with all these things and it's like oh my god we have heard this before right we've seen this before we have seen how it where people are starting to talk about everything else then the the problem at hand and that is the slowing of the economy which we saw in 2001 and 2007 where it was just as obvious as it is today I did not have that framework back then let me just put that up but but uh today I have and it's uh it's actually showing it quite clearly so in the biggest scheme of things we are we have seen a crossover of the leading indicators meaning that has been telling us for quite some time Titanic hit the iceberg it's going to sink doesn't mean it does it immediately ly we're starting to see some of those things. We just had the ADP numbers coming out day minus 322,000. Not a great number either. Let's see if we get the numbers on Friday uh with the shutdown of uh the US administration. But we should see a deterioration in the job number which my model by the way said already from November of last year saying going into 25 we should see that. And I was pulling my hair out uh when we saw those numbers in May and June and so on. They were 144 270 I thought things first revisioned the first uh number was in one of the months and then we saw the revision in August which really just lays it up like like the uh like the model is telling us. So real economy slowing and this is completely disconnected from what the the markets as uh and the S&P and NASDAQ and and everybody in the financial markets are looking at right now. Mhm. Just to recap the four phases from the Zeberg business cycle model. Phase one was the early expansion. I love the metaphor of like smooth sailing. Phase two, late expansion, hitting the iceberg. The warning signs emerge. Phase three is the recession. The ship sinks. Phase four is the recovery, rescue and rebirth. Are we now I take it we are phase we're phase two because we haven't seen the recession yet. We and it took a while for the Titanic to sink. So like you said you can go get a drink at the bar hence markets going up the disconnect. I don't I do want to talk about the markets and the disconnect and um let's explore that a bit more because like you know oftentimes you know we'll have folks come on and kind of caution and warn on the economy and they'll see people in the comment section will say like look at the markets look at the markets and it doesn't mean that you're not in the markets like you just know like you're like let's let's kind of get your bigger picture take on the markets and that disconnect but the thing is people are think um in in Arab that that the markets are leading it's not it's incorrect and again people just need to go study. If you sit down and you take a look at the number of of unemployed people number of unemployed people you'll see that every time it bottoms out before the stock market actually tops out. So you have in the model actually which is what is it first of all back to your question on whether we are in phase two the model actually have the leading indicators are already in phase three so telling us we are going to get a recession phase two but the real economy what we feel on a daily basis is still in phase uh in in in uh phase two which means that we have hit the iceberg but we haven't we're not sinking and um oh uh hang on here I just got a call and so so and then we uh we'll see when phase three sets in but Um at this point here there is a uh yeah there is this disconnect into the market and of course I am in the market. Of course I see that. But again looking into history also and looking at what it looks like when you see the the economy topping out uh in 2001 and also in 2007 and even in 2019 18 and 19 we also had a slowdown. COVID didn't bring out the recession which is maybe a little difficult for some people to swallow but it was actually a slowdown but was ongoing already. And you can just look at the short-term yields back then and and else but but also my business cycle picked that up. Um so we are at the point where where where it's getting um the real economy is rolling over but we also know that's the time where the financial the the the central banks of the world starts to to cut and if you look at it they are actually cutting now if you look outside of the US like there is a very big thing coming. I mean the we we have a lot of cuts around the world already and uh and it's only the Fed that is very far behind actually. So it's not just the uh about the um it's not just about the US here but people looking just at the market and thinking everybody is discounted in there they actually will be late and that's why again and again and again people will surpass the point where we actually have seen the top because they think kind of you know they they also adopt the u the understanding that well things have been going so great. How could they go be so great in the markets if uh if things were about to roll over? And and that's the big disconnect. That's where the business cycle will actually help you more than just looking to the markets. You just pointed out too like even leading up to the 2020 pandemic by late 2019 that the Zeberg business cycle model was saying that that um you know that late 2010s expansion was on borrowed time. A recession um was ahead. Of course, we saw no one no one really saw the pandemic coming, but um just makes me curious like when you see the central banks intervene like how much does that impact or there how much does Fed policy impact like the various you know booms and bust cycles and it seems like we're almost becoming so or we have become not becoming we're so dependent on you know central bank central banks coming to the rescue if you will. Yeah. Yeah. But we think that they come to a rescue and and and again first of all they they can never really counter it. They have never done it successfully. It's it's a when we have had a crossover in the business cycle model in and famously back in the mid '9s we actually had a what people think oh this was actually a soft landing actually there was no no crisis coming. The Fed started to cut correct but there was no no issues there with the business cycle. It was not like the economy was slowing and the thing is this time when you when you have the slowing of the economy that creates a negative effect and people spend less and they will then you know people the fewer people will then have to be employed and you can look at the cap capacity utilization right now in the US it's actually down at 77% normally pe businesses you'll see that they start to lay off people when it gets down to around 80%. So we we also below there and so things are not developing to mean it's not you know it's not a recovery you're not seeing any kind of recovery you're actually seeing that we are kind of going idle for a little been going idle for a little while maybe because of all the stimulus that there were supplied back in after the co which for a lot of people have created a lot of buffer and savings and then you can you know see that that is starting to now uh become uh yeah not a thing any longer because people are simply spend spent that money uh the the the surplus uh savings that they had. So things are developing and it's it's just um just about observing the the right things and not be too blind on if the market tells me I'm fine, I'm fine. Because remember in 1989 you saw the nic peaking up straight up. Things were absolutely not fine there. I can tell you and the NASDAQ 2001 peaking right into a top. Things were not fine there. So just ask yourself maybe this time when we also actually have the largest market capitalization to GDP we have ever seen, do we think with the slowing economy and the consumer being underwater as they are and we start to see delinquency rates also moving up quite strongly. Do we think that the NASDAQ is telling the truth or do we think that maybe NASDAQ is becoming a little exuberant here or a little frother? I I go with the last. Gold keeps setting new all-time highs, but price appreciation isn't the only way to profit from owning gold. Monetary Metals is redefining the future of precious metals investing. Instead of paying to store gold, imagine getting paid to own it. With Monetary Metals, you can earn up to 4% on your gold paid in physical gold. That's right. Your ounces grow each month, not just your paper balance. A yield on gold paid in gold means you're stacking more ounces every single month. And you still benefit if gold's prices rise. You're earning more gold every month. and enjoying potential price appreciation at the same time. Go to monetary-medals.com/jullia to learn more and see how you can start earning 4% on your gold paid in gold. And to that point though, do you stay do you stay net long? Do you since we're head I think last time you and I spoke we talked about heading toward like a blowoff top. kind of take me inside how you're thinking it from thinking about it from an investor angle. When will you say I got to get out of here or enough's enough? Like how do you think of I mean you you see where we're headed but how do you deal with because I think a lot of folks probably are like they don't want to miss out and that's the psychology of it too and that's dangerous too which is in the book by the way so you will you'll also see about that. Yeah but that's the thing I mean that's the that's the the thing where we can all be wrong. I mean all famously also Isaac Newton was uh was you know a long in your book. Yeah. He Yeah. Exactly. Right. And he lost a lot of money actually. He got no no sea south sea bubble. South Sea bubble bubble and he actually and he actually afterwards said well you know I I you know famously said that I can calculate the the body the movement of bodily heavenly bodies but not of of madness of men. and he and he actually forbat any anybody that to to talk about the South Sea stock at any point when he was in you know present. So he really got hurt by this and he lost you know what would have been $3 million to these today's money. So, a lot of money and and um so it's something where we all get sucked into this because we think oh but you know AI come on that's going to help us just think about it the the the developments and the technologies that we have seen over the years in the 1920s we had the car the radio electrification and people tell me that it's a great thing because I can go and take pick up my phone and order some things on Amazon. Well, try imagine actually putting, you know, clicking um turning lights off and on on in your your living room or using electrification for your production process or getting your message spread by the radio or going into a car, sitting into your car for the first time after having used horses. I mean, we have seen technological developments and advances before and they have led to a frontunning of this which we see again. So I think we are we are on the cusp of something where technology is going to take us in the next leap into uh into the future here in terms of productivity and so on but it doesn't save the markets and and I think that is the that's the problem here. We are simply frontr running these opportunities and we want to be there. We want to think this is you know we are so smart this time and every time we then just get caught by our own emotion and feeling right of being on the right same side as everybody else who says it. And this is the the that's the mentality that actually brings us to uh to take the wrong. So you ask me about my my position. Well, I I think I am first of all, I think we're seeing the the the late phase of uh of the the market development here because we have seen actually since you and I spoke last time also uh that the market has been more or less going straight up. Uh so can't remember when but uh but we have seen very strong rallies in uh in both the S&P and NASDAQ. Bitcoin, crypto, and so on has been a little more muted, but I think we're about to see the next strong leg there. But I think it's going to be the last in Bitcoin for this m this time. And I think the the next top that is going to be there, which can by the way be a lot higher, is going to be uh is going to be a very big top. It's going to be one that let's see if we get to that point again. So um we are seeing the the the the risk takingaking here the the that people get into and they will probably see the rotation also from crypto as from Bitcoin Ethereum into small uh coins and altcoins and memes and so on and and I think on the stock market you're going to see that there will be a lot of uh small companies that will do extremely well and outperform uh the fang stocks. So I think based on my my model and the um and this is the second part of my my my my I have the business cycle model but then there is the Elliot way model as well and there's a liquidity model as well which are combined my my framework um and the uh and the the Elliot way model tells me that we have more upside. We have 7,500 maybe on the S&P and uh NASDAQ 28,000 maybe a little extra also there uh should be seen but it's going to be a very spiky thing and we are not far off. I looked at the Singaporean index this this morning and uh the the candle for September does not bode well for what is ahead. I don't think it's a top but I think we are getting closer to a top with what I saw on on the Singapore. Now why is the Singapore index so important? because it's a little small economy based on trade and and when that tops it means that the economy of the world gets into problem and that's why we everybody will see that we have problems. So you you want to see the canary in the in the coal mine you look to the Singaporean index and uh and if that tops then we then I think the rest is going to have a problem as well. Interesting. I think you you're the first to share that um insight on this channel. That's fascinating. Okay. Okay. So, that's a canary in the coal mine. A bit of a warning sign on the global stage then. Um, okay. Just a clarifying question too. Like if you see further upside, it's not like you're short. You're not like shorting though. No, not at this point. Absolut absolutely not. Not at this point. Yeah. Um cuz I some I sometimes see like back and forth on X. I just want to make sure and get clarify too. Okay. Let me ask you this. um the everything bubble. Is there anything that's Well, maybe we should frame up the everything bubble, but is there anything that's not in a bubble? The problem is with with with what we have seen over the years is that when central banks are suppressing rates, yields, everything becomes attractive. Why? Because when you are having interest rates at 4% and you come up with this fantastic new idea and you want your business plan tells you you can earn 5% on it, it kind of makes sense to do it because why why all the effort if you can just put your money into 4% and getting that on a fixed so you you'll maintain you you you probably will do it if it's 5%. But if it's 3% you would not because at least why would I go through all the the pain and I can see it gives me a 3%. The problem is when we have had these low interest rates that we had for many years and here I'm not talking about for the last two or three years here now but but for many years this is something that is a a structure that a a a situation that has been built up over what we have done since 2008 is the distortion of capital of human capital people minds uh into all sorts of speculative uh things and projects and so on. So when interest rates are below 1% back to your project from before 4% 3% well okay I'll still do it because it's much better than what I can get in safe returns and especially if it was negative uh the when the yields were negative. So the thing is that it that has caused a distortion in terms of what we think is good value is what what we can invest in and that is not something that is going to go away overnight like like that. It is something that has built itself into the whole pricing mechanism on the housing market on in private equities companies. So what they can you know what what what is a good cash flow from a potential business that you buy into uh from everything bonds everything. Uh so so we we have this it has kind of seeped through the system and it has kind of you know put in a an understanding what the valuation level should be and and that that's what we see. So the bubble is in a lot of places. I if you have to you know point to places then the stock market is one thing that is absolutely certain. If you look to crypto market I mean there may be some of these are there will probably be some of these big crypto projects that will be fantastic. But just a crypto for the crypto's sake or for a currency sake. No. And also not the memes and all that. Forget about that. And then you have the private equity companies that have been also uh buying in everything because if you were there a partner of a private equity company of saying oh I gota I got to got to find good deal yields for my my investors and if you didn't well they would pull their money out. So you found something and that self- enforcing loop has created this this situation we're in. So the it's been going in everywhere and and we don't feel like we're in a bubble right now because you know it's like general this how it's been feeling for some years now. So it doesn't feel like that. But look at the valuation levels they are extreme extreme and and and this is the problem. So when that goes out when people start to see that you actually have a decline in a lot of assets it has a deflationary uh component that means that people are losing value they'll be selling there'll be margin calls. There will be a lot of things and that can then start the the lav lavine from or the avalanche so it's called the avalance to to to roll and uh and I think we are we're not there yet as I said we're not there yet I think we can go have a few more months but we are not as far as way from it so as as a lot of people think I I definitely don't see that I have a question so like if a lot of people don't see that we're in a bubble does that make the bubble even more dangerous than if like everyone kind of just recognized it you know absolutely but that's the problem. I mean, it's that the problem that is that what we don't know and what we don't see because then we we get hit by from a blind angle. So, people looking at their Bitcoin say, "Yeah, Bitcoin is going to hold up well." Guess what? I don't think it is. I think it's going to be really bad and you're going probably to lose money on it if you, you know, bought in over the last year or so. Uh, and uh, and and and there will be a lot of other things also your the value of your house and so on so forth. So, the bubble is is so clear this time. I think that it's unbelievable that it's not over all over the news. First of all, it should be something we're saying, guys, we saw these numbers before. Um, we are in something, but of course, nobody likes to be the the bearer of bad news. And and here I am. But I also wonder, okay, let's say um let's say you're one of those folks, you own some crypto, you own a house, you got some stocks, you might be feeling really good and like prosperous. Like why would someone want to be like, "Oh yeah, it's a bubble." You know, they probably feel really good on the way up. Um, but that's the way that's the problem. Yeah, that's the problem. And and we als we all know that feeling also because we all lost money if we've been long enough in the market that all of a sudden it starts to go against us and then it's not such a nice feeling any longer and then we say, "Oh, why didn't we sell at that point?" Um, I I actually had my one of my friends, he he was in Nova Nordics, which is a great uh Danish medical company, and uh they came up with this, you know, uh what is it called? Vobi and or Oimpic. or simp I don't know which one's sorry I don't know I don't even know the it's it's the GLP one yeah yeah people think I'm stupid because I don't know I just product was theirs now but um but the thing is that he said to me oh Henry you got to understand that this is a fantastic company I said yeah fantastic cash flow I can see that but it's very very highly val you know value the valuation is extreme at this point yeah but now they we're going into this is going into the you know the the whole be piece thing in the world and it's the fantastic you know massive industry a massive market and I say yes but that's not a you know it's something everybody knows so if everybody knows it everybody has been buying into it already and and guess what it fell from around 1,200 to around 340 to 300 I think within you know I think the top was around December last year so things are that you know we will all look at that and they see wow feeling good and he felt so good while it was climbing and I was wrong because I said to him by around 8900s, you know, maybe it's a good time. And and then he he lost his lot of money on that, unfortunately. And the problem is I think a lot of people will see the same. They're going to sit there and look at their bitcoins and say, "Hey, I've done so well. Fantastic. And I'm, you know, yeah, and may come down, but then it'll go up again." And then we know if we get hit by the big one, we are feeling sad afterwards and say, "Why didn't we why why didn't I actually, you know, hide out or take a little profit or whatever it is?" Because the greed and the FOMO increases as the market is going up and especially when it goes up as strong as it does right now. It's very very difficult for the human mind actually to and and for successful investors to be out of the market and just looking at it and say hey I got my share of this. That's Warren Buffett. I mean he he took his money out some time ago and you can wonder why. and we're looking at these things here now and then say but he's you know well I got my my fair share of this move here and I'll be ready for the next move and that's the problem so many people are not really thinking and saying oh is this a sustainable de development are there any obstacles in the way and they are grasping for this and saying oh but the Fed has got our back they will make sure by the way the Fed have never been able to do that and oh the AI is going to change the world yes it will but it's not the same as you cannot have a bubble and whatever kind of this you know uh argument that comes up problem is the structures are there and you can see that we are heading into what is a very significant high as I see it. All right. Tell us where where do you see on the high? Like where do you see the level? Where do you see it headed? And if it bursts, where do you see it going from there? Have you put targets on there? I don't know if you have. Yeah. Yeah. Yeah. Yeah. I have. But uh there are certain things I I I probably will not mention Bitcoin because people will just Oh, they'll go bananas. But you know, this isn't like really a crypto channel and they're not like the biggest Bitcoin audience. I mean, some people are Okay, good. Fair enough. Good. I think the S&P is has a rendevous with 7,500 7,800 even. I could definitely see that, but it's going to be much quicker than people will understand. Um I I think there is a a chance we see that going developing really quick. Um and uh and I think the NASDAQ as I said 20 28,000 maybe maybe higher even a lot higher actually than that. But I there are some Fibonacci levels that are a little more easy to read on the S&P. So 7,500 I think is is around that level. uh and um how low well if you look at it this way if we have right now the market capitalization to GDP is around 220%. That means if we go back to 19 uh so to 2007 where it was 107%. And it was still a bubble at least in the stock sorry in the property market and we saw the NASDAQ and and the S&P dropping quite a lot. So if you go to that point, which was still something it could drop from, you would have to half the market's value right now. That means that not instead of having what is it today? I don't know 6,000. Where is it today? Yeah. What are we on? Um on the S&P um on the futures because the market is opening literally 60 seconds. But um 60 seconds. 6,711. Yeah. 6,7. So if you if you go down to the half of that so it means 3,350 around that level we would still be at the level which would have been the second high no sorry the third highest then in terms of market valuation we have ever seen that's half that's that's cutting half of the of the price that's 50% down and in two so so you had in 19 uh so so we we are just in unprecedented waters here we have such an extreme market uh capitalization here And in extreme people say yeah but the earnings are are following these are forward earnings guys and if you look at that and these forwards earnings they normally disappoint and disappoint a lot when you start to see the slowdown. So I of course it's it's it's a generalization but that is what you do when you look at indices and and then people say but this time is different and if you start that discussion then I probably have to go because I I don't think it is. And that also comes up in your book too when people start saying this time is different. Um let me ask you this. This is another topic as I'm looking at markets. Looking at gold 3,895. Gold has been just one, it's been a really popular topic on this show. It's been on a tear. If I recall correctly, I think you've also been a little negative on gold. But yeah, can I just get your big picture take on gold and then I have a few more follow on? Sure. Um so I famously said or inf famousamously I don't know said long time ago I think job gold is going to to to decline and I stand by that. What I did not see was that it would have this extreme rise that we saw first. We didn't if you looked at miners and you looked at silver and you looked a lot of things it actually did not show that gold will have this. So gold was front running things somewhat and people now say oh but that's that's because we have seen the bull market. I actually stand by what I've said. I was wrong in terms of that it would make this spike and I think it's actually in a and people are gonna hate me for this so but I'll say it anyway is in a kind of a mini bubble right now because people have been been buying into the inflation scenario and they are also buying into the situation where we potentially have some issues with the monetary system um or a lot of issues actually which is also what what the book is about the monetary house of cards. So goals should rise long-term, no doubt. And my target for that is $35,000 in 2035 or something. I can go extreme. I really a lot. But the thing is you are going to see the dollar putting in a very very large bottom in the not too distant future as I see it. And if I'm right on that and I was again hands down I was not know not trying to to to to uh to explain it away did not see gold taking this this uh this this spike first did not but it does not mean again that it cannot take a big decline. Will it reach my levels that I talked about in previous times? No. Will it reach could it reach 2,000? Absolutely. And that would still be a quite a big drop. So wrong but I would still argue that it's because simply it's been front running things a little more. And I was uh not not correct on that. But having said that, then I think you're going to see into the final blowoff phase here that Bitcoin and and other things are going to outperform gold. And you're going to see that actually the crypto guys will come out again and say, "Hey, look what we said. Gold is going to be, you know, secondary to to to uh to Bitcoin." I think you're going to see that into the blowoff top that I'm talking about here, which will not be a too distant uh event. But come the next few years, you're going to see quite the opposite. And we are starting to see a breakdown between if you look at S&P and gold. So S&P or the the the the stock market uh in in in gold terms that we are seeing a crossover and a breakdown of that which means that gold is starting to outperform on a structural level on a very secular structural level the S&P that does not mean that doesn't mean that it will be happen in the next few uh months but I think on a larger scale and we're talking the next decade here I think S&P will is gold is going to outperform the S&P because we it's just fallen so far behind So I think the big picture is yes, it's been rising and everybody is now bullish to gold. I think be careful because if the dollar puts a bottom in that I think it's going to do and go right against what people think there and inflation is not playing out because you actually get deflation also back to my my my business cycle model. It shows that we have deflationary pressures coming well then you will um you you don't want to be in gold necessarily. I think people will understand that gold will fulfill its finest task which will be to provide liquidity when liquidity can't be found and if the earth is going to open up as I think it can with the valuation levels in the stock market and all this the everything bubble is going to burst I think you're going to see that the dollar is going to rise a lot and that will be very painful for gold in the short time time frame in the short time frame. Okay, that's fascinating. Okay, so when this all bursts, the blowoff top, the bubble, I'm curious, how how do you because it's pretty scary scenario. How do you prepare and what do you do in the aftermath? Because it do do you own gold? Do you want to own gold? Because a lot of people who watch this channel, they do own gold and they've been pretty happy with like the gains, but like I don't know how are you if you don't if you don't. No, but I definitely I mean everybody should own gold and I own physical gold as well. And uh but will I buy more right now? I don't think it's it's but hey, I've said this for a long time. So I've been missing out on that. But but luckily I've been been not missing out on other things. So So yeah, I would I would I'll take that. But just think about in in a in a liquidity phase or in liquidity shortage phase phase like uh what we saw also in 2008. If a bubble burst all of a sudden a lot of people will be forced to go in and restructure their debt. They they'll have to make ends meet in terms of you know payments and so on so forth and we are all right the whole world who has a little debt on our balance sheet or personal balance sheet we all short the dollar sort sort of because most of the debt in the world is denominated in dollars so if that starts to happen then you will see that the dollar is going to have a positive effect from that it doesn't mean I'm I think the dollar right now is fantastic but it's still the cleanest shirt as I mean the there's a lot of shirts out there and it's still the cleanest this one even though it's quite dirty. So I think you're going to see that it's there first of all the restructuring thing of the deflationary bust is going to bring about a massive uh demand for for for dollars and then you're going to see that is uh is actually being enforced and and reinforced by by the uh uh yeah that everybody is practically short the the the dollar also. So I think with that I think you know if you can stand by that and you say well every opportunity where gold is going to decline I'm going to buy it because my or horizon is is 5 years from now great then you can buy it but you may see a very deep decline in this uh and it may not even show as much if you look at physical gold because there can be some you know uh you know quite diff large differences as people obviously know. So the uh to the spot price on on on the markets and the paper or paper gold. Um and so yeah, you can keep it if you don't need it. If you don't need to do it, but just be aware that that's a situation. And if you got liquidity, well then I probably will say, well then stick to your dollars for now. Wait, wait it out. Look at when when people are selling gold off in, you know, in masses and then thinking maybe you're buying something there. When people start to say, oh, gold is losing its shine or whatever. That's that's probably the moment. So I can tell people to keep it or not. Everybody should have some gold in their portfolios. But um but I think uh it it's a matter of the of the the the shortage in dollars that is going to be into this phase which I think a lot of people have a difficulty in in in actually imagining. Mhm. So, um, to kind of recap, so with your thesis with the everything bubble collapse, that initially is going to cause deflation, um, and that will clean out a lot of the bad debt, too. But then, as part of your thesis, and correct me if I'm wrong, then we move into, um, after the deflationary bust, you move into back into like high inflation environment, like a stagflationary environment. Is that correct? Yeah. Because what we everybody will say when I say but Henrik the the Fed is not going to allow that there's going to be a deflation or Trump is not going to allow it then I'll say them first of all there's never been a central banker in the you know in history or president in history who would allow it if they could disallow it like that they cannot so let's first agree on that secondly of course they're going to come out with guns blazing and the problem is this time around that you know back in the 2008 the situation was quite different you had a deflationary envir environment. You had globalization going full speed which means that there was a pressure on prices uh and and you also had a lot you know just of things the productivity development and so on. So things were actually being developed cheaper and the you saw that the deflationary pressure was just you know to the downside. The Fed was was fighting with that. Now we have reintroduced inflation. So in 2020 when COVID hit the Fed went out there everything in and at a time where you had people going home going couldn't go to work you actually had a disrupt disruption in supply chains in the supply chain you know aggregated global supply chain you can kind of imagine when you then put demand into that a lot of demand into that I we we got an extra I don't know bon check from the from the government also it was some savings that they had and they just poured back to people and we go we we spend the time home people started to spend that into a supply chain which uh um disruption. If you on the first year of economics and you know at university you learn about supply and demand and and if supply is collapsing and you put a lot of demand into it what you get is inflation and that's what we saw that inflation is now going through and has now ripped through the the the society and caused infl yields to rise have caused prices to come up a lot. Remember this is a stock and flow thing. There's a difference between how much water there is in the in the water top and how much water is there being poured in every month in every minute. And and the thing is inflation is the water being poured in whereas the level price level is what is in the top already. And and this is the the problem the top the water has gone up and people feel that like inflation but it's a price level that has been going up and that is what is hurting also the the consumer. So the problem is now the Fed is going to come out again and say, "Oh, we got we can look at disinflation because you can actually see that the the amount of water coming out can decrease and it looks like there's going to be no water coming in." And they don't like that the Fed, they actually like a steady flow of 2% inflation. Um but the problem is if they do that this time and come out and you know introducing a lot of money into the system again or doing QE or whatever they're going to do the problem is people will then start to say oh look at this we're going to get inflation and then the expectation of inflation is going to come up and this is not just something I say this is not just a thesis this is actually what you can observe if you look at yields and there is a significant move higher uh in in the yields now which have shown that we have put in a as I see it a secular bottom in yields. We are putting a secular bottom in commodities as well. It may come down and we may see it as disinflation or outright deflation. But I think the problem is that when the Fed starts tries to do what it did in 2008, which they will or 2020, then they're going to see inflation. And that's the problem, Julia, because think think about it. You know, our parents or grandparents, if you ask them and say, "Guys, you know what? Today we got this modern monetary theory, you know, that's it's in incredible. Every time there's a problem, you just pour money on it. Why didn't you think of that in the 60s or the 70s when you had depre, you know, when you had slowdowns and they'll like, oh god, they'll say, you know what we got? We got inflation at that point. So this is the problem that the shift in the in the economic climate in the regime that I call inflationary regime and the inflationary regime has shifted. It's so clear. That's also why Jeff Gonax talks about that it has shifted. Doesn't mean inflation is going straight up. It means that the the development over the next many years just like after Fulkar killed inflation in 1981 or 79 to 1981 which is also in my book. Um you'll see that there is a development to the downside for a secular long time like what you had from the 1920s into the top also and so on. It's it's going like that over the many year last many years. We have a significant bottom in inflation. It's been moving up. It's coming down. But the trajectory now is higher. And if the Fed comes out like they did in 2008 and 2020, they are going to create inflation like what our parents are saying said would have told us if we just said you just pour money on it. Uh and uh and that is the problem. And this is what none of us has really we I mean I'm 50. I uh I was six years old when we when we saw this regime shifting last time. I mean not many of us can understand and see this. That's why we have to ask you the people that are a little older than us and try to understand what is going to happen to inflation in an environment where the economy just rolls over and you try to pull money on it. And if you do that then you get inflation. And if the economy doesn't turn with that because that's what they hope. They hope that when they make the when they cut the rates, you you you got to drop me if you want to say. No, I want to listen. No, I don't I don't want to interrupt. Keep going. So, so when they if they are coming out again and say like what they did here now in September and probably going to do here in October also, you know, cut rates, they want to to to have Mrs. Johnson in the US to say, "Oh, I now saved $100 on my mortgage loan. Fantastic. I'm gonna take that money immediately. I'm going to go out and I'm going to spend it immediately all hundred and preferably they want her in you know figuratively speaking or you know rhetorically you're speaking here that the they take this money and they that she actually doubles it by taking up a loan a credit loan or something and then spend that money as well because if she does that then you have the positive cycle that they hope to will start going on which will then create higher growth and so on. The problem is Mrs. Johnson have seen inflation this time and probably also her debt levels is a little higher. If you look at an aggregated level, you can see the US, they had 60, you had 60% into GDP last time, we're now at 120%. So the problem is if you save those $100, you kind of look at it and say, would I now go spend it, which is what Paul wants me to do, or will I actually stuff it and just see if there's going to be a rainy day in the next coming months here? If you do the latter, which would be normally from a psychological perspective, from human beings, I mean, she just saw her neighbor getting laid off and prices have risen as we talked about, would it be natural for her to think, "No, I've got to save this." And I think that is the thing which is going to play in this time. This is the financial world completely ignorant about us. I see it. They think that the Fed every time they print money, it's going to create a fantastic effect in the market. But guess what? If it does what I'm saying there, you can probably see that money maybe setting into commodities, which I think it will, but potentially not supporting the the the purchasing power, the power of the of the consumer or the, you know, the wealth of the consumer because they're going to save it instead. And that is the problem. If she saves that money, it's not going to work. So you may introduce then inflation because some of the money will start in the financial world and people start to speculate with that and you'll not see the real economy picking up and that is stackflation. That's what you see. That is why the slowing of the rec recovery if they come out like that again and the money does not support the consumer because he doesn't want to spend it then you have a problem and that is what I I I think we're going to see. Quick question though. If the consumer doesn't spend it does that that doesn't drive more inflation right I thought if you were buying more chasing correct okay so correct but that there are different types of inflation also so you can also have yeah so this is the that would not be consumer inflation so correct it's actually very spot on you need to see her actually spend that and it will start to you know turn faster but the thing is it can also happen in other part of the so it can happen also just sorry due to speculation also with the money and the financial system starts to get into commodities for instance because that money will need to find a place right it needs to there's so much money building up so where would we then put it and if the economy doesn't demand doesn't pick up well then it can see it actually start moving into things like gold silver uh commodities and so on and that's why I think speculatively here but uh but I think you're going to see a different kind of dynamics to what is going to happen when the Fed comes out because the Fed is going to come out like in a massive way I guess like for the Fed like we've talked about and your book obviously talks about like the the error of the massive policy errors that they've made. How much does the Fed like how much can they even make a difference at this point? Like I think the last time you and I spoke, correct me if I'm wrong, you made the case that they should be cutting or should have already been cutting. Will their cuts even make much of a difference at this point? like the we just saw the 25 basis point cuts. Just would love to get more of your take on the Fed and I take it they can't really correct their errors at this point. Maybe they're too late, but they are way too late. And again, it it's down. I mean, it's it's the the the division between the real economy, you and me, having a job and having a home with a mortgage loan, and then the financial world where it's all about, oh, if liquidity comes in and that money, then you can then, you know, Nvidia will be, you know, worth this much and so on so forth. This is the the financial speculation world and this is the schism that we are starting to see that you the most most you know famously I I put up a few charts also where you can see the the development in the S&P and it actually follows the job uh openings uh that you very very clearly over the last 25 years and now you just see a big uh divergence between that S&P going up and job openings going down. So this is the problem uh right now right here is that you have this disconnect going on and uh so so what the Fed is doing now is like uh rearranging the deck chairs on Titanic. So you know shuffling them a little around and making people feel more comfortable helping the first class passengers the asset holders like helping the first class passengers definitely yeah because you know it's not going to help a lot for for Mrs. Johnson here right now. I can promise you since the cut here 14 days ago, she doesn't feel a lot of much of a difference. So, so the problem is and and as I said probably also last time I saw the last survey on how difficult people find it to put food on the table in the US. It seems like 15 16% of the US population find it very difficult actually to put enough food on the table. That's the real world. That is the real world. And this is what people tend to not to understand honestly. Yeah. like kitchen like kitchen table dining table dining room table economics like in the household like how people actually feel and then um I'm saying this is a millennial like I'm a 37y old and like home prices these days if you want to go buy your first-time home it's crazy um and a lot of this stuff's not really moving right now and so I'm trying to be patient but um yeah it's just I think I saw the stat and I'm probably wrong someone said I think the average age of a first-time home buyer right now in the US is 56 or something crazy like that. It should be you know someone in their 30s which is just wild. But but that's the problem. The problem is again and you ask me where we had we have a bubble as well. If you look at the price uh the Schiller price index also on on homes it's it clearly shows that there is a bubble in in housing prices as well and especially if you look to the affordability which you talk about right now and the affordability is actually now at the levels we were in the what we at least here in Denmark called the poor 80s where people did not have enough money. So, so that the whole stock market is booming and you know all this is simply the division between the real economy and the financial world and and this is where I I call the financial world and the liquid test because they kind of think it's all about liquidity by the end of the day. It's not it's about the 70% the bottom 70% of US population but you know of the world population. How well are they? What do they feel like? And and if you follow that, you can actually see there's a very close relationship between the consumer confidence and and the unemployment rate. The unemployment rate just follows if you invert that. You'll just see how that actually when the consumer confidence plunges, it takes a little while and then you start to see the unemployment rate rate going up, which is down if you invert it. So um I I think that is that is the situation right now. We are we are in this uh twilight zone where we don't need you don't really understand where you need to look to the financial world which we also talked about earlier the prices the stock prices Henry what is it that you don't get is it because you are you know you're out of the market I can tell you I'm in I'm bullish and I'm so uh you know long and it's actually you know uh irresponsibly uh long I would say called it almost in terms of you know what I what I should do at this point but I can just see this the structure developing as you know to a a blowoff top and and uh And then the real world the real world is is not feeling that absolutely not. And uh that schism is going to be and that's also why back to the the book because this whole setup that has now been created this monster that we are created where valuation levels are so high and the only way we have out of this is inflation to come in and try to make things and ease things up or normalize things. That is going to to to be hurtful to the consumer. the ones that are actually already looking at it and say, "Hey," and if they're going to lose their jobs and you if your unemployment rate unfortunately goes up and you at the same time later down the road could see more inflation and especially with the infla with the price level that we have back to the bath bathtub. Well, a lot of people are not going to be very content. And and I think that is actually the the the monster that the central banks have created, which is why I thought this book here was really needed because somebody needs to say this is not about Trump. I'm not necessarily a fan of Trump. I'm not necessarily a fan of any president. I don't care. But this is not on Trump that you have created these kind of valuation levels. This is on the central banks. This is on the hubris of the central banks believing that they are able through keyn economics to micromanage inflation levels from no we don't like 2.3 so we want it to 2.2 or 2.0. I mean the yeah the ignorance or the hubris of this is is just staggering. uh and and I think we are we're going to see that over the next few years here when when it burst and we're going to see inflation coming out later that it's unfortunately going to be the not so well off people and it's going to take the biggest u you know you blow because of this and people will blame it on Trump. Mhm. Yeah. Because and in your book as you point out like this house of cards, this goes back to post 2008 um from like just the central banks from the ultra low near zero rates for over a decade. Quantitative easing like the printing of um trillions in central bank money that's led to like massive debt accumulation whether it's government, corporate or household. Then as we've seen the asset price inflation, leverage and speculation and just like this kind of faith that people have in central banks that's dangerous that they'll always come to the rescue. And I I I call it the rise of the demigods. And I and I and you kind of have that. I mean, I can't remember having sit and been watching, you know, the uh the uh Greenspan, you know, pressor back in the days, but today it's like everybody is just, you know, on the uh on these FOMC's here. We we kind of think that they have a magic ball and and we've just seen again and again and again they miss on terms of where we heading. They thought we had a strong economy until the other day. Uh we they didn't see the 9.2 or 9.1 inflation spike into 22 transitory. They didn't see the transitory and all that. I mean how much do we need to see before we actually take this uh you know belief in them and kind of say well maybe they don't have this kind of crystal ball that we all think and uh and and maybe they can actually be the more they have then been doing and the whole thing I mean that's also what I say in my book that reinventing money printing and then you award that with a Nobel Prize in economics I I just cannot understand it and I hope the next few years is going to prove that that was a mistake. I I asked you this last time. I I think I asked you this. Um if you could be inside one of those FOMC pressers, maybe as a journalist or maybe if you could have time to sit down with let's say Fed Chair Powell, who's the chair right now, what would you want them what would you ask them or what would you want them to understand? The real economy. I would like to actually I would like to if we had to investigate the uh to reform the Fed, which I hope definitely not just the Fed but central banks all over um just sit down and say guys what are you looking at? What are your leading indicators? And and which which one are you looking at? I mean for I mean you just have to go into the charts and take a look at as I said what I said before look at when the unemployment rate and when the consumer confidence starts to develop what are you looking at which are leading indicators because if you look at inflation then you're looking at a lagging indicator you don't need to know a lot about economics to understand that the inflation level that you have out here is actually you know the process of a lot of different things that have been bought and purchased into various depots and you know intermediaries and so on before you get to that level and it can take a long time because first you start to you know use whatever you had in your storage and then you'll buy some more which then goes up in price and it's a that that that takes a takes some time. So if you look at something that is a lagging indicator say hey I got to drive this economy now by looking out the rear window that's what they do. So if if that's I hope that's not the case, but if it is, I'm I'm terrified about what they can that we we're seeing the consequences of that because there's hopelessly late in rising rates and they're hopelessly late in cutting rates and this time is even even worse because they kind of feel guilty that they brought this inflation out and now they're going to hammer inflation. But in that process, they're hammering the uh the consumer. That's why I said they need to cut they need to cut the short-term rates because that will have an impact. And no inflation is not a problem because right now the consumer is not well off the consu if the consumer is feeling great as you said before then you can have price inflation people start spending a lot of money but if 15.6% 6% of the US economy or the US population not the economy but the population is finding it difficult to just put food on the table because of housing because of rates because of mortgage loans and and what have you car loans and so on then you need to make sure that that they're give them a little you know you know give them the ability to breathe here and that is the problem and that's why I think the it's too academic it's too much from the financial world I think this should be about observing leading indicators on the consumer understanding that 70% of the US economy is the consumer and of that you would have to look into you know what they people spend and people will spend up to a certain income level they will spend everything they have and then you'll start to save but if you focus on the ones that save 99% of their income well then you're probably not hitting things right you you you're simply looking at the wrong thing so when there was this journalist saying hey why what is it that the consumers do not understand it was three or four FOMC's ago since they are so you know under apparently not not uh not happy the the confidence is so low and and Paul's like yeah something tariffs and blah blah blah that's probably where I would start to understand it's about the consumer it's not about the economy from a financial perspective about crypto about all these things it's about understanding the the basic Mr. Johnson's uh economy and if she's feeling good then things are better. I would like to see what they do there and that would what I would be asking more of and there was a good journalist. I can't remember who it was but it was a fantastic question. Yeah Henrik, I've so enjoyed having you back on the show. Before I let you go, let folks know how they can, you know, find more of your work, support your work, pick up your book that just came out. I got my copy yesterday. Um anything that you'd like to leave this audience to think about? Any parting thoughts? The floor is all yours. Well, the Yeah, Henrik Seberg would be the place on on X. Uh I also have a Substack channel that you can also find me on. Uh also at Henrik Seabour, I think. Um and well, what to leave you off with? Uh I think we are when everybody is as I said earlier not just today but but also we're back you know half a month 6 months ago when everybody is starting to say oh this is great and there's no going no stopping this train that's when I start to be worried we were not there a month ago I'm not saying we're there right yet right right now but we are seeing increasingly that people are expecting this can just go on and they're now all the things are now starting you know maybe we can even get something of peace also in the Middle East. I hope for that. Uh but but you know if you can these things will add on to it. So be careful. I just want to say that because when it feels the best like we talked about with the Nicay and the NASDAQ and all that may not be the time for you to put your money into exactly that. There may be that you actually have reached the peak euphoria. So when you feel the best about your economy, think about it and say okay maybe this is too good right now and uh maybe there will be some downside. So, so take good care and uh and then study what what real people how they feel, not not just what the financial market says. Henrik Zeberg, head macroeconomist at Swiss Block and author of the Monetary House of Cards, the bust of the everything bubble caused by central bank hubris. So wonderful. Welcome you back. Welcome you back to the show. We are looking forward to our quarterly appearances. We will have Henrik on the first Wednesday of every quarter going forward. Really thrilled to have you on more often. really appreciate you helping us all learn and get better and just sharing all of your knowledge and your wisdom. Thank you so much, Henrik.