Wed, June 26, 2024 at 07:13

• 

  Kang-hoon

  • Hello, Annie.

  • Today, I have some intriguing news about a significant shift in the financial markets.

  • Veteran macro investor Luke Gromen believes that tens of trillions of dollars will move away from the US bond market and into Bitcoin, gold, and stocks.

  • 
• Annie

  • Wow, that's a huge shift!😲 What makes him think this will happen?

  
• 

  Kang-hoon

  • Gromen points out that central banks around the world are becoming wary of stockpiling US Treasuries.

  • They've seen how the US government can arbitrarily confiscate a country's holdings, as they did with Russia.

  • 

  • This makes Treasuries no longer risk-free instruments.

• Annie

  • I see.

  • So, central banks are losing trust in US Treasuries.

  • What about other investors?

  
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• 

  Kang-hoon

  • Gromen believes that other Treasury investors will eventually sell their holdings because assets like gold, Bitcoin, and stocks offer more upside potential.

  • He highlights that the US government can no longer afford to raise interest rates due to its massive debt, making bonds less attractive.

• Annie

  • That makes sense.

  • How big is the bond market we're talking about?

  
• 

  Kang-hoon

  • The bond market in question is worth about $130 trillion.

  • Gromen describes it as the 'sucker at the card table' that will eventually realize its position and start selling bonds to buy assets that hold value, like US stocks, gold, and Bitcoin.

• Annie

  • That's a massive market!

  • So, what happens when they start selling off these bonds?

  
• 

  Kang-hoon

  • According to Gromen, this process will continue until the bond selling reaches a point where it causes Treasury dysfunction or forces interest rates to levels that the US government can't afford.

  • At that point, the Federal Reserve and Treasury Department would likely print more money to manage the situation.

• Annie

  • Printing more money?

  • Wouldn't that just lead to more inflation?🤔

  
• 

  Kang-hoon

  • Precisely.

  • Printing more money would indeed feed back into inflation, which in turn makes assets like gold, Bitcoin, and stocks even more appealing.

  • It's a cycle that could accelerate quickly.

• Annie

  • This sounds like a major shift in the financial landscape.

  • How soon could this happen?

  
• 

  Kang-hoon

  • It's difficult to predict exact timelines, but Gromen suggests that the incentives for investors to move out of the bond market and into other assets are already in place.

  • The process could start unfolding rapidly as more investors catch on.

• Annie

  • Interesting.

  • So, in your opinion, is this news a positive or negative development for the market?

  
• 

  Kang-hoon

  • I would consider this a positive development, Annie.

  • The shift indicates a move towards assets with higher potential returns and could stimulate growth in sectors like technology and precious metals.

  • It also reflects a broader diversification of investments, which can be healthy for the global economy.

• Annie

  • Thank you, Kang-hoon.

  • This has been very enlightening!😊

  
• 

  Kang-hoon

  • Upon comprehensive consideration, this news is perceived as a 😍Bullish.