Summary
Transcript
What if I told you the reason stocks and assets go up and down is not because of the economy, the company, cash flows, price to earnings, or any of that. But instead, it’s all controlled by a $170 trillion force you’ve probably never heard of. And even if you have, you probably don’t understand. When this video, I’m going to break all of this down. We’re going to look at what has the power to move markets, make fortunes, and ruin lives. We’re going to look at what you can watch to see this clearly and understand what’s happening.
We’re going to look at exactly what we should be doing to survive this tidal wave that’s coming. And if you’re new to the channel, my name is Mark Moss. I’ve been investing for over 25 years. Now unfortunately for me, it took me till the 2008 great financial crash and me losing tens of millions of dollars for me to realize there was this force over the markets that had power over my life. And I wasn’t even paying attention to it. But you don’t have to do things the hard way like I had to do.
So let me give you the real driving force behind this $170 trillion market mover. Let’s go. So let me just tell you right upfront, the driving force behind asset prices is liquidity, but it’s not just the US M2. That’s what most people think. You have to understand that this is a global thing and it’s more than just M2. This means it’s not just cash in the bank. It’s not just central bank magic tricks. It’s the entire financial system. Now imagine it’s a massive tide, swelling and receding, lifting and sinking everything in its path.
And guess what? It’s statistically proven to drive stock prices, gold prices, and even Bitcoin prices higher. Now that you get it from a high level, let’s unpack this core financial driver to learn how to watch it, how to measure it, and how to react to building wealth and avoiding the crash. Okay. So first, let’s just start with the basics of this. Global liquidity, as it sounds, is about more than just the US, right? It’s global and it’s about the entire financial environment. Now we have to learn how to look at liquidity globally.
And again, like I said before, it’s not just the M2 money supply or even the central bank balance sheets. Now, according to Michael Howell from Cross Border Capital, who was one of the first people in the world to start tracking global liquidity all the way back in the 1980s, when he was at investment bank, Solomon Brothers, he says that it’s a much broader concept. He said, if you picture all the sources of credit, savings, and international capital flowing through the world’s banking systems and money markets, this includes one, domestic private sector funding.
So think like commercial banks, shadow banks, households, corporations. It also includes official monetary institutions. Yes, this includes essential banks. And three, it includes foreign investors and lenders. Now cross border capital flows are crucial, but yet most people don’t pay attention to them. Now, if you want to see me break all this down as well as examine which assets benefit the most from this, then it’s going to take a lot longer than this video, but you can join me live as I walk you through this. I got about 30 charts to really show you what to watch.
And we’ll talk about how to implement this. You can join me live as I break that down. Ask me any questions. There’s a link down below. It’s all free if you want to come hang out. But let me show you exactly what we’re looking at here, at least from a high level you can understand this better. Okay. So let’s just talk numbers. Now, if we look at the global liquidity, or we’ll call it TGL, the global liquidity, we can see that it hit a low of 158 trillion in October of 2022.
Now this is right when Bitcoin, the S&P 500 and gold hit their recent bottoms. Now, if we fast forward to March 2024, we can see that the TGL surged to an all time high of $170 trillion. And you can see on the chart, this set Bitcoin up to about 342%. It’s put the S&P 500 up about 50% and gold up by 35%. Is that a coincidence? Nope, not a coincidence at all. This correlation is confirmed by Granger casualty tests. So to put it simply, more liquidity means higher asset prices. Now, going back to Michael Howell in his book called Capital Wars, he said that financial liquidity explicitly drives investors risk appetite and hence asset allocation.
As the pool of available liquidity increases, defaults and other systemic risks should diminish, thereby reducing the need to hold safe assets. And so allowing investors to expand their investment horizons towards holding more risk assets. Rising collateral values then provide feedback underpin liquidity creation. And they went on to say that while financial liquidity is usually necessary for an asset boom, it’s not always enough by itself, because bull markets typically need a fundamental theme to stimulate and sustain investor interest, end quote. So when I think about that, I think like they need a catalyst, a fundamental theme to stimulate them.
So maybe like AI in 2024, maybe the rise of Bitcoin as the world is moving away from the dollars. And so we had these fundamental themes at the time we have these liquidity booms, which is why we see tech stocks like AI and Bitcoin moving so fast off this liquidity. Now think of it this way, more money sloshing around means more bidding on assets, more driving their prices up. Remember the same rising tide lifts all boats. So that’s what we’re thinking about. But in this case, some boats get lifted higher than others.
The key is to find out which of these assets will go higher than others. And we’ll come back to that in a minute. Now to understand this from a recent historical lens, let’s take a trip down memory lane, not too far back, just back to where I talked about the intro, we’re talking about the 2008 great financial crash. Now during that time, global liquidity plummeted, it dried up. And this triggered a massive sell off across financial markets. Central banks around the world had to step in, they had to inject liquidity to stabilize the system.
And then if we take that lens, fast forward to just 2020, we saw the same thing during the COVID-19 pandemic, right? A similar liquidity crunch occurred when they shut the economy down, all of that. And again, central banks flooded the markets with liquidity, and that sparked a rapid recovery in asset prices. So we can see that historically. And so now that you sort of have this base understanding, the next question is, well, what’s going to happen to liquidity in the near and long term future? And the answer is, well, liquidity is always going to rise, at least until it can’t rise anymore.
Why is that? Well, because it’s all about debt. So you have to understand that as something I talk about all the time, so you should already know by now, but we’re in a debt based monetary system. So money is created through debt issuance. And the more money, the more debt that’s created, the more this accelerates. Now currently, global debt, both public and private stands at over $350 trillion. Now this debt constantly needs refinancing, creating an ever growing demand for the liquidity. Now today, financial markets function more as a debt refinancing mechanism, than actually sources of new financing.
Back to Michael Howell, explaining in his book, Capital Wars, he said, quote, today’s financial markets increasingly have to serve as refinancing mechanisms rather than new financing mechanisms, making the capacity of capital more important than the cost of capital, end quote. So to put this in more simple terms, the more debt we accumulate, the more liquidity we need to keep this system from collapsing. So when you look at global liquidity, it doesn’t just rise continuously, but it moves in cycles in these refinancing cycles. So historically, these cycles last around five years. And this aligns with the average debt maturity profile.
That’s why we see these cycles. So for example, from May 2010 to June 2014, TGL rose from $85.5 trillion to $110.3 trillion. This cycle repeated from March 2015 to March 2018. And again, from October 2018 to March 22. And what we can see is that each cycle’s lows often coincide with financial crises. Think the 1997 to 1980 Asian crisis, the 2007, 2008 global financial crisis, the 2020 COVID crisis. During these times, central banks step in, they flood the markets with more liquidity to avert disaster. Now to visualize this a little bit better, let’s bring in some charts so we can see what we’re looking at here.
Okay. So in this chart right here, we can see TGL from 2010 to 2024. And this highlights the three major surges we’re talking about. This chart right here, we can see the TGL index, and we can see how it makes the silical patterns even more clear. And this chart right here, we can see that each peak and trow aligns with significant market events. And if you’re any good with pattern recognition, maybe an elementary kid with pattern recognition, where do you think this goes next? Up or down? You can put that in the comments down below.
Now zooming in on recent trends, we can see that since October of 2022, we’re in the midst of this new surge from 158 trillion to 170 trillion in just 17 months. But here’s a twist. The current monthly increase is slower than the previous surge. Now does this mean that we’re in for a slower rise? Or is a sharp increase on the horizon? Well, given the global debt shows no signs of slowing, the latter seems more likely. So for instance, US federal debt alone is rising by around $1 trillion every 90 to 100 days.
So this implies that liquidity will continue to grow. It’s going to continue to keep up with the debt refinancing needs. But also remember, this is a global phenomenon. Like for example, China. China’s starting to stimulate with liquidity big time. Right now they’re pumping in billions of dollars to prop up their commercial real estate sector. And this is super bullish for global liquidity. Now, if you want to keep an eye on this, if you want to watch this, it’s complex, right? There’s a lot of charts, but let’s simplify this a little bit.
So for the US, for example, we can look at the central bank balance sheet, minus the reverse repo, minus the TGA account. Or an easier way, according to Michael Howell, is just keep your eyes on Bitcoin. He says that Bitcoin has become the ultimate barometer for liquidity. We can see that it moves in advance, either up or down from other asset prices. He says that its price movements sink almost perfectly with TGL. During times of abundant liquidity, Bitcoin’s gains have far outpaced those of any other major assets. But also, conversely, during liquidity crunches, Bitcoin’s price dropped significantly.
Now, check out these charts here. One’s depicting the TGL since 2010. And another is showing Bitcoin’s price in US dollar terms. And do you notice something that’s sort of remarkably similar? The rise and the falls in Bitcoin price mirror almost exactly the fluctuations in TGL, right? Almost perfectly. And so now, here’s the multi-million dollar question. How can you use this knowledge to your advantage? When liquidity is rising, what we want to do is focus on assets that benefit the most from increased liquidity. These are going to be hard, scarce assets, commodities like Bitcoin, like gold, copper, lithium, uranium, etc.
Conversely, during periods of declining liquidity, it’s wise to shift towards safer assets or hold cash to avoid significant losses. Now, let’s talk about another opportunity. Have you noticed how tech companies and AI companies, they’re booming. Now, this trend is partly fueled by rising liquidity. And by understanding the current liquidity cycle, you can position yourself to profit from these breaking trends as well. Now, currently, right now, we appear to be on track with the previous TGL surges. And if history is going to repeat itself, which it looks like it probably is, then TGL should continue to rise until probably late 2025.
Now, what this means is that we’re likely in the middle of a very serious bull market for risk assets, which is what I’ve been saying for a long time, and it fits perfectly within the four to five year market cycle, but it also fits perfectly within the four year Bitcoin cycle. But remember, the key is to stay informed, the key is to stay adaptable. So what we want to do is we want to continue to monitor these liquidity trends, we want to watch for signs of cyclical changes. And then we want to adjust our investment strategy accordingly.
By doing this, you can navigate the financial markets more effectively and build a resilient portfolio. This is why you see me constantly talking about this, the liquidity here on YouTube, and you know, on social media. So if you want to just follow along for me, because you’ll see that I’m posting all the time. Now, if you want to see the exact charts to watch, so you can just keep your own eye on this. And then you can understand what moves assets and then you can move accordingly based off of that, then come hang out with me live.
I’m going to walk through all this in much more depth and detail. I’m going to have, like I said, about 30 charts, I’ll give them to you. So you can watch them for yourself. You’ll understand how to implement it. And like I said, I’ll be there live. So you can ask me any question that you have of how to implement this, how to think about this or whatever you need. It’s all free. If you want to come hang out, there’s a link in the description down below. But just to sum all of this up, global equity, it’s the most powerful force.
It’s what drives financial markets, understanding its cycles and its impacts can give you a massive edge in your investment strategy. And by riding the waves of liquidity, you can capitalize on market booms and you can protect yourselves during the bust. So next time you hear about global liquidity, don’t just shrug it off, dive deep, analyze the trends, make informed decisions, because this knowledge can transform your financial life, helping you seize the opportunities to mitigate risks. But let me know what you think about global liquidity. Do you think it’s really the force that I say it is? Let me know in the comments down below.
And of course, as always give me a thumbs up if you liked the video. If you don’t, that’s okay. You can give me a thumbs down, but at least leave me a comment and tell me why down below. And of course, subscribe if you’re not already subscribed. And that’s what I got to your success. I’m out. [tr:trw].
See more of Mark Moss on their Public Channel and the MPN Mark Moss channel.
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