MacroVoices #507 Michael Howell: Is This The end of the Everything Bubble

Episode Summary

Executive Summary: Macro Voices episode 507 centers on Michael Howell’s view that the 65-month global liquidity cycle is turning down after peaking in late 2025/early 2026, implying weaker equities and stronger commodities, gold, and possibly Bitcoin. He ties repo stress, falling reserves, and massive debt refinancing needs to a likely policy pivot toward lower rates and more “Treasury QE,” while the post-game frames near-term market weakness and trade setups around dovish repricing.

Main Topics: Global liquidity cycle turning point (Priority: 5/5): Michael Howell argues global liquidity follows a roughly 65-month cycle driven by debt refinancing dynamics, and that the current cycle is rolling over after a late-2022 bottom, with the peak occurring in late 2025/early 2026. Equities losing liquidity support (Priority: 5/5): The interview argues equity outperformance is likely ending because liquidity has been the dominant driver of asset prices since late 2022, and the current selloff may be the start of a deeper correction rather than a temporary dip. Commodities, gold, and mining stocks as the next winners (Priority: 5/5): Howell says commodities typically outperform near the liquidity-cycle peak, with gold and mining stocks benefiting from monetary debasement, Chinese liquidity, and a shift in the asset-allocation regime. Repo stress, reserves, and Fed liquidity (Priority: 5/5): The discussion links rising SOFR-repo tension, lower bank reserves, and Treasury General Account rebuilding/shutdown effects to a shortage of usable market liquidity, reminiscent of 2019. Debt refinancing wall and Treasury QE (Priority: 4/5): Howell emphasizes the world’s refinancing burden—especially U.S. Treasury issuance—and argues policymakers may shift from Fed QE toward Treasury-led liquidity support via shorter-duration bill issuance. China, stablecoins, and the new currency war (Priority: 4/5): Howell frames a bifurcating monetary system: China accumulating gold and liquidity support while the U.S. leans into stablecoins and digital collateral, creating a capital war between gold-backed and tech-backed systems. Trade and technical outlook from the post-game (Priority: 4/5): Patrick Serezna suggests a rate-cut repricing trade via a SOFR call spread, while the post-game highlights weakening breadth, a key S&P 50-day breakdown, a firmer dollar, and a still-constructive but consolidating gold market.

Key Arguments: Global liquidity is the flow of funds through financial markets, especially repo/shadow-banking channels beyond conventional M2, and it is a major driver of asset prices. The 65-month cycle is likely a debt-refinancing cycle, matching the average debt maturity of roughly five and a half years. The current liquidity upswing began at the October 2022 bottom and is now inflecting lower in late 2025/early 2026, near the cycle peak. Equities have been propelled by liquidity since late 2022; if liquidity turns down, stocks likely face a headwind and commodities should become the relative winners. Repo markets are showing stress similar to 2019, indicating reduced flexibility in funding markets and a possible blowout if liquidity remains tight. Treasury General Account rebuilding, the end of the debt-ceiling constraint, and the government shutdown have all withdrawn liquidity from markets. The U.S. and global system face a massive debt maturity wall, with refinancing needs rising sharply in the late 2020s, requiring more liquidity or more monetization. Policymakers appear to be shifting from Wall Street support toward Main Street support, using lower rates plus balance-sheet management or Treasury issuance changes. Fed liquidity is falling and bank reserves are below a critical threshold, which is contributing to repo tension and weaker risk assets. China is using liquidity and gold accumulation to strengthen its monetary position while stablecoins pose a threat to its control over domestic capital flows. The U.S. appears to be moving toward digital-collateral/stablecoin architecture, while China leans on gold; this is described as a capital war, not just a trade war. Gold and Bitcoin should be viewed as complementary monetary hedges in a debasement regime, not mutually exclusive alternatives.

Data Points: Global liquidity cycle periodicity: 65 months - Howell’s core cycle framework for liquidity and asset rotation Global liquidity cycle trough: October 2022 - Last major cycle low referenced in the interview Tolerance around average cycle: About 8 months - Historical flexibility around the average liquidity cycle SP 500 level: 6642 - Macro scoreboard as of Nov. 19, 2025 SP 500 weekly move: Down 304 basis points - Macro scoreboard for the week ending Nov. 19, 2025 US Dollar Index: 100.11 - Macro scoreboard showing dollar breakout continuation WTI crude oil (Dec contract): 59.25 - Macro scoreboard as of Nov. 19, 2025 Gold (Dec contract): 4,082 - Macro scoreboard; gold consolidating after Q3 rally Copper (Dec contract): 501 - Macro scoreboard level for copper futures Uranium: 76.15 - Macro scoreboard level for uranium contract US 10-year Treasury yield: 4.14% - Macro scoreboard as of Nov. 19, 2025 SP500 correction: First peak-to-trough 5% correction since Liberation Day - Patrick’s post-game commentary 50-day moving average event: First closing print below 50-day since Feb. 21, 2025 - Referenced as a key technical breakdown SP500 below 50-day in prior instance: 1,200 points lower before bottoming - Eric’s comparison to the last similar breakdown Fed liquidity withdrawn: About $500 billion - Howell’s estimate of liquidity removed over the last six months Liquidity returned by government reopening: About $100-$150 billion - Estimated partial offset from shutdown resolution US bank reserves threshold: Below $3 trillion - Howell says this is contributing to repo stress Critical reserve level estimate: About $3.3 trillion - Howell’s estimated minimum adequate reserve level Debt-liquidity ratio equilibrium: Around 200% - Howell’s estimated stationary equilibrium for debt versus liquidity Collateral-based lending worldwide: 77% - Cited from World Bank in Howell’s framework Existing debt to roll annually: About $70 trillion - Howell’s estimate based on roughly $350 trillion debt and five-year average maturity US public debt growth since 2000: 10x - Howell’s long-term comparison for debt inflation SP500 gain since 2000: Less than 5x - Howell’s comparison versus debt and gold Gold gain since 2000: 12x - Used to argue gold has outpaced debt growth Potential US M2 growth in 2026: 7-8% - Howell’s back-of-the-envelope estimate under a more monetized regime Potential US debt-to-GDP by 2050: 250% - Howell’s reference to CBO-style debt trajectory Gold price projection: $10,000/oz by mid-2030s; $25,000/oz by 2050 - Howell’s trend-based debasement projection SOFR/December 2026 contract level: Around 96.90 - Patrick’s trade setup implying roughly 3.10% Fed funds at end-2026 Proposed options trade: 3-month SOFR Dec 2026 97.5/98 call spread - Patrick’s way to express a dovish repricing view Trade cost: 8 points - Patrick’s stated premium for the spread Trade payoff: About 42 points - Patrick’s stated potential profit on the spread Payoff ratio: Roughly 5:1 - Patrick’s summary of trade convexity

Pivotal Quotes: "liquidity is basically being pulled from markets" — Michael Howell: Explaining why equities may be topping as global liquidity turns down "This is a capital war, not a trade war." — Michael Howell: Describing U.S.-China monetary competition and the role of liquidity, gold, and stablecoins "If you look at that chart and spotting the fact that Fed liquidity was dipping as sharply as it is, I'd be fairly worried about the health of Wall Street" — Michael Howell: On the implications of falling Fed liquidity for equities

Implications: Listeners should expect a tougher backdrop for equities, more supportive conditions for commodities and gold, and heightened risk from repo/liquidity stress. The likely policy response is lower rates plus more Treasury-led monetization, while the broader system shifts toward a currency-and-collateral competition between the U.S. and China.