Michael Howell, managing director at Cross Border Capital, is the world’s leading expert on global liquidity, a key concept in finance that relates to the relative ease of financing in markets around the world.

After previously calling in 2022 that a collapse in liquidity would usher in a bad year for risk assets, Howell returns to Forward Guidance with happier tidings. Howell now argues that global liquidity conditions reached a nadir in October 2022 and since then have been rising, in part due to the People’s Bank of China (PBOC) injecting trillions of Yuan into the Chinese financial system, as well as money market funds pulling cash from the Fed’s reverse repo (RRP) facility.

Howell also shares with Forward Guidance listeners his thoughts on why the yield curve is sending a false signal, as well as on private credit creation and cross-border flows.

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Timestamps:

(00:00) Introduction

(01:40) Liquidity Is Rising - Why?

(06:17) But What About Quantitative Tightening (QT)?

(09:03) Treasury Market Liquidity & Bank Reserves

(18:10) People's Bank of China Is Injecting Lots of Liquidity

(25:48) Y2K Fed Comparison

(30:50) Market Outlook for 2023

(32:58) Curve Ad

(35:12) Liquidity Outlook For Next Few Years

(41:38) Inverted Yield Curve Could Be Sending False Signal

(50:40) Are Rate Cuts Actually Coming?

(59:40) Private Sector Liquidity & Cross-Border Flows

(1:06:50) Consequences On Global Economy

(1:13:01) Is Liquidity Resurgence Already Priced In?

(1:17:48) "Rebound" Phase In Liquidity Cycle

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Disclaimer: Nothing discussed on Forward Guidance should be considered as investment advice. Please always do your own research & speak to a financial advisor before thinking about, thinking about putting your money into these crazy markets.