Episode summary
The Liquidity That Fueled This Bull Market Is Turning | Why Michael Howell is Watching Bonds
Excess Returns
· · 1 hr · Hosts: Jack Forehand, Justin Carbonneau · Guests: Michael Howell
Summary
Michael Howell argues that the liquidity cycle has already peaked in growth terms and is now slowing, which makes risk-asset gains harder even if absolute liquidity has not yet collapsed. He says the market is being propped up by AI, but that AI is a capital-intensive boom that can eventually run into financing constraints, especially as a large wave of debt needs to be refinanced.
He frames global liquidity as the flow of money through financial markets, not the real economy, and says Wall Street and Main Street increasingly compete for the same funding. As capital is diverted into AI capex and the real economy strengthens, financial-market liquidity weakens. Howell also stresses that debt-to-liquidity matters more than debt-to-GDP, because capital markets are now mostly refinancing systems rather than new-capital-raising systems.
On his cycle map, he says markets are on the cusp between speculation and turbulence, a regime where long-dated government bonds tend to outperform and many liquidity-sensitive assets struggle. He argues the Federal Reserve matters, but repo, collateral, Treasury issuance, reserves, and private-sector balance sheets matter just as much or more. Looking ahead, he sees China’s debt problem and a possible devaluation dynamic as especially bullish for gold.
Key takeaways
- Howell says liquidity growth peaked in late 2025 and is now slowing, which is making asset gains harder and choppier.
- He argues the market is approaching the speculation-to-turbulence transition, a phase that favors long-dated government bonds over risk assets.
- Howell says debt-to-liquidity is more important than debt-to-GDP, and he views a debt-to-liquidity ratio above about 200% as dangerous.
- He thinks AI has given technology stocks a late-cycle second wind, but that the boom remains vulnerable because capital-intensive industries are cyclical and financing-sensitive.
- Howell says the Fed matters most in crises, but repo markets, collateral volatility, reserves, and Treasury actions are central to everyday liquidity conditions.
- He sees China’s debt burden and likely devaluation pressures as a major longer-term bullish factor for gold.
Notable quotes
“Liquidity moves in a cycle and we've already seen the peak of the cycle at least in terms of the growth rate of liquidity”
“All money that's anywhere must be somewhere”
“we think we're on the cusp between speculation and turbulence”
“this is exactly the time you should be thinking about bonds right now”
“Capital markets all about debt refinancing. They're not about raising new cap”
How the episode opens
Liquidity moves in a cycle and we've already seen the peak of the cycle at least in terms of the growth rate of liquidity. All money that's anywhere must be somewhere. Capital markets all about debt refinancing.
They're not about raising new cap and we're talking about a total role of something like 50 trillion for advanced economies. But actually this is exactly the time we should be thinking about bonds right now. That is extremely bullish in my view for the gold price.
It's not about P multiples. It's about somebody else and not somebody else's liquidity.
Michael, welcome to Excess Returns. — Justin, great to be here.
You are founder of GL Index and Crossber Capital and author of Capital Wars: Rise of Global Liquidity. You spent decades studying something that often gets a little less attention than earnings or valuations, and that is global and domestic liquidity and how the flow of money through the global financial system influences markets and assets. And I think this is a very interesting time to be talking about this area.
Um there's this massive wave of debt that needs to be financed across many countries. We obviously have enormous amounts of capital flowing into AI and I think that these sort of dynamics are particularly important for investors to understand right now. So today the conversation is around global the global liquidity cycle what it means for markets and how investors should be thinking about that in the context of stocks bonds and other asset classes.
So very happy to be discussing this with you. We're taping this in um beginning of November here and October was a pretty rough uh period for tech stocks and I you know you've kind of said that the money is starting to bleed out of financial assets and so what is global liquidity telling you right now?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- global liquidity
- repo markets and collateral
- debt maturity wall and refinancing risk
- ai earnings and tech stock support
- government bonds and treasury yields
Companies and tickers mentioned
- CrossBorder Capital
- GL Indexes
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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