Transcription
I don't think that the the NASDAQ has stopped here. I mean, I think we will see some volatility and I actually expected some kind of volatility because when we get closer to a top doesn't go like all bull days and bull weeks up and then it just drops all of a sudden that was it. It always gets more and more choppy into the top. And I think that kind of volatility is what you see when the bears and the bull starts to fight it out up towards the top and at some point the bears are going to win.
The war in Iran has kicked back up. The markets are getting choppy. Is a blowoff top coming soon or are we headed for a crash? And how will we know?
Hello and welcome to Milk Road Macro, the podcast that knows that I could reuse old jokes in these intros, but I keep making up new ones. Anyway, I'm your host, John Gill, and today is Wednesday, June 9th, and today we are joined by Hinrich Zeberg. Hinrich is a macroeconomist renowned for his expertise on business cycles. He currently serves as the head macroeconomist at Swiss Block, and he recently published a book called The Monetary House of Cards: The Bust of the Everything Bubble Caused by Central Bank Hubris. As you can imagine, I am always very excited to talk to Henrik. This is going to be a really great episode today. So, if that sounds good to you, make sure you like and subscribe. Share this episode with somebody who's going to enjoy it.
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Today's episode is brought to you by Cape, the privacy first mobile carrier, Nexo, earn interest, borrow and trade crypto, and Koshi, where your takes finally pay out. And without further ado, we're going to get some takes from Hinrich Zeberg. Welcome to Milk Road Macro. Hinrich, how are you?
>> Thank you so much. Um, great.
>> Hinrich, I thought a good place to start would be to just revisit the the framework that you've been calling for for a long time. um which is sort of this I think you call it like this three phases of a bare dinner um which is the first is a blowoff top and then a crash led by technology stocks and then moving into a period of stagflation. I wonder if you could just start us out with like a highle summary of this outlook here and just give our audience an overview of of the framework you're you're taking to this macro landscape that we're in.
when it comes to the blowoff top, I think that is materializing since we spoke the last time. I uh you don't need to look far in the um in the stock market and in the markets around the world also to to see that that's been materializing. We've looked at look to the Cosby index, look to the semiconductors, look to you know everywhere you go, you'll see that there are these crazy moves and that was exactly what I was expecting and uh and then people say yeah it's not it does not blow off top because it's not come to my particular asset or Bitcoin in particular and I think that is a I mean I think the uh we will see that as well also for uh for for crypto because these these are just the most risky assets and they're going to be the last in the queue so to speak and uh and this is really where the animal spirit kicks in when you have that kind of move. So, so we don't need a lot for for rotation to to come out of you know semiconductors or the Cosby or any indices around the world uh before we could see the move into into other into assets like crypto into crypto assets in in the US and I think that is that's the next phase of it. So the the blowoff top is developing and it's like it or not it's something that has been taking since 22 actually, if you look at the market since then that is really when they started to go go nuts. Uh after the so we had the initial spike out of the corona situation then when inflation the first part of inflation was over we then saw that move up in the um in in risk assets and they just keep pushing and pushing and for longer than I expected. I give it that but it I've never called the top at any point since uh 22. So we are um we are still there and uh but we are getting closer. We're definitely getting closer and I'm actually saying that we are at a point now where the um the I think there are markets in the in Asia that has that have topped already uh risk assets and risk indices and I think we will see that rotation now into the US. So the we are you know need to ask about the framework where but but this is more the outlook in terms of the uh about about that three three dish kind of course that I I was laying out and so we are in that you know you can call it that appetizer we're in right now and then we will see the um the main course the the the real story unfold when this this starts to collapse because this is I mean people can talk as much as they want about this not being a bubble. This is a bubble and this is as big as it gets so far. I mean we haven't seen anything bigger than this ever. And when people say yeah but there is earnings this time but you can look to all sorts of you know um metrics and you'll see that this is a bubble and it's the biggest we have seen ever bigger than 1929. It's bigger than 20 and it's definitely also bigger than the biggest one we've seen which was 2000. and and people just have to relate to that. And if we uh when they do that, then you'll also see that what we should expect is that it was going to burst. When it bursts, you're going to see something that is different from what you saw in 2000 because in 2000 you only had a tech bubble. This time you have a tech bubble where the housing market is also affected and the consumer is affected which it wasn't. The consumer wasn't really affected in 2001. Um, so the situation was not the it's not the same like that and it's not the same like in 2008 seven and eight because we didn't have really a bubble there. You had it in the real estate but you did not have it in the tech market as well and in all of in in risk assets in general. So I think you're going to see a um you know a a combination of that and actually that's also why I think it's going to get get worse and the biggest bubble in the world is going to crash create the biggest crash in the world. That's that's how it is.
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>> Gotcha. Okay. Thank you for that framing. That's very helpful. Hinrich, one of the things I love about you is you're simultaneously one of the most bullish and most bearish analysts that I I've ever spoken to. Um, so I want to go through a couple of these things in a little bit more detail and I want to start with something you said about the consumer. Um, as the the health of the consumer is for you a big indicator of the underlying economic health in these markets. Walk me through what you're seeing in terms of consumer health right now. Why is this so important for investors to pay attention to?
>> Understand why people don't pay attention to it. Uh because if you look to to the markets and to the economy, 70% of the economy is the consumer. 70%. So if you had to go somewhere and you you know you you blindfolded you had to pick something out and out of 100 people you would pick one out you know if you there would be 70 people out of 100 that were you know the mo the most important thing of this economy and then I can't understand why you're talking about the one or two people that is you know within AI or you know this is just so fragmented or so skewed to one side because it's not a good story it's not interesting to talk about Mrs. Johnson back there, you know, in in the 19th percentile in terms of, you know, income and talk about how she is doing because we are, you know, we want to have the headlines. We want to talk about AI. We want to talk about how we can send data centers into space and SpaceX IPO and all these fancy stuff like we wanted to talk about the new economy back in 2000 and say how this was going to change the world and we were right. We were right and everybody was talked about it was were right. But it's the problem is just that that is not what drives the economy. And the economy right now is driven by Mrs. Johnson and what she can see and feel in terms of her of her of her wallet. And uh right now I can tell you she doesn't feel good. The housing affordability is is very low. The uh the the her savings rate is down to 2% 2.6% which is by the way the lowest we have seen only going into the financial crisis. the more people ever live paycheck to paycheck. Um, so if they miss you know one paycheck they are you know they are deep trouble because they don't they can't you know make a living then or they can't you know make you know make ends meet. Um, we see some you know, so this is the reality of things and if they get a a $1,000 kind of you know extra bill you can be the car breaking down or something like that they are you know it's going to be a big problem but they won't be able to the median consumer will not be able to handle a $5,000 extra bill and I mean things can happen so we we are in a situation where the consumer is probably at the worst place they have ever been outside of a recession and and and this is by you know this is not headlines but this should be the one thing on the top of headlines every day saying we are in a bad place with the economy because of the consumer, but it's not a good story. Who wants to hear about that? That's that's the unfortunate situation when it comes to the economy and the markets. We don't want to hear about things that are really that really matters. We want to talk about Musk and what he says and about setting things up, but you know, he doesn't drive it. An AI investment cannot run a a an an economy. So I hear people saying, "Well, this is a an investment-driven economy." Well, there's nothing as an investment driven economy. There's an investment boom. We've seen that before. We saw that with the telco investments and we saw a boom in there. We saw with the internet and a boom into the 2000 also. But it doesn't drive the economy. And this time around, we have seen a boom in investment going into AI. It's not actually not as big as people say, but it's it's that's for another day. If you look to the capital expenditure and as part of GDP it's we have seen similar to that but but you know when we look at this people are just talking and it's just narrative and there's no really people holding you know on to facts the problem is with that you can have all the investment in the world you want but if that does not materialize into a return return on investment well then it's not going to be a good thing. So we we we better hope that all these investments here they're going to bring a return because if they don't well they're going to be someone is going to be a little disappointed there and the only one who can bring return out is the consumer by the end of the day. You might buy it from one business and the next business but businesses by themselves do not earn money. They earn money by selling things to the consumer at the end of it. But it's really about the consumer. You cannot drive an economy on investments. If you can boost an economy on investment for a certain while and if you do not see that trickling into new jobs then you have a problem if the new jobs are not coming up. So let's say now you invest in AI the problem is right now that when you invest in AI you don't do it to hire more people in you do it because you actually want to reduce the number of people because you want to become more productive. That is the whole story about AI. So if when you do that, you don't necessarily say go and say, oh, by the way, we need two more people. That's not how it works. You will actually see if you can reduce it and and that's also the problem. So right now you're seeing an economy there that is running on this investment boom and that is why we really haven't seen the the decline in the economy and then we have these headline numbers what comes out on the on the non-farm payrolls for instance which is the I mean it's the most simple thing in the world to double click on the non-farm payroll and then see what is what is it actually that we we're getting. We get 172,000 jobs. First of all, we need to remind ourselves that last year and I was sitting on other interviews as well saying these numbers I don't get one bit. I said that in Q1 and Q2 last year. We can go back and take a look at that. And I said I don't get it because it's, you know, that's not where the economy is at. And then along came August and we saw 1 million jobs, you know, disappearing because they were never there. They had to calibrate with I think it's with insurance numbers or something like that. So, so it really and then these numbers they didn't exist. And also non-farm payrolls is both part-time jobs and full-time jobs. So they don't ask for that in the non-farm payroll survey which happened. So what has happened this time around is actually you saw 172,000 apparently 172,000 jobs in May but 79,000 jobs full-time jobs were lost and lost in the same month. So make that fit. you've lost a, you know, 79,000 full-time jobs, but you had a job creation of 270 uh, sorry, 172,000 jobs. It doesn't add up. It doesn't add up. And that's why I'm saying these numbers are completely, you know, a mirage and they will be adjusted down the road. I mean, you know, call me in in August and we can take a look at it. uh they they will be revised and uh and right now you're actually seeing that there was since uh January of 20 25 so a year and what is that five six months you've seen a loss of full-time jobs 1.9 million full-time jobs has left has similarly lost in that period 1.9 million out of 171 thou million jobs that is not a great situation similarly duration of unemployment time people are unemployed is moving up we are now 50% and higher than going into this financial crisis. So people are not looking and this is what again we have something that is a boring story because it and it doesn't you know go quick like this and it's not Trump saying that and the market goes like this though it's the endorphin kind of you know triggering things that are interesting to look at but it's not what runs runs the economy and that is what people don't get. Business cycle tells us tells us where we are at tells us where we are and we are right now at a situation where the economy is rolling over.
>> Gotcha. Okay. So, thank you. There's a lot in that answer. Um, and I think the the thing I was going to ask about was that jobs report. So, I'm glad you commented on that. Um, because a lot of people have been pointing to that saying, look, we're adding jobs. The economy is strengthening, you're saying if you look under the hood, it's not as as rosy a picture as people are painting it as. Um, I I want to ask about your views on inflation because we've gotten the the June CPI data just this morning, it's in line with expectations. The headline, I think, was 4.2%. Um, but the people have been pointing at this accelerating inflation and accelerating job growth and saying the AI capex is driving a reaceleration in economic activity um at least in certain sectors and I'm curious your thoughts on that. What do you think the signal inflation is sending is and how serious are you how serious of a concern is this 4.2 headline CPI print?
>> I'm not concerned one bit about inflation. Not one bit. And again people are missing so many of the you know the medium steps or the steps in between there because they say inflation is bad then the Fed will not supply us more you know of of our you know a drop in terms of liquidity. Well first of all inflation is a problem for the consumer. This let's just start by the where where so how things are really connected here. Inflation is a problem for the consumer because if you have high inflation, you're going to see that the consumer will spend, you know, will be having more difficulties in actually buying their normal groceries. That is the problem with inflation. That is why the Fed has a mandate on keeping it at bay. However, inflation by itself when the economy is when the Fed when the economy is rolling over and the consumer is already in a bad situation is not inflationary. Inflation is not inflationary. inflation can actually be deflationary. Why? What do I mean by that? Try imagine you have, you know, a certain amount of money you can spend every month and now you see that the money that the that the price on oil for instance, you know, or or the gas actually rises. What are you going to do? You're going to cut down on something because you don't all of a sudden get more money in your hand because inflation goes up. It's not like you get now, oh that's nice now, I got like $200 extra a month. No, that's not how it works. You got the $1,000 you can spend. So what you're going to do is that you need to cut back on back on certain other things and that is the problem because when you when when inflation is high then you'll see that people need to cut back. So right now what people are not understanding is that an inflationary number inflation going up is a problem when the economy is accelerating then you have a problem. That's like in 2022. That's where you have a problem because the economy was actually accelerating because you've been pumping all these money out and you had, you know, all businesses hardly couldn't follow up with the with the demand. That is a problem. It's not a problem when the economy is slowing, which is is right now. And then people pointing to the non-farm payrolls, which I just talked about, which I don't trust one bit. going into 26, the last 5 months of 25 was an average uh job creation on the non-farm payrolls of - 9,000 - 9,000 jobs per month. All of a sudden in 2026 we saw an acceleration boom exploding up to you know these uh 170 something thousand which we've seen in the last few week uh few months again understanding that these number will be revised and where did that acceleration come from and then people come up with all these stories because they don't read under the hood they don't look to the one thing as I said the fulltime employment and not just the non-farm payroll and if you look to that you're losing full-time employment your uh jobs and you are creating jobs that will be so you're looking at an a gauge which you know really you don't know if it's you're going 60 m hour or 100 miles an hour or 20 m an hour and then you will know later oh we we were not going with 100 miles an hour we actually go 20 m hour so you cannot use that as a gauge to you know and and and the Fed that does that I know which is you know extreme the thing that they actually last year thought that the economy was as strong as it was when really was not strong and the same is the situation right now. But I think I'm not I'm not worried about inflation at the time where the economy is rolling over. I'm much much more worried about the situation with the consumer right now that they have had the you know that this after whammy now with the oil prices going up which is going to hit short term. That's a supply shock and that is a problem short term but that supply shock is going to create a you know demand destruction. that demand destruction is the consumer saying, "Oh, okay. I I'll need to cut back and there are certain things we can't buy." And that has a a multiplicating uh effect which will hit the uh the rest of the economy. So, I'm not afraid of the the inflation going up. And one thing again people also does not understand do not understand inflation always moves higher into the last phase of an econom of the economy. Go back to 2008 and see inflation. It was up at 5.4 four or something like percent back that was in 2008 when the Fed was cutting like crazy remember that the Fed was cutting like crazy already in January of 2008 inflation was moving up to 5 point something in the midst of 2008 why did the Fed cut like that because inflation is not a problem in the moment when the economy rolls over and at that point the economy was starting to lose jobs every month so the artificial number we have right now of 170,000 jobs is creating this uncertainty which I think Paul has been in and that's why he didn't dare to to start to cut because he did not want to be the one who creates another wimar situation like in Germany in the in the 20s right so he was afraid looking at those numbers I do not dare to cut anything and I can kind of understand that because this the gauge is simply broken and doesn't work and uh and that's why he is u we now in a situation where the consumer was you know seeing I'm I'm pretty agreeing with I agree with Trump there the I mean there should have been cutting for long time ago uh to to support the consumer. So inflation is not a problem. The problem is that we we have way too hawkish a stance on the monetary policy at this point. And the longer the consumer stays on the water and a bigger percentage of the consumer, the longer they will take to recover. It's like if you have had this for a year or two years and you've been up to your neck and just managing things, right? then it will take you longer to start daring to take on that next new loan to buy a new car or whatever it is. You will wait a little extra because you need to see if things are now. If it's like a three or five month thing, okay, then you you more, you know, you'll recover more quickly. And this is what the problem is that that the consumer now has been under water since 22 almost, right? and and and when they when we finally get that whammy from the uh from the economy when the the investment boom all of a sudden cannot drive it any further you know why do we think that the economy is then all of a sudden going to pick up like you know massive way I don't think it will
>> okay Henrik I think that's a lot of information for our audience to digest on how you see the economy there um but I like this emphasis on the consumer and the consumer health as opposed to some of these other headline metrics that people focus on more let's pivot to the markets now because this is something that's been divergent, right? Like the underlying economic health is showing some strains, but the markets keep going higher. And I'm curious your your thoughts on this. A lot of analysts have pointed to rising forward earnings estimates for a lot of companies in the S&P 500 that are sort of leading this rally um and and using those forward earnings estimates to justify these valuations, saying that this bull run that's driven by AI stock investment is going to continue. Do you agree with this analysis? Do you trust these forward earnings estimates? And uh yeah, I can already see you laughing a little bit, but but why don't you trust these forward earnings estimates?
>> I I think this is the uh this is the the problem of getting older and and and remembering things and actually, you know, try and understood the things back 25 years ago and then having to listen to these things again. And I think that's why it's becoming so, you know, annoying almost to sit and hear, oh, but this time it's something different, right? First of all, when you have earnings, you can have you can have businesses earning all the money in the world. It doesn't drive the economy. I mean, you know, you can have profits and you normally have peak profits into the top into the top of the business cycle where uh where where the econ where the recession begins. So, right into the recession because businesses are good at cutting out people and say, "Oh, now we need to lay off people because they we we need to earn money." They they need to to make sure that they make ends meet. I don't know what the next uh analyst is talking about in terms of the looking at these uh these valuation level here and say oh but this is you justified by you know this and that the situation is we have a extremely overvalued stock market at this point you know to crazy extensions and uh we and that can go on for some time and at some point you cannot it cannot any longer and you will see that into the final phase of this and that's why I called the blowoff top in 22 because It was clear to me we were getting into that phase where you would see these kinds of development. It's this this is what happens and that's the cyclic of the understanding of the business cycle is so important and it took longer. Let me just say that first of all it took longer but that's fine. That's been just because of all the the money that's been circulating and all that and all the stimulus we've seen. But anyway, now we're coming to a point where the you you cannot squeeze more out of this and you'll say no Nvidia is earning good money and so on. Yep, it's it's right. Again, if you believe that the economy is driven by the businesses, I'll just, you know, ask you to go back, take a look, take the profits on business and see, did you have recessions anyway? Do uh even when businesses were making good money, yes, you did. What were the driver of that every time? That was the consumer. When the consumer start to stop to spend, then you have a problem. And the consumer right now is down to 2.6% savings rate, which where normally would be about 5 to 8% or 10%. So 2.6 is, you know, lower. Why are we there? because the consumer is under stress and when they are like under stress like this the businesses will not continue to earn good money. I mean again it needs to come from somewhere. So I don't know what the analysts are talking about and I, you know, I know that they did not for foresee the S&P around 6,000 7,000 back in 22. They were, you know, at a different place. I said we would go to this kind of level and then we would see where the top would be and we are now heading closer and closer to it. And the I was also expecting uh I don't know if you've been following that but I was actually expecting in March also that we would have more or less a vertical kind of move in the market uh because that's what we have seen elsewhere and also because of the structural setup we had and that's what we've seen with the NASDAQ and um that goes on for some time until it doesn't any longer. It's an it's a nice Eiffel T tower we're building and at some point it's going to come down and I don't get much for the narrative that comes from analysts and so on. I I honestly don't think it's worth its money.
>> Okay. Well, I think we'll have to find out what happens with all of that. SpaceX is about to have its IPO. There are plans for Enthropic and OpenAI to follow quickly behind that. I think this will happen around the time this episode is released. Do you think that this wave of IPOs might mark a market top for equities in this cycle or do you think that there's still room to go even higher from here as this sort of euphoric uh bull run continues?
>> There's a reason why they all come out. Now, we always have that also into the major talks. you'll see a lot of IPOs and uh and obviously people are you know these you know people doing the IPOs well the businesses will obviously try to milk the market as much as they can and they certainly doing this this time I have to give it that I mean the valuation levels for for SpaceX is just extreme will it market on the day that we see the IPO no I don't think so I think that they will have attracted enough information you can see also we've been bombarded with you know information of how great this is going to be and the you know the um data centers now in the in in the space and I even got you know intrigued by that and say wow that sounds interesting and that maybe spacics could be a good idea right long run maybe maybe at these valuation levels that we we're hear about with basic absolutely not and it might could it rise 10 20 30% even you know despite that sure because there will be attracted a lot of you know capital I can see there was a lot of interest in it and um so surely surely they're going to be a lot of you know money coming into that and could be pushing it up and the whole speculation around that and uh you know people don't look to that. There's a reason why you know it's Warren Buffett has been putting money out of them the market uh for some time and he he knows when the part is getting a little too wild and it's time to go home and I think uh I I mean I am not better than him definitely. So I think it's I would look to him and say I I think it's time to go home. It might be that there's an extra dimension to this party here, but uh you don't need to be in all of it. And uh and I definitely want to be don't want to be one of those having having the severe hangovers tomorrow because there will be hangover because this is not driven by fundamentals at all. It's driven by animal spirit. And that's also why you can have it can go on for some time more. I don't know how long, but I think the levels that we're looking at is not far off where I I've said that the the market talk could be.
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>> I want to ask you about something you mentioned the last time you were on the show, which is that you watch a lot of the Asian markets, Asian economies to get a leading indicator of where the global bull market is going or or when it might be ending. And I wanted to get an updated outlook from you on that because I think, you know, the Korean stock exchange has been stopped because of sell-offs a couple of times now this week. Um, and I'm just curious your updated outlook on that and what you're seeing in those markets as a as a you know, forward-looking indicator for what might be to come uh in in the US markets.
I I think it's interesting every time we see a a vertical uh stock that goes vertical, we we just say, "Oh, this is uh this is fantastic." I always get worried when I see that say, "Okay, this this shows us that there's something in the end coming to this." And then it goes on for weeks and weeks and and people are just uh becoming more and more bullish on it. And I think what we have seen with the Cosby and elsewhere is that it's um this is exactly the kind of move that you would expect into a very big top and it never ever ever ends like going up and then it levels out. It always ends like a an Eiffel Tower. It's more like how long how low it going to go after. So yes, I do look to Asia and it's because there will be and I also look to Europe by the way, but it's it's um it's normal that you will see some kind of lead on from the Asian markets. It could be like from Nick Nikay which I also potentially could see have topped. I think the hen has topped already in January and when I say top I mean a major top and uh and so there are other markets there that I think are important to look to and the Cosby was just in a in a crazy movement. It's a very tech heavy uh index. So that makes sense that it kind of you know moved like that. So um I think it sends us a warning sign now that we're starting to see the that that where the top potentially could be in. Does it mean that it will be in that for for the US market? No, ne not necessarily. I don't think it will actually because the normal cycles will tell us that we will then see the rotation into US. Now, if you've been part of the OSBY and you've been in, I don't know, Samsung or something like that and you then all of a sudden you start to see, oh, I'm I'm up three four 400% on my my portfolio. That's pretty nice. You know, people are wise. They don't think it's going up another 3 400%. They say, oh, now I can actually take that money and I can put it into something else which has not been moving this much. And then they will look to the US markets because the good old US is where we see the strongest economy apparently, right? And that's what we hear every time. We hear that it's the US economy that is the strongest and they're going to stand the longest and then you see that uh you know fulfillment because people are starting to put their money into the US and that's the rotation that I see going on. In 2000 you saw the uh US markets topping out in March of 2000 and you saw the Cosby topping in January of 2000. That was two months before in the Cosby. So and in 2007 it was actually like the cost be topped in a month later which tells us also that that's one of the indicates that tells I'm not saying that's the whole story behind it but it tells us that we have a more like a tech situation like in 2000 than we have a 2007 situation when it comes to the markets. So and that's also what the valuations are saying. So the the situation is that yes, I look to the Cosby and I say if I see a top there, I can still see the US markets going higher with the rotation we can see going for some time, but it definitely is a canar in a coal mine falling down from its stick and then we'll have to say we see whether the uh the situation will be the same. I think it's going to be the same and but that still leaves us with the potential strong face and I I don't think that the NASDAQ has stopped here. I mean, I think we'll see some volatility and I actually expected some kind of volatility because when we get closer to a top doesn't go like all bull days and bull weeks up and then it just drops all of a sudden that was it. It always gets more and more choppy into the top and I think that kind of volatility is what you see when the bears and bull starts to fight it out up towards the top and at some point the bears are going to win. Not where we are right now but not so much later from where we are today.
>> Okay. And I want to ask you about how to navigate this because our audience is a lot of very intelligent and savvy but also mostly self-directed investors and they're not Warren Buffett. They can't really afford to sit with 300 billion in cash on the sidelines. So, a lot of investors are trying to figure out how to navigate these market situations because it does feel like a lot of these things are in bubble territory or at least overvalued. They've they've in some cases gone up several hundred% in a short period. And yet there's also this risk of missing out on, you know, like you said, a continuation of this this bull run in AI stocks uh if if you sell out too early. How are you navigating this yourself? Are you staying allin on stocks? Are you starting to take profits? Like how are you thinking about this? How are you navigating this in your portfolio? And what would you say to the audience?
I don't think I'm necessarily the, you know, like this the average um person in or the average investor because I I follow this closely every day and I spend I don't know 10 12 hours every day in front of the the screen. So I I I know what I look for and I don't think there's one thing because if it was that easy there are certain set of things that you can be looking for and these are some of those are the levels but when it comes to this about feeling you know FOMO as I said in interviews before the move in March and uh and I actually also put in some of my Substack publications I said you know you you I I want to say that there is this move here because if I didn't say it and I said get out of stocks now you would think after 30% higher that I'm wrong and then but you don't need to participate in that 30% because it is a speculative phase and that is what you know so if you've been part of it I mean I I Warren Buffett he went in in uh in in in March of 2009 and started to you know just said when you know when you're seeing things as deeply undervalued as they are right now that's the time to move in and you've been you know moving holding on ever since been adding on and so on and I think the situation is now that we are coming to the other end of this and that's why he now has been starting to pull out and it's down to risk profile whether you want to be part of that or you don't want to be part of it and he has pro you know obviously a portfolio size where he needs to to start selling off a little time before otherwise he himself can crash the market I'm sure but but it's um the thing is that people will be um the FOMO is the second strongest feelings when it comes to investment so It's only almost it's not as strong as as you know when you lose money but it's almost as strong as losing money. Uh the feeling that you get there that you know you feel that you're losing out on something which is not as good as well but sometimes it's okay. I mean it's okay not to be part of the party if you know that's going to end in a bad in a bad manner and and there will be and then start to look for the new new opportunities because there will be new opportunities. It's not like this is the only thing and you're going to jump in in front of the the steam uh you know train there or whatever it is that's coming against us and you you to to pick up the pennies there. So look at the market say yeah it's okay it goes up 25% but it doesn't mean you're wrong it just means you're early and that's okay you can be early and come out and get out if you are more risky and I I am definitely a little more risky on that. I I think I I see that rotation going on. It's it's you know almost too clear that it will happen because that's the part of the animal spirit and there people have been earning a lot of money and they're going to seek into the next and and and I also have certain indicators telling me when I think it's um it's the time for the market actually to to top out and some of those are that you start to see it in Asia and all elsewhere to top out first and and then you start to look to the next ones, right? But the situation is that I'm I'm not the ordinary investor when it comes to that. I am staying in longer than most people should and would and uh and I but I will be out the moment when things are are starting to because there will be indications absolutely and people just need to look. Uh so I will not advise people on something but I only say it's okay to feel FOMO. Don't lose money on it in the uh on on staying in too long especially not when things have been going up. And if you're up two or 300% you've done well. If you're up you know 100% you know you also done well. But do do not you know fing for the next 25% necessarily because that's I think it was very Dalia saying this is the the phase uh the 20% where people just go insane and you're going to hear I think you're going to see more and more of that and you already seeing it because you have the FOMO around AI already and it's it's just going to get more insane I think as we go into the final phase of this.
>> Okay. So, there are risks to getting out too early, but there's also risks to staying in too long. Everybody is going to have to reflect for themselves, figure out what's right for their portfolio. I think that's a pretty suspect answer on that. Um, Henrik, I got to
I'd like to ask you about crypto because I'll be honest with you, I follow your work for a long time. I think this is one of the most wild takes I've heard, which is that you're still calling for this blowoff top to end with a rotation into Bitcoin and digital assets here.
Um, Bitcoin, uh, by many metrics has been in a technical bare market now for close to a year, not quite a year yet. Um, but you've stuck to this conviction throughout this this bare market for Bitcoin, calling for this rotation and this blowoff top. Walk me through the thesis here. Why are you so convicted that we're going to see a trade from shift from AI stocks into crypto and and and what what do you see that's going to drive that catalyst there?
Animal spirits. It's not a catalyst. It's animal spirit. And you don't need much. So you now you have a 130 trillion uh stock market, a global stock market, and in the and crypto, I don't know how much it is today, but is it two and a half, three trillion? Two trillion, okay.
If you get a 100 billion coming into, let's say, half a trillion coming into crypto right now, that will drive a lot. And there are indications that a 700 billion kind of move into Bitcoin and this, or no, sorry, into, yeah, Bitcoin and crypto in general will drive, could drive this this move here. Do I think that with the potential of a lot of cash, a lot of money, capital coming out of of Ky and elsewhere and moving into to other markets, also from from the uh from the likes of um, yeah, some of the NASDAQ stocks as well. I mean, the Fang stocks and so on. Yeah, I do think so.
I think that you're going to see that animal spirit coming in and said, sitting looking there at the Bitcoin and saying, we, we can still see that moving up. And uh, and technically, it looks like Bitcoin has put in a top. And I want to emphasize that I, I was wrong when I called for 170 and 180. I think it was the highest I ever set. I actually said 125 back in the days of 2,000. And I have my, and I said that was from when it was at 16,000 and I said 125,000. That means, like, looks like it could be the top in terms of the Fibonacci extension, and it was 126, I think, right? I think you, that was the top, and I think we, we will look at that in retrospect here when it starts to head lower. Um, but it doesn't do that in a straight line. And that's what people always think. It's like, you know, something is dropping, it has to drop from right here on. It has already dropped a lot, and there will be, you know, phases in that. I mean, all even in the, even in the financial crisis, you had strong rallies in in some of the stocks that were dropping. You had very strong rallies. This is Bitcoin at a time where you're going to see rotation coming in. And as I said, 700 billion, 800 billion coming into crypto world will do a lot. And even just will create just that rotation, which will then push the market up even further. So I am not so worried about that it's not going to a rally in Bitcoin.
The the only thing will be how high is it going to come, go. And, and I think the 100,000 line is a, a psychological line. It's actually also becoming very much a technical line that could be making sense. But bounce back to 100,000 and a euphoria around that and talk about how Bitcoin is going to save the world again. I hardly can say this. I mean, it, so honestly, I think it's stupid. I have to say, I think it's stupid. And I want to say that out loud. It's stupid. There's no salvation in Bitcoin whatsoever. And people can talk about it, limited supply from here on to end of days. There's nothing that can, you know, convince me that that's going to be. There was a talk back in the 1989 also about the limited supply of land underneath Tokyo and actually under the imperial palace back then, and that was the reason why it could go to, you know, infinity almost in terms of price. What happened to that to to that limited supply? We know how what happened. So, you know, people are talking like that, and it's, it's, I don't know, chitchat. And, and what we see is that it's, um, it, it will drop, and it will drop because there is no, uh, you know, you look at yourself. If you had three components here, you had, you had cash, you had Bitcoin, and you had, you know, Apple stocks, and you were being met by a demand of, you know, you need to pay back this loan now. First, you'll take your cash and pay back the loan. If you don't have cash, you look at Bitcoin or the Apple stock. And a reasonable investor would say, well, the Apple stock is generating a dividend every year of something. I don't know how much it's been over the last few years, and Bitcoin doesn't. And it's much more volatile. So, I think I'll sell my Bitcoin. That is the, that is the rational for why what you will see.
It is a more riskier asset. There's no doubt about that. And, and that means that it's a, you know, a thing that can only move up if there is somebody buying it behind you. If there's not, it drops. And that's why it drops a lot. And you can see how it's been always when NASDAQ has been dropping, it's been dropping by more. It's a leverage bit to play on on on the NASDAQ. So, I think you're going to see that NASDAQ will drop and drop a lot into a potential uh crisis that could be coming. And especially if the dollar is going to move up as fast as I think it can. But it's not in a straight line, and that's the thing. And I think the dollar can drop further from here. The Dixie can drop to 94 or something like that. And you can see Bitcoin thriving in that. You can see gold thriving in that. And you can see the rotation also still going on. And that's where Bitcoin will have its uh its kind of hurray rally, that move. By the way, and this is where people say, "But why do you think Bitcoin is going to have a bounce and Ethereum is going to go to new all-time highs?" Because that is normally what we see. We normally see that when Bitcoin only bounces, that is actually where Ethereum and altcoins are doing the best. And we can understand why. It's because Bitcoin doesn't steal all the thunder. It's like with the NASDAQ. When the NASDAQ was soaring higher, everybody was just pouring into that, and you know, we went on. But when it starts to kind of, you know, level out and, you know, people starting to think, maybe I should put my money somewhere else. But I think that is the, that is the rotational, you know, part of the rotation that is now going on and will go faster and faster and faster. And that's why I think it's going to come to Bitcoin and Ethereum also.
Could I be wrong? Sure. Um, it looks like, uh, we have at least peak fear soon, or we could have a little more. But let's see what comes, uh, next week. But, but when it does, we also know that four, six, eight, 10 weeks is enough for for the whole, for very, very strong crypto rally and an altcoin rally. And, uh, and this is what people don't realize. You know, you had some that was four to six weeks, and we just saw two, 300% on the altcoins or Ethereum. Can we see that? Yeah, sure we can. There's plenty of time for that. And, uh, and I think that is the, that's the endgame here. That's what we're going to see. That's the furthest, furthest out on the on the risk curve. That is where we're going to see capital going out. And it's not the whole chunk of money. It's not the people who have been. It's not Warren Buffett that is starting to say, "Oh, I need to buy Bitcoin." I can promise you, we will not. But, but it's, it's other people. And they, they will see that, and we will see that at some. So, I, I, I think it's a barely, it's not so much of a contrarian. I actually love to be the contrarian there because then I think, okay, even though I don't like the asset that much, you're probably going to see that it can happen because people are calling it off right now.
You're listening to the Milk Road Show, which means you've got takes, strong ones, I bet. But where do those takes actually go? Do you tweet them into the void, argue them in the group chat, or do you try to express them by buying a stock? The thing is, stocks move on like 50 other things at once. And that's where Koshi comes in. It's a CFTC regulated prediction market where you bet directly on outcomes like Bitcoin hitting 100K, Fed rate cuts, GameStop buying eBay with a clean yes or no. We did a full deep dive on why prediction markets might be crypto's third product market fit moment. Check the show notes for the full report and claim $10 free when you trade $10 on Koshi.
I want to get your thoughts on one thing here that I've heard a lot of people say, which is that now that we've had this rise of AI and the speculation has all been in there, this blowoff top might happen, but it's going to stay where it has been, which is in in the AI stocks. And the market has sort of like overlooked, forgotten about, and crypto has sort of missed this this whole um big bull run for the last nine months or so since October um in uh in the equities markets. Do you think that there is anything to that idea that this like blowoff top will happen in the equities market but won't rotate into crypto because cryptos just sort of missed out this time? Like what are your, what are your thoughts on that?
Why would it miss out? I mean, this, this is where people are coming up with these things because it didn't happen yesterday, and I'm tired of waiting, and I don't bother to look. So if you look at all the times you have seen NASDAQ going almost vertical, you had quite a few times of that since uh 21, and, and you actually before that also in 17 and 18 and so on. You actually had some strong moves on on on NASDAQ. It started, let's say, there was one rally that started in late 21, and we saw the NASDAQ was heading higher for 10 weeks in straight, and Bitcoin was going was flat, and actually dropped into the final week of it, and then it took off by 80%, whereas the NASDAQ moved by 7 to 8%. I mean, people, we, if you look at what we have this time around, you've seen everybody was bearish the equities in in in March of of of late late March this this year, and I was not. I was saying we're going to have a vertical rally. And if you put 10 weeks on top of that, you are almost at the time where we are now. I'm not saying that's going to be a replay of that, but we almost there because the money first flows into one asset, and you kind of feel, oh, I feel comfortable here now. Let's move on to something else. And I made good money. Let's move on to the next one. And, you know, that's how it works. And then it doesn't move. The moment that people is, then all these narrative comes up, and it's always there is so this wise guy coming up with some kind of narrative of this is happening now because this and that, and then it goes straight against him. And, you know, I think we need to understand that human psychology is moving from peak fear to peak, uh, euphoria. And you got to find yourself somewhere where we are in that right now. You are at peak fear of for crypto, but you are at, you're starting euphoria on the on the stocks. And when you start to see some pullbacks there, then you'll see the rotation going on. And that is what I'm, I'm suggesting. So I'm, I'm, I'm this about the crypto has missed out. It, it sounds like it's a, it's a human being that didn't, didn't catch the train, right? These, we're talking about, we're talking about millions of people. So it's not like just one person all of a sudden, sudden miss the train. I mean, there like that. So I think, I think you're going to see that risk, risk rally here is, is going to continue because we're not at the top yet. We don't see all the indication. We would at the top, really the top in the US markets, and we only need four to 10 weeks in terms of a strong rally for for this to go insane. And then everybody will forget again, and everybody will have been bull all along. Like, go, go back in March, and I, you, I can show you my articles on this and say I was bullish, and I put it on, and I even said this is going to be a very, very strong run, and we're going to. And people were killing me on X with that. Oh, had to understand, I'm going to ruin my reputation. This, I don't know whether people right today. But the same thing is now people don't analyze. That's how don't they don't look honestly, and they don't, and they come up with all these sorts of narrative because it's kind of the feel-good kind of thing, I think.
Hinrich, I, uh, really appreciate you coming on Milk Road Macro. I, one of the things I've always admired about you is that you are very consistent. You are very convicted. You are contrarian. Um, but, you know, whatever does happen here, like you said, you could be wrong. We'll have to see how it plays out. But I, I do admire the way that you've kind of stuck to your guns on a lot of these things, even when the market hasn't always confirmed it immediately. Um, where can we send people to find more of you and your work online?
Well, first of all, you can go to Henry Seabourg on X and Substack. And we also have our SEM services and the Seabourg letter, which I just, uh, I'll be, we'll be publishing today actually, the version for June, where I'm also laying out this is like a 40-page, uh, kind of report that I do every month, and I go through all the the business cycle and also the the real economy and to tell people that that's what matters. And then I go into markets and so on. You can find that on SEM at Swissblock, uh, on the Swissblock site. So you can look it up in Google. But, um, yeah, that's pretty much where to find me and to to follow my work.
Hinrich Zberg, thank you so much for being on Milk Road Macro. I hope we can talk again soon. Thank you all for joining us. I hope you all learned something today. So until next time, stay safe, stay educated, stay bullish, and we will see you all on the next episode of Milk Road Macro. Thanks for being here, everyone. Bye. Want insights on what's really moving markets and how we're trading each event? Subscribe to our channel, then join the Milk Road Macro and Macro Pro newsletters. This show is for educational purposes only. Nothing we say is financial advice. Investing is risky. Never invest more than you can afford to lose.