FidelityConnects: Jurrien Timmer – The global macro view – September 28, 2026

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<b>Subtitles are AI Generated</b>

 

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Hello and welcome to Fidelity Connects.

 

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I'm Pamela Richie. Stocks are down today but still near all-time highs

 

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despite a series of rotations within global indices and volatility

 

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across the world. The bulls continue to be in charge ahead of the US

 

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midterm elections.

 

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And the oil price shock that never really arrived for equity markets

 

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is partly to blame certainly for the rate hiking cycle that global

 

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central banks are grappling with at the moment.

 

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A new normal is upon us in rate markets.

 

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And while analogies to the equities plunge of 2022 are tighter

 

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than they were, some of the hyperscaler household names are helping to

 

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climb the wall of worry, at least for now.

 

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Our next guest says, as long as the baton from robust AI

 

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capex growth can be passed successfully to growth powered by

 

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AI efficiencies, the secular story can likely

 

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remain intact.

 

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Joining us now for a discussion on how investors can position into the

 

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end of this year and beyond is Fidelity Director of Global Macro, Jurrien

 

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Timmer. Warm welcome to you. Happy Monday.

 

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Happy Monday. Good morning, Pamela.

 

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Great to have you here.

 

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Jurrien, I wonder if we begin with the tug of war between the discussion

 

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of rates and earnings, because earnings are holding up the markets.

 

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Rates threaten the equity markets, and there seems to

 

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be a bit of a tug of a war.

 

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Yeah. So there sure is.

 

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So maybe we start with the heat map with the caveat that if you're watching

 

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the show on your phone, you're not going to be able to read any of the numbers.

 

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But but you know, there are it's a balancing act.

 

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There are so many cross currencies.

 

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You know, you see here, S&P is down only about a percent from the highs,

 

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which is pretty remarkable, considering that the 10 year Treasury yield is

 

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at 520 and the Fed is, you know.

 

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Raising rates and is expected to keep raising rates until we get to

 

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close to 5% on the short end.

 

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But you see towards the top, you know, earnings, expected earnings over the

 

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next 12 months are 20%, which of course is a very big number.

 

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Operating margin is 17.2.

 

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It keeps going up almost week by week.

 

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So it's very hard to derail a bull market when

 

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you have those kinds of fundamentals.

 

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But what we see is that investors are not paying up for those earnings.

 

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You know, the PE drawdown is still about 19%,

 

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meaning that the PE is 19% below its highs.

 

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And the forward PE right now is about 19.

 

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I mean, that's hardly nosebleed territory.

 

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And it just shows what typically happens when you get to peak earnings

 

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or peak earnings growth.

 

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And we don't know if we're at the peak yet, but when you close to that.

 

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Investors are not gonna pay up for those earnings because there is a

 

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cyclicality in earnings. So that's one factor.

 

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But the other factor is the revenge of the Fed model,

 

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which you and I have talked about many times.

 

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When the risk-free rate, which is at 5.2%,

 

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becomes very competitive with equity valuations,

 

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the stock market has to respond by lowering its PE.

 

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So for me, The reason why PEs are falling, even though earnings

 

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are rising, is that investors are not paying for peak earnings and

 

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they can get a risk-free asset at a very

 

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compelling valuation.

 

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And as always the case, the price level of the S&P is just the residual

 

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of earnings and PEs.

 

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And that's why you mentioned an echo of 2022.

 

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So I think that is a very plausible scenario,

 

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where Earnings continue to rise, the

 

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PE falls further, and actually we can pull up slide 10

 

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for a second, and I'll get back to the heat map later, but we'll just go to

 

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slide 10, for a sec.

 

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The bond PE, which is the inverse of the yield, is on the horizontal, and

 

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the equity PE is on vertical, and since, during

 

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the 60s, 70s, 80s, 90s, when the

 

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Fed model really dominated, and since COVID.

 

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There's been a pretty direct relationship between yields rising

 

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or the bond PE falling and that pulling the stock market with

 

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it. And so right now we're around five-ish percent on the bond, 5.2.

 

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If we were to go to 6%, which is not a prediction, but it's certainly

 

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possible, that would indicate a PE for the

 

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S&P 500 of about 16 times earnings.

 

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So if we go from 19.3 where we are to 16,

 

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that is almost a 20% haircut.

 

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But at the same time, when we look at slide four, we

 

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see that earnings are booming.

 

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The year over year change in the trailing earnings number

 

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is 30% and you see there in the pink that

 

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the PE is falling. So it really becomes a math question, right?

 

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Most of us tend to solve for the price, but the price is really just the

 

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byproduct of valuation and earnings.

 

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And so if.

 

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Valuations were to continue to fall if rates rise,

 

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then it's just a matter of to what degree our earnings offsetting that.

 

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And back in 2022 when we of course had that nasty

 

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rate-driven bear market, 28% in the S&P,

 

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bonds and stocks were correlated so there was no place to hide,

 

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at that point earnings were only offsetting what was

 

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a 33% decline in the P.E.

 

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By about 8%. Earnings have been recovering from COVID,

 

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and this was the deceleration from that recovery.

 

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And so there was very little cushion for earnings to offset valuation, which is

 

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why we had a pretty sharp bear market.

 

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So that, in theory, should be different this time, but we'll see.

 

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But just going back to the heat map for a moment, while I have

 

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a glass of water.

 

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Yeah, I was going to add a bunch of things

 

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on there. So going down to heat map.

 

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Yeah.

 

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We see that even though the S&P is barely off of its highs,

 

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the breadth numbers are definitely not good.

 

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So you see the percentage above the 50-day moving average is only

 

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27%. Above the 200 moving average is only

 

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49%. Just four weeks ago, that was in

 

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the 70s. And so the equal weighted index is narrowing

 

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again, or the market is narrow.

 

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And it's actually the MAG-7 that are pulling the market or keeping the market

 

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from falling.

 

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But so I mentioned bond yields, if you go halfway down, you see the oil price

 

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situation that of course is still very, very urgent with no

 

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end in sight. We see the rate side, again, 516 as of

 

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last Friday, 2.82% is the real yield.

 

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If you were to buy a 10-year tips right now and held it to maturity,

 

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you would get a real yield of 2.8%

 

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on top of whatever the inflation rate was.

 

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That's very, very generous, and that is a very compelling,

 

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safe alternative than wondering what the AI story is or

 

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isn't going to be. And then I'll just, the last thing I'll point out,

 

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if you go all the way down, you see the polymarket odds

 

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for an upset this November with the midterms.

 

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And you can see that the Senate is now at 62%,

 

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flipping to the Democrats, and the House is now 93%.

 

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So it is looking increasingly likely, especially

 

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with no real improvement in the Middle East,

 

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that what generally always happens

 

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will happen again, which is that a president gets elected

 

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or re-elected. And two years later the Congress flips

 

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over to the other side.

 

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I'd love to come back to that just sort of in the in the march towards the

 

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midterms, but we've spoken about tips I think a couple of times and

 

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whether you felt it was a I mean, it's obviously a

 

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signal It's something that people trade off and it has been for a long time But

 

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I think the question was whether in a period of time where there were

 

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essentially zero Interest rates and funding money was basically it was

 

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basically free to fund yourself whether that was a more important

 

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time to be looking at tips as a particular signal as versus now when

 

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rates are rising really quite quickly.

 

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I think you answered part of that, but to what extent should they be taken

 

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differently?

 

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Now Yeah, so I'm fascinated by the

 

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tips market because it looks so complicated.

 

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If we go to slide 18, that's a scatterplot of

 

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real yields and nominal yields.

 

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And you can see that they're pretty highly correlated, at least directionally,

 

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right? So when yields fall, they tend to fall both in nominal terms

 

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and real terms. And then the size of these dots is the five-year

 

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excess return of tips over nominal treasuries.

 

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Um, and I've been racking my brain, trying to figure out all

 

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of this nuanced math, right, because you're buying a bond index, there's

 

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duration, there's convexity, the tips index might have

 

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a different duration and the nominal ones, um, to what degree

 

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is the tips break even, which we can show on the next slide.

 

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Um, you know, so the tips breakeven is the difference between like a five-year

 

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nominal treasury and a five year real treasury.

 

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The difference between those two is that the break, the inflation break even.

 

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And Many people think that there is signal

 

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in there, meaning this is the collective view of the market

 

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in terms of where they see inflation going.

 

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And indeed, the Federal Reserve itself, for years, has touted

 

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the breakevens as being very quiet, as saying, hey,

 

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the market's not worried here about inflation.

 

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But it's interesting. When you look at this scatter, so that's the five-year

 

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breakeven in the horizontal, which currently is around 2.3 percent.

 

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And the actual realised forward five-year

 

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inflation in the vertical, right?

 

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Because that's what the five- year break even says.

 

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This is gonna be inflation over the next five years.

 

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I challenge you to find any kind of correlation there because I certainly

 

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can't. And so it leads me to the question is like,

 

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is the break even, is there even a signal there?

 

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Is it kind of like the forward oil strip curve, Maybe these

 

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are just mathematical residuals that hold little value.

 

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And so if we go to slide 21, so this is what

 

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I spent my whole weekend doing because it's been very stormy here.

 

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We had a nor'easter and so I was very much in my element having a cup of

 

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coffee and a fireplace going and peeking out on TIPS math,

 

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so.

 

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And I'm so pleased that you're challenging us to figure out whether, like,

 

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we'll just take it what you say. Thank you.

 

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So So I'm not a bond person, although I did start my

 

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career in the bond market. So my bond colleagues could very well challenge

 

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me on this. But if I take a very, very simplistic

 

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approach and say, okay, today I can buy a five-year

 

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treasury nominal at 5% when

 

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the break even is 2.35%, which

 

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means that I can by that five year at a real yield guaranteed

 

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if I held to maturity. At 2.65% and then the actual

 

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return is that plus whatever the actual inflation rate is.

 

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And so how does the math then work?

 

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And so in this chart, the blue bars at the top is the five-year

 

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forward relative return between

 

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tips and nominals expressed as a excess return.

 

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So a five- year CAGR, if you will.

 

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And so, March 2020...

 

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Was the peak forward return, right?

 

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Because that was during COVID.

 

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We were worrying about deflation.

 

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Yields were negative on a real basis.

 

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They were near zero on a nominal basis.

 

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So you can kind of have a sense that if you bought TIPS in March of 2020

 

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and inflation was about to go to 9%, TIPS would have done very well and

 

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that's exactly what they did. So their five-year excess return CAGR.

 

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As of March 20, so for the next five years, which was March of this,

 

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of last year, was actually 500 basis points or 5%.

 

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So it's a very simple way of looking at it.

 

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And so for me, the punchline is very simple.

 

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If I buy a five-year nominal at 5%

 

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and inflation goes to 2.5 from where it is currently,

 

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which is about 3.5, then I'm getting a real return of

 

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2.50. If I can buy, if I buy a five-year tips

 

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I get a real return of 2.6, which is the real yield on

 

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the five year. And so the two are equal if inflation

 

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returns to the old regime of two and a half.

 

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So the two should be exactly equal other than differences in duration,

 

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things like that. So if I think that the inflation

 

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rate for the next five years is going to be higher than that, then

 

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tips are going to win. And if it's going to be lower than that, nominals are

 

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going to win. And it really is that simple.

 

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It's just, you know, what is inflation going to over the next five years and is

 

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it greater than or less than what is currently the break-even rate?

 

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And so to me, that is a very simple, useful way

 

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of looking at real bonds versus nominal bonds.

 

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So they are useful and just compare it to the

 

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period of time where it seemed like inflation forever, the outlook was that it

 

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was essentially nothing, whereas now it's a real debate.

 

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Yes, exactly. So if we just pull up 21 a second time,

 

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you can see in the bottom panel, the actual

 

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CPI year over year rate in the purple, and the five year tips

 

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break even in the blue.

 

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And you can say that, you know, they kind of mean revert over

 

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kind of to two and a half percent.

 

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So over the long term, the tips market has not been

 

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wrong, but it has never been really tested.

 

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In a secular high inflation regime, right?

 

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Because tips were only invented in the 1990s and they really didn't even

 

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become something you could trade with confidence until the 2000s.

 

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And that entire period until five years ago was a period of

 

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low inflation where, as you probably well remember,

 

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the inflation rate never even got to the Fed's 2% target from

 

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the low end.

 

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And now, of course, it's not going there from the upper end.

 

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And so for me, the question is, are we in a new inflation regime where

 

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inflation is 3% to 4% instead of 2% to 2.5%.

 

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And if that is the case, then tips will be very competitive as

 

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long as the break-even, again, which is the difference between the nominal and

 

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the real, is below that new regime.

 

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So if inflation ends up at three and a half for the next five years.

 

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And the breakevens are 2.3, then tips are gonna win over nominals.

 

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Now, they could win by going down less, right, because there's still bonds,

 

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they have a duration, but from a bond investor's perspective,

 

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when you are populating that bucket, you know, that 60-20-20 bucket,

 

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which is something we should also discuss, you're wondering

 

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what is the best bond to put in there?

 

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And my sense is that tips, you know.

 

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They have little downside because I find it hard to imagine that

 

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inflation is going to be less than the tips breakeven of 2.3.

 

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I mean, it could, right? If the AI productivity miracle ends up happening

 

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and inflation is at 1%, yeah, the nominals are gonna win big time.

 

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But assuming that two and a half is kind of a floor and you

 

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have only upside as the variable, then tips at

 

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worst should do the same as nominals and at best they should.

 

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Outperformed by a couple hundred basis points.

 

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Which is really interesting because it comes to the correlation of bonds

 

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and stocks, essentially, and actually oil being, as you mentioned in

 

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your research, being uncorrelated, essentially.

 

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It just sits there and does what it's doing and isn't really affecting,

 

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which also is what happened in 2022.

 

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You had the correlation of the two and there's some recency bias,

 

16:59.418 --> 17:00.786

concern for investors.

 

17:01.920 --> 17:06.158

Ergo we get to how perhaps you want to set up a portfolio today based

 

17:06.158 --> 17:06.592

on some of that.

 

17:06.592 --> 17:10.629

Yes, so why don't we go to slide 13, which is my 60-20-20,

 

17:10.629 --> 17:14.733

which I updated a few weeks ago, just because some

 

17:14.733 --> 17:17.136

of the moving parts are moving.

 

17:17.136 --> 17:21.240

But yes, so right now, since the Iran conflict started,

 

17:21.240 --> 17:25.677

bonds and stocks have been sharply positively correlated and bonds,

 

17:25.677 --> 17:29.648

I'm sorry, and stocks and oil have been sharply negatively correlated.

 

17:29.648 --> 17:33.652

And that's all you really need to know, because oil and

 

17:33.652 --> 17:37.589

bonds... Are driving the bus right now for equities.

 

17:37.589 --> 17:39.525

And yeah, earnings are growing, which is great.

 

17:39.525 --> 17:43.662

It provides that cushion, but that

 

17:43.662 --> 17:46.031

doesn't help the valuation question.

 

17:46.031 --> 17:50.169

So just to revisit the 60-20-20, which of course we've been talking about

 

17:50.169 --> 17:54.540

for the last four or five years, the old 60-40,

 

17:54.540 --> 17:58.744

I think, is gone because that only works if bonds are negatively

 

17:58.744 --> 18:02.981

correlated to equities, so the new 60- 40 is the 60, 20,

 

18:02.981 --> 18:06.952

20. The 60 is still equities, but it's much more global now,

 

18:06.952 --> 18:09.888

as opposed to just buying S&P.

 

18:09.888 --> 18:13.926

And 20 is bonds, and that could include tips, or you can put them in a separate

 

18:13.926 --> 18:18.263

category. And then the rest are things like gold, and you know,

 

18:18.263 --> 18:20.699

Bitcoin is looking really interesting.

 

18:20.699 --> 18:25.137

Some of these other alternatives, like commodities and managed futures,

 

18:25.137 --> 18:28.507

are very sharply negatively correlated these days.

 

18:28.507 --> 18:30.609

And I'll show you that on slide 15.

 

18:31.777 --> 18:35.914

And so to me, that is really the model, really of the last four

 

18:35.914 --> 18:38.183

years, but also the next five years.

 

18:38.183 --> 18:42.187

And so we see the big buckets here, equities at the top, bonds on the

 

18:42.187 --> 18:46.225

right. This shows the correlation to treasuries on the horizontal and the

 

18:46.225 --> 18:48.694

correlation two equities on the vertical.

 

18:48.694 --> 18:53.365

And you can see that the green circle or oval is

 

18:53.365 --> 18:57.369

right of centre and the light blue oval bonds is

 

18:57.369 --> 19:01.306

north of centre. And that's another way of saying that bonds and stocks are

 

19:01.306 --> 19:03.609

positively correlated to each other.

 

19:03.609 --> 19:07.813

So we really want those diversifiers to be correlated

 

19:07.813 --> 19:09.615

to neither of those two.

 

19:09.615 --> 19:12.718

And fortunately, we have some very good options here.

 

19:12.751 --> 19:14.720

You see Bitcoin right smack in the middle there.

 

19:15.721 --> 19:18.724

Macro CTA are managed futures.

 

19:18.724 --> 19:22.895

T-bills, of course, cash when the Fed is tightening and real rates are

 

19:22.895 --> 19:26.598

very positive is a very good way.

 

19:26.598 --> 19:30.636

To have some optionality without any liquidity or

 

19:30.636 --> 19:34.640

duration risk, you know, we hate to say it that a long-term investor would have

 

19:34.640 --> 19:39.077

cash in the portfolio but it provides optionality that if the yield does

 

19:39.077 --> 19:43.081

go higher, you have cash to spend on capturing those

 

19:43.081 --> 19:47.419

yields. On top of that, you have equity, long

 

19:47.419 --> 19:51.423

short, sorry, leverage loans, syndicated loans, gold is in

 

19:51.423 --> 19:55.561

there. And if we go to slide 14, I show the

 

19:55.561 --> 19:59.364

52-week sharp ratios of all of these components.

 

19:59.364 --> 20:03.168

It's sort of like a spaghetti chart. But the grey line on the top is the

 

20:03.168 --> 20:05.904

60-2020. This is not investment advice.

 

20:05.904 --> 20:07.639

It's not optimised.

 

20:07.639 --> 20:11.343

It's just my back-of-the-envelope approach to how would I invest.

 

20:11.343 --> 20:12.344

It's pretty good looking, though.

 

20:13.345 --> 20:17.349

Yes. You can see that a

 

20:17.349 --> 20:21.320

year ago in the spring, right? So after the tariff tantrum

 

20:21.320 --> 20:25.290

and then the AI meltup, the world really

 

20:25.290 --> 20:28.460

does look different, right? Commodities are doing a different thing.

 

20:29.895 --> 20:33.165

And so different, you know, international stocks have been much more

 

20:33.165 --> 20:37.603

competitive. So in the table there on the left, I show kind of what my

 

20:37.603 --> 20:41.740

hypothetical weights would be. So 30% S&P, 20%

 

20:41.740 --> 20:45.811

EFA, 5% EM, the Eurozone banks, we've

 

20:45.811 --> 20:49.815

talked about that, I think are really a fascinating little sub-asset class.

 

20:49.815 --> 20:53.852

It would be part of EFA of course. And then The ag investment

 

20:53.852 --> 20:56.154

grade bonds goes from 40 to 10.

 

20:56.154 --> 21:00.392

And then I've got tips in their gold commodities, cash, high yield,

 

21:00.392 --> 21:02.561

uh, et cetera, et Cetera.

 

21:02.561 --> 21:05.797

And you can see how disparate those sharp ratios are.

 

21:05.797 --> 21:08.900

So sharp ratios, are risk adjusted returns.

 

21:08.900 --> 21:13.372

And you see that the bond side is really dragging things down

 

21:13.372 --> 21:17.976

while the hard asset side become gold Bitcoin leverage

 

21:17.976 --> 21:21.580

loans. I don't know what's going on with leverage loans, but they're, they're

 

21:21.580 --> 21:22.281

they're red hot.

 

21:22.281 --> 21:24.716

And then the MAG-7 is keeping...

 

21:24.716 --> 21:26.918

Data centres. No? Data centres? Was that?

 

21:26.918 --> 21:28.053

Data centres, no?

 

21:29.721 --> 21:33.859

Leverage loans are like high-yield bank loans, they're very

 

21:33.859 --> 21:38.030

much part of that and also their appeal is that

 

21:38.030 --> 21:41.533

there's no duration, right? They're floating rates, so there's duration risk.

 

21:42.868 --> 21:45.971

So anyway, so you can kind of slice and dice this anyway,

 

21:47.205 --> 21:50.642

but that's how I think about broad diversification.

 

21:50.642 --> 21:54.780

And again, that last 20 is to protect from both the 60 and what

 

21:54.780 --> 21:59.017

used to be the because what used to be the 40 is no longer

 

21:59.017 --> 22:03.088

protecting the 60, and if anything, it is driving

 

22:03.121 --> 22:05.991

the 60 just like it did back in 2022.

 

22:05.991 --> 22:09.194

That is fascinating. It's really fascinating to have you note some of the

 

22:09.194 --> 22:13.265

similarities. But also, of course, it is quite a different world on an

 

22:13.265 --> 22:17.202

international investment thesis for many investors that have the money

 

22:17.202 --> 22:19.571

to put to work. There's a question coming in here. I wonder if I can put this

 

22:19.571 --> 22:23.608

to you. You're in, how far can the US, the 10-year,

 

22:23.642 --> 22:27.879

30-year talk about the yield here, rise before the Fed has to

 

22:27.879 --> 22:28.880

intervene?

 

22:30.449 --> 22:34.386

That that that is the that is a trillion dollar question,

 

22:34.386 --> 22:38.523

right? Because I think Scott Besson who is a very

 

22:38.523 --> 22:42.461

respected Maybe feared person on Wall Street, but

 

22:42.461 --> 22:46.398

certainly has his credentials I I think he made a tactical

 

22:46.398 --> 22:50.836

mistake a few weeks ago when with a lot of pomp and circumstances

 

22:50.836 --> 22:56.141

You know, he said we're gonna buy back these these long dated off-the-run

 

22:56.141 --> 23:00.145

Treasuries and we're going to buy back a whopping 4 billion of them,

 

23:00.145 --> 23:02.047

which is like a drop in the ocean.

 

23:03.048 --> 23:07.119

And then he was, there was a little bit of hubris, not to speak ill of the

 

23:07.119 --> 23:11.223

gentleman, because he's got an impossible job being the country's

 

23:11.223 --> 23:15.260

top bond salesman. But it was like, I am the house, bet against me

 

23:15.260 --> 23:19.164

if you want, you Bloomberg nerds, this and that.

 

23:19.164 --> 23:24.403

And that was when the yield was like 4.7, it's now 5.2.

 

23:24.403 --> 23:28.173

And the bond market always has the last word.

 

23:28.173 --> 23:32.177

But to your point, that's on the Treasury side.

 

23:32.177 --> 23:36.014

And so he needs to do that operation twist, right?

 

23:36.014 --> 23:40.118

Where he buys back long bonds and sells T-bills.

 

23:40.152 --> 23:44.322

He needs to that times 100 to really be felt.

 

23:44.322 --> 23:48.460

And I don't know how the Treasury, or whether the Treasury can do something

 

23:48.460 --> 23:53.064

like that without having the Fed be complicit in its,

 

23:53.064 --> 23:54.933

not complicit, sounds bad, but like.

 

23:54.933 --> 23:58.703

Playing a role in terms of reserve management and balance sheet stuff.

 

23:58.703 --> 24:02.774

And so it brings you to the question of how high is so

 

24:02.774 --> 24:05.811

high that the debt becomes unsustainable?

 

24:05.811 --> 24:09.781

And actually, let's pull up slide nine real quick to show you that.

 

24:09.781 --> 24:14.486

And, you know, Besant has said, I have said many times that the simple

 

24:14.486 --> 24:18.423

rule for measuring whether debt is sustainable or not is

 

24:18.423 --> 24:22.561

that the cost of the debt needs to be below the growth in the economy.

 

24:22.561 --> 24:25.931

And that's true for anyone. If you start a business, you get a bank loan.

 

24:25.931 --> 24:28.567

As long as you outgrow that debt, you're fine.

 

24:28.567 --> 24:32.637

And look what's happening to the real yield and to real potential

 

24:32.637 --> 24:35.740

GDP growth, which is the speed limit.

 

24:35.740 --> 24:39.377

It is now exceeding it, not by a lot.

 

24:39.377 --> 24:43.248

And it could very well be that that blue line, which again is the speed limit

 

24:43.281 --> 24:47.252

for the economy, could very will go up if the AI

 

24:47.252 --> 24:48.954

miracle happens, right?

 

24:48.954 --> 24:52.657

Because The whole point of this. Is to outgrow the debt.

 

24:52.657 --> 24:56.761

But right now, at this time, yields are going up

 

24:56.761 --> 25:00.866

too much. And if it keeps going, questions are gonna

 

25:00.866 --> 25:04.836

arise about the sustainability of the debt, and then you get

 

25:04.836 --> 25:09.508

into the playbook of what the Bank of Japan has done until recently,

 

25:09.508 --> 25:13.879

what the U.S. Did during World War II, and that's financial repression,

 

25:13.879 --> 25:17.949

where the Fed and the Treasury are in cahoots to manage the

 

25:17.949 --> 25:20.318

yield curve and to manage interest rates.

 

25:20.318 --> 25:24.723

And of course, that story, if it were to happen,

 

25:24.723 --> 25:28.693

would be a boom for both gold and Bitcoin and

 

25:28.693 --> 25:30.562

commodities in general.

 

25:30.562 --> 25:35.100

And that's one of the reasons to have those in that final 20,

 

25:35.100 --> 25:39.104

just as optionality that if we ended up going back into a

 

25:39.104 --> 25:43.375

financial repression mode and the government pushes real yields

 

25:43.375 --> 25:47.512

back down, that you have real assets that can compete

 

25:47.512 --> 25:48.513

with that.

 

25:48.947 --> 25:51.783

Tell us just a little bit about Bitcoin.

 

25:51.783 --> 25:54.319

It's essentially round-tripped from a year ago.

 

25:54.319 --> 25:59.090

I think year to date, year to day. It is essentially round tripped and

 

25:59.090 --> 26:03.228

went through a, I don't know, a fall, not a winter, but maybe an autumn.

 

26:04.796 --> 26:07.465

A mild winter. A mild, yes.

 

26:07.465 --> 26:10.135

And back it is for all these reasons.

 

26:10.135 --> 26:12.704

Yeah, so slide slide 16.

 

26:12.704 --> 26:16.708

And actually, it's funny, you know, as most of you know I post my

 

26:16.708 --> 26:20.679

my stuff on LinkedIn. And then it goes on X as well.

 

26:21.846 --> 26:25.784

And whenever I post like a chart on a bond yield,

 

26:25.784 --> 26:29.120

it gets you know 50,000 engagements or impressions.

 

26:29.120 --> 26:32.290

Whenever I post something on Bitcoin, it gets a half a million impressions.

 

26:32.290 --> 26:35.560

And so that's certainly been the case the last few weeks.

 

26:35.560 --> 26:39.764

So so let's go to slide 16 This is just a purely technical chart

 

26:39.764 --> 26:40.765

of Bitcoin.

 

26:41.700 --> 26:46.938

We went from 126,000 to 57,000.

 

26:46.972 --> 26:51.643

Even a year ago, when Bitcoin peaked September-October,

 

26:51.643 --> 26:55.914

I had put out 60,000 as my line in the sand,

 

26:55.914 --> 26:59.117

as being the objective for a mild winter.

 

26:59.117 --> 27:02.120

You weren't far off there. I mean, it went down a little bit more.

 

27:02.120 --> 27:03.588

I would say it.

 

27:03.588 --> 27:08.326

Yeah, I would say it was close enough, but 60,000 is

 

27:08.326 --> 27:11.930

the support line of the power law curve.

 

27:11.930 --> 27:16.067

That's also where the gold to Bitcoin ratio was at

 

27:16.067 --> 27:20.138

an extreme that has only happened when Bitcoin

 

27:20.171 --> 27:21.873

put in major lows.

 

27:21.873 --> 27:24.409

And so we ended up having a double bottom.

 

27:24.409 --> 27:28.346

That first 60, 000 was too fast because these winters, whether they're

 

27:28.346 --> 27:30.949

mild or severe, tend to last a year, right?

 

27:30.949 --> 27:35.153

You have a four-year. Halving cycle, so three up, one down, but

 

27:35.153 --> 27:39.357

now that latest one was basically a year, and now we've

 

27:39.357 --> 27:43.528

taken out resistance, and that actually, so that confirms

 

27:43.528 --> 27:48.133

a double bottom, which suggests that we go to 100,000.

 

27:48.133 --> 27:52.137

And ultimately, I don't have the chart this week, I had it last week,

 

27:52.137 --> 27:56.374

but if you look at the harmony of the wave counts, all the way since

 

27:56.374 --> 27:59.778

inception till now, There is a logarithmic

 

28:01.079 --> 28:04.049

math to it, there's a pattern to it.

 

28:04.049 --> 28:08.987

And if a new bull market has started, which I think it has,

 

28:08.987 --> 28:12.290

we could go to 300,000 by 2029.

 

28:12.290 --> 28:15.860

So that's, that's worth playing for as far as I'm concerned.

 

28:15.860 --> 28:18.596

And it gets even better if we go to slide 17.

 

28:19.698 --> 28:23.201

I now show Bitcoin priced in gold.

 

28:23.201 --> 28:27.205

Why would I do that? You might wonder about you know, Bitcoin to

 

28:27.205 --> 28:30.108

me is a high beta version of gold.

 

28:30.108 --> 28:34.145

And so this is just a way of denominating it in gold instead of in

 

28:34.145 --> 28:38.349

dollars. And here you can see a nice bottoming pattern

 

28:38.349 --> 28:41.986

as well. Bitcoin is out running gold right now.

 

28:41.986 --> 28:46.524

I think gold is still kind of held captive a little bit to the

 

28:46.524 --> 28:48.026

Iran Middle East story.

 

28:49.094 --> 28:53.064

But you see the flows into Bitcoin ETFs as well as gold are

 

28:53.064 --> 28:54.766

on the rise again.

 

28:54.766 --> 28:57.001

And so in my...

 

28:57.001 --> 28:58.670

Hypothetical allocation.

 

28:58.670 --> 29:01.206

I used to be five gold, one Bitcoin.

 

29:01.206 --> 29:05.710

I'm now three and four and two because

 

29:05.710 --> 29:09.948

I think Bitcoin is going to outperform gold here.

 

29:09.948 --> 29:13.952

That's fascinating. It's just a final thought as we sort of look to this week

 

29:13.952 --> 29:18.022

of you know, lots of news coming in, lots news from last week

 

29:18.022 --> 29:22.060

and we're heading towards you know a jobs count that presumably

 

29:22.060 --> 29:25.063

is going to be a bit pounced upon by those that have to set interest rate

 

29:25.063 --> 29:28.066

policy. So just sort of what to look for as a final thoughts.

 

29:29.534 --> 29:33.638

Yeah, so by all accounts the economy, the US economy is running pretty

 

29:33.638 --> 29:37.876

hot. The PMIs are booming, the jobs

 

29:37.876 --> 29:40.145

numbers have been good, obviously the earnings story.

 

29:41.412 --> 29:45.383

So there would have to be a pretty negative story in the

 

29:45.383 --> 29:51.456

payroll report Friday to change the market's

 

29:51.456 --> 29:55.093

sense of how strong the economy is.

 

29:55.093 --> 29:59.097

And if it's a strong number it will only

 

29:59.097 --> 30:03.234

reinforce that the Fed should not have cut rates three

 

30:03.234 --> 30:07.705

times last year. It's already taken back one of them and

 

30:07.705 --> 30:09.874

that it needs to take back the others.

 

30:09.874 --> 30:14.078

And the forward curve is basically telling you as much.

 

30:14.078 --> 30:18.116

And so it would put sort of renewed emphasis on the Fed and maybe

 

30:18.116 --> 30:22.153

other central banks that those rate cuts last year were

 

30:22.153 --> 30:23.521

premature.

 

30:23.521 --> 30:26.724

Thank you so much for starting off our week with these incredible charts, some

 

30:26.724 --> 30:30.028

of which have been viewed by, as you said, half a million people.

 

30:30.028 --> 30:32.297

So we're delighted to be part of that.

 

30:32.297 --> 30:34.499

You're in timber. Thank you for setting us straight.

 

30:34.499 --> 30:35.500

Have a great week.

 

30:36.201 --> 30:37.202

Thank you, you as well.

 

30:38.603 --> 30:40.738

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