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- [00:00]
A
Liquidity in the last 10, 12 years kind of changed the game completely before you have the demand cycle, credit cycle. So it was quite easy to forecast, let's say. And everything's changed after 2008. We're in an environment where all you choose to use fundamentals and you're not going to make money 100% or you choose to ignore what you think is right and follow the trend for now. And now we are at level that you cannot step back on it without breaking everything. In the peak of 2008, public date was like 8 trillion. We're at 37 now. You can't roll back on that. But it doesn't mean the system is going to collapse tomorrow. Either the housing market has been frozen in the US for three years or been slowing down for three years. And it's not now that it's going to blow up. We are about to reach the inflection point. So foreign.
- [00:56]
B
You're watching Excess Returns. I'm Matt Zigler and I've got one of my favorite Macro newsletter writers in the house. It's the Mad King himself, Remy Tito. Welcome to Excess Returns.
- [01:07]
A
Hey, Matt, how you doing?
- [01:08]
B
Oh, I'm doing great because we have so much ground to cover, probably too much ground if I'm going to be honest. I started to summarize this, this latest piece from you, and that's part of why I wanted to get you on. I was like, this is a, this is a three hour conversation. We're going to see how much ground we can cover in about an hour. Here we're talking about desynchronized cycles and cognitive risks. I think top level. But I'm going to drop us in right here. You wrote, fundamentals have lost their grip, liquidity has taken the throne, and the Fed now holds the match over an already heated economy. Poetic, I might add. How should investors be thinking about this? Not just the liquidity cycle in general, but where we are right now in 2025.
- [01:52]
A
Well, you can, you know, the important thing is why did I write that? Right? And I could see, yeah, right, let's. Why is that? So I could see a lot of people saying on social media, okay, this is overextended, overextended. It's going to collapse. It doesn't make sense. And you see so many people saying it. And not only random people, you know, you have like big names saying it as well. And you're like, okay, something is off versus the fundamentals. So what's going on here? Is the market wrong or are these People wrong. Which one is it? And that's where I started to dig deeply. Obviously what I realized is. And what is well known now I think is liquidity in the last 10, 12 years kind of changed the game completely. You know, the cycle before you have the demand cycle, credit cycle. So it was quite easy to forecast, let's say. And everything's changed after 2008 really from 2012. And you can see it in the chart. There's a lot of chart that start correlating really well versus the business cycle in 2012. And the reason is the liquidity. So it's synchronizing to the liquidity and then we add that big, big, big injection in 2007. No, I'm sorry, in 2020 with COVID and, and that was like. Basically we're still going running on that because that was a lot of, of injection suddenly and yeah, so it's, it's. I think we, we're in, we're in an environment where all you choose to use fundamentals and you're not going to make money 100% or you choose to ignore what you think is right and follow the trend for now. And it is something I had to adjust two years ago. The data looks bad for a while. It's been looking bad for a while. Nothing happened. And two years ago I had that thing. Okay, I'm not wrong. I think my framework is right, but it's not playing like I expect. So I need to adjust to that. And that's what I've done basically in the last two years and kind of changed the way I look at things.
- [04:10]
B
Another part that I think is interesting, and I know you slipped and said the 2007 before 2020, but 2007, 8, 9 is when we got the introduction of hey look, liquidity works. And can you imagine if we added fiscal to this side of the equation and then 2020 was a complete game changer after it starts in 2012, it goes crazy in 2020 and it lands us where we are today. Is that a fair assessment to say it reaches exactly.
- [04:36]
A
And there is. And now we are level that you cannot step back of it on it without breaking everything right. And you can't wait when. When. I don't, I don't know, I don't remember the number by memory but I think in the peak of 2008 public date was like 8 trillion. I think something like that. We had 37 now something, you know in those numbers in that amplitude and it's like you can't, you can't roll back on that. Are you gonna, are you gonna diminish that? You can't, you just need to roll over. You just need to, you know, it's, it's, it's quite a mess we're in, I think. But it doesn't mean the system is going to collapse tomorrow either. We need, basically we need, we've been given cards, we need to, we need to play them. There's no choice now. You can, you can play it smartly, take more risk or less risk, you know, depending where you are in your, in your life and the risk you can take. But yeah, I think, I think we, we are right now going through crazy time and, and gold price is, is saying that, saying, okay, something is happening here and we better be careful now, we better be careful as investors. There's nothing we can do. We have to write it and when we can convert to the right asset. But even then selling to cash to what it's debasing on a daily basis. So it's actually quite complicated. Now I think I want to introduce.
- [06:02]
B
One other part of a framework that you put out there that I really like, I think you call it. I'm looking for three continents, three policies, one fractured world. Can you explain what that means?
- [06:13]
A
Yes. So what we are now is, and again this is something I looked at because I don't know if you've seen in social media you had the debate of are we in a late cycle or in an early cycle. So people are like, okay, no, we're in a late cycle, it's going to blow up later. We're in an early cycle, it's going to go up for a few years. People are debating that. So I'm like, yeah, okay, I don't care who's right, but where are we really in the cycle? In Europe it's not only the us, it's Europe, US and Asia. And when you look at it just by looking at the rate in central banks, you see so the bog now is at 0.5% when it's been nearly negative for decades. China is basically free money at 1.4%. Europe went from 4.5% to 2% or from 4% to 2%. And the US went from 550 to 425. So the US is still the IRA when the other ones, they're more like already ready to turn. So that's creating a world in different gears. So now if you think about it, we have 30 trillion of debt or the US has 37 trillion of debt, they have the highest yield. So they're printing money at 4% of that debt. More or less, let's say more or less. Right. It's not all the yield and stuff. So to make it easy. So right now you have, the world currency is growing at 4% every year. Well a big part of it all that day. That's what's happening. So now do you play that and what does it create in terms of globality I would say. And how does it play out with Europe that is clearly slowing down with Asia that even in Asia you have two speed, you have Japan that's hiking, China that's cutting. So it's like it's really a mess everywhere right now. It's really what I call the desynchronized cycle. And, and, and what's needed now is, is the Fed to accelerate cut, I think. But even then people are convinced or convinced themselves that cutting accelerating cuts like in the middle of, of the cycle is a good thing. When it's not really.
- [08:43]
B
It's never been in line with that. And it's part of this whole late cycle versus melt up idea. How do we think about that? Because you can't think, you can't think of the US just as like a one off. And this is another part where I think you get agitated by this too. When people want to say oh it's like 99 or oh it's like 2018 or oh it's like whatever. The world doesn't have an analog to those years.
- [09:07]
A
No, no. And that's the thing. People like to frame things to try to focus the future so they look in the past, it make it easier to create a framework and stuff. But we are going into in uncharted territory here. There is not like. So in 99 you had the craze around broadband and Internet and stuff. The AI craze is different. It's a different level because we're talking before we were talking hundreds of billion of market cap, now we're talking trillions of market cap. So it's a different ball game together in nominal term and I think in tech for example, now, because it's accelerating, the next phase is going to come very quickly and the next phase is going to be robotics and then quantum computing. This is coming already. That's going to be the extension of the AI money and craziness that we're seeing now. You know, it's a, it's a structural buildup and we know it's going to blow up at some point. It always does. And that's going to give the, the, the way for the next wave.
- [10:20]
B
Does that pave the way just for more melting up, do you think? Or is it just.
- [10:24]
A
Yes? Yeah, I think so. I think so. I think, I think not on, you know, CAI is going to grow not on necessarily on generative AI. I think there's a limit in terms of users for that. But I'm using AI a lot in a lot of different systems and I think it's absolutely amazing the productivity you can get. So the next thing is, and you see it in Japan already, AI is going to be there. It's going to be used to replace aging demographics. This is happening right now in Japan already with AI, with robotics, with all of that. Now if Japan succeed, because they're the one with the biggest problem, population is shrinking already and it's well known that problem. Right. And I think they're creating the blueprint for that issue now. If they succeed, there is no reason he can't go to Europe, he can't go to the US or he can't go to China. To China, where China is a bit bigger in term of population. But you know, Japan is quite a big scale already to, to build it. So if they succeed there, I think, yeah, it's going to be fascinating and, and therefore we're going to have more AI, not to create more content, but eventually to replace people in the jobs.
- [11:51]
B
Well, we'll take it to. Yes, we'll take it to not just create more sloppy in the world.
- [11:57]
A
No, no, no more content. We're good.
- [12:01]
B
All right. Another place that you surprised me on this was, was with housing specifically. And I think I'm shifting really to the US on this one. You called housing the next driver of the cycle, not the risk. Yes, break that down. This is a good counter take.
- [12:17]
A
So if you look at the business cycle, you know, as you know, and I'm not sure people know about it, I use business cycle in my, in my framework because that's, that's what I've been taught. And so normally the, the housing correlate quite good with ism, for example. And if you look at ISM versus housing price or whatever, you can see that the last three, basically the last three years ISM has been in contraction. Housing over the same period it stopped growing because price were too high in the US and, and, and we still had some data that versus ISM in the, in the business cycle went up. So you had that, that breaking correlation between some data between not and I think that's why we Kept ism stayed low because of, of, of the housing freezing. Basically. Now the housing, the housing market has been frozen in the US for three years or been slowing down for three years. And it's not now that it's going to blow up. Now we are about to reach the inflection point soon it blow up at the top, not at the bottom, when there is excess. Now for three years, basically the housing market pattern has been building resilience and you can see it in the data now in the stocks. It start to pick up or it pick up stronger than other stocks. And that's because people are already pricing rate cuts coming and that obviously that's going to be the first, the first sector I think that's going to benefit from it in many way. In, in different ways. So when, when we're going to have the cuts, it's going to be good. Money is going to get cheaper, you know, inventories, all that stuff. But housing is going to start moving again because it's going to get cheaper, although the prices, the pricing need to keep cool again a bit more. But here's the thing. So at this stage, you have two choices, or the market adjust and the price goes down, or you find a way to make the income of the people higher. It's one or the other. And I think the Trump administration, with the move in crypto, with the move on technology and everything they've been doing, they're trying to push the income higher. Now, is it going to go to the right people? I'm not sure about that, but that's the play. That's what's happening. That's the play right now.
- [14:47]
B
Do you see that direct line between interest rates and housing prices? And then I know you see it differently in different parts of the country. Like this is, and this is creates the opportunity, right?
- [14:59]
A
Yeah, because you have different markets in the US you have the East, Midwest and, and the West. They're all different market and they're all at different level of maturity. Some are oversaturated, some are based on a luxury market. You know, it depends basically you, you got to look and for which part of the market you wouldn't participate. If you want to invest and, and, and choose, choose which, which area you want. If, if you know if interest is going to cut. Well, interest is going to cut because Europe is doing it, China is doing it, Japan is different. So the US Is going to do it anyway and we know Trump is going for it. So even if they don't cut now with Powell, it's Just a matter of few months before you put someone else that is going to cut quickly and that's in May. So regardless, we have it coming strong. We're going to have it. When they're going to cut a. A lot of people are going to refinance. Everyone that bought a home in the last five years is going to refinance. That's a given. That's going to be cheaper. And that refinancing is going to create a wave of liquidity or could create a wave of liquidity, I think. And then we're going to see how our market reacts to that.
- [16:15]
B
You brought up crypto in this and I want to pull a crypto quote that you wrote. I think this was in the altcoin season that wasn't. Crypto hasn't died. It's grown up. I think that's a really interesting perspective for where we are. And this almost nuanced wealth effect that you're describing and how people are thinking about other assets, what's going on there?
- [16:35]
A
Yeah, so. So again, you know, on social media, everybody was looking for, okay, this cycle is going to play like the other three cycle, which is bitcoin goes go up first, Ethereum go up second. And then you have altcoin season this year. This season has playing completely differently. And. And it was always going to be. That's going to be the case on that one. I'm going to explain why. So crypto always worked with narratives. That's how it's been sold. So the first cycle in 2012, 13, it was like, okay, that's that decentralized money. And it was only for gigs. You know, very few people knew about it. But the core idea was it's decentralized. The government can't control it. Okay, we want that. It goes up collapse 85%. Okay. The next narrative is, okay, now we're going to program monies. That's when Ethereum come up and all the ICOs and people start to make scam and frauds. But that's when you created Ethereum, Cardano and all that stuff. Okay, that's the second cycle go up 80%. Correction again. Third cycle narratives. Okay. This time we have defi. You can make crazy yields. You have NFTs coming, you have VCs investing. We go up correct. 80% again, you know, same story. What's the next one? So the which take us to these narratives. This nar. Now think of what I explained in circle. Okay, we went decentralization. ICOs, which is programmation of money, like okay, like Bitcoin, then you have. Then you have the defy. Nft. Now this, this one, which closed the cycle versus this. It. We couldn't be more centralized now in term of crypto. It's. So we went from decentralization to fully decentralized, where you have government support, political support, government support. You have ETFs, you have institutional money flowing, you have all of that. So now the circle is closed. There is no narrative left that they can come up to boost it. Right, like they did before. So you cannot, therefore, now, or we go sideways, or we go up, but at a slower pace. It's not going to happen like before. And the other thing that people tend to ignore and which I think was a complete coincidence, is after, right before each cycle, before, you had a global economic event that led to increased liquidity in a part of the world, Europe, Asia or the US and that happened in 2009. 10. Then you had Europe, 2012, then you had 2016, which was right after Trump got elected. Then you had Covid, and then you had now, which now we had nothing really. And that's. You know, everybody was saying, oh, it's going to be the same. We've seen it before and it's not. It's not. It was never going to be like that because it would be. Come on. It would be way too easy now. And, you know, the first time it surprised people. The second time tried to take advantage of it. The third time you laid the Yunarchi. There's no force time. It's like, come on. So, yes, it's going to go up, but we're not going to see multiple that, as we've seen before. And then you have the underlying product. Then we can argue about a lot of things. Then in the end, 99.8% or 9% of crypto are absolutely useless. And we never go anywhere and do anything.
- [20:21]
B
Does that make Bitcoin effectively, like, literally? Is bitcoin now gold or a version of digital gold?
- [20:27]
A
No, it's. No, no, it's.
- [20:28]
B
Tell me why people.
- [20:31]
A
Again, you know, people need to frame things to justify their positioning. All right, so Bitcoin is decentralization. Bitcoin is gold. Bitcoin, it's for them. So they. They feel right to holding it. But bitcoin or any crypto asset right now is nothing else and more than a speculative asset. That's it. That's what it. It's a new form of. Of, you know, it's a new form of making money. Obviously, you know, a lot of people made money. But it's. I would not say it's gold, I would not say it's money that is just that speculative asset. Now, that being said, I don't know if you own Bitcoin or if you ever used it to transfer bitcoin. You can transfer billions in a blink of an eye for cheap, for nothing. And he arrives in the next 20 minutes. Right. That technology, which is crypto eventually is really good compared to the current banking system we have. That is, to me, that's what it's not bitcoin itself or the price of bitcoin, I kind of don't care. But I do care about the system you can build not on bitcoin, but on the rest of the system. Now, bitcoin was the first, it's the most trusted. For now you have institutional buying it. You have sailor going crazy with it every time he can raising money. So yeah, fine. Does it mean that bitcoin is worth the money they're paying? Not necessarily. But the reality is, yes, it's true. It's a limited supply. Yes, it's been useful for country like Turkey or Argentina to protect against massive inflation. But in the end it stays some. It remains something that sine cloud and again, like the stock market. For people that like fundamentals, they say, oh, it's backed by nothing or it's. Yeah, but that's irrelevant at this stage because we're going to a phase of, look, we have data in the cloud, we don't have data in a computer. So we're going in, in that phase of the world where things have value but we don't have it in the data. They're not backed or they. It's different. The technology is creating something very different all over now it's not just crypto and it's something that a lot of people don't adjust yet well to it and some may be too overconfident over it.
- [22:58]
B
So we talked about the narratives that everybody tells themselves about crypto and everything else for that matter. And you put. I want to jump to this. You called this the era of fiscal dominance where the marginal dollar strengthens government balance sheets, not speculative risk assets. So let's talk about positioning. Let's talk about how people think about portfolios under that quote. Because that's really fascinating to me that.
- [23:22]
A
Well, no, like it's how people look at portfolio. I think you have from, from, from, from what I observe on social media. Right, so you have some people that I would say are in their 50s, 60s, they're like, okay, that doesn't make any sense. AI doesn't make sense. Crypto doesn't make sense. And then you have the younger generation that is willing to bet everything on the most volatile stuff they can. Well, that makes sense. They're young, they can afford to lose it and they have time to make it again. So that makes sense. But here you really have a split world in investing between fundamentals. What's happening now again, technology blurring all the lines that we know of. And what is also interesting is whatever group it is, they have their narratives to justify their positioning. And what I don't understand is why gold will deny the right to bitcoiners or deny the asset or it's valueless or the other way around. And bitcoiners say, well, gold is worth nothing, which is not we've seen lately with the running ad. But you know, it's like, why do you even bother saying that? Focus on your positioning, focus on why you own it. And if the guy next to you want to own gold, that's fine, go. You know, it's, it's, there's nothing wrong with it, I think. And, and that is for any narrative, any asset. But at the moment I see too much people saying, well, my, my narrative is the best, my asset is the best. And you know, way that bitcoin collapse and you're going to lose all your money and way that gold is not going to overperform. It's like, yeah, boring. I think, I think people need to need to adjust a bit. So yeah, when you look into all that and you have the liquidity on top of it and, and, and the total end of that and it's like, okay, what do we do here? You know, how, how do we deal with that? And, and I think you have, you, you have huge, you, you have, yeah, you do have huge opportunities in market. You just need. Now the difference is before you would trade the cycle, now you trade fiscal policy. Basically, that's all you got to do. And on top of the problem, I would say now on top of that is regardless how good is your framework, regardless how good is your analysis, you're one tweep, one tweet away from Trump to mess it up anyway. You know, he's going to say one thing and suddenly market are going to overreact and the next, in the next two days going to change his stance and he's going to back up. This is, we've seen it and, and whatever is in our TV or your analysis, anyone equals up Down. We have that on top of that to deal with. Now. I don't want to be. It's not about being political here, but that's a layer of information that we need to deal with as investors.
- [26:31]
B
On the private side, can we look at. Can the private side screw up liquidity in a way that policy can't handle? Thinking of the private equity and private credit claims, some of that stuff. You have any thought on that?
- [26:43]
A
No, I haven't looked into it. I haven't looked into it much, but yeah, so, so what, what's. How, how did the private side mess it up?
- [26:53]
B
Well, I'm asking if the private side could. Could the private sector basically mess up liquidity in a way that makes it even harder for government policies to operate? Could we have a. I don't want to say shadow banking collapse, but you've all these stories that we've heard over the last, you know, 15 years here.
- [27:13]
A
No, well, no, I don't think so. I don't think so. What I. Why finishing, you know, they, they. What they're going to do when money gets cheaper. They're all going to borrow money to do buybacks anyway. So it's like that, that was the game before. They're just going to keep playing it. That's, that's the game. It's been the game between. Since 2010. The buybacks, you know, has been accelerating. Buyback plus passive investing plus plus crazy liquidity. Well, no, first crazy liquidity, cheap money company buybacks, you know, and, and then it's from there it's just like. Yeah, we've seen. So no, I don't think, I don't think for that as long as they can keep doing it and things gonna be messed up. Now it would, they would have been messed up if the I state why the yields keep. Keep I. But now it's gonna, we know it's gonna go down. I think, you know, the bond market is saying exactly that. I think. Yeah, we, we're fine for now. For now.
- [28:19]
B
The policy commitment to quote unquote, run it hot is. That's the most important factor here.
- [28:25]
A
Yeah. When you think about it, they don't have a choice. Their valuation is already overextended. Most of them are. Their revenue is going to the revenue. If you look at the revenue, they're multiples. The growth is limited anyway. In revenue, if you look at it in nominal term, I don't remember now I did an analysis six months ago about it on the Max 7 and the revenues and in nominal term, it's not possible to justify the evaluation and reach the revenue. Even in five years, that will be trillions in revenue. We're not there. It's not possible technically. So meanwhile, if you don't want evaluation to go back down, there's only one way to do it. Borrow money.
- [29:15]
B
I'm shifting gears. It's related to what you just said though, because I want to talk about some of the AI and autonomy and specifically human capital. And you've had a lot to say about protecting human capital. You were talking about industrial labor laws and AI's cognitive implications, especially this risk of trading freedoms for efficiencies. Can we just talk about that a little bit? How are you thinking through this?
- [29:37]
A
That's deep.
- [29:38]
B
It is deep.
- [29:40]
A
Yes, it is. So when, so when you approach AI, I think so now we're going in a world. We are already in a world where you're going to have employees that are replaced by AI. So that's the low. The low, the low. I don't want to say the low jobs, but you know, the manufacturing and stuff in automation, basically in manufacturers. So that's happening, that has happened. That's happening. And then you're going to have in finance, lawyer, whatever, you name it, you're gonna have the world of people using AI and people, not the productivity of the one that are using AI is going to increase dramatically. I mean I was talking to, to a big, big company not long ago that I did an IPO in crypto not long ago. I was thinking to an executive there and what he said is now all the coders are expected to use AI. Now what we expect from them is 5x in productivity. If we don't have that, they are. So that's the world we live in. So now if you ask there's many coder, they're going to say, well, I don't want to use AI. I trust only my code and stuff. If they don't use that for coding, they're gone. They're gone because someone is going to be. You become more competitive if you do it. So that, that is something that is happening already now. I would say the risk of that is okay, if your good employees use AI, become more productive. There is a fine line between okay, you're going to increase productivity, but he's going to stop thinking to do it. So he's going to go faster to solve problem, but eventually he's not going to use his brain as much because AI is going to do it for him. So at the moment of problem solving and knowledge and all that. It's like, okay, you get the knowledge, but the application of it, you still need to be on top of it. If you don't know that, then human capital is going to eventually become more dumber. Yeah, I think, and it's something I realized, don't remember. I think I was talking with someone. I, I think I talked, I talked to someone about, about AI and they told me how they use it. And, and that's when I realized I'm like people are going to get at the same time more productive but also could become more stupid. Right. And it's, it's, it's actually when you start thinking about it, it's very, very fascinating, I think. And, and we need to be very careful. Oh, if you, if you're in a company and you ask your employee to use it, you need to be careful. Now you're not going to see the difference, but in five years you might.
- [32:37]
B
Do you think this presents, is this a macro risk? Is there a tangible idea of how we think about this in a macro framework?
- [32:43]
A
Macro risk? I don't know. You know, you have, you have. No, I don't think that, that, that specifically I don't think would be a macroist, but it's more from a human side point of view. Right? It's, it's, it's, yeah, it's more that the macro risk is more on the robotics coming and AI really taking over a few jobs. That's going to have some impact. But see, now is the thing, now they're going to say, okay, so you lost your job to AI. So from this point you have two choices or you get AI ready, right? Or you do a business and you need to be a ready or you stay behind. There's no choice. So regardless of, you know, most, most of the time people are going to go through that phase. So the AI pass is set. We're going to have to go through it. People are going to have to follow it. Are they going to be impacted by it? And it's going to have an impact on, on, on the way people think. That's, that is for sure. That is for sure. You know, and that's where the way model are trained, the information they use to learn is going to become crucial. And right now we don't have too much transparency about that.
- [34:05]
B
Any odds that we get protecting human autonomy as like the new ESG in the next five or 10 years.
- [34:12]
A
Yeah, you know what, yeah, that's, that's. Well, yeah, yeah, that's going to be, that's going to be. Well, put it this way. People, people losing the job or people refactoring to. To do new stuff and adapting to AI anyway. They. You're gonna have to pay for that. And the ESG of AI is coming. That's perfect. So every company that implement AI for productivity is going to have to pay higher tax for that. I guess we're going there. That's actually. I didn't think of that point. That's a great way to put it. The esg. AI is coming to counterbalance the losses, the human losses. You don't have a choice. It's not like the government can pay for it.
- [35:01]
B
You know, somebody's gonna quantify it sooner or later or attempt to.
- [35:05]
A
And so all you pay for it or you start doing great. Sun style. What's the move in French? That way. There's an old movie in the 80s, I think it's Green sun called. Do you know it?
- [35:18]
B
I don't think so.
- [35:19]
A
You don't?
- [35:20]
B
I don't think so. Pulling one out on me here. All right.
- [35:24]
A
I don't remember. It's a. It's a synonym. I don't remember who made it. I remember seeing it as little. So it's a it. Well, basically dating humans.
- [35:34]
B
Oh, like Soylent Green.
- [35:36]
A
Ah, that's one. That one. That one in French is different. Yeah, that one. That one. You know, they convert you into food and stuff. So.
- [35:43]
B
Yeah.
- [35:44]
A
Are we gonna have to go there?
- [35:46]
B
You know, things I didn't have on my bingo card for today. All right, I want to talk about. It was, it was really interesting. I'm glad you brought up the crypto as a, as a clock or as like this, this cycle. Because thinking in narratives is one of the other parts that you apply to this macro research that I just find is part of why I like reading your work. You said we live in a world where truth drowns in noise and narrative drives Price. You gotta have a real strong understanding of this. Similar to that crypto framework. Do you see this in other asset classes right now or do you see other frameworks in the way these narratives.
- [36:25]
A
Are shifting right now? It's been. We had A.I. obviously defense has been strong with multiple front end globally. So that was a given. The next one, the one that's oh, we had space. Space is also decent and the one emerging now is quantum computing. This year it's been. And I think in the next two, three years are going to go heavy now. And it's fascinating because quantum computing is not going to be ready before 15 years at least. But you know people are getting excited to bet on what can happen there. So it's extremely speculative I'd say other than that, you know the narratives is the investing, the investing framework. I would say it's quite, you know when, when you summarize it to look at monetary policies it become a lot easier and then you just have to, to assess okay, who is where. You know, Europe for example, it's more defensive and, and, and green infrastructure. Asia would say with free money and where they are now because they've been in pain for a couple of years. I would say, you know, Asian tech is about to have a good boom with cheap money. Now in the middle of that obviously the US remained the US and it's the dollar asset. So it's the dollar the US So it's going to keep going up and then you have gold in the middle that you must have as a hedge over the middle of it. And all that is based on policies really, you know they're simple investing this is that you can just, you can just justify using policies and I can build united with chart and that that. So when it becomes that clear and easy I think it's, it's, you know, it's, it's, it's a no brainer in those cases.
- [38:25]
B
Do you worry about or how do you think about pulling the returns forward in some of these themes like in quantum computing which you said it's an emergent narrative money people are starting to get excited about it. How do we think about how much of the returns get pulled forward and the excitement part versus same.
- [38:40]
A
That's the thing. You look at it with the old people, with the old time framework, we don't care about it. That's the problem. I mean if you look at quantum computing revenue, some companies they don't even make. They make 4 million, 6 million. It's not even in the double digit or triple digit. It's not even in the billion. But they're already worth 4 billion. Right. And quantum computing is basically the solution to problem that don't exist in a dimension that we can't see. Right. That's what it is. So here we can send a lot of things. I mean the pitch people must create must be amazing. The pitch around quantum computing. So now is quantum computing change the world? I don't know yet. You know my do. I don't know. It's quite complicated and I think it's right now it's just a narrative. But the same that AI 15 years ago was just A narrative just markets of people need the next thing. Now the next thing is quantum computing. It's been the last year already. I think I wrote about it at the beginning of the year and it did well this year. Now is it something I recommend to invest? No, but it is still a narrative that's emerging. You can see people getting excited by it. And now if you think about it, there's no many left narrative to emerge. We have AI, we have robotics, we have quantum computing. Then we're going to have quantum computing in space. Then we're going to have quantum computing on March and then we're good, I think. So that's the next.
- [40:28]
B
Is this part of where it's just you identify these narratives as they emerge and then that's also where you basically have to almost throw fundamentals out the window and just focus on what's trend, what's moving, what's interesting.
- [40:41]
A
You want to invest in it? Yes, I don't now I write about them. I should invest in possibilities, but I cannot recommend them personally I can't do it because I know it's very speculative now a lot of time I do that with the mat king. Okay, here's an emerging narrative. You want to invest in it. I don't know your profile, you want to take risk. Here it is any other the fundamental that goes with it and here are the weakness that are within. So now you know you at least you have a decent level of, of information, well structured, well breed well sort through and then you can decide. But as, as a writer I cannot, you know I think I did space. So for example I did at the beginning of the year I recommend I saw space as okay, it's getting better. Yes, your SpaceX starts going great things. I'm going to put it as a trade. So I put it as a trade. Go up 30%, go down 50%. Obviously when it goes down 50% I have people saying why are you putting this trade? They're very speculative, they're very risky. And I'm like okay, just wait for it. And now by the end of the now I'm good, now I'm pretty. It's pretty solid. And the way I've done it to be protected was okay, I build a basket, I cover different kind of products in the space race and, and you know one of them is going to, you know, they're all going to at some point work, they do a launching work, they go up 100%. Now that's, that's the game. There's no fundamental yet There is no revenue yet for some of them. SpaceX is quite different. But you know, this, this is if you want to build or you have a completely, completely safe portfolio where you have gold, treasury and some ETFs like Solid or you keep some. You. I think, I think depending on where. Again, it all depends where you are in your life and in your journey. Right. And you can have some more room for speculation. Now the narrative for speculation, they're very easy. You have four or five. They're very simple. So you choose one of them, the one that you like the most, the one that you like, the fundamental, the one that you can relate to it and that is Bitcoin, space race, robotics, quantum computing. I wouldn't say AI because AI is quite late now. I think the other one are going to have a better upside and then they link to AI anyway in some ways.
- [43:14]
B
So yeah, philosophically for you, why is it important to be aware of all these things even if you're not going to invest in them now?
- [43:25]
A
Because you need to know everything that's happening in our business. You need to not. You need to have an answer for everything. But I want, you know, I want to explore different theme when I write and because I have people that I know are going to be protective. I have some that are speculative and that's why now when I write, I'm trying, I'm trying. If you, if you look at the, the piece that I have, you know, I have the market stuff, the macro stuff, then I have some, some thing that make you think then I'm going to have some, some, some interesting theme to invest in. And, and I tend to balance for the, for the both side of the spectrum, investing spectrum. And I think, I mean it's, and what, what I like is when I see an art emerging is like, okay, is it really valid? Is there something behind it or is it just like wind? And, and I like, you know, I like to, you know, I don't, I don't believe what I see or the noise I see. So I tend to, to look into it and when it's interesting I write about it.
- [44:30]
B
Covering all these places. Another thing that I love is you're always writing about behavior and I mean like the behavioral sciences, cognitive behavior and how that emotional cycle sort of maps across the macro cycle.
- [44:43]
A
Well, I think it's, you know, it's, this is something that we, that's another layer and I think that's another, another reason why market as low are losing fundamentals. Now we have, so we have a Lot of people using Robin Hood, for example, you know, 20 million, 25 million, whatever. A lot of investors that are not sophisticated, they don't, they don't know much, but they just like invest on impulsion or emotions and they're going to take a lot of risk for it. So that is switching the market structure dramatically. We've seen it with GameStop, not, I don't remember which front. So this emotional or behavior thing of the earth of us versus them is changing the game as well. You know, it's, it's, and, and again, that's something we need to adapt to. So it's, it's, it means you need to be aware that people are using Tick Tock for trade, for trade recommendation or, or Instagram or whatever. Is it right? No, it's not. Absolutely not. And should you do it? No, you shouldn't. But a lot of people are doing it because that's the world where they exist. That's the world where they spend their time. That's the world where they're getting information. And that's not only for investing. That's going to be for, I know people that start to have philosophical debate about Palestine and Israel after watching two TikTok videos. And it's like, yeah, no, don't. Just don't go there. Don't go there because you don't know what you're talking about. You've seen a video that most likely is going to be served through an algorithm to confirm your bias. So it's like, okay, this is the world we live in. So again, we need to deal with those cards and all that behavior I just described. In a way, I think you can, you can anticipate some moving markets or when you see training, you know they're going to train out not because it makes sense, not because the fundamentals back it, but because people believe in it. Now, is it the right way? Is it a way I will do? No, I'm not. You know, for example, I miss Nvidia because of it, because I didn't want to jump in the train. Like, at the time I didn't see the story obvious. And, and it's, it's a saying that I'm like, okay, fine. Then I just look on the next thing and I say, I missed that one. No big deal. You know, it's, there's always the next opportunity. Anyway, in markets, how do we measure.
- [47:38]
B
Getting late in that emotional cycle almost with markets, does that, does that play a role or do we just kind of like ignore that? Do we think about this as like an emotional cycle in markets. Is there a sentiment indicator in here somewhere?
- [47:51]
A
So that I wrote about that not long ago. So if you look at sentiment around the world of households and consumer it's depressed or going down everywhere but yet we have market at all time almost everywhere. So here you have a massive disconnection between what the survey tells you. At least the sentiment surveys versus the reality. Right. So there is something going on now. Is it. You know, is it. I doubt that, I doubt that people trading on Ruben would other one moving the markets much. You know, it's still, it's still more of a professional thing I think. But they do have, they do have that. Yeah. Ability to, to change sentiment over. Well, let's, let's. We have to make money. We, we have to, we have to go after the Wall street guys. You still have that mentality big time, you know. And so they try and I think I saw a chart about the amount of naked option they were selling at Robin Hood is like people just go one way or for whatever reason, you know and, and, and it's something that puzzle me now. Some people or they, they say they are. We don't know. You know, they, they say they may increase again. They outp from a lot of people on Wall street now. Are they right? Does that make they right? I don't know. Do you trade. If you trade. If you trade with the. And, and how they do. Is he right? I don't know. But it's. Some say it's working now. I don't know if it's working. It's not working for me and I don't do it. It's simple. But you know, it's something that again you have to, you have to take, people have to take in consideration at the moment of investing. You can't think dismiss it and say well those Robin Wooders, they don't know what they're doing. They just. Yeah, but they still have the power to gather crowd and that's when the information spread and, and, and I'm sure funds now they have, they have you know quants that monitor that. That. Well they have algorithm that monitors social media for okay, what's picking up what's not, what's talk about more and stuff. I'm sure they have that now and then, you know, it's in, in the tools. It's crazy. What about.
- [50:23]
B
We talked a lot about narratives and I know investor education is a big theme for you. Storytelling for education and reading narratives are kind of two different things. But they're very related. What's the power of the importance of storytelling?
- [50:42]
A
A. If you build the right narrative for investing and it flows like a story, it's easier to understand. And I tend to really, really go deep in the data. So when I'm going to build a narrative, it's not two charts. It's going to be 40 to tell my narratives. Now usually at picking narratives, I'm not necessarily too early when I do it, but they're quite solid. You know, they're, they're, they're extremely well thought through from macro, from fundamentals, from, from a lot of things, a lot of points. Sorry. And yeah, it's, it's, for me, it's something that always worked and it's something that, and I guess that's how I work. When you're going to tell me, okay, you should invest in that, I'm not going to take, I'm really going to take the word of someone for it. I'm going to have to look, okay, what's the narrative here? Does it work or does it not? So I guess I transfer that the need for me to justify, to justify taking a position into, into my work.
- [51:51]
B
Is there a way I'm going to let you cherry pick one. If you want to cherry pick one. Something that you've thought through recently that you just walk us through what that looks like putting that narrative together. And then I mean Putting together a 40 chart deck is a, is a big test of your own logic to say does the story.
- [52:07]
A
That's a small one. That's a small deck. 40. So that's. Yeah, that's 25 pages. I like when I do that.
- [52:14]
B
Yeah.
- [52:15]
A
Well, for example, now I'm working on, on a narrative that market can't correct more than 30%.
- [52:21]
B
Okay, but say more explain how are you thinking through it More more the process than necessarily the outcome here. Very.
- [52:30]
A
Okay, so if so first, since 2008, you see the volumes, you know, I saw a chart of volume. Google volumes, for example, they go down, down, down. But they were really high 2009, 10. They're all the same. Everything changed. And if you look at all the bigs, big companies that are saying the volume collapsed and they're all in the Same range since 2012, more or less. What's that? That's passive investing. Right. So you know that when market correct at some point the rebalancing of passive investing and the flows they're going to have to go by. There's no choice that that's the way they structured. Right. So that's one thing. The second thing is right now we in, in the next 10 from now, in the next 15 years, if we get a market correction like 2008 or 1. A big one. A big one. You get an entire generation and the largest one, largest cohort that get wiped out, the baby boomers. Right. Who is in each government still running each government in the world. Well, especially in the US Baby boomers. So until you have a real shift in, in politics, I think in term of age, baby boomers are going to be protected. They cannot let their generation fall or collapse. And now they don't have time to make money back. They're retired. They need to get their pension, all of that. So from a demographics tool point of view, you have a very interesting situation here where really they cannot let the market go. They can't. They can't. And if you do, if you have like, I'm talking big collapse, right? If you have a big collapse, then that generation is going to completely, utterly. I don't want to, I don't want to swear, but yeah, we can say that if we're there. And I think for that, you know, so if you look at the, so here you have two, two things for that narrative. You have demographic and you have structural flaws, right? So that's two interesting things. And now that's where I start building my narrative and looking at, in detail at it. And if you look at markets since beside Covid, since 2008, you don't have a correction more than 25%. Even, even, even. I think the maximum we got was this year in April. I got 25, 30, something like that. And then it bounced clean. And if you put the trends and stuff since it's, it's insane. It's, it's perfect, Perfect. So I think when I look at the charts like that, I'm like, okay, there's something happening here obviously. So the structure of the fund, the structure of the flow is changing now. There is also a reason from a systemic reason not to let it go, at least for the next 10 to 15. And now I'm looking at, I haven't looked into it yet. It's like, okay, how do we benefit from that? How do we play with it? How do we play, how do we position for it?
- [55:52]
B
Because that ties it right back around to this whole policy driven idea of put that front and center in how you're building the portfolio.
- [55:59]
A
Yeah, because then, then you are. Exactly. Then you have. So if, if you use the policies now based on the policies, you have, okay, you, you're going to have, for example, you're going to have technology that's going to go better and that fits right into that. Okay, what's the flow through passive investing? Now, the correction can be, we've seen it. They can be sharp, they're quick, 25, 30, and they bounce quickly. And every time, every time that happened, if you looked at the news flow in the last 12 years, they reverted quickly. And it's like they're controlling how much it's going to. Okay, let's push it back or let's, you know, in 2022, for example, from, from nowhere. From nowhere. We had the charge GPT coming in October 2022 and it changed everything. We were down 30%. And then you have the AI naughty that started, you know, so, okay, what's going to be the next one? I don't know. But right now, so with this year, we had the tariff collapse. Right now, what happened with, I think with Trump's policy around tariff is redesigning the supply chain, really. And he's pushing people out of China. There's a lot of game theory in what they're doing, I think. And, yeah, that's going to change the supply chain. And now it's going to work for the next 10 years. And you see it now, they're fighting strong, you know, with China. And it's going to be, yeah, definitely interesting to watch there. And something is happening.
- [57:43]
B
I've got a couple more questions for you before I let you go. I got to get you get your words in the hat on this one. The first one. I want to ask one of our standard closing questions. If you could teach the average investor one lesson, what would it be?
- [57:58]
A
I think that's interesting because that's going to be a summary of everything we said today. So I would say you got to filter the noise and choose where you're getting your information. Right. I would say do not invest. Do not invest or take a position on one chart only. You need to have fundamentals that goes with it. It's always. Because now people like. Soundbite. Like short. Yeah. They don't want to read. They don't want quick, long stuff. They want quick stuff. And the easiest quick stuff for people to invest is a chart. Right? That, that's the easiest. Like I look at it. Okay, that's good. I go with it. You know, the fundamentals remain. Absolutely. Like, okay, chart is a start. It's not the end of it. It's the beginning of your, of your journey, I think. Oh, that's how it is for me every time. The other thing I would say is, is if you miss, if you miss an investing opportunity, like, don't look back. There's always going to be the next one. And don't, don't, you know, don't, don't beat yourself up. That's fine. So, yeah, that's so. And yeah, that's interesting. That's exactly in what everything we talked about today.
- [59:11]
B
Good summary. Good.
- [59:12]
A
Yeah, no, it's. Yeah.
- [59:14]
B
All right, one more for you. Something a take that you have an opinion, investment, markets, life or otherwise, that most of your peers would disagree with you on.
- [59:24]
A
Right. So that's a tough one because I have peers that are bulls and peers that have bears, and I cannot have a framework that both cannot like or disagree with. This is not possible by default. Now, there's a few stories. You know, I think crypto is here to stay, for example, not because of the. I don't care about the valuation, as I said before, but because of the technology behind it. You know, we see it now, we haven't talked much about it, but we see it now where the stable coin is really embedding into, into Wall street and, and, and basically the stablecoin issue are become, are going to become the biggest buyer. Obvious debt, I guarantee you that. And that is happening already. That is growing already. And all the regulation have been put in place for the last six months to facilitate that. So that's their way of finding new buyers of the debt. But we haven't talked into it. We have to talk about the AI generates, but I don't think we have time. I think AI still have room to grow. So that's for the AI bears, I think, regardless of the valuation and what they think. I think we got to go. We have, yeah, we have room to go. There is some crazy product. So an example is, you know, the new platform of the Mad King. A year ago, to build that, that would have been. And I used to run a tech team, so I kind of know that would have been a team of six people. And the cost to build that would have been around not far from Alpha Million. I think, you know, the platform, the way it works, all the tech that I used, and it's all automated. There is AI integrated, there is, you know, there is payment, there is a lot of stuff. All of that is very expensive. We talked about it offline before. To redesign your chart stuff, you need a Figma designer and then you need a decoder, and then you need. So all those steps you have all those people now when you use your AI and you know what you're doing a bit, all that is gone, all that's gone. So you know the platform, you see for example the new one, I built it myself while I was writing so on the side so I had time to do it. And, and it's something that you know, when I do that I realize, okay, this is going to go crazy now. You know, it's going to change the game. We just. Now I would say, no, we just. The race is okay. We're going to see companies of 1 people, 2 people making 10 million, 100 million might get even an application that generates a billion in revenue. A one person application. You don't need backend, you don't need front end, you don't need tester, you don't need designer, you don't need any of that. So it's just a matter of time before we see that. And that will be because of AI. You know, now the tech, for example, the tech is not a cost, it's not a hurdle anymore. So where do we go from here? A lot of things can happen and another thing that I would say is markets are going to get extended beyond what people think and beyond fundamentals. And it's something now that fundamental they will matter at some point, just not right now. At some point they're going to catch up, but right now is not the time. I think for the reason I explained before that you know, with demographic and, and flows and stuff.
- [63:00]
B
All right, Remy, I know people now probably want to go check out this new website. I know you want to show it to them. If people want to bug you on the Internet, where should they look you up these days?
- [63:10]
A
On Twitter at the King Court. And they can find, they can look at the platform atthemadking.com which you know you well, I mean you have a lot of things now in there. You know, you can see the content. I think there is quite decent amount of free content. People can sign up and they can navigate and read free stuff and yeah, and there is a lot, there's. I mean, I mean I've been developing a lot new stuff in it which amongst them is, you know, when I build an AI engine so you can discuss my content, but not in a way of most of the AI agent when they implemented people that summarize this or give me the bullet points or give me that. Now the way I'm building mine is no, we're going to think further together about it. I'm not going to summarize it for you, what I write is not meant to be summarized or you miss the essence, really. And my work is very detailed, so and so that's why now in what I write I try to. Okay, here's a summary if you want it and if you want to dive deeper, then you have the longer stuff. And I'm building as well charting system which I just can't sell my Bloomberg terminal because of it. And I'm very happy it is that good for now.
- [64:33]
B
Well, I'm excited to have you back to do a tour of the Bloomberg counseling.
- [64:41]
A
Yeah, that'll be a good one actually.
- [64:44]
B
All right, well, you got my attention here. When you're ready to show me how this thing works. Remy Tito, the Mad King, I'm so happy that you joined me here today. You're watching Excess Returns and please go to the website. Check out the stuff he's doing, if nothing else stuff. And you heard him say it. Even if he's not advocating or investing in it, he puts ideas on your radar and then gives you a framework for thinking through it. For professionals, that is an invaluable resource. Remy, thanks so much for the time.
- [65:12]
A
Thanks Matt.
- [65:13]
B
Thank you for tuning into this episode. If you found this discussion interesting and valuable, please subscribe on your favorite audio platform or on YouTube. You can also follow all the podcasts in the Excess returns network@excessreturnspod.com if you have any feedback or questions, you can contact us at xs investreturnspotgmail.com no information on this podcast should be construed as investment advice. Securities discussed in the podcast may be holdings of the firms of the hosts or their clients.