Henrik Zeberg: Yield Spike Will Burst Stock Market Bubble
Tom welcomes Macroeconomist Henrik Zeberg back to the show. Henrik discusses where we are in the winter season of the Kondratieff cycle and what comes next. He believes we are approaching the final deflationary phase, which will have severe consequences.
He says, “we can only stimulate for only so long, and the lockdowns will be one of the reasons why we will see this deflationary bust.” Excessive debt results in a reduction in consumption, which will pressure growth. Central banks believe that they can stimulate the business cycle and incentivize people to take on more debt. However, this will only end up exacerbating the problem. The real economy is not better.
The Fed has created a bubble in assets, but money velocity has continued to collapse. Commodities have declined since 2009 and have recovered somewhat, but he believes they will head down in a final bust as the dollar roars back, crushing growth globally.
Henrik believes big asset moves like Bitcoin and equities are being driven by the declining dollar and a spike in bond yields. Expect a liquidity crunch, margin calls, and sharp declines in gold, silver, and equities.
He argues that all these asset bubbles will burst and that bursting is always deflationary. Money velocity must pickup to get inflation, and we won’t see that until after the next major panic. Commodities are not at their structural bottoms yet, and he provides some rather startling price targets.
Time Stamp References:
0:00 – Introduction
0:46 – Winter is here.
6:10 – Fed Dangers
8:10 – Liquidity & Timing
12:20 – Commodity Risk
13:37 – Stock Market Chart
17:46 – Inflation & Velocity
19:49 – Velocity Drivers
22:59 – Yield Curve
25:27 – Silver & Gold
27:53 – Timing
29:33 – Playing the Bottom
33:38 – Bitcoin Predictions
36:44 – Dollar Strength
37:48 – Wrap Up
Talking Points From This Episode
• Kondratieff cycles and a deflationary bust.
• Why asset bubbles must pop.
• Yields and US dollar to strengthen.
• Price targets for commodities and Bitcoin.
Henrik Zeberg is a Macroeconomist (M.Sc. Econ) from the University of Copenhagen. He is a Business Cycles student, Elliott Wave practitioner, and Chartist. You can find out more about his newsletter on his Website.