Forget Fundamentals Or Technicals. Asset Prices Are All About Liquidity | Sven Henrich

in markets makes perfect sense through the lens of liquidity and and when liquidity trumps it dominates it trumps everything macro fundamentals valuations nothing matters that that's that was the message in any of the interventions that we've seen since 2009 and I think that's the phase we're going through right now [Applause] [Music] welcome to wealthyon I'm wealthy I'm founder Adam Taggart thanks for joining us for part two of our interview with technical expert Sven Henrik if you haven't yet watched part one of this discussion with Sven in which he explains what his technical analysis says is likely to happen most now that the Bulls have won the battle for control that raged in the markets at the beginning of this year head over to our Channel at youtube.com wealthian and watch it there first it sets the context for the investment themes we discuss in this video okay let's get started watching part two of our interview with Sven Henrik first is we've got regular people who watch this Channel and they are just trying to navigate what's going on hopefully not become collateral damage to anything bad and to try to at least make some money with a relatively acceptable risk return ratio if things go well uh what sort of be some of your parting advice to those folks you know I heard you say like all right don't go super long into Tech right now maybe buy on a pullback wait for a pullback to buy if there's a pullback if you're bearish don't Pile in immediately because that's likely to get bought in the near term um what other bits of counsel would you give them well you know first of all one of one of the things that was missing by the way in May and this had me confounded as well you know Tech was already flying high but some of my technical signal charts were Max oversold which made absolutely zero sense to me it was really confounding so I had on the one hand tech stocks just going brutally overbought and the overall Market be no sold well now I have the answer for that the Market's caught up and as we approached this week now a lot of the check boxes that were missing are now being ticked off this Market is getting now very much overbought again which suggests you know the opportunity to lighten up a bit wait for pullback makes sense uh for for sure uh in in terms of selling you got to be very very careful because momentum breeds momentum and we've seen that in in recent weeks um but there's another chart that may be worth watching in terms of a trend line uh I mentioned the s p monthly chart you know we had the support holding we got the break above the monthly 20ma there was a trend line that actually broke last year it was a key resistance trend line all the way up to before covet and then we had this just massive blow off top broke above it held this support a few times but we broke it to the downside last year as all the money printing came to an end we just tagged that again as a resistance so is is bears look like to be non-existent having completely disappeared from the market polls taking over I find that technically of Interest with the lag effects still coming I'm I'm I remain open to the bear case but I'm cognizant of bulls and control so I think this is going to be now a tactical Journey here into the summer again if we get a pullback into the monthly 20ma if but holds support you got a record you got to respect it and then then you're probably clear for the year um on on the upside uh however if that breaks and we'll show on which show then that this rally here was a fake album so this is that there's always that possibility when you get too much uh momentum and and optimism again if that fails so I use measuring sticks where I know who's in control and that to me remains a key measuring stick I think generally volatility is way too low for the macro environment that we're facing so I do think we're going to have another volatility Spike this year and if if it breaks below the monthly 20ma on a sustained basis then you may actually still get a larger bear Market in the second half of the year which was originally my script see I'm also trying to be honest with my my scripts I'm saying okay well the first half year rally makes sense to me second year we'll see who what's what's really happening with the economy and then earnings and then where we are and remember back then I said 3200 was kind of a second half of the Year possibility which seems completely insanely impossible right now right No One Believes that not even the bankers believe that anymore not even Mike Wilson believes that anymore you know he's the most bearish guy and you know things maybe 3 900 could could be happening right but that's that's what happens this is the psychology of the market right it's gonna break the Bears yeah and in October October just one just anecdote which is so absolutely classic okay Goldman Sachs the crack team on Wall Street right best paid guys out there beginning of 22 they were talking about 5200 right and then the s p dropped and then they reduced a price Target 4 900. and the s p dropped some more you know the other four thousand I forget the exact sequence but they kept dropping their price Target and then in September it basically right in front of the laws to drop their year-end price Target to 3 600. and then the thing rallied up 200 and they raised their price Target to 4 000 well like what a week ago or two they now raised their price target of 4500 now that we've crossed over 43 going into 4400 thanks that's extremely hot I'd love to get paid their paychecks to be able to forecast that well but it's it's it's so reflective of when I say the environment it's difficult I'm not trying to make fun of them I'm just trying to highlight that the biggest Pros on Wall Street get it horrifically wrong and they get jerked around and no one has any particular Insider predictive Insight in terms of how this plays out they're all chasing price that's why I'm saying liquidity has a lot to do with this in terms of how this is all being influenced but we gotta understand all this where we choose individually how we view risk reward at any particular given time and and so to me this is an Adaptive journey I mean I I don't like risk reward to the upside right now at all you know shorting is hard and dangerous for most people anyway right but you know I do see short opportunities setting up here because of having that cup and handle Target being reached the trend line being reached overbought reading sentiment and potentially liquidity coming out so that there are possibilities there and then when that happens then we need to see again a new battle for control can Bulls to defend the the key measuring sticks or or not and this is where the macroeconomic data comes in as this the journey unfolds doesn't you know no one needs to be stubborn about anything this remains a a complex journey to navigate through and then using signals to be tactically positioned all right with um Lance Roberts is it financial advisor who's endorsed by wealthy on here he's on the channel every week with me and uh at the beginning of the year he declared this as the year of the audible and I hear that's what you're saying a lot too which is we just have to be really Nimble and be ready to to change the plan at any given moment given the way that things are unfolding on the ground here well this this Market has done a fantastic job of making everybody look like an idiot at one particular time period I guarantee you this is this is going to keep surprising us um into next year as well uh so we just got to be we just got to be humble in terms of uh the the developments and I haven't I haven't even spoken to geopolitical any of that sort you know but I I give you one example you talk about recessions and and or slow down not mattering Germany is officially in a recession guess what the taxes at all-time highs who cares have you have you looked at the Nikkei lately holy cow I mean through the roof on the monthly Bollinger band no one cares I mean it it's astonishing some of the price action we're seeing um in in a context of the supposed greatest monetary tightening in in decades but I don't believe it because as I mentioned earlier we've still got all our liquidity flushing through the system so no it's it's not been cleansed at all right you keep cracking open doors that I I want to keep talking about you with we'll be here forever if I do um let me just ask a couple of quick bullets um one is if you could just give a quick note on your your outlook for bonds right now what is this is where I go back to that tnx chart I mean I I I don't have it confirmed at all I just see a big potential weekly both flag which I find myself struggling with because If the Fed is pausing or has paused already you know then this shouldn't really play out but why is it showing me that technical pattern uh because that suggests uh still higher rates to come although you know if you're talking about a recession then you would expect lower rates so bonds bonds are a bit of a puzzle to me and I'm just saying in general the bond market is sending a very different message than the stock market and the stock market has been ignoring the bond market at this time and there's there's this wide jaw and and both can be right it's kind of my my view I'm curious I hear people say when the stock market and the bond market differ the bond Market's usually proven right because quote unquote that's where the smartest guys you know on the street operate um does that still hold true in a world a Washington liquidity well that's that's the journey the Undiscovered Country right I mean some someone has to record this is why I go back to earnings deals you know you you are now in a phase where you got competing forces you never had that in the last few years right because you had the Tina effect there is an alternative for guess what there's an alternative now a largely risk-free alternative yeah or yield so why am I paying you know 30 times earnings and a lot of these really expensive stocks I've never mind in a video or Tesla or something else by the way this was this was kind of funny I saw some tweet from someone some random accounting now they have these historical accounts and it talked about the Ponzi scheme the guy that actually did there was a guy named Ponzi and it was in the 1920s and and we all you know the phrase a Ponzi scheme well there was actual guy that this is coined after and he was promising you know 50 return in 90 days and I had to laugh because this Market here has been blowing past all this I mean Tesla went up 46 in like 15 days you know Ponzi couldn't compete with that I'm finding Ponzi you know and again you know we're talking almost trillion dollar company here I mean it's it's incredible yeah but by the way just going back to this I talked about liquidity equation and markets I actually posted a chart of Tesla vis-a-vis Bank Reserves in it's absolutely stunning because when when Tesla bottoms Bank reserved had bottom when Tesla Peak Bank Reserves had popped the same relationship that I mentioned in markets we can see in some of these high-flying tech stocks so don't anyone tell me there is not a very clear relationship that's very dominating in these markets so this is the part of the Flying Blind part because I I cannot tell you where this is exactly going it should go lower on the liquidity front but it hasn't and and the reason it hasn't in the recent months is because of these Bank interventions so this is where I go back to the Illusion part maybe maybe we're all being on some level completely deceived because we're when looking through it through the wrong lens and and you cannot Square it with fundamentals just with liquidity just to finish that point yeah what we're seeing in markets makes perfect sense through the lens of liquidity and and when liquidity trumps it dominates it trumps everything macro fundamentals valuations nothing matters that's that was the message in any of the interventions that we've seen since 2009 and I think that's the phase we're going through right now okay um so I hate to shoehorn one other additional question in here but um the the FED has been very particular to tell us okay this this Bank interventions are not QE right um and you could say it's a loan it's got to get paid back and all that stuff and therefore it's not going to enter the real economy um how I mean clearly we're seeing the markets react as if it's QE um how is this money making its way into the financial markets here but by the way they also said it wasn't QE in 2019. when they said literally not QE right yeah markets didn't didn't care well it's it's it's it's X excess money in the system you know the the it always finds its way into into markets somehow I mean if you have excess cash you can deploy it you know that we can argue about the precise mechanisms um and there's been a lot of online discussions about you know is QE even stimulative and people disagree with it well whether it is or isn't in terms of money going into the real economy and for years it hasn't gone in the real economy right because velocity of M2 was just not there um but it makes its way into Financial assets assets and as you alluded to earlier in the part well that's just keeps widening the wealth inequality equation which no one seems to ever care about so maybe it's Mission accomplishing that's that's the plan um I think we talked about this a little bit last time as well yeah the the the social disintegration that's taking place in front of our eyes every month I mean just look at political situation the U.S keeps getting worse and worse and worse you know there's real anger out there and yes the concern is that if you have a tightening cycle that doesn't fix housing affordability for example what do you guys what do you think is going to happen you know if rates are higher for longer and you don't get the cleansing of the excess you know the the whole issue with inflation is yeah you you I guess declared Victory when the rate of change is back down to two percent but you have absolutely no reprie from the prices that got raised none you know maybe get lucky on gas prices but if you don't see it in your rental prices and your wages haven't kept up you're behind you're behind that if you're not an asset class owner which most people are not I hate to say it then you're left behind again so how is that how is that helpful and you're you're looking sort of with a snapshot of where we are right now but then you take things like AI right which of course everyone's cheering right now right but that's going to dramatically disintermediate the labor force right and so you know if you are a younger member of the younger generation you're just looking at a series of current blows or blows you see coming in the future that are just diminishing your prospects I mean you get to a point where you really lose Faith you know in the promise and as you said you know there's there's definitely sort of a simmering anger here particularly on the lower end of the socioeconomic Spectrum but also in the lower end of the demographic Spectrum where people are just increasingly feeling like this is just not fair well if if AI leads to a road where it creates a bunch of new jobs new category of jobs that didn't exist before that's just the vast pool of opportunity [Music] um but if it leads down to a path where you know a lot of other jobs just disappear and folks that are not well versed in that Arena are just losing their jobs then yeah it's just gonna exacerbate everything I mean I guess you know when you look at the internet when it first came online and now our AI is presented us the new internet basically right um we had a lot of optimism with that and the internet proved to be a game changer for everything but it also didn't prevent 90 drawdown in the recession in the real world draw down in all the later winners in the internet I.E the apples Amazon's you name it Google they all got hammered hard because the view that the internet was going to solve everything yeah it did so and didn't solve everything but it was a massive Game Changer that led to immense opportunities well a lot of stuff God completely obliterated along the way and if you look at a lot of the companies that were the initial Promised Land of that time they all disappeared and or got haircuts that lasted for for decades you know everybody wants to presume to know who the winners will be and you can make the case yes you know the the monopolies that we have right now they're unbeatable right because they have so many resources at their disposal but you know we we've said that a number of times as well you know a little bit look at the mobile space right it was the Nokia's the blackberries or even Computing Cisco whatever completely new players came along on the way so that that that will take time to sort out on on a personal load and I'm for freely admitted I'm I'm not an AI expert all right I just dabble to like everybody else you know on the various offering stuff out there I mean on Twitter you know every every day now you get some right about ooh there's a thousand new AI tools and if you don't use them you know your Stone Age dinosaur or whatever but you know what I find missing and I've done a few experiments on that in in things that I actually think I know things about ie Central Banking monetary policy and and markets and what I found interesting is when I asked some basic questions or put out some basic prompts um these AIS give you a ton of interesting information and they present them in a very authoritative authoritative way meaning yeah that sounds pretty pretty solid but being a subject matter expert I I realized that this a lot of the information is completely incorrect and so I actually went back to challenge it on it and say well this is wrong because of this here's the link this is wrong because of that in AI came back and you can you can put that into plus side sentence it apologized it corrected itself and and then agreed with me what okay how is that helpful because if if you're not a subject matter expert in something you you're running the risk of taking information that's fit to you by by Ai and you end up being completely misinformed now you can say while the AI is learning and therefore I took my information and it updated its information well I'm just one guy what if a thousand guys keep feeding it different information you know what what is truth what is actual reality and so I I can see one key element missing in all this AI stuffs at this point and that's judgment human judgment that's that's currently lacking now we're early in the process and things can change I freely they aren't exponential and ultimately can be great but also I suspect at this stage it could be a great source of misinformation which is terrible because we got an avalanche of misinformation already so it's it's going to be a increasingly difficult jungle to navigate through I suspect in general but no matter my my initial concerns here you know investors at this point even though can you call them investors if they're one day zero day options Chasers are pricing in Perfection for years to come yeah I think that that is something that is clear right when you look at like nvidia's price to sales ratio right I mean that that company needs to deliver Perfection for a ridiculously long period of time to Merit its current multiple of sales well they have to sell a lot of chips right I mean I mean that's great and and I'm sure they will but someone has to pay for all these right is is there counter ledger to this where okay and where there'll be competitors coming in and you know there'll be something and all that stuff right you know people talk about you know even Elon Musk talking about the regulation and and this that to to hone things down and this could all get scary well the Chinese are not going to regulate the Russians are not going to regulate the who knows who's all out there we don't know who the other players are going to be but they're all going to be players out there and yes and that that'll lead to competition and and competition as a way of changing things on on a diamond so I I these wild valuations we're seeing right now okay I I don't know how long the momentum will last but at some point there's going to be a reality I I hope for the best I hope for the best but I I I again it's all about risk reward at any given moment in time and and right now to me it's shifting okay we're gonna have some testing ahead of us all right we'll spend look I have a lot of questions we didn't get to it's always a sign of a great interview where you just kept throwing Diamond after Diamond here into the discussion um my last question for you for now of course we'll have you back on and actually if we get to the point where your ta shows you I think you said you know we could get to a point where um you know if if the bull run really does begin to encounter real resistance um and uh you know we begin to see a potential door opening for a real world version um loved if you come back on the channel and kind of just update us on what your tia is saying at that point so whenever that happens please let me know we'll bring you back on but back to kind of all the um you know there's a lot of dislocations right now right there's dislocations from the key moving averages there's dislocations from the fundamentals um there's dislocations from what the FED is telling us versus what the Market's believing I mean it's just dislocations everywhere a lot of that's being driven by you know policy um and whatnot um so if if you were in charge if I made you Emperor Sven yeah um what are there any reforms that would be like at the top of your list that you'd want to do to start trying to bring things a little bit more into [Music] fundamental balance here ah thank God I'm not in charge I wouldn't want the job I agree with you I've been talking about the FED specifically or really anything I mean it could be you had a market is structured or whatever but I imagine Central Bank policy is probably somewhere in your mix there well one thing is you know I I'm not in charge I would just urge them to stop with the non-stop speeches uh that they've been given then I mean this week this coming week I guess we have 15 pet speakers again are you kidding me in one week oh yeah we've had that before as well um and let's say they're all the best intentions people in the world uh I I think they're shooting themselves in the foot uh as a central bank you want to have credibility with the market and these constant proclamations that we've seen over the last few years have greatly undermined The credibility of the Federal Reserve everybody get things wrong I get that I get things wrong um but they're not learning from that um when when you give speeches at a rate 45 50 a month you will get things off more wrong than otherwise you you you're opening yourself up to losing credibility fed certainly has done that with the entire inflation fight I mean remember did there are people now in the FED that says no right hikes no rate Cuts in 23 and 24 whatever [Music] um as Powell the other day not for a couple of years you don't know that right have no idea what policy should be or could be based on any type of events that are coming our way that's the same mistake that they made in 21. when they said and let the market through hundreds of speeches they kept repeating this there won't be any rate hikes until 2023 or Kashkari for example until the end of 2023 and people believed it I I keep going back to this example December 21 they put out a a uh plot forecast for the FED funds rate of less than one percent for 2022. and people believe that and where are we now we're at five percent the end of the year what 4.8 percent instead of less than one percent well let me throw one at you you know everybody's now blaming the bank's CEOs for having mismanaged their positions and that's why they blew up and yes you can blame Bank CEOs yeah who was telling them that's not going to happen yeah if if your bank CEO and you actually believe the fed and you manage your risk accordingly he no wonder things are blowing up so then then I'm looking at this and say well are you by misguiding the market because you're so insistent on doing that are you actually becoming a source of instability because now they have to come in and intervene everything again and now maybe this is actually prolonging the inflation fight which then ultimately may make things worse much worse down the road you know and and now power goes out not for a couple of years when he doesn't know when his own team his own fed is already putting in Pennsylvania rate cuts for for next year I I just I just think they're the overall processes is is not extreme is not helpful I think the the fact that this is still resulting in ever widening wealth inequality it's never been any acknowledgment on this on the side of the FED um they they are risking ultimately a society breaking apart I don't want to see that uh it's it's incredibly challenging and there's no accountability ever for for any of that uh as I said you know housing prices they they added what trillion and a half into mortgage-backed securities during covet which interests Supply constraint housing market which blew housing prices to the roof and they have barely corrected at all they're pricing people out of the housing market I'm doing a terrible job of trying to wrap this thing up because I am but you keep opening these great doors so housing market you know head scratcher um in the sense that it's it's I mean it's housing prices move more slowly than financial asset prices like stocks and whatnot we all get that but you know mortgage rates have now been very high for a good long time we've kind of Trapped people in their homes right where now they almost can't afford to move right because they they're sitting at a really low mortgage they're going to have a big fat mortgage on the next place they go to or fat mortgage rate um but uh but here in the US you know we have a ton of people that are sitting on these these low mortgage rates for the next 30 Years in your country if I understand correctly um mortgages they're they're roughly have to be taken out every five years so theoretically every year you have about 20 percent of the housing stock that's re-rading so you would expect to see home prices correcting faster in countries like yours is that indeed Happening Here well the housing market has slowed down for sure uh on the upper echelon but you know house prices keep going up okay so you're still seeing the same Dynamic we are but but the the issue is as you mentioned there's there's a lot of variable refinancing and Bank of England is expected to raise again this week uh it's it's gonna squeeze people out hard so there's that that's the concern that they're going to break something hard down on that front um any any UK structurally is is the sickly child of Europe now because there are effects from brexit and inflation is higher than anywhere else in the Eurozone so there's there's definitely issues here uh also with labor right because as as you broke out of the Eurozone you know a lot of the labor Supply that was here is no longer here oh it's been reduced dramatically yeah and it was the more affordable later labor too right yeah absolutely and so I see a lot of High Street shops have been closed and not coming back I don't see any demand for all this yet that's just all tells me that the hammer is still to drop in a lot of these these economies um just closing out on the Fed so you know they they need to be very careful in terms of The credibility I think once you get into a phase where the FED has no credibility with the market bad things can happen because no one listens to them anymore um and and so then then they're gonna have to follow through harder and I think we're kind of approaching this period right now so be interesting to see what the reaction is this week to 15 at speakers appearing obesity what this statement was last week and what maybe they intended to have happen basically what actually did happen all right well look it's been I could we're coming up on two hours here yeah we go another two with you um but this has been wonderful thanks for giving so much of your time and your expertise to us here for folks that have really enjoyed this and for the very few who may not have been familiar with you before where can they go to follow you in your work from here well my daily musings you can find me on my Twitter handle at Northman Trader um where I try to post charts Sometimes some sarcastic notes as I'm known to do for you yeah I I can just observe the absurdity of the world but I'm trying to keep it real at the same time uh website is Northman Trader also have a YouTube channel I post uh North casts where I try to uh do a few technical macro observations uh in video format as well all right it's been as usual when we edit this video we'll put up the links there on the screen and in our description to all those assets there folks uh if you don't already follow us then you absolutely should and I don't need to explain why you've just seen it in this almost two hour uh Bonanza of insight he's given us um all right uh Sven uh it's just been wonderful look um you you've done a phenomenal job of really underscoring what a tough Market this is for a seasoned long-term professional like you so you can only imagine you know a regular viewer of this channel who's trying to navigate on this on their own how overwhelmed a lot of folks can feel uh so I just want to thank you for for really underscoring um why we on this channel encourage people to work under the guidance of a professional financial advisor and just trying to navigate this stuff I think very few people are have the expertise the time really um but also the skill set to to successfully navigate this ever-changing environment that we've just been talking about here um folks if you have a good one who is creating a personalized financial plan for you uh and then executing it for you while keeping you well informed uh you should absolutely stick with them they're rare they're worth their weight in gold if you don't or like a second opinion from one who does consider scheduling a free consultation with one of the financial advisors that wealthian endorses um to do that just go to wealthyon.com fill out the short form there only takes a couple of seconds these consultations are totally free there's no commitment to work with these guys it's just a free public service they offer to help people like you you know hopefully position prudently given all the issues that that spend such a great job talking about here um and if you'd like to see Sven come back on this program again particularly when his ta starts telling us we need to start paying attention because there might be a directional shift uh please cast your vote for that by hitting the like button then clicking on the red subscribe button below as well as that little bell icon right next to it Sven again I just want to say it's always an honor having you on the channel thanks for giving us so much your time it's been great thanks Adam for having me look forward to our next discussion as well all right thanks so much everyone else thanks so much for watching foreign

Channel: Wealthion

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Length: 37min 4sec (2224 seconds)

Published: Wed Jun 21 2023