Comments
Transcript
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DRNo kidding the dollar will accelerate lower. Most analysts hugely underestimated how much the US dollar and US standard of living will collapse this decade and century. At the minimum, an 80% crash seems conservative by our models. This is the Asian century, and America will be the big loser for both this century and this decade. To anyone objective, this has clearly already begun in 2020, the first year of the new decade.
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TRI'm getting a little bit tired of this "central bank liquidity drives markets" talk when I never get a compelling explanation for how the mechanics work. Under fiscal stimulus monetized sure it makes sense - the money would flow into the economy and someone would put them into assets at some point of the money chain - but the 20 trillion mentioned here are just bank reserves. Are the mechanics then that (1) central banks do asset purchases (2) banks lends to that to real economy companies and consumers and we get a similar affect as under fiscal? We know that velocity offsets that to a large extent. Maybe it works in the real estate channel as he is eluding to where the debt is collateralized. Maybe also to finance share buybacks for blue chips to some extent. Other than that would really want someone to explain it to me. Also - the chart around min 5 does not look super compelling. Is the argument that sometimes the liquidity takes 3 years to work through the system, sometimes it's instantaneous and sometimes it does nothing at all because that's what it looks like
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DRThe data this year and since 2017 inclusive is showing a big shift in East Asian demographics (exploding births, longer lifespans and healthspans - by far the best in the world). Demographics are changing drastically and most in the West are out-of-date about it. That said, do demographics matter much? Africa has had an explosive population, but it hasn't helped one bit.
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DR$25K btc in 2021? That's going out on a limb. Just sayin. No opinion as I'm unqualified to value BTC.
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TMInteresting perspective. Got some useful information from this for sure. I’m not sure how he thinks the US has great demographics that are on par with India though. The US has an aging population. Average age is 38. Boomers drive a replacement economy as they retire.
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CWQuestion becomes how does this debt-liquidity spiral break? Can we paper endlessly over it? Or do fundamentals (i.e. cash flows relative to interest/debt) matter at some point? We are seeing a record number of zombie companies (close to 20% as per Ed Altman's data from NYU) and, while defaults have slowed down, companies that do go bankrupt have recovery values <10%. This looks like the further we push out the moment of truth (recognize bankruptcy) by using even more leverage / liquidity the more devastating the final blow will be (until close to nothing can be recovered). How far away from this point are? What am I missing in my analysis? Comments welcome!
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JLThere's a divergence in the liquidy vs global wealth correlation between 1991 and 1996, so it wouldn't be out of the question for there to be one from 2020 onwards too, although the correlation does seem highest since 2008.
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JLThat was excellent. Can we please get Michael back for the geopolitical half of the sandwich sometime soon? Geopolitics is a constraint that can upset any narrative and hence very important to keep an eye on. Thanks RV!
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RGFantastic. Very clear.
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JLLudwig Von Mises summed up the endgame we are headed for more than 70 years ago. If you understand this, you understand the ultimate convergence point where all of this is headed. "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." Ultimately, debt related issues are met with more debt, and when the debt load becomes unsustainable the debt is monetized. If you understand this, you will have a better grasp on why Bitcoin is in sprinting distance from all-time highs. Also, this is what that whole Van Metre view gets wrong. Put aside all the technical and plumbing jargon. Look at the ultimate factors and the policy reaction functions. Central banks do not alone, they act in accordance with treasury departments as needed. If monetary doesn't get things moving, fiscal comes in. When monetary and fiscal combine, you eventually get backbreaking debt loads which can only be addressed through de facto monetization. That is the end game. That is where it goes. Von Mises laid out the core thing to understand in 1949, and he was right.
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TEWow. That was mind blowing. This needs to be digested and responded to by @Raoul and @Steven van Metre (and maybe even @HH). There is a HUGE and very important shoot-out to be had.
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VBIs central Bank 'printing' leading to Bank reserves really liquidity?
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ECI enjoyed listening to Michael's perspective on equities, and that they may not be overvalued as is the common narrative, however, the derivation of chart shown @35:22 that shows equity valuations is is not really well explained at all, and I quite opaque, so I am a bit skeptical of it until I can see the derivation.
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TWGreat interview. Lots of good information to digest. I would like some clarity on part of his thesis. It seems to me that liquidity and asset price is correlation not causation. The way I am understanding this, 1) He has basically discredited the potential for the money to start moving in the economy again to rebuild wages and employment. 2) He is assuming the money wont be used to pay back credit 3) He is assuming that bankruptcies wont occur 4) He is assuming that when evictions start that rent will hold steady and home prices will increase 5) He is assuming that US equities and land will be the primary receiver of that liquidity over all foreign equities or land. Is there a reason for this relationship cause effect reason to expect this as the primary outcome or is it just a guess? I'm asking to figure out how to position because I doubt in this situation all equities will be created equal. If the logic is just supply and demand, then wouldn't gold and bitcoin facilitate that more? Do we all just say earnings on all stocks dont matter anymore and there are no expected returns? Or do some products increase more radically in price causing those expected returns to rise much more dramatically? Thanks anyone who can point me to his underlying logic for that assessment!
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MHGold $2500 is not a "big call"... :-)
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OBEquities being 'nowhere near bubble territory and haven’t been since 2000" seems rich. On most traditional valuation metrics US equities are in the 90-100% percentile.
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JAIF bond yields are going up, the last place I want to be is in stocks. Not with this much debt lying around. If the market couldn't handle 3% yields in 2018 during QT and the Fed pivot, why does anyone expect them to handle 2% today? They literally tried to do this and reversed course. If yields go up, the fed is going to have to put in yield curve control. They want inflation to run hot. The fed is literally telling you that yields aren't going anywhere.
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JvI would like to see a discussion on China with Michael Howell and Thomas Orlik (China, the bubble that never pops). https://www.youtube.com/watch?v=AaVtwXMv0ZE&t=1608s And exactly one week ago Jay Pelosky shares his high expectations for the EU, while Howell projects hard times when the dollar devalues.
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DFEnjoying the content. Some feedback that the poor audio quality made the video much much less enjoyable. Thx.
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RDHigher Vol = Spike in Yields? No mention of 2nd wave of Covid and it's effect on the real economy. Central Bank Balance sheets don't seem to effect velocity of money. 10 year at 2. I think this guy might be jumping the gun on the reflation trade.
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GFI love Michael's analysis, however, while Bitcoin/Gold multiple on a linear chart shows converging, how is the logarithmic chart looks like ?
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OTI want to watch this video again and it is not replaying it :(
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MKGreat interview. Does anyone know how to get charts referenced?
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MHhaving same problem when trying to watch same video twice... Help!
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SSThis seems to be in contradiction to a fair amount of Raoul Pal’s view of lower bond yields and further deflation. A point of agreement seems to be on Gold and Bitcoin, so that’s a plus. For those of us sitting on a lot of Treasuries it does seem to be a conundrum on when to get out of those.
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MH20 years out India looks like the big mover. IMHO
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PUWhat Michael fails to address is that if you do get a rise in inflation (and a rise in interest rates), ESPECIALLY if inflation is > 3.5%, equities will get rerated lower in price. Mathematical certainty plus extremely high correlation. Equities do not like inflation in excess of 3.5%.
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PVCrystal clear as always. Macro narrative is compelling and data driven. Only issue he's anticipating BTC to hit $2,500 in 2021. I guess he meant $25,000 as BTC is already at $16,000 as of Nov 12.
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JGHi Michael, given the strong negative relationship between bond yields and gold, how do you justify a bullish stance on gold in the face of your expected rise in yields?
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SSIs Michael Howell doing this interview in a bunker with no lights on? Damn, COVID in the UK must be worse than I thought.
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MJEnjoyed this interview but can you ask Steven Van Metre to do one of his breakdowns?
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MRHaving a hard time understanding why equities are cheap and Bitcoin will only hit $25k in 2021.
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EFOne of the best Macro orientated videos I have seen on RV in a while. Very deep research and eloquently explained without any sensationalism. Michael should be a regular
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EMI struggle with taking this guy seriously after saying central banks are "injecting cash". That is just demonstrably false. Bank reserves aren't "cash" or "liquidity" in any shape or form. If there is "a large amount of cash in the system", why is money tighter than ever? Why aren't banks lending? Why is there still a global shortage of dollars? I kept on watching, hoping the introductory statement was ironic, but moved on when I realized he was dead serious.
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CDI've heard the CB injecting liquidity leads to asset inflation narrative many times but I've never seen charts like his, pretty interesting
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AMA few of the explanations and justifications don't make sense to me. Maybe I'm totally out to lunch, but I highly doubt bond yields are low because private investors are hungry for income. I think bond yields are low globally because 1) QE has been in place on and off at almost all central banks since about 2008, hence 2) private investors are front running central banks in anticipation of more of the same idiotic policies, and 3) aggregate global demand has been very weak over the past 10 years as a result of excessive leverage in the system. It is a fact that private investors are hungry for income. These investors buy equities. Private investors buying bonds are buying them mostly in anticipation of capital gains. Last one in is a rotten egg. On that point, I agree with Mr. Howell.
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arThe equity/safe asset ratio is interesting. But can we really make much of a historical relationship whose denominator (which, in Michael's words, is up 400% T10yr) has no historical precedent?
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RMEye opening analysis!
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FL09>31 .... can we get that chart going back to 1995?
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HKGreat interview. Had a technical issue though... Something up with the web interface for iPhones’ browsers. Can’t fwd/step through. Android is doing fine.
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FL29>30 ...."given that economies are recovering"..... https://covid19.who.int/ I think Bill Ackman Is Right
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MHFabulous interview. On point, crystal clear. Thank you, RV for bringing MH on a timely basis.
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VPPrecise, clear, data driven, excellent!
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AWv shape recovery?
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SSMore please. :) That was great! Thank you both.
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MHWhere can i see the charts?
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SZThis guy is on point