The Everything Code: Making Sense of Everything (2024)

Hey Visionaries today's episode is brought to you by polka dot a leading layer zero blockchain with over 2,000 developers it's a network protocol that allows arbitrary data not just tokens to be transferred across blockchains listen to what polka dot Creator gavinwood tells Ral about polka Dot's coming Jam chain short for join accumulate machine so what we doing is we're turning what used to be the polka dot relay chain Built for a very specific purpose right to secure and relay messages between separate blockchain ecosystems and we're turning that into something much more akin to a this

like World computer this this like kind of ubiquitous multicore single turn virtual machine learn more and join the community Now by going to realvision docomo do join me Ral pal as I go on a journey of Discovery through the macro crypto and exponential age landscapes in The journey man I talk to the smartest people in the world so we can all become smarter together hey everyone I'm Ral pal and welcome to my show the journey man where I travel on that Journey to the Nexus of macro crypto and the exponential age of Technology now this

is a very special show this week I'm going to do something I've never tried before it's a you you're probably going to need a bit of time you're going to need a pen and Paper you're going to need to bookmark this and I'll give you some more instructions as you go but I'm going to give you the whole insight to pretty much everything I do and how I do it and how it fits in with the broader world you see I've been writing Global macro invest in my research service let me share my screen here

with you guys um I've been writing Global macro investor my research service for 20 years if you remember but I was in I was in Goldman Sachs where I was running the hedge fund sales business in equities and Equity derivatives um and I started writing kind of macro notes that became very well known amongst all the world's most famous hedge fund managers I then went to GLG Partners where I started and ran the global macro hedge fund uh and I ran that for a while and then decided to opt out of the Rat Race cash

in some lifestyle chips and head to the Mediterranean coast of Spain and to have An income and to keep myself in the game I started Global macro investor and the idea was I was going to serve in hedge funds with the kind of content that they really needed indepth research based around a lot of the groundbreaking work that I done on the business cycle 20 years later I still uh I still write GMI and it's the epicenter of all of my thinking everything that you guys see of me comes from this Genesis this is where

all of the thinking it's what Started real Vision it's what started the asset management businesses what started all the things you see on Twitter even on YouTube they all come from one thing GMI which I'm immensely proud of it also happens with that kind of doing a sales pitch over time it's easily had the best track record because we have a recorded positions uh every month uh and we've been doing that for 20 years probably the best well the best track record of any research service in The world bar nun and it's all recorded which

I'm immensely proud of and it's come with some years as well so it's not like I'm here and get everything right but over time using a long-term time Horizon using a structure of secular Trends plus the business cycle I've really managed to do something I think unique there's nothing like GMI nothing at all even looks remotely like it in terms of the breadth and depth of what we do and I'm going to Peel back the curtain on that today and I'm going to give you pretty much the biggest ever presentation of my macro thesis you

have seen and it's not going to be all of it either because there's a lot more still that goes into it what you're going to see is something that is just the top level of the work that we've done thousands of hours to build this macro thesis and also there's a whole bit that goes Before it how demographics happened why we got into this mess I've shared some of that on YouTube before uh talking about the whole exponential age thesis then there's also what happens after all of this which again is around the exponential age

um which I'm not going to cover in this but I'll cover in another point but this will give you the bulk of really what you need to know to understand everything that's going on how to navigate it what to do about it And give you some poters of where you can pick up some of my stuff to help you in your journey so to show you what I mean by that is GMI here is at the epicenter of what I do but because we talk a lot about exponential age thesis within GMI David mattin works

with me there and we span out the exponential which is cheaper because GMI is expensive that helps people both construct portfolios and understand the exponential age whether it's AI robotics Genetic Sciences new forms of energy all of the things that make the component parts David and I write about with Julian running the business cycle elements of that so Julian who the hell is Julian B I'll come on to him in a minute he's he's freaking me out because he's wearing a shirt today which is not normal well he's not naked normally when I speak to

him he just normally has a t-shirt on anyway um uh Julian helps me so he does a bit for the exponential List but also Pro macro Pro macro is the real Vision kind of subset of GMI it's a smaller part of GMI it's obviously cheaper but it's still you know it's a research service aimed at people who kind of know what they're doing um but want to have kind of a mentor to help guide them in the space the other one is the macro investing tool so Julian is without question the best business cycle analyst

in the world we have a big framework that I built over the years And then Julian's massively improved on that fits into liquidity and other things so we span up the macro investing tool that's now part of real Vision Plus or people can just sign up for real vision and then pay extra for the macro investing tool the job of the macro investing tool is to be your idiots Guide to the business cycle and how to allocate assets accordingly it's not a trading system but it is a very very good way to understand what's going

on How to reduce the noise and what really matters to you and your portfolio it's one of the best received products real vision's ever had then in the middle is xam so part of my big thesis has obviously been uh cryptocurrencies and I've been in that space since 2013 xam is my Asset Management business that I co-founded the idea here is that um High net worth individuals family offices don't have an easy way to allocate into the crypto space to Capture this broader trend of going from $2 and a half trillion dollar to10 trillion to1

trillion and that hedge funds were the best way but investing in a single hedge fund is actually not easy so this is a fund of funds where we choose like 14 of the world's best hedge funds but we use Julian and my macro framework for the asset allocation model so it's very unique in what it does and we're we immensely proud of that and the other thing why xam was important to me Is the secondary markets in crypto it's a 2 and half trillion dollar asset class but in terms of asset management the hedge funds

in the space they're about eight billion dollars they're minuscule so there's not a lot of secondary Market liquidity outside of the trading firms like jump Etc and it was important to me that we create deeper markets for all of us and an ability for Capital to flow into the space then finally what a lot of you see is Snippets of all Of this that comes into Twitter and YouTube and and the idea I've always had and I think you guys know is if I think we've got the biggest macro opportunity of all time if I

think the world has kind of screwed in ways people don't understand but I can make sense of it I want to share it with as many people as possible the more people I can take on to this life raft and onto this journey the prouder I will be of all of you guys because I want you to succeed and I can See how broken things are and hopefully we've got some really good Solutions in how we think about things using the everything code thesis so anyway there's a lot there it's not a sales pitch but

I just want to understand how all of these things fit together because you'll see some of these component parts and you don't quite understand it's all basically from the same thinking and that thinking is something that I'm going to stop sharing for now I'm going To bring on this kind of weird hybrid Swiss English American person called Julian B Julian joined me a couple of years ago now um at GMI do you want to give well let me say J's Been instrumental in in how we built out the product and also developing the exponential age

thesis we've had some huge breakthroughs not the exponential sorry the everything code but um Julian do you want to give your story as well because you're going to be sharing part Of this me mega presentation that we're going to lay down the whole thing so tell me give people idea of your background as well and why the hell you're working with me why would you do something so stupid yeah um well look I mean I've uh started I mean I started my professional career um at a large European asset manager in Switzerland so why in

Switzerland because I'm half Swiss half American I was born in Switzerland I Grew up in the US um and then after uh kind of University which by the way in the early stages I was studying shark Neurology in Hawaii and then uh for whatever reason decided that wasn't really for me although uh Hawaii is a great place um decided to jump into economics uh in Colorado finished that um and then I was kind of sitting in a you know my graduating class as one does and thinking you know I had good grades but what did

I have that other people Didn't have and the only thing I could really arrive at at the time was that I had a Swiss passport so uh my dad was uh still in Geneva at the time and and is still in Geneva now and I called him up and I said I'm coming over and he said no no no um but I did anyway and so I ended up working with an asset manager there um and then really sat close to a couple of hedge fund desks at the time who were discussing Global macro and

um just kind Of fell in love with what I was overhearing and decided that that was what I wanted to do so quently over the coming months I ended up knocking on the cio's door and saying I wanted an opening with an investment strategy role uh in London and and I took that and and the rest is kind of history and I spent my time between investment strategy um which then as it became such a core focus of My overall work I was asked to relocate back to Geneva to help run a Series of uh

multi-asset funds um of around five billion uh Swiss Franks and we you know we did really well the years that I was there we won multi-asset fund of the Year award um you know we had a really good run but like r i kind of came to the conclusion after spending 10 years uh working at an asset manager and of course having some foresight into what we're starting to see today um with the rise of AI uh early on but you know that the jobs that I was being promised In some of these uh in

this company would would probably not be there by the time I would get there um so in any case that thinking coupled with um you know you finding me on Twitter I think it was yeah years ago because you were ping me on Twitter like some annoying Speck on Twitter say no you were pestering me what are you talking about you said I like that chart can I use that chart um anyway and then so I just I ended up calling R and I said I'm at a kind of a Crossroads and he said well

why don't you uh you know have you would you consider joining GMI and uh then what was it came to the Round Table in uh the Global Micro investor Round Table that's right in Grand came in and uh you know the rest is is history and so now it's been almost two years that we've been working together and about uh you know 50% of it is good yeah and how we kind of dovetail is like as I said Julian is really King of The business cycle stuff and also has developed a great liquidity framework you

know my although I've done business cycle for years what I've been really at is the secular thesis and solving the bigger puzzles and how it all fits together and that kind of magics come together and that's what we're going to try and present to you now so I'm G to kick off this presentation and we'll flip between Julian and I as we go through the bits that that we kind of Focus on even though both of us focus on everything and I'm trying to stress that this is 30 years of work here uh it's not

complete because it's just not enough time because we could probably do four or five hours on the kind of work that we've done but I think it's going to help you guys a lot in understand the world and you've seen all bits of it but you've never seen it all together so we're going to put it all together now it's is minus the exponential age thesis Um because we just don't have time to go to all of the technological disruption as well but when I use Tech and NASDAQ in the presentation you can think exponential

age as well although the exponential age should outperform NASDAQ over time okay so I'm going to share my screen and get cracking he everyone listen if you want unfuck your future let me help you follow this channel subscribe click the notifications and you'll get everything as soon as it Comes out see you there I made this presentation or parts of this presentation recently to a group of family offices most people don't realize diversification is dead many of you have seen the thesis like irresponsibly long or hear that I'm 100% long salana whatever it may be

and it sounds like this is a crazy idea what the is Ral doing isn't he being responsible but it's not it's based on an understanding that I'm going to go Through why diversification is dead and why concentrated risk- taking in the greatest macr trend of all time is the way forwards as long as you do it intelligently which is part of this don't this up thesis of how to do this intelligently Julian was unfortunately ruined by me he came as this Diversified asset allocation guy and he's ended up being a total Degen as well um

because you can't not conclude this and by the time we go Through the presentation you will get there as well I'm going to start with a chart that most of you have kind of seen me talk about and you're going to really understand why it matters I mean I tried to put this together in tweet threads I try and put it together for ways for you to understand but this is going to give you the full understanding liquidity is everything it is increasing on a globalized level at 8% a year this is The global hurdle

to all Investments that you make anything that doesn't beat this is actually making your future self borer you can also add in let's say 4% three or 4% uh um Global inflation so you've got a 12% hurdle rate that is staggeringly difficult to beat but if you don't your asset allocation is going to make your future self horer and that is the big deal that we've got the thesis that I'm about to outline Is also based on the fact that once I started digging into the debasement trends I realized there is two and only two

massive secular Trends in the world one is cryptocurrency this is the log chart of Bitcoin which over time as we know has produced since 2012 alone 20 million per returns no asset has ever come close to this in all recorded history the other Mega Trend it's such a beautiful exponential trend is the NASDAQ since 2008 it's been a perfect Trend these are secular trends that are outperforming everything they're based on adoption curbs and Technology plus flow of capital because they outperform they tend to outperform more but I'll come on to the importance of these but

these are the two key assets that matter to me when I'm talking about portfolio allocation because everything else as you'll see is actually secondary so let's get into this everything code thesis you've all heard About it you understand bits of it you don't understand all of it for sure and this is still only part of what we do with the everything code thesis so at top level this is the important thing this is what call the magic formula GDP growth equals population growth productivity growth and debt growth so the number of people if it's growing

your economy grows because there's more people doing economic Activity the more productive they are the more economic output each person gives so that's a multiplier and debt growth is a way of offsetting when these two factors aren't strong enough you can grow debt and what happens is the economy grows but you're robbing the future so let's go through these in a bit more detail so you can understand how it all dovetails in together so firstly here's the trend rate of US GDP we can observe this in any developed uh Economy around the world a slowing

Trend rate of GDP over time economic growth is slowing currently Trend rate of growth in the US is 1.75% so even though we're higher than it now it oscillates around there so we should be seeing slower growth over time as Trend rate of GDP comes down but you can have periods where it stays above trend for a bit but overall this is like a magnet it's a magnet because Population is slowing down Trend rate of growth here's the working age population which matters and you can see how much it's slowed from 8% to about 1%

that's a massive slowdown in working age population growth and even with immigration you don't get anywhere near the kind of ability to sustain High rates of growth so growth slows over time look at the slope it's the same kind of slope we saw in the Last chart then let's talk about debt growth that's been a big feature of our times this is the opposite so as growth has slowed debt growth has gone up and the trend of debt growth keeps Rising so total debts in the US is about 3 70% of GDP it's staggering these

are staggering amounts of debt which is the problem the world has gotten into is we have too much debt considering the amount of GDP that We have so that creates the big problems that I'll come onto but GD the but debt itself has different component parts the private sector peaked in 2008 so this was the introduction of bar 3 this was tightening of lending standards to households households delevered so they stopped spending as much money on real estate debt and other debts and corporations have become less debt burdensome over time because Technology companies don't use

debt while old economy companies which tend to die over time tend to use debt so we've seen a large shrinkage of debt growth it's still high it still accounts for 120% of GDP to put that in perspective interest rates were at 2% let's say and GDP is at 2% to make easy maths then servicing just the debt for the private sector takes 100% of GDP growth each year leaving the government side Unfin that's the real issue we're dealing with here and so what's happened is the balance sheet the um the debt makeup has changed it

shifted because you can't get rid of debt so easily it shifts from one sector to another and what it's done has been jammed onto the government side of the balance sheet so the government is taking the strain and that's a purposeful part because governments have a bit of magic that corporations don't Have and that's called the balance sheet or liquidity the ability to create money to service your own debt or debasement of currency is something that helps governments run these higher levels so we've seen this all over the world where the governments are now running

the debt and they use liquidity and debasement as a way of financial repression to service it another way of seeing this is the interest payments on the debt so every cycle and I'll come on to These Cycles in a minute every cycle they issue new debt it gets rolled over about three or four years later when it gets rolled over there's not enough GDP for the debt that's been added for this side so what happens is they have to inject liquidity or debase the currency to pay for it so even though this chart is very

dramatic because of the covid payments we may not expect liquidity us Liquidity to follow it exactly but it's going to follow it it has to there's no other way without having a debt crisis and you don't need a debt crisis when you can print your own currency you might have a currency crisis eventually but when the world is 400% of GDP and debt and half of that is US Dollars quite hard to have a US dollar crisis so anyway so the point being is the Aging population the slowing productivity the slowing growth what they lead

to is more Debt the debt ends up getting monetized and put on the balance sheet of the central bank or disappearing act by debasement of currency and over time Lo and beholds liquidity looks like the Bitcoin chart or the NASDAQ chart it's an exponential Trend it is the key Trend since 2008 when all interest rates got reset to zero in the in what I would refer to as a debt Jubilee which I'll come on to in a minute because it's an Important point but the biggest point of all something most people don't understand is that

all of this is actually driven by one factor and one Factor alone and that's demographics and the great thing about demographics are they are Destiny because you can't really get around the fact that you've got no births happening in the economy or other things that leads to a Slowdown of growth in the Future unless you happen to have a huge W wave of immigration but demographics actually explain everything and I've tried to explain this many times to people it explains the inflation of the 1970s it explains the disinflation of the '90s and 2000s it explains

so much of what is happening so let's dig into demographics here is the birth rate per thousand people it's been Collapsing now there is immigration but it's not enough I mean we got 1% immigration that was the largest ever year in the history of the United States this year I believe it's just not enough to stop this and yes we haven't got birth deaths here which is another way of looking at people are living longer yes but it's still the hasn't change the trend this is the biggest trend of our lifetimes ever since the Baby

Boomers grew up and came to the labor force We've been dealing with this excess bulge of humans that we can't deal with so what's interesting is what we really care about in economics terms is how productive are those people well they need to be in the labor force to be productive the labor force participation rate is a measure of the percentage of the population that's in the labor force and it's been falling over time and it's actually just a function of the demographics so we can extrapolate into The future to say that in the future

58% of the entire Workforce is going to be working of the population is going to be working that's an extraordinary thing to think about what does that do for growth how's the world work when you've got so little of the population who are actually in the labor Force now some of that changes over time because of deaths in the Baby Boomers but this is a really important thing so when you're faced with this slowing this structural Slowing of productivity and uh population growth you end up building up debt growth this chart is a chart that

you will never have seen anywhere before in fact most of this work you'll have never seen anywhere before it's all entirely our own work this is the labor force participation rate versus government debt is a percentage of GDP now it's inverted here but you can see government debt is a percent of GDP is driven by demographics so as the Population slows we have all of this debt we can't service it we increase the debt we don't have enough growth we increase the debt and they all go in this merry dance together this is the trend

it's one of the most important charts I can possibly explain to you that debt the deficits everything is all a function of demographics you can see it clearly here they debase the currency by using liquidity to offset the debt look at That correlation it's staggering so the effect of debasement the thing that drives up asset prices is driven by the increase in debt which is driven by the population and it's all a function of of that magic formula so once you understand these things you start to understand how the world works but we get much

more into it in the everything code because we start talking about the liquidity cycle and how this all comes together in ways that are Meaningful for us as investors or just humans right these things are really really important things and the liquidity cycle is the next part of this we showed how liquidity is a function of debt but then we also show so here and I've been showing these charts for a while and people now have kind of accepted them as okay I get this now when I first started saying oh by the way the

key driver of asset prices is liquidity and debasement everyone Laughed at me and now everyone takes it dead seriously this is the NASDAQ which is 97 and a half% correlated to Total liquidity it is the key driver of all assets why 97 a half and not 100 well the the the two and a half% is the NASDAQ outperformance based around a secular Trend um of adoption that means that it doesn't entirely map so I mean that's a but that's a crazy crazy thing the other Thing that I tried to explain to people it's really difficult

to get people's heads around everyone goes equities are expensive I'm like you looking at the wrong measure because if you think about what debasement does it moves the scarce Supply asset price or equities let's call them equities but it doesn't affect the variable input which is earnings or wages so if you think at economy level wages grow with GDP Roughly and um assets go up with liquidity the basement so one goes much faster than the other which which is why the rich get richer and the poor get poorer the exact same mechanism is what drives

valuation of equities earnings are variable they're more in line with GDP growth the price of equities is driven by debasement so over time what we see is equities look optically more expensive using this old measure this Measure was fine when we weren't debating the currency it is next to useless now when we look at um a world of currency debasement since 2008 Krypto is the other one that's driven by this liquidity cycle in fact everything is but again I'm focusing on two assets and you'll get to understand why later so here's Bitcoin because it's got

the longest price history of all crypto here you've got about an 85% correlation with um liquidity why is It not high people think well this is all just a liquidity thing no no it's liquidity plus technological adoption and that technological adoption is what drives the outperformance which lowers the correlation but it's again staggeringly High correlation liquidity is everything it's something I've try to get across the everything code is the understanding that liquidity is everything it's there for a reason all the governments and central banks Understand that reason which is we can't have a debt crisis

if you debase currency you can't also have a stock market crash where the main Market is down 50 60% because all you need to do is debase the currency in by Magic the market goes up you guys can all remember what happened in 2020 that was debasement of currency that stopped the asset side collapsing which would have brought down the house of cards because assets are collateral for all of the Debt so you can't have we've taken out that leftand skew of the markets which is the ability to crash because all they need to do

is turn on the Magic Money printer and it all goes away even though it hasn't really gone away as we know you're all paying for it by this tax which is a debasement tax of 8% a year plus the inflation again money printing doesn't create inflation inflation is based on inflation as in CPI is a variable asset thing which is goods and Services that are supply and demand that's not driven by this this drives assets and scarce assets only it does not drive wages it does not drive earnings it does not drive commod modesty prices

it does not come about all of these things where people's narrative is confused they're looking at the wrong thing they're confusing debasement with inflation okay so now we understand liquidity how it fits in what its job is why the Central banks and governments are using it to pay the debt which is unserviceable what I discovered was something was so profound that's created the next leg of the everything code for me and the thing that really unlocked it I started realizing it was in fact I pinged Julian in fact Julian you tell this story about this

for a sec yeah um it's funny because so the the chart that R has up on screen now um I received at like 5: in the morning as As one does when you work with r pal and there was just uh no no other comment other than holy um and so I woke up to that and because of the time delay I'm in Europe you know he's in Cayman I had to sort of wait you know whatever it is for him to to wake up to explain it to me um but essentially it was that

so it was really was really funny um but yeah the idea is what I'd discovered is just messing around with my Bloomberg screen I had Realized that the ism had gone from being this thing that I used to spend my life predicting when would it Peak when would it bottom all these things I spent my whole life doing that because the RM drives assets which Julian will show you later to oh it's perfectly cyclical I don't need to do any of that work really that's just backup work if it's perfectly cyclical I need to understand

why and if it's perfectly cyclical then there's a probability I can forecast it Okay now we're talking a code a hack that's really important so I start looking at is the ism from the past cycle predictive of the future cycle and hey presso it is so now we can understand the business cycle going out into the future and here it says and again Julian we'll talk about this stuff later here it says that the ism will probably Peak sometime in June 2025 it won't be an exact bit and we know where it's going and if

we know that and we'll come on to the liquidity and how that fits together you can see how we can kind of predict asset prices which sounds hubristic and maybe stupid but I don't think it is and you'll see in a minute so what the hell is driving this thing why have we got this perfect cyclicality it's because we are in a debt refi cycle back in 2008 we had this Debt Jubilee as opposed to writing up all the debts all of the major central banks around the world and government said holy we've got a

big debt problem we went too far the private sector's got too much we need to figure it out we need to stick it on the government balance sheet we need to clean this mess up because if not we're going to be in in the 1930s all over again so what they did was a magic trick Which was make all interest rates zero so hey presso nobody needs to pay their interest imagine what it would be like for everybody here if all of your interest payments suddenly went to zero and stayed there for a decade well

that's what happened and so the governments then thought okay right we need to clean up our balance sheet sort this out make sure that we can Finance all of these debts so they restructured all of their Debts into the onee to fiveyear sector so you can see that from the chart here is it's all clustered and what it did was create a fouryear cycle and that four cycle is perfect this is not the first time it's happened either Julian and I did some work on the 1950s after a similar situation all the debt after World

War II and they did the same thing Financial repression that time was yield curve control reset the debts and the economy was massively Cyclical until productivity eventually grew and they got their way out of it so this has been done before it's the 1950s Playbook and here it is again debase the currency and then service the short-term debts and it's creating this perfect cycle but even within this cycle it breaks down to Shorter cycles and this is where it gets bananas which is a word you'll hear us use a few times it's so arrogant and

stupid to think that you can just simply break it down From here's a fouryear cycle and it breaks down to simple four years but it does and it has done since 2008 and what you've got here in this kind of overly colorful thing is you've heard me talk about this macros spring in green that's when the economy starts thawing because liquidity is starting to rise then summer comes and liquidity starts really moving and then fall is when you really often get a large Injection of liquidity before eventually we go into wi which is the blue

and liquidity shrinks as the central banks pull liquidity out of the market to try and cool inflation and the economy overall and they've been doing it perfectly these debt Cycles also happen to be the US presidential election cycle because it so happened that 2008 was the presidential election cycle year it's also the same as the Bitcoin harving cycle because Bitcoin was 2008 so we've Got one Mega cycle that rules it all it's the most powerful cycle we've ever had and most people can't see it or don't yet understand it and it makes them be wrong

in their understanding of how everything works and you can see it people trying to explain things on Twitter without understanding what really moves things but when you understand that same grid of colors the same Seasonality understanding that each of these was an increase or decrease in liquidity well when you look at the NASDAQ and we've proven how NASDAQ is correlated NASDAQ breaks down exactly by the seasons to NASDAQ does well in summer which is we're in now we're just transitioning into but it does really well at the end of the cycle in Fall it tends

to have a a momentum it's kind of a reflexive process which really Builds on itself Because in Fall earnings are at Peak so equities are driven by earnings earnings plus the investment cycle people have got more money to invest so it falls that would be equate to 2025 should be really strong for Tech and strong for this year too which is summer coming off green which tends to be very good the spring too so this is this exponential age Tech Trend that I talk about but crypto same cycle this is the crypto cycle we can

call it crypto Spring crypto summer crypto fall crypto winter it's the same as the election cycle it's the same as all the thing the yeah the presidential cycle it's they're all same so crypto tends to do decently well in Spring the anomaly was 2020 because of the pandemic it did very well in Spring less well in in Fall um generally speaking like the NASDAQ fall is when the real price action Starts my guess is will probably be more similar to 2017 2013 this cycle because we're not jamming excess liquidity in early it'll accumulate over time

but anyway now you understand the cyclicality why it happens based on liquidity you understand liquidity itself and why liquidity is there what its job is to do is debase the currency to pay for the debt that's making the rich get poorer the poor get poorer it means your wages don't go up as as much As the cost of housing it's all described within the everything code but the everything code goes one stage further because it's so cyclical we can forecast further out as well so we showed you the ism cycle and how it's forecastable but

we can forecast liquidity too and if liquidity is the driver of assets guess what we can forecast assets that was the point when Julian and I kind of looked at each other went this is really truly crazy And it's been working and I'll come on to some of the caveats on that in a bit but let's forecast the liquidity cycle now let's go back to the Chart we looked at before well we can forecast the business cycle the business cycle The Institute of Supply manager survey is the best General business cycle indicator and we can

now put one cycle the previous cycle onto the new cycle and invert it and you get this you get the Repeating cycle so that tells us forward-looking the business cycle should be going up now there's a lot of information in that and Julian will explain what that means but basically if you know the business Cycle's going up until June cyclical stocks will do well Commodities will do well all of the things driven by the business cycle and earnings will do really well technology and crypto driven more by liquidity as well and we'll We'll come on

to that in one second okay so let's forward look liquidity don't expect this to be perfect this is the first time we've used this kind of thing but here is using the ism cycle we can forecast Global liquidity cycle and it suggests that Global liquidity peaks in September 2024 and it doesn't go negative until December 2025 our work tends to suggest that the assets Peak when the liquidity cycle Goes negative or just around beforehand but it could Peak not with the peak liquidity but somewhat on its way but generally speaking it tells us we've got

most of 2025 to be positive and then things go negative again now you might see the underperformance now and say well why is it not working well look at the look at liquidity it's not following it's like this is early days yet we've got plenty of liquidity to come whether It's helping China by injecting dollars into the global system for the Chinese currency or for the Japanese or bailing out the commercial real estate or giving out stimulus for the for the um El or whether it's running down the treasury general account or whether it's the

Chinese printing money or the Europeans cutting rates or whatever it is there's lots of liquidity lies ahead they've just been a bit slow with the massive injections of liquidity because They needed inflation to get down now we think inflation is dead um at least for the rest of this cycle so therefore they should have a green light to really start jamming liquidity so it's been delayed let's say because inflation is not below 3% yet that's all to come okay by using that we can forecast how liquidity goes and guess what it fits within that lovely

log Trend which is perfect it kind of suggests that this would be right so Global liquidity Peaks Around then that's what it's going to look like and eventually as liquidity itself starts falling um we will end up so that's June 2025 now and as liquidity starts falling by December then assets should cool off significantly and we go through the winter cycle now please take these I know people are just going to take them and say R pal predicts this do not do that please it irritates the out of me this is the everything code I've

Not shown this to everybody before here the everything code against the NASDAQ because if we can forecast liquidity we can get somewhere close to forecasting uh prices so it's suggesting by June 2025 we get to somewhere like 27,000 in the NASDAQ does it Peak then does it Peak somewhere between then and December but we're looking for that kind of directionality it also maps with those log Trends we get to about 30,000 in NASDAQ that's kind of my the Target In my head will it be less than that will it be more than that don't know

don't care directionally right um before you start having a larger correction and for those of you playing along at home in crypto here is the same the the cycle gives you a peak of 400,000 in Bitcoin again I have no idea could be 50% wrong I don't really care the point being is the structural rise in prices lies ahead and it's going to Be reasonably big now again what are the dates between 2025 June and December does crypto beak early I don't know I actually don't think so uh it would because we're going to more

closely follow the 2013 20 2017 cycle but it's not clear so I keep an open mind it's not about nailing the top it's not about getting the price right about directionally getting this whole Trend right so now I've laid out the everything code and how by putting all This together we can actually forecast assets which is pretty bizarre we'll see it's still a hypothesis it's been working perfectly since we we discovered this let's see how it plays out over the site but directionally it's the most important thing you can use understanding this stuff now I

know you can't build GMI total liquidity yourself sure you can sign up for the macro investing tool and get it from there or Pro macro or GMI whatever that's the way of doing it you can find your own proxy like M Global M2 it's nowhere near as good but it gives you a rough idea or fed net liquidity gives you a rough idea um but obviously if you if you want this work you have to get it from um from the various sources like the macro investing tool or uh real Vision Pro macro where you'll

get the commentary of understanding of of why it matters and what it's going to do for you and Forward-looking so now we understand that I also want to bring it from so this is very top down I've gone and Julian is going to bring it Bottoms Up this used to be a top down framework the business cycle for us but it's actually now become our Bottoms Up work which is how macro we think the world has become and how massive this everything code picture is so Julian's now going to run through uh I I'll stop

sharing my screen Julian's going to run through the Business cycle and its importance because you guys really need to understand this part of this work was also in the uh in the real Vision Academy and our work on the business cycle but it's never been put together all in one framework before so hopefully this is going to help bring up your understanding and and again hope you're taking notes at home one thing to know is this entire deck of 100 25 pages will be available to everybody on the real Vision platform for free all of

you guys watching this on YouTube just go to realvision tocom sign up it's free just your email address and you can have this entire presentation it is the most important presentation we've ever done I think it's probably the biggest presentation has ever been done on macro uh certainly make public so it is important you can go there also on realvision I will put this into our um AI bot on Real vision and create a summarized note of it as well so you can digest it so it'll give you a note that you can find on

the Note section of the platform it will give you the whole document and you should have a much better understanding you can take your own notes on the platform too because you're going to need to do this because I understand I'm dumping too much information on you one go but it's too important not to share right Julian over To you yeah so thanks Ral um so as R said I'm going to talk through the business cycle um what R really just addressed is our major secular thinking around macro liquidity how it all fits together but

R also referenced on a number of occasions was the business cycle and the ism and we believe we believe that the business cycle is the most important driver of all asset prices over the medium term so when we talk about making asset allocation Decisions when we talk about uh risk management decisions we talk about quick quick to interrupt there because I've already said liquidity is but just to clarify liquidity is a function of the business cycle so the business cycle is the framework to understand all of that that's why it's so important yeah and I'm

going to come on to that as well later when we talk about uh the macro Seasons right because we're looking at a regression on interest rates and growth And why not liquidity because growth and liquidity are correlated and liquidity is a function of growth right um so yes that that's right um now uh overall the business cycle once you see it once you see the way it works with all asset prices you you just can't unsee it it becomes embedded in your investment DNA um so let me show you that and what I'm going to

where I'm going to start is really basic okay so I'm going to start from the understanding I'm going to try To that you don't know what the ism is and then we'll build it out talking about some more uh complex to topics as we work through the presentation so when R talks about or or I talk about the business cycle uh we're we're really the ism and the business cycle are tend to be synonymous right because we use them interchangeably and what what the ism stands for is the Institute uh um for Supply management and

it's a monthly survey which is handed out to the World's largest supply chain Executives um asking them about their business so you know what do new orders look like what do your inventories look like you know what's your employment situation look like do you expect growth to pick up or slow over the next let's say six months right there's a lot of subcomponents Within These uh these surveys but essentially what they're trying to do is get a gauge as what to what's going on in the economy um and Ism is also known as a a

PMI so a purchasing managers index and we have these this is the US version we have them for Europe we have them for Japan uh we have them for China we have them for Brazil you know you get the point and the way to think about these is very simply um below 50 means the economy is slowing um and above 50 means that the economy is expanding okay so currently the ism is slightly below 50 so what it's telling you is that the economy is Still slowing but it's slowing at a slower Pace than it

was back in June of last year because the ism was lower now what is a a sort of a typical business cycle what's actually going on here well if we just take for ex if we just um hypothetically say the ism's still at the lads okay we're looking for signs of for Recovery one thing you would do there and then where you might see some signs of a recovery is look into some of the the subcomponents of these PMI Indicators so you can look at things like the outlook for new orders right or um the

Outlook or so capex intention so the the outlook for capital investment six months down the line and generally these things turn higher than the headline T turn higher before uh the headline ISM number and gives you some idea as to where this thing is heading so let's just say for example and I think Julian people can actually play along at home With those because you can do it on trading View and stuff like that you can put the ism or ISM new orders on the same chart and have a look at it'll give you a

good idea of of of what what we mean by that and again this is exactly the stuff that gets covered in the macro investing tool where we make it kind of idiot proof that you don't even need to make your own charts don't need to do anything and you don't even need to make your own charts and you don't even Really need to think about it but the point is is I'm just trying to illustrate Here and Now what a business cycle is and so if we just fig if we just take an ism at

the lows and let's just say for example the outlook for new orders has started to improve if that's the case that means that there's discussions being had between supply chain managers that the Outlook so that that that orders are going to come in stronger six months down the line if That's happening that means that confidence is starting to improve if confidence is starting to improve that means consumer confidence is starting to improve that means CEO confidence is starting to improve if those things are improving it's very likely that bank lending is starting to improve so

banks are banks willingness to make let's say commercial and Industrial loans or household loans is improving so that's an injection of liquidity that means More consumption that means more investment right which leads to more earnings and more GDP at a later stage in the business cycle let's say the ism is now approaching 60 that means that inflation is probably coming from some mix of demand Pole or cost push inflation demand pole is consumption cost push is Supply driven um and that leads to uh central banks becoming more hawkish they then hike rates right higher interest

rates increases the the Cost borrowing costs at the same time as this is going on wages are generally Rising this means that you have margins being compressed margins being compressed means eventually you probably have layoffs you have layoffs what does that lead to less consumption less investment less earnings less GDP so that's actually what's going on here and I just picked a random number of things to say there I mean you could have picked anything but that's really what's Going on within a within a business cycle over time and really what you'll find out as

I go through this presentation is the business cycle is is is the earning cycle and that's why it Maps uh very well to basically all asset classes so now if we look at the ism um versus equities so here we're looking at the ism um versus the S&P 500 and year- on-year term since you know around 1950 you can see that they're extremely Correlated okay and they've been extremely correlated over this entire period And if I zoom in now it becomes you know even more clear so the business cycle is the key driver of asset

class performance across the board and it's not just the S&P 500 it's the NASDAQ and I'm going to talk a little bit later about why some assets have priced in more of an economic recovery than others it goes down to the four seasons of asset allocation um liquidity But again I'm going to talk about this but essentially the NASDAQ has has front run uh the ism and this actually makes sense I'm going to talk this comes into play when we talk about the the GMI business cycle dominoes understanding that risk assets tend to be a

pretty good leading indicator of the economy bar anything systemic or exogenous or endogenous shocks where it's very difficult to have visibility on things like for example covid it's very Difficult to price something in like that in in advance because we just we don't know it's coming but bar that equities do a pretty good job and what happened in Q4 of 2022 is the NASDAQ fell to pricing in an ism of 37 .7 which was deep recession territory um and at the time our lead indicators which I'll come on to in a second as well had

turned higher and we just said this is too much of a recession of the price um you know that's exactly when we turn Bullish but I'll build that scenario out for you in a little bit but essentially it's the NASDAQ right it's also cyclicals versus defensives and actually this is probably the key chart for your understanding so cyli calls are energies materials Industrials consumer discretionary defensive equities um to be like staple Consumer Staples utilities um or healthcare for example and this makes sense because as the business cycle is improving so the ism Is rising cyclicals

outperform defensives so this is things like let's say if the business cycle is turning higher confidence is improving as I say spending is improving you're much more likely to buy a new car or go shopping or eat out when the business cycle is improving things like stocks like lvmh and BMW will outperform as a result of that but when the business cycle is slowing and and and and the top your top line is slowing plus wages are rising Which is typical late cycle ISM slowing you get margin compression and as a result of that the

stocks with less cyclical cash flows be it Walmart Coca-Cola tend to outperform and what I'm going to show you later in the MIT tool is that much like you have cyclical versus defensive Equity plays you have exactly the same thing across Commodities you have staple um um you have sorry defensive Commodities and uh uh cyclical Commodities cyclical Commodities we know them it's copper it's Lumber it's things like that but defensive Commodities are things like grains or or livestock I mean if you lose your job and I gave this example and R actually talked about um

the original video that we did at the Academy talking about this framework originally um I I break out the seasons a little bit in more detail there so if you haven't seen that I would encourage you to go see that but um just because You lose your job doesn't mean that you're going to stop eating corn flakes if that's what you eat in the morning it also means you're not going to if you're a meat eater you're not gonna all of a sudden stop buying steak I mean you might stop buying steak but you're not

going to go vegan you might buy hot dogs instead whatever it is so it's the same thing cyclical versus defensives applies across the entire uh ecosystem that's what you see at play here it's the same Thing with small cap equities so here we're talking about the Russell 2000 emerging market equities I'm going to speed up a little bit now because we've got quite a bit to get through it's not just uh equities either here it is versus crude oil prices again it makes sense as the econom is improving oil prices go higher demand is improving

it's the same thing with aluminum prices copper prices the copper gold ratio now just Remember this chart because I'm going to talk about this uh a little bit later um and what this basically just tells you is and it makes sense as the business cycle slows people increase their allocations to gold as the business cycle recovers um people increase their allocations to a more cyclic coal commodity that's more dependent on um the business cycle which is copper so keep this in mind because I'm going to come back to It same thing with carbon just a

function of the business cycle credit spreads I mean well actually this is not credit spreads this is hyg so it's uh uh High Yield Corporate bonds and it's the same thing if you look at investment grade bonds and then Bitcoin um and I'm going to talk about it being elevated uh in a second just to clarify everything but the Bitcoin does not operate uh in line with The business cycle it operates in line with the liquidity cycle and the easing of financial conditions that's why you've seen Bitcoin start to price in an economic recovery in

advance that makes sense um and I'm GNA that's that really is going to come into play when we talk about The Dominoes um but the point here is just that everything is cycal so now you're going to say okay again we just cover pretty much the entire capital structure right I mean a huge series of Assets including crypto and the point that I made before if this is the case then there's no diversification everything is driven by the same macro factor with some things leading it some things lagging it but generally it's all one Trend

which is the economy stupid yeah exactly right and that this was this this chart was pretty profound we first found it just because for so long excuse me we have been heard we've heard people saying well Bitcoin you Know it Bears no resemblance to the real economy and therefore it's not governed by the same economic fundamentals as a credit spread or an equity risk premium actually it is it's all the same thing as R just said it's the economy stupid and it is the economy stupid and we were the first people in the world to

prove the macro cycle on crypto without question and you'll come into this later without question we've done more macro work on crypto than any other people in The world and we were the first to show this as you said people said it's uncorrelated it's nothing to do with macro it's like it's everything to do with macro yeah and this is another reason that this is profound is and this I had to make sense of this chart for me to make sense of crypto because I've always thought in macro terms when I found this chart you

know the reason it's also important apart from ETF buying Now by larger institutions more And more institutions will finally get come to come to terms with this but when I was working um um at my asset manager you know they were all making sense of the ism versus the charts I just showed you versus equities versus credit versus FX it's the same I could I could show you a 100 charts with the same correlation across it a number of different assets excuse me um but this now all of a sudden if I was to bring

this back uh to my old employer and show Them this it's like guys you have to redefine your risk on riskof grids you've got equities at one extreme you've got bonds at the other you've got uncorrelated assets somewhere in the middle right like gold for example and all this means is that if you're bullish on the business cycle Bitcoin should be the asset that you go to it's not equities anymore it's not msci world it's Bitcoin if you're bearish this is the one thing you don't want to own just Because of the volatility so it's

just about redefining uh your risk-on riskof grades now again has the ISM sorry has Bitcoin PRI now that excuse me Bitcoin is priced in a lot of the acceleration in ism is this now the peak well no um this is again a chart shown um in another format re something uh Ral was talking about earlier but this is the ism Advanced 15 months and inverted versus uh our GMI weekly Global liquidity index now the reason that Something like this works um you hear people all the time oh the FED they're behind the curve and guys

the fed's behind the curve because their mandate is behind the curve they operate at a six to seven month lag versus ISM I'm going to show you this in a second and that's because they're focused on lagging indicators so what this is telling you is that central banks intervene with a lag versus the business cycle to support it via liquidity Injections as a means it's it's like a life raft for weaker economic growth momentum so over the next like we're projecting basically into 2025 that we see liquidity Rising as a result of weaker economic data

which is now behind us but because they work with a lag this means liquidity will continue to rise from here and this was another chart that Ral had referenced but we didn't have in the pack but that's because we have it here again there's an 86% correlation between uh Bitcoin and liquidity so again Bitcoin Works in line with the liquidity cycle if we're talking about something that we mentioned earlier as well fed net liquidity which is basically just the balance sheet minus the treasury general account minus the uh reverse repo facility bitcoin's currently pricing in

that number around 6.5 trillion the current number in fet liquidity is 6.1 trillion okay but we Are so what is that 7% 6 7% premium we're expecting fed net liquidity to go much much higher from here as the debt refi cycle via the work that we've done on the everything code takes hold right it happens in two stages rates come lower first then that means that debts can be rolled at more sustainable levels and then that means everything can be put on the balance sheet of the later later stage that's phase two um so in

any case Bitcoin is just front running The liquidity cycle expecting more liquidity which we agree with so there's nothing wrong with that um and so if anything on the the previous chart that I showed you versus ISM Bitcoin should just hang out there until such a time that the business cycle Peaks and rolls over sometime in in 2025 um the next next point I'm just going to talk about with liquidity and I'm going to skip over to The Dominoes I just think that this is important and This is something not a lot of a whole

lot of people focus on is this is excess liquidity um so excess liquidity has started to rise again and this is one of the liquidity factors or sorry this is probably the liquidity factor most correlated on a forward-looking basis with Equity PE ratios okay and so this was a big signal for us back in Q4 of 2022 that um um the business cycle was turning because liquidity was in this sense Leading versus pees injecting and the way to think about this rather is better I explain it first is excess liquidity is the amount of liquidity

available in the system the economy in excess excess of what is being consumed by Nom nominal GDP which in theory can then be financialized right because it's liquidity that's sitting on the sidelines which isn't being consumed and so that's the way that this works and as you can see it's very correlated With pees so again this gave us a strong signal back in also Julian it fit that it also fits in with that chart that I showed earlier with um the rising of P ratios because it's driven by liquidity and you're proving it here in

a very clear manner that debasement of currency actually is the dominant factor in a PE ratio correct correct and again because you know as R just said because the crypto and liquidity and Tech are all so correlated Now post 2008 the fact that this is rising is good news and I again I haven't seen anybody else talking about this recently at all so this is definitely on our radar and again um sort of explains why even though crypto has priced in the recovery in advance there's more liquidity to come now a normal economic um cycle

tends to play out in sort of a sequence of dominoes um there's different stages to each cycle um diff some data leads other data and What I'm going to do now is I'm going to show you that explain it to you and then we're going to talk about our GMI Financial conditions index how it is that that helped us get us get it right back in Q4 why we're still confident that it's working well today and then I'm going to show you sort of a countdown to zero because R and I are living so far

in the future versus current ISM because you have to because risk assets actually move ahead of ism Um using a framework for lead indicators at a 6month interval five month 3 month one month to sort of confirm or refute our views around the business cycle as we as we um because as I say because we live so far in the future uh because a lot of what we were calling for in Q4 of 2022 is really only coming to light now given the long leads that we're working with so um this chart now that we

know what the ism is um and we know that within the way that we think about The world it's more of a coincident economic data point economists will tell you it's leading and that something like industrial production would be uh coincident and lagging would be unemployment but within our framework it's more coincident and everything else is lagging so the way to think about this chart is at T equals z that's the ism everything to the right hand side of this chart in blue is leading by a Certain number of months which you can see on

the bottom and everything else on the left hand side of this chart is lagging and in Black okay I don't have all the indicators here just to give you some context the next thing immediately that your eyes are going to be drawn to are these yellow these sorry these colored bars so you can see the green bar Ral and Julian this is us we tend to try and operate at plus n months versus the current ISM because we have to Because if I skip back to the yellow bar now at three months that's where risk

assets operate well actually risk assets isn't the right term it's where equities operate because as I just said to you before Bitcoin really tends to operate at around an 8mon lead time versus the ism so the point here is if you're focused on the ism Sam and buying and selling Bitcoin and that's the only thing that you're paying attention to um you know you're always going to miss Certainly the lows uh because of the way that this moves in advance um and then at T equals z as I say after that you've got industrial production

unemployment oh and then the yellow bar right central banks this is where central banks operate central banks operating behind the curve the pink bar not the yellow bar oh did I oh the pink bar th this is where they operate of course they're behind the curve it's their mandate that's that's the data that they're Looking at so when you're trying to make decisions around uh Central bank's next move they're not looking at commodity prices they're not looking at the ism they're not looking at new orders to inventories and you hear people all the time oh

well all of a sudden they're becoming less hawkish and commodity prices are rising I mean first of all commodity prices are not a huge input into CPI overall if we talk about energy Goods yes but even Taken together it's less than 30% um and and second that that stuff works with f a long lead because this is we're not going to show this here but we also have the inflation dominoes so the inflation dominoes just in summary is that commodity inflation leads Goods inflation which leads Services inflation and services inflation is a function of unit

wage costs which are still falling and that's that's really what the fed's focused on because that's really core so Extremely extremely lagging anyway um and jul that's the reason why the FED always cut as the business cycle is growing ism's going up they're still cutting because they're dealing with wages and shelter which are deflating the CPI numbers for an extended period of time I mean shelter is like 18 months behind and so you tend to get this disinflationary pressure on the things they look at forward-looking inflation will have already gone up but they don't Focus

on that so they tend to cut late into the cycle and continue all the way through which is why macro fall is tends to be lots of rate cuts and liquidity because they're focused on all this lagging stuff that's right and again just coming back to this chart R's right I mean CPI shelter operates at around 17 18 months they look at wages 13 months so people all of last year were fighting R and I on wages and them being sticky they're everything going back below 5% Uh they have now um but again it's just

so lagging in the business cycle that it takes time for that to come down and our our lead indicators for that um suggest that we should see 4% before we see any material Trend uh higher so and again it's very difficult to have an inflation spiral without a wage price spiral given Services is such a large part of inflation overall um so this is our GMI Financial conditions index it's a regression on Commodity prices uh interest rates and the dollar and the way to think about this is It's inverted here so as the red line

comes lower it means that Financial conditions are tightening okay so really and this is Advanced um nine months versus the ism but let's just say with the with the lead in play we were really at the tightest levels uh in Q4 of 2022 um uh since the global financial crisis and then it started to inflect Higher as did the liquidity numbers and so the point with showing you this chart is that R and I with this framework that we've put together and 2022 was the perfect example are really the you know one of the very

few people talking about the early Innings of an economic recovery when everyone else is still banging the table about recession um and that's where we were and what you can see we also bought risk Assets in Q4 because we saw that bounce in liquidity In financial conditions in advance we got the the the the qualification that liquidity was changing and that allowed us to buy you know kind of go Max Long Tech and crypto that's right I mean in fact in September that was the article that we or that was the um GMI that we

published it was it was titled the turn is near and that was exactly when we were calling for the bottom and everything else and that took a lot of I mean a lot Of Courage because I mean everyone else I was talking to was I mean do you remember that time I mean it was unbelievable um but anyway because we live so far in the future and because a lot of the data that you would normally wish to see to give you a gauge on how the economy is doing be it industrial production retail sales

capital goods durable goods that stuff's only bottoming now right so some 20 months later the way I like to use this Framework is using lead indicators to confirm my view sequentially working backwards um to help to help me feel a bit easier about living so far the future so if we come back now to 6 months right so how we're looking at the percentage of countries with Rising oecd composite lead indicators um this is as I say it's a six-month Le versus ISM higher okay good that makes me feel a bit better right these were

all turning higher within their respective leads Which again helped us build confidence here's one at five months okay good another one at 5 months great ISM new orders to inventories higher okay great and then ISM new orders so what I showed you on the dominoes leads by around a month okay so it's choppy it's you know what down in April a little bit um but again um it's very clear that the ism is in the process of bottoming especially when you look at the continued easing that we've seen in financial conditions Over the course of

last year and uh this year now what I also like to do beyond the ism then now we're going to come into some of the coincidence stuff and then we're going to skip to um the MIT tool is look at real coincident economic data as defined by The Economist right so now all of a sudden exports are starting to improve right on schedule given the ism leads this by four months so you cannot the point is you cannot wait for the for exports to improve uh To take a view on risk assets uh just because

of of the lag you know just two weeks ago we had the Q2 number for conference board CEO confidence this operates um uh at a a coincident um Pace versus the ism so there's no leader lag what it showed is a modest increase in sentiment yet again and CEOs have an excellent sense of what's going on in the economy in high at a high level so I think this is encouraging so seeing all these things You know counting down from nine to zero and then in some cases minus going negative right into exports and also

now what I'm going to look at here earnings starting to improve with the ism five months forward um is is is encouraging now uh at the beginning of this year we had said that there was six rate Cuts being priced into to the curve that means that um the market was expecting the FED to cut rates six times this year We said that three of those could be priced out we already priced out four um so more than I was expecting but even then it hasn't really mattered mattered and it hasn't really mattered just because

the Market's attention has shifted from the FED which makes sense because over the last two years the FED has been in inflation fighting mode and this is a really complicated market for uh environment for risk assets but now the market shifted their attention over To earnings which we were in earnings recession last year and now they're starting to uh improve and um so it's not it's not it's less about the Fed now and and it's more about earnings and so if you think about it like this and this is this is actually a very important

Point um you know multiple expansion so prices rising without any recovery in E is very normal okay prices rise with the liquidity cycle earnings rise with the business cycle so last year uh was a Story of um multiple expansion and people will come out to you and say earning I mean prices are rising but earnings are not I mean how are these valuations Justified it's it's very normal it's just as I say prices are following liquidity earnings follow the business cycle so what happens with the lag so that's telling you is that this year is

just about justifying the valuation premium that was built last year as prices started to rise and That's currently happening but it needs to happen it need we need to see even more follow through here now that additional rate Cuts have been taken off the table so as long as earnings continue to improve we're going to be in good stad um uh and and if we look at that was trailing earning earnings which I showed you before this is essentially analyst expectations um which um for for 12 months out of the line and they're Rising as

well and this also helped r and i in Q4 when when the analysts became as bearish they had as they had been uh since covid and before that GFC we just said now this is this is too bearish given what we see on the liquidity and macro front and here we're again reaching a cycle High um so far so so again so far so good and this is the focus for markets now so as long as earnings improve we should see a Broadening out of cyclical Equity performance unlike we saw last year which made sense

because earnings hadn't yet bottomed yet and what we saw was Tech discretionary long duration assets perform but not traditional um cyclical plays so that's what I'm going to talk about now um getting getting through it um so how to invest across the business cycle so to understand this we have to understand the four seasons of asset allocation now the slides are going to Change a little bit here uh temporarily just because these are charts um from the MIT so the macro investing tool um that we have on real Vision just taking out of one of

the documents that I've presented just to confirm for people the macro investing tool you get it in real Vision Plus or you find it in the real Vision Marketplace when you sign up to the platform for free when you want to download this document this huge document get the AI notes um you You just click on the bottom left icon it opens the marketplace you can flip down and see more about the macro investing tool it's part of plus and above so it is I think the single most powerful thing to help you in your

investing Journey so this is where it all ties together and Julian's made it kind of idiot proof for everybody so off you go yeah um so I'm just going to start by saying um this this framework has been Used for a long time by some of the best investors uh in the world and if you look back in time what you'll hear you know time and time again is that the two most important things to solve for when it comes to investing are differential changes in growth and inflation and so growth and inflation are the

two most important things now with what Ral said with liquidity there's no question liquidity is the most important driver of asset prices um both in the short Term and the long term but the point here is that uh liquidity is really a function of where we are in the business cycle so there's a degree of multicolinearity between growth and liquidity so to it's keep things simple stupid um it's better to focus on growth um and and inflation so we we break them down first of all the text on the right hand side is just for

you it's to help you better understand what's going on um during these macro regimes outside of Just growth and inflation um so if we talk about spring and I'm going to run through these quickly because we still have a lot to go through is that's a disinflationary boom that means that growth is accelerating right lead indicators for growth um and inflation momentum is still decelerating so that's macr spring that's where we were all of last year I'm going to show you that in the scattered chart a little bit later summer is then an an environment

where Growth momentum is still accelerating but the second derivative of CPI or ppi is starting to accelerate that doesn't mean inflation's accelerating it just means the pace of decline in year-on-year terms is slowing down this is the excuse me this is the discount mechanism for risk assets and that's why this is important for this framework and what's also nice about this framework is r and I always give our views because we have views uh uh and I think it's Important that everybody has views but this is a data dependent approach so irrespective of our views

on inflation this model runs in the background and it keeps you honest and and it's EXT and I built it for that in fact um if you watch some of my previous videos on MIT if you go to the real Vision platform you'll see me talk through this are you accusing me of being dishonest is that what you're trying to say there very AR um then and then fall is stagflation right so a lot of you will have heard that before it's when inflation's rising and there's no growth this is typical kind of classic late

cycle um and then winter is is is the most riskof macro regime it's when growth is slowing and inflation is slowing um and so these are the the four uh Seasons uh uh for for macro now this is the latest table um and in fact I'm going to update this next week uh for for April and what's Important here is well is is a couple of things so don't get overwhelmed by this and again if you are overwhelmed by this please go see one of my former videos where I really break this down um in

detail because I'm not going to have the time to do that today but essentially within here we have a leading a composite lead indicator for growth for all these countries and for inflation we're located somewhere where uh Midway up the supply chain I think if you go Into any further up the supply chain you tend to lose the signal the same can be true of certain PMI surveys with respect to prices so I I'm located somewhere uh uh in between um somewhere middle of the supply chain now the point here is that this is March

data and again this is older now I'm going to update this last week but the growth data Within These composite lead indicators leads the ism by two to three months so you're looking at and and in some cases data is always Lagging right because of just the way it's released but if I was to plot these growth indicators versus the ism or versus I just use the ism as my kind of go-to example you'll see that as we progress through this presentation but it's it would be the same for Canada Germany France now what's also

important is it's not so much about the individual countries uh as far as the signal from the noise here it's really about focusing on on the table at the bottom Right so looking at the percentage of countries scoring within each Macro regime so what you can see is that last year was about macro spring I'm going to show you this in another format in a second and this year we've seen an increasing number of countries beginning to score into macro summer and so what's really important here is to identify regime changes that are trending that's

and because once you identify that these tend to be multi-month multi- quarter Trends in asset allocation so it makes the asset allocation and selection process a whole lot easier um and then as you can see winter if I here I used a rolling 12 Monon uh window just because that was a little bit easier to digest and it's what we use for MIT but we have this going back much much further but then the table becomes a little bit too like you know Skittles rainbow colors uh it's too overwhelming so this is just The 12

month so you can see that again Winters come down significantly and when we look at the same chart I just showed you but in Time series format I just wanted to show you this because much like the seasons are linear kind of here on Earth it's the same thing within the macro Seasons so Peak summer then you get Peak fall Peak winter Peak spring Peak summer this isn't always true and it oversimplifies a business cycle Um but it's most of the time this is this is the way Works um one good example for when it

it didn't work out like this was covid right that was a situation that was you know an exogenous shock and we went from Spring straight back to winter but that's not something that you can pick up within a a quantitative tool or approach that has to be me or Ral or you know someone involved in markets who is reading something you know that that's Where you have to have some discretion um so I show you this because what I want to come on to is this and I'm just going to use this as a real-time

example to talk you through one example and then and then we'll move on uh uh to macro summer so this is the this is the um the leading indicators which are embedded into the model itself okay so what you're looking at is the percentage of countries scoring within each Macro regime and so if we look at recovery and Again this will be updated next week and I'm pretty convinced we'll see an improvement and expansion the way to think about this in simple terms again is recovery is let's say pmis below 50 so in contraction territory

but improving on a month on-month sequential basis expansion is you're above 50 so you're now growing the economy is now expanding and it's it's it's expanding on a sequential month-month basis slow Down above 50 but peing um contraction you're below 50 and slowing okay so what you see in this current environment is that recovery is probably topping out here expansion is accelerating there is nothing going on in slowdown which makes sense and contraction is is is plunging so just to give you um views on the way I used this back in 2021 so slow down

really so that blue line really started to pick up in July Of 2021 and this makes sense because the global PMI itself which you can track probably easier than building something like this out peaked in May but what was important there was not the fact that it peaked but it started to show up my numbers by July because what it's telling you is that the pace of decline is accelerating so this was the first thing it's not a red flag um but it's a yellow flag then by April of 2022 the Contraction quadrant started to

follow okay so it's the exact opposite to what we're looking at today um and this gave me the confidence coupled what I was seeing on the liquidity and Lead indicator front that we were going to transition into what we call macro winter and from there the market went on to fall another 23% I think Peak the trough it fell around 25% so a lot of that um could have been uh avoided following something like this on growth Momentum finally in September October of 2022 the contraction quadrant peaked out at an extreme recovery started to go

higher um from really October onward so here we're talking about 2022 and this you know coupled with what we were talking about um with financial conditions liquidity um really gave us the confidence to stick our neck out uh back then so the point here is that right now there is no significant shift in regime taking place the two riskof Quadrants that you would worry about are not building there's zero zero zero economies are in slowdown and contraction is still falling so that's the way to think about this that's exactly the same way to think about

the seasons the seasons are growth and inflation this is important for asset allocation so I'm going to show you that in just a second and then when we're just looking at pure growth this is directionality so you can think about it As beta some fancy it's the direction of the market whereas let's say the seasons are the outperformance so trying to achieve Superior performance versus the market over the long run and just if we look at a slightly longer term chart um so here we're looking at the percentage of countries with lead indicators above Trend

you know we're still looking at an environment where these are rising a late cycle economy sees this number much Much higher historically closer to 80% so there's nothing hot about the economy yet and in fact as I've pointed out before growth momentum is still weak but now what we're seeing is apart from a greater percentage of countries entering recovery meaning that they're no longer as deep in PMI negative territory they've actually come back or improved a little bit we're seeing a larger percentage of countries globally that are now above 50 and Rising so That's 35%

so this is this is good news so now if you couple that growth view with the what I talked about on the second derivative of inflation now the second derivative of inflation is rising because of the massive easing in of financial conditions that we saw last year but again the second derivative is the actual year-on-year change of the year-on-year percentage change it's complicated I've explained this many Times in my videos so I'm not going to go into it now but essentially if I project out that white line it says to me that by June of

this year um it it could be around zero so what would you do you need to look at June of last year and in June of last year CPI year on year was at 3% we're at 3.4% it doesn't tell you that the CPI is rising but what this does tell you is it keeps you locked in to macro summer just because this is the discount mechanism For risk assets they're not worried about the year-on-year comps it's the second derivative so that keeps us locked in to macros summer for now now just just two more

charts two weeks ago when I presented the MIT update um the mark the cross asset class performance so let's say the S the macro signature embedded in asset class performance started to price in macro winter on a month-to-date basis so the green bars whereas the year Today you can see that it's been most consistent with Summer now spring and summer share similarities because they're both risk on um um you know Tech still does well in summer it does less well than it does in spring but because of the secular Tailwinds we think it continues to

do well but you get a broadening out of cyclical performance in in summer but a lot of Commodities you know it's there's similarities which is why it's still elevated anyway it Makes sense the market would start to price in um a cycle regime into macro winter the market was lower by around 5% um and pretty much across I mean we're talking about the S&P 500 but most assets were down so that makes sense and that was also driven by the withdrawal in liquidity because of tax season so if liquidity is one of the markers for

the seasons we had this little Min season within which was tax season where money came out of money market accounts and Went into the treasury general account wasn't spent it drew down liquidity it gave it a little mini winter season before we start going back again yeah and well two things about that um first of all that that liquidity drain as R just pointed out is more technical in nature it has less to do about the overall Trend in liquidity the second thing is that this is exactly why this process becomes interesting because there was

a liquidity air pocket um Which was driven by incoming tax receipts the it w and it wasn't it was literally a drain of of liquidity because they came out of as R said money market accounts um that took the market lower now all of a sudden the Market's pricing in winter but we've got a different view so um the last time we had a signal like this where the macro regime was supportive so we were in Spring at the time uh we started to see a little bit of Summer But it was mostly spring winter

was coming down but we had a what a 10% corc me if I'm wrong rout was about five or 10% correction in the S&P was on the news of svb back in March of last year so we saw pretty much an identical chart the market wanted to rotate into macro winter but the economic fundamentals were consistent with a continuation of the cycle so what we wrote in GMI I'm going to write read it to you at the time that this was happening so we saw a Chart like this was year-to dat market pricing has been

consistent with macr spring however due to the banking scare back in early March with basically all assets falling the market started to Discount a transition to macro winter again this is exactly what we want to see as we have a different view when the market starts to move against you but you have strong conviction backed by solid economic fundamentals opportunities to enter new positions and Add to existing ones are created okay so when you have that conviction but the Market's pricing in a different scenario and then you look at what the Market's doing today right

with markets with the NASDAQ and the S&P now back at all-time highs you can see not only year to date are is the market profile consistent with macro summer but the month-to DAT Market profile um is also uh consistent with macro summer and winter has come down Considerably now talking about the MIT um asset tables I'm going to talk you through one of the tables um we also have these tables um on the platform for Commodities uh for FX we have it for crypto as well so talking more about phases when Bitcoin dominance is the

theme uh and when it's not um credit bonds style factors growth we've got we've got a lot of these tables but this is just one and what this is is a a regression on um growth and Inflation going back as far as I can with these assets and in in certain cases that's as far back as 1950 but generally speaking I can cover everything uh back to 1960 so it's it's a it's a long regression crypto of course not but as far back as I can with Bitcoin so what you can see is that in

mac and and again the green arrows mean that the asset class performance is statistically significant um during that macro regime Yellow doesn't mean it doesn't perform so you see that you're like oh well I don't want to own let's say Euro stocks in Spring no it just tells you that there's better things to own right because that's the whole point of essentially a z score um so what it tells you is macr spring equities and credit do well and crypto does well and then let's just skip down forget the regions let's just look at um

sectors what does well uh in in an environment Of rising growth and and subdued inflation consumer discretionary technology semiconductors home builders everything else is sideways to Flat those were the best performing sectors last year I mean the market profile was completely consistent with the economic fundamentals last year despite what everyone else might be telling you it was textbook macro spring now look at macro summer so equities do well oh but Commodities do well okay so Commodities Weren't doing very well in Spring no there are Commodities that outperform uh the a broad commodity index so if

you're a long short fund you can long certain Commodities and short others as you go through the business cycle with what I was talking about before as there's cyclical UND defensive Commodities but Commodities only really start to do well in summer because of the inflation component and then just look at the sectors energy materials Industrials up financials Technologies up Regional Banks up so I'm going to talk through um some of these uh now the only thing I'm going to say is as R alluded to earlier is that when we finally re decided to um bring

this tool to real Vision we had said that this is not a trading tool it's not a trading tool it's an asset allocation tool which helps us focus on owning the best assets across the capital structure as we progress through the business cycle okay It's not a this is not a a tool designed to help you identify a 5% correction the purpose and it's fine to trade around sentiment it's fine for you to do that if that's your thing the purpose of MIT is is this 5 to 10% correction as I showed you before with

the market pricing and the lead indicators so on and so forth is this 5% to 10% correction a buying opportunity or or is it not right that's what this is about so buying dips are spring summer to an Extent fall but that requires more active management on my side because there's a lot of things going on in Fall so it can go one way or the other but winter is a sell the dip kind of thing um if that makes sense so welcome to macro summer so we're going to go through what's happening here at

an asset allocation level I think this will be interesting um um for for most of you so as I said before Bitcoin and and rs also Alluded to this Bitcoin generally front runs the ism because it moves in line with our financial conditions index Bitcoin leads the ism by eight months our financial conditions index leads the ism by 9 months Ruby um because basically as I say this is all down to the easing of financial conditions the NASDAQ it's the same in fact it's the same for all spring assets long duration Equity play where earnings

are forward earnings are further out Tend to do well in an environment of spring so that's discretionary home builders Tech you know I just went through them um they all had an incredible year last year um which is very typ difficult during macr spring now the Russell 2000 this is interesting because only now are we starting to see an environment where the Russell can do well because sorry can you just flip back a chart a sec I just want want to clear something up for people so people Might look at this and go well nasdaq's

done you got to understand year-on-year rate of change if you look at previous times it's stuck around this 40 50% rate of change for the rest of the cycle until you get to fall or even to winter so what it means is you're compounding growth on top of compounding growth still so it doesn't mean the asset itself Peaks means the rate of change has reached its maximum velocity of % year on year but you're still going to See 40% plus year-on-year rates have change yeah and and just to that point I mean if you look

at the NASDAQ if you pull up a chart on the NASDAQ um it's gone up in a in a straight line since Q4 I mean it it looks like it's like that so what all this is telling you is that that degree of advancement is is now going to start to slow doesn't tell you that the NASDAQ is peaking year on-ear PS are tricky but R's right um and you can see even in 2020 um the equity Market of course led the ism higher the whole way then it just pauses there and waits for the

business cycle to top out then it goes okay um earnings are lower here I'm out right um now the Russell 2000 as I said before is is pricing in really current ISM but nothing forward-looking but this makes sense because the Russell 2000 is really linked to what R and I call the old economy right therefore it's highly dependent on the earning cycle so This is why um personally I like things like small caps uh materials Industrials financials uh Banks I'm going to talk about these a little bit later I almost got shot by talking about

Banks earlier in the year I actually did it on Maggie Lake Show and I remember I came on and I was like the only guy Advocate advocating Banks but I'm going to show you why that made sense so that you can do this for yourself um so again pricing and current ISM nothing forward-looking But makes sense because these are um style factors which are attached to the earning cycle they don't operate with the liquidity cycle like long duration lays like technology us materials same thing right but then you look at the technicals and again this

I did originally a video about materials Industrial a broadening out of cyclical performance which makes sense within a year where earnings are started to improve and therefore we should get a Cap a year where capex starts to improve these things should do well so and you saw them score well um on average within a macro summer regime so now materials broken out retesting push higher Banks remember what I said about Banks I mean I again I just remember talking about this and and just being you know so much push back explode voting higher why again

first of all it's a year-on-year comp but again had it hadn't priced any of the forward-looking stuff um uh uh at At the beginning of the year now banks are moving higher broken out of their Trend pushing higher copper is telling you so copper specs this is not this is the speculative positioning in Copper so what this tells you is that um uh people are taking larger and larger copper positions as a percentage of total open interest and Franklin it's at a high what of two years now so they're telling you something they're telling you

that they're anticipating a move higher in The business cycle which we could have told you was coming uh what now R 20 months ago I mean with with with the work that we've done um and then look Copper's gone ballistic it's gone to an all-time high and now I want to come back to copper and this copper gold ratio as I talked to you about earlier because in an environment where the business cycle is bottoming and starting to move higher copper outperforms gold and what are we seeing A huge wedge breakout of copper versus gold

so this is macro summer this is not and and this is validating right you want to be looking at something like this meaning oh okay we're currently ranking within macro summer within the growth and inflation quadrants this is happening oh okay you know what that makes sense right as opposed to why why is this happening it's happening because of where we are in the business cycle now the last thing I'm going to talk About and I think this is really important um is altcoins um should be thought of as well they behave a lot like

small cap equities so altcoins should be thought of as small cap tokens which is exactly what they are so I'm not telling you anything new here but there's small cap tokens like a small cap equity and Bitcoin should be thought more of a as a large cap growth Equity right so Bitcoin Operates in line with the liquidity cycle altcoins operate in line with the business cycle right because these projects are smaller they it's it's it takes more time actually I have the chart do I have the chart yeah um it takes more time for liquidity

to filter through uh both the real economy and into real risk assets which is impacts altcoins as a percentage of Bitcoin market cap with a lag so here's fed net liquidity which we've talked about a Number of times Advanced 12 months versus altcoins um as a percentage of Bitcoin market cap now um again what we're expecting here is very similar to what we saw in 2020 and 2021 where altcoins begin now that the business cycle troughing but if I just skip up for a second haven't priced in anything forward looking but work in line with

current ISM very similar to other classic cyclical recovery plays in Fiat Land versus this is crypto World um We'll we'll start to gain market share versus Bitcoin it feels like they were're at the right stage of the cycle and this is because as I said before as liquidity and speculative Behavior starts to trickle down into earlier stage projects and smaller tokens Um this can happen now that more of the crypto space has been made whole with Bitcoin reaching all new Time new all-time highs in March um so unless of course you Bought at the highs

in March in which case you're probably banging your head on the table but I think you've probably recovered 50% of that down move now so we're now down what around 10% um but in any case I have um some charts for you a little bit later um and now I'm just going to hand it over to R for a second to discuss nfts are trophy ass look I know this is a lot for everybody to take in I don't think anybody sat Through a two and a half hour macro presentation before but it is important

and we're trying to show the depth and breadth of what we do and how you guys can learn from this to understand how the world works so you stop picking up you know Silly information on Twitter and thinking that's the answer doesn't mean we're always right but we're trying to give you the framework of understanding of how the world actually works so you know we've gone through the Liquidity cycle we've gone through the everything code we've shown how the business cycle matters we've shown how you can just turn into a model that we've done with

MIT to get you in the right direction in what you're doing so you're not trading things you shouldn't be doing you're investing in the right things now you know GMI is is an extraordinary body of work because we cover everything from secular Trends which we've shown to you but we do Everything including the rise of India and all sorts of things business cycle analysis as you've seen technical analysis we're not really showcased how much technical analysis we do we have obviously trade recommendations B based around this we we cover geopolitics social trends technology trends of

the exponential age we look at the future and what the future is going to hold for the global economy and for all of us we look at the Past how we got here we look at liquidity we look at macro models and we try and make sense of everything so here's another nice one for you we came up in our work was nobody else had done this before and I presented this and I've talked to you guys about this before is that nfts are a trophy asset they actually exhibit very regular kind of trophy asset

style macro pricing so how this works Is trophy assets like Fine Wines these are generally driven by when people have excess liquidity themselves I you're making money usually stock markets are alltime highs and your earnings are going up so think of the earning story Julian said well guess what you start buying Fine Wines sticking into storage as assets because they go up in value or you end up drinking them Julian and I were talking about this before we both buy Fine Wines none of us ever sell them We just drink them but either way bedet

liquidity like the altcoin cycle is also the fine wine cycle bizarrely enough Bitcoin is actually the lead because of what we talked about on Fine Wines so it tells you that if you're a fine wine collector you should be loading up now because Fine Wines are going to Skyrocket for the next 18 months to two years um and that's pretty interesting to me but where it gets really Interesting is when we look at things like nft users worldwide versus crypto market cap it's all based on the same thing if you think of the Art Market

in crypto people buy art like I've been buying art recycling gains out of my salana to buy long-term assets so I've been buying x copy and beeple as a long-term store of value so as crypto market cap goes up people recycle the profits into trophy assets it's the same as the fine wine Market and guess what it's the same as the secondhand luxury watch Price Market nft users as a proxy for demand for nfts matches exactly secondhand watch prices of Rolexes protect Philips and everything else they're all driven by the same thing everything is macro

and macro is everything and that's why I've been looking forward and it's a thesis I'll talk in more in more time about about why I end up buying some really trophy nfts because long-term these Assets appreciate against de basement but they're also incredibly scarce they tend to outperform De basement very well over time and My Chosen vehicles have been um um x copy the artist plus people but let's flip back to the money shot now that a lot of you are here for you've sat through a ton of charts a ton of understanding hopefully you've

gone to the realvision website realvision domcom you've downloaded this doc so you can go through it in detail you've read The notes now let's come to crypto and what comes next Julian over to you yeah thanks R all right so crypto what comes next we're going to try and Breeze through a lot of these charts just because uh this is already I think a two-hour presentation and we want to spare you from sitting too much longer but again I think I have some good charts for you so first of all again let's just back up

and zoom out if uh you're new to crypto 20% Correction 20% Corrections are are pretty much the norm right we've had five of them so far this cycle this is is not going to be the last one get used to it um however with what we just witnessed um with the the pullback in the entire crypto space but again we use Bitcoin for a lot of these charts as Ralph said earlier just because we have the history um is it's very typical Behavior around the having so Essentially what happens is into the having you get

a rally a strong rally then you get some sideways chop for a period of time and then post having you get a fairly large dump um before prices start to recover so I think that's where we are now um and despite all kind of the mid curving going on around the having I'm going to buy today I'm going to sell tomorrow you know it's going to be April 14th which is the low you know whatever it is this is really the only Chart that matters from an Investor's point of view I would say if you're

a Trader that's your thing I'm not a Trader I'm an investor so this is more appropriate for my time Horizon and post having we've always seen prices much much higher which again goes in combination with the macro that I've shown you the liquidity framework both on a secular point of view and a more tactical point of view um it's exactly the same thing with Bitcoins reaching New all-time highs post a 75% draw down higher 100% of the time you know and it's also very easy to get caught up in crypto narratives given that almost everyone

has a View today and that's that's a complicated place to be in especially if prices are going down right it's very easy to get scared um so what I found extremely helpful um you know over my investing journey is all whenn and doubt to zoom out right and so these are the previous Bitcoin Cycles versus the current cycle um and what you can see is that the big picture remains that we're still fairly early in a cycle from historical context versus both in in in respect to both time and performance except for the Bitcoin Genesis

cycle so that was the um 2011 cycle but as you know the market structure back then was I mean mostly speculative and looks completely different than today so it's not really comparable and when we look at the Cycles that look most similar today the 2015 to 2018 cycle um Maps uh very well and so again just illustrating um how early we still think that we are now does this need to play out perfectly no and I'm sure it doesn't but contextually it feels about right and that's what's important here Additionally you know we're just nowhere

near a plus three standard deviation move in some of our sentiment metrics so this is an aggregate of um things like RSI Different oscillators uh stochastics and you can see that anytime if I aggre I started with like 12 I got it down to I think eight or so that made sense um you know we're just not there yet and that would these are some of the things these are some of the things we use for the asset allocation framework for xam when we're looking at where which types of hedge funds to allocate to where

they are on the risk cycle there's a whole bunch of factors that we've built around The macr crypto thesis that we haven't got time to show today but a lot of these all come together to allow us to try and allocate correctly according to the cycle within the framework of the fact that we're allocating to hedge funds not to the market itself yeah right um and then if we just talk about so again if I just get back to this if we cross three dead C deviations I'd be concerned but if I look back if

you look back to let's say 2016 cycle you know we have a lot of these um you know 1.8 standard deviation moves and it was choppy but we were in in the trend so just don't get too lost in in narratives around Peak cycle I really just don't think we're there yet um and then if we just skip to alt season for a second and I've got three more charts and then I'm going to leave you love you and leave you um is that so this is altcoins so at at xpm at GMI we track

300 altcoins outside of let's say Ethereum salana um and of course Bitcoin um so this is uh a percentage of assets outperforming excluding stable coins Bitcoin overall rolling 90day period And if we just look at this point so we've talked about presidential election years we've talked about Bitcoin having years and the debt refi cycle years it's all the same cycle it's one big cycle so in 2019 the percentage of assets outperforming Bitcoin over a rolling 90day period so the the percentage of Altcoins was running at just 5% okay then by Feb of 20120 it went

up to 67% then uh in March of 2020 it fell to 33% and then skyrocketed higher over the next 6 months reaching 83% so 83% of altcoins were outperforming Bitcoin over a 90-day period now look at what's happened again in 2023 July of 2023 the year before the Bitcoin having year the presidential election year the debt refi cycle year so the everything code cycle year um we fell to 5% then in Feb of 2024 we skyrocketed to 65% and we've since come down to 31% now and and again if I if I just when I

when I think about what I showed you as far as altcoins as a percentage of Bitcoin market cap versus the ism acting like small uh like the Russell 2000 but not pricing any forward looking it makes sense here now that we're entering the phase where altcoin should outperform Bitcoin and if we look at the previous instance that this Happened right so um and and again March of 2020 I didn't I couldn't I didn't take because at the time Bitcoin was at 4,900 this was the low of covid so it's not really fair so what I

did instead is I took the 8th of May level which was 10,000 and then I basically projected out altcoins XE because I think that's more fe uh more fair uh when talking about altcoins versus Bitcoin market cap into the peak of the cycle which Occurred in uh uh November of 2021 and altcoins went on to 20x from here um and uh Bitcoin went on to 7x and again 7x it's nothing to turn your nose up we're just at this cycle transition now where I think allcoins begin to gain market share versus uh Bitcoin and this

is another chart that a technical chart we do a lot more technical analysis in Bloomberg but sometimes we do them in data stream uh this is the tool that we're using here you can see it was a Huge wedge pattern and we flagged this well before it broke out back at around 300 oh no what was it yeah it was it was 350 billion back in Q4 of last year and we've since gone to around 800 billion this is the top 300 coins and we think that we can get to S trillion or so this

is one of the things that gave us confidence in our salana bet we could see this breaking salana looked like it was the chart we had a macro fundamental story um we had a technical story and we Had a story they all came together and that gave us Maximum Conviction that's right and yeah that that was a big trade at the time when we put it on um and um and and again the market cap has since doubled since we talked about originally spoke about the banan zone and so I think we think that this

brings the entire space above a tent in this cycle um and the everything code just to kind of wrap things up is why you see charts like this they don't Need to play out perfectly but prior Cycles are repeats of current Cycles just because of this uh debt maturity schedule and the rolling of of the the debt refi cycle and so you know I mean I think um you know we could hit 20,000 on ethereum this cycle and and um into the peak in in 2025 let's see right but what I also so much as

it's possible just based on repeats now it may be different doesn't mean that we're not saying R and Julian Banner headline Think eth goes to 20,000 we're saying listen just understand how this could play out here yeah and I think that's an important point because I think most people are still scarred from the previous cycle I mean there's different probabilities of how this cycle plays out and we'll figure it out by the time we get to fall it could be a blowoff Top Cycle where things go a lot further Than People expect don't forget this

is the first time we've ever had institutional Buying um and there's also the probability that this could become a truncated cycle like we had the last cycle um although we Tire a slightly lower probability to that but nevertheless um you know this is a chart I wanted to show you and then the last two charts on eth and then I'm I'm I'm wrapping up I think I said that like five times now already um is that these five wave down Cycles that we've seen and I I show it to you here on eth just Because

I'm following up with the chart that I showed you previously they're visible everywhere in crypto so you get a huge pump higher a selloff uh a a wave two higher a wave three lower a w five a wait sorry wave four higher and then a final dump lower into um you know full let's say capitulation and then prices move higher again and I see these time and time again in fact you can see it here over another a different time Horizon and so I think That in our view this was the pause the having the

correction that we've seen the 20% draw down in Bitcoin more for altcoins that this was the pause that refreshes the economy is still on track right next up is rate cuts the global rate cutting cycle is already happening which is where I was going to show you now and so this leads to an environment um where we feel bullish out into mid 2025 so now we're going to pass it I'm going to pass it back over to Ral for The last section of this epic macro presentation uh the super massive black hole over to you

man okay I'm gonna bring it all home now you've heard me talk about the super massive black hole the crypto black hole you've seen everything that we do to reach the kind of conclusions that we do and now I'm going to come to the conclusion the conclusion is straightforward we're dealing with a technology adoption it's the fastest Pace of adoption of any technology that's investable AI is not investable right now and it's been growing at twice the speed of the internet if we assume that it grows at the speed of the internet which would be

probably a false assumption it should grow faster for the rest of this year or so we get to the end of 25 with 1.1 billion active wallets active wallets are not actual users because people have multiple wallets much like people have multiple IP addresses which is what this is showing to we're comparing it to IP addresses so we get to one 1 billion wallets that's a huge number and that drives the adoption of the space based on meta's Law and the valuation then if we extrapolate out into the future I keep saying this space is

going this is the biggest macro opportunity we have ever been given it's been the best macro performing asset of all time it's the best risk adjusted Reward of any asset in all history it's an alien asset class and that that's trend of $2 A5 trillion dollar today to 10 to 15 trillion this cycle to 100 trillion by about 2030 2032 is driven by this adoption curve that's when you get to four billion active wallets by the end of 2030 that's a mega Trend that's all you need to know two and a half trillion 10 to

15 trillion 100 trillion you're trying to capture that you're trying not to this up because this Is the gift you've all been given and everybody can put 10% of their wages in or whatever it may be because it's a democratized fractionalized asset that's globally homogeneous everybody in the world invest in the same product Bitcoin is the same in Nigeria as it is in Brazil as it is in the Cayman Islands that is the gift to humanity we get to invest in the infrastructure layer the network layer of this incredible new technology and on top they'll

build the Applications layer which will be the new Googles and Facebooks of this web 3 world so that's what's driving this trend the debasement of currency plus the ridiculous adoption of this technology which is only growing you hear every institution now saying well we want to build real world assets on bitcoin rails the exchanges are going to build on it the corporations are going to build on it you know we're already seeing so many people building on top of These rails because it's just a better system then we've got digital ID layer we've got the

stable coins layer we've got so many things being built that's going to keep driving this logarithmic chart which gets us to you know at the end of this cycle we don't know but you know Bitcoin according to our work could get to 400,000 could even go higher than that sure it could be truncated too but it doesn't matter because the trend goes longer and your game is to stay in the Trend even if you take some lifestyle chips off let's say at the end of this year just so you take economic pressure off yourself it

allows you to continue to participate in this trend because if you don't you try and get cute and try and time it you'll this thing up job here is trying to unfuck your future so you can understand where I get these little memetics from how to unfuck your future you're being the based upon here is your Answer don't this up is don't miss out on this trend the crypto super massive black hole as I'm about to explain to you means that really there's only one asset that matters and then we'll come on to the final

one which is the banana Zone that you all love so again we go back to the total liquidity chart this is how you are being this is the how you what you need to unfuck yourself from is the Debasement of currency crypto's giving you that it's also that Tech adoption and it's your root out so at xam we built out this table that I put on Twitter I put it on every month but look it's a noisy table um but what it's showing if you go to the bottom of this the Light blues of the

each year from 20 2011 crypto is the best performing asset three years out out of four in the fourth year it's the worst so macro Winter it's a terrible asset well terrible asset the lows are always higher than the previous lows it's in a secular Trend you don't even need to worry about if you just own it you just own it but the other years it outperforms everything else bar none but then when you put that together even with the numerous 85% pullbacks bitcoin's done 20 million returns eth which started later in 2016 less than

324,000 per returns and salana Has done 8,300 per return since 2021 when you look at the annualized performance Bitcoin is 139% a year eth 146 salana 203 then we go out to the next best performing asset technology this is the NASDAQ not the exponential a basket that we built in prro GMI and the exponential list different variations of it this is just the NASDAQ it's done 17% returns so the NASDAQ has managed to outperform the FED Balance sheet U the global liquidity plus inflation by a few percent actually by by 5% the year that's okay

nothing else no other asset has outperformed the debasement of currency Plus infl inflation not one the S&P roughly keeps you flat everything else your future self is poorer from owning it that this is this is profound in your understanding of asset allocation once you realize this you realize you're wasting your time trading other stuff You really are because you are not going to compound the returns that you need for your future vision of yourself to be wealthier so let's take NASDAQ which is the best performing Equity Market in the world Bar None over the last

decade and we look at it versus Bitcoin it's down 99.92% get your heads around that that's the difference between the next best asset Beyond NASDAQ it's alien this is the biggest macro trend of all time and it's so powerful that anytime you take money out of crypto and put it into anything else you're going to lose money so therefore the only thing you can take crypto money out of is lifestyle because lifestyle is priceless everything else is priced on a relative basis and what you find is everything goes down it's why a lot of people

in crypto hold out to buy Property until they're ready to because property gets cheaper if you're denominating currency is Bitcoin or another crypto the super massive black hole means that this beautiful technical chart of global liquidity means we're about to start the next leg of liquidity which we talked about before the next leg of liquidity is the driver that will continue the next leg of this market and the central banks are showing That liquidity is coming because then cutting rates says hey we're ready for liquidity to come remember the reverse happens in cryp in crypto

winter macro winter they start hiking rates and they start withdrawing liquidity here they're increasing liquidity and cutting rates because they want stimulus that is your friend your biggest friend and when those factors come together technological adoption people investing in the space liquidity starts Flowing you get the banana Zone and the banana zone is just all of these factors coming together for macro summer and macro winter that's what lies ahead as far as we can see so hopefully I've shown you over this two and a half hours the sheer amount of work that we do in

this space and it's here to share it with you it's kind of like open source here you go guys if you go to realvision decom you can download this entire presentation so You can follow along and you can figure some of this stuff out yourself if you want us to figure it out for you this is the macro investing tool for those who just want the business cycle elements if you want the Deep dive it's obviously Global macro investor but that's for you know hedge funds crypto hedge funds family offices asset managers if you want

a lighter version a cheaper version but that really gives you some depth then that's the real Vision Pro macro Service if you want to know about the technology side and Technology investing that's the exponential list or all of these together what we've got here again is how to unfuck your future why you don't want to this up the super massive black hole and the banana Zone things you hear from me these sound like memes but they're not they're based on thousands of charts and thousands of hours of Research I really hope this helps you understand

it again on realvision uh on realvision tocom I will create some AI notes to summarize this so you've got simple summary you can create your own notes on the platform you'll have the doc dock as well so you've got everything everything that you need to make sense of everything and hopefully that's what we've done today so and again the other point being is the macro investing tool will be part of real Vision Plus this is an announcement I don't know if it' be fully announced by this time those of you who are subscribers in its

own right don't worry we'll look after you but we think it's too important not to share all we're trying to do between Twitter this on YouTube all of the different products is to give you everything that you need including the asset management firm to make sure that you all participate in the greatest opportunity of all time Anyway thank you so much for your time I know your time is precious but hopefully we've delivered something precious for you and we will see you next time if you like this please subscribe to the YouTube channel if you're

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