Transcription
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Hello and welcome back to another episode of Two Blogs Trading. Today we're joined by Michael How, one of the sharpest minds in global macro. He's the founder of Crossber Capital and a leading expert on liquidity, the real fuel behind market moves.
Markets are no longer about raising new capital for uh investment ventures. The primary transactions are 80% of those are debt refinancing transactions. The trend in financial liquidity has got to be upwards because the only way that you're going to afford this debt or the spending is by printing money.
Bitcoin is a very very good barometer of liquidity conditions. And my sense is the Fed is certainly pushing against that idea as much as they can. What you can think of in the textbooks was a 10-year business cycle. This is a 5 to six year debt cycle. The problem the Federal Reserve has is that they're the ones that cause this problem. And you can see it here because this is something we call Fed liquidity which is the active part of the Fed balance sheet. In other words, it's the bit that creates liquidity. So you're getting a 40% decline in Fed liquidity. And look what happened to the market. They crashed.
What you see is that the gold price, which is, you know, around $4,000 an ounce now would be $10,000 an ounce by the mid 2030s and an watery $25,000 an ounce by 2050. In this episode, we break down why liquidity matters more than interest rates, how today's debt levels could trigger funding crunch and what traders need to watch as volatility rises. If you want to trade with the tide, not against it, this one's for you.
Michael, welcome to Two Bloss Trading. Thank you so much for taking your time out your day today to to join us.
Well, great present, Jonathan. Good to see you. Um, good to be here. Lots going on.
Well, what's going on? There's a lot going on in the markets right now and and there's so much to speak about. Um, obviously your background is fantastic and it's we actually haven't had someone of your kind of ilk in on on the podcast before. So, it's going to be really interesting to kind of deep dive into uh into volatility and so on. So, um I suppose before we jump into all of that, give our listeners a bit of a background in terms of how you got into the trading world in the first place.
Well, I suppose to be accurate, I'm I'm on the research side, but um a lot of what we do is actually used by by traders pretty extensively. Um the the origins of what I do go back to uh a couple of decades or at least ago when I worked for the US investment bank Salomon Brothers and Salomon was the world's biggest bond trader as uh many people will recall. Uh now part of Cityroup uh but that's you know that's the way of the world I guess. uh and Salon Brothers was pretty much the fixed income markets worldwide and to understand the fixed income markets you had to understand credit flows, capital flows, what central banks were doing uh etc. And u you know here we are now but the world has changed a lot in those three decades and I think you know the way to understand this is really to say probably two things. I mean, one is that markets are no longer about raising new capital for uh investment ventures as the textbooks tell us. Uh they're there really to refinance debt. Something like 80% of transactions in global financial markets, the primary transactions are now 80% of those are debt refinancing transactions. So what you're already looking at in the markets is a a debt refi cycle. Uh and that's how we got to think about it. So that's number one. And I think number two is that if you look back um you know 20 30 years the big players in markets were principally pension funds and insurance funds and they were you know investing our savings and arbiting against fixed income and the sort of the common metrics they'd look at would be things like the yield spread between equities and bonds and they make their decisions accordingly. The world's changed I mean that's not going on funds have been yeah the 6040 model. I mean the pension funds have been eclipsed. Uh they're in draw down. they're not really big investors in risk assets anymore, uh, etc. You know, what you've got now is a lot of leverage. You've got hedge funds playing. You've got leverage pools of capital that are swinging around in these markets. And what that's governed by is not the fixed income markets, but really the repo markets. And it's the repo markets which are kind of unraveling right now. They're they're potentially breaking. And we need to understand why.
This is why we have you on, huh? So, um, so yeah, I mean, look, liquidity is a big thing for you, right? I mean, that's that's your your go-to. This is what you follow in the markets and you believe upon liquidity u more than anything else in terms of how you actually analyze the market. Right.
Correct. I mean I mean what we're doing is we're basically uh understanding the fact that money moves markets and we're tracking money and we're looking at uh the flows of money worldwide and we're trying to understand the direction and maybe the inflection points and we stress liquidity which is a bit different from money. Uh money has got sort of a a fairly fixed or rigid definition which is the uh the deposit liabilities of high street banks. Uh that's what people think of as M2 money. But you know the world's moved on from that too. Uh you know the world is not just about high street banks. It's about big financial institutions. Uh it's about hedge funds as I said uh you know you've got to start understanding the flow through financial markets and it's that which we think of as liquidity. And what's more it's global. It's not local. uh you know what happens in Japan or China or the US clearly affects Europe uh in enormously and and vice versa.
Sure. And when we talk about liquidity and that's what you look at, what about when we have you know economic data coming out and all this kind of information as well like is that something that you also look at or is that do you purely based upon uh liquidity?
Well to say we don't look at it is wrong. I mean we don't put it as high priority really. You've you've only got to look at the US, you know, in the last few weeks to realize that with the government shutdown, there's been no data. I mean, has it made a difference? I I would I would say not. Markets, you still wake up every morning, markets still go up and down, and no one seems to bother too much about the lack of economic data. The fact is that money moves markets, economic numbers so much.
For sure. Look, we're seeing so many big investment hedge funds and so on start to kind of pull back their portfolios as well at the moment. I mean, are we going towards a squeeze at the moment? Obviously, we are. I mean, look what US debt 30 trillion. I mean, like it's it's out of control. The refinancing on this is is again scaling out of control. You know, where are we going? What direction?
Well, I mean, ultimately, uh, we've got to think of, um, of the financial system as having a trend and a cycle. Um and I think that it's fair to say that given the uh the sort of train wreck of uh government finances worldwide. Um the the trend in financial liquidity has got to be upwards because the only way that you're going to afford this debt or the spending is by printing money. And that is the sad reality of what we're looking at. And that tells you pretty much why there is a clamor to get on the sort of gold train as fast as anyone can because you know a lot of investors realize that uh gold is a really good hedge against uh uh government um you know uh government monetary money printing if you like and that's ultimately what we got. But yeah the other thing we've got to recognize is that uh markets never go up in straight lines. There's a cycle we've got to pay attention to and that cycle is a cycle both in liquidity and in sort of risk exposure, risk appetite. We got we've got to understand those those two dimensions.
Now you know there's a slide that you you can well we can show which is looking at weekly global liquidity which is a chart um you know bright orange in Italy but um that's not necessarily supposed to be an amber traffic light. It's just basically uh looking at uh the course of global liquidity uh you know over the course over the the track of the last four years and what it shows is that really since the low point towards the end of 2022 which you can see there uh global liquidity has been on a tear upwards and you know despite the fact that we've had you know doubts about the economy um you know uh uncertain prospects for interest rates or whatever else the fact is that liquidity conditions have actually expanded dramatically over that time. Partly because the Federal Reserve in America has been um you know let's say uh less than straightforward about its operations. It's actually been throwing quite a lot of money into the US system over that period. Uh there's been changes in the way that the US Treasury itself operates. So it's been undertaking a lot of bill financing which means that they're financing the government at the very short end of the market which has actually helped liquidity conditions. And then the other elephant in the room is what China's been doing. China certainly since the beginning of this year, which explains a lot of the recent rally in liquidity, has been pumping a lot of cash back into its markets for the first time in two or three years. And that's why the Shanghai stock market is also racing ahead. Um why gold is going up etc. So you can see here that liquidity has been on a tear. The problem is that you know as we know markets never go in straight lines and uh if you look at the following chart this is an index which is actually a daily index that we that we uh create which is looking at the momentum it's an index of momentum of liquidity. So whereas the other one was measured in US dollars this is measured in terms of rates of change and we've got two metrics there. One is a simple liquidity now cast which pretty much says say says you know what we've been arguing that you're looking at an inflection looking at us at a progressive slowing down uh in liquidity which is why markets are becoming you know more and more difficult to trade and then the other line is really a measure a more more conventional measure of market liquidity which is the the internals of the market looking at bid ask spreads uh looking at measures of of volumes etc. uh and it's really a measure of of the depth that the trading depth of markets and you can see that pretty much matches um the global liquidity now cast but it lags a little bit and so what we're seeing we think are growing tensions and those tensions are really coming out of the repo markets in particular.
Right right and it's interesting you say right we know that gold is is is flying at the moment and we know the reasons behind that right geopolitical reasons safe haven reasons and so on but we're still also seeing the stock markets flying at the moment I And at what point does that turn?
Well, I think you got to look at a sequence here to be to be, you know, to be fair. I mean, uh, you know, everything doesn't necessarily happen at once unless there's a big rugpool. Um, you tend to see different assets responding more sens more with more sensitivity to liquidity than others. And, you know, principally right at the front in terms of high sensitivity are things like gold, uh, silver and otherwise precious metals and Bitcoin. bit Bitcoin is a very very good barometer of liquidity conditions and the fact that you've had you know I mean admittedly gold has been racing until it hasn't but the sharpness of the declining gold is probably telling us that it's hitting a bit of an air pocket and the fact is that Bitcoin has been kind of range trading recently it's had ups and downs this year but it's not really delivered great performance from you know January through now um it's kind of treading water overall but there you know there's been a seessaw in between um and right Now you're looking at Bitcoin finding it tricky to make more progress and I think that's down to the fact the liquidity conditions are kind of stalling out here. Uh I they may I mean don't get me wrong they may go up again but I think we're in we're pretty much in the hands of what the Federal Reserve and maybe the People's Bank of China are up to and we've got to look at them pretty closely. And my sense is the Fed is, you know, not really willing to uh to come back in size quickly into markets and to do the necessary job, which is actually to inject more QE into the system. Um they're they're certainly pushing against that idea as much as they can. And what's more, Treasury Secretary Bessant in the US has actually pretty almost said categorically they can't do it. uh because he said it creates too much of a wealth divide between you know Wall Street and Main Street uh in terms of US society. So you know it's now as he keeps saying it's now Main Street's turn and that's pretty much I think how we read the US administration's policies.
Sure. Sure. And I suppose looking at where we're going at the moment. I mean do you foresee 2026 seeing a huge downturn at the moment? Is that something on your agenda? What you're looking for? Um, obviously we've got AI holding things up. Um, obviously the the Mag Sevens are propping up everything at the moment, but I mean there's there has to be a I mean so many so many um top voices out there at the moment are warning of this is going to there will be a downturn, but how long can AI and all these tech firms prop up the the considerable problems and issues that that are underlying?
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Well, I think there's a there's a couple of things to say, Jonathan, on this. I mean, one is that a lot of those people that are that are c let's say shouting warnings or screaming fire are saying that largely because um you know, markets have gone up a lot and on conventional valuation metrics, they look expensive. But, you know, after all, I think you've heard those uh those sort of creed uh many times uh over the last two or three years uh and nothing's happened. reason it's different this time is that what you're actually beginning to see is uh you know high valuations for sure but you're also looking at liquidity conditions starting to inflct and what I've got is a chart which is our sort of centerpiece which is the global liquidity cycle as we call it which is an index of the momentum of liquidity through financial markets uh going right back to the 1960s and what you can see is the black line which is the actual data the last read was September end of September this year and the dotted lines are sine wave that we've put on top of that to show there is a regular four to five years sorry five to six year cycle and that five to six year cycle uh is a debt refy cycle okay so this liquidity is already reflecting the uh the ups and downs are reflecting the movements or the need to refinance debt uh in different in different blocks of debt uh you know basically with a five to six year frequency so rather like the old business cycle that people think of in the textbooks was a 10-year business cycle. This is a 5 to six year debt cycle or debt refi cycle. Now, that cycle, as you can see on the chart, opened in October of 2022, pretty much exactly uh on track with the sine wave that we illustrate, and it's slated to inflect downwards in late 2025. Lo and behold, it looks like it's doing that uh you know, pretty much on track. uh we did have some thought that it might be extended by what the Fed is doing uh into early 26 but we're really only talking the difference of a few months but we've got to try and understand why this inflection is currently underway and maybe why it could keep going uh and that's really you know one of the questions to ponder now if I jump in and say why is that going on let me show sorry two things one is that if you look at the average length of a cycle this is a liquidity cycle the Red line on this chart is looking at the latest cycle and the dotted line is looking at the average cycle uh over the years 1970 to 2025. So what this is basically telling us is that you know on average we're pretty spent here. Uh it may not be you know inflecting lower or the red line may not be falling sharply yet but it looks like it's it's sort of lacking upward impetus and that's what we got to be alert to.
Now if I come on to the actual mechanics of of the here and now what's going on uh what you can maybe see or maybe if I start with this chart what this chart is basically describing and this is maybe a tad wonkish but it's basically saying look if you want to understand the financial system today don't bother picking up a textbook because I mean they're they're really so out of date it's it's they're useless frankly. What this is saying is the financial system today really rests around or is built around a debt liquidity nexus. And that debt liquidity nexus that I put in the centerpiece of that diagram is saying that financial stability means you've got to have an equilibrium between liquidity and debt. And the paradox of the system has is that uh debt needs liquidity for refinancing. So in other words, when you come up and want to roll your debt, you've got to have somebody who is effectively going to give you the capital or the liquidity to do that. Uh you know, a credit provider or a bank that's got the balance sheet capacity to do it. So you need that liquidity. But then the other side of that is that uh liquidity needs high quality debt because something like as the right hand sorry left hand side says something like 77% uh of all global lending is collateral backed which is a world bank figure so you need that collateral and that collateral tends to be things like US treasuries or German boons you know highquality debt uh therefore there's that paradox at the heart of the system liquidity needs debt and debt needs liquidity now when you get you start to go wrong on this is you get a disequilibrium or a mismatch between these two things and what goes wrong are the repo collateral markets and you need to understand looking at metrics like the move index which is a measure of volatility in the US treasury market or you've got to look at sofa spreads which are the spreads of repo rates market interest rates against fed funds targets now I'll show you a couple of charts one is this one which is one to ponder uh and this is looking at the debt liquidity ratio of all advanced economies uh since uh 1980s is annual data but it illustrates the point quite neatly that you've got an equilibrium which is that dotted line. If you go above the equilibrium above that dotted line uh you'll see there that there annotations and those annotations refer to financial crisis. So when you get a stretched debt liquidity ratio, in other words, too much debt in the economy as people say, but you got to measure it relative to some benchmark. And I'm saying debt to liquidity is the benchmark. When that debt liquidity benchmark is stretched, you get a financial crisis. And that's a refinancing crisis. You can't roll the debt over. So, you know, you get potential defaults and then central banks have to come in and bail the system out. And every one of those annotations refers to a past crisis and everyone is really a refinancing crisis. So that's what we're looking at. That's what you've got we've got to watch for. The other side of that on the lower part of the diagram is when you get too much liquidity and not not enough debt if you like to refinance. The money's got to go somewhere. So the vent is financial assets. And then you start to look on the lower right you see there's that big bite out of the chart which is the everything bubble as I've called it. And that is basically the last 101 15 years. We've seen bumper returns on financial assets because there's been so much liquidity relative to debt. Why have we got ourselves in that situation when we know there's a lot of debt? Simple answer is number one, every financial uh crisis be it uh or every crisis be it COVID, be it the GFC uh in 2008 has been met with more liquidity by central banks. You know, QE has become uh you know, part of the lexicon now. Uh that's all they do. every time there's a crisis they'll expand liquidity right the other thing is that what they did in uh the COVID crisis they dropped interest rates to near zero which is pretty much unheard of in human history in when I was at Salon Brothers the Bible textbook was called a history of interest rates by a chap called Sydney Homer he looked at 4,000 years of um of banking history and nowhere in those pages was there any evidence or is there any evidence of zero interest rates so that's how out of line we we are but that zero interest rate not only incentivized people to take on more debt, you know, foolishly, but it also encouraged a lot of corporations, governments, and households to term out their debt into the latter part of the uh of the of the 2020s. So, you've got all this debt which is likely to come back into the system needing refinance in 26, 27, 28. And that's why that line, the orange line starts to go up quite sharply. And that's where you're exposing tensions in the system. Now those tensions are gathering and they're being expressed in the repo markets. And I want to show you this chart which is the one that you know really stands out in terms of daily oper. This is the daily track of what's called the sofa rate which is the the rate that now is the key short-term market interest rate in the world economy. Um so this is in US dollar a US dollar rate in in the US. uh but it's overtaken Euro dollar uh rates as really the key interest rate worldwide and this is looking at it against Fed funds uh the US policy rate target. Now, you kind of expect given the fact that sofa is collateralized and fed funds isn't that sofa would trade at a tiny discount which is what you know has happened but the corridor of normality is shown there the normal zone where you kind of get this ranging pattern and then you start to move out of that corridor on the upside and you move towards the danger zone and what you're looking at is more and more evidence of repo markets basically seeing shortages. So when you get shortages of liquidity or insufficient good quality collateral for borrowers. So that's basically saying look there's either a shortage of of good quality government debt uh to borrow against uh it could be there could be deteriorating credit quality. There could just be a lack of it uh or you've got a lack of liquidity among the dealer banks to actually lend. Then you're going to get problems. And that's what we're seeing. And it's not necessarily the extent of those jumps that are the worrying thing for me. It's the frequency and what we're seeing is happens day after day after day and you know as again last night you know the print coming out of the US was another big figure um you know for imbalances in the repo markets and it's coming day after day.
Now the problem the problem the Federal Reserve has is that they are the ones that have caused this problem and you can see it here because this is something we call Fed liquidity which is the active part of the Fed balance sheet. In other words, it's the bit that creates liquidity and which fuels asset markets from a US central bank standpoint. Now, this is the growth rate of what they're doing. And this basically illustrates that you you've come from a period in early in in 2021 where there was abundant liquidity. Look at the growth rate there. But that was COVID. Okay? So, 80% 60%, you know, these are really high numbers of liquidity expansion. And then you start to go down into early 22 where you start to see the reverse. You're getting a 40% decline in Fed liquidity. And look what happened to the markets. They they crashed uh stabilization from the back end of 22 as I alluded to. Good growth uh through most of the period and you're getting 10 20% growth in Fed liquidity. Then you get this air pocket at the back end of 2024 when markets again take a a bit of a bath. a big rally through early 2025 because the Fed is pumping liquidity technically because of this debt ceiling that you've had imposed on the US. So they've run their they've run down their Treasury balances etc. And now what you're getting is this period the gray area that we've uh shaded there which is really from now through to the middle of 2026 where you go down again you've got this negative growth or actually contraction in Fed liquidity and it's happening as we speak. So, you know, this is the problem that you've got and this is well, I'll show you a a better chart. This is US bank reserves against what we think is the minimum necessary. Uh, and this is where this all comes through. If the Fed doesn't provide liquidity, the banking system gets short of reserves. Uh, if the banks are short of reserves, then you get a problem in terms of the repo markets and you get trade trade fails uh in terms of the the markets. And you can see the red dotted line is our estimate of where they should be. So about you know $3.3 trillion dollars of reserves and the orange line and the dotted orange line is our pro or where's actual reserves and our projection of where that's going to sit and you can see that doesn't look a happy picture because it's a big shortfall.
So what are you getting in the system which is sort of the the final chart in this is just to say look it it's it's not this is not rocket science if you don't get the liquidity which is the orange line. So the orange line is the differences between require or adequate reserves and actual reserves. So that shortfall is being plotted as the orange line and the black line is upside down measured on the right scale but it calibrates the number of trade fails in the system. In other words, when dealer banks basically can't fulfill transactions and these things sour and you know pretty nice correlation there. And so what you've got is a situation where uh it potentially you could see a lot of disruption. Now why is this a big problem? It's a big problem because if you start to see volatility coming into the bond markets because you're getting trade failures and a lack of liquidity and high repo rates which discou rage borrowing, the hedge funds are going to start to move out of the bond market. Yeah. and they've been powering through the so-called basis trade between um Treasury cash and Treasury futures and they've been big buyers. Now a Federal Reserve paper which didn't really get a lot of airtime um very recently said that if you calibrate uh if you dig into the data which is not transparent you find that actually last year the hedge funds are the key marginal buyers of US treasuries and basically whacked in about 1.5 trillion into the market. Now, these are big numbers and so if they start to unravel and they can unravel really quickly because hedge hedge funds move fast uh you know a matter of survival of course. Sure. You're going to see you know a lot of disruption. So the Fed can't be complacent here. And the trouble is that you know the the noises that are coming out of the Fed are that they really want to tough this out. And you know, one of the key uh policy makers at the Fed who used to run the SO account uh Lori Logan pretty much said in a recent speech, well, you know, uh to sort of summarize her words, she said, look, if you're going to make an omelet, which is getting bank reserves down as a policy, you you've got to break eggs. And so the message is they're going to tough it out. Uh and I think that's really dangerous.
Where do you see the like okay so with the current direction things are going how do we make those changes is there like any way out of this squeeze like I it's hard to see right
Well, it's very hard. I mean, what's going to happen? I mean, Chairman Powell at the Fed has more or less said what's going to happen. He said we're going to end QT right. He said that in a speech 10 days ago. Um, and you got to expect that to happen in the very near term, maybe as early as next week or so. Um, so that could happen, right? That's unfortunately that's not enough because even if you end QT, you're not going to get liquidity back into the system in the size that's required. You're going to have to restart. They're going to have to restart QE and that's being being muted already that they they may come back and do that. But that's what's necessary. The trouble is that, you know, the administration doesn't want that uh because they say this is, you know, feather bing Wall Street too much and we want to target Main Street. And so you're getting this sort of standoff between, if you blank, uh, Wall Street and Main Street. And I think that the way the administration is operating is that they want Main Street to win. So that's why I think this is kind of a dangerous situation. And you know all the time you're getting the federal deficit being very high and but they're funding it with short-term bills and that's not a great happy environment in the longer term. So it's not surprising that people are moving into gold.
Absolutely. I mean like realistically the assets at risk are stocks and also like you say bonds are at risk as well. But I mean potentially dollar does better out of this like I said that kind of riskier uh precious metals potentially bitcoin. Again, there's a big issue with fee at the moment, that's a different story in another another conversation, you know, like realistically once we get this squeeze, how long before people start pushing away from risk on assets?
Well, I look, I think you I think as I say, you've got to come back to two things, right? One is trend, one is cycle. The trend um I think is the trend in liquidity expansion is exponential. And I'm just going to explain maybe why that is in a in a chart that I've got right at the beginning of this presentation which sort of puts this into perspective. This chart here is looking at what I call the US structural deficit. Now this is this is not you know beating up the US because the US is in many cases one of the cleanest shirts in the laundry. Uh if you start to look at you know France or Britain uh I mean golly this it's a I assure you it's a lot worse than this. Okay. uh but the US is very good with providing data and it's very easy to they're transparent and you can look at it and this is showing projections of the US structural fiscal deficit out to 2050 so we're looking at 25 years hence right now that fiscal deficit and bear in mind deficits structural deficits surely should be at least zero maybe even uh you know the deficit should be on this scale negative ideally okay where it has been for most of that period. Okay. Apart from the spikes which was the GFC in 2008 spike number one and spike number two uh was COVID. Right now the structural deficit comprises of four factors simply four programs. Social security, Medicare, defense and interest payments. So that's all it is. There's no discretionary elements in that at all. If you look at that orange line, that orange line is trending higher. you're getting up to 10 12% of GDP in fiscal deficit. That's even without you know things like u you know roads, infrastructure, whatever else governments do. Okay, this is simply those four programs and that shows the burden that they're taking. The interest bill is escalating because it's interest rate compounding. Defense is a big number as we know 5% of GDP. Medicare and social security are just winging upwards because of aging demographics and the welfare commitment that even America has made to its people. You know, put that in European terms and wow, that looks a lot worse. And the dotted line there is looking at debt held by the public as a percent of GDP. Now, those figures are largely based on Congressional Budget Office projections. The Congressional Budget Office in the US is a bipartisan body, so it's pretty much neutral. They come up with conservative figures. They don't even factor in recessions here, which would blow these numbers out even more. And you kind of get the picture that, you know, what we all need to come to terms with is this radical increase in the size of of these fiscal deficits. This is not what we're used to. This is a new world. We everyone's got to get used to it. And a worrying dimension is looking at this which is saying if you take that public debt to GDP ratio the dotted line same one and you make a very simple assumption and that simple assumption is that gold um or gold matches that increase in public debt. So in other words what you're doing is you're saying let's keep the public debt to GDP u ratio fixed in gold terms. So we basically move gold up with the growth of GDP and the growth of this ratio. So what would happen to the gold price assuming the stock is the same in terms of of of fulfilling that criteria. So what you see is that the gold price which is you know around um you know $4,000 an ounce now would be $10,000 an ounce by the mid 2030s and an watering $25,000 an ounce by 2050. And that's simply doing this math. If anyone says, "Well, of course that's fanciful, it's never going to happen, is it?" Well, let's just think back what happened in the last 25 years. In the last 25 years, US debt from year 2000 to 2025 has gone up 10 times. So debt now is almost is $29 trillion. Marketable debt in the private sector is 29 trillion uh dollars. So it's gone up 10 times in 25 years. The S&P 500 has gone up 4.7 times. So actually pretty decent return but hasn't matched debt. Gold has gone up 13 times and gold has more than matched the increase in the fiscal in fiscal debt and that's what you expect because it's a monetary inflation hedge and printing money to fulfill the deficit and to cover the deficit and to basically cover debt is monetary inflation and that's what we've got and therefore you need in your portfolios gold, precious metals, bitcoin, anything which is a monetary inflation hedge and that's that's why there's this appetite but there's a cycle. So, would I be chasing these things right now? No. But I'd be taking a view that said, you know, I'm going to add to them on any any weakness progressively.
Interesting. This has been a lesson for me. I'm going to be honest. And uh whoever is listening to this or watching on YouTube, well, it's it's been an absolute lesson. It it really has. And tell me like for for traders listening in who want to kind of get access to information, especially around volatility, like what's the best indicators? Where where should they look for this data?
Well, I think the I mean, first of all, we've we've got a um a substack called Capital Wars, which basically, you know, runs through both narrative and provides data on what's going on uh you know, at least three times a week. Um fantastic. We write. So that's that's one source. Uh we have an institutional service which is uh you know much more detailed and provides data uh as well particularly for quant firms. We do a lot of that. Um and if you want to do it yourself, I mean the best the most ready takeaway is to go to the um let's say go to the to Fred website. So it's FE which is the St. Louis Fed and alternatively look at the New York Fed website because they give a lot of information. But you can really glean a lot about the repo markets from those two sources. But you want to be looking at the sofa sofr Fed funds and just look at the some of the you know, the tension the indicators they they throw up which are highlighting tensions in markets and that's what you got to start to figure because I think that that's what really matters.
100% and we'll put all the links in the descriptions as well so make sure to to check them out guys. So, um, look, thank you so much. I tell you, you also you have a book as well, obviously. Uh, is there any more books coming out or
I was afraid you're gonna ask that question. Yeah, there's a book I wrote about this stuff about 5 years ago now called capital wars. I mean, it's still pretty relevant. It was largely sort of tackling the uh capital war between uh China and the US and it detailed why liquidity is very important. And it was really trying to say that, you know, all this stuff about trade wars is just veneer on top. The real battle is about capital. a supremacy of global capital and America wants to win and China doesn't want it to win. It wants to win itself. So that's what all these tensions are really about ultimately. But that book is called Capital Wars and no more on the agenda now.
Well, I mean I I'll try but I can't promise you. I'd tell you they take so long to do.
Yeah, for sure. Well, look again like I said this has been a a real eye opener for myself even. Um thank you so much for joining us today, Michael. It's has been an absolute pleasure.
Thank you, Jonathan. Enjoyed it. Thank you.
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