Core Viewpoint - The value of the US Treasury's gold reserves has exceeded $1 trillion for the first time, driven by a 45% increase in gold prices this year, raising speculation about a potential revaluation of these assets by Treasury Secretary Bessent [1][2]. Group 1: Gold Reserves and Valuation - The current value of the US Treasury's gold is over 90 times the amount reported on the government's balance sheet, suggesting a significant discrepancy that could lead to a revaluation [2]. - Unlike many countries, the US government directly holds its gold reserves, while the Federal Reserve holds gold certificates that correspond to the value of these holdings [3]. - A revaluation of gold reserves could potentially inject approximately $990 billion into the Treasury, reducing the need for new Treasury bond issuance [4]. Group 2: Implications of Revaluation - A gold re-marking would have substantial implications for both the Treasury and the Federal Reserve's balance sheets, effectively functioning like a quantitative easing operation without actual market purchases [6][7]. - The re-marking would increase the assets and liabilities of both the Treasury and the Federal Reserve, with the Treasury's assets rising by the re-marked gold value and the Fed's assets increasing by the value of gold certificates [9]. - The market may view a gold re-marking as unconventional, as it has not occurred for decades, likely due to concerns over the independence of fiscal and monetary authorities [8].

Core Insights - The share of below-3% mortgages has declined to 20.4% in Q2, the smallest since Q2 2021, indicating a slow exit from the "lock-in effect" for homeowners and investors [1][8] - The share of 3%-3.99% mortgages decreased by 30 basis points to 32.1%, the lowest since Q3 2019, reflecting a broader trend of rising mortgage rates [1][8] - The overall mortgage landscape is characterized by a significant decline in ultra-low-rate mortgages, with the share of 4.0%-4.99% mortgages dropping to 17.9%, the lowest since 2013 [8][11] Mortgage Rate Trends - The ultra-low mortgage rates that emerged in early 2020 led to a surge in refinancing, with 65% of all mortgages outstanding having rates of 3.99% or below by Q1 2022 [2][5] - The share of mortgages with rates of 6% or higher rose to 19.7% in Q2, the highest since Q4 2015, as home sales and refinancing activities have significantly declined [11][12] - The share of mortgages in the 5.0%-5.99% range has remained stable at around 9.9% in Q2, indicating a balance between new originations and payoffs [12][13] Economic Context - The ultra-low-rate mortgages were a result of the Federal Reserve's quantitative easing (QE) policies, which began in 2009 and intensified in 2020, leading to historically low mortgage rates [15][16] - The Fed has since initiated quantitative tightening (QT), shedding $2.36 trillion in assets to address the inflation and housing market distortions caused by previous policies [16][18] - The period of negative "real" mortgage rates, where mortgage rates were below inflation, peaked with rates below 3% and CPI inflation exceeding 7%, creating unsustainable conditions in the housing market [18]

A few things are happening here. So since September of last year, one year later, the Fed has now reduced rates by 125 basis points. Yep.And that brings us to 4 and a quarter 4 to 4 and a quarter. The Fed no doubt will go to a neutral rate, which is 3%. So they have 125 basis points to go.So only at the halfway mark. So that's the first thing. It's only eased one time this year.But they have a lot more to go because jobs are slowing. And more importantly, the neutral rate is much lower than the rate we have ...

Group 1 - The Federal Reserve has reduced rates by 125 basis points since September of last year, currently at 4.25% to 4% [1] - The neutral rate is estimated to be around 3%, indicating that there is still room for further rate cuts [1][5] - The current restrictive rate environment is negatively impacting economic growth, particularly in sectors like housing and construction [2][3] Group 2 - Job growth is slowing, which is prompting the Fed to initiate an easing cycle despite higher inflation [3][5] - The next Fed chair, expected to take office in May, is likely to adopt a more dovish stance, potentially lowering rates to the neutral level of 3% [6] - Historically, the Fed has lowered rates by 100 basis points or more in 8 out of the last 14 instances, often leading to subsequent increases in long-term rates [6] Group 3 - The average mortgage rate in the U.S. is currently 6.4%, while existing mortgages average 4.1%, creating a significant gap that discourages homeowners from moving [8][9] - This disparity in mortgage rates is contributing to a slowdown in housing and construction activity, placing additional pressure on the Fed to adjust rates [9]

Core Viewpoint - The bond market's reaction to Federal Reserve actions is critical, with inflation trends being a more significant driver of bond yields than Fed rate cuts [3][4][6]. Group 1: Federal Reserve Actions - The Federal Reserve's potential rate cuts are largely anticipated by the market, but the actual impact on borrowing costs, such as mortgage rates, remains uncertain [2][4]. - The Fed's balance sheet management, including quantitative easing (QE) and quantitative tightening (QT), is crucial for influencing long-term bond yields [9][10]. Group 2: Inflation and Economic Conditions - Inflation remains a key concern, with current rates around 3% and showing signs of increasing, which complicates the economic landscape and poses risks of stagflation [3][7]. - The bond market is experiencing hesitancy in longer-term investments due to inflation expectations and significant fiscal deficits in various countries [6][7]. Group 3: Market Dynamics - There is a possibility of a bond market rally following Fed rate cuts, but it may not be sufficient to lower mortgage rates below 6% [8]. - The dynamics of supply and demand for bonds, particularly longer-term bonds, are influenced by investor confidence and the Fed's actions regarding its bond holdings [6][7].

Core Viewpoint - The article discusses the growing criticism of the Bank of England's approach to managing interest on reserves and the implications of quantitative easing (QE) on public finances, highlighting the urgent need for reform in light of rising government borrowing costs and losses incurred by the Bank. Group 1: Criticism of Current Policies - Louise Haigh calls for a more strategic unwind of QE and criticizes the excessive cash given to commercial banks at taxpayers' expense [1] - Richard Tice highlights that the current approach is leading to tens of billions in losses and urges the Bank to stop selling bonds and reduce interest payments to banks [2][5] - The Bank of England's profits have diminished significantly, with forecasts indicating a potential loss exceeding £130 billion by 2033 [2][3] Group 2: Financial Implications of QE - The QE scheme has created £895 billion in electronic money, leading to annual costs exceeding £20 billion, which is viewed as a catastrophic expense during fiscal constraints [4] - The Treasury is now required to refund the Bank, which initially profited over £120 billion from QE but is now facing substantial losses due to higher interest rates and lower bond prices [3][4] - The current fiscal situation necessitates a reevaluation of the Bank's policies to alleviate pressure on government borrowing costs [8][15] Group 3: Calls for Coordination and Reform - There is a coalition of voices from various political factions urging the Bank to adjust its policies to mitigate financial strain on the government [5][8] - David Aikman suggests that the Treasury and the Bank should coordinate to limit the costs of quantitative tightening (QT) on public finances [14][16] - Proposals include ceasing bond sales and potentially imposing a tax on income from the Bank to generate additional revenue for the government [19][22] Group 4: Future Outlook and Decisions - The Bank is expected to make decisions regarding the pace of QT, with predictions of slowing down active sales to avoid market disruptions [20][21] - Analysts are working on estimates to counter claims that QE has become a financial burden, emphasizing the long-term benefits of lower debt issuance costs [12][18] - The Chancellor's upcoming letter to the Bank may not lead to significant changes in monetary policy, as the MPC retains operational independence [13][23]

Macroeconomic Factors - Expectation of 3 or more Federal Reserve rate cuts [2] - Federal Reserve is anticipated to end its Quantitative Tightening (QT) program [2] - Treasury is expected to implement Quantitative Easing (QE) through bond buying [2] Crypto Market Liquidity - Stablecoin liquidity is projected to exceed $300 billion [2] - Money-market funds hold $7.4 trillion [2] Regulatory and Product Approvals - Anticipation of Clarity Act approval [2] - Expectation of over 90 crypto Exchange Traded Products (ETPs) approvals [2] - Potential approval of ETH ETF staking [2]

U_S_ Gold Reserves & Valuation - U_S_ holds 261_5 million ounces of gold, officially valued at $42_22/oz, totaling $11 billion [1] - Market value of U_S_ gold reserves is approximately $867 billion at $3,300/oz, creating an $856 billion shadow reserve [1] - Revaluing gold could strengthen the balance sheet but weaken the dollar [2][4] Potential Impact of Gold Revaluation - Revaluation acts as stealth QE, providing liquidity without printing money [2] - At $5,000/oz, U_S_ gold reserves would equal $1_3 trillion [4] - Government benefits from debt reduction, while savers in dollars and bondholders may face losses [4][6] Obstacles to Revaluation - Political concerns about admitting dollar devaluation and its impact on confidence [5] - Inflationary signals from money printing could send gold and Bitcoin prices soaring [5] - Congressional approval is required for revaluation [5] Market Implications - Gold and Bitcoin holders are likely to benefit from revaluation [6][7] - Dollar weakening and debt shrinking are expected outcomes [7] - Hard assets are favored over paper assets in this scenario [7]

Investment Rating - The report indicates a "sell" signal triggered by a cash level of 3.9%, which is below the threshold of 4.0% [19][90]. Core Insights - The August Global Fund Manager Survey shows the highest bullish sentiment since February 2025, with 68% of investors predicting a soft landing for the global economy [3][7]. - There is a notable rotation in asset allocation, with a shift from European equities to emerging markets, which now holds a net 37% overweight position, the highest since February 2023 [5][26]. - The sentiment regarding AI's impact on productivity is strong, with 55% of investors believing that AI is already boosting productivity [75][79]. Summary by Sections Macro & Policy - 68% of investors predict a soft landing, while only 5% are positioned for a hard landing [3][7]. - Rate cut optimism is at its highest since December 2024, with 54% of respondents expecting the next Fed Chair to resort to quantitative easing or yield curve control [3][46]. Risks - The primary tail risk identified is a trade war triggering a global recession, cited by 29% of investors [54][61]. - The perception of inflation risks has increased, with 27% of investors concerned about inflation preventing Fed rate cuts [61]. Asset Allocation - Global equity allocation is at a net 14% overweight, the highest since February 2025, with a significant rotation towards utilities and energy sectors [5][20]. - A record 91% of investors view US stocks as overvalued, while emerging markets are seen as undervalued by a net 49% [67]. Crypto & Gold - Only 9% of investors have exposure to crypto, with an average allocation of 3.2%, while 48% have exposure to gold, averaging 4.1% [6][71]. - The total portfolio exposure to crypto is just 0.3%, and to gold is 2.2% after adjusting for those without allocations [6][71]. Investor Sentiment - The overall sentiment regarding the global economy has slightly deteriorated, with a net 41% of investors expecting a weaker economy in the next 12 months [36][97]. - Expectations for higher inflation have risen, with a net 18% of investors anticipating an increase in global CPI [42][100]. AI Perception - 52% of investors do not believe that AI stocks are in a bubble, while 41% think they are [79]. - The belief that AI is already increasing productivity has grown from 42% to 55% since July [75].

Market Manipulation & New Normal - Financial markets have become heavily manipulated, removing true risk in a holistic evaluation [4] - The US dollar has lost approximately 30% of its purchasing power in the last 5 years [6] - The government is essentially guaranteeing asset owners will always win, preventing mass stock market investor failure [7] - Central banks will continue to print money, devaluing currencies, leading to a long-term upward trend for stocks, Bitcoin, and gold [8][10] Investment Strategy & Outlook - Historic valuations matter less due to dollar inflation, government intervention, and retail investor behavior [3] - The S&P 500 is expected to be higher in the future, making a doomsday scenario unlikely [4] - Bitcoin and gold are outperforming the S&P 500 over the last decade, signaling a shift in market dynamics [6] - Investors should adopt a "get long and chill" strategy, capitalizing on the continuous money printing by central banks [8] Bitcoin Perspective - Bitcoiners have been highlighting market issues for 15 years, and the broader market is now recognizing these concerns [9] - Bitcoin's upward trend will continue as long as money printing persists, a sentiment that also applies to stocks and gold [10]