Surplus Countries, Deficit Countries, and the FX Endgame

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Check. Ladies and gentlemen, welcome to the Capital Flows live stream.

Appreciate all you guys joining today.

Hang on 1 second. Let me just make sure Here we go.

All right.

We are good to go.

You know, um we have some really interesting things.

I was um you know, we're we're starting a few minutes late just because I wanted to go over some of the talking points given the news that we had this morning and how you want to think about it from the

new Claude model that dropped. I mean, I will say if you're not on top of that, um it's just one of the most important things for the AI side and also markets. So,

both of them right now. So, it's just absolutely critical.

Um and my view right now is that especially on Let me pull up the the tweet that we just had.

All right.

Here is the most recent tweet that was just put out by Claude AI, Anthropic, all of those guys. And

they have just released the Claude Opus 4.7, the most capable model. It handles

long-running tasks with more rigor, follow up instructions more precisely, and it verifies its own inputs before reporting back. If you have been using

reporting back. If you have been using Claude code, then you know how big this is and how critical it is. So, you can hand out more tasks with less supervision.

And uh if you have a process already with Claude code that you're using, then you know that one of the biggest factors is still kind of the entire delusion thing where it'll

say something's done and it's not.

Right? Which is why you still need a certain type of discernment and decision-making for these types of things. So, that is one of the things

things. So, that is one of the things that is happening on the day. And you

know, one of the one of the things that I've been laying out on the Substack, and I actually laid out last night, is you know, we have this entire bigger picture context with

the macro regime and with macro liquidity that I'm going to cover today.

But within that, one of the things that I was telling paid subscribers is you want to watch when these different models drop and the

action price action response of equities. For example, notice that we

equities. For example, notice that we had this new model launch and the software sector is up today, actually.

Think about the significance of that.

When you have all of these Anthropic models launch this entire time and you have all of that pushing the software sector

down, now you have the opposite. You

have a new model launched, but the software sector is up.

And that in my view is a signal because it's indicating about where we're at with positioning. And I believe

positioning. And I believe yeah Anthropic it's IPO. I'm going to try to pull this up.

IPO. I'm going to try to pull this up.

Let's see here.

This is one of the you know, important charts that I'm watching right now because you have the Anthropic IPO probability before the end of this year. So, IPO before the end of

2027. We already have SpaceX at

2027. We already have SpaceX at basically 100%. You have Anthropic and

basically 100%. You have Anthropic and Open AI here. And

my view is that you're going to we could have the Open AI Anthropic IPOs this year. You know, we're at a bit of a coin

year. You know, we're at a bit of a coin flip for both.

And part of the dynamic behind that is that they are trying to release models and really get, you know, they're not going to say this because it would be market manipulation, but they're not

going to say this, but they're releasing models for strategic purposes into their IPO.

And you know, that is one of the main things and you can see that from these lows right here, even you know, earlier this year, you have a

pretty significant increase in the probability of their IPO right here.

And that's important because if you have capital flowing out the risk curve and beginning to buy these names, what you're having is a lot more liquidity in the market. And then if you

have the software sector then bid on top of that, that is creating a very positive environment for equities. And

so, you know, I've seen a lot of people say that the rally in equities is only a short squeeze in positioning and it's not driven by macro liquidity and things like that.

If that is your view, then you're not pulling together all of the equity risk curve and how it functions. And that's something that I

functions. And that's something that I laid out.

There's an echo. Is there anyone else having issues with the audio?

If you're here, uh let me know if the audio is okay. I

don't know if there's a echo or anything like that.

Trying to make sure that we're good here.

Okay, sounds good. Sounds good. Okay, so

what what I want to cover today is twofold. Number one is I laid out for

twofold. Number one is I laid out for paid subscribers last night all my views as it relates to equities, the places I would focus for positioning and

wines and macro liquidity and things like that. But what I would say is that

like that. But what I would say is that my entire goal at capitalflowsresearch.com is very straightforward. Map the macro

regime so I'm on the right side of it and take a very few large asymmetric bets. This is what I'm going to come

bets. This is what I'm going to come back to every single stream. And we're

streaming every single day at 8:30 a.m.

Mountain Standard Time. I think it's 11:30 Eastern. And my entire goal on

11:30 Eastern. And my entire goal on these streams is to incrementally build a foundation of knowledge for you and share all the models and breakdowns that

I'm providing. So, if you are not a

I'm providing. So, if you are not a subscriber already, go to capitalflowsresearch.com.

capitalflowsresearch.com.

All of the models, slide decks, charts, every single thing from these live streams is laid out every single day on the website. You can

go through all the educational primers.

I cannot emphasize enough that it you know, if you go through yesterday's live stream, which was very important, go through these credit cycle melt up playbooks that I laid out. Over the last

4 days, I've laid out my entire thesis on the credit cycle cycle melt up and what we are seeing right now. And you know, I've been laying that out in the bullish case

for equities for I think a week and a half, 2 weeks now. Um maybe even a little longer. Um

little longer. Um uh base basically beginning of April.

And my view is that the inflationary shock has set the stage for liquidity to enter the markets and that's what we're actually seeing in the market. If you

look at the data instead of these kind of reductionistic liquidity indexes that don't connect to the price price action of markets, you will see the capital is moving out the risk curve.

That's very clear.

And so, my entire goal yesterday was breaking down how does money function in the system? And I covered that right

the system? And I covered that right here. You can go through yesterday's

here. You can go through yesterday's video. We talked about how there's

video. We talked about how there's credit risk and duration risk in the market and every asset functions on a spectrum of credit risk and duration

risk. And within that, you have the

risk. And within that, you have the yield curve that you need to map, which I gave you an entire model for that.

That's in the educational primer section.

And then within that, you have the equity risk curve where capital moves across the risk curve when liquidity increases and back when liquidity

contracts. Within this, you need to

contracts. Within this, you need to understand the difference between liquidity changing and just an equity rotation.

And so, one of the things that people have brought up is saying, well, how can macro liquidity be expanding if things like Bitcoin or other equity sectors are still kind of, you know,

underperforming? And the reason for that

underperforming? And the reason for that is that liquidity can increase in the market, but there is no guarantee that it's going to go to the specific asset that you want it to go to. You know,

there's a lot of reasons why the fundamentals of Bitcoin have actually changed over the last year.

And so, understanding these factors and where they're going helps you not misinterpret underlying rotations for macro inflection points.

And that's what we have been seeing. You

know, one of the charts that I covered, I don't know if it's in this deck, but I covered how all the high yield indexes or all the companies with the most

highest sensitivity to high yield debt, they've all been making all-time highs right now.

That doesn't happen when you're contracting in liquidity. So, these

views about liquidity or a lot of people have been asking me about liquidity contracting again just connect it to price action and you're not going to have a massive issue.

And so, that is the what I covered yesterday in this deck. And what I want to cover

this deck. And what I want to cover today is the larger structure of cross border liquidity and trade imbalances in the flows of

capital.

Because that is really going to set the framework for every single financial crisis that has occurred in this period of time over the last basically 100 years. Because since World

War II, we have had globalization really take a front row seat to everything that has happened in the

world.

When you have globalization, that shifts how the flows of capital function.

And if you understand how those flows function, you will understand cross border flows and this larger situation with the dollar's reserve currency status.

You know, a lot of people have asked questions about why are equity valuations at all time highs? How do

those connect to the larger regime that we're in? Why is it that value investors

we're in? Why is it that value investors have underperformed so much? What what

has been the driver of all these different things? And the answer comes

different things? And the answer comes back down to how trade balances and capital accounts now function in the modern world. And

And here's the thing.

We have not been in a period where we've had a reserve currency like this ever. Right? Like you have a very unique

ever. Right? Like you have a very unique situation in terms of trade balances.

Obviously, you have currencies such as the pound that was a reserve currency for a while back in the day.

But we didn't have the same type of global trade that we did today.

And so when we walk through these slides, I want you to spend time thinking about how can we connect this to market views?

Cuz that's what we're going to do. I

don't personally I don't like going all over all these theoretical concepts and not connecting them to the market. I just think it's kind of like worthless. Like why are we going to go over theoretical concepts

and if it's not going to help us make money then why are we going over it?

Right? I'm not saying that it can't be important from an educational perspective or something like that. But

for our purposes, my entire goal, again, this is the entire goal of capital flows, right? Is how do we map the macro

flows, right? Is how do we map the macro regime and get an edge in markets?

That's what we're doing here.

And so you want to develop a base of knowledge over time that connects to markets so that you can find those asymmetric bets. And again, everything

asymmetric bets. And again, everything is laid out there. I laid out last night the liquidity situation and how it connects to the equity rotation, FX flows, interest rates, everything like that for paid subscribers on the sub

stack. And again,

stack. And again, we'll be doing this live stream every single day. Uh 8:30 a.m. And so where I

single day. Uh 8:30 a.m. And so where I want to to start is And again, this slide deck will be available at capitalflowsresearch.com after this.

We're going to start with trade balances and capital flows. So

when you think about the economic system overall, whether it's domestically or internationally, you want to we you want to think about it as it relates

to the accounting mechanism that exists.

So think about it as if you have ever analyzed a balance sheet, you have assets and liabilities and those always need to net out. You have, you know, every person's spending is another

person's income, every person's asset is another person's liability in the financial system.

And so the accounting system is one of the things that we use to be able to quantify what is happening. Now, here's

the the key distinction. Just because

you're using an accounting system to quantify the moving parts, doesn't mean that you have predictability over those moving parts.

That's really critical. Because, you

know, we have an accounting mechanism for GDP, doesn't mean we can predict out GDP over the next 10 years or something like that.

And so when you think about accounting principles the key thing about them is that it's about netting out how you're quantifying the moving parts.

And then once you do that, then you can build an attribution analysis model and quantify your view.

And that's what all of us do. If you

just go through all of the different accounting mechanisms for a country and say, how does growth, inflation, and liquidity all net out?

And how do those flows move? And if you go through any of the flow of funds data, if you go through any of the GDP data, if you go through any data in the economic system, all of it nets out, which is why when people

talk about like, oh, the data's manipulated and stuff like that. Well,

you know, if it was manipulated, then it would be reflected across every single data set, which it's not. And, you know, I I have no doubt that some things move here and there and there's some statistical discrepancies and some

changes here and there and things like that. But the idea that all the economic

that. But the idea that all the economic data is manipulated just, I mean, you know, when you go to actually connect it to markets and other things like that and you kind of triangulate it and you account for some variance and error and

things like that, it all comes together pretty well.

And what you want to do is connect how those accounting mechanisms function as it relates to credit risk and duration risk in the drivers of markets. And if you went through the video yesterday, you

know how to do all that. So I laid all of that out yesterday for credit risk and duration risk.

And then what I want to cover today is this accounting mechanism and the global trade side of things.

So one country's trade surplus is another country's trade deficit. This is

really key. It always nets out. So if

the US is importing a lot of stuff on net, then and we have a trade deficit, we import more than we export, then there has to be another country on the other

side of that that exports more than they import. Very simple.

import. Very simple.

And so the current account and the capital account must net out to zero.

And I'll explain that a little bit. The

trade surplus is not a sign of competitiveness. It is the mirror image

competitiveness. It is the mirror image of excess domestic savings flowing abroad as capital exports. When a

country produces more than it consumes, the excess output leaves as exports and excess savings leave as capital. These

are not two separate events, they are two sides to the same coin.

They're two sides to the same accounting identity. What that means is that global

identity. What that means is that global trade is connected to global capital flows.

And so let me give you a very intuitive example of this. Let's say you want to import you you know, you you are running a business and you say, you know what?

I'm running a, you know, clothes business and I want to import um a bunch of stuff from India, Vietnam, and China.

And you say, hey, I I want to buy a bunch of goods and services from you.

Let's say a bunch of goods.

You then need to take the dollars that you receive from customers. So let's say I'm making a million dollars a year selling clothes.

And I take 100,000 of that and say, hey, I want to import all of this. And they

say, okay, well, it's going to be, you know, 100,000 US dollars.

But the thing is you have to remember that that country, they have their own domestic currency.

And they could quote it in dollars or yuans or, you know, they could you know, the in whatever the currency is of that country.

And so what ends up happening is they say, okay, well, you know, we'll we'll quote you this amount of yuan or dollars or whatever it might be.

And then what you need to do is convert the currency and sometimes it's done on the back end or the front end or whatever it might be. It really depends.

But you convert that money into the local currency and you are able to buy

the goods and services of that country.

They then take that money that you gave them.

Let's say you gave them dollars.

And they now need to take those excess dollars that they have and be able to put that into some type of financial asset. And so that's where the capital

asset. And so that's where the capital account comes. So let's say you take a

account comes. So let's say you take a bunch of money, you give this other country dollars and they say, okay, now we have these dollars, we can now we have to, you know, know what we need to do with these. And we can go buy

goods and services or we can go put them in dollar denominated assets. And so

that's where the capital account really comes in.

Now, this is what applies to every single country in the world.

And this is going to frame how cross border flows function and how FX markets function. Because all of us who are

function. Because all of us who are building FX models or trading FX or that those types of things, we are always spending time thinking about how does this connect to the

current account, capital account, interest rates, any differentials between the country. And that is why we have seen macro liquidity shift over the

last 10 years and why a lot of the things that have moved FX over the last five years have, you know, really shifted from what they were 20 years prior. And, you know, people will say like, why are we even

talking about this theoretical stuff?

Why are we really digging into these moving parts? You know, if you're

moving parts? You know, if you're trading and you're trying to think about things beyond just regular technicals, which, you know, momentum is a very well known factor in markets. If you're going

to just trade momentum, then, you know, you basically just go build a momentum model and you accept the returns of the momentum model. And, you know,

momentum model. And, you know, especially in today's market, you know, you can take, you know, you can run a CTA or trend following strategy or stuff like that. But if you really want higher

like that. But if you really want higher returns, you need to add informational edge into your model. And if you don't have that, that's fine. Probably just

using pure technicals. But, you know, systematically especially, there's going to be a cap on those types of returns.

And so the idea that all of us have, whether you're in the active space, prop, hedge fund, you know, family office, trading your own capital, whatever that might be. You

were always trying to find some type of edge to integrate into your model to understand what is going to happen in any type of financial asset.

And so, why imbalances exist? Let's

cover this briefly. But at the national level the accounting you have savings minus investments equals exports minus imports. All that means is that the

imports. All that means is that the flows of capital net out countries import and export different items. And you can go over this on your own, you know, later. One of the people I would,

know, later. One of the people I would, you know, encourage you to read on this is, you know, Michael Pettis has some great books on this. If you're trying to understand the dollar's reserve currency status, that in my view has been one of

the primary reasons why we have equity valuations at such high levels. Um I

think the technological change is definitely a big thing as well.

But across every global market in the world, we have high valuations. A lot of that is connected to the surplus of dollar liquidity in the system from the dollar's reserve currency status. And

so, global imbalances, what happens in imbalances is global imbalances must eventually adjust. The accounting

eventually adjust. The accounting mechanism demands it. There are only three paths. Surplus countries boost

three paths. Surplus countries boost domestic consumption and reduce excess savings allowing for balanced trade to emerge naturally or deficit countries contract through a recession, austerity,

or forcibly reducing their savings and things like that. The idea here is that I'm going to pull up this other

slide right here. Is that in the world today we have a different makeup of how each country imports, exports, and consumes.

And so, what has taken place is that in the United States right now, 70% of the GDP, or you can say share of GDP, is

household consumption.

So, that means that the United States, we consume more than we produce.

That matters because if you're trying to understand the probability of a recession then you go you're going to want to look at how it connects to the labor market

and also connects to household spending because that's a larger share of GDP.

People are saying, why does this even matter? How does this even connect to

matter? How does this even connect to markets and things like that? That

connects to when we go through economic data prints there's the economic data prints that we have in the United States and how they impact markets are going to be very different

than how they function in things in places like Germany where household, you know, as a share of GDP, it's a lot

smaller. It's closer to 50% and you have

smaller. It's closer to 50% and you have corporates as a larger percentage.

But then you also have government spending and, you know, state and things like that as a contribution to GDP. And Germany

actually exports more than they import.

So, you know, Germany right now, one of the reasons why I've talked about, you know, the Eurozone and the forward curve in Germany is because Germany is a net exporter. They're

exporting more than they're importing.

And this and and then the Eurozone overall is fundamentally short crude. So, that's

why the Euro, one of the reasons why the Euro dropped more than the dollar or more against the dollar and why the DXY rallied during this crude rally. It wasn't just

because equities were selling off, it was because in the Eurozone, that entire country or I'm not going to say country.

Someone Someone the other day I I said the Eurozone is a country or whatever you want to you call it and they said like, oh, what are you What are you talking about? You don't know

talking about? You don't know I'm like, okay, whatever, man.

In the Eurozone overall all of those countries are short oil.

And so, the way you want to understand that is that when you have these countries that are short or long oil and then it connects to them being net

importers or exporters that is going to change how they relate and price market risk. Because when you have a very

risk. Because when you have a very higher a much higher probability of stagflation in the Eurozone or in Germany than you do in the United States, which

is why you actually have more hikes priced on the forward curve in the Eurozone or, you know, more aggressive hawkishness in the Eurozone. So, for

example in the United States right now pull this up.

In the United States right now, we basically have a pause priced for the April meeting and the June meeting in the US.

The difference is that in the Eurozone we have Let me pull up the chart here.

For the basically to the end of this year, we have 50 basis points of hikes priced.

So, in the United States, we basically have 25 bips of cuts priced, I believe.

Let me pull up this right here. So, for the end of this year, we have no cuts, no hikes priced, basically a pause. You can see this right here.

And, you know, you have, you know, this number right here, you know, it's three bips. So, we have three bips of cuts

bips. So, we have three bips of cuts priced this year, which is functionally a pause. And so, you have that, you

a pause. And so, you have that, you know, number right there as three bips.

And then on the Eurozone side if we look at where we're at for this year for the Z6 contract, we have 47 bips of hikes priced. Why is that? It's because you

priced. Why is that? It's because you have these countries more aggressively or the ECB having to have rates

aggressively higher because when you have oil rise like this, you have a much more challenging situation for the Eurozone versus the United States.

And that plays into the entire FX side of things and it's why I laid out a chart last night breaking down all these flows for paid subscribers about we went

from inflation driving FX to now real rate differentials and some other factors. And mapping how those change

factors. And mapping how those change things change in real time makes a lot more sense if you understand this context about, okay, well, Germany is

you know, net short oil. They don't

produce any oil.

China, on the other hand, has a very different structure, which is why they export so much to the entire world.

The majority of their GDP, a lot of it comes from exports and being able to have the entire household sector be a smaller percentage. And, you know, let

smaller percentage. And, you know, let me actually flip over. I want to share this chart from Bloomberg. Let me pull up this chart really fast. This will

really frame the connection to financial markets in a in a much clearer way. And

I would be watching these flows every single day if you're trading in the Asia session or if you're trying to come in and say, okay, well, what's happening in Asia that I need to connect

to US markets.

Okay, so here's a chart of Chinese real estate sector in white. And then in blue, you have the

in white. And then in blue, you have the Goldman Sachs infrastructure buildout. So, new

infrastructure buildout. So, new infrastructure that is like, you know, manufacturing, AI buildout, things like that in China as well. This is one of the largest divergences that has ever

taken place in China. Why is this? How

does this connect to larger structure that exists?

What has happened over the years is that China has leveraged up their property sector so much

that you have seen a very aggressive you know, basically like China over the last couple of years has gone through a

2008 financial crisis in the real estate sector as they have unwound their entire really defaults in the property sector.

You know, if you kind of go online, everyone will talk about how China has really, you know, built all these buildings just to create GDP, but no one's in them or there's all these

issues and things like that.

There has been a 2008 like unwind in China because they have leveraged up their property sector so much. And so,

what China as a country has done is they have tried to export a lot more to the world in order to make more money to prop up the real estate sector so that things don't collapse. And China runs a

closed capital account, which is why their entire country hasn't had a flight of capital where everyone has rushed out of China.

And so, the market is still pricing this mechanism on a marginal basis, which is why we see the real estate sector down so much and it's putting pressure on them to export a lot more. And they're

now putting all their capital into this new infrastructure buildout right here so they can compete in the AI arms race, the space side of things, all of the rare earth materials and things like

that. So, that has really framed how

that. So, that has really framed how economic data has come out and how it pushes around markets.

And when we think about these you know, different factors for trade surpluses versus deficits, I'm going to connect this to price action a little

bit. All of these flows connect to how

bit. All of these flows connect to how you have inequality in a system. So, for

example when you have total output of $100 and you need to say, okay, we just sold, you know, you let's say you have a company and they just sold $100 worth of

a worth of shirts.

How much goes to the worker and how much goes to the corporate overall?

And when depending on how this ratio functions, how much goes to workers versus how much goes to corporates determines how much of the how much the

worker can go and buy that shirt. So

let's say you have, you know, a company that you work at, you guys sell $100 worth of this shirt to every you know, everyday consumers.

And then the worker gets $25 of that, the corporation gets $75, pumps their stock, the wage the worker gets $25.

The worker then goes around here into the economy, swings back around, and they say, "Oh, you know what? I have

$25. I want to buy that shirt, or I want to buy this other thing that the economy is producing."

is producing." And you're saying, "Well, he only has $25. How is he going to buy this thing

$25. How is he going to buy this thing that's $100?" And that's the entire

that's $100?" And that's the entire point of how you can have an imbalance in a system where a consumer says, "Well, now I need to wait longer." Or

in the United States, we take out debt.

And you say, "Oh, that's fine. I'll just

buy this thing, and I'll take out debt for it." Which is why, you know, home

for it." Which is why, you know, home prices and home valuations are at all-time highs right now because the amount of inequality that exists in incomes in the system has, you know,

people have had to take out more and more debt to be able to do that. And the

market has allowed them to do that with the amount of liquidity in the system from mortgages. So, this is a feedback

from mortgages. So, this is a feedback loop that is the reason why we have so much dollar liquidity in the system.

And so, what has taken place is that the US has become a place where every single country in the world

exports their goods to and then on the flip side, they also want to invest in the United States. So,

what that occurs, what begins to result from that situation is that every single country in the world is saying, "I want the US to buy my stuff, and then I also want to buy US equities."

And so, what ends up occurring is that there is so much aggressive exporting to the United States that all of us buy.

And then all of them say, "Well, we want to shove our capital into United States markets so we have all this liquidity."

And then the United States, what they do, all of us in the United States, say, "Well, we want to buy your stuff, and since you're also giving us so much money as well, I'm just going to go take

out a bunch of debt and loans, and use that loan to go buy the stuff from these other countries." And this is how imbalances

countries." And this is how imbalances occur, and the reason why the US has been able to do this for so long is because of the dollar's reserve currency status. And, you know, all of these

status. And, you know, all of these different countries have taken, you know, negative returns on a real purchasing power basis, but they've made up for it in the just extent of exports that they've made.

So, that is one of the largest things that is taking place. And actually, you know, it's kind of funny. We I think we talked about this in a live stream earlier this

earlier this week.

And it was that when you have this structure that exists, most people don't even understand this structure.

What I will say is that people like Scott Bessent, Kevin Warsh, and Stephen Myron, they actually understand this structure really well, which is why Trump has been putting them into play.

And why, you know, this entire structure is something that, you know, even a lot of people in financial markets don't understand really well because everyone is so US-centric, and they say, "Well, I just need to find the next Amazon. Why

do I need to understand global capital flows?" Which by the way, if you uh

flows?" Which by the way, if you uh there's this old video of Druckenmiller, or it's not old Well, I guess it's old now. Maybe it's like 5 or 10 years old

now. Maybe it's like 5 or 10 years old now. But Kevin Warsh worked for Druck.

now. But Kevin Warsh worked for Druck.

And Druck's entire um What is it? Commendation of Kevin Warsh was that he understands global capital flows in the system better than anyone else he's ever met.

So, when you have that type of situation, where you have Kevin Warsh understanding these flows of capital, and then he's coming in to help, and then you also have Scott Bessent on his side,

they understand this larger situation that exists, which is why they are actively trying to shift this situation.

And it's not, you know, in my view, all these people that are saying, "Oh, well, you know, Trump has no clue what he's doing. Everyone's just being psyop'd,

doing. Everyone's just being psyop'd, and they're just chasing these news headlines on Truth Social and things like that." I think it just misses the

like that." I think it just misses the entire point because most people don't even understand this structure about all the negative effects in the United States due to the dollar's reserve currency status and everyone dumping their goods on the United States over

and over.

And so, the idea here is the current account and the capital account are always

netting out. And what begins to occur is

netting out. And what begins to occur is the equity market in the United States and even other countries becomes a release valve for these larger trade

imbalances that occur. And I want to move to this one chart right here.

And it is about the geographies of reserve currency.

And so, the privilege side of the dollar's reserve currency status is that the US can and Treasury can issue cheaply. They

have a deep buyer base, lower real yields, and Wall Street dominates global finance. So,

finance. So, there's a reason why the United States is the deepest, most liquid financial market in the world.

And why you have asset owners that can benefit from a strong USD, and why the United States Treasury can issue debt so cheaply. It's because of the dollar's

cheaply. It's because of the dollar's reserve currency status.

The burden side is that you have a stronger dollar kills trade competitiveness. So, it's

very difficult to be a net exporter in the United States.

To be someone who says, "Oh, let me go build these Nike shoes or these, you know, shirts, and sell them to people in China."

China." Unless it's a super high-ticket item or something like that. It's very tough on a operating expense basis to be able to make money doing that. And so, what

happens is the manufacturing base slowly erodes, and we've been in a 50-year decline in manufacturing employment.

Now, it's not just about manufacturing, it's about overall global trade. Because

if manufacturing is falling, that's fine, but if you have other places take up the mantle of that, then that's fine, but we haven't seen that. It'd be

different if services really helped offset that, but we're just not seeing that right now.

And so, the other idea here is that when you have the reserve currency status of the the dollar, and it allows financial markets to be so liquid, and it creates

a safety net in a sense, and then that's not even accounting for all the Fed changes that we've seen.

You have wage stagnation, which means you have households have to borrow to be able to just have a house or just be able to live.

And that is one of the largest factors for why inequality exists. And I don't mean inequality in the, you know, political sense that everyone complains

about this wages and that wages, whatever that might be. I just mean that on a structural basis, when you have inequality, there are economic consequences of it.

And it has nothing to do with, "Oh, how hard are you working?" or things like that. I think there's still so much

that. I think there's still so much opportunity that exists overall. And

there is no excuse for, you know, whatever you want to accomplish in life, especially with the internet and AI and everything else these days. But there is a certain structure that exists now,

especially if you have just a regular corporate job or a regular job that has no specialized skill set. Because, you

know, if you just have a regular skill set, and it's not doesn't have some kind of edge behind it, you're competing in a global market.

In the same way that, you know, if you're on social media, you're competing in a sense for attention between every single person in the world, not just the people in your neighborhood.

Whereas if you start a business in your neighborhood, you have a smaller base where you can just have a competitive advantage in that area. Which is why a lot more

that area. Which is why a lot more people in private equity firms and things like that have pushed capital toward a lot more locally built businesses that get rolled up because

they're not going to be impacted by the international competitive landscape cuz they're so locally based.

So that privilege, in a sense, of the dollar's reserve currency status has a privilege side and a burden side.

And what we have seen is you have the China trade surplus.

You have the United States that tried to put some tariffs on them, but what began to take place is China just began to reroute all of their exports through

Vietnam, Mexico, Thailand, and India.

And then they just dumped those on the United States and went through the back door.

And so, that is the reason why Trump has been trying to shift the entire pressure points on China because he realizes that even if you put tariffs on

China, they can just go through these back doors. And he is trying to figure

back doors. And he is trying to figure out a way to be able to cut a deal and push back on that. And if he can do that, it will probably be one of the greatest accomplishments over the last

basically 40 years.

We'll see if he can do it. Um

the Let me move to Okay. And this is why this idea of the

Okay. And this is why this idea of the savings glut about Okay, we have all this extra capital in the system from all these global trade changes in

the dollar's reserve currency status.

It's why since 2009 you have had equities, luxury goods, coastal real estate, private equity AUM, gold, sovereign bonds, you know, you have such

a large return that is very different in one sense from a historical norm or whatever you might want to call it. It's been so high

because of the amount of capital in the system due to global trade expanding so much over the last 10 years. That's one

of the biggest sources of liquidity and actually, you know, we I talked about this yet in yesterday's stream and then also in the paid report for subscribers.

I mean, I broke it down a lot more for paid subscribers. But the idea is that

paid subscribers. But the idea is that over the last 5 years since COVID, everyone's focused on central banks a lot. And central

banks have been a large portion of liquidity and all of these changes in the liquidity cycle. However,

cross-border flows are now taking over as central banks pause.

So now central banks are, you know, really shifting how they relate to the underlying system.

The balance sheets and cuts and hikes have been a little bit more neutral over the last year.

And so as a result, cross-border flows are now becoming one of the largest things. And if you're saying, "Oh, well,

things. And if you're saying, "Oh, well, how does that tangibly connect to financial markets?" Great question. When

financial markets?" Great question. When

you look at uh here here's a great example right now.

When you look at where we are at with the S&P 500 and this rally that took place. Notice that, you know, and this

place. Notice that, you know, and this is one of the things that I've been saying on the Substack that stocks are going to outperform bonds, and that's exactly what has happened.

Bonds now are facing a little bit of headwinds because we're pausing as this inflationary impulse makes its way through the system. But notice what is not taken place is that you've

actually had EUR/USD move in lockstep with equities. So you now have this

with equities. So you now have this divergence, and let me build this out a little bit more so it's a little bit clearer for you.

Notice that you have had equity market bid. Again, that's capital moving out the risk curve. Uh especially

when you look at this rotation right here, also the fact that we rejected the Anthropic news and the software sector didn't make new lows. Probably the most bullish signal you could potentially

watch and see because if Anthropic news about a new model coming out is not causing software to sell off further, you're probably going to have an unwinding positioning in software a bit.

Probably going to happen.

But notice that you have FX, EUR/USD actually rallying with equities, but bonds are in this range right here and and basically

sitting now and waiting.

And a lot of that comes down to central banks pausing, but the Fed and other global central banks in different ways,

and now it's going to be about how aggressively or how, you know, on the margin are central banks going to pause relative to the inflation in their

system, and that's why real rates and especially real rate differentials is going to really drive FX and capital flows. And

so I you know, one of the things that I laid out is how do you quantify that in the report last night for paid subscribers, and it connects to and the reason why you've had the euro rally and

the euro hasn't stayed down here with bonds.

That's one of the main reasons.

And so let's go back to Great question here, by the way. If you

guys have any questions, please throw them in the comment section. If you want to keep things simple, what's the easiest way to track duration risk and credit risk and then build that in to quantify the different regimes?

I laid out yesterday in this entire section right here. This

Yes, this one right here. In this entire live stream, I laid out how you quantify those in a video, and then I laid out all of the models and I noted all the models for that. You can go through

these right here, and then there's also uh models in the educational primer section.

It's right here.

Oops.

All these TradingView models that will help you apply all the things that I covered in the live stream, and then also you have the curve regime model right here for TradingView, which helps you further

refine that idea of credit risk versus duration risk.

So all that was laid out in the live stream yesterday.

Let me pull up.

Okay.

So now what I want to do is switch back to TradingView and really cover where we're at as we move into the end of this week. My

view has been that we are seeing a credit impulse that is fairly significant that you, you know, don't want to be on the wrong side of.

And that's why that's why we are seeing such an aggressive rally in equities over the

last 2 weeks. And my view is that especially in the S&P 500, you had this level right here, which functioned as, you know, really clear support and buying pressure for the news

event that took place. Then you had some news over the weekend that caused a gap down. Again, you know, not really

down. Again, you know, not really significant in my view. And then, you know, you're still seeing this rally and melt up because central banks, especially the Fed, is pausing into

higher inflation causing real rates to fall. You will notice

fall. You will notice that crude prices are still pretty elevated overall.

And, you know, this is one of the things that people have used as a reason to say, "Well, I don't want to bid equities because crude prices are still elevated."

elevated." Equities have decoupled from crude, and if you were following me on the Substack, especially at these levels right here,

the strength and divergence between stocks, bonds, and FX all diverged literally at this high right here.

So if you go through Let me pull up the dashboard.

One moment.

Here it is.

Notice right here we had, and I'm going to pull this in even further. Let's see if we can year-to-date.

Notice that right here we had, you know, here's the DXY, the high in the DXY, and then we have, you know, this kind of low in equities right here, and then you

have the 10-year moving 10-year interest rate moving up here. This entire period of time right here is where, you know, this entire move, initial move right here caused the covariance or the strength between

it to rally a little bit. And then

notice that we began to have the covariance, which just means the strength between stocks, bonds, and currencies all really shift.

And that's why the strength between all of them collapsed right here. So notice

that at the highs right here, when the 10-year was moving like this, you had a a break because you had the DXY didn't

make a new high, and then you had rates overlap with the high and lows in equities, and this actually, if you actually put the Russell in here, you see the entire

covariance basically drop off, which basically means the strength between these three factors collapsed. And

you'll even notice that during that time the Russell was already bidding because it you know, again, where where did all of this

rotation come from? It primarily came from put this.

There we go.

Um yeah. So you can Let me actually put these on the same axis so you can really see. Notice right here how the S&P 500

see. Notice right here how the S&P 500 in blue made This is not really visualizing it as well as I want it to. Notice how the S&P

500 made new lows, but the Russell didn't.

So see in blue here, you have the Russell holding these levels.

Whereas ES is making new lows. So the

Russell is holding these levels right here while ES makes new lows. Why is

that? It's because you have seen Ah, dang it. Sorry.

dang it. Sorry.

I wasn't on TradingView.

What we have seen right here is that the Russell has held these levels, but ES was making new lows, which means that there's a combination of rotation

in the underlying equity sectors, and then it also connects to the macro impulse from stocks, bonds, and currencies. So stocks, bonds, and

currencies. So stocks, bonds, and currencies begin to slow in their strength. And then you say, "Well, I

strength. And then you say, "Well, I want to further refine my view with these equity sector rotations." And if you just looked, let me pull this up,

at what we were seeing with the equity rotations on a broad basis and let me move to year-to-date.

You can see we had this entire rotation where energy is up tech is down

and then that began to shift once you had this move in the you know tech was the largest contributor to the downside and

that began to shift because the Russell has less sensitivity to all the mega cap tech names which is why once you begin to have these let me pull this up.

Once you begin to have the shift take place you began to have energy lag and then you have communication services begin to lead and [snorts] that began to take place

at the same time as the entire covariance matrix began to weaken and that's basically why you know again on the sub stack when we were beginning to move

in this range right here and let me pull this up.

When we were in this range specifically and in the Russell when we were you know not in ES but one of the things that I talked about in the Russell was that in this range right here I was basically

saying listen this right here is a great place to get long because we're likely to bid because of how the positioning is offsides and we have so much equity rotation about to take place and now we

are seeing things like the software sector up and again that all connects to my view on Oracle which again is up another 5% on the day. My largest positions are Oracle

the day. My largest positions are Oracle and per right now which you know we're now seeing Oracle really bid aggressively and if you're saying well how do I connect that to you know the

thesis and everything like that this goes back to you know if you go to my largest bets in the credit cycle on the website these layout my two largest bets and the

thesis for Oracle and for per and why I think they're the best expressions of risk right here and you can go through all of the resources models and breakdowns for that because

they explain how to quantify all those moving parts.

And so going back to you know this bigger picture idea of you know what I'm trying to accomplish

is when you map the macro regime correctly not only on a global basis for trade but also for each

country and the economic data then you can begin to say okay we know that we probably have a credit cycle impulse taking place I want to be on the right side of that.

Then on top of that I want to say what are the names or the exposures that I can have inside of that that have the best exposure and sensitivity and trade

expression to the macro regime.

And that's where you want to find a several large asymmetric bets to take.

And that is my entire goal right now and those two bets for me are Oracle and per and within that I think I you know I laid out all my views for paid subscribers last night so if you want to see the other views that I have you can

go on the sub stack.

Everything is laid out at capitalflowsresearch.com for paid subscribers and then every single day this entire slide deck that we went over today on global trend there are some slides I didn't go over

you can be able to get all of those to on capitalflowsresearch.com I'll send those out every single day. I'm going to do this live stream every single day at 8:30 a.m. Mountain Standard Time and

8:30 a.m. Mountain Standard Time and those were really you know this is really where we're going to build that knowledge to understand those kind of moving factors. So I wanted to go over a

moving factors. So I wanted to go over a couple questions that people had before we end the stream so if you guys have any questions please feel free to put them in the chat

and we'll we'll go over it.

Let's see.

How do you think about risk and trying to get on sides after such a rally in equities? Well I

would say several things. Number one

is I think about this idea of executed extremes and mean in between that's how you you kind of that's my kind of phrase that I use a lot.

Here's what I would say is I would be looking you know crude has moved back down I'm still bullish equities I think we're going to remain above this gap oops I think we're going to remain above this gap level in the Russell and also in ES

right here.

Here is what I would say though is that this if we have any type of marginal bid here in crude I think that is going to drag

down equities maybe maybe intraweek or something like that not excessively I don't want to short equities at all sounds like a not a great idea.

If crude bids up like this at just a little bit you know now that we're at this bottom end of the range and we bid up in crude just a little bit we are likely to sell off in equities and I would use that as an opportunity

to get long if that happens. So if we move back down to you know this area in ES and you know crude went back to the top end of this range which again I don't think it's too crazy but the fact

that we're deep decoupling from it is why you know that is possible but my view is that you know we're likely very likely

to remain above these levels in 6800 in ES and if we move back down anywhere in this range right here I would be looking for longs to get on sides.

That's how I think about it.

Too late to buy Oracle it's going to go down now no I actually think honestly I'm still buying Oracle I still think it's a great opportunity I think that we're going to move to

all-time highs and I'm still long the calls that I noted and everything like that.

What would it take for you to turn bearish on stocks and sell your position? Great question. There is

position? Great question. There is

definitely scenarios where that could happen and that's why you want to constantly map all these factors and monitor the situation.

My um Oh okay all right sounds good guys. Um

what would it take to turn bearish?

This is very straightforward.

On a let's talk about broad basis and then I'll talk about Oracle and per.

My view is that once you have this credit cycle the liquidity in it begin to lose and have negative consequences whether

it's through inflation the currency or long end rates that is when we begin to get unsustainable in liquidity.

So what you have to understand is that liquidity always has consequences this idea that well you know stocks you know valuation go up forever don't worry about whatever you know that's not

really the best way to approach markets.

Valuations are very important thing to take note of as they connect to liquidity. And so

liquidity. And so when liquidity increases too much in the system it has to have an impact either on inflation or the currency or both

sometimes it's both.

Right now we're not seeing long end rates blow out because of inflation or too much liquidity in the system.

So you know my view is that as long as long end rates don't move that's super positive and I don't want to be bearish equities.

What's likely to happen first is that you're going to have capital move back from the risk curve if long end rates especially long end real rates rise we're not seeing that right now which is why I'm bullish.

And so we would need to see a rotation out of a lot of these high beta names so we're not seeing that right now.

So that's number one.

Number two is if we have some type of shift in cross border flows which would connect to a weaker dollar potentially

if that began to take place and that began to shift capital across the risk curve and shift some curve moves that would begin to turn me bearish or I would say neutral we need we would need

to see you know there's a very different big difference between neutral and bearish equities massive difference. So

that's what I would say on a broad basis we're not seeing those things right now.

Now within Oracle and per what we would need to say and again by the way you know like you should always have a scenario where you get out of a trade doesn't matter what it is.

Always have a scenario that is realistic for why you would exit a trade on any time horizon I don't care if you're holding stocks to for the next thousand years right you need to have scenarios

where you say you know what things have shifted and changed I need to do X Y or Z.

When I think about Oracle and per if I'm wrong with those it'll be in this way or if the view gets falsified it'll be in this way.

Number one is if Oracle begins to take out more debt and do that into a weakening

market of not not equity market but a weakening return for capex that they've put in then that would begin to take the stock

and probably drag it down further.

I don't think that's taking place I think there's a floor because they said they don't want to go above they don't want to go get downgraded to junk status in their bonds.

And so my view is that if they don't have the cash from all their capex begin to realize this year and they have to take out more debt into the end of this year that's going to take the entire

escape velocity timeline and push it into 2027 which means we probably chop in a range for another 6 or 12 months as long as they don't go bankrupt, which I don't think is going to happen. And the

entire point is that the market is already pricing them to not do well. And I think that it's the best opportunity to fade right now because let me pull up this chart

right now. You'll you'll love this

right now. You'll you'll love this because it's it's just I I mean I love this chart cuz it just shows how much positioning is offsides

right now in Oracle. Here is the credit default swap for Oracle.

We're pricing we're pricing basically a higher probability of default in Oracle than we did in 2022 right here. So basically

this bidding up is basically this is basically credit spreads for Oracle.

And everyone is betting that Oracle functionally just doesn't do well and goes under, which it's already priced to perfection in the bearish scenario, which is why I'm so bullish. So

you know, that would that's what I would say on Oracle.

On PER, what we would need to see for me to change my view is several things.

Number one, we would need to see the underlying protocol of Hyperliquid begin to have some type of execution error and them not be able to take more and more market share. We're not seeing that

yet or we're not seeing it. I don't

think it's going to happen, but if it does happen, that would change my view.

The second thing is if the company itself PER, Hyperliquid Strategies, if they begin to have issues in executing or if they begin to dilute

their stock and not buy it back when it's at a discount to NAV and they show that they're being reckless in how they're acting then that would cause me to shift my view.

I don't think they're doing that right now and I don't think they are going to do that because I think they actually know what they're doing and they're trying to create expectations around the market that are drastically different than any

other treasury company, which is why PER is my largest position and I'm very bullish on PER as a company overall. Um

so you know, that's what I would say about that. I think that's great

about that. I think that's great question cuz you always need to ask the scenarios where you could be wrong or where you would get out of a trade.

All right.

Trying to see why this is not working. Here we go.

Okay, yeah. As a reminder, you know, I mean share in PER since we were back down at these levels sub 350, you know, we're up basically 100% now.

I continue to be bullish.

People keep asking me for price targets.

I don't like to talk about price targets, but what I would say is that I think HYPE is going to hit an all-time high and I would not be surprised I think HYPE is going to hit

you know, I I would not be surprised to see HYPE hit 150 bucks sometime in the next 12 months.

And I think if that happens PER could trade at and if it if that happens into this regulatory arbitrage and things like that and we have this moment in time where PER gets added to the

United States, but the ETFs haven't launched yet you could have this window of time where we trade at a two to three to maybe six premium to underlying

uh net asset value. I think that's very possible.

All right. Couple more questions. Won't

all of this IPO activity be bearish for equities as money moves into the IPO names? Well, it it's going to depend a

names? Well, it it's going to depend a little bit. That's actually why Tesla is

little bit. That's actually why Tesla is likely down right now and one of the reasons it's diverged from the sector and underperformed on this bid right here because people are probably waiting for the

SpaceX IPO. There's probably some

SpaceX IPO. There's probably some connection there. Um but

connection there. Um but I think we're going to rally into these IPOs and I think that there could be a sell the news event on them.

Um it really depends on how we kind of people get positioned into them.

All right. Another question on Warsh, do you think once he put uh will Mm.

I don't think he's going to end Fed speak.

I do think and I'm not sure you know, here's the thing. We just don't know.

Everyone's pulling clips from past Warsh things. What I would say is that Kevin

things. What I would say is that Kevin Warsh is going to take a stance toward monetary policy. They're still going to

monetary policy. They're still going to keep their dual mandate or whatever and just talk about that. But he is going to take a stance where he coordinates with Besant and takes a more global view on

what is happening as opposed to just the dual mandate that they have. So I think he's going to integrate all of that more into their framework and I think he's going to add in a lot of things that people have never seen before. That's

what I think he's going to do. I don't

think he's going to end the Fed speak. I

don't know if he would do that or not.

I don't think inflation especially expect expectations are going to collapse just because he comes in.

And uh but I do think he is going to change the framework a little bit. The

biggest hurdle that he has is how he's going to flip other Fed governors or how he's going to interact with them. That's

kind of how I think about that.

What do I think about the divergence between S&P equal weight and mags? Um I

think that divergence can take place for a long time and I think this oh it's low breadth bro idea is kind of ridiculous to me because you have the entire software sector

which could rally to all-time highs right now. If that happens, software is

right now. If that happens, software is one of the largest weightings in the index, it could just melt up the entire thing.

The entire thing. It could be insane. So

I mean, you know, again, people are talking about well, equal weighted is down. Yeah, well, what about the

down. Yeah, well, what about the software sector that people have been rotating out of and could rotate back into? That could

be massive. That's my view.

All right.

How can I model which sectors are contributing most to the rise in equities? All you do is you can do this

equities? All you do is you can do this very easily. Ask ChatGPT, but take each

very easily. Ask ChatGPT, but take each sector ETF and figure out its weighting in the index and then you just do a weighted average return and you can see

you could build this Let's see.

This chart that I have that shows the weighted average return of equities. So

this is not just the return, but how each sector is contributing to index returns. So for example, over the last

returns. So for example, over the last month tech over the last month we've had a six and almost 7% return.

Three and a half percent of this has been from tech.

Right?

30 basis points has been from industrials even though industrials have probably outperformed tech.

Yeah, so industrials are up more than tech.

But tech has added more returns to the index. So you just ask, you know, put in

index. So you just ask, you know, put in weighted average return.

All right. Do you have a targets in mind where you plan to take profits in PER and Oracle or not necessarily sell at all?

It will be really about how each of them digest news and how that impacts the risk reward cuz as long as I think there's further upside, I'm going to hold. I haven't sold any. I'm still

hold. I haven't sold any. I'm still

holding the position and if it changes, I'll publish a report on the Substack for it.

When do you think Bitcoin will hit a new all-time high this year, next year, or five to 10 years? What's your thoughts?

All right. This will be the final question cuz why not end on Bitcoin, you know?

All right.

Here is what I'm here is what I want to say about Bitcoin. Number one,

I as as a piece of technology itself I love Bitcoin.

I think it's great. Okay?

I am not so delusional to not manage my risk though, especially as a trader. So here's the thing. If

you're saying, "Hey, I like the long-term outlook for Bitcoin." Great.

Put money in it and stop talking about it. We got better things to do. We don't

it. We got better things to do. We don't

need to talk about how Bitcoin's going to be higher in 10 years. That's just

like, okay, let's let's Okay, we think it's going to be higher in 10 years.

Great. Let's go home and do something else. Like let's go add some value

else. Like let's go add some value somewhere. Let's go create something in

somewhere. Let's go create something in the world. Let's go run some other

the world. Let's go run some other trades. Let's go do something, right?

trades. Let's go do something, right?

You know, my entire goal is, "Okay, yeah, I think Bitcoin's probably going up over time. I have a core position.

I'll buy you know, I I own some."

Cool. I don't really talk about core positions cuz I think it's kind of irrelevant. Right? Like it's Okay, I'm

irrelevant. Right? Like it's Okay, I'm long this stuff over the next 10 years.

Great. Like nothing really more to talk about, you know, like I have my playbooks for those and there's nothing really to change. So now it's all about, well, how do I

have more returns in the interim between all these changes?

What we have seen in Bitcoin over the last year, and let me break down this price action for you.

You know, we had this rally up during the 2025 credit cycle impulse out of the tariff lows.

Now, what began to take place at these highs and in this period of time is treasury companies began to really leverage up.

This impact itself of treasury companies leveraging up, calls Q blowing out a little bit, a little bit of shift, is one of the reasons why we had this leg down like this

in Bitcoin because we were unwinding all of the leverage that got placed in the system from Bitcoin.

Now, here's what I would say. I I

we also this move down also connected to the fact that people I I I just I I don't mean this in a bad way. I still don't get why people don't

way. I still don't get why people don't understand that Bitcoin is not the only asset on the far end of the risk curve.

Right? If you have a choice between Bitcoin is this brand new brand new innovative concept that uh no one knows about and everyone wants to buy.

And you say, "Oh, cool. Well, I'll buy that. It's on the far end of the risk

that. It's on the far end of the risk curve." Buying Bitcoin because it's a

curve." Buying Bitcoin because it's a new innovative concept was this trend right here.

Ev- like this these trends right here are all about liquidity and relative returns between Bitcoin and other products not novelty.

And actually, I mean, a lot of these returns right here were just from front running the ETF launches. And some other factors right?

So, to say that Bitcoin is this novel concept and things like that is really not not the way that you want to approach

things. If I have a choice, you know,

things. If I have a choice, you know, betting on Bitcoin here because it's new and the greatest thing that's going to get the highest return is like betting on AI right now.

So, right now, the fact that Bitcoin is moving down and then this entire period of Bitcoin moving down, all the AI names moved up, is telling

you that every single investor and trader, rightfully so, I mean, if I have a choice right now to be at long AI names that are going to potentially 10x this year versus Bitcoin that might

one or two x, I am going to be long those AI names.

Like like that's it's just it's just very clear, right? And here's the wild thing that and this is why that people who are just kind of looking at it reductionistically are just going to lose money over time.

If you say, "Hey, let let let's just so so funny to me.

If I say, "Hey, listen. You have a certain amount of capital this year that you can put into one asset you have to sell at the end of this year.

But you have to sell at the end of this year.

You can put it in Bitcoin that's going to go up two x or you put it into an AI name that's going to go up 10x, what will you do?" And people will say, "Oh, I'll still put it into Bitcoin."

And you say, "Okay, so you want to take less returns for a time horizon trade of one year."

And they would just say, "Yes." And then they flip the script and they say, "Because you don't get it over the next 10 years." And it's like, "Whoa, whoa,

10 years." And it's like, "Whoa, whoa, whoa.

I'm talking about this year. What are

you going to do?"

So, don't get surprised when Bitcoin goes down for, you know, a year or something like that while every other innovative thing in the world taking

place is taking capital from it.

Right? Like I I I want to be long AI during this entire period of time, which is why Bitcoin has correlated with the software ETF that has been disrupted by AI, right? Like I think that this reason

AI, right? Like I think that this reason why you've had these correlate with each other, which is why I think you can have an unwind and they'll correlate in the upside.

But I I think that's just a really important thing to understand as a baseline for understanding the flows of capital.

Next, you want to think about how are the fundamentals of Bitcoin and how it's going to be used changing. There's a lot more fundamental attribution in the AI names that are going to contribute

returns than Bitcoin. There is no GDP transactions getting run through Bitcoin. It's not getting added to bank

Bitcoin. It's not getting added to bank balance sheets. It's not getting added

balance sheets. It's not getting added to sovereign balance sheets. And there

is no innovation happening that would begin to constrain people to have to buy Bitcoin because of these other factors in the world. Now, are things happening in the world that are constraining

people to buy tokens and bid up these AI names? Yeah. There is the mass one of

names? Yeah. There is the mass one of the largest constraints in the world right now is people needing to buy tokens. I mean, one of the largest

tokens. I mean, one of the largest expenses I have in life now is tokens and data.

Not, "Oh, well, I need to buy Bitcoin so I can hedge my risk."

So, again, I'm just will it probably go up over the next 10 years? Probably. You

know, I think it's going to, but when, you know, what pace does that take place and when does it hit a million dollars and stuff like that? You know, that those things are unknown. And that's the entire point. Here's one of the things I

entire point. Here's one of the things I say all the time.

If Bitcoin hitting a million dollars is a 100% certainty, there's there's no reason to buy it.

Because an asset, the entire point of buying an asset is because you don't know the future.

It's pricing a future unknown risk. So,

by definition, an asset, when you buy it, has uncertainty with it. And if

you're going to say that, "Oh, well, this this asset doesn't have uncertainty or risk with it," you're basically saying that this asset defies the laws of risk, physics, every like just everything.

And uh you know, that gets into a little bit more of an epistemological argument where you're saying like, "Okay, well, Bitcoin is this kind of meta thing that is created that doesn't even apply to the laws of the world that we see and

stuff like that." And then you're just like, "Okay, well, seems like the laws of gravity are working pretty well on it right now." So, listen. I'm saying I

right now." So, listen. I'm saying I think Bitcoin is going to go up over time, but let's not be delusional and think that you can't have these moves in between and we want to manage these

moves. Overall, my bottom line base

moves. Overall, my bottom line base thesis is I think Bitcoin will turn into more of a

beta in markets that correlates with these broad risk-on risk-off flows. And

risk-off flows. And it will likely be more similar to a lot of these tech software names because you have a lot of the

growth behind it.

Now, with that being said, I do think that you're going to have a rally in Bitcoin if the Fed begins to increase its balance sheet again, but that's not probably this year.

Unless you have some massive crisis.

So, if we had a massive crisis like the SVB crisis and things like that, I mean, I remember the SVB crisis happening and I remember just like bidding Bitcoin cuz I said, "Oh, well, they're going to increase their balance sheet. They're

going to step in and save the system."

And that's what we saw. So, those are my views on Bitcoin, the overall macro environment, talked about global trade, talked about all these different factors. As a reminder, if you are not

factors. As a reminder, if you are not on the Substack again, the entire slide deck that I shared today, I'll be sharing and sending out on capitalflowsresearch.com.

capitalflowsresearch.com.

Everything is laid out on the website.

Go through all of the recent reports on the credit cycle. It really frames everything for where we're at, credit cycle playbook, the melt-up trigger, and then the largest bets that I'm

taking. Everything is laid out. Every

taking. Everything is laid out. Every

single thing is here for you. And my

entire goal streaming every single day is going to be laying out the macro regime and explaining the bets that I have within it. And, you know, this these live streams and all these

educational materials that I have on the Substack, you know, I'm you know, I'll put in the work to lay all these things out for you, but it really takes your

side too to be able to invest, prepare for these live streams, go through the educational primers, go through the slide decks, go through these different ideas so that you can set yourself up for success.

So, again, everything is laid out on capitalflowsresearch.com.

capitalflowsresearch.com.

I'll be sending out the slide decks and all the breakdowns that I covered today in the stream and then I'll be covering more tomorrow in the stream that I have.

I'm, you know, in the process of building out some more AI models and things like that. So, those are the main ideas that I wanted to cover. Everyone,

thank you so much for joining and I will catch you guys tomorrow at the same time for the live stream.