So from your recent posts until now, you mean we have still have abundant liquidity but cracks are starting form and you are a concerned enough to be risk off?
This isn’t just a different model, it is a fundamentally different world-view, one that prioritizes financial plumbing and engineering over fake notions of fundamental value.
Unquote
Look at the ridiculous PEs of some companies and the lack of “value” they produce
Is there a possibility that the fed, in line with their political leanings, might favor a deflationary deleveraging over an inflationary one and let the government default?
This would create a huge rebasement in assets that would disproportionately impact « the rich »
Hi Michael, re: USD, do I understand it correctly (considering your previous article on it), that right now we could see further weakness but that is only temporary because you see USD here as a safe asset?
Re: risk-off. You say that BTC and gold are great to hold because they are monetary inflation hedges. Other cryptos are correlated to BTC. My question is, if (when) we have monetary inflation, BTC moons, isnt it plausible that other cryptos would follow as well? And stocks too? Basically, in the end, if they “print”, everything will go up? In that case, I dont get the risk-off approach. What am I missing? Or do you mean before we will get to not QE, QE, there will be a lot more pain?
There are two moving parts: liquidity and risk exposure. We have the (likely) end of bull market in liquidity and the start of a bear market in risk exposure. Gold is a pure liquidity phenomenon, BTC includes a sizable risk element. This makes BTC more volatile but better to trade.
USD is likely to fall a bit more as economy skids but we are less downbeat than consensus. What are realistic alternatives? Euro faces bigger challenges. SwFr too small and Yen tied up with China.
In several of your recent pieces you seemed to be optimistic that liquidity growth in Q1 would support the recovery of bitcoin (and other risk assets?) in Q2 while warning of the risks increasing substantially by Q3-Q4, particularly in terms of money market liquidity running dry.
Given that you now are officially "Risk Off", has anything changed about that thesis? Based on your previous posts, I would have thought that now is a good time to ADD risk to ride the Q1 wave of global liquidity that should hit the markets with a 3-month lag in Q2.
Strategically 'risk off' However, we suggested a couple of weeks back that BTC could rally based on improving liquidity and gold price. Latter is purely a trading view. This is a trading market. If we are in a bear phase (hard to say) rallies are often very sharp.
Mr. Howell, could you help me understand what you mean by even if Trump wins the trade war, he could still lose the capital war? What is the capital war in this instance and how does he lose. Are you saying that things end up so unfavorable in the US that all foreign investment moves on to other continents leaving the US economy much smaller? I just wasn't really sure I understood what this actually meant and was hoping you had a second to Econ 101 me :)
I mean that it is getting harder to attract capital into US. This may be reflected in rising bond yields. When USD firm and in demand, American capital can dominate the World viz last 15 years?
So from your recent posts until now, you mean we have still have abundant liquidity but cracks are starting form and you are a concerned enough to be risk off?
Yes because recession is a 'regime' shift. No point chasing markets until things are clearer
great article but not sure about USD being a safe haven asset. As it loses value debts correspondly shrink and become easier to re-finance
The way things are rather than some ideology
Quote
This isn’t just a different model, it is a fundamentally different world-view, one that prioritizes financial plumbing and engineering over fake notions of fundamental value.
Unquote
Look at the ridiculous PEs of some companies and the lack of “value” they produce
Almost like the tulip mania
Is there a possibility that the fed, in line with their political leanings, might favor a deflationary deleveraging over an inflationary one and let the government default?
This would create a huge rebasement in assets that would disproportionately impact « the rich »
Who knows? But I would watch for 'shades of grey' on this theme
Wow Michael thanks for this, this is very sharp and actionable
Hi Michael, if liquidity runs dry in Q3/Q4 (and probably next year), do you think gold also suffers?
Temporarily, it should. But in long term there is no alternative
Hi Michael, re: USD, do I understand it correctly (considering your previous article on it), that right now we could see further weakness but that is only temporary because you see USD here as a safe asset?
Re: risk-off. You say that BTC and gold are great to hold because they are monetary inflation hedges. Other cryptos are correlated to BTC. My question is, if (when) we have monetary inflation, BTC moons, isnt it plausible that other cryptos would follow as well? And stocks too? Basically, in the end, if they “print”, everything will go up? In that case, I dont get the risk-off approach. What am I missing? Or do you mean before we will get to not QE, QE, there will be a lot more pain?
There are two moving parts: liquidity and risk exposure. We have the (likely) end of bull market in liquidity and the start of a bear market in risk exposure. Gold is a pure liquidity phenomenon, BTC includes a sizable risk element. This makes BTC more volatile but better to trade.
USD is likely to fall a bit more as economy skids but we are less downbeat than consensus. What are realistic alternatives? Euro faces bigger challenges. SwFr too small and Yen tied up with China.
Good stuff. But it seems bitcoin is breaking out, so more liquidity is injected?
Hey Michael,
Does “risk off” mean you have started selling any of your BTC or other positions? Or rather it means you have just stopped buying? Or something else?
As always, thanks for the quality content!
I would rather reduce stocks and credits. BTC good for long term. Like gold I would buy dips and not chase
BLIMEY…BTC CLEARLY BROKE TREND IN FEB. IT RECENTLY WENT BACK BULLISH… WHETHER THAT HOLDS…?
Hi Michael, thanks for the post!
In several of your recent pieces you seemed to be optimistic that liquidity growth in Q1 would support the recovery of bitcoin (and other risk assets?) in Q2 while warning of the risks increasing substantially by Q3-Q4, particularly in terms of money market liquidity running dry.
Given that you now are officially "Risk Off", has anything changed about that thesis? Based on your previous posts, I would have thought that now is a good time to ADD risk to ride the Q1 wave of global liquidity that should hit the markets with a 3-month lag in Q2.
Strategically 'risk off' However, we suggested a couple of weeks back that BTC could rally based on improving liquidity and gold price. Latter is purely a trading view. This is a trading market. If we are in a bear phase (hard to say) rallies are often very sharp.
Great question. In the last paragraph, he recommends increasing holdings in gold & bitcoin.
Yes this is my question as well - thanks Michael!
Mr. Howell, could you help me understand what you mean by even if Trump wins the trade war, he could still lose the capital war? What is the capital war in this instance and how does he lose. Are you saying that things end up so unfavorable in the US that all foreign investment moves on to other continents leaving the US economy much smaller? I just wasn't really sure I understood what this actually meant and was hoping you had a second to Econ 101 me :)
I mean that it is getting harder to attract capital into US. This may be reflected in rising bond yields. When USD firm and in demand, American capital can dominate the World viz last 15 years?