Preston Pysh (00:03:25):

Yeah. So I got the terminology that you could just describe and we understand the 19 different jurisdictions, but how would they put this into applications? So if they were going to … is this just like advanced yield curve control, QE? What is it that they’re going to actually perform with this?

Alf Pecca (00:03:45):

So the new anti-fragmentation tool is effectively supposed to be a full backstop for country spreads to avoid that they widen to a level where the monetary policy can’t be transmitted equally to all jurisdictions. This sounds very complicated, but indeed what it really is to make sure that Italy, Greece, Cyprus, Portugal and Spain to a certain extent. Their government bonds spreads measured against Germany, which is effectively the benchmark safety net in Europe. These government bond deals the spread against those bonds and the German bonds don’t widen to levels that signal the fact that investors have lost confidence in the eurozone to remain a cohese project. So you need a backstop for weaker countries to make sure that the monetary policy is spread equally across all jurisdictions. And now they think of that, Preston, is they effectively say, “All right, we have to make sure that if investors want to sell or short all the Italian government bonds out there, for example, they know they’re going to be facing the wall.”

Alf Pecca (00:04:49):

And the wall is an authority with an infinite … potentially infinite balance sheet, which is the European Central Bank that can act as a backstop and can say, “You can sell as much as you want, we’re going to buy all of that.” So the idea is to have an unlimited bond buying tool, but only to use it as a backstop, if the situation gets worse and worse.

Alf Pecca (00:05:08):

Now, the problem is the conditionality that the European Central Bank had to attach to this tool. It’s not like, “Hey guys, if you sell Italian government bonds and the spread against Germany goes to this level, we’re just going to buy them all.” But they also had to put some conditions in there, and the conditions are that the country doesn’t need to have macroeconomic imbalances. The country doesn’t need to be in excessive deficit procedure. That that sustainability pattern needs to look okay. So there are a bunch of conditions that basically have to be assessed by external bodies, the European Commission, the International Monetary Fund, and all other external bodies from the ECB. Effectively the ECB is looking for political cover. It’s looking for other institution to tell them they have a green light to come in and backstop the widening of this spreads.

Alf Pecca (00:05:55):

But before this counters can effectively convince all the other bodies that they are implementing reforms, that they are on a good path, there is a time inconsistency issue here, because investors are not going to wait for all this bureaucratic body to sit and give a verdict and then wait for the Central Bank to put things in action. If they feel that things are getting worse, they’ll act very fast and put even more pressure on countries like Italy or Greece than we are already seeing right now.

Preston Pysh (00:06:23):

So this sounds really unfair to … if I was a German, I would be hearing this and I’d be saying, “Well, this just doesn’t work.” So when we say anti-fragmentation, it’s also an anti-fragmentation for those that are typically, and I’m saying typically, because I guess they’re not net exporters as of present, but if I’m Germany and I’m hearing this, I’m saying, “We’ve got to get out of this situation.” Is that correct? Or what do you think their thoughts are?

Alf Pecca (00:06:51):

So right now, the anti-fragmentation tool is effectively what Germany, Austria, Finland, the Netherlands and all Northern European countries had to give in to obtain something in return. And what they’re obtaining in return is the European Central Bank hiking interest rates. You have to think about it, Preston, in a way that if this tool wouldn’t exist and it wouldn’t be effective at all, every time the European Central Bank would even try to hint and they’re trying to raise interest rates, higher interest rates hurt weaker economies, weaker balance sheet economies like Greece or Italy or Cyprus in a disproportionate way. So while Germany, the Netherlands, Finland or Austria, other countries could and would want to have higher interest rates right now to fight inflation, which is skyrocketing in Europe as well, they actually could never get there because you would have other issues to face with, which is the fact that Italy is at risk of blowing up if interest rates are effectively brought higher and higher without a backstop facility. So it’s nothing else than giving in something which is this anti-fragmentation to obtain something back, which is a title monetary policy for longer and a more sustainably tighter monetary policy to actually fight inflation, which is becoming a domestic policy issues as well for countries like Germany.

Preston Pysh (00:08:07):

So talk to us about Italy. So I’ve talked to a few macro folks and Japan immediately comes up with their yield curve control. And then I always ask, where’s the next place we’re going to see yield curve control? And almost everybody suggests that it’s going to be in Europe. So talk to us a little bit about that idea and also what’s happening in Italy right now and just your general thoughts.

Alf Pecca (00:08:32):

Yeah. So the idea behind yield curve control is that you, as the monetary policy effectively have an infinite balance sheet that you can expand in your own currency. And as long as your currency is domestic is the one you can effectively have jurisdiction on. You can print bank reserves out of nowhere digitally. You can expand your balance sheet on the liability side via having more bank reserves you just created out of thin air and you can use these bank reserves to extract bonds from the private sector and effectively exchanging these bonds for bank reserves. So you take these bonds away from the system and you say, “Guys, don’t worry about those bonds. You don’t have to buy them, I’ll buy them.” And you give in exchange to the private sector this newly created bank reserves that you’ve just basically created out of thin air. These bank reserves go into the banking system. They remain stuck there. They can’t get out, but effectively the private sector doesn’t need to worry about absorbing this issuance anymore. Preston, because there is somebody else who’s doing that, who’s the central bank.

Alf Pecca (00:09:31):

Now, in [inaudible 00:09:33] control, the interesting thing is that as we have seen in Japan, you don’t necessarily need to buy all the bonds out there, but you can effectively signal to the private sector that if they want to sell bonds and make yields higher, because as you sell bonds, prices go down and yields go higher. If yields are going higher than a certain level, they would then basically conditionally to that level being hit by as much bonds as possible to that level to make sure you can never cross that. Because the private sector is a limited balance sheet. Capacity, we cannot expand it the way that we want. We need to get credit to expand it. To get credit, you need to have certain features and you need to pay back and to service this newly created credit with cash flow, with salaries, with earnings. For the Central Bank, it’s completely different. They can just expand it however they want. And yield curve control is a smart way to make sure they’re on a quantitative side. It looks like you’re not expanding it to a very large extent because you have this conditionality you just sent as a message to the private sector that as they try to hit that level, you will ultimately expand your balance sheet. And it’s a messaging tool. It’s some sort of a forward guidance tool as well, to a certain extent that is more qualitative than quantitative necessarily.

Alf Pecca (00:10:48):

Now in Europe, the problem with that is, again, a bureaucratic legislative problem, because the German constitutional court has somehow green lighted quantitative easing programs that they always oppose from a domestic perspective in Germany, because of the history with the Weimar Republic and inflation getting out of control. They’re really not happy with quantitative easing programs. They sort of green lighted them. And one of the main conditions that German constitutional court put was that quantitative easing programs need to be defined in size. They need to be of a certain defined size. You cannot just say “I will indefinitely print as much as possible if you try and hit this threshold.” Generally speaking, German regulators and let’s say the law in Germany doesn’t really allow that. So when you try yield curve control in Europe, it becomes very complicated, because as a Central Bank, how are you going to defend Italian government bonds saying that you have only a certain amount you can buy, Preston? How big does that amount need to be?

Alf Pecca (00:11:49):

Hedge funds can use leverage. They can also become very, very large in selling these Italian government bonds if they think that you will have to give in at some point as a Central Bank. They can try to break the ECB if the ECB commitment is not very strong. So while Europe might be the best candidate from a macro perspective, and I tend to agree, if you understand the legislative issues and fragmentation within Europe, you also understand that a very extend and effective spread control or yield curve control in Europe is also very difficult to apply.

Preston Pysh (00:12:26):

I’ve never heard that side of it. And I think that your … it makes total sense that Germany would have policies like that in place, based on the history and what they had dealt with not long ago, right? Like this 1920s for us seems like it was a long time ago, but culturally, I think that it’s so near and dear to, I mean, you’re only a couple generations removed from that hyperinflation event happening that it’s still fresh in that population’s mind. And I didn’t realize that you have that still kind of posing a threat to them implementing yield curve control. Now, do you think that that’s going to prevent it from happening, or do you think at the end of the day, they’re going to have to do it and the German population is going to have to deal with it in some sort of way?

Alf Pecca (00:13:19):

Slowly but surely we are going to get there, Preston. In some form or another. It’s going to be a very rocky road ahead, and it’s not going to be simple. But you’re seeing that the Germans would have never dreamt of allowing [inaudible 00:13:31] in the first place 10 years ago. If you would’ve asked any German, “We are going to get the European Central Bank, just print bank reserves and lift all the bonds out there.” All of them, for reference in 2020, the European Central Bank, I calculated has bought more bonds than all governments across Europe had issued. Try to think of that, Preston, for a second. If you’re a private sector entity in Europe and you are a pension fund, you are a bank, you are an asset manager, the Central Bank is telling you, “Dude, you want to buy some bonds? I’m sorry. You have to compete with me. I’m going to crowd you out. I’m going to take all the newly issued government bonds this year by all governments in the eurozone. I, Central Bank, I’m going to buy them all. And if you want to buy some more, you basically have to compete with other owners of government bonds around there.” So you have to beat up the prices to make sure that they can sell them to you. So you’re crowding out the private sector completely.

Alf Pecca (00:14:27):

If a German would’ve heard this 10 years ago, that it would be like, “What? We’ll never going to allow that.” And in reality, we went to that point. Went to that point because Europe is a place where fragmentation is very high and cohesion is very low until problems reach a certain degree where the geopolitical importance of the eurozone and the Euro in general needs to be preserved. And therefore, if the heat in the kitchen is becoming really, really unbearable, at some point, they’re going to close themselves in the room and try to find a compromise solution.

Alf Pecca (00:15:00):

It’s always a temporary band-aid, but if you keep adding temporary band-aids one across another, then at the end of it, maybe in 20 years, you can imagine we’ll have some sort of yield curve control in Europe. It’s going to be pretty complicated to engineer though, because of this legislative issues and inherent differences in DNA as well. Really a Spanish guy is just a different guy. Has a different DNA, has a different interpretation of social policies or economic policies than a German guy has. And those differences will always be there and will be difficult to be bridged.

Preston Pysh (00:15:36):

Hey, so we talked a little bit about CDS and you had sent me a chart, and I’m going to pull it up for folks to see here. And if you can just describe this chart that I’m showing, that you had sent. Talk to us about the CDS markets, what it is, and then talk to us about this chart that I’m displaying right now so people can understand what you’re talking about.

Alf Pecca (00:16:00):

Okay. So Preston, this is a chart I shared on the macro compass. It’s the free newsletter I post once a week. And we do some deep dives into certain topics. And in this case, we’re talking about Europe. And CDS is a credit default swap. And those contracts became very famous during the great financial crisis for a bunch of reasons. But what they do really, they allow owners of certain risks to have a product that hedge them against the default risk, especially the credit risk. So a risk of the issuer of a certain bond for example, to default, if you buy a CDS, you’re going to be protected against this event. Now the CDS product became very, very much famous after the great financial crisis. They’re still pretty traded in pretty decent size actually to the point that if you look at the CSs market in Europe, there are two different CDSs.

Alf Pecca (00:16:56):

One CDS as a regulation, going top of my head, goes back to 2005 before the great financial crisis. And if you buy the CDS on Italian government bonds, under the law of 2005, you will be protected against the risk of default, but this CDS will not protect you against the technical default that Italy can actually incur to, if they will choose to redenominate their debt from euro back to lira. And now you can understand that if you bought some bonds denominated in euro, you might not want to have some bonds denominated in lira, because if Italy goes out of the eurozone, lira will obviously devalue big times against the residuals in the eurozone, which will be mostly Northern European countries at that point. So you might actually want to be protected against that event, too, right? You want to be protected against Italy defaulting, and you also want to be protected against Italy redenominating their debt into their own previous domestic currency called the lira. Now, if you want that double protection, you need to buy another CSs, which is a 2013 or ’14 law, one of the two. And this new CDS protects you against that risk as well.

Alf Pecca (00:18:09):

Now, why am I mentioning this two CDSs? This chart, for people who are listening, shows the spread between the two CDSs. So if one protects you against redenomination, the other doesn’t, you can understand the spread or the difference between the two effectively encapsulates the risk of redenomination or a proxy that investors are assigning for the risk of redenomination, or how much are they willing to pay more for the other CDS that also protects them against this risk marginally. And the chart shows that the proxy for this redenomination risk or what I also call the Italexit risks or the risk that Italy basically exits the eurozone has actually spiked up very quickly in 2022.

Alf Pecca (00:18:50):

This is the result of a couple of things. It’s the result of the ECB attempting tightening monetary policy. And every time they do, which means, Preston, they stop quantitative easing. They even suggest they’re going to hike. They did a hike of 50 basis point, the largest since at least a decade in the eurozone all at once. They obviously apply pressure on countries like Italy. And the more pressure they apply, the more probabilities there are that theoretically Italy could choose at some point to just release the pressure by exiting the eurozone. It’s a very residual small probability, but it goes up in terms of pricing. The second is that Draghi’s government just fell in Italy. So we don’t have a government anymore. Literally, we don’t. We have a situation where we have an energy crisis. The economy is weakening. The European Central Bank is tightening monetary policy, and we do not have a government anymore, which means we’re going to run for elections at the end of September. And the polls are showing that we are at best going to get a very fragmented government. At worst, we are going to get an outright European critic/skeptic coalition. And obviously that coalition increases the probability that Italy might decide to apply some pressure and try to get out of the eurozone.

Alf Pecca (00:20:01):

Now, you have seen now this proxy for redenomination, which is different between the two CDSs, pricing to levels, which are basically amongst the highest you have seen over the last 10 years, close to 2018, where we had a government crisis and we really had a government coalition, which was outright euro skeptic back then. So investors are becoming pretty nervous about Italy, and I have to say pretty rightly so.

Preston Pysh (00:20:28):

Do you think that it’s just a matter of time of when that plays out where they revert back to the lira or is it something that you think is recoverable? That they’re to continue to use the Euro. Or is all the math, right, of all this debt leading us down this inevitable path, it’s just a matter of when?

Alf Pecca (00:20:48):

I have to say that it’s a chicken and egg game, or actually it’s a game theory problem here because the eurozone is roundabout convenient enough for all the members to still be part of the eurozone. And why? Because the Northern European countries have benefited from a much weaker currency that in reality, they would’ve had. If it wasn’t for the Euro, they would’ve had a Deutschmark or another Northern European domestic currency, which would’ve been much stronger than the Euro was. So by design of the eurozone, they effectively had this competitive advantage of being expert driven nation for most cases, and being very productive and relying on a weaker currency and their structural domestic currency should have been. They effectively have reaped quite some benefits out of the eurozone. And on top of it, do not forget the geopolitical benefits that the eurozone brings, which is you can negotiate.

Alf Pecca (00:21:41):

If you do it smart enough, you can negotiate contracts when it comes to energy security. That should be much better than your bilateral negotiations. The eurozone hasn’t done a great job at the energy security at all, but in principle being a block rather than a single country delivers these advantages. It also delivers advantages for weaker countries, because you can argue that also being part of these bigger block to a certain extent allows you to have closer connections to neighboring countries, allows you to have a different way when it comes to geopolitical negotiations. So the incentive scheme is just good enough for everybody to want it to stick into it, Preston, while people do not like uncertainty. And getting out of a project, which has last for 20 years and has brought peace and a certain amount of wealth increase over the last 20 years, the uncertainty that getting out would provoke is actually pretty, pretty big. So I think at the end, Europe will try to do whatever it’s necessary to try and stick together. It’s becoming every time more and more and more. And so it’s becoming every time more and more difficult to achieve, so.

Preston Pysh (00:22:50):

Interesting. Let’s transition to a chart that I think is really easy to wrap your head around and is useful for understanding the longer, well, not longer, but your eight year cycles. And so I’ve just displayed a chart that on the top line is just your unemployment numbers. And then the line underneath of that is the difference between your 10 year yield and your two year yield, which is a really popular chart that you see being shared online. Because what that chart is displaying to people is a negative yield curve, at least between the 10 year and the two year on that bottom line. So Alf, take us through your thoughts in general on this chart, the 10 year minus the two year in particular, and whether you kind of see that as a leading indicator to a recession and just really all your thoughts around it. Is it reliable? Is it a great place to start?

Alf Pecca (00:23:50):

Yes, it is. The yield curve is a super good economist actually, I have to say. It has a almost immaculate track record in predicting sharp economic slowdowns. Now, why do I say that instead of recessions? Because there have been maybe a couple of cases in the past where an inverted yield curve between 10 year and two year has failed to predict the recession, but nevertheless has predicted quite a sharp economic slowdown. And when it comes to investing, Preston, and protecting our purchasing power, all that matters is that we are able to understand the change in cycles. Is growth accelerating? Is growth sharply decelerating? That’s all we need to understand. If it turns into a recession, okay. But if growth is moving from four to 0%, now, that’s not a recession because it’s not negative, but it’s damn if it is a strong economic slowdown, right? And so from that perspective, a flattening yield curve between 10 year and two year is a fantastic predictor.

Alf Pecca (00:24:46):

So first let’s explain why, I think, and then this very nice chart you brought with unemployment rate, which also helps us bring everything into one picture. The reason why a sharply flattening and inverting yield curve between 10 year and two year predicts economic slowdowns is the following. Let’s take the example of now. The two year government bond deals in the US have actually spiked up very aggressively over the last six to seven months. And why? Because two year government bond deals have to reflect by design the very short term monetary policy, the federal reserve will try to force upon markets. A two year yield is nothing else than the sum of all fed funds rates over the next two years, you can say, so the discounted value of all the fed funds future prevailing we will see over the next two years.

Alf Pecca (00:25:33):

Why? You can think the federal reserve is quite a weight when it comes to imposing what the monetary policy and therefore the fed funds will be over the next two years and therefore markets are somehow forced to adopt their pricing to what the fed tells them the pricing has to be. This is the short end of the curve, the two year treasury yields. The 10 year treasury yields, they’re completely different beast. A long end bond deal tends to reflect the perspective for structural growth and inflation over the next 10 years. Right? So if the federal reserve is forcing upon us a cycle of tightening, which is going to bring in their head fed funds rate all the way up to three and a half, 3.8, 4% but the bond market is smelling, Preston, that these very tight monetary policy stands right now over the next two years is actually way too tight for what the economic can handle because of weak demographics, because of productivity rates, which are not exploding, because excessive debt in the public and in the private sector is very hard to be sustained and refinance if interest rates and borrowing costs are all of a sudden much higher than they were before.

Alf Pecca (00:26:38):

What the bond market is going to do at the long end, so 10 years, 30 years, it’s going to prize that future growth and future inflation will be very weak. So the 10 year tends to prize what comes after the two years. So from year three to year 10, what’s going to be the contingent result in terms of growth and inflation we’re going to achieve when the federal reserve is going to put upon a such higher borrowing costs in the short term. Well, the result isn’t going to be great. They’re probably going to be forced to cut interest rate back all over again to try to stimulate the economy. And that gets priced in in lower 10 year interest rates. And as you see this happening, the shape of the yield curve between two year and 10 year tends to flatten very aggressively all the way to actually inversion. And the unemployment rate chart you show there also track this very, very good.

Alf Pecca (00:27:29):

And you can see as an employment rate drops, so let’s go from 2012 all the way down to 2020. After the great financial crisis, we did quite some damage, structural damage to the economy. And then we tried to actually fix it, right? So we kept economic policy and monetary policy pretty loose for a long time. And as we did that, unemployment rate actually kept grinding lower and lower and lower and lower all the way to 3.6%. But look at that. That is also tends to be a point where the yield curve has flattened all the way to in Y. Because every time unemployment rate goes under 4%, which is where the federal reserve thinks the structural employment rate in the US should be, roughly 4%. Every time you cross this level below, the Central Bank gets worried that we are overeating. And if we are overeating, that’s what they’re going to do. They’re going to try and impose upon us a cycle of tight monetary policy right here right now. As they do that, guess what happens? All over again, the front end yields go up to reprise this tighter monetary policy.

Alf Pecca (00:28:31):

The private sector is like, “What are you talking about? I cannot handle these rates. It’s too high. I cannot borrow at these rates. I cannot buy a house at these rates. I can’t do anything at these rates.” And the bond market is like, “Oh, you count? Okay. So if you count, I’m going to price the future growth and future inflation are going to come down.” And the yield curve tends to flatten all over again. Back to 2022, unemployment rate, 3.6%. And the federal reserve is telling us they need to tighten like there’s no tomorrow. On top of it, we have an inflation problem right now that we didn’t have for the last 10 years. So their commitment to tighten increases even more, which I guess all over again, flattens the yield curve even more aggressively so.

Preston Pysh (00:29:11):

When we see the unemployment numbers start getting worse, and we see the spreads go from this 10 to two year number that we’re showing here, which is a negative number, 0.27 when I captured the chart. And we start to see those spreads become positive again between the 10 and the two year, is this just a function of fractional reserve banking that this has to unwind? Is it just inherently how fractional reserve banking works? Because a person would look at this and say, “Well, maybe it can just stay down there. Why can it not just stay down there, Alf, when you’re looking at it?”

Alf Pecca (00:29:46):

Well, the reason why this can’t stay down there is that if it would stay down there, it would mean the federal reserve wouldn’t give up on their tighten plans at all, Preston. So it would mean that they would keep the front end policy very, very, very tight, even in the phase of the economy slowing down. If they do that, what happens is that as our system is based on continuous credit creation, continuous leverage, we need to feed the leverage beast and the money printing beast every single time, if the federal reserve doesn’t accommodate this process. If they keep interest rates too tight for too long, the system doesn’t work anymore.

Alf Pecca (00:30:31):

Let’s make an example. With mortgage rates, I think it’s very, very clear. Mortgage rates in America have moved from 3% to 6% in the span of only three to six months. That’s the fastest ever increase in mortgage rates that has ever been recorded in the US. Preston, you simply are not able to borrow the same funds and to face a monthly mortgage installment rate at the new mortgage rates to buy the same as of before, because borrowing rates have doubled. And so before the median housing in the US after mortgage would cost you, whatever, 1,500 a month. Now, it’s going to cost you 2,500 a month. Are you making a thousand more per month in salary? No, you probably are not. Actually, inflation adjusted terms you’re making less. So what happens is that if the federal reserve wouldn’t ease and they would keep monetary policy very, very tight, this borrowing rates wouldn’t be coming down, and as they don’t come down, Preston, we simply can’t afford borrowing anymore. And if we do not borrow, what happens is that we are not creating new credit. We are not oiling the credit driven monetary policy mechanism that we have put in place since the ’70s.

Alf Pecca (00:31:41):

After abolishing the gold standard, what we have basically done is we have made money supply completely elastic. There is nothing that pegs, pins hard money supply to anything. We can extend credit every time we want. And there is nothing that is pegging this credit creation to anything. The only thing that is pegging it to anything is the ability to afford new credit creation, which is nothing else than borrowing rates need to be low. And if the federal reserve wouldn’t ease back all the way, again, these borrowing rates wouldn’t be coming down again, and nobody would be able to continue to borrow, which would deleverage the system and actually cause a 2008 plus sort of outcome that nobody wants. No elected politicians actually wants to have that happen under their watch.

Preston Pysh (00:32:31):

I’m going to pull up a chart just of the 10 year treasury. And I’m curious whether you … I think I’m sharing it right now. Can you see it, Alf, the 10 year-

Alf Pecca (00:32:42):

Yeah, I can see that. Yeah.

Preston Pysh (00:32:44):

So this is the 10 year treasury since the ’80s. I think a lot of people are familiar with what this looks like. This is the yield, obviously, on the 10 treasury. And as we look at this, and it’s important for people that are looking at this on YouTube, you can see on the Y axis, I have that in log terms and you can see how the volatility on the yield is just totally blowing out as we move right on the timeline. When you look at this and we see that the 10 year treasury got down to it looks like 0.32%, which is practically nothing for a 10 year treasury here in the US. Do you see that potentially achieving a lower yield moving forward? Or is that the bottom of this cycle for the 10 treasury?

Alf Pecca (00:33:28):

No, I don’t think that is the bottom. So of course, with this predictions, you have to think about what is the time horizon for this to happen. But Preston, what we’re doing here is we are taking a system that is basically built on its core let’s say, and we are leveraging up more and more at each iteration. That’s what we are doing. We are financializing the system as much as we can. We’re adding leverage on the government balance sheet and on the private sector of balance sheet. We are adding complexity and financialization into the system. So every time you have an unwind, for some reason. Last time you had it for a pandemic, next time can be for a credit crisis or it can be because of a recession or it can be because of a default. But every time you have to deleverage a system that has become bigger and bigger and more leverage and more leverage each and every time, it’s very simple. The reaction is going to be worse and worse every single time.

Alf Pecca (00:34:25):

Actually, you can even see that in this chart. You can see that every time you had a crisis of some sort, the rally in the dollar or in 10 year treasury yields actually tends to be sharper and sharper and sharper. So you are now seeing also the dollar, for instance, Preston, going all the way to highs reached only a decade ago. And the dollar is sucking away liquidity from everything else. So you will be seeing the next time that you have a systematic crisis somewhere in the world, you will be seeing the [inaudible 00:34:59] 10 year treasury yields that is at least as big as it was last time. That’s by the design of the system that has probably added more leverage, more complexity and more financialization, in the meantime has sucked everybody in. And every time you need to deleverage, the problem becomes bigger and bigger. So I would expect on a long term basis that every time you see a new problem, the reaction will be even sharper than it was the time before.

Preston Pysh (00:35:24):

So with enough time, you’re thinking this goes negative?

Alf Pecca (00:35:28):

Yes, pretty much. The only thing about the negative interest rates that can be politically complicated in the US is that don’t forget the dollar is the reserve currency of the world, which means it acts as the denominator for about 70 to 80% of transactions and commodities and instruments about anything is priced in dollars. Basically, that’s what I’m saying, right? Trades, invoices, commodities, instruments, anything is priced in dollars. What this does is it also effectively forces or brings foreign reserve managers, so people who accumulated surpluses in dollars everywhere in the world to have, again, a large pool of liquid instruments in dollars to be able to actually get their hand on them or sell them or buy more when they need to manage their domestic currency. Right? So it’s an effects stability mechanism.

Alf Pecca (00:36:24):

Preston, if you would go to the Arabs or anybody else who has sold commodities and get dollar in exchange for the last 10 years, and you would tell them, “Okay, guys, so now you’re going to be charged for the luxury to own these dollars.” Because that’s what negative interest rates are, right? You’re going to be saying to an oil exporting country, “You export oil, you get dollars back, and now you have to do something with these dollars. And if you want to buy treasuries, I’ll give you a negative nominal return.” From a political standpoint, that might be a bit complicated to accept. I would say actually there are many central banks around the world that have somehow limited their euro composition of the FX reserve basket exactly for this reason, because euro yields on German government bonds were negative for so long, and they do not want to be charged for the luxury to own reserves that are resulting from their exporting ability. So they’re exporting goods and services. They’re receiving dollars back to want to charge the negative interest rates that can be complicated.

Alf Pecca (00:37:24):

Still, you could be headed towards 0%. And I think the path of least resistance for long term bond yields, because of weak demographics, because of productivity trends, which are stagnant, because of a system that keeps relying on unproductive debt, keeps relying on more leverage to make the whole machine oiled, the long term perspective for long term interest rates, especially real interest rates keeps being lower, lower, and lower.

Preston Pysh (00:37:50):

So for people that are here in that and maybe they’re looking to buy a house in the coming five years or whatever, I mean, they should hold out. If you think that the rates could potentially go negative, I mean, they’re going to get completely different pricing, but at the same time, the prices on the houses will continue to blow out if we keep pushing these yields down to nothing, correct?

Alf Pecca (00:38:09):

Correct.

Preston Pysh (00:38:11):

What does a person do who’s 30 years old and wanting to buy their first house? Because right now interest rates are really high. The prices on the houses are also really high after this past year. What do you tell a person like this? They’re in a no win situation it seems.

Alf Pecca (00:38:25):

Yes. Right now, it’s really a tight spot. You can’t afford anything decent because prices have gone to the moon and mortgage rates have gone to the moon, which make, again, as we said previously, your mortgage installment completely unaffordable against what you are buying right now. So to make housing more affordable, basically, Preston, is to say, you want to make leverage inherently leveraged assets, because a house is a very leveraged asset because of mortgages. Our common is to get a very high leverage on a mortgage to buy a house, it’s incredible. So you’re talking about a highly leveraged product, highly dependent on interest rates. You want to make that cheaper in a world where we are talking about interest rate being structurally low, and credit creation to be the engine that oils the system, such that this wealth effect can be reverberated.

Alf Pecca (00:39:21):

Unfortunately, that’s not likely to happen. And if it happens, those prices are going down. They are going down in a de-leveraging process. So if the federal reserve keeps monetary policy too tight for too long, there is a moment at which unemployment rate picks up, people don’t have a job anymore. House prices are unaffordable because they’re too high and mortgage rates are too high on top of it. So the only release bar is for house prices to drop simply because there’s not going to be enough demand to meet these high prices and high mortgage rates. But at that point, prices are dropping and you probably can’t afford the house anyway, because you are one of the guys that is facing high interest rate, high borrowing costs, and probably you lost your job. So housing prices dropping as the economy slows down as the side effect of a recession basically. It’s nothing to be particularly happy about.

Alf Pecca (00:40:10):

The situation is honestly not easy on housing, and it is the poster child for wealth inequality. It is really the poster child of the side effects of these wealth effect monetary policies we are running, where by all in the credit machine, we make credit access cheaper and cheaper by a lower borrowing rate. So the people who can get their hands on these leverage and on these assets, they will become inherently richer by a wealth effect and people who are late to the game simply because of demographic change and demographic cohort they find themselves in, they’ll have a very hard time getting their foot through the door. The only thing that can change all of this, Preston, is actually politics and voters. So if you look at 2028, 2032 elections in the US, the composition of boomers, let’s say, voting and the share of boomers amongst the voting population will start shrinking. And if you sum all the older generation, they will drop below 50% in terms of voting counts or voting shares across the voting population for the first time between 2028 and 2032. So as a new cohort of people with different incentive schemes will be voting, perhaps we can shape the politics and the policy making towards something that is a bit more sustainable. That is infinite credit creation, wealth effect machine that basically feeds wealth inequality to extreme levels.

Preston Pysh (00:41:32):

So before we started recording, I said that I wanted to go into the real estate market in China with you. I’m going to share a chart that you provided me. I don’t know if this is the right one that you want displayed for this portion of the conversation, but feel free to share your thoughts on what’s happening over in China right now from a real estate standpoint.

Alf Pecca (00:41:54):

Oh man. So Preston, before we talk about China, we should talk about this chart for a second, at least. And for people who are not watching, but listening, this is a chart that shows the market cap of all biggest asset classes in the world. So it’s total market cap of the global equity market, the global bond market, the gold market and the real estate market. And now, don’t cheat guys, but especially if you’re not watching, the question you should try to answer in your head is, what is the biggest market in the world? And then the answer you’ll give me is obviously is the stock market. It must be the stock market. It’s so big. And the reality is that the stock market is huge. It’s $110 trillion globally speaking, that was at the end of 2020. Now, it’s, yeah, probably a bit higher even, but it’s $110 trillion.

Alf Pecca (00:42:46):

The bond market is bigger. So if you thought it was the stock market, you’re wrong. The bond market is $124 trillion worldwide. So it’s bigger than the equity market. Gold is roughly at $12 trillion. That’s a figure that most people are familiar with. What about the real estate market? Would you guess it’s 100, 200, 90, 30? Well, summing up the residential real estate, commercial real estate and agricultural land, we’re talking over $300 trillion. It is bigger than the bond market, the equity market and the gold market all together. I mean, when I first saw the chart, I’m like, “Wow, I know it’s leveraged. I know it’s a big market.” And obviously, it also has inherent utility to humanity. I mean, we need to live somewhere in the first place, right? So it has a utility scale too, at least a utility, which is much more tangible than buying a stock let’s say or buying a bond. But the fact that it is bigger than the equity and the bond market combined and the gold market on top of it combined, it’s pretty mind blowing.

Alf Pecca (00:43:51):

Now, why it is so big is because as we explain before, Preston, you can actually lever up your purchasing power on houses via mortgages. And as people turn me off, it’s not true, people in the US buy houses cash all the time. Again, I invite people to look at the big picture, 87% of house transactions in the US, 87% in 2021 were backed by a mortgage. So the mortgage market is underlying the housing market and it’s pretty big. And it’s what allows this very large leverage, 300 trillion. Okay, that’s incredible.

Alf Pecca (00:44:23):

Now, what is the biggest geographical single asset class in the world? Must be the US stock market, the US bond market. Not really. So US bond market is around about $20 trillion and the Chinese real estate market, Preston, it’s $55 trillion, two and a half times larger than the entire treasury market in the US. And it ranks as number one geographical single asset class as the biggest in the world, $55 trillion. It’s gigantic.

Alf Pecca (00:44:56):

What’s happening over there, it’s also pretty large. China’s going through unexpectedly big deleveraging process when it comes to residential real estate. People in China have a problem when it comes to allocating their resources. It’s very difficult as a Chinese guy to invest abroad because of capital controls, regulation, restrictions, and the Chinese stock market can be pretty volatile and not representative of the Chinese economy overall. So people have invested and basically supported the Chinese real estate market big times. And regulators in China have allowed a buildup of leverage, which is incredible. So China has basically expanded their leverage on the real estate market in an incredible way, all the way up to $55 trillion.

Alf Pecca (00:45:43):

Most of these projects, infrastructure, real estate projects were actually not very productive, Preston. So we are talking about credit creation for unproductive purposes to a reasonable extent. All of a sudden, China decided that, that had gone too much uncontrolled and decided between the end of 2020 and beginning of 2021 to apply some tighter regulation when it comes to financing real estate projects. And as they did, many developers started to have problem, because when you are very leveraged, it’s exactly the same mechanism as we discussed before. When you are very leveraged, you are relying on more credit and cheaper credit and lacks of regulation. That’s what you want, the old time to oil the mechanism. And as you stop and reverse that, you go through de-leveraging. And now de-leveraging, the size and the magnitude of this de-leveraging has caught Chinese policy makers by surprise. And we having Chinese people refusing to pay their mortgage installments on new houses projects. Basically, they have been promised they’d been delivered by a certain time that invested them. And obviously the developer went belly up and they’re refusing to pay mortgage installment. And we are witnessing a very large deleveraging process in the largest market in the world, which is not covered enough, I think, from a macroeconomic standpoint.

Preston Pysh (00:47:03):

So when we look at the Chinese market and we saw what happened last year with the Evergrande situation, is there a lot more that’s happening behind the scenes that we’re not necessarily seeing in the public purview, that’s just not coming to light?

Alf Pecca (00:47:20):

Well, Preston, together with Evergrande, which is a very famous story. If you look at all the indexes, which are trying to track real estate developers across the board and other sectors that highly depend on real estate developers in China, you see that the weakness is not only in Evergrande, actually most of these sectors have been decimated when it comes to market cap. So you have to think that the weakness is very widespread. And the fact that Chinese people are even stepping up and saying to the CCP, to the Chinese Communist Party, “I’m sorry guys, but you made sure that this leverage machine and this wealth creation machine basically could work. And we rely on that to increase our purchasing power. You can’t just stop it and reverse it all of a sudden.” Because don’t forget as well, Preston, that the Chinese population has received an extremely small percentage of the wealth and basically of the wealth that China as a country has been able to create since they joined WTO in the early 2000.

Alf Pecca (00:48:24):

If you look at the share of consumption that comes from the private sector in China, a percentage of GDP, it is amongst the lowest of every developed and emerging markets out there. So the Chinese people aren’t basically getting rewarded for the effort and for being the engine that has been basically behind the Chinese growth miracle over the last 20 years. And on top of it, now they’re getting damage when it comes to one of the few ways they had to somehow create wealth. It was, of course, fueled by unproductive credit creation, lacks of regulation, the Chinese policy making actually supporting this machine, but they’re not going to stand behind this. And we are seeing weakness that spreads actually beyond Evergrande and to the entire developer sector and also to other sectors, which are, let’s say adjacent to the real estate sector in China.

Alf Pecca (00:49:20):

It is pretty big. And also, it has ramifications when it comes to global macro. China with its credit creation has been the engine of cyclical growth all over the world with the big amount of aggregate demand that they were creating because they weren’t growing structurally. And on top of it, they were also creating credit, adding leverage very, very quickly. They had such an amount of aggregate demand to export towards the world. And now, if you deleverage, you go towards the opposite trend. The Chinese population is becoming older, the workforce isn’t growing anymore, and now you’re going to deleverage as well instead of adding further leverage. These as ramifications also for other jurisdictions that are very dependent on the demand that comes from China. So we should watch this trend very carefully, and it’s not looking good. Because to stop deleveraging process is a very, very difficult effort. Once it’s put in motion, it is very difficult to stop very quickly.

Preston Pysh (00:50:18):

Almost like a water wheel that starts spinning in the opposite direction. It just reinforces itself as it starts going in that way. Hey, I’m going to-

Alf Pecca (00:50:26):

Pretty true.

Preston Pysh (00:50:26):

I’m going to throw up a chart here. Describe what this is and why you find this to be an important chart right now for the people listening.

Alf Pecca (00:50:35):

Yeah. So again, this is all about [inaudible 00:50:37] and I think they’re very important in macro analysis. And most of the analysis out there tends to stop at headlines. And I try to do my best to look at a little bit under the hood, especially on the macro compass. And this as well is one of the charts I published on this free newsletter I write. And it shows, Preston, that it’s not only the pace of inflation, it’s not only the absolute level, which is above 9% in the US, but it’s the momentum and it’s the composition of this inflationary pressures, which is freaking the fed out. And this chart shows basically the components of the CPI baskets, which are running above 4% inflation year on year. So the CPIs a basket, as we know of many items, and with this chart, I try to look at, in percentage terms, how many items of this basket have an inflation rate above 4%? Above 4%, just way above the fed target, which is 2%, right?

Alf Pecca (00:51:35):

And I found out that over 70% of the CPI components are running at over 4% year on year when it comes to the inflation rate. This scares the federal reserve big times, because you can’t say anymore that inflation is due to used cars or other very volatile goods. Everybody’s stuck at home and has fiscal similars and is buying stuff on Alibaba and Amazon and that’s why we have inflation. With over 70% of the CPI basket above 4%, you can’t argue that anymore. So the composition of this inflationary pressures is as important as the absolute level and the pace.

Alf Pecca (00:52:12):

The other thing that is very relevant is that the momentum of inflation isn’t slowing yet. So if you look at months and month inflation and you analyze that or you look at three months over three months, so measures of momentum rather than only the absolute levels, those are also accelerating and you see that inflation is broadening overall to especially to categories, which are very sticky pressed like services inflation, rent of shelter, services expressed as energy. Very sticky late cycle baskets of inflation … Sorry, components of inflationary basket are seeing inflationary trends that are becoming entrenched. And those you don’t bring down very, very quickly. It’s very hard to actually bring these down. And that’s why the fed is becoming more and more aggressive at each iteration.

Preston Pysh (00:53:01):

So when I see this and then I think about the 10 year minus the two year that we talked about earlier, we were at like negative 0.27% on that chart. And I see this and I’m thinking, it’s going to even go more negative between that spread of the long end and the short end of the curve. How negative do you think that the 10 minus the two can get?

Alf Pecca (00:53:24):

So this is one of the trades that I have on my book. That’s also what I do, by the way. I just share everything. I’m buying both on a long term and on a tactical basis. I’m an open book. I’ve managed money. I know I would be wrong. I have nothing to hide. It’s full honesty from my side. This is a trade which is working. It’s a very tactical, relatively sophisticated trade. But what I did is I bought a 10 year bond and I sold the two year bond. And I made sure that I waited well enough that the only thing I carry is the slope of the curve. So I’m that thing that this slope between 10 year and two year actually goes even more negative. And I’m targeting minus 50 basis point, five zero, as my next target. I started it when it was positive, way positive. It’s been going very well, and I keep on running it, because you’re perfectly right, Preston. If you’re the fed and you look at this, you don’t care if you’re going to worsen the recession. You don’t care if unemployment rate is going to go up, at least in the early stages, you really don’t care. Later on, maybe you’ll care a bit more if the damage you’re doing becomes large and larger, larger, but right now, you have … let’s recap, inflation at 9%.

Alf Pecca (00:54:31):

The momentum of inflation is accelerating. The composition of inflation is going towards a trend where you don’t like, it’s broadening. Inflationary pressures are broadening towards the sticky components of the CPI basket. I’m sorry, but you got to do something about it, and you won’t stop, Preston, until you see results. Now, the interesting thing is there are two things that are interesting is that inflation is one of the most lagging indicators. And in macroeconomic analysis, you have forward looking indicators, coincident indicators, lagging indicators. And so for instance, forward looking indicators would be some surveys that have a statistical significance in explaining how GDP will do in a year from now. And if you look at the service today, they’re forward looking because they anticipate changes in economic activity. A coincident indicator would be maybe the labor market. It’s a coincident with lightly lagging indicator, labor market worsens or improves only after the forward looking indicators have pointed towards a certain trend in the economy, right?

Alf Pecca (00:55:32):

And then the lagging indicator, one of the most lagging of all is inflation. Because to develop or to slow down inflationary pressures, you need some time for all of these to feed into the economy and the elasticity of prices and the consumption habits and all of that. The fed will be looking at targeting the most lagging indicator of all, which is showing its worst behavior, not only in absolute level, but in composition and momentum over the last 40 years, Preston. So they’ll be big and they’ll be looking in the rear view mirror. They’ll be looking at the most lagging indicator and try to slow it down as much as possible. They’ll be as hard for as long that I think the yield curve will invert further and further and further.

Preston Pysh (00:56:15):

So let me try to rephrase what I think I just heard you say. You’re watching the unemployment numbers and as they start getting worse, then you’re going to get out of that trade.

Alf Pecca (00:56:26):

Yeah. When they get worst enough that I smell the fed is going to be start looking at those at least [inaudible 00:56:33]

Preston Pysh (00:56:34):

I’m sorry to interrupt you. Finish your thought there and then I’ll ask the question.

Alf Pecca (00:56:37):

No, sorry. I’m just saying that the labor market is a slightly lagging indicator too. So before it weakens to a point where the federal reserve gets worried enough to consider another item into their equation, it’s going to take quite a while. So right now, they only have one item. It’s an equation of one line. Bring inflation down, down, down, down, down. It’s the only thing they care about right now. Before something else becomes bad enough to enter that equation in the first place, it’s going to take a bit longer. When it does enter, then I’m going to be looking for them to actually start cutting rate accommodate so that two year yield can actually finally come down and you don’t need to flatten the curve anymore because you can just buy the front end of the bond market and it’s going to be okay. But sorry. So you were saying.

Preston Pysh (00:57:23):

The real simple question here. What level do you think the DXY gets to?

Alf Pecca (00:57:30):

Oh, so let’s say-

Preston Pysh (00:57:33):

Before all this change, the wind shift the other way.

Alf Pecca (00:57:35):

So the DXY is basically about 57% euro against the dollar. So let’s say euro against the dollar went through parity. It’s now rough a little bit above that. I think with bridge parity pretty easily and sustainably so, that would be my best case scenario [inaudible 00:57:53] I can be wrong. I would expect 0.9, 0.95 to be totally doable on a euro dollar, especially Preston, if we are right on them keeping the pressure on and keeping the temperature in the kitchen very high, because they’ll be looking not at the pan whose frying oil is exploding, then only be stopping when the kitchen is off on fire. That’s what we are talking about. And if you’re talking about that, then you cannot be positive about risk assets. You cannot be positive about other currencies. The only thing you can be positive about is preserving your purchasing power in such an environment is $1 dollar [inaudible 00:58:32] cash protection, very defensive assets.

Alf Pecca (00:58:34):

It doesn’t sound fancy, but there are cycles every time. And my role is to make sure that I am looking at macro models that point towards what’s coming next and what could be the best as allocation in this cycle without having my [inaudible 00:58:47] attached to a certain asset class. I mean, investing and protecting purchasing power, it’s all about being nimble, intellectually honest, and trying to steer your asset allocation according to which cycle you’re in. And right now, it’s not the cycle to be offensive, is the one to be defensive.

Preston Pysh (00:59:03):

Yeah. Hey, so I’m a huge Bitcoin fan. In fact, this is a Bitcoin show, but I talk a ton of macro because I think it’s super important to just impacting the price. What are your thoughts on Bitcoin and where do you see its role in the future?

Alf Pecca (00:59:22):

So Bitcoin, I’m a very top down macro person, Preston. So Bitcoin for me serves as the main indicator for the digital asset space in general. And the digital asset space in general, I treat it as a macro asset plus, which means that it has certain features, certain characteristics, certain implied and realized volatility and a certain collocation basically in my quadrant and in my cycle analysis, right? And at the moment, effectively, it tends to behave in the cycles as a pretty leverage risk intensive asset class. You can see that it tends to be very volatile across cycles and its wings are very wild, which tend to appreciate capital and depreciate capital very rapidly. Also, you see that its correlations are evolving in a very interesting way as more institutions come into the space. And you can see that they treated somehow as a proxy for tech. You tend to see that Bitcoin tends to trade in certain part of the cycle as a leveraged version of a tech stock, right?

Alf Pecca (01:00:30):

So that is the result of institutional investors coming in, having to design and allocate the asset class in their models in a certain role. And the role that Bitcoin tends to have right now, cyclically speaking, is that of a risk sentiment asset class, a tech driven risk sentiment asset class. Okay. So that is the cyclical analysis you can do in Bitcoin. And you can do the Ethereum and you can consider that as part of your asset location from a tactical perspective.

Alf Pecca (01:00:57):

From a structural perspective, that’s a different story. So from a structure perspective, you’re considering the digital asset space and you have to ask yourself, what is the role it could play over the next 10 to 15 years? And there are two line of thoughts that I’m still investigating. And I tend to be very much open minded. One is the role that the underlying technology has and will have likely over the next 10 to 20 years. The world isn’t becoming an industrial world anymore. Whatever people say when they talk about onshoring, when they’re talking about the importance of energy and labor and capital being depreciated against labor being appreciated, that’s the ’70s, that’s the ’80s. Our business models are not likely to reflect that again. They’re likely to reflect more technological advancement going forward. So from that perspective, this asset class tends to fit pretty well into that structural development we’re looking ahead of us over the next 10 to 20 years. So I have sympathy from that structural perspective.

Alf Pecca (01:02:00):

The other theory is a basket of digital assets mostly the scarce one let’s say Bitcoin or defined, discuss and supply. For instance, Bitcoin, to serve as an anchor or a potential anchor when it comes to redesigning our monetary system. And that is the other big consideration that these asset class is in at the moment. And there, I think it is okay to consider it as a potential call option. So that’s a theory that many people have come across with and they’re like, “Okay, what is the probability it’s going to play a role in reentering a new monitory system?” Is it 0%? While assigning at 0% all the way to something generally in investments is not a smart idea. So if you think there are some good macro reasons why Bitcoin could be more than 0%, part of this basket that anchors the next monetary system then only for that very reason you should structurally own some.

Alf Pecca (01:02:54):

So I tend to be extremely open about that. Maybe you should record another session only on this. Because of how money works and how we are used to deal with money, it can be relatively complicated to imagine a deflationary system. It can also just thinking about it and designing it in our head as we have been born and raised in an inflationary … in a system where money supply can expand. Thinking of a system where it can’t expand, it brings a lot of questions around. Can you create credit in Bitcoin? Can you lend Bitcoin? Can you expand its supply at least temporarily until you bring it back? But all these questions need to be addressed thinking that the world isn’t becoming a less technological place, it’s becoming a more technological place.

Alf Pecca (01:03:40):

And also that, to be honest, the monetary system we’re living in, as we describe it for an hour, tends to be very shaky. And the more time goes on, the more this de-leveraging episodes are stronger and stronger and stronger and the more the wealth inequality tends to widen to a point that you can maybe foresee the possibility we need to redesign it. That’s how you need to ask yourself, what is the role the digital assets can play in this reshaping effectively? So maybe I didn’t give a definite answer, and it’s very difficult to give one, but at least I hope I give some frameworks that I’m using to consider the asset class, both cyclically and structurally.

Preston Pysh (01:04:15):

I loved it. I loved it. And as you were describing that, the deflationary versus this inflationary thing that we just spent an hour describing all the nuances of, I’m thinking of two galaxies, literally moving towards each other, like this as time is progressing to the right. What a fascinating discussion. Thank you so much for making time Alf. And for people that are not subscribed to your free newsletter, we’re going to have a link in the show notes for them to sign up. And I mean, just a couple of the charts that we shared today. You have tons of these and you have analysis in your newsletter. I highly recommend people to check out that link in the show notes. And if there’s anything else you want to highlight, Alf, please highlight it right now.

Alf Pecca (01:04:59):

Well, Preston, I just want to thank you for the hour we spent together. Your questions are very good, and that’s not a surprise for me. I’m used to listen to your interviews. All I want to say is that if people enjoyed this, indeed, they can find much more at the Macro Compass. It’s free. There are, I think, 75,000 people reading it. It’s quite a lot. So thank you everybody who’s reading that. If you want to find out, you can just Google it. It’s free. And once a week, I release a piece, which is my macro analysis and some investment ideas as well.

Preston Pysh (01:05:27):

Thank you so much, Alf. Amazing discussion. And thank you for your time.

Alf Pecca (01:05:32):

Thanks, Preston.

Preston Pysh (01:05:33):

If you guys enjoyed this conversation, be sure to follow the show on whatever podcast application you use. Just search for We study billionaires, the Bitcoin specific shows come out every Wednesday, and I’d love to have you as a regular listener. If you enjoyed the show or you learn something new or you found it valuable, if you can leave a review, we would really appreciate that. And it’s something that helps others find the interview in the search algorithm. So anything you can do to help out with a review, we would just greatly appreciate. And with that, thanks for listening. And I’ll catch you again next week.

Outro (01:06:06):

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