‘Superinflation’ Crisis: Cash To Lose 50% Value, ‘Violent’ World Clash | Phillipe Gijsels
Summary
Market Outlook: The podcast discusses a potential prolonged period of superinflation and geopolitical volatility, suggesting a shift in global economic dynamics.
Commodities: Philippe Gijsels predicts the largest bull market in commodities, particularly emphasizing the potential for significant rallies in gold, silver, and copper.
Central Banks: The European Central Bank (ECB) and Federal Reserve's monetary policies are highlighted, with expectations of continued loose monetary policy and potential rate cuts to stimulate growth.
Global Economy: The discussion covers the impact of China's economic slowdown, potential balance sheet recession, and its implications for global trade and inflation.
Investment Strategy: Gijsels advises focusing on real assets such as equities, real estate, and commodities, while reducing cash holdings due to expected inflationary pressures.
Technological Innovation: The podcast highlights the importance of investing in US technology sectors, despite high valuations, due to ongoing hyper innovation in AI and quantum computing.
Geopolitical Risks: The potential for increased geopolitical tensions and their impact on market volatility is discussed, with a focus on the implications for currency and commodity markets.
Portfolio Diversification: Emphasis is placed on diversifying investments across emerging markets and European stocks, alongside maintaining exposure to US technology.
Transcript
way more in the future and I think it will be way more violent than than we're used to. The biggest bull market in commodities we've ever seen. Um and that's only maybe not the first inning but the second or the third inning. So we're very early I guess in this game portfolio allocation um aspect of the conversation. Summing everything together, what are you advising clients to look at or consider right now when it comes to allocating assets? The world is broken up into different blocks or tectonic plates. These tectonic plates are shifting, colliding with each other right now in a forth turning environment. We'll examine what this means for global order. More violence unfortunately and much much higher inflation and certain assets will rally tremendously. We'll reveal which ones. This is all according to our next guest, Philipe Giselle, chief strategy officer at BMP Paraka Foris. Mr. Giselle has been on the show before. Check out our last interview link down below. and he's the co-author of the new world order economy and five trends investing in times of superinflation hyperinate innovation and climate transition. We'll be talking about these themes super inflation hyper innovation and climate transition and what this means for investors and of course we'll be going over what's going on this week with central bank policy transitions as well. Thank you very much for coming back on the show Phipe. Good to see you again. Thanks for having me. I understand uh you're currently in Europe. So let's start with uh news coming out of Europe and then we'll talk about commodities and the world industrialization aspect and the new world order. So the ECB kept rates unchanged last week. How do you think that's going to impact other central banks expected to announce their own rate decisions this week? We're speaking on the 16th of September. Well, I think indeed and this is a little bit risky because the Fed is going to be tomorrow. But okay, it's more or less all clear for 25 basis points even if Donald Trump maybe wants some more but I guess maybe it would not be a very good signal to the more than 25. Now of course this is the first of a series three probably potentially more. U yeah and honestly the US economy has been slowing uh quite a bit the last couple of weeks. uh quite a bit of read data points and the job market the bash book and and others of course ECB is hold they they told us they said risks are balanced so that's ECB speak for say we're not going to move a lot but Mr. Slag they kept the door open by saying okay as they always do it will be data dependent so they could go either way and I still believe that the world economy is slowing uh and that we will see quite a bit of stimulus coming in from the US the the Federal Reserve and that eventually if the Fed does enough maybe the ECB will cut also a bit even though the European economy is quite strong because I think that everything that's happening in Germany with with the fiscal stimulus that's coming in it has not got enough attention um in in the media and I think this is I think this is a very important point. So but all in all very loose monetary policy which is is constructive for markets overall. This is from the uh ECB uh website. The new ECB stat projections present a picture of inflation similar to that projected in June. They see headline inflation averaging 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027. Interesting how they're not projecting higher inflation because of the trade war. Can you comment on this? Yeah, indeed. So, um I think inflation when you look at the US, it's more like 2.8 3.0 somewhere maybe a little bit higher. So, yeah, that that's too high for the target. So, if you have the Federal Reserve that gots well uh yeah, you you above target. So, that's already a little bit uh strange or scary. Now, the US is Europe is clearly predicting round two, which is their target. I think this is overly optimistic. Now if you look at tariffs they will mostly impact uh clearly the US itself the consumer so their prices will go up more in Europe in Europe you also have the the element that the euro is strong so that's also helping inflation I guess but overall and that's one uh of the big book the new world economy in five trends that we predict structurally higher interest rates and then talk more about long uh the long end of the curve interest rates and also structurally higher inflation. So I think this is maybe an uh underestimation of inflation but what I think and that's very important that this environment and therefore it's a new world order. I think clearly that the central banks will on the side of of cutting that they will focus in their mandate more on the the economy and less on inflation. So I think what they're doing now they're already sowing the seeds for more inflation down the road which is of course good news for for gold, silver and other things. Okay, we'll touch on gold, silver, and commodities in just a bit. Let's move on to global growth. Now, this came in a few weeks ago. China's shipment to the US or shipments to the US plenched 33% in August. Overall exports growth hits a six-month low. Imports from the US also dropped 16% from a year ago, customs data show. Now, you have highlighted that China is perhaps already in what's called a um balance sheet recession. Do you think this news accelerates that view? Yeah, the balance sheet recession of course stems from um from the housing market and a lot of people saved a lot. They put a lot of their savings into the housing market. The housing market collapsed. Uh Chinese uh feel poor. They don't consume. They don't invest and they will save even more. So that's that's where the balance sheet recession idea comes from. On top of that, if exports are weak because you can try to export your way out of trouble. But if that road is is blocked, you have another issue. So that that makes the situation even worse. So I think that the Chinese economy is fairly weak. Well, what they will do and we know that from the um experience we had in Japan and their real estate market went bust somewhere at the end of the the 80s and it took them about 40 years or more to crawl out of that. So in a balance sheet transaction, lower interest rate just don't work. We see that in Japan. So the only thing is and I'm not a Canian but the only thing um that held this good old Caninesian stimulus and that's what what China will do eventually because they cannot afford to have 30 40 years of of we grow because their their society will not tolerate it like it was tolerated in Japan. So they will stimulate that will help the world economy will help grow it as well together with what the central banks are doing. But once again it's also inflationary and once again uh it's good news for commodities. So a lot of uh arrows point in the same direction I would say. Well do you well just on that front do you you said the stimulus may be inflationary but don't you think China try to slow down maybe deflationary or disinflationary maybe maybe they could export some of that deflation to the west and force the Fed and other central banks in the west to cut even faster. Yeah, absolutely. That's a very good point and I think they have been exporting more than anything else, more than goods, they've been exporting deflation and that has clearly helped. But if you look again at the figures that you've shown a couple of minutes ago, ECB is just at the target and probably underestimating US is still above the target. So if you now altogether get central banks cutting in Europe and the US, you get fiscal stimulus on top of that in Germany. You get fiscal stimulus coming from China. Well, this will indeed make the economy move forward. This will help profit growth. So, there are a number of very positive aspects to that. But the point is it will be inflationary. So, if China goes from and I totally agree with you, exporting deflation at the moment to exporting less deflation or even start to export inflation again, yeah, that will have a massive impact on on a global scale. So that's one of the elements why I think that that a lot of central banks and also economists at the moment underestimate inflation for the coming years. Before we continue with the video, let me tell you about a very important topic. How to protect your privacy. Now your private information doesn't just live in the inbox of your phone. It's being collected, packaged, and stored and tracked by data broker websites all over the internet, even without you knowing. That's where today's sponsor comes in. Delete Me. I use delete me to protect my privacy. And here's how it helps you. It's a platform that helps you remove your personal data like your name, address, and contact info from hundreds of these data broker websites. When you sign up, you'll get a detailed privacy report showing where your data was found and what's already been removed. And Delete Me keeps working throughout the year, scanning and clearing your information regularly. It's an easy way to take back control of your digital footprint without trying to track everything down yourself. Go to joindeelme.com/david Lynn and use the promo code davidin at checkout to get 20% off of US plans link down below or scan the QR code to get started today. Well, your book is called The New World Order and Five Trends: Investing in Times of Superinflation, hyper innovation, and climate transition. Now, uh you said offline in a note to me that you wouldn't change a single line if you had to rewrite the book. In fact, many of your predictions may be coming true. You think we're living in a forth turning kind of environment. Can you just elaborate on what exactly that means? And uh yes, no sorry, excuse me. Uh fourth turning indeed is is a term that we borrowed from Neil Hal. It's the book the four seal by Neil Hall and he's an historian and he puts things historical in a historical context. So his is reasoning is and I tend to agree with that is that basically every 80 years you get a fork turning for four turnings together are 80 years and for turning is more or less give and take a year 20 years. So now the last for turning before this was the second world war and then of course you have a lot of destruction and then the pain and horror and then people say hey we're never going to do that again and then you start to build United Nations and European Union and and the climate accords and then trade organizations and health organizations and then of course unfortunately after 80 years and that's as we speak uh people who have lived through the pre previous ordeal are very old or unfortunately dead and then the cycle starts. again. And what Neil How does very well in this work is is putting things in perspective because if you look at the news, it's it's all horrible, but it looks more than anything very random. Crowds in every direction, wars, uh people in the streets, leftwing, rightwing, everything. And you say, "Yeah, this is a world gone crazy, a world completely random. How can I make sense of this?" But if you look to these glasses and I can everybody recommend to read that book uh to these glasses at the world and you see yeah because of for turning is unfortunately a period of civil wars of wars of a center everywhere that gets strong smaller and smaller and is unable to make the the decisions to cut the budget or to to get the budget in order. extremist parties on the both sides that when sitting governments, sitting presidents, sitting parties are voted out basically everywhere. And what Donald Trump is doing is of course destroying a lot of the institutions or trying to destroy a lot of the instit institutions that were built in the previous cycle. So yeah, we will have to go this through this and this means that we will have a lot of geopolitical volatility and in our world of course this will translate in volatility in Euro dollar in in rates and everything. So I think a lot of of things are coming through and when you listen to serious podcasts and and then serious interviews this for turning idea uh was not that present let's say a couple of of years ago but people start to talk about it and I'm absolutely convinced unfortunately that's the world we're living in today. What are some of the effects of this forthring? Let's talk about Europe first because you're based in Europe. Do you think the European Union will last as a coalition? Well, that's you as very difficult question and being a European, I can only hope it's not the case, but but it's clear we can no longer kick the can down the road. So we have come to a to a fork in the road and we go either left or either right and as a European I hope but that's more a hope than a prediction or a lot of all the things I will be saying will be predictions which I actually believe but this is more hope that at a certain moment in time in 15 years time we will say hey Donald Trump was probably the kick that we needed to get ours in order and to to come together uh as as as a as a union as a continent basically and and try to resolve our own things, try to get more independent in terms of re her to to get our defense policy going, to get road going, to get innovation going. And maybe that's the case, but it could indeed also go the other way. And then and that's the the big question that's today on the table. And if you once again believe this for turning story or or Jesus, well in in in the world of a forturning, it's extremely difficult for countries to work together because everybody goes back to his own church and his own parish and everywhere. So it's extremely difficult but maybe we will be forced to do it and yeah uh history will tell where we go but but I think Europe and European Union is at an extremely critical juncture at the moment. Europe is currently militarizing with Germany wanting to build the largest army in Europe. Scandinavia is recruiting women, so on and so forth. The uh EU unveiled a $800 billion militarization plan in March 2025. What are the assumptions behind this plan? Why are they doing this? Well, indeed, because you want to be independent a little bit from the United States. If you look at Germany, they they exported or outsourced, we should call it, outsourced their defense policy to the US. they outsourced energy to Russia and a very important uh export market was China. So all these two things fall apart. Germany is realizing this. Um I think Germany and I will say in German they have the children or the means that they could not run a budget deficit. Now they can like I said this is a game changer for for Germany and also for Europe because it's it's like a Marshall plan after the second world war. uh it's it's a couple of times the German re reunification in money. So this is hugely important. Germany still being the dominant economy or the biggest economy still in the Euro zone. Uh when they spend on on military and they indeed spend also on infrastructure that will help but I think that Germany has realized that we can no longer be under the umbrella all the time of the United States and and we will have to take uh yeah paid a little bit in our own hands. And of course if Germany Germany leads maybe some other countries like Belgium where we a very very small country of course on a world scale but but basically we will maybe follow this lead and maybe like I said in 10 15 years time uh this will indeed uh be the moment that we say yeah we started to to change things for the better and also I believe and I would not call it European renaissance because that's maybe a little bit too strong but since the beginning of the year we also see money flowing again to Europe a little bit. Yes. To the United States, to the UK, to other places. So having independent big deep capital markets, a capital union, uh stock markets that do well, IPO market, M&A market, that kind of thing is of course also very important. You're probably maybe too young for that. But uh in my time, I used to play Age of Empires. And then of course, I love that game. You love that game. you would build these small uh armies and everything, but you need stones, you need wood, you need uh meat, you need gold also to build your army and and and that's one thing. You need a healthy strong economy to be able to build uh to build your army. That's that's basically it. Well, people are talking about this bifurcation of the world where you have the bricks forming an alliance and then you have the US on the other side. Where do you think EU falls? the EU falls in this bifurcation. Do you think the EU will trade more with China and Russia or the US in the future? Well, that that's a hard one. I think that once again Europe is a very difficult position because we have been under the umbrella of the United States for the longest time. Um, and it's very hard because it's also in terms it's not only trade but also technology. If you get technology divided in different groups and different types, yeah, you have to choose a certain moment in time. Are you going to use telecom systems that are building in China or the United States for example? So also there Europe I think is in a very difficult situation. I I think in the best of all worlds you trade with with as many partners as possible. Uh but that that will basically not be easy. And I think the biggest problem maybe in Europe even making a abstraction of the the deficit and the the fiscal problems you have in France and other places is not the innovation but the scale up of innovation. Because if you look at companies uh in the United States, they make them every couple of hours. They make a new $100 billion company like Pontier which is even bigger at the moment. We've not built a company of that size, a new company of that size for the last 30 years. So we have good universities, we have good ideas, we have innovation, but we are unable to scale up and and that's of course all the red tape and all the bureaucracy and everything that's here. So that that's a major problem. But in terms of trade, you can hope that that indeed uh we can trade with as many partners as possible. But uh we have to make sure that we don't become the museum of the world because of innovation is is not very strong anymore. People will visit Europe for past but not for our future. And and that's an issue. But I think I I also believe a little bit in the or a lot in the the predictive power of markets. The fact that European markets finally get some momentum going is is maybe the indication that at least markets believe that that we have a chance of of getting out of here. Well, you've compared the global economy right now to a series of tectonic plates moving and possibly colliding with each other. Tell us about how this collision may play out. What does that mean? Well, that means indeed you have the geopolitical uncertainty which comes from the foring. So, you have the fragmentation of the world. Everything is going in into block. So uh we had the Pakam Americana. So after the fall of the Soviet Union, China, US was basically the only superpower. Now you have at least two uh with with with China coming up. You have potentially India. And then you go to a world that's more normal I would say because only having one superpower is very rare. You can go back to the Roman Empire 100 BC to 100 after Christ. Then Roman Empire was the only empire around and then you had peace because there was only one very strong force. And we had for 50 60 maybe 100 years especially after the second first world war second world war you had the United States but now you have more countries basically and that's this also this for turning this this fight between the new superpower and the old superpower but you also see that on the economic side because the world is fragmenting and it's very hard for me to speak about the dworld economy 10 15 years ago you could talk about the world economy and then you could say it's expanding it's going into recession. So they would all move more or less these tectonic plates in the same direction at the same speed. Um central banks would do more or less the same. No, you cannot do say that anymore because Europe is maybe for the first time in quite a while going to grow faster than uh the US. Uh Fed will cut ECB is probably on hold. In Japan uh the Bank of Japan is hiking interest rates. So these are all moving at a different speed in a different direction and like tectonic plates tectonic plates they would move in the same direction at the same speed but now they move in a different direction at different speed and this means yeah they will collide somewhere and the collisions will create the volatility and the volatility is what we see in Euro dollar where in my mind the trend has only begun. You will see it in the long end of the rate curve. You will see it in commodity markets and you will see it in equity markets where we had of course after the liberation day the big fall in equities which were were of course uh uh made good for uh quite quite fast afterwards with that type of volatile events we will still have way more in the future and I think it will be way more violent than than we're used to. way more violent like physical like kinetic war. Is that what you're referring to? Well, on both sides you will have unfortunately I hope nothing is going to happen with Taiwan but but you will have more wars and then more pressure points on the geop geopolitical front. You will see uh economies being harder to read and being more volatile and those two combined will make for more volatile market share. I think they go together. The US 10-year yield fell from the beginning of the year at uh 4.8% now down to 4%. So the bond markets had um a pretty good year uh at least in the US. Which region in the world do you see the long end of the curve moving the most in the next uh couple of quarters? Well, I think the big story because you mentioned the 10 year um but the big story is more in the 20 and the 30 year because there you see them going up uh the longer everywhere in Europe in Germany um in US in Japan as well. So I think if you have big problems in in the bond market, I think it will start in Japan because Japan has been running a deficit for the longest time that that debt to GDP is probably the highest in the world and it was not a problem and it's never a problem until it becomes a problem. But if all of a sudden you start to pay interest rates over that debt, yeah, you get in fiscal trouble uh with your budget. And I I think this is in a way logical and that's also what we describe in our book because the very long end of the curve and I know I'm I'm oversimplifying things but I'm still going to do it. There are two very important building blocks of the the long end of the curve. First of all is inflation expectations. So when you think that inflation will be higher uh in 10 15 years time especially higher than today which we think you will ask for a higher yield and then of course you have the term premium if you believe that maybe governments will not be able to pay back the debt uh in the long run but you will ask for a higher risk premium and these two things are happening on the long end of the curve. So I think that the long end of the curve is telling us that this world is coming. Now, of course, central banks will not let it happen. They will cut the the short end of the curve. They will do that. You have seen a lot of financing also on the shorter end of the curve to take money away from the long end of the curve to have less supply. I would not it's not I would not call it in the US yield curve control like they did in Japan. But, but still uh I think if if push comes to chef and then then you get into trouble then they will try to control the curve. They will do once again quantitative eaten easing if necessary and so on. But the long end is is telling a very important story and most people look only up until the 10 year and there everything looks rosy. You see normal behavior but if you go beyond the 10 then you see what what the market is thinking about the long run and that's maybe not happy story. The 30-year rising in the US what is that signaling? higher inflation expectations or higher economic growth or both. uh those two and on top of that a higher term premium that people start to doubt whether the the the US will pay back its debt in 20 30 years time and that that's a big thing because we've all learned in school from our books of economics and everywhere the US is is risk-f free and everything prices from the risk-free but if the risk free is no longer risk- free well what does your model look like so you have an issue and everybody is talking about um yield spreads being so tight, corporates over over government bonds and and high yield and so on and and and you say, "Yeah, that's logical because people do not see a lot of risk in the market." But you could also say maybe they see less risk in government bonds than in government bonds. And that's also a way that the spread would be very low. So maybe we have to look at a new way with new glasses to this world. And if we we see a low spread, it does not necessarily mean that people do not see too much risk in government um corporate bonds over government bonds. But maybe they say, hey, maybe government bonds are uh for the first time in history maybe less risky than government bonds. So So that's uh that's something uh I try to wrap my head around at the moment. Let's talk about the dollar. Why do you think the DXY fell despite the long end of the curve rising and as you said the term premium rising? Shouldn't higher interest rates move capital to the US, not away from it? Well, that's the the logic you talk about over the last 15 years um when that money would flow very easily towards the US bond market and towards US stock markets. Um and the the outperformance of the dollar compared to the euro but also to many other uh currencies has been the fact that money has been flowing towards um US. I always say to clients never believe a bank you're making a prediction uh about Euro dollar because they're always wrong. But if you could look at it with hindsight for Euro dollar but for any currency you want to discuss there only two flows important. uh there are the trade flows, commercial flows and there of course the investment flows and if you look Euro dollar well Europe has a trade surplus with US for the longest time so that means there is more demand for euro less demand for dollar that would push the euro up but what we have done for the last 15 years as Europeans as Belgians we've taken our trade surplus we have added our savings and we put everything back in the United States uh in the bond market and in the equity market because that was the place to be. I always compare it to a candy shop. You had a candy shop. You could only eat as an investor Nvidas and Apples and Microsofts because all the rest emerging markets, Europe, small caps, UK, you name it, they would all lag. Since the beginning of this year, this has changed because money has been flowing more evenly over the over the globe. They call it the end of of American exceptionalism to a certain extent. You could also call it diversification to a certain extent. But it is no big surprise in my mind that as the European markets are outperforming and emerging markets are outperforming US that that also has an impact on the Euro dollar. So if you believe like I do that this money will float more evenly over the world uh then you would also expect a weaker dollar. So I would not exclude 125 and if we talk again which I hope uh in a year or two I would not be surprised to see 130 140 which also opens up opportunities for emerging markets because I also think that emerging market equity will do well in this environment and that even emerging market bonds and local currency will do well. Did I did I misar you? Did did you say DXY is going back to 130? Well, I would not be surprised to see that in the next uh next I talk Euro dollar. Yeah. Yeah. Oh, you're okay. Yeah. All right. Well, okay. So, the your view on the dollar then the US dollar is it going to strengthen then from here? Well, I think it could strengthen a bit because if if uh if indeed uh you see a little bit more money flowing again to the US, but but I think you the dollar will weaken and the euro will strengthen because money will no longer flow this easily towards the United States. And we we tell clients uh it it would be a mistake not to be invested in technology. Even though the valuations are high, you do not want to miss the boat uh on AI. You do not want to miss the boat on quantum and all these things and if you say technology well to a large extent you still stay in the US. So it would be I think the mistake not to be invest in invested over there. But what we have been doing in portfolios since the beginning of the year is diversifying towards Europe towards European small caps towards UNI uh UK stocks towards emerging markets and so on. So I think that it will be more evenly distributed and of course you have even as European investor you have always dollars in your portfolio but we have been reducing that and we've also been hedging a dollar exposure because like I said I would not be surprised to see you dollar at 130 or more um over the next couple of years. the fact that the uh US dollar has slid while the S&P 500 has risen. Uh what does that signal to you that capital has flown uh to a risk appetite environment and so do you think this risk appetite will continue? Well, it the two go together a little bit, but it's it's not only what the S&P has done. It is also what the other indices have gone because the last 15 years, the S&P 500 has outperformed everything else. And that's mainly due to a magnificent 7, the big companies, the Apples, the Microsofts, the Nvidas, and so on. Since the beginning of the year, the US has done well as once again well. The S&P is up, but European indices are up more. If you look at the Euro stocks is up more, especially the Spanish stock market is up more. The German stock market is up more. Even the Chinese stock market is up more. So that that's what I mean is that the outperformance of the euro. I'm not saying that Europe US market is not going up anymore, but it's not going being so dominant as before. So it's very well possible that other stock markets will do better. And if other stock markets do better on a relative basis, this is always you can always coincides with the weaker weaker dollar as well. Well, your your book explores hyper innovation. Which area in the world would be most responsible for hyper innovation in the future. Maybe that could maybe that could give us a sense of where capital will flow. Well, well, there once again Europe does not score too well because I said we've not been able to to create a $100 billion company uh for the last 30 years. So it's a little bit a race between China and then uh and and US at the moment. And if you see of course the amount of money that that both countries are pouring into data centers for example um I saw a graph the other day that about 70% of all the venture capital in US goes to AI at the moment. So that will always like internet create a boom bust. A lot of these companies will go bankrupt and so on. But in the meantime you have a lot of innovation. And so I think if you look at these new technologies well I think that the amount of investments going in is the highest in US. China is in the second place. So they will lead uh you will need a lot of need a lot of rare earth for that as well. China has them. Today there was only once again the the news that I saw that US will put five billion which is a lot of money but in the big scheme of things not that much money but in developing rare earths projects Europe is also not uh scoring too well on that one either. So if it if you look where it goes at this moment, I would say that that yeah, the US is still going to take the lion share of this followed by China and it will be extremely hard for other countries to to follow up because this these are massive investments and then the people who build these data centers put the money in AI quantum computing is next. Combination of the two is extremely powerful. So I think that yeah it will be most of all US tech. So therefore I still think it would be a mistake not to be invested there even though valuations are high. Let's talk about the theme of super or hyper um very high inflation. I think you called it uh super inflation not hyperinflation. My my apologies super inflation. Uh what does that look like in today's world? Was that is that a repeat of 2021? And second part of the question which assets uh will we use now in 2025 and beyond to hedge against superinflation? Yeah. Well, I think um when I sign off books, I I very often write it all comes and goes in waves. It always does. So these inflationary waves and interest rate waves attached to them because they they move together tend to be waves of 20, 30, 40 years sometimes. So the last big inflationary wave started after the second world war which is no coincidence that this was the last for turning then gained speed in the 60s especially in the 70s with the oil shocks and reached this peak in 82 then came became president of the Federal Reserve brought inflation under control and then inflation came down until co somewhere uh and now I think okay we had a peak with co which was of course moderation a little bit but I think with co we have entered a period where inflation on average will no longer between be between zero and two but between two and four and of course with peaks above that so it doesn't have to be 10% each and every year but but I think that two between two and four will be the new normal uh and okay there are lot of reasons for that um if you have a world of conflict uh well war is inflationary peace is deflationary so it will be more conflict you will need a lot of money for the climate transition. You have the aging of the population. But most of all, the US has about 37,000 billion of debt. Um, you have other countries in Europe and other places in the world, there's also a lot of debt. So the only thing to keep only way to keep this debt manageable in a certain way is to let inflation run because if inflation runs in real terms basically the the the debt weight becomes smaller. So when you have a mountain of debt you can basically do three things. You can try to save your way out of it and grow your way out of it. That's in a fork turning extremely difficult because populist parties will take benefit of that. You can default. Let's hope that we do not go there. Or you can try to create some inflation 3 4% instead of two. And in this way, you keep the debt more or less manageable. But that's of course if you think about it, if you have inflation 10 years in a row on an average of 4%, you lose almost 50% of your purchasing power. So in this environment, cash is not an option. And if cash is not an option then your question okay what do we need to own then? Well the answer is real assets and real assets are real estate are equities are commodities are gold or silver are pigeons wine stamps jewelry whatever you can dream up everything that's tangible but not cash. This is an article from uh Bloomberg syndicated by Yahoo Finance. Gold could rally to almost $5,000 an ounce if the Federal Reserve's independence were damaged and compromised and investors shifted just a small portion of holdings from treasuries to bullion. Goldman Sachs said a scenario where the Fed is Fed independence is damaged could likely lead to higher inflation, lower stock, and longdated bond prices. Uh the bank outlined the possibilities. Uh $5,000 if just 1% of the privately owned US Treasury market were to flow into gold. A lot of assumptions there. Why would the Fed's independence be compromised? Is that a view that you share as well? Well, it's a hard one, but but you see, of course, Donald Trump putting pressure on the Fed. Um, he tried to get rid of Jerome Powell. Okay, that's not really working. Now, he's working on some of the other voting members of the Fed, uh, Lisa Cook, I believe, and other. So I think that that in a way um we will be living in a world and I tend to agree with the view that that it's it's written down there that we will live in a world dominated with with fiscal dominance I would call it. So you will have very big deficits and you will use the central banks to to buy back the debt do quantitative easing make sure that interest rates are low enough. So the pressure on the Federal Reserve but also on a lot of other central banks around the world will increase. So that that's certainly correct. And the other part um in this article we we talked about 4,000 in our book when gold was $1,800. Now we're not too far from that. So I think we will fairly quickly go to the 4,000 which will coincide with $50 silver I believe. But that's only the start of it because it's absolutely correct. Since the beginning of the year, investors are back in the gold market. But before investors were met sellers, gold went up because central banks were buying so much. They bought last year about 1,000 tons of gold. And that started or or accelerated at least with with Russia invading uh Ukraine and US blocking access to to treasuries and and kicking out of Euro clear and then and freezing reserves and so on. So that this made a lot of countries around the world also China notably think okay we have to get rid of these treasuries and we should buy gold. So the entire bull market in gold up until now or at least up until the beginning of this year and was driven by central banks why investors were absent. I think that investors only hold in their portfolios worldwide and it could be be off a couple of of decimals but is about 2%. So only 2% of all the assets of investors in the m in the moment is in gold precious metals or related assets like mines and so on. So if they shift only a little bit towards gold which which is happening as we speak I think well 5,000 6,000 10,000 I think these are all levels that that are possible in the coming years and gold silver copper uh rare earths they're all here as well. So I'm that has gone fairly fast. So you could not exclude that you have some pause here and I think gold will pause at $4,000 and so we will pause at $50 but after that I think it will go way higher and much higher than people can imagine. Well what is the uh BMP forecast? Well the BMP forecast is always like like banks are very prudent. We we talk about 3,800 on gold but when we reach 3,800 we will say 4,000 and when we reach 4,000 we will say 4,0002. So we so we lock step so we have to be a little bit more ambitious and express something. So we've always talked personally I've talked about 4,000 you know book already quite some time ago. Uh and and I I'm sure it's not going to end at 4,000. So you name a figure and I I believe it. Well you're calling it the largest bull market in history. uh what makes this different from let's say 2011 when uh commodity prices like precious metals rose and then very shortly fell and stayed low for years. Well, that's a very good point David and that the answer is I think because last time it was mostly demand driven. that was demand driven from China getting in a WTO industrializing very rapidly having a lot of demand for copper and so on and and supply could not really follow um this time it's on the demand side it's electrification uh for a lot of things not gold but silver very rare earth copper and so on because you need a lot of copper for your electrical revolution but it's also supply driven in the sense that because of climate change people were not allowed to open new minds. Um it was a very bad business for a very long time. The return on equities were extremely low. So nobody wanted to invest in the commodity space and yeah we have underinvested in the total commodity space only maybe China not but all the other countries around the world basically have underinvested in the commodity space for the last 20 30 years and now they're catching up. But of course a lot of these mines uh and then then projects they have long lead times. So it takes you 15 years, 20 years to open a new mine if you get the permits and everything. So if you look at soft commodities, well, it's about harvest, it's very difficult to predict. But with with with metals and hard commodities, well, you see the supply and when I see the supply coming up over the next couple of years and I see the demand that's coming in, well, it's it's not an equilibrium. So you need massively higher prices. So in my mind, this is is going to be the the biggest bull market in commodities we've ever seen. Um and that's only maybe not the first thing, but the second or the third. So we're very early, I guess, in this game. Which other commodities? Um we've talked about precious metals. Which other commodities may benefit from this uh new world order that you're talking about? Uh any base metals? Yes. Yeah, absolutely. So I would would certainly highlight copper. That's also what we we talk about in our book because the point is in our book there is also a Bloomberg chart where we look at consensus demand for for lithium, for copper, for cobalt, for nickel for the next 25 years until 2050. But if you make a prediction like that, okay, you know, it's going to be horribly wrong because the bars will be higher or lower or whatever, but I think they will be way up. But also the composition will be different because I do not know what the batteries of the future will look like. But suppose you need less cobalt and more nickel for example, that will have an impact. I'm getting more bullish now on on lithium at the moment. Lithium has been hammered uh incredibly. Uh also the lithium the equities that go in the lithium space, they've been been damaged. So they look like they're bottoming out. So on a very spec speculative basis I would would also buy lithium or lithium related assets here. But the point is if lithium is replaced one day by sodium or by natrium well you have another story once again. So that's hard to predict and therefore I feel the most comfortable besides gold and silver with copper because if you want to move electricity from A to B it's still copper and if you look at demand and supply for copper well it's it's yeah it's not squaring at the moment. So I think this is going to go higher. I love the rare earth space uh because the US is going to invest massively to get more independence from China in the rare earth space. If you want to win the trade war to China, it's very hard to do that. Um if you have no independence in the rare earths, it will take time. But the problem is as an investor, they're very volatile. uh these mines are not always very um profitable and it's also very hard to find investment vehicles to to play the steam but but uh my first idea would be gold and silver and after that copper um that would be the the key ideas. Well, the last question I'll let you go. So the uh you wrote to me off like copper could uh double. So that that is a prediction that you're making. But however, I'm wondering, Philipe, um just on that note, perhaps we might see a disruption in the copper supply, which would actually help your thesis. Let's say if the trade war heats up between the east and the west, I'm not saying well, but let's say it does. China has already banned several critical minerals exports. China holds roughly 60% of the world's copper refining uh supply. Let's say they stop doing that and stop exporting refined copper to the world. Let's say they stop exporting the remaining strategic uh minerals reserves to the world. What will happen to the electrification agenda? What will happen to the AI race? Well, that's extremely difficult for the Western and and China is using this as a weapon very cleverly to to uh to to get this way in the trade war. So, like I said, it's very hard to win the trade war against China when they have this capacity. They're very strong in Latin America and Asia in mining but indeed refining capacity they're even stronger and recently um last couple of months let's say year I think US is getting on board with that idea and is starting to invest massively in these new product uh projects and that will take time but eventually it will help but that makes a lot of these smaller midsized miners a very good investment opportunity now there is a lot of volatility going on because if you say copper you China, okay, there's refining capacity, but you also have Russia, but they also have a lot of countries in Latin America like Chile, Peru, they have a lot of supply, but what happens each and every time you have a political manifestation, they immediately block the roads to these mines. So disruption can come from a lot of of places. So this this means that we're in a in a very long secular uh bull market in these things driven by the foring driven by the geopolitical uncertainty. More uncertain these things become the bigger the bull market becomes and yeah um I think the uncertainty is is quite high at the moment. Great. Thank you very much. I appreciate your time. Uh, Phipe, uh, uh, before we go, the, uh, portfolio allocation, um, aspect of the conversation, summing everything together, what are you advising clients to look at or consider right now when it comes to allocating assets? Well, own real assets. So, do not have too much cash. Uh, that that's one thing. uh own US technologies certainly but look at diversification uh in emerging markets in European stocks and in other places um as interest rates are going to be cut in the US uh and we worry about the long end of the curve we invest uh in the belly of the curve 3 to 5 years uh because we do not want to be in the short end and own some gold some silver and some copper absolutely great thank you very much Philipe where can we follow you and learn more from you well uh mostly on LinkedIn. So that's easy. I'm on Twitter a little bit on Xbox now, but I'm mostly on LinkedIn. All right, we'll put the the link down below so you can follow uh Philipe on LinkedIn. Thank you very much, Philipe. I enjoy uh the conversation as usual. Appreciate you coming back. We'll speak again soon. Thank you, David. Speak to you soon. Thank you for watching. Don't forget to like and subscribe.
‘Superinflation’ Crisis: Cash To Lose 50% Value, ‘Violent’ World Clash | Phillipe Gijsels
Summary
Transcript
way more in the future and I think it will be way more violent than than we're used to. The biggest bull market in commodities we've ever seen. Um and that's only maybe not the first inning but the second or the third inning. So we're very early I guess in this game portfolio allocation um aspect of the conversation. Summing everything together, what are you advising clients to look at or consider right now when it comes to allocating assets? The world is broken up into different blocks or tectonic plates. These tectonic plates are shifting, colliding with each other right now in a forth turning environment. We'll examine what this means for global order. More violence unfortunately and much much higher inflation and certain assets will rally tremendously. We'll reveal which ones. This is all according to our next guest, Philipe Giselle, chief strategy officer at BMP Paraka Foris. Mr. Giselle has been on the show before. Check out our last interview link down below. and he's the co-author of the new world order economy and five trends investing in times of superinflation hyperinate innovation and climate transition. We'll be talking about these themes super inflation hyper innovation and climate transition and what this means for investors and of course we'll be going over what's going on this week with central bank policy transitions as well. Thank you very much for coming back on the show Phipe. Good to see you again. Thanks for having me. I understand uh you're currently in Europe. So let's start with uh news coming out of Europe and then we'll talk about commodities and the world industrialization aspect and the new world order. So the ECB kept rates unchanged last week. How do you think that's going to impact other central banks expected to announce their own rate decisions this week? We're speaking on the 16th of September. Well, I think indeed and this is a little bit risky because the Fed is going to be tomorrow. But okay, it's more or less all clear for 25 basis points even if Donald Trump maybe wants some more but I guess maybe it would not be a very good signal to the more than 25. Now of course this is the first of a series three probably potentially more. U yeah and honestly the US economy has been slowing uh quite a bit the last couple of weeks. uh quite a bit of read data points and the job market the bash book and and others of course ECB is hold they they told us they said risks are balanced so that's ECB speak for say we're not going to move a lot but Mr. Slag they kept the door open by saying okay as they always do it will be data dependent so they could go either way and I still believe that the world economy is slowing uh and that we will see quite a bit of stimulus coming in from the US the the Federal Reserve and that eventually if the Fed does enough maybe the ECB will cut also a bit even though the European economy is quite strong because I think that everything that's happening in Germany with with the fiscal stimulus that's coming in it has not got enough attention um in in the media and I think this is I think this is a very important point. So but all in all very loose monetary policy which is is constructive for markets overall. This is from the uh ECB uh website. The new ECB stat projections present a picture of inflation similar to that projected in June. They see headline inflation averaging 2.1% in 2025, 1.7% in 2026, and 1.9% in 2027. Interesting how they're not projecting higher inflation because of the trade war. Can you comment on this? Yeah, indeed. So, um I think inflation when you look at the US, it's more like 2.8 3.0 somewhere maybe a little bit higher. So, yeah, that that's too high for the target. So, if you have the Federal Reserve that gots well uh yeah, you you above target. So, that's already a little bit uh strange or scary. Now, the US is Europe is clearly predicting round two, which is their target. I think this is overly optimistic. Now if you look at tariffs they will mostly impact uh clearly the US itself the consumer so their prices will go up more in Europe in Europe you also have the the element that the euro is strong so that's also helping inflation I guess but overall and that's one uh of the big book the new world economy in five trends that we predict structurally higher interest rates and then talk more about long uh the long end of the curve interest rates and also structurally higher inflation. So I think this is maybe an uh underestimation of inflation but what I think and that's very important that this environment and therefore it's a new world order. I think clearly that the central banks will on the side of of cutting that they will focus in their mandate more on the the economy and less on inflation. So I think what they're doing now they're already sowing the seeds for more inflation down the road which is of course good news for for gold, silver and other things. Okay, we'll touch on gold, silver, and commodities in just a bit. Let's move on to global growth. Now, this came in a few weeks ago. China's shipment to the US or shipments to the US plenched 33% in August. Overall exports growth hits a six-month low. Imports from the US also dropped 16% from a year ago, customs data show. Now, you have highlighted that China is perhaps already in what's called a um balance sheet recession. Do you think this news accelerates that view? Yeah, the balance sheet recession of course stems from um from the housing market and a lot of people saved a lot. They put a lot of their savings into the housing market. The housing market collapsed. Uh Chinese uh feel poor. They don't consume. They don't invest and they will save even more. So that's that's where the balance sheet recession idea comes from. On top of that, if exports are weak because you can try to export your way out of trouble. But if that road is is blocked, you have another issue. So that that makes the situation even worse. So I think that the Chinese economy is fairly weak. Well, what they will do and we know that from the um experience we had in Japan and their real estate market went bust somewhere at the end of the the 80s and it took them about 40 years or more to crawl out of that. So in a balance sheet transaction, lower interest rate just don't work. We see that in Japan. So the only thing is and I'm not a Canian but the only thing um that held this good old Caninesian stimulus and that's what what China will do eventually because they cannot afford to have 30 40 years of of we grow because their their society will not tolerate it like it was tolerated in Japan. So they will stimulate that will help the world economy will help grow it as well together with what the central banks are doing. But once again it's also inflationary and once again uh it's good news for commodities. So a lot of uh arrows point in the same direction I would say. Well do you well just on that front do you you said the stimulus may be inflationary but don't you think China try to slow down maybe deflationary or disinflationary maybe maybe they could export some of that deflation to the west and force the Fed and other central banks in the west to cut even faster. Yeah, absolutely. That's a very good point and I think they have been exporting more than anything else, more than goods, they've been exporting deflation and that has clearly helped. But if you look again at the figures that you've shown a couple of minutes ago, ECB is just at the target and probably underestimating US is still above the target. So if you now altogether get central banks cutting in Europe and the US, you get fiscal stimulus on top of that in Germany. You get fiscal stimulus coming from China. Well, this will indeed make the economy move forward. This will help profit growth. So, there are a number of very positive aspects to that. But the point is it will be inflationary. So, if China goes from and I totally agree with you, exporting deflation at the moment to exporting less deflation or even start to export inflation again, yeah, that will have a massive impact on on a global scale. So that's one of the elements why I think that that a lot of central banks and also economists at the moment underestimate inflation for the coming years. Before we continue with the video, let me tell you about a very important topic. How to protect your privacy. Now your private information doesn't just live in the inbox of your phone. It's being collected, packaged, and stored and tracked by data broker websites all over the internet, even without you knowing. That's where today's sponsor comes in. Delete Me. I use delete me to protect my privacy. And here's how it helps you. It's a platform that helps you remove your personal data like your name, address, and contact info from hundreds of these data broker websites. When you sign up, you'll get a detailed privacy report showing where your data was found and what's already been removed. And Delete Me keeps working throughout the year, scanning and clearing your information regularly. It's an easy way to take back control of your digital footprint without trying to track everything down yourself. Go to joindeelme.com/david Lynn and use the promo code davidin at checkout to get 20% off of US plans link down below or scan the QR code to get started today. Well, your book is called The New World Order and Five Trends: Investing in Times of Superinflation, hyper innovation, and climate transition. Now, uh you said offline in a note to me that you wouldn't change a single line if you had to rewrite the book. In fact, many of your predictions may be coming true. You think we're living in a forth turning kind of environment. Can you just elaborate on what exactly that means? And uh yes, no sorry, excuse me. Uh fourth turning indeed is is a term that we borrowed from Neil Hal. It's the book the four seal by Neil Hall and he's an historian and he puts things historical in a historical context. So his is reasoning is and I tend to agree with that is that basically every 80 years you get a fork turning for four turnings together are 80 years and for turning is more or less give and take a year 20 years. So now the last for turning before this was the second world war and then of course you have a lot of destruction and then the pain and horror and then people say hey we're never going to do that again and then you start to build United Nations and European Union and and the climate accords and then trade organizations and health organizations and then of course unfortunately after 80 years and that's as we speak uh people who have lived through the pre previous ordeal are very old or unfortunately dead and then the cycle starts. again. And what Neil How does very well in this work is is putting things in perspective because if you look at the news, it's it's all horrible, but it looks more than anything very random. Crowds in every direction, wars, uh people in the streets, leftwing, rightwing, everything. And you say, "Yeah, this is a world gone crazy, a world completely random. How can I make sense of this?" But if you look to these glasses and I can everybody recommend to read that book uh to these glasses at the world and you see yeah because of for turning is unfortunately a period of civil wars of wars of a center everywhere that gets strong smaller and smaller and is unable to make the the decisions to cut the budget or to to get the budget in order. extremist parties on the both sides that when sitting governments, sitting presidents, sitting parties are voted out basically everywhere. And what Donald Trump is doing is of course destroying a lot of the institutions or trying to destroy a lot of the instit institutions that were built in the previous cycle. So yeah, we will have to go this through this and this means that we will have a lot of geopolitical volatility and in our world of course this will translate in volatility in Euro dollar in in rates and everything. So I think a lot of of things are coming through and when you listen to serious podcasts and and then serious interviews this for turning idea uh was not that present let's say a couple of of years ago but people start to talk about it and I'm absolutely convinced unfortunately that's the world we're living in today. What are some of the effects of this forthring? Let's talk about Europe first because you're based in Europe. Do you think the European Union will last as a coalition? Well, that's you as very difficult question and being a European, I can only hope it's not the case, but but it's clear we can no longer kick the can down the road. So we have come to a to a fork in the road and we go either left or either right and as a European I hope but that's more a hope than a prediction or a lot of all the things I will be saying will be predictions which I actually believe but this is more hope that at a certain moment in time in 15 years time we will say hey Donald Trump was probably the kick that we needed to get ours in order and to to come together uh as as as a as a union as a continent basically and and try to resolve our own things, try to get more independent in terms of re her to to get our defense policy going, to get road going, to get innovation going. And maybe that's the case, but it could indeed also go the other way. And then and that's the the big question that's today on the table. And if you once again believe this for turning story or or Jesus, well in in in the world of a forturning, it's extremely difficult for countries to work together because everybody goes back to his own church and his own parish and everywhere. So it's extremely difficult but maybe we will be forced to do it and yeah uh history will tell where we go but but I think Europe and European Union is at an extremely critical juncture at the moment. Europe is currently militarizing with Germany wanting to build the largest army in Europe. Scandinavia is recruiting women, so on and so forth. The uh EU unveiled a $800 billion militarization plan in March 2025. What are the assumptions behind this plan? Why are they doing this? Well, indeed, because you want to be independent a little bit from the United States. If you look at Germany, they they exported or outsourced, we should call it, outsourced their defense policy to the US. they outsourced energy to Russia and a very important uh export market was China. So all these two things fall apart. Germany is realizing this. Um I think Germany and I will say in German they have the children or the means that they could not run a budget deficit. Now they can like I said this is a game changer for for Germany and also for Europe because it's it's like a Marshall plan after the second world war. uh it's it's a couple of times the German re reunification in money. So this is hugely important. Germany still being the dominant economy or the biggest economy still in the Euro zone. Uh when they spend on on military and they indeed spend also on infrastructure that will help but I think that Germany has realized that we can no longer be under the umbrella all the time of the United States and and we will have to take uh yeah paid a little bit in our own hands. And of course if Germany Germany leads maybe some other countries like Belgium where we a very very small country of course on a world scale but but basically we will maybe follow this lead and maybe like I said in 10 15 years time uh this will indeed uh be the moment that we say yeah we started to to change things for the better and also I believe and I would not call it European renaissance because that's maybe a little bit too strong but since the beginning of the year we also see money flowing again to Europe a little bit. Yes. To the United States, to the UK, to other places. So having independent big deep capital markets, a capital union, uh stock markets that do well, IPO market, M&A market, that kind of thing is of course also very important. You're probably maybe too young for that. But uh in my time, I used to play Age of Empires. And then of course, I love that game. You love that game. you would build these small uh armies and everything, but you need stones, you need wood, you need uh meat, you need gold also to build your army and and and that's one thing. You need a healthy strong economy to be able to build uh to build your army. That's that's basically it. Well, people are talking about this bifurcation of the world where you have the bricks forming an alliance and then you have the US on the other side. Where do you think EU falls? the EU falls in this bifurcation. Do you think the EU will trade more with China and Russia or the US in the future? Well, that that's a hard one. I think that once again Europe is a very difficult position because we have been under the umbrella of the United States for the longest time. Um, and it's very hard because it's also in terms it's not only trade but also technology. If you get technology divided in different groups and different types, yeah, you have to choose a certain moment in time. Are you going to use telecom systems that are building in China or the United States for example? So also there Europe I think is in a very difficult situation. I I think in the best of all worlds you trade with with as many partners as possible. Uh but that that will basically not be easy. And I think the biggest problem maybe in Europe even making a abstraction of the the deficit and the the fiscal problems you have in France and other places is not the innovation but the scale up of innovation. Because if you look at companies uh in the United States, they make them every couple of hours. They make a new $100 billion company like Pontier which is even bigger at the moment. We've not built a company of that size, a new company of that size for the last 30 years. So we have good universities, we have good ideas, we have innovation, but we are unable to scale up and and that's of course all the red tape and all the bureaucracy and everything that's here. So that that's a major problem. But in terms of trade, you can hope that that indeed uh we can trade with as many partners as possible. But uh we have to make sure that we don't become the museum of the world because of innovation is is not very strong anymore. People will visit Europe for past but not for our future. And and that's an issue. But I think I I also believe a little bit in the or a lot in the the predictive power of markets. The fact that European markets finally get some momentum going is is maybe the indication that at least markets believe that that we have a chance of of getting out of here. Well, you've compared the global economy right now to a series of tectonic plates moving and possibly colliding with each other. Tell us about how this collision may play out. What does that mean? Well, that means indeed you have the geopolitical uncertainty which comes from the foring. So, you have the fragmentation of the world. Everything is going in into block. So uh we had the Pakam Americana. So after the fall of the Soviet Union, China, US was basically the only superpower. Now you have at least two uh with with with China coming up. You have potentially India. And then you go to a world that's more normal I would say because only having one superpower is very rare. You can go back to the Roman Empire 100 BC to 100 after Christ. Then Roman Empire was the only empire around and then you had peace because there was only one very strong force. And we had for 50 60 maybe 100 years especially after the second first world war second world war you had the United States but now you have more countries basically and that's this also this for turning this this fight between the new superpower and the old superpower but you also see that on the economic side because the world is fragmenting and it's very hard for me to speak about the dworld economy 10 15 years ago you could talk about the world economy and then you could say it's expanding it's going into recession. So they would all move more or less these tectonic plates in the same direction at the same speed. Um central banks would do more or less the same. No, you cannot do say that anymore because Europe is maybe for the first time in quite a while going to grow faster than uh the US. Uh Fed will cut ECB is probably on hold. In Japan uh the Bank of Japan is hiking interest rates. So these are all moving at a different speed in a different direction and like tectonic plates tectonic plates they would move in the same direction at the same speed but now they move in a different direction at different speed and this means yeah they will collide somewhere and the collisions will create the volatility and the volatility is what we see in Euro dollar where in my mind the trend has only begun. You will see it in the long end of the rate curve. You will see it in commodity markets and you will see it in equity markets where we had of course after the liberation day the big fall in equities which were were of course uh uh made good for uh quite quite fast afterwards with that type of volatile events we will still have way more in the future and I think it will be way more violent than than we're used to. way more violent like physical like kinetic war. Is that what you're referring to? Well, on both sides you will have unfortunately I hope nothing is going to happen with Taiwan but but you will have more wars and then more pressure points on the geop geopolitical front. You will see uh economies being harder to read and being more volatile and those two combined will make for more volatile market share. I think they go together. The US 10-year yield fell from the beginning of the year at uh 4.8% now down to 4%. So the bond markets had um a pretty good year uh at least in the US. Which region in the world do you see the long end of the curve moving the most in the next uh couple of quarters? Well, I think the big story because you mentioned the 10 year um but the big story is more in the 20 and the 30 year because there you see them going up uh the longer everywhere in Europe in Germany um in US in Japan as well. So I think if you have big problems in in the bond market, I think it will start in Japan because Japan has been running a deficit for the longest time that that debt to GDP is probably the highest in the world and it was not a problem and it's never a problem until it becomes a problem. But if all of a sudden you start to pay interest rates over that debt, yeah, you get in fiscal trouble uh with your budget. And I I think this is in a way logical and that's also what we describe in our book because the very long end of the curve and I know I'm I'm oversimplifying things but I'm still going to do it. There are two very important building blocks of the the long end of the curve. First of all is inflation expectations. So when you think that inflation will be higher uh in 10 15 years time especially higher than today which we think you will ask for a higher yield and then of course you have the term premium if you believe that maybe governments will not be able to pay back the debt uh in the long run but you will ask for a higher risk premium and these two things are happening on the long end of the curve. So I think that the long end of the curve is telling us that this world is coming. Now, of course, central banks will not let it happen. They will cut the the short end of the curve. They will do that. You have seen a lot of financing also on the shorter end of the curve to take money away from the long end of the curve to have less supply. I would not it's not I would not call it in the US yield curve control like they did in Japan. But, but still uh I think if if push comes to chef and then then you get into trouble then they will try to control the curve. They will do once again quantitative eaten easing if necessary and so on. But the long end is is telling a very important story and most people look only up until the 10 year and there everything looks rosy. You see normal behavior but if you go beyond the 10 then you see what what the market is thinking about the long run and that's maybe not happy story. The 30-year rising in the US what is that signaling? higher inflation expectations or higher economic growth or both. uh those two and on top of that a higher term premium that people start to doubt whether the the the US will pay back its debt in 20 30 years time and that that's a big thing because we've all learned in school from our books of economics and everywhere the US is is risk-f free and everything prices from the risk-free but if the risk free is no longer risk- free well what does your model look like so you have an issue and everybody is talking about um yield spreads being so tight, corporates over over government bonds and and high yield and so on and and and you say, "Yeah, that's logical because people do not see a lot of risk in the market." But you could also say maybe they see less risk in government bonds than in government bonds. And that's also a way that the spread would be very low. So maybe we have to look at a new way with new glasses to this world. And if we we see a low spread, it does not necessarily mean that people do not see too much risk in government um corporate bonds over government bonds. But maybe they say, hey, maybe government bonds are uh for the first time in history maybe less risky than government bonds. So So that's uh that's something uh I try to wrap my head around at the moment. Let's talk about the dollar. Why do you think the DXY fell despite the long end of the curve rising and as you said the term premium rising? Shouldn't higher interest rates move capital to the US, not away from it? Well, that's the the logic you talk about over the last 15 years um when that money would flow very easily towards the US bond market and towards US stock markets. Um and the the outperformance of the dollar compared to the euro but also to many other uh currencies has been the fact that money has been flowing towards um US. I always say to clients never believe a bank you're making a prediction uh about Euro dollar because they're always wrong. But if you could look at it with hindsight for Euro dollar but for any currency you want to discuss there only two flows important. uh there are the trade flows, commercial flows and there of course the investment flows and if you look Euro dollar well Europe has a trade surplus with US for the longest time so that means there is more demand for euro less demand for dollar that would push the euro up but what we have done for the last 15 years as Europeans as Belgians we've taken our trade surplus we have added our savings and we put everything back in the United States uh in the bond market and in the equity market because that was the place to be. I always compare it to a candy shop. You had a candy shop. You could only eat as an investor Nvidas and Apples and Microsofts because all the rest emerging markets, Europe, small caps, UK, you name it, they would all lag. Since the beginning of this year, this has changed because money has been flowing more evenly over the over the globe. They call it the end of of American exceptionalism to a certain extent. You could also call it diversification to a certain extent. But it is no big surprise in my mind that as the European markets are outperforming and emerging markets are outperforming US that that also has an impact on the Euro dollar. So if you believe like I do that this money will float more evenly over the world uh then you would also expect a weaker dollar. So I would not exclude 125 and if we talk again which I hope uh in a year or two I would not be surprised to see 130 140 which also opens up opportunities for emerging markets because I also think that emerging market equity will do well in this environment and that even emerging market bonds and local currency will do well. Did I did I misar you? Did did you say DXY is going back to 130? Well, I would not be surprised to see that in the next uh next I talk Euro dollar. Yeah. Yeah. Oh, you're okay. Yeah. All right. Well, okay. So, the your view on the dollar then the US dollar is it going to strengthen then from here? Well, I think it could strengthen a bit because if if uh if indeed uh you see a little bit more money flowing again to the US, but but I think you the dollar will weaken and the euro will strengthen because money will no longer flow this easily towards the United States. And we we tell clients uh it it would be a mistake not to be invested in technology. Even though the valuations are high, you do not want to miss the boat uh on AI. You do not want to miss the boat on quantum and all these things and if you say technology well to a large extent you still stay in the US. So it would be I think the mistake not to be invest in invested over there. But what we have been doing in portfolios since the beginning of the year is diversifying towards Europe towards European small caps towards UNI uh UK stocks towards emerging markets and so on. So I think that it will be more evenly distributed and of course you have even as European investor you have always dollars in your portfolio but we have been reducing that and we've also been hedging a dollar exposure because like I said I would not be surprised to see you dollar at 130 or more um over the next couple of years. the fact that the uh US dollar has slid while the S&P 500 has risen. Uh what does that signal to you that capital has flown uh to a risk appetite environment and so do you think this risk appetite will continue? Well, it the two go together a little bit, but it's it's not only what the S&P has done. It is also what the other indices have gone because the last 15 years, the S&P 500 has outperformed everything else. And that's mainly due to a magnificent 7, the big companies, the Apples, the Microsofts, the Nvidas, and so on. Since the beginning of the year, the US has done well as once again well. The S&P is up, but European indices are up more. If you look at the Euro stocks is up more, especially the Spanish stock market is up more. The German stock market is up more. Even the Chinese stock market is up more. So that that's what I mean is that the outperformance of the euro. I'm not saying that Europe US market is not going up anymore, but it's not going being so dominant as before. So it's very well possible that other stock markets will do better. And if other stock markets do better on a relative basis, this is always you can always coincides with the weaker weaker dollar as well. Well, your your book explores hyper innovation. Which area in the world would be most responsible for hyper innovation in the future. Maybe that could maybe that could give us a sense of where capital will flow. Well, well, there once again Europe does not score too well because I said we've not been able to to create a $100 billion company uh for the last 30 years. So it's a little bit a race between China and then uh and and US at the moment. And if you see of course the amount of money that that both countries are pouring into data centers for example um I saw a graph the other day that about 70% of all the venture capital in US goes to AI at the moment. So that will always like internet create a boom bust. A lot of these companies will go bankrupt and so on. But in the meantime you have a lot of innovation. And so I think if you look at these new technologies well I think that the amount of investments going in is the highest in US. China is in the second place. So they will lead uh you will need a lot of need a lot of rare earth for that as well. China has them. Today there was only once again the the news that I saw that US will put five billion which is a lot of money but in the big scheme of things not that much money but in developing rare earths projects Europe is also not uh scoring too well on that one either. So if it if you look where it goes at this moment, I would say that that yeah, the US is still going to take the lion share of this followed by China and it will be extremely hard for other countries to to follow up because this these are massive investments and then the people who build these data centers put the money in AI quantum computing is next. Combination of the two is extremely powerful. So I think that yeah it will be most of all US tech. So therefore I still think it would be a mistake not to be invested there even though valuations are high. Let's talk about the theme of super or hyper um very high inflation. I think you called it uh super inflation not hyperinflation. My my apologies super inflation. Uh what does that look like in today's world? Was that is that a repeat of 2021? And second part of the question which assets uh will we use now in 2025 and beyond to hedge against superinflation? Yeah. Well, I think um when I sign off books, I I very often write it all comes and goes in waves. It always does. So these inflationary waves and interest rate waves attached to them because they they move together tend to be waves of 20, 30, 40 years sometimes. So the last big inflationary wave started after the second world war which is no coincidence that this was the last for turning then gained speed in the 60s especially in the 70s with the oil shocks and reached this peak in 82 then came became president of the Federal Reserve brought inflation under control and then inflation came down until co somewhere uh and now I think okay we had a peak with co which was of course moderation a little bit but I think with co we have entered a period where inflation on average will no longer between be between zero and two but between two and four and of course with peaks above that so it doesn't have to be 10% each and every year but but I think that two between two and four will be the new normal uh and okay there are lot of reasons for that um if you have a world of conflict uh well war is inflationary peace is deflationary so it will be more conflict you will need a lot of money for the climate transition. You have the aging of the population. But most of all, the US has about 37,000 billion of debt. Um, you have other countries in Europe and other places in the world, there's also a lot of debt. So the only thing to keep only way to keep this debt manageable in a certain way is to let inflation run because if inflation runs in real terms basically the the the debt weight becomes smaller. So when you have a mountain of debt you can basically do three things. You can try to save your way out of it and grow your way out of it. That's in a fork turning extremely difficult because populist parties will take benefit of that. You can default. Let's hope that we do not go there. Or you can try to create some inflation 3 4% instead of two. And in this way, you keep the debt more or less manageable. But that's of course if you think about it, if you have inflation 10 years in a row on an average of 4%, you lose almost 50% of your purchasing power. So in this environment, cash is not an option. And if cash is not an option then your question okay what do we need to own then? Well the answer is real assets and real assets are real estate are equities are commodities are gold or silver are pigeons wine stamps jewelry whatever you can dream up everything that's tangible but not cash. This is an article from uh Bloomberg syndicated by Yahoo Finance. Gold could rally to almost $5,000 an ounce if the Federal Reserve's independence were damaged and compromised and investors shifted just a small portion of holdings from treasuries to bullion. Goldman Sachs said a scenario where the Fed is Fed independence is damaged could likely lead to higher inflation, lower stock, and longdated bond prices. Uh the bank outlined the possibilities. Uh $5,000 if just 1% of the privately owned US Treasury market were to flow into gold. A lot of assumptions there. Why would the Fed's independence be compromised? Is that a view that you share as well? Well, it's a hard one, but but you see, of course, Donald Trump putting pressure on the Fed. Um, he tried to get rid of Jerome Powell. Okay, that's not really working. Now, he's working on some of the other voting members of the Fed, uh, Lisa Cook, I believe, and other. So I think that that in a way um we will be living in a world and I tend to agree with the view that that it's it's written down there that we will live in a world dominated with with fiscal dominance I would call it. So you will have very big deficits and you will use the central banks to to buy back the debt do quantitative easing make sure that interest rates are low enough. So the pressure on the Federal Reserve but also on a lot of other central banks around the world will increase. So that that's certainly correct. And the other part um in this article we we talked about 4,000 in our book when gold was $1,800. Now we're not too far from that. So I think we will fairly quickly go to the 4,000 which will coincide with $50 silver I believe. But that's only the start of it because it's absolutely correct. Since the beginning of the year, investors are back in the gold market. But before investors were met sellers, gold went up because central banks were buying so much. They bought last year about 1,000 tons of gold. And that started or or accelerated at least with with Russia invading uh Ukraine and US blocking access to to treasuries and and kicking out of Euro clear and then and freezing reserves and so on. So that this made a lot of countries around the world also China notably think okay we have to get rid of these treasuries and we should buy gold. So the entire bull market in gold up until now or at least up until the beginning of this year and was driven by central banks why investors were absent. I think that investors only hold in their portfolios worldwide and it could be be off a couple of of decimals but is about 2%. So only 2% of all the assets of investors in the m in the moment is in gold precious metals or related assets like mines and so on. So if they shift only a little bit towards gold which which is happening as we speak I think well 5,000 6,000 10,000 I think these are all levels that that are possible in the coming years and gold silver copper uh rare earths they're all here as well. So I'm that has gone fairly fast. So you could not exclude that you have some pause here and I think gold will pause at $4,000 and so we will pause at $50 but after that I think it will go way higher and much higher than people can imagine. Well what is the uh BMP forecast? Well the BMP forecast is always like like banks are very prudent. We we talk about 3,800 on gold but when we reach 3,800 we will say 4,000 and when we reach 4,000 we will say 4,0002. So we so we lock step so we have to be a little bit more ambitious and express something. So we've always talked personally I've talked about 4,000 you know book already quite some time ago. Uh and and I I'm sure it's not going to end at 4,000. So you name a figure and I I believe it. Well you're calling it the largest bull market in history. uh what makes this different from let's say 2011 when uh commodity prices like precious metals rose and then very shortly fell and stayed low for years. Well, that's a very good point David and that the answer is I think because last time it was mostly demand driven. that was demand driven from China getting in a WTO industrializing very rapidly having a lot of demand for copper and so on and and supply could not really follow um this time it's on the demand side it's electrification uh for a lot of things not gold but silver very rare earth copper and so on because you need a lot of copper for your electrical revolution but it's also supply driven in the sense that because of climate change people were not allowed to open new minds. Um it was a very bad business for a very long time. The return on equities were extremely low. So nobody wanted to invest in the commodity space and yeah we have underinvested in the total commodity space only maybe China not but all the other countries around the world basically have underinvested in the commodity space for the last 20 30 years and now they're catching up. But of course a lot of these mines uh and then then projects they have long lead times. So it takes you 15 years, 20 years to open a new mine if you get the permits and everything. So if you look at soft commodities, well, it's about harvest, it's very difficult to predict. But with with with metals and hard commodities, well, you see the supply and when I see the supply coming up over the next couple of years and I see the demand that's coming in, well, it's it's not an equilibrium. So you need massively higher prices. So in my mind, this is is going to be the the biggest bull market in commodities we've ever seen. Um and that's only maybe not the first thing, but the second or the third. So we're very early, I guess, in this game. Which other commodities? Um we've talked about precious metals. Which other commodities may benefit from this uh new world order that you're talking about? Uh any base metals? Yes. Yeah, absolutely. So I would would certainly highlight copper. That's also what we we talk about in our book because the point is in our book there is also a Bloomberg chart where we look at consensus demand for for lithium, for copper, for cobalt, for nickel for the next 25 years until 2050. But if you make a prediction like that, okay, you know, it's going to be horribly wrong because the bars will be higher or lower or whatever, but I think they will be way up. But also the composition will be different because I do not know what the batteries of the future will look like. But suppose you need less cobalt and more nickel for example, that will have an impact. I'm getting more bullish now on on lithium at the moment. Lithium has been hammered uh incredibly. Uh also the lithium the equities that go in the lithium space, they've been been damaged. So they look like they're bottoming out. So on a very spec speculative basis I would would also buy lithium or lithium related assets here. But the point is if lithium is replaced one day by sodium or by natrium well you have another story once again. So that's hard to predict and therefore I feel the most comfortable besides gold and silver with copper because if you want to move electricity from A to B it's still copper and if you look at demand and supply for copper well it's it's yeah it's not squaring at the moment. So I think this is going to go higher. I love the rare earth space uh because the US is going to invest massively to get more independence from China in the rare earth space. If you want to win the trade war to China, it's very hard to do that. Um if you have no independence in the rare earths, it will take time. But the problem is as an investor, they're very volatile. uh these mines are not always very um profitable and it's also very hard to find investment vehicles to to play the steam but but uh my first idea would be gold and silver and after that copper um that would be the the key ideas. Well, the last question I'll let you go. So the uh you wrote to me off like copper could uh double. So that that is a prediction that you're making. But however, I'm wondering, Philipe, um just on that note, perhaps we might see a disruption in the copper supply, which would actually help your thesis. Let's say if the trade war heats up between the east and the west, I'm not saying well, but let's say it does. China has already banned several critical minerals exports. China holds roughly 60% of the world's copper refining uh supply. Let's say they stop doing that and stop exporting refined copper to the world. Let's say they stop exporting the remaining strategic uh minerals reserves to the world. What will happen to the electrification agenda? What will happen to the AI race? Well, that's extremely difficult for the Western and and China is using this as a weapon very cleverly to to uh to to get this way in the trade war. So, like I said, it's very hard to win the trade war against China when they have this capacity. They're very strong in Latin America and Asia in mining but indeed refining capacity they're even stronger and recently um last couple of months let's say year I think US is getting on board with that idea and is starting to invest massively in these new product uh projects and that will take time but eventually it will help but that makes a lot of these smaller midsized miners a very good investment opportunity now there is a lot of volatility going on because if you say copper you China, okay, there's refining capacity, but you also have Russia, but they also have a lot of countries in Latin America like Chile, Peru, they have a lot of supply, but what happens each and every time you have a political manifestation, they immediately block the roads to these mines. So disruption can come from a lot of of places. So this this means that we're in a in a very long secular uh bull market in these things driven by the foring driven by the geopolitical uncertainty. More uncertain these things become the bigger the bull market becomes and yeah um I think the uncertainty is is quite high at the moment. Great. Thank you very much. I appreciate your time. Uh, Phipe, uh, uh, before we go, the, uh, portfolio allocation, um, aspect of the conversation, summing everything together, what are you advising clients to look at or consider right now when it comes to allocating assets? Well, own real assets. So, do not have too much cash. Uh, that that's one thing. uh own US technologies certainly but look at diversification uh in emerging markets in European stocks and in other places um as interest rates are going to be cut in the US uh and we worry about the long end of the curve we invest uh in the belly of the curve 3 to 5 years uh because we do not want to be in the short end and own some gold some silver and some copper absolutely great thank you very much Philipe where can we follow you and learn more from you well uh mostly on LinkedIn. So that's easy. I'm on Twitter a little bit on Xbox now, but I'm mostly on LinkedIn. All right, we'll put the the link down below so you can follow uh Philipe on LinkedIn. Thank you very much, Philipe. I enjoy uh the conversation as usual. Appreciate you coming back. We'll speak again soon. Thank you, David. Speak to you soon. Thank you for watching. Don't forget to like and subscribe.