Lowest Cash Levels Ever | Kevin Muir on Markets at Extremes

Summary

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Excess Returns – “Lowest Cash Levels Ever | Kevin Muir on Markets at Extremes”

Date: February 4, 2026
Guest: Kevin Muir (“The Macro Tourist”)

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Episode Overview

This episode of Excess Returns dives into market extremes, particularly through the lens of investor sentiment, market rotations, and the macroeconomic landscape, featuring returning guest Kevin Muir. The discussion explores the record-low cash levels among institutional investors, the implications of rotating markets, the role of gold and other commodities, the volatility in global currencies, and the potential impact of the new Fed Chair. Muir brings his nuanced and often contrarian perspective on current market conditions and where risks and opportunities may lie for savvy investors.

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Key Discussion Points & Insights

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1. Sentiment and Risk: “Buy Your Straw Hats in the Winter”

[03:26 – 08:27]

• Extreme Bullishness: Institutional investors’ cash positions are at historic lows, indicating “everyone is all in.” (B, 02:43)
  • “If you look at things like their cash level in terms of institutional investors… it's the lowest level ever.” (B, 00:22)
• Sentiment Surveys: AAII and Bank of America surveys reflect exceptionally high market enthusiasm and risk-taking.
• Disconnect Between Sentiment & Price: Despite all the optimism, indices like the QQQ (Nasdaq 100) and S&P 500 have gone largely sideways for months.
  • “What I'm really looking for is a consensus that is not being confirmed by the market.” — quoting Bruce Kovner (B, 07:25)
• Perspective from Experience: Wise market veterans express a sense of unease—something “feels not quite right.”
  • “I'm getting nervous about the stock market, and these aren't the kind of, like, doom at 11 guys... just fellows that I respect... have seen a lot of different cycles.” (B, 04:59)
• Kevin’s Stance: Now is the time to hedge or protect, not chase risk.

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2. Market Internals & Rotation: Healthy or Harbinger?

[09:28 – 16:17]

• Unusual Rotation: Since the start of the year, marked outperformance of small caps and equal-weighted indices compared to mega-cap tech (“Mag 7”).
  • “They went up the most they’ve ever gone up versus the NASDAQ 100 in terms of number of days…” (B, 10:06)
• Distress for Quants: Quantitative strategies got “destroyed” in early 2026, missing the magnitude and direction of the rotation.
• Portfolio Flows: Large institutional rebalancing may have driven much of this action (“sometimes it’s just the fact that someone big has changed their position”).
• Cautious Interpretation: Is this a “healthy” broadening or the last gasp before a market rollover?
  • “Is this a healthy rotation into the rest of the market… or is this kind of just the final last grasp as people chase the last few stocks… before we roll over?” (B, 12:47)

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3. Rolling Bubbles & Violent Rotations in Commodities

[16:20 – 20:19]

• Gold Miners’ Mania: Gold miner stocks, once hated, became a “rolling bubble”—and such bubbles are “getting just more and more violent.”
• Advice on Bubbles:
  • “If you hear yourself saying ‘it’s gone too far too fast’…put that pink ticket away and wait another couple weeks. Because it can always go farther than you can imagine.” (B, 18:32)
• Stanley Druckenmiller Example: Even seasoned pros can exit trades far too early (“Druckenmiller sold his Nvidia…like a double ago.” (B, 18:55))

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4. Cross-Asset Volatility & Risk Parity Regime Change

[19:45 – 26:03]

• Rebalancing Gets Messy: Frequent and outsized policy portfolio rebalancing in pensions and large allocators creates new instabilities.
  • “The last basically six months of these policy portfolio rebalances… is just happening too fast.” (A, 15:44)
• Breakdown of Old Correlations: For the first time in decades, US stocks, bonds, and the dollar are all falling together (“Liberation Day" moment). This undermines classic risk-parity constructs.
  • “For the first time in decades, we saw a situation where the US Dollar, the US Bond market, and the US Stock market all went down together. And…I think that's underappreciated…” (B, 22:41)
• Gold as New Hedge: Gold is becoming the preferred “ballast” in portfolios as bonds lose their hedging role.

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5. Global Flows, Currency Effects & US Relative Performance

[26:03 – 31:30]

• Asian Retail Flows: Persistent buying of US tech by Asian retail investors has kept the US market bid, but policy is now nudging a reversal (e.g., Korean tax law changes to encourage money back home).
  • “To me, that’s just the chasing of the final gasps of an AI bubble.” (B, 27:20)
• US Underperformance in Global Terms: Once FX-adjusted, US stocks have substantially lagged the rest of the world’s equities on both nominal and risk-adjusted (Sharpe ratio) bases.
  • “The MSCI World ex-US Index… had three times the sharp as the S&P 500 in 2025.” (B, 29:42)
• FX as the Overlooked Driver: Currency moves, not just local equity fundamentals, explain much of country-level returns outside the US.

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6. Commodities, Energy, and Underinvestment

[31:08 – 40:33]

• Energy Out of Favor (But Not Forever): Muir had previously avoided energy stocks (“felt the pain”), but turned bullish when US policy changes (regarding Venezuela) didn’t pan out as “oil bearish” as expected.
• Commodity Cycles: Underinvestment in supply across many commodities is key—when demand finally hits, response is limited and price spikes are sharp.
• China’s Shift to Scarcity Pricing: For the first time, China is less willing to underprice global commodities, altering the long-term supply/demand dynamics.
• Bullish Thesis: Energy and select commodities (aluminum, copper) are now “one of the few places you can hide in because no one owns it.”
  • “If we do get a rotation… you would find oil stocks actually outperform. And I know that seems ridiculous… but… nobody owns them.” (B, 38:44)
• Late-Cycle Rally Potential: Historically, energy rallies can continue even into economic contractions—sometimes “the last sector that sends the economy over the cliff.” (B, 40:13)

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7. The Macro Tourist’s Tactical Approach

[40:33 – 45:16]

• Beyond Equities: Sometimes the best risk/reward is in overlooked corners—such as energy bonds trading at distressed levels rather than equity.
• Macro Tourism Defined: Leaving the bank to explore markets broadly, not confined to a single “sandbox.”
  • “When I named myself the Macro Tourist, people used to say…it’s like a derogatory term, right?...But I love finding different niches, love finding different opportunities.” (B, 42:51)

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8. FX Markets: Volatility and Structural Dollar Weakness

[45:28 – 54:33]

• Dollar Overvalued: The strong dollar makes US assets and US vacations expensive for the world.
• Needed Rebalance: The dollar “needs to be fixed” (i.e., lower) to address deep imbalances in trade and capital accounts.
  • “On the other side of a lower US dollar is less money going into the US to fund these deficits and also to go invest in their financial assets and it means a lower stock market.” (B, 49:25)
• Tariffs & Trade Deficit Insight: Trade restrictions may briefly reduce deficits but at the cost of market performance—Trump’s policies highlighted this tradeoff.

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9. Global Fiscal Policy: The World Turns Keynesian

[54:33 – 62:38]

• Rest of World is Spending Again: After years of global “austerity,” Trump’s shifts forced other countries (Canada, Europe, Japan) to ramp up fiscal stimulus—ending the US’s role as sole global demand engine.
  • “We had this situation where the rest of the world wasn’t spending enough, okay. And then Trump comes along and all of a sudden… even the Germans are talking about spending.” (B, 60:25)
• Repatriation: Major funds (e.g., Japan’s GPIF) may bring money home, emphasizing deglobalization and new capital return priorities.

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10. The New Fed Chair: Trader vs. Central Banker?

[62:41 – 68:27]

• More Volatile Fed: New Chair Kevin Warsh is “more a trader than a central banker”—his instincts are to react, not wait for the data, likely leading to a more volatile policy stance.
  • “If it was just Kevin Warsh setting policy, I can assure you it would be way more volatile than it’s ever been.” (B, 66:06)
• Communication Style Change: Expect less telegraphing and more uncertainty in Fed moves (“I also think you should introduce some uncertainty into the decision…” (B, 67:10))
• Historical Anecdote: Warsh has a track record of “cheerleading” both for hikes and cuts, pivoting rapidly as markets move—a “cheerleader for traders in charge of the Fed.”

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11. MMT – The Outlier’s Framework

[68:30 – 70:53]

• Kevin’s Contrarian View: MMT (Modern Monetary Theory) is extremely useful for understanding how the economy operates—even if one disagrees with the policies it inspires.
  • “In terms of understanding the economy, [MMT is] one of the absolute best tools out there.” (B, 69:17)
• Advice: Separate the operational logic from the political overlays—study Warren Mosler’s foundational work.

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Notable Quotes and Memorable Moments

• “If you look at things like their cash level in terms of institutional investors… it's the lowest level ever.” (Kevin, 00:22)
• “What I'm really looking for is a consensus that is not being confirmed by the market.” — Bruce Kovner, quoted by Kevin (07:25)
• “If you hear yourself saying ‘it’s gone too far too fast’… put that pink ticket away and wait another couple weeks. Because it can always go farther than you can imagine.” (B, 18:32)
• “For the first time in decades, we saw a situation where the US Dollar, the US Bond market, and the US Stock market all went down together. And… that’s underappreciated…” (B, 22:41)
• “The MSCI World ex-US Index… had three times the sharp as the S&P 500 in 2025.” (B, 29:42)
• “I just love markets. I love finding different niches, love finding different opportunities.” (B, 42:51)
• “On the other side of a lower US dollar is less money going into the US to fund these deficits … and it means a lower stock market.” (B, 49:25)
• “If it was just Kevin Warsh setting policy, I can assure you it would be way more volatile than it’s ever been.” (B, 66:06)
• “In terms of understanding the economy, [MMT is] one of the absolute best tools out there.” (B, 69:17)

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Timestamps for Key Segments

| Segment | Description | Timestamp | |---------------------------|---------------------------------------------|-----------| | Sentiment extremes | Market sentiment, surveys | 00:22–08:27 | | Market rotation | Small caps, equal weight, quant damage | 09:28–16:17 | | Rolling bubbles | Gold, violent commodity moves | 16:20–20:19 | | Risk-parity breakdown | All assets down, new hedges | 19:45–26:03 | | Global flows & FX | Asian flows, US vs. world returns | 26:03–31:30 | | Commodities case study | Energy, aluminum, underinvestment | 31:08–40:33 | | Macro tourism | Trading bonds, niche opportunities | 40:33–45:16 | | FX regime shift | Dollar overvaluation, capital flows | 45:28–54:33 | | Global fiscal turns | Foreign spending, deglobalization | 54:33–62:38 | | Fed chair transition | Warsh’s volatility, trader vs. banker | 62:41–68:27 | | MMT & frameworks | Economic plumbing, misunderstood MMT | 68:30–70:53 |

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Conclusion

Kevin Muir delivers a cautionary, sharply analytical take on crowded sentiment, the risks of market consensus, rapid rotations, and the global macro cross-currents roiling both commodities and currencies. His advice is to stay hedged, stay curious, and don’t underestimate how far extremes can run—especially in a market where traditional hedges are failing and macro drivers are shifting. For investors seeking true “excess returns,” the message is to watch for signs beneath the surface and never be afraid to think contrarian—especially when the crowd is convinced.

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Follow Kevin Muir:

• The Macro Tourist
• Email: [e-mail]

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Transcript

[A]

Taxact can think of a million things.

[B]

More fun than filing taxes. TaxAct is going to name some now. Sitting in traffic, folding a fitted bedsheet, listening to your co worker talk about his fantasy team digging a hole. Digging an even larger hole next to that original hole. Unfortunately, TaxAct's filing software can't make taxes fun, but TaxAct can help you get them done. TaxAct, let's get them over with. If you look at things like their cash level in terms of institutional investors, how much cash they're holding in their portfolios, it's the lowest level ever. When you look at these things in terms of sentiment, you realize that everyone is all in. I'm just looking at this setup. And then you combine that with the fact that gold and silver are doing these crazy things and to me, you put it all together and it's a time to buy your protection. Now, it doesn't mean I think that we're going to go straight down from here. It just means that this is an opportunity to buy some hedges. One of the things that I'm really struggling with here is, is this healthy rotation into the rest of the market, like a broadening of the market where we can see small caps, mid caps value, equal weight, do better. Can we see a nice rotation out of the Mag 7 into everything else, like almost the immaculate rotation and. Or is this kind of just the final last grasp as people chase the last few stocks that are still cheap before we roll over?

[A]

You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use, where better questions lead to better decisions. And now, co host of the Market Huddle podcast, the macro tourist himself, old enough to be tragically hip and too young for a tragic hip replacement. Kevin Weir, welcome to Accessories.

[B]

Hey man, I can always count on you. And coming up with something witty. And for those who don't know, actually I had this Christmas special and I forgot to give you credit because I.

[A]

Went and leave credit for these things.

[B]

I should have. Although maybe you didn't want credit after.

[A]

You saw it, but no, it was really good. Tell them what the Christmas episode was.

[B]

You are one of the most kind of creative people in finance by far and away.

[A]

I'll take it. My wife and my dog back there are smiling right now. So I appreciate, I appreciate that. We're going to talk about a bunch of different stuff today. You've been on fire with macro tourist posts. So this is a long time coming to get into this. We're starting with this piece. It just came out before we pressed record on this. It's winner. We're buying straw hats. You know, I wouldn't. Are you a straw hat guy? I can picture you maybe.

[B]

So I need to wear a hat all the time, but no, I'm more of a baseball cap kind of guy.

[A]

Yeah.

[B]

And a toque. Here in Canada, we need to do toques. Do you know what a toque is?

[A]

I think I know what a toque is. Explain.

[B]

You guys call them. What do you guys, beanies?

[A]

Yeah, we call them beanies. Or. Yeah, hats. Anyway, those types of hats.

[B]

Yeah.

[A]

Which is what I picture you in.

[B]

Yeah, no, that is pom pom guy.

[A]

Do you like a pom?

[B]

Yeah, nothing wrong with a pom pom. I'm. I'm secure enough in my masculinity that I'll wear a pom pom.

[A]

Okay. And I figure on Halloween I could get you out there in, like, a fuzzy kangal or a bucket hat.

[B]

Nice.

[A]

Late 80s throwback. Okay, so what the hell are these hats? Let's talk about serious.

[B]

So there's a scene on Wall street, it's buy your straw hats in the winter. And basically it means, like, hedge when you can, not when you have to. Right. And one of the things that kind of just amazes me right now is that everyone is so bullish and there's just kind of falling all over themselves in terms of their enthusiasm for the stock market. And if I hear another person tell me that there's no way Trump's going to let the economy go, let the stock market go down, and there's no way that he's going to run it hot, and, you know, all these things. And when I'm sitting around thinking about the risk in this environment, and what I'm sensing is that there's all sorts of weird, strange things happening under the surface. You're seeing some changes in, like, what stocks are leading. You're seeing things like gold and silver taking off. And lately I've been getting some of my, you know, wise old friends, guys that are even older than me, like, old as dirt, and they're. They're sending me notes and they're saying things like, you know, I can't put my finger on it, but something just feels not quite right. You know, I'm getting nervous about the stock market, and these aren't the kind of, like, doom at 11. Guys that are screaming, you know, you gotta get short. The world's gonna end. These are just fellows that I respect that go long and, you know, sometimes short, and have been around For a long time and seen a lot of different cycles. And I've just kind of been putting together a whole bunch of the different aspects of things that have been troubling me. And I think to myself, well, you know what, actually this is the time, you know, when everyone's enthusiastic, when the sun's still shining and the flood hasn't hit the town. This is when you should be buying insurance, not later, when everyone sees the problems ahead of us. And so let's just talk a little bit about what I see in terms of that. So one of them is sentiment. There's the bank of America has this great global fund manager survey that's kind of the, the gold standard of it. And if you look at things like their cash level in terms of institutional investors, how much cash they're holding in their portfolios, it's the lowest level ever. Like ever. Not just like, or sorry, ever in the history of their survey. When you look at their, their risk appetite, which is kind of a self reported one, the only time it's been higher was in the midst of the 2022 frenzy. Otherwise it's at the highest level of risk taking that we've seen. Other things like the A I I in the American association of Individual Investors survey which by the way, you guys get Liz Ann Saunders on all the time and she is just gotta be the most underrated, awesome analyst there is out there. And every time you have her on, I'm like, I gotta watch the whole thing. I just, I just love it. And she's the one that, that really opened my eyes to this. She said, you know, you have to be careful with these surveys in terms of the soft versus the hard data, some of them are just kind of self reported. Are you bullish or bearish? And with the kind of mood changes and the social media, we're getting flip flopped from one side to the other. But the thing about the AAII survey is there's another one that shows your actual stock market exposure and that one is actually at the highest that it's been ever as well. So when you look at these things in terms of sentiment, you realize that everyone is all in. It's very much a kind of enthusiastic, exuberant world. A buddy was telling me that he was at a, well, I won't say the firm but was at a conference, one of these sell side firms, you know, macro conferences. And everyone was just talking about how bullish they were, how it was going to continue going up. AI was going to give us all these benefits. There was going to be all this stimulus from the one big, beautiful bill. Just anyways, from the sentiment perspective, Matt, it doesn't get any better than this. Then when we go and we look at the actual performance of the stocks, it's not really reflecting what we, what we're hearing. Right. Like, if you go, you know, I went and looked at the charts, I was surprised to see that the QQQs, the NASDAQ 100, hadn't hit a new high in like three months. Right. It's been going sideways. We, we haven't gone anywhere. S and P is the same way. And so one of the things that I love is this Bruce Kovner line. He says, what I'm really looking for is a consensus that is not being confirmed by the market. And why he's looking for that is that in essence, he's looking for something where everyone believes one way and something else is happening in the market. And then there's going to be a lot of people that are wrong. So I'm just looking at this setup and then you combine that with the fact that gold and silver doing these crazy things, and to me, you put it all together and it's a time to buy your protection. Now doesn't mean I think we're going to go straight down from here. It just means that this is an opportunity to buy some hedges.

[A]

So I love the, the layers of nuance that you have in this, especially with sentiment analysis, because sentiment analysis is intended to be confirmed by something else. One of the classic examples I always go to in my mind is in that bank of America fund manager survey where it's so, A, you're looking for complacency, that everybody's on the side, same side of the boat. B, you have to always recommend everybody always throws up the tail risk part, which I always think is the craziest part to reference to that entire report because it's like, where, where was pandemic right before COVID hit? It wasn't on the thing, but it stayed there for a full, like, year.

[B]

Yeah, well, I always laugh and say whatever everyone's worried about, I always discount the first one. And the reason I priced out the first one. Yeah, exactly.

[A]

Right.

[B]

By like a market crisis is by its very definition a surprise because if it wasn't a surprise, it wouldn't be a market crisis because everyone would have priced it in already that the possibility of it occurring. So I'm 100% with you.

[A]

All right, so let's talk about internal market movements since the turn of the year. So I think December into January has been wild. And to your point, the Q's sideways, but like equal weight S and P up. You've got a bunch of these things, small caps. The Russell 2000 doesn't just go down. Did you know?

[B]

Yeah. And did you see the damage that was done to the quants in the first couple of weeks of the year?

[A]

Talk about that. We've. I don't think any of the guests.

[B]

Have talked about this. It's just huge. Guys were just getting destroyed. They had all the wrong trades on. I think that we had. You know, you referenced the small caps. I think that they went up the most they've ever gone up versus the NASDAQ 100 in terms of number of days by. By, like, they beat the old record by like six days or something like that. It was just every single day you pull up the chart. It's just every day was just. And it really felt to me like that there was somebody big that was offside or had come in or someone else had come in and said, okay, in the new year, we're going to rebalance our portfolio. We're going to go and we're going to do this. And I've seen that happen a lot. And I always kind of think it's funny when people start trying to make not excuses, but reasons behind why it occurred. And sometimes it's just the fact that someone big has changed their position. And I was on the sell side at rbc, like, in Canada, and I remember sitting around and like, this one really sticks in my mind because I knew. The index trader told me, listen, we're gonna go. We're upping our position in equities. I need you here. Because we're gonna do a lot of trade. We got a lot of stock to buy. And I kept waiting for it. And I would phone him up and go, like, okay, so we're gonna do it today. And he says, well, no. And it ended up being like someone's kid got sick, right? Like, so one of the portfolio managers, kids got sick. And so we have a situation where all of a sudden it, you know, it gets. Finally the guy comes into work and we get the situation when the order's coming in and for a week, we buy the stock market and we send it way up to the moon. Like, we're just buying it and buying and buying it. And I'm sitting there and they're like, I'm watching the news, like, at night, and they're coming up with all these reasons why The Canadian stock market's rallying. Canadian stock market's rallying on good news because of this, this and this. They go, no, it's not. It's rallying, you know, because I'm buying it, because this client is allocating more money. And it could have just as easily been the week before and it just happened to be this week. And so when you're actually the one executing those orders, you realize that over the day to day, it's much more random than anyone understands. Yes, there, there's like elements that aren't, but there's also big, huge elements that are. And so when I thought about what happened at the beginning of the year, one of my worries was, was this just kind of some random change in a portfolio? And are we just seeing this rotation that is just someone rebalancing their portfolio, some big, huge whale out there that needs to rebalance it. So I reached out to one of my buddies who's kind of a whale himself, kind of an allocator, and we were talking about this. And one of the things that he brought to my attention that kind of worried me is that he reminded me that sometimes towards the end of the move, you get a move out into the cheap stocks right before everything rolls over. And so one of the things that I'm really struggling with here is, is this a healthy rotation into the rest of the market, Like a broadening of the market where we can see small caps, mid caps value, equal weight, do better. Can we see a nice rotation out of the Mag 7 into everything else? Like almost the immaculate rotation and. Or is this kind of just the final last grasp as people chase the last few stocks that are still cheap before we roll over. That's back to my, you know, straw hats. One of the reasons why I think it's time, at the very least on the possibility that that is what's occurring here, why you should be looking at the, you know, owning at least some protection out there. They always tell you there's a catch, a compromise, an asterisk. Term supply. See store for details. May be less than advertised. May vary by mood. Probably Sprite. Zero sugar. It's different. It's the lemon lime flavored refreshment you want with zero sugar. So no fast voice, no caveats, just refreshment. This is Sprite Zero sugar. Obey your thirst. Time is valuable. That's why Lowe's blueprint takeoffs turn blueprints into quotes faster. Bring us your plans and we'll generate itemized material lists to make quoting easier so you can get back to building plus. At the Lowe's pro desk, you get access to thousands of building materials not sold in store. And when your order's ready, we'll deliver everything to the job site. Improving is easy at Lowe's.

[A]

There's a wrinkle inside of this. And this is from I used to do a lot of work, still do a decent amount of work with policy portfolios, pensions, stuff like that.

[B]

Okay.

[A]

And I always notice this just because so many conversations over the years, it just pushes my brain into it. So we're coming up on 1231 last year. All I can think of is all the people who need to rebalance because they just had another year above target for their portfolio performance.

[B]

Right.

[A]

And like they felt it at the end of like Q3, but now coming into Q4, they're like, I might be sitting on the next two years worth of like distributions or like all these planning strategies that come into this. Yeah, that like I gotta rebalance and lock this in. The weird part about that policy portfolio rebalancing that, I'm like, I know this is happening that first week of January is now because of that style rotation. A lot of the stuff they would have rebalanced into also just ran farther than it was supposed to coming into the end of January.

[B]

Right.

[A]

And I'm like, the last basically six months of these policy portfolio rebalances stuff is just happening too fast and sooner or later some of these kids gonna miss soccer practice or whatever the hell is going on. And that's where my brain goes.

[B]

Yeah. And, and to your point as well, about the fact that one of the things is the, the Mag 7 and the Concentration in those markets in terms of how big they are and then the, versus the other parts of the market, I think we've kind of forgotten how small some of those other markets are.

[A]

Say more about that. Give some examples. Yeah, like, so that's a great point.

[B]

Gold, like gold stock, like the gold miners. It was only a year ago you couldn't give these things away, that everyone hated them. Even as the gold stock, even as gold was going up, Everyone said, people, gold, central banks buy gold, they don't buy gold miners. Right. There was, there was nothing. And I, you know, I wrote a piece saying, okay, eventually they're going to start making some money. Like they can only blow. So the, the, the, the CEOs can only blow so much more money and eventually it's going to start going to the bottom line. Then you're going to get the quant guys Buying it because the EPS revisions are going to go higher than it's going to feed upon itself. There's only so many private jets they can buy. They couldn't even, they couldn't lose money fast enough given how quickly gold was rising. And all of a sudden, out of nowhere, like the gold miners went just ballistic. And even though I was a bull, I never imagined they would be this violent. And I think if I was going to give people advice about one thing, it's that don't underestimate when we get these rotations, how violent the moves can be. And I kind of coined this term way back when as like a series of mini rolling bubbles. And it was these, these things that I kind of noticed was that all of a sudden everyone would get excited about one thing. It would go up for a year. And I kind of always thought about it. It would be like the smart hedge fund would buy it, he'd tell his buddies, then all of a sudden, you know, the tech, the techno, the, the, the kind of guys that are the chart readers would buy it because it was doing better. Then they would go on TV and it would get some momentum and things like that, and then it would just kind of go, and it'd be a year later and then it would roll over again and they go to the next one. And this kind of cycle went through and you'd see it occurring. You know, it'd be EVs one time and then it's like, you know, right now it's, it's gold miners. But it was also bitcoin at one point, like these series of rolling bubbles. But bubbles are getting just kind of more and more violent. And I think that's one of the things that I think people should be really aware of. If you hear yourself saying it's gone too far too fast. And that's fine if you want to sell your long, but if you got out a pink ticket trying to go short and you say to yourself, it's gone too far too fast, put that pink ticket away and wait another couple weeks. Because it can always go farther than you can imagine. Like, let's not forget Stanley Druckenmiller sold his Nvidia, what, like, like 100% ago? Like double a double ago.

[A]

Easily a double ago.

[B]

Yeah, right. Yeah. Like, this is one of the smartest, most, you know, shrewd investors in the world thought it had gone too far too fast. And it gone even.

[A]

It went even crazier, I think, inside of this. And I want to take this to Volatility next and cross asset volatility, asset class volatility. Because the. Too far too fast doesn't bother me when it's a meme stock or it's like an idea that everybody's bowled up on. It doesn't bother me because I'm like, I probably know or can guess who the players are pushing money this way. What bothers me is when I start to go, the people who are trying to do this responsibly are going to start tripping. Because this beginning of this year is the example. They rebalance responsibly. In 2024, the responsible rebalancing carried along nicely, and it's all right. No, no big stress. But in 2025, as the year progressed, it's like, well, we rebalanced out of that, and then the thing we rebalanced out of now requires another rebalance.

[B]

Yeah.

[A]

And it's kind of that whole, like, once you sold, how do you get back in? And then.

[B]

Oh, yeah, yeah. That's where.

[A]

Cross that asset. Cross asset volatility starts to become a real problem to me because, like, those ripple effects make it.

[B]

Yeah.

[A]

They really mess with you. You can trip for sure.

[B]

And I think also the. The different assets are affecting, like. Sorry, the. The precious metals. To me. Yeah, talk. Yeah, talk about this, like, because that is. That is a worrisome rise. Like, at a certain point, you. You start to worry about it, and.

[A]

Then we sit there too precious.

[B]

Yeah. Um, and that the reality is that the gold was going up for. For reasons that were actually because people were worried about the system. And. And. And. And it's more complicated than that. But at the end of the day, that is why folks were buying gold. They were worried about the financial system. And when you have that sort of worry, eventually people start to look and say, hey, look, gold's going up at this rate. You know, maybe something else is going on. It. It causes concern. Right. And. And I really viewed the gold rally as unhealthy. And it was part of the reason that I thought. I think that a lot of my buddies were saying it's not. They were worried about what they were seeing and all the different things. It. Like. Like, let's stop and think about other times gold rallied like this. They weren't good times. Right. Like, it's not like you go say, gold rising is terrific. And I know it felt good for a lot of us because, like, you know, I was a gold bug. I had my good share of gold. I obviously sold it too early like a chump. Like I always do. But the reality is that I was in. I was enjoying it. I think a lot of people enjoyed it. I think there was a lot of investors who thought this was great. In general, something going up is all terrific. Um, but I think that when you stop and think about it from a kind of a, a system or point of view, when you start thinking about what this means for the global financial system, it was actually a terrible sign. It was showing that there was less confidence in our underlying fundamental money. And that is the real problem. And the signal it was sent, that was sending. And I think it's actually more complicated than that. I think there was another element of, of the gold rise that people probably overlooked. And I, and I first came upon this. I think it was Dean Kernut with this Alpha exchange. He would talk about this, and he was talking about how gold was a great hedge asset to marry with your risk assets. And then like, if we think back to the original risk parody and the fact that you would go and you would, you know, combine stocks with bonds, and it was like just a beautiful portfolio construction tool because you had this, this asset, which was bonds, that was in the midst of this secular decline in interest rates, rise in prices, that was also negatively correlated to your risk asset. So you almost. It was like, almost like a hedge that made you money, right? Because when. When stuff got really ugly in terms of the economy or the markets, your bonds would go bid and then your stocks would go down, but your bonds, if you owned enough bonds, you'd be okay. And then meanwhile, on the whole, bonds would also just keep carrying positively and going, you know, up, up and up. Liberation Day. That all changed. And for the first time in decades, we saw a situation where the US Dollar, the US Bond market, and the US Stock market all went down together. And I think that was. That's underappreciated in terms of how big a deal that was. Because if you think about, let's just take a European pension fund, they sit there, they buy their Mag 7, because in the past, the US has been the only place with growth. And so they own these US dollar assets. And then they can say to themselves, hey, you know what? The other great part about this is that when stuff goes wrong, the US Dollar goes bid. So we actually have a situation where, when things are going down, when the met. When my Mag 7 stock is going down, I'm actually picking up on the US dollar currency. So my overall volatility is lower. So, well, therefore I can buy more U.S. stocks. Well, what happens when all of a sudden that correlation becomes positive and the US dollar goes down while the stocks are going down, instead of them owning, you know, being able to own more, they actually have to own less. And that's part of the reason that I actually, I'm kind of negative on US Stocks because I think that they're over owned and things like that. But back to gold. I think that the bonds were replaced with gold that ended up being a new hedge asset that you could own alongside your risk assets that could go up on its own in the secular gold bull market, yet also be a ballast to your portfolio.

[A]

I think this is a fascinating take because I think you can actually map that back to the 2022 for swift seizure of the Russian assets. And I think that's where it's really interesting to talk to you, to talk to Rupert Mitchell about this stuff. A non US perspective on how this goes into portfolio construction. And I will even wrap it in to say that the great debatably non financial movie Charlie and the Chocolate Factory or the book if you really want to go road Dahlia where you buy the golden ticket and you realize it's a horror show on the other side.

[B]

You want to comment on that? I'm get. Get myself in trouble. I won't be allowed into your country if I start saying this stuff like that.

[A]

Let me just say don't forget to burp when you're up the highs. All right, take me, take me to this because that, that vol pickup in bonds, in commodities, in currencies. I'm with you on this. This is where it feels disorienting. Like why hasn't this crept into stocks if all of a sudden gold is a safe haven asset in all these portfolios and are we just waiting for that? That, that's my question.

[B]

So that's a, that's a great question. Personally, I think one of the issues that, that has kept the US stock market bid more than it should has been the Asian retails love affair with AI. Right. And you've seen the Koreans, Japanese just continuing to plow money into that. And so much so that it recently you saw the Korean government on Christmas Eve sneak a rule change in and I, I can't believe it wasn't on purpose because you put something through on Christmas Eve that's like the Friday night dirty or whatever they say in terms of like releasing bad earnings like a Friday at 6 o', clock, Friday night, 6 o'. Clock. Like you're releasing a change in tax law on Christmas Eve. You're Doing it on purpose. Right. So they made this change in tax law that basically tried to encourage investors, Korean investors, to sell their foreign assets and to bring them back home. Like they encourage them repatriation. And I think that we're getting to the point where this will happen because the reality is that it almost has to, because a lot of these countries are spending more money. They're going to need the money at home. I think that we're going to see more of that money coming back home. And whether, you know, this was a tax incentive, but it might as well have just been a tax penalty. It's the same thing. Right? And so what really worries me is that although there's been this kind of one last gasp into the US Stock market by these, you know, foreign things that foreign investors. And by the way, I have this great chart that shows the actual amount of foreign buying of equities. And it's like through the roof in terms of like, numbers that we've never seen over the last 12 months. And to me, that's just the chasing of the final gasps of an AI bubble. But as that money needs to come back home, I think you're going to see it being sold in the US and it's going to create a lot of volatility, a lot of tension. There's going to be foreign currency wars. I think that'll be one of the next steps. And then turn back to your question about when we finally roll over. One of the things that I think a lot of folks miss is, is that, you know, you'll see guys on TV saying, oh, all you people that said sell America. You don't understand. You know, look at how much we're rallying. You guys are just a bunch of idiots. Like, there's a famous ETF specialist on Bloomberg that just loves going on about all the pannikins that were saying, sell America. And he'll go, look, the Canadian Pension Fund owns US stocks and look how great they've done. They're up 17% or whatever it is on their S&P 500. But what he doesn't ever stop to think about is the fact that the Canadian stock market's up 35% in terms of, you know, compare that. You look at underperformance. Yeah, you look at 25, like, go pull up world stock markets for 20, 25 and then look at them on a nominal basis and the US Is still is at the bottom. But then look at them on a US Dollar basis. Like, put all the currencies the same and it's even shockingly more then go and risk adjust them like you know, figure out the Sharpe and it's like unbelievable. I think that the MSCI World X US Index, so basically every other stock in the world except the US one had three times the sharp as the S&P 500 in in 2025. Now I'm gonna get in all sorts of trouble because I'm gonna get all these things about Sharp doesn't count. You should be using Sortino and I like whatever. Okay, whatever. It doesn't matter. The reality is a risk adjusted the rest of the world's doing better. This episode is brought to you by Indeed. Stop waiting around for the perfect candidate. Instead, use Indeed Sponsored Jobs to find the right people with the right right skills fast. It's a simple way to make sure your listing is the first candidate. C According to Indeed data, Sponsored Jobs have four times more applicants than non sponsored jobs. So go build your dream team today with Indeed. Get a $75 sponsored job credit at Indeed.com podcast terms and conditions apply with Venmo Stash. A tag on one hand and ordering a ride in the other means you're stacking cash back with Venmo Stash. Get up to 5% cash back when you pick a bundle of your favorite brands. Earn more cash when you do more with Stash. Venmo Stash terms exclusions apply. Max $100 cash back per month. See terms of Venmo Me.

[A]

We're going to invent an AI friend named Sortino. We're going to have him just like magically appear in these conversations.

[B]

Always the quant guy that has to be like, oh, you shouldn't use Sharp. Right? Like you got to use the Sortino. Like, yeah, okay, I get it.

[A]

It's certainly the right thing to say. And your disclaimer is approved with excess returns stamps. Talk about in the us if not big cap tech, if not AI. You've been writing a lot about energy and you've been actually saying like, not yet, not yet, not yet for a long time. That's been changing recently. Yeah, talk to me about energy.

[B]

So you're right, I was kind of on the fence about energy. I was trying to just not touch it. All my friends were feeling the pain from it because they were all long, you know, was the butt of all sorts of jokes, you know, like, why is oil down? Because it's a day ending in the letter Y. It was just, it felt very much the same sort of behavior that the gold miners felt like the previous year. Like, like, I, my buddy Paulo Macro has this thing, you know, that guy on the, on the desk that says, and he's got a sign out in front and like, convince me of this. He goes and it says something like, convince me that stocks, gold stocks, or sorry, energy stocks aren't what gold stocks were in 2025. Like, whatever, you know, meaning that the energy is the new gold stocks. So, yeah, I kind of changed recently. I went and said, this is it, this is time. And, and it happened when Trump went and invaded or, sorry, Don, invaded issue. I'm going to get in trouble. I'm definitely back. Definitely not going to be allowed into your country.

[A]

Kicked out of our shock.

[B]

This will get censored when, when he liberated Venezuelan from the, the, the terrible dictator. And what we got was this kind of just huge bearish rush in terms of, you remember, or everyone started selling oil. All these, you know, you know, Trumponians telling us how he was playing 4D chess and there was going to be this rush of enter of, of oil to the market because we've now opened up all this, you know, this locked in crude. Wouldn't surprise me at all of that. Bloomberg ETF analysts was talking about how, you know, he's just, you know, Canada is no longer needed. And I stopped and thought about this. I'm like, okay, you know, I get it. They're going there. And I'm like, I started digging around, looking at how difficult it was to get this oil out of Venezuela and I'm like, this is. Nobody's going to invest in this. This is ridiculous. This is going to need so much money, right? Like, this is going to need just tons and tons of capital. Not only that, we're already at a price where existing oil wells are no longer new exploration isn't being funded. I think Harold Ham said for the first time, did he shut down wells in the Balkan or at the very least, he's not, he's not, he's not exploring for any nuance, right? Like, so we're at the point where oil is no longer profitable. And so everyone always tells me that Trump's going to, you know, put oil price down. And I always already say, like, he already has. We're at the stage where it really can't go much lower unless you just want to kill the entire US energy industry. So I stopped and I thought about into that and I said, you know what? This is it. This is kind of like the sell the rumor by, you know, buy the news and kind of in reverse. And I said, this is the time to buy it. So I just stood in there and within a week, people kind of had figured out that, that Venezuela was no longer what we thought it was. And then I got lucky in terms of there was a wholesale, you know, rush into assets. Combine that with some problems, you know, worries about Iran and we've run a while now, but kind of bigger picture. One of the things I just want to talk about in terms of commodities and I think you can take this story and apply it to a variety of different commodities. And earlier in the year, I applied it to aluminum. Aluminum was a perfect example. And let me just walk you through why I got bullish on aluminum was we had this situation where, you know, aluminum's used in a lot of electrical things. There's, there's a growing demand for it and stuff like that. There's a good buy, there's a good story. On the demand side, the trouble was always on the supply side in that we had this situation was where whenever the demand picked up and the price picked up, we saw that there was Chinese ready to make another aluminum plant and just kind of, you know, supply it. So you're sitting there and you're like, I can't remember the number. Like us used to have, I don't know, 20, 25 aluminum smelters. They're down to like four. Like, it's just, it's been absolutely crushed. So nobody's invested in aluminum for just like a couple of decades now because China's just been eating that lunch. So China comes out and they say, you know, we're going to do this anti involution thing where we're no longer going to put prices of everything down to like the absolute money point where nobody makes any money and nobody believes them. Like, nobody believes that this is going to be the case. They're all like, oh no, she's going to keep doing this. And I'm like, I'm like, you actually look at this guy, when he says he's going to do something, he does it right? Like, it's kind of like the opposite of our friend Trump, you know, says he's going to do a lot of things and then doesn't do anything. And like people, the market's too quick to believe them. And then Trump, you know, she doesn't, you know, do a lot of fanfare. He just kind of says it and then quietly goes about doing it. Anyways, going back to aluminum, we had this situation where for the first time we were rushing up against point where demand was Pumping up against where in the previously China would have supplied it. And all of a sudden they said, we're not going to supply it. But not only that, we have this situation where nobody has invested in aluminum for like a decade or two. So getting more supply, getting it online, it's going to be really difficult. This is the exact same story that we've seen in copper, right? Like copper, we went and we had this huge BRICS build out in the 2000s, right? It was that whole Jim O' Neill BRICS, you know, China growing, stuff like that. And they threw money at it and they made so much excess supply that the reality was that nobody could make any money. And so what's happened now is that we finally kind of chug through all this excess supply. And the reality is that any new supply is going to be really difficult to bring online. And it's. And I. And the market is underappreciating how much we've underinvested in commodity supply expansion, along with the fact that we've just gone from a world where we in essence had global, you know, free trade, so nobody needed to stockpile anything, to a world where all of a sudden you're worried about your neighbor selling you stuff, so everyone needs to own more of it. So we have this just huge, massive resource bid that's occurring in terms of all these, you know, resources being underinvested in terms of supply with rising demand. Also, you know, the fact is everyone else is now all of a sudden spending on a fiscal basis, doing deficit spending. So we have all this deficit spending happening and there's not enough supply and going back to energy, just bringing it back. It's the same story there. And yes, I understand the world's going more electric and there's all sorts of different things of that, but at the end of the day, you know, there's still a lot of oil that's being used. It's still. It's still going up. Even China, even though the fact that their percentage of electric, it keeps going up. But the reality is that their absolute usage of oil continues to go up. And so I just look at energy as being one of the few places that you can hide in because no one owns it. Everyone's so bearish on it. And so if we do get a rotation, if we did get a situation where the economy rolled over, and everyone would say, in an economy rolling over, you should sell oil. I think the economy rolled over, you would find oil stocks actually outperform. And I know that seems ridiculous, but the reason they would outperform is because nobody owns them. So they would just be like, let's get back to bench.

[A]

It's kind of funny in that scenario too because I flashback to, I flashback to 2008. I flashback to you have a giant economic contraction on your hands, but nobody owns these things and there's a need for this supply. And that was the peak oil run.

[B]

Yeah.

[A]

It's not like we haven't seen a version of this before.

[B]

Well, and if you look, it wasn't just 2008, 2000, there was oil run into the end. It's often the last sector that actually sends the economy over the cliff. Right. So if we are going to assume it's going to be a traditional cycle, this would be what you'd expect to rally at the end.

[A]

Talk a little bit about, and this is one of the things I love seeing in the macro tourist stuff is you'll look at not just how the equities are valued, how the equities are priced, how the equities are trading, but also the spot curve. Like, you'll look at the oil curve, you'll observe when something does or doesn't move, sometimes a few years out. That's not something that most people are going to look at. Why do you do that? How's that useful to you?

[B]

Well, sometimes it's for trade construction. I'll go and I'll be like, oh, I can go and buy something a year or two out that's cheaper. That that'll be a better risk reward. One of the things that I remember specifically is that last time, not when oil went negative, but the previous time, oil had the kind of the shale and then we had the Saudis deciding they were going to send prices way back down. We had this really bad. I think it was 17. I can't remember the exact point, but there was a, there was a point where I got bullish. Oil, like it had gone down, down, down, down. And we had gotten to this point. I'm like, oh, I'm gonna go, you know, buy some oil. And I looked at the curve and I was like, oh man, the curve is just like, I'm gonna have to pay up for forward, you know, oil. And like, there's a lot that's gonna be difficult. Like I'm gonna have trouble making money there. Like that's already discounting. And then I said, I went and looked at the equities and the trouble was that the, the price of these companies have gone down below the bond price. So the equities were trading like call options, right? And so I was like, oh geez, you know, like, like the equities are trading like call options. I don't want to buy that. Then I looked at it and it's like, oh, these bonds, like these, these, these corporate bonds are trading like death. Nobody wants to own them. Nobody wants to own a 60 cent bond, right? Like, there's very few guys, I'm like, I could buy this and if I'm wrong, I'll, I'll own the next round of equity. Like, like that's what I thought to myself. I'm like, okay, so I'll be the next equity holder if I'm wrong on this. And if I'm right, you know, these things will, you know, yield me 20% or whatever. And so for one year I just sat there and I traded, you know, corporate energy bonds and like, and, and so that's one, you know, when I, when I named myself the Macro tourist, people used to say to me, you know, it's like a derogatory term, right?

[A]

No, that's insulting.

[B]

Yeah, it's like got it right.

[A]

Gotta lean into it though.

[B]

Yeah. But at the same time, one of the, the reasons that I left the bank was I was sitting there just being forced to trade one little thing and I was, I just love markets. I love finding different niches, I love finding different opportunities. And I, I went and I went on my own so that I could go and find the things that were the best risk reward. So for that point I thought that the bonds were the best risk reward. So I ended up being a corporate bond trader. And Matt, you'll love this. I had the other day, I was, I was in one of my stir groups and for those who don't know what a stir is, it's short term interest rate. And these traders, they're the weirdest bunch of them all. Like, like there's no doubt about it and they won't even be upset. I say that they'll just be like.

[A]

Yeah, of course we're stirring Badge of honor.

[B]

And they, and they were sharing some article about this just weird trade where someone had figured out tips when, when the government doesn't produce a, an, an inflation forecast. Like you know how they miss the, the inflation for that one month There was some strange trade where tips approximated it or you still earned it in the tips, but you didn't earn it in the, in the inflation swap or I've got it backwards to the other, but the reality was that there was a bunch of traders that had like figured this out. Like real shrewd guys or folks and they had gone and done the arb and like to me I'm like yeah man, that's just awesome. And like there like I love figuring stuff out like that, that the market misses and that you go and you're the person that figures that out and you're like I'm going to nail this trade. And it's like a terrific trade. There's no better feeling in the world. And in fact if there's anything that like I would say was one of my weaknesses, it's the desire to find those trades instead of just the easy trades. Like sometimes I'm so busy trying to be. I'm like, why are you making your life so hard? Like why don't you just go buy spoons?

[A]

Listen kids, dad's got to go read the fine print on exactly how this, this monthly tips is going to be calculated. I'm going to need three days.

[B]

But I can see you appreciate that. You appreciate that trade.

[A]

Well, because I appreciate the Hardy Boys and Nancy Drew and stuff like that too. I like a good amount of torture.

[B]

Yeah.

[A]

In a, in a. All right. So big deep markets, a place where. And I, I extra appreciate the tourism on this because I feel like it's supposed to be sleepy, boring, liquid deep and that's fx. What the hell is going on in fx? Because I also feel like this is much like nobody used to talk about gold and now everybody's talking about gold. Nobody talks about fx. My fall out of the seat moment was getting ready for some year end stuff and looking at just how much equity markets around the world like X US moved because of changes in the dollar. Oh yeah, I went. This is an earnings growth, this is multiple expansion in fx explaining all these country returns and this can't be good. This can't be good. We heard you.

[B]

Nine years of bring back the snack wrap and you've won. But maybe you should have asked for more. Say hello to the hot honey snack wrap. Now you've really won. Go to McDonald's and get it while you can. So I've been a huge US dollar bear and I think it's just starting. And one of the things I also believe is that FX Vol. Is just as a, is a screaming buy. And I've been saying this for six months and I've been just wrong. Like there's no doubt I've been wrong. Like there's just, there's, there's no couching this. It's, it's been boring, but I'm not giving up. And, and, and one of the things that I think is that don't own FX fall over the short run, buy longer dated FX fall. And ultimately why do I feel this way? It's back to this thing about the US capital account deficit is just so monstrous. And then ultimately if we think about the imbalances in the world, we think about what everyone's upset about, about Americans losing jobs, about the K shaped economy. A lot of it is based upon that imbalance. It's based upon this huge financialization. It's made it difficult for America to compete on a manufacturing basis because everyone's coming in and buying your stocks, sending your currency higher. So it makes those with assets richer, but it makes it difficult for you to compete on the world stage. And when you think about how to fix this, like how to, you know, zero those imbalances or at least improve them, I don't see how you can do it without fixing the value of the dollar. And it has to be lower. Like I have a lot of good American friends and they go, they travel around the world and they're like, like one guy is like email because he travels a lot. He goes, oh man, I'm in Japan, you should see how cheap it is here. And he goes, I'm in Brazil, you should see how cheap it is here. I'm in like Bordeaux, I can't believe Bordeaux is this cheap. And I'm like, dude, like do you not see the common, you know, thread to this? It's not that everywhere else is so cheap, it's that your currency is so expensive. And like if you go and you're want to know, like in terms of travelers, like think about going to Miami versus going to Costa del Sol in Spain, like go and just dial those two vacations, right? Like it's not even close. Like in terms of like, I bet you Miami would be at least twice as much for me when I go look at it. And so back to the currency, I think it needs to be fixed. And when I see a situation that is that big of an imbalance and I see all the pain that it's causing and then I seen how ultimately that fixing it would help a lot of things. I think we're eventually going to get there and the trouble is we're going to get there in a way that's difficult. And part of the reason that I that that folks have been hesitant to, to get there is because on the other side of a lower US dollar is less money going into the US to fund these deficits and also to go invest in their financial assets and it means a lower stock market. And so when I originally, you know, came up with this piece in, in early 2025 where I was talking about the tariffs and I was, and I was saying how Trump's goal is to get the trade deficit down like zero, like he believes in zero. And let's just put aside, you know, whether it's right or wrong. Let's just say we get to zero, we get there, that means that there's going to be less money getting recycled into the US and that. And like, if you just think about what happens now, you guys, you buy, you know, iPhone from China. You, you know, you pay US dollars, but someone has to buy the Chinese iPhone. So when you, they, some company somewhere, Apple I guess, buys it in renminbi and the reality is that they get the, the, the Chinese company that's building it gets US Dollars instead of converting that into renminbi, they say, oh wait, you know what, the bank of People's bank of China doesn't want this to go up. So People's bank of China will sell me, the renminbi, will take the US Dollars and we'll just leave the US dollars in there, you know, and recycle them into the US So that we can have a situation where the, the renminbi doesn't go up in price, right? Like that is in essence what's caused this huge imbalance is the fact that the, these currencies have not been allowed to rise. And so if we think about, if that gets reversed and changes, it means that that money that was getting recycled in the US that was buying bonds and then someone else was buying stocks or whatever and was buying all those things, it comes out of the US So it means that the stock market goes down. So back to the trade deficit. One point I, someone had sent me this chart that was the change in the trade deficit versus the change in the Nasdaq. And it was a one year change in the trade deficit versus the one year change in the nasdaq. And they sent me this thing and it was like on, like they had made it. And I thought to myself, there's no way that's right because it was like almost it was too, right? So I did the old Reagan like trust but verify. So I recreated it myself. I recreated it and yeah, it's like shockingly accurate like that the change in the trade deficit affects the change in the, in the nasdaq. So when I wrote this piece about the tariffs in early 2025, before the tariffs came, because I kept saying, he's going to do them, he's going to do them. And you guys, because remember, there's lots of folks thought he wasn't going to do them. It's all just part of the art of the deal and stuff. I go, no, he's going to do them. He loves them. Now. He ended up tacoing way faster than I ever imagined. But I got the call right about him doing them. But I had this really smart pod, you know, pod shop, macro buddy that told me. He goes, you know what? Even if he does them, once he realizes the cost of reducing the trade deficit, he's going to give up on reducing the trade deficit. And sure enough, that was the correct call. That guy was wiser than me because he understood that Trump was going to taco. So back to this thing about the US Dollar. Ultimately, the US Dollar needs to go lower and the trade deficit needs to be, you know, reduced for the, a lot of the imbalances in the economy and for the rebalancing of, you know, towards U.S. workers to occur. The trouble is that rebalancing towards U.S. workers will come at the cost of a lower stock market. And that is the dilemma that everyone is trying to stick handle, right? They, they want the US worker to, to have a job, they want all these things, but they don't want a US Stock market to be lower. And I, I think it's going to like the market's going to dictate it eventually. And not only that, you go around threatening, you know, the people who are buying your bonds. Generally, that's not the greatest way to encourage people to buy more bonds, right? Like, that's the real problem, right? Like you're running this huge capital deficit and then you're going and it's like yelling at your customers and, and he doesn't think that they're customers and they aren't in terms of you guys are the customers for the goods, but the other countries are the customers for your financialization. And I think that that's the part that a lot of folks are missing.

[A]

Inside of this is this idea that you encourage, you strong arm, you do whatever to say you need to spend more money. And we're seeing it in Europe, we're seeing it in China, we're seeing in other corners of the world where governments are spending money, they're doing their version of stimulus to basically get spending up. But for the first time, there's not Stimulus, like through trade, where the US Is the beneficiary of that external spending. At least not directly. Maybe. Maybe in a weird, dense, fabricated way they are. It feels like this is another artifact of what you're just describing.

[B]

Like, yeah, so listen, the, the, the, the system as it was needed adjusting. I will be the first to say that. And it's not like everything Trump does is bad because he's going to rightfully point out that, you know, the rest of the world wasn't doing their share in NATO. He's 100% correct. I'm embarrassed as a Canadian that we promised that we would do X percent of gdp. Camera what the number was, but we were doing half. He's right. He's right. It's embarrassing that, that we did not, you know, spend our promised, agreed to amount of, of money on, on NATO. Now he's probably gone a little far and the rest of the world is kind of now waking up to the fact that he's not just forcing people to do their share, they're also realizing that the system as they know it has just been upended. And I would argue that I look at the last 20 years and I look at the wealth that was created in the US and the fact that you guys have X percent of the world's wealth, whatever it is, 70%, I don't know what it is. It's big. It's a big number, right?

[A]

Big number.

[B]

Do you guys have been the biggest beneficiaries of globalization? You guys figured it out. You have, you know, understood how to do it. And when I hear him say the, the world's ripping the US off, I'm like, okay, so you guys have 70% of the world's wealth. What, you're supposed to have 80. Like, is it 90? And, and, and I should just see the boomer logic. I'm like, maybe you don't have a problem with the, like, the system has worked great for you guys. What you've had is a redistribution problem. Right? The reality is that the, the, the, the fellow that in, you know, Arkansas that was making a John Deere tractor is now without a job and can't figure it out. And Elon Musk has, you know, or, you know, earliest Ken Griffin, Craig Griffin has more dinosaur bones. He's wealthier from that point. Like, it's just becoming more and more concentrated. But back to your point about the fiscal stimulus. So the whole world has woken up to this fact that the US has changed and we need to change now. I'm going to Talk about Canada, because Canada is easy for me because I'm here and I see it happening here. So we, you know, had 10 years, a decade plus of not doing very good things with our economy. Stupid stuff. You know, no sense crying over spill milk. It was dumb. We weren't focusing on the economy. We weren't building pipelines. We were focusing, we were stopping LNG terminals. Like, I think at one point someone told me the German government came to us and said, listen, we'll build and pay for the terminal. You just let us put it there, you know, because we need, you know, we don't want to rely on Russian. And we, and this, the guy said no, like just absolutely, just brain dead things, okay? But now all of a sudden we wake up and we have Trump, you know, threatening our sovereignty and we're like, holy smokes. This isn't just a little bit of we need to change. This is an existential crisis. And so now going back to pre Trump or pre Liberation Day or you know, pre2025, you looked at the world's deficits to GDP and if I told the average, you know, person that the American deficit to GDP was 7% and then asked them what Canada's, they'd say, well, if the US is seven, those guys are socialists, must be ten. What about Japan? Well, Japan, I hear there's all sorts of debt and there's all sorts of problems. They spend like bridges to nowhere. That must be like 11. What about Europe? Oh, those guys are full on socialists. They, they must be 12 or whatever. But the reality was that when you looked at the deficits of the spending of other governments, the U.S. was running a 7% deficit to GDP. Canada was 2, 2 and a half. U.S. europe was 2, Japan was 2 and a half. They were low numbers, austerity, effectively. Yeah. And in fact, I have been arguing for a long time that we weren't spending enough and that this was actually all. The problem was that America was the only one willing to spend and therefore they had all the growth money was attracted to their, made us. So there was kind of a vicious circle, right? Like if you're sitting there, you're a smart Italian young person and you're sitting there going, well, my economy stinks. There's nothing going on. Like the economy, like I have negative interest rates, like, and stop and think about negative interest rates, how stupid that is. You're sitting there, you're like a, an old Italian grandma and you're trying to save in some extra money to send.

[A]

Your, you'd Be nice to Nona with this metaphor.

[B]

I love, I love the old Italian grandmas. And so she's trying to save some money to send her, you know, grandson to university. And the government, instead of giving her more as she saves, is actually taking it away from her. So what does that make her do that makes her, you know, have to save even more? It's ridiculous. They got it all backwards. It was like completely just brain dead policies anyway. So going back to this, we had this situation where the rest of the world wasn't spending enough, okay. And then Trump comes along and all of a sudden you have the Germans even going, oh geez, you know what? We used to have this 0.35% debt break. We gotta spend some more. Right? Like this is like even the, you know, it's serious when the Germans are talking about spending. And so Canada, we're gonna go from two to five or four or whatever it is. Europe's gonna go from two to four. And so the rest of the world is spending more money. And here's part of the reason I think the currencies are gonna end up being a bigger deal is that we're gonna see a situation where in the past there was excess capital because there wasn't enough people spend, so everyone, there was money flushing around, stuff like that. Now all of a sudden there's lots of people wanting to spend lots of different governments. And that's part of the reason that I think that we're going to see some pain as the world starts competing for that capital. And you're going to see a lot of folks being, having to bring it back home, back to the Koreans. Like they wanted to bring home the money and change the, the, the tax law because their currency was weakened too much. But what about Japan? They have a new woman in there. She's going to be reelected as Prime Minister, but she is very much a Japan, a maga, like Japanese policy. So what if she starts spending some money? So where's that money going to come from? Well, the easiest thing to do would to be the 50% of the, of the GPIF, which is the world's largest pension fund in the world. Just is, is in foreign assets. Just bring it home.

[A]

Repatriate.

[B]

Yeah, yeah, like a lot of money. You're a big Russell Napier fan. It's, it's gonna happen. And, and people think financial repression, but the first, you know, step of financial repression is for the money that's all out in this new globalized system that has been going around freely gets forced to come back home.

[A]

All right, I have one more area that we definitely have to cover before I let you go.

[B]

Okay.

[A]

That's the new Fed chair. That's wash. You have been saying that basically is more of a trader than a traditional banker. Yeah, I'm really intrigued by this framing and I'm also just, I'm fascinated by what it means to have this switch in the Fed chair because I don't know if the market knows what to think of this yet. Yeah, I think a lot of stuff's going to get pinned on this donkey.

[B]

That's a good lie. Okay. Yeah. So some people blamed the gold sell off on Thursday and Friday to Borsch. In fact, because they said he's more hawkish and he's gonna shrink the balance sheet, I'm gonna take a little bit of a different tack. And a lot of people are trying to read in what he said over the last six months as he's been auditioning for this job saying this is where he's going to take the Fed. I have no idea what he's going to actually do. I don't, I don't think he even does knows what he's going to do. But I do have confidence in one thing. He is more of a trader than a central banker. Right. And by the way, she showed out to my buddy Harry O. Perkins who just like called it out and said the, the, the greatest signal or signal of all time has just been assigned to the behead of the Federal Reserve because this guy gets everything wrong. He's gotten every call wrong. And I'm like, that's what happens when you work for a British bank and not a U.S. bank. You're allowed to say stuff like that. He was just. And, and I'm actually kind of shocked that I, at first I was like, I thought I was the only one who was pushing back on how great he was. And then I've been reading, listening to a lot of guys like Warren Pies was kind of saying negative things about him and all I'm just going to say I'm not sure what their reasons are for it, but I will just tell you my experience and when I think about him and I think about what he's like, I think he's a trader. And I, and I. And one thing that people need to understand about traders is that they always think the central bank is, is slow. Like they're always running ahead and going, oh my God, this unemployment number so bad. We gotta get out ahead of this. We need to cut. We need to cut right away. And then the thing is, three months later, there's like, gets revised the other way. And the traders are like, oh, my God, look at the economy. It's way stronger than we think. We're gonna have to raise rates and stuff like that. And, and, and this, this tendency for traders to be like this. And I've seen this numerous times where, where you've had a cycle and within the cycle, you've seen them go up and down over, you know, the, the path of the Fed, of the, of the central bank, numerous ways. I've seen that happen time and time again. And that's fine, that's how markets are. But the trouble is we've just put a guy that is, was a cheerleader for those traders in charge of the Fed. And I'll just, I remember very distinctly in 2018 when him and Stanley Druckenmiller were going around just pounding on the table, talking about how Powell was way too slow raising rates. They were talking about raising rates at like 50 basis points. And it was, they were, they were just brutal to him, just brutal. And I'm thinking, oh, God, these guys are real hawks. I thought to myself, and I was like. And they were just miserable. And then we had the situation where Powell actually started raising rates. And then we had that. We're a long way from neutral error and combined with some problems in the funding market. And all of a sudden the stock market went no bid. You couldn't finance a corporate bond there. And we had that little mini Christmas wound that was actually quite dangerous at one point. And literally, just like that, he's, he's changed his tune and he's talking about how Powell's an idiot for not cutting rates so fast. And I was just like, oh my God, bud, you were just like. It wasn't that long ago you were bitching about and not going, you know, up fast enough, and now it's not going down fast enough. And so my suspicion is if he's allowed, and I don't know how much he's going to be like, he's actually going to influence policy. But if, if it was just Kevin Warsh setting policy, I can assure you it would be way more volatile than it's ever been. The other thing I think is that he's going to go, and I actually happen to agree with this, he's a big believer that they should cut down on the number of, the amount of communication. I don't think that that helps. I also think that you should introduce some uncertainty into the, into the decision, like they always go and do exactly what's priced into the market. I think you're better off actually having some uncertainty. In my day, you know, I remember funding at the front end of the curve, and the curve was always upward sloping. And I think it may, it helped a lot for it to be an upward sloping curve. And there was always a worry that they would just out of the blue raise rates on you. And that's why it was an upward sloping curve. Now nobody's worried about that. And it's in, it's, it's, it's very much the opposite. And I think that you might see warsh affect that. So if I had to make a guess, I would guess he's going to try to be aggressive on cutting rates over the short run. He's going to commute, reduce the communication. He's going to try to get it upward sloping. I don't think it really means that much, but I do think that over the longer run, one of the things that you can take home is that if he's influential at all, it's going to be a more volatile fed than we've ever seen.

[A]

All right, I have one of our favorite closing questions for you.

[B]

Okay.

[A]

What's something that you think the majority of your peers would disagree with you on?

[B]

Oh, that's an easy one. They all hate mmt. Like, they're like that Paul Simon song that like, you know, they spit on the ground every time it gets mentioned. And I think I understand why they hate it because they're focused on the parts that MMT that people take the policies and then say, okay, given these policies, this is what I want to do with it. And a lot of times it's mixed with green and all that stuff like that. But if you actually look at the, the way the economy works, like, if you go like, study what Warren Mosler and you know, those types of folks that have, you know, spent their lives devoted to mmt, have figured out, you'll realize that in terms of understanding the economy, it's the one of the absolute best tools out there. And it's just like I, it's underrated all the time. And not only that, I always say this, Trump is the most MMT president there's ever been. He really is.

[A]

And even by miles, by miles, even.

[B]

Now they're doing it, they're like saying, well, interest rates actually don't affect the economy as much as, as everyone thinks, therefore we should lower them. I'm like, you know what? I actually don't disagree with them. I, like, I, I have. My only problem with them is the hypocrisy of like, saying, you know, when, when, when my guy's in power, we got to crank rates because it's. Otherwise we're going to lose credibility with the Fed. And when, when my. When or so when the other guy's in power, that's what I got to do. And then when my guy's in power, I'm going to just lower rates. But I am in Warren Moser's camp that I don't think interest rates affect the economy as much as people think and that there's all sorts of different things. So one of the easy ones for me to say is, you know, MMT in terms of understanding how the actual economy works. Just be careful because people are gonna go, oh, Kev, I read that. And now all of a sudden, like, this the biggest bunch of bs, I'm like, put aside what they think you should do. Focus on how the economy works. Focus on the plumbing side of it. Go listen to Warren Mosler and listen to all the different things he said. He's a hedge fund manager, for, you know, heck's sake. Like he. And he is the father of mmt. This is, it is one of the most valuable economic frameworks to understand.

[A]

Kevin Weir, Colin Roche and the other people have gotten this in my head. Going to give you full credit for protecting Mosler's name. Kevin, if people want to follow you online, they want to bug you on the Internet. They want to check out the Macro Tourist. Where should we send them?

[B]

So it is the macrotourist.com and if you want to get a few of my old or my new pieces, feel free to send me an email [e-mail] and I'll hook you up.

[A]

You know you want to get some of those free pieces. Make sure you send Kevin a message. Let him know excess returns sent you. And trust me, you want them because you want the recaps. What do you call the recap? Emails?

[B]

My private feed recap. You like those?

[A]

I love the private feed recaps. Trust me, if you're watching this, if you're still with us, you want the private feed because you want to see all the little chatter and back and forth and other ideas that come in. Guaranteed to have 15 things that weren't on your radar in your eyeballs. And then on top of that, there's always some, like, goofy other story.

[B]

Well, I'm glad you enjoy it, Matt. I had a terrific time and thank you very much for having me on.

[A]

Thanks Kevin Like Comment subscribe all the things below. We are out. Thank you for tuning in to 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 [e-mail] if you have any feedback or questions, you can.

[B]

Contact [e-mail] no information on this podcast.

[A]

Should be construed as an investment advice.

[B]

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[A]

Holdings of the firms of the hosts or their clients.