Henrik Zeberg: Markets Approaching Historic Blow-Off Top Before Major Crash

I think it will be much worse than people anticipate. And it's like, there's this understanding now that, you know, as long as liquidity comes into the system, everything will be fine. And the Fed can keep pumping this market up. Problem is, if that was the solution, you would have seen other stock markets and other situations also being solved by liquidity. And liquidity cannot solve a solvency problem. And that is the problem we have right now. Henrik Zeeburg, Head Macroeconomist at Swissblock. It is so wonderful to welcome you to the show. Thank you so much for taking the time to join me today, Henrik. Thank you very much for having me on today. Well, I'm excited to have you on. And I feel like you are someone who puts out some incredible content on X. And I also read your latest Zeeburg letter. And I'm really excited for this audience to get to know you and understand that framework in which you look at the world. And one of the things about this show, Henrik, is we always start with the big picture, that macro view, more of that framework in which you're looking at the world. And when it comes to that big picture macro view, you can take all the time you need to set the table. All right. Sounds good. I mean, and I like that. I mean, this is the way I think we really have to look at markets, first of all. And it's about understanding the environment we're in, the economy we're in, and then taking from there. Because you can always be very positive and optimistic and bullish in a market where the market's been going up. But it's really about where is the economy actually heading? And if you look at that, I think, first of all, I have a framework. And thank you for mentioning that also in the Zeeburg letter also, that if you look at the leading indicators, coincident indicators, and lagging indicators. And this is something that I know the conference board has been doing also, and they do also. But they don't look at it the same way that I do. I put some techniques and methodology that I've been developing onto it. And what we see is that the economy never slows immediately, or it's doesn't turn on a dime. It's something of a very, very slow-moving, you can call it train or slow-moving super tanger. So when there is a momentum in a certain direction, it's not just something that is going to turn overnight or because of any policy changes or anything like that. Of course, you could say you saw that into COVID. But even there, you saw that the economy was slowing already in 2018 and going into 2019. So the setup, the framework here is really based on that, based on that the most important thing for the economy is the consumer. The consumer is very focused on the labor market and on the housing market. And if the housing market is bad, well, for as long as they keep their jobs, things are good. But at the moment, we start to see the housing market is actually deteriorating. You will see that that's very often spilling into what we see in the labor market. That may take longer, which it has this time around. But the business cycle is rolling over on the leading indicators, suggesting that we should see a downturn in the coincident indicators, which are the real economy, which means that labor market data should start to soften and we should see also GDP growth coming down and we should see maybe even what could be a harder stop in the economy. So this is what it says. And well, it is about being patient. I think I have said maybe famously here that we're going to see a very bad recession, but I'm not sad that it's going to stop now. There are some imminent recession indicators that I call them that will be very visible and flashing. So in April, when everybody was very bearish on the developments, it was very clear, actually, that things were not that bad at this point, and we could still see the market actually developing quite strongly to the upside. But we are getting there, and we are now seeing this blow-off time when you see how strongly the market's been developing. And now we start to see Bitcoin, and I think you're going to see crypto as well having a fantastic run here into what I think is the final phase. Yeah. There's so many threads I would love to pull on with you. When I was reading your letter and you were walking folks through your business cycle model, you described this as a Titanic moment, a Titanic-like moment. Can you elaborate a bit more on that idea? Yeah. Really, it's about at some point, like with the Titanic, when the Titanic hits the iceberg, we know that there is a damage to the hull, to the ship, and it's going to sink. It's not the same thing as it's going to sink immediately, but there's going to be a negative feedback flow. The water's coming in, pulling the ship further down, more water comes in, and then you just see things developing. And exactly the same thing with the economy. It's the same thing where you start to see we're hitting the iceberg. What is the iceberg moment? It's the moment where we start to see yields coming up very strongly, which is often driven by inflation. So when inflation is coming up as strongly as we saw when the Fed and central administrations or administrations from around the world started to stimulate into what was a supply crisis, well, then you're going to get inflation. And when inflation comes in, you see yields moving up. When they do that, the Fed will have to start fighting that. And that is the moment where the ship actually hits the iceberg. That is the moment where things are starting to see a negative feedback loop. People will have less to spend, and first, everybody will safeguard their house in a way so that you'll be able to pay the mortgage loans, but then you'll try to cut down on other things. And that slow cut down process is the feedback loop. There's the water coming in to the ship and pulling it down further and further. It doesn't mean that with the music can't be playing, you cannot go up and have another drink at the bar. But it's just inevitable at this point, as I see it, that the ship is going to be pulled down. And looking at the housing market right now in the US, it does not look good to me. It looks like it's frozen solid. And it's just a matter of time before that actually will be an effect that is going to make the ship sink even faster. And at this point here, the Fed should actually start to make sure that there wasn't being more water got into the boat or into the ship. What they're doing right now with the high Fed fund rate that they have is actually making things worse. So I think we're heading into a very bad time. But it doesn't mean that the music will stop playing tomorrow or the next week. And I think you can see it into the autumn, actually, that you'll see markets actually developing quite strongly. After what I think will be a summer doldrum where there'll be a pullback, but we'll get higher after the summer. As you highlight, a blow off top is where you see things headed. I'm looking at the S&P 500 today. We're at 6257.63. Where do you see, do you have a target in mind where you see things headed as relates to the markets? Yeah, so based on what we have seen with the decline we saw on the pullback, the low we saw in April, it suggests that we have a level around 6700, maybe even as high as 6900. But this is where we're heading. I don't think we're going there in a straight line. We have to also see that things have pretty much been going straight up here. Now we kind of have a pause. It suggests also that there will be this kind of pullback into the summer. But after that, I think you'll have a pretty strong development into the autumn, which will bring a lot of people onto the wrong side of the market at the moment where they actually should start to focus on macro. I mean, I said you can start out by looking at macro and I like that because by the end of the day, I think macro is going to drive things. It's going to be about the real consumer, about the real economy, the consumer. Consumption is what is important. And that is being, you'll see, we see the first strains on that and that will be pulling the ship down. So 6968, 6900 could easily be the target. Around that level, we need to see how things are developing. Would be surprised to see it more bullish than that, but could not rule it out. But there will be Fibonacci levels we can follow. Let me ask you this from like an investing or maybe probably a trading perspective of, you know, I imagine some people might want to ride up to a 6800, 6900 level, but I imagine that can also be pretty dangerous. Like, how are you thinking about the environment? Are you wanting to just be more nimble? Like, are you someone who are you like net long still? Like, how do you think about playing in this kind of environment? So there is always that there are two fears, right? There's the fear when you start losing money, and that's the pretty strong fear. And you don't want to get out. You don't want to lose money. But there's the other fear that is as equally strong as FOMO. So the moment when you start to see markets moving up this strong, a lot of people feel like they are missing out. And that is a pretty strong feeling. And that's why I think a lot of people will actually, you know, stay with the market. I think this blow off top that I talk about can actually move quite further, much further than most people will understand, especially in the crypto field. And I want to participate in that. So you could say I am more risky kind of type. But there is probably a reason why, you know, very successful investors have been taking some chips off the table already. You've seen also Insider started to take, you know, selling their stocks. You've seen Warren Buffett doing the same thing. And I think it depends on your risk profile and also whether you actually, you know, if you are more on a trading basis than you are on a more investing. And I've been part of this for, you know, six to seven years. And then, you know, I don't need to be part of this final blow off top. And I take my chips off the table. So for me right now, I am still part of it, but I am very cautious on what we see. And if we see something that is developing in a more negative way than I expect, well, then I'll be the first one to get out the door because I think it's going to be quite a crowded door to get out of. And you mentioned the macro is going to matter a lot more as someone who's like deep in the macro world. What are the signposts that you're paying attention to? Like, what are you looking at? What will you be looking at? So the most, the best way of looking at things is actually looking at the interest rate yields level, yield levels. And when we start to see those drop, when we start to see yield spreads starting to spike, people normally think it's when you get the inversion of yield spreads that you have the problem. It's actually not. When it uninverts again and it starts to spike after that, that is the moment where we need to start to pay attention to yield. I'm paying a lot of attention to the labor market, to the initial claims, but also the continuing claims, which we see, and they are now rather high and have been moving up, which is a worrying sign, which is also something Powell has been mentioning. So we are starting to see that weakness in the labor market. But in terms of when to get out, there are some clear signals that I have developed myself and I hope to actually get me out in the right moment. That is in basic or in simple terms, it's really when you start to see the momentum of the decline in short-term yields starting to accelerate to a certain level. And when that happens, then we're getting much closer. Then it's because famously ---- hits the fan and you need to get out. So looking at the short-term yields levels and how they develop, not the levels, but actually the development or the decline that we should see. And then also on the labor market side, you start to see that the initial claims coming up on a weekly basis, those would be the signs. And then there are on the market side, the Fibonacci levels that I follow, there are levels where there'll also be a candle analysis that I do to understand if we see something that potentially can become a top. So these are the signs that I'm looking for. Okay. So again, on the blow-off top, walk me through that scenario, maybe the post-blow-off top scenario that you're thinking about in the aftermath, even. How does this play out in your mind? Normally people will ask, what is going to be the trigger? There must be a trigger. And then you can go back and say to yourself, well, what was the trigger for the top in October of 2007 before we had the top there in NASDAQ and the S&P? Well, there wasn't really a trigger at that point. It's just to a point where all of a sudden the buying power is just not strong enough any longer to keep the market going. Because I think the trigger is already there. That was the titanic moment. And you're seeing the deterioration of the consumer. So what is going to happen? How fast is it going to happen? Is it going to be like what we saw in 2007, where we had a decline first, and then it lasted a month, and it was way into 2008 before we actually saw the big decline? That could be. I think, though, that this time around, with the spike we have seen also here of late from April on into what could be the blow-off top, that it could come down quite stronger this time. And I'm actually thinking, and this is hypothesizing here about what we could see, that we may see something of more of a trigger this time than we have seen previously. Because it seems like the move up higher here could be something that is going to reverse really quickly. And as I've said also many times, I think the Fed is so late right now in terms of supporting the economy that we may see that there could be some kind of fallout. I'm quite certain that there are things going on underneath the hood here that we don't know of, but will become clear to us going into the coming years, that we will see that that could be something that could trigger a sharp decline. So down to my head, I think you're going to see something that can develop quite strongly up to a strong top. And then I think you'll see somewhat of a reaction due to something. But what the trigger is going to be, I don't know. But there may be actually some kind of trigger this time around. Could be that bad unemployment numbers, even though you'll see the Fed starting to panic with rate cuts, could be something of it. And people say, oh, actually, things are not looking good. And then they will see a sell-off. It could be something of geopolitical things that could then be the trigger this time around. But the actual deterioration of the economy is already happening. And this is what people need to understand. It's not something that comes out of the blue and say, oh, on Tuesday, it was fantastic. And then on Wednesday, everything is just bad. Things are deteriorating, like also we saw into early 2008, where things were slowly starting to cause problems in the banking sector. And you saw then you had Bear Stearns in March of 2008. And then you had some other problems. And this is the slow deterioration that we're going to see that all of a sudden may trigger something of what we then can call a black swan afterwards. Hence the super tanker analogy, the Titanic. It can be slow. OK, on the decline, do you have a scenario in mind? You said severe, like sharp. How are you thinking about how sharp? So you could look at it like this. I mean, the market capitalization to GDP right now is around 200%. And normally, in a long time frame, you would see it at 70%, 80%, 90% would be probably the average for that. In 2008, 2007, you were at 109%, which actually was a top. If we actually fell to that level, that could be around, let's say, 3,500, which actually was the bottoming area of the 2022 bottom. So could we see a development where we saw the stock market actually crashing to 3,500? I could see that. Not in one day, not in a week, not even in a month. But I could see that level as something important. And that would not even be taking out the full bubble, because as we know, 2007 or 2008 was actually quite a 2007, was quite not as bobblish as we saw in 2000 or what we saw in 1929 or something like that. But it was still quite high valuation levels. So even if the stock market halved from this point on, we would still be in what would be considered quite high valuation levels. So just think about that. Then you can say, how bad could it be? I think it would be much worse than people anticipate. And it's like, there's this understanding now that as long as liquidity comes into the system, everything will be fine. And the Fed can keep pumping this market up. Problem is, if that was the solution, you would have seen other stock markets and other situations also being solved by liquidity. And liquidity cannot solve a solvency problem. And that is the problem we have right now. It's a solvency problem at the, there's too much debt simply in the system, much, much higher than we had in 2007 and 2008, also relatively. And that's why back then, we could see it in the aftermath of the financial crisis that debt was a problem. Right now, we cannot see that debt is a problem at this point. We start to see it with the US economy, but I think it's much more widespread than people understand. And if the valuation levels are starting to come down, and God forbid that Bitcoin drops by 50%, 60% also, I think we could see a lot of fallout from that as well. So I think there are many reasons why you could see a potential top setting in. And if liquidity starts to be drained because of problems in the financial sector or whatever, like what we normally see, again, we have to understand it's not necessarily the trigger point. It can be the deterioration that brings us into that. Well, then all of a sudden, we can see a much different scenario than what we see right now. This would be so much easier to sell if we were in, let's say, beginning of April of this year, because everybody would be on that side. Now, we have seen new all-time highs. There seems to be a thing of yesterday or last quarter, and people start to say, well, it must be wrong on that. Well, I think that's exactly the kind of sentiment we'll see into the top. Mm-hmm. And you know, it's interesting. I was just looking on the prediction markets, and the forecast for a recession this year alone has dropped. I've been watching it for the last couple of months, but it's dropped to 20% is the expectation. So pretty much no one is expecting it. Yeah, that's excellent. Good. That's normally like that. I mean, when BlackRock went out and said, you know, we were probably in a recession in April, it was quite clear we were not. And the same thing goes for the business cycle model telling me that in 22, also, when everybody said that you have inflation. It was so clear. I think I go through that also on some of the materials out there on the business cycle. It's clear to see that there is nothing, not a recession coming at that point. But this is where people jump to that conclusion. Right now, it feels nice and comfy because the market's been going up. Everybody is in profits, but they can change. And we have to remember, these things don't end when everybody feels bad. It ends when everybody feels good. Exactly. Yep. You mentioned, I thought this was interesting. I'd love to hear a little bit more. I'm probably going to misquote you, but it's not a liquidity problem. It's a solvency issue. Could you elaborate just a little bit more on that? I just, it piqued my curiosity. So the thing is that liquidity is still, you know, in abundance out there. There's a lot of liquidity being supplied right now, also being pumped in by central banks from around the world. The problem is that people have very high debt levels also when it comes to their housing and what else have their car loans, their credit card loans and so on. And that is the problem. This has been triggered, and you need to look at this in a very long time frame. And this has been caused by the easy money policy. Because what QE does, it doesn't create wealth, artificial wealth that just comes down from the sky. What it does is that it triggers or it incentivizes you to go out and bring in more and put on more debt. Actually, you'll be able to, because interest levels are just lower. So you'll simply be able to buy a much bigger house than you expected, more expensive. And you'll bid the house prices up like that. That's why we've seen this strong rise also in the housing price some years down. And everything is getting pumped by that. Because also, if you have a cash flow and you have to, what is the cash flow worth of a thousand dollars you get every month in your hand? What is that worth? Well, in a 10% environment, that will have one kind of value. But in a 0% value environment, it will actually have a much higher value for you. And this is what has happened with the yields levels and the interest rates. When they were so low, they have incentivized people to actually take on a lot of risk. So all sorts of investments have been, well, it's okay. It just provides me 1% or 2%, because what could I get alternatively in the market? So as long as interest rates have been low, it's been okay. But now interest rates are higher. And I think we're heading into, let me just say this, in a long time frame, we are seeing higher levels coming in interest. I think we have a new inflationary regime, which means that interest levels will be going up, which means that a lot of projects out there, businesses and whatever have we, will now become less attractive and simply have been valued at too high levels. And people have leveraged up with debt at the same time. So you're actually looking at valuation levels that have been pumped up by low yield levels. And then the debt has been there to support that kind of acquisition or whatever it is. So if you look at that on a macro level, you'll see that the debt levels are much, much higher going from countries to companies and business and for private people as well. That's the problem. And that is where actually, I think we're coming to the point where Keynes was famously asked, so what happens when we get to the zero interest rate level? You have pumped everything into it. You have low, you have stimulated all the way down to it. And then he famously said, well, in the long run, we're all dead. So what he meant by that, as I see it, was we don't get to that because before that point, we'll actually have seen the economy rebounds. But guess what? We're seeing that in Japan right now. We're seeing yields levels down to zero. The only way that if they start to rise by a quarter of a percent point, ---- hits the fan there. And we have done the same. So by pumping the economy up with stimulus, we have quantitative easing here. And they gave Ben Ankle a Nobel Prize for reinventing money printing, which is, let's see how it goes down in history. I think it's stupidity. But anyway, but we have now pumped up the economy and it feels good and nice and comfy for many years. Will we actually see that continuing when inflation comes back into the system? I think this is where we see the real fallout of it. So what we have seen for the last 17 years has been an artificial, an experiment in how long can you actually take this? And the only thing you can see is that at one point, it's going to come to an end. It's either going to bring out inflation, which will push up yields. And a lot of people will then be feeling that and you get a recession. Or the central banks actually will do that themselves and actually cause the recession. So we are at a then if I do and then if I don't kind of moment in terms of this. I fear that we're going to see it actually being the markets that will trigger this. That was a long one. Sorry about that. No, no. On this show, we let our guests go as long as they like. I think the record is 22 minutes and like 34 seconds for a single answer. No one complains. So we don't really interrupt. Yeah, we just don't interrupt. Okay. We should bring up the Federal Reserve because it sounds to me like they are making some massive, massive policy errors. I would love to just kind of get your big picture take on the Fed. Well, I think that the Fed, as you said, is making a massive policy error right here. And they are looking at the economy. They have the two mandate policies there. And they're looking at the labor market and they look at inflation. Problem with inflation is that it's backward looking. So when you have prices, you meet prices at the grocery store. They also have actually, you know, they have taken a while to get to the grocery store, which means that they've gone, you know, from, you know, when you produce things, they cost something and then they went into something else. And, you know, it actually takes a while before you hit those exact prices as a grocery store. And that's why when you see prices moving up into 2022, it was actually caused by the stimulus that came out in 2020 and 21. I mean, you know, a year, two years later, you can see that kind of inflation coming out. Because first you will actually use what you have in your storages and so on to meet the demand. And then you'll find out, oh, I actually have to hide my prices in order to meet the demand, you know, to meet the demand that I'm facing. This is normal. The problem with the Fed right now is that they're looking at it as like a leading indicator. So they're saying, what is inflation? Oh, we need to make sure that inflation goes from 2.4%, which is an, I mean, the 2% is not something they have come up with through, you know, mathematical kind of, you know, calculation or anything that they've said. This is like a thing. So they say 2.4 is too high and they want to keep the lid on inflation. They fear inflation because of tariffs while they're looking at a housing market that is actually, you know, frozen solid, which is such a big part of all the consumers. And they are, you know, even stepping more on the break here. I have to be, I mean, I'm not necessarily a Trump fan, but I have to say that, you know, I agree with him at this point that they are hopelessly far behind. And also with the ECB being so much, I mean, ECB and other central banks around the world are far ahead of the Fed here in terms of actually trying to stimulate it. So I think they are making this worse as we're seeing right now with the high federal fund rates. They should be focusing on what comes ahead. They should be focusing on the same signs we saw into the financial crisis on the housing market actually being out there. We don't have the same kind of speculation, but we have a very high supply. We have also the problems with people actually being able to pay their mortgages and so on. All these things we see again, and yet they are focusing on the inflation level, which is in 2008, it even went up to around 5% and it came crashing down. It was not inflation that was the problem at the end of 2008. It was deflation while the Fed came out. At this point, we are 2.4% and we see the economy is rolling over. So I think they're, yeah, making a massive mistake here. Gold prices have been breaking all-time highs this year, but price appreciation isn't the only way to profit from owning gold. You can earn a yield on gold paid in gold without selling your gold or silver. Unlike dollar yields that can be slashed or even go negative, a yield on gold paid in gold means more ounces in your account every month, not paper. Monetary metals is revolutionizing the way people invest in gold and silver. Instead of paying to own the metal, now you can get paid to own it. Right now, there are opportunities for you to earn 4% on gold paid in gold in their marketplace. The interest you earn is paid in ounces of physical gold or silver, which you get in addition to any price appreciation that comes from gold and silver during the year. The question is this, why earn in dollars when you can earn in gold? Join thousands of investors who are earning a yield in physical gold and silver every month with monetary metals. Visit monetary-metals.com forward slash Julia to learn more. Let me ask you this because they have a credibility. You could argue they have a credibility problem when they were like, oh, inflation's transitory. Can they also have another credibility problem on the other side of it as relates to inflation? 100%. But they have famously been too late on hiking and also on cutting rates. And why is that? I mean, if you watch, if you're driving your car and you're looking out the rear window, you're not going to see whoever is going to pass on the road there before you actually hit the person and you can see them in the rear window. That is what they do with inflation. They should be looking at some of the front, the leading indicators that are telling us things are slowing. Because the moment they actually see that slowing in the labor market, that's when the negative spiral is already going. And if they wait to see it in inflation, that is definitely the time when things are slowing. Just again, back to the financial crisis. CPI went up to, I think, almost 5% into 2008. And the Fed were looking at that. And they were even famously, late 2007, saying, oh, we actually think that, I think it was October of 2007, yeah. They were saying, oh, we see that inflation is a concern here. That was in the quarter where the growth rate was already negative. It was negative 1.6% in Q4 of 2007. So the Fed is looking at things that are in the rear window. And the problem is, if you drive a car going that way, you don't want to look out the rear window and navigating it. So I think it's a huge problem. And I think that's why they are always late cutting and late hiking. And I imagine the later you become, it probably gets even worse. Absolutely. I mean, again, it's a slow-moving thing here. It's about the consumer and how depressed they are. And when the Fed is being asked about that, sorry, you're saying something. But I just like that. He was just dismissing it when he was asked. There was actually, I think it was two FOMC meetings ago, there was a journalist saying, so what do you make of this, that the consumer is actually not looking so favorably at the situation like you do? I thought it was a fantastic question. And then he was like, yeah, well, we don't. And maybe it has to do with the tariffs and brushing it off. And I was like, wow, you're dismissing 70% of the GDP growth by just saying, I don't care what the consumer is thinking. I'm actually this part of my franchise, this arrogant that I think I know better because I sit and watch the numbers and I want to look out the rear window on inflation. I don't know. I think they're making a big mistake. Let me ask you this, Henrik. If you were in that room during the FOMC presser, what would be your question for Fed Chair Powell? Probably along those lines. I mean, again, I mean, and also just holding up the data, I again, just look, look at the housing market. I would probably be looking at the housing market also and asking about that. Why is it that we see the consumer so much feeling so bad? We're seeing that the housing affordability is as bad as it is right now, which takes us all the way back to the 80s, where it was a horrific period to own a house. And then you say, how can you say that this is the most fantastic economy we have? Which he also said in the October meeting, I know we're in July now, and he will say it's all the tariff fault. I don't think it is. But I think they are not good. But I think it's not because of that alone. And then claiming that you had a strong economy. How are you actually looking at the consumer here? And how can you dismiss the consumer and the housing market this much? And isn't it a little too almost like committing hubris here and sitting and thinking you can micromanage inflation level from 2.4 to 2%? I mean, how can you even do that? If they could do that like that, how could they miss going from 2 to 9.1% and actually thinking that it would not surpass 3%, which is what Yellen said at that point? How can they be this arrogant? I don't know. That's probably why I'm not a journalist there sitting there in that room. How about for the Fed for the rest of 2025? It sounds like what I'm hearing, they need to be cutting. Do you think they will cut though? Yeah, I think they will. I fear that we're going to see the panic cutting that they also did. Again, remember in 2000, I started to read these things quite intensely because I think probably one thing we do as human beings is that we commit the same kind of mistakes all over. And especially if you don't change anything, like the Fed hasn't, well, then you're going to do the same mistakes again. And what the Fed did there was that in October of 2007 said, oh, we are worried about inflation here. And in January, two and a half months later, they were panic cutting the interest rates. So I fear that you will see that they will do that again this year. All of a sudden, it's going to play out of their hands and they will have to do it because the market will force them to and the developments will force them to. So I think it's not so much if they want to, I think they will have to at some point. And now we actually have a situation where their independence of the politicians is on the line, which may even make it worse because now he can look foolish or like he's paying attention or obeying Trump's orders on getting lower Fed fund rate if they start to cut, which is putting them into a fix here. And I wouldn't like to be in his seat right now, Paul. I have to say it's a bad situation because he'll lose confidence. Sorry, trust and credibility, whatever he does right now. Bring up another area that's getting a ton of attention, and that is Bitcoin. I'm looking at the price right now. It's north of 120,000 per Bitcoin today, as we were recording on Monday, July 14th, shortly before noon. You look at crypto, you look at Bitcoin, what do you think is going on there? What is the movement that we've seen in Bitcoin? What is that signaling? I have to say, I'm not a Bitcoin maximalist or anything. I don't think it's going to be the salvation of the world. I don't think we're going to see a shift where Bitcoin is going to come in and save everything that is wrong with the monetary system that we have. That's not how I look at things. I think Bitcoin is a new asset that has come in. I think Bitcoin may well do well, form well over the next many years. But I think what we're seeing right now is what Bitcoin is, is a gauge of liquidity. And we see liquidity coming in from central banks around the world. We see it moving into Bitcoin first. And then you also start to see what happens in other assets, digital assets right now. And I think it's speculative behavior, I have to say. Especially if you look at also now various companies around the world starting to put Bitcoins into their treasuries. I just have to say that if you put something into your treasury, into your business, put it on the balance sheet, which can fluctuate with up to 80%, has done that many times in history, I think you're gambling. So I think it's a gamble that's going on, which is something we always see into major bubbles. I think the very definition of this bubble is that we have right now, as we said before, we have the market capitalization to GDP, which is double what we had in 2009, sorry, 2007, and way higher, like 67% higher than what we had in 2000 when we had the dot-com prices. So we are in a bubble-ish period. We are in a period where easy money has been thrown everywhere. And I think that has been triggering the whole digital setup here. Now, it's driven by an expectation of liquidity coming in. And you're seeing Bitcoin as the main driver of that. Long-term, will it have some kind of role? Perhaps. Will it save the world? Will it become the new reserve currency? I don't see that. I see it as something that will be a tool and an asset that people can invest into, which may be overblown in terms of price right now. And when everybody is in the same side of the boat, and everybody is pointing to it and say, oh, this is the big salvation. I remember a time when 2000, when everybody said, well, this is a new economy. Henrik, it's because you don't understand. And then probably I was part of it back then. I was also thinking, yes, this is new. It's completely new. That was 2000. That was the dot-com. And of course, there was something to it because we were seeing a new... But we also first had to go through 80% decline in NASDAQ. And we saw the vast majority of all these startups, they collapsed. 2007, we saw how... Who would think that the real estate market could actually drop on a national level and across the world? Nobody. Since, again, everybody was on the same side of the boat. Now, if you say today, you go out and you say, in any kind of setting... And I've been in a few where I say, well, guys, when everybody's thinking that this cannot go wrong, and it's just the best thing, and it will... When you then ask about it, why is it that Bitcoin will save the world? Because if you don't own it, you will actually not be safe. That's what I'm being told. Well, then I think we have a problem. So I think, and especially if I ask people, when will it actually... At what level would you consider that this has been going too far and it's become a bubble? And people say, well, you need to get past $1.6 million per Bitcoin before we can get even closer to that. Then I start to pay attention and think, okay, it's like in the short... The big short kind of movie that says it's a bubble when they come back home from Vegas. I think we are in a situation here now where everybody seems to think that this is... You just need to be part of it. But does it mean that I'm bearish right here? No. My target has been $150,000 for quite some time. I probably have to say it can go even to $880,000 here. But that's the thing with bubbles. They can go on longer than you can stay rational, almost, or stay profitable. And I'm long a digital asset at this point here and will stay for that because I think there is a move up here that'll be quite strong based on the liquidity we can see coming in because we are late phase in the business cycle. So I'm not seeing this as a whole new thing. I'm seeing this as actually the confirmation that we are late phase. Interesting. You're long it. As you point out, you see that it could hit $150,000 per coin, but also you're highlighting there are some real vulnerabilities to having this in a lot of portfolios too. I think in your letter, you also highlighted that there could be a subprime-esque risk to this. Yeah. I think it's dangerous when everybody... What is it actually that you're buying into? Why couldn't it decline again? Why couldn't you see it go below, say, $80,000? I could see that. I mean, we have seen this before. We just look at the charts. We've seen how it goes up to... I can't remember the levels now, but you've seen it going down 60%, 70%, 80%. Why is it that this time we think that it's not going to decline like that? And what we do see is that we now are facing a real recession. The one time it faced a recession was into corona and the Fed came in there really quick. And you can say, oh yeah, but that proves the case. Well, first of all, Bitcoin actually plunged at that point also. That's one thing. Secondly, it's not a sure thing that the Fed will come in as early this time. They did that last time because of what you saw with corona and everything. But that's not the same as they were going to do the next time, because they may be more scared of inflation, as we've seen. So you could easily have three, six, nine months worth of liquidity drain. And if there's one thing that Bitcoin does not like, it's liquidity getting sucked out of the system. That is what you will have if you have a bubble bursting. If a bubble bursts and you see liquidity starting to come out and that harms Bitcoin, then you're going to see that actually causing that wildfire into all the treasuries that have not been built up, saying, okay, when do you start to sell your Bitcoins? When is MicroStrategy going to be forced to sell Bitcoins? And others also that are pumping this up. So I think we are moving into, I even said 180,000 now, so I think it can go even further than 150,000. But I think we're in dangerous territories here in terms of this. And I have to say, I think there's a bubble shaping up right here with digital assets. Yeah. Again, I'm looking at the prediction markets. The forecast has Bitcoin this year at $149,000 per coin. So just checking out what's going on on Caoshi. Let me ask you this. This is a very popular topic. Bitcoin on this channel is kind of funny. It can be a very contentious topic. But a very popular one is gold. What is your thesis or outlook for gold? I've also famously been, not short in gold, because I didn't do that luckily, but negative on gold. And I think the inflation narrative that we have seen has made gold outpace or outrun with the normal levels. And if you compare gold to the miners, for instance, Barrick gold miners. So the Barrick gold miner, that one is the largest gold miner. It's not the largest in the world. You'll see that that has not performed nearly to anything what we see with gold. You don't see silver having done that. You don't see platinum having done that, even though they have had small spikes over the last. So I think there has been a front running of the inflation narrative that everybody's been convinced that we now have inflation. And hence, you need to own gold. And that's why I think you've seen this move up in gold to a large degree. Again, I unfortunately think that we're going to see the floor opening up in terms of liquidity, like what we saw in 2007 and 2008. And I think that can be a bad thing for gold. Do I think we have a top here? I don't think we have a top here, but I think we're getting closer to it. I don't think we're seeing the 5, 10 times on gold prices start rising, like what we saw into a stagflationary environment we had in 77 to 79. There we saw in two years that gold went up, I think, five times in that period. But that's not the environment we're in right now. We are not in a stagflationary environment at all at this point. We still have labor growth. We still have low inflation. We have 2.3%, 2.4% inflation. That's not stagflation. So I think there's a front running of things. And there is a sense to that. I think we are moving into a situation where the monetary system is under a lot of pressure. And I also own gold, but I'm not buying more gold here. And I will be buying more gold if I see a pullback. But I think the pullback can be quite severe before we get to that point. Sorry about that. If you hear my dog, sorry about that, everybody. OK, so you're not buying it here, but you do own it, to be clear. Yeah, absolutely. I mean, yeah, absolutely. I mean, it's something everybody should own and should have in their portfolios at all times, obviously. So it's more like, if you think that this is the environment for it to actually go up where people seem to think that this is a fantastic market for gold and just keep going up because the world is coming apart, I don't think that is what's going on. And again, in my thesis, we will see some kind of a deflation or a bust, which will bring gold low again. So I will be buying it into the next move lower if we see that. But yeah, so far I've been proven wrong on that. And it has been defying gravity, I would say, and even defying all its siblings like platinum, silver, and the miners and so on. Yeah, I want to bring this up with you to just kind of frame everything up. You've described what we're going through as the everything bubble. I think perhaps the biggest bubble in history, bigger than 1929 or even 2000 during the dot com bubble. I would love to hear more on that. And I guess it is a bit contrarian to what we're hearing from a lot of folks out there, although a lot of folks who come on this channel, they do share your views as well. I would love to hear more on the everything bubble thesis and why you feel like it's going to end badly, because it kind of feels like everyone else just doesn't see that coming. I would love to just kind of frame it up for folks. Well, again, as I said earlier, that if you have a situation where, and we don't have low yields right now, I'm not saying that. But if you've had a long term with low yields, your values have been pumped up. So the values of homes, the value of anything, of businesses and so on, in the search of yield, you've been going out and say, I would get so low if I go and buy bonds or whatever, and I'm ready to accept a very low return or expected return. So if you are squeezing yield levels through QE and pumping in liquidity to the system we've done for so many years, it will re-arise the valuation levels. And that's what we see. That's why you can just look at the PE level in terms of the equity markets. We can look at the, as I said before, market capitalization to GDP. You can look at all sorts of measures and people just dismiss it. But that's normal what they do. It's just like, again, what I also refer to in the article there, the emperor's new clothes. I mean, it's like pointing to the same thing and saying, why is it that we one more time have to see the same kind of signals and we come up with a different conclusion like what we should have done last time? I mean, so I think we're seeing all the signs of this being a massive bubble. When bubble bursts and they will burst, then you will have some kind of deflationary bust and it's going to come out badly. And as I said before, even if the equity markets, they actually halved at this point, it would still be considered a high valuation at this level here. Maybe not so much with the earnings right now, but we have to understand that earnings are also a byproduct of the inflation and of the valuation level. So the expectation of earnings, it's more like when we see the bubble burst, what kind of dominoes are going to fall and what is that going to bring out? I think you're seeing the end game of this fantasy that we've been building up since 2008, and it can be going on for a lot of years. But we also have to understand that even though the things go on for quite a long time, it doesn't mean that will go on forever. And I think the situation is now that whereas we have been able to pump up the markets again, where when the economy has been stalling and pump in, you're just saying, okay, we'll go out, we'll do whatever you call it, QE or non-QE or whatever they said. Well, that situation has changed because I think inflation has been reintroduced to the system. And if you look at a very long-term chart of the 10-year yield, you will actually see that there is a very clear shift in the levels of this, which means that as I see it, we're now heading into an inflationary period. So since 1981 until around COVID, we've actually been in what is a deflationary period where we've seen yields going lower and lower. People were expecting inflation to be lower and lower and lower, and it happened because of that. Now it seems like that mood has shifted, and we get the sentiment now and the expectation that inflation can actually go higher. And we saw 9.1%, and actually that's why people are also front-running with gold. So I think you're seeing a shift here. And if that is the environment we're in, then as the Fed comes out and tries to reignite the economy with more easy money, that is probably not going to have the same effect. And the problem will be that, again, if you've seen inflation going up, you've seen yields going up, and you may even have lost your job. If you then save some money on your mortgage loan, are you then going to take that money immediately and go and spend it? Because if you don't, then QE will not work. And I think that is the problem at this point, is that we have seen a situation where people are expected to go spend that money. But if they don't in a QE kind of world, well, then we'll see a different outcome. So I think we've simply seen a scene shift here, and that is the problem. That is what we are going to see. And the Fed will, again, potentially realize that. The moment they try to come in and say that we will support the economy or do something more when deflation starts to stare them right in the eyes, if they do that, I think inflation can come up really quickly again. That's the problem. That's the difference. It's so interesting to hear this, especially you're kind of getting at the psychology, too, of how people might react in this scenario. How are you thinking about how you might want to protect yourself? Well, I think it's going to be very, very difficult this time around, because I think there's going to be kind of a whipsaw situation. So right now, everybody was just bearish until April, and now everybody gets all bulled up. And if I'm right, then you're going to see a top in September. People will then say, oh, what happened there? Then you'll see the Fed come back in again, and they are going to do something about that. And then you'll see that we'll probably see inflation again. So you can see a lot of things going on here that can happen really quickly. And I'm not certain a lot of people will be able to actually follow that. So shortly, how I do this, I hope I can ride the bubble, the top here, and going into the final phase of that. I hope I'll be clever enough to get out in due time, as everybody is all bulled up and very in sentiment. It's just sizzling with enthusiasm about cryptos. And the moments I write, I usually use it on X and write, oh, I think I'll go short or something here. And if you just get shitloads thrown at you, okay, sentiment's great. But then I think it's about also understanding that the decline this time, it may not be the same as what we have seen before. Previously, we have seen a deflationary bust, which means that you can pump it up again with stimulus. That can happen, or that can work for as long as inflation is not being moved back up again. And that's what we saw into 2008 and in 2012 and so on, when they reintroduced certain elements of QE. Inflation stayed low because people were expecting that. And you had a lot of debt, actually, and that was keeping it down. This time here, the expectation is from people that inflation can move higher, and they're going to sit on their money. And if I'm right on that, then you can get a potential stagflationary period down the road, not here, but down the road. So in short, then a deflationary bust, the Fed comes in with their guns blazing, and then they're probably going to unleash a kind of a stagflationary period. If that's going to unfold, that is going to be very, very difficult. For me, I hope I can stay long in the top. I hope I'll get out and then maybe get long the dollar or something like that. Bonds for a short time. And then I think I will head into commodities. I think commodity is going to see a fantastic rebirth at that point. So let's say a year and a half down the road or a year down the road. Henrik, I have to say, I've really enjoyed having you on the show. I know this is your debut appearance, and I feel like I've learned a lot from you. I would love to get you back on. Before I let you go, let's have you leave the audience with some parting thoughts. Anything that you would like to bring up that could be reinforcing something from this conversation or anything that you would like to leave them to think about. And I would love for you to tell them more about your work, where they can find you, where they can support your work. Please feel free to plug the new Substack as well. Anything. The floor is all yours. Well, when it comes to any kind of advice or anything, it's really about looking. Just look. Just look for yourself. And if you find yourself standing in the same side or the same side of the boat like everybody else, then think maybe you're not there. You're not the right place. When it feels good, the sentiment feels good, you may be right for some amount of the time, but it's okay actually to question, are things really as good as we're being told? So it's really about sitting down and understanding how things are developing and what is happening. And I'll just tell people or ask people to do that. Look for yourself. Don't just accept no matter who it is. Bernanke was saying in 2008 in February, if recession comes, we will be ready for it. Recession was already three months old at that point. So you cannot trust what comes out there. And then be cautious. And when it feels too good, it's probably because it is too good. And it's too good to be true. So look. And that's what I do. I don't like to be a contrarian at any point. I think it's about understanding the business cycle. This is what I do at SwissBlock. You can find me, first of all, on X, at Henrik Seberg. But also at SwissBlock, where we have various publications. And the Seberg letter is a macro report that I do every month, where you'll actually be supporting or you can be supported by the business cycle model that I have. And also with the way I look at the markets in terms of saying, we actually have a top. So even though we have a trend, it doesn't mean that the trend will continue. You'll probably see that there will be a reversal of the trend at some point. And these things will then come all together in what I call a multi-dimensional market model that I have as well. So this is what you can follow there. And yeah, be careful. Because again, and then study history. Study history. I mean, I cannot be more specific on that. Things are never the same, but they rhyme. And we were definitely seeing that again. I love that. Henrik Seberg, head macro economist at SwissBlock. Thank you so much for being so generous with your time, all of your knowledge, helping us all learn and get better. I really, really enjoyed this episode. I feel like this audience is going to love learning from you. And I look forward to having you on in the future. Thanks again and take care. Thank you, Julia.