Michael Howell, CEO of CrossBorder Capital, an investment advisory firm, and author of Capital Wars, returns to explain why the global liquidity cycle peaked in late Q3/early Q4 of last year — and what that means for the rest of 2026. His core argument: money is fungible but finite, and a booming real economy is now pulling liquidity out of financial assets, which compresses P/E multiples even as earnings look fine. That puts us in what he calls the speculation phase: rising bond yields, strong commodities, pressured crypto, and low-quality equity returns where index gains mask widespread underperformance. He also pushes back hard on the popular "debasement trade" explanation for gold, arguing the real driver is the People's Bank of China injecting liquidity to devalue the yuan internally while holding it steady externally — with Chinese retail locked out of crypto and the Shanghai Gold Exchange now setting the marginal price. On the bond side, he lays out how the Treasury is quietly monetizing through front-end issuance and buybacks — private-sector QE under Treasury direction — a strategy that works until it doesn't, with Japan's move from 50bps to nearly 3% as the cautionary tale. His bottom line: range-bound Wall Street, no bonds, gold and silver on weakness, and watch commodities for the first sign the boom is ending.
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Links:
Website: http://www.crossbordercapital.com/
Twitter/X https://x.com/crossbordercap
Substack: https://capitalwars.substack.com/
Book: https://www.amazon.com/Capital-Wars-Rise-Global-Liquidity/dp/3030392902
0:00 The call: range-bound market, own gold
0:20 Welcome back, Michael Howell
1:19 Two pools of money: markets vs. the real economy
2:30 The liquidity cycle has peaked
3:20 What this phase looks like
4:48 Why a booming economy is bad for stocks
5:22 The P/E multiple is where liquidity shows up
6:34 Late cycle, explained
7:38 Augusta Precious Metals
9:29 Global liquidity vs. the world business cycle
10:45 Atlanta Fed nowcast near 6%
11:54 The K-shaped economy is global
12:45 Monetary inflation vs. Main Street inflation
14:45 Speculation now, turbulence next
15:15 The cycle map
17:55 Monetary Metals
19:49 Gold: it isn't the debasement trade
20:30 It's China: PBOC liquidity
22:15 Why gold and not crypto
23:14 Inside the PBOC balance sheet
25:00 Yuan gold and the 27,000 line
26:15 Bond yields track nominal GDP
27:40 NGDP at 7-8% vs. a 4.7% ten-year
28:18 Treasury QE: funding at the front end
30:20 Who's actually buying the debt?
30:51 The beach ball under water
32:35 The two-year note leads the Fed
34:30 The 2022 analogue
36:00 Why MOVE matters more than VIX
37:08 Treasury buybacks and the volatility cap
38:30 Margin debt and the 2026 range call
39:31 Parting thoughts: commodities as the warning
40:30 Gold, silver, and the ratio to watch
