The World Is Dumping U.S. Assets | Julian Brigden

Historically, periods of major market disruption (1970s, 1930s, dot-com bubble) saw 'nasty' equity corrections where the divergence closed via the worst-performing market falling hard, not via relative winner outperformance.

“I think that risk is still there but it will depend on whether we go into a recession uh or not. If we don't go to a recession, we just avoid it, but we get the the sort of Plaza 2.0 kind of accord or Marilago accord and we come in and we're intervening to push the dollar thing, then maybe just US stocks just underperform. ... I think um you know, you go back to the 70s, you go back to the 30s, you go back to the.com bubble. Um I I think that's I think that risk is still there but it will depend on whether we go into a recession”

The whole world is invested in the United States; of every dollar globally that has gone into equities, 70 cents has gone into the US according to Bridgewater research.

“the whole world is invested here in the United States. It's just very simple. Um I think Bridgewater did some great research uh recently. They said of every dollar globally that has gone into uh equities, 70 cents has gone into the US, right?”

The corporate sector is now willing to raise prices (as seen post-COVID), unlike the pre-COVID era where raising prices meant losing market share; this makes it unlikely that companies will absorb tariff costs, and the burden will fall on consumers.

“We live in a world where the corporate sector is kind of profit maximizer and certainly since co Prior to co I think that we lived in this world and I think this is one of the biggest changes that co initiated where there was a reluctance to kind of raise prices. We kind of got used to a world where you didn't raise prices and you grew market share or you maintained your market share and then COVID came along and they went we can jack prices and we can still maintain our market share”

If equities go sideways, CEOs will cut capex and employment, which is the historical pattern seen in prior cycles when stocks stall.

“I mean structurally long- term Yes, but short-term, no. I I just I just worry that if we go into, as I said, even a benign scenario where stocks just go sideways, we've seen this sort of game in the past. I mean, CEOs will just go, 'Well, my earnings aren't rising and my stock price isn't going up, so I better cut some cost.' And they smash the glass and they reach into that box and they grab that, that fire axe, and they just go capex. and um and employment”

Treasury Secretary Scott Bession's argument that a lower trade deficit helps the US more than it hurts China or Europe (because the US imports 50% of its goods) is not convincing; the jury is out on whether GDP will rise more in the US or its peers, and the process requires creating certainty and a supportive environment for capital redeployment.

“The first the first thing to note, Jack, is we import 50% of our goods, right? So here in the US, so whacking on a whatever the tariff comes down to be ends up being I mean a big drag on US consumers, right? I mean Germany doesn't export 50% of its products to the US, right? So in that sense I don't agree. I mean look it's possible over time that GDP will rise more here. We will take factories from other parts of the world. They will lose out and all these all these sorts of things Jack. So I think you know the jury is out on that one.”

There is risk of 'fiscal dominance' where the bond market becomes unwilling to finance the deficit, forcing the central bank to prioritize government solvency over inflation/employment, which triggers QE and currency debasement—a scenario Brigden finds appalling but possible.

“what does then happen is you can get to a point where the central bank is forced to cross a rubicon where it goes from prioritizing employment and inflation to going to prioritize as my good friend Mike Taylor talks about the solvency of their boss right which is government and at that point you get QE and the problem is that has other consequences right then the currency, unless other countries are doing it at the same time, gets annihilated. That's when gold goes parabolic. That's when silver goes parabolic.”

Price increases from tariffs may not be transitory; instead of a one-time adjustment, they could become ingrained if, in a strong labor-market scenario, workers demand wage increases to offset the 25% cumulative price increases, creating second-round effects and making inflation sticky.

“To what extent does it get built into a second round effect? Do you start to see it filter into the service sector? Right now typically that's what happens. service prices lag, goods prices. Do we end up with said booming economy and um we avoid recession? Let's say we just go into a period of sort of soft disc growth and next year all that capex investment is picking up painting a picture. I'm not saying this is my best case, but all that capex investment is picking up. Those factories are coming into the US and unemployment still sitting at 4.3%. and workers are like, 'Well, yeah, you know, I'm still down 25% on my COVID food basket.' And then we got another 10% in 2025 and this is 2026 and unemployment's full and there are no workers to go work in those southern factories. So, I'm going to ask for a big pay rise, right? And then that become the secretary round effects. It becomes ingrained”

Most people and CNBC analysts don't understand the dollar's role in making different asset prices; they focus on fundamentals and ignore the dollar's importance, which is a critical analytical error.

“Don't listen to the analysts on CNBC who are just this US ccentric wealth managers because they never consider the dollar. They don't understand the dollar. They don't think it makes the hapens worth the different. It's all about the fundamentals. No, the dollar drives absolutely everything.”

The US has a hyperfinancialized economy extremely sensitive to equity market performance, because companies are incentivized to hire/fire based on stock price rather than earnings fundamentals.

“I think we've created hyper uncertainty I would say in the nature of these tariffs. Right. If you were if you were a garment producer and you were like, 'Oh my god, I have to get out of Vietnam.' Now you've just gone, 'Well, I can leave another 6 months, right? I you know, let let 90 days. Let me let me kind of see.' Right? So, um, sure. Uh, so I think I just think this process takes a lot longer than people realize. And what I worry about here in the US is this sort of hyper financialized economy that we are incredibly sensitive, Jack. for our consumption and our employment based upon the equity market. Right? This is what companies do. Companies don't solve for profit. Companies don't solve for earnings. They sold for their stock price.”

If the US goes into recession, the Fed will cut rates, which will kill inflation via demand destruction. If the US doesn't go into recession, inflation likely won't be killed by policy, and either the Fed will have to make a difficult choice or (if the Fed is replaced or politically constrained) the bond market will force the decision.

“Because if we get a recession, it will kill the inflation. That's what recessions do. If we don't get a recession, the odds are it will not kill inflation. And then maybe the Fed will have to make the decision. Or if the Fed has been replaced by some flippity floppity fled by there because of Donald Trump, then I suspect the bond market will make the decision for the US.”

The world doesn't work such that after 1,000% gains, investors double down; during the Plaza Accord and end of Bretton Woods, US assets significantly underperformed their peers, particularly in non-US currencies, and the Nikkei and DAX outperformed in their own currencies.

“just logic would dictate you've had a good run extraordinary good run. You know, do you do you double down here and think you do a,000% again? I mean it it just the world just doesn't work like that. Not when you have an administration that is saying to you, the dollar is too high. We want a deal to drive the dollar lower. And when you look at Plaza and you look at um the end of Breton Woods, Jack, I mean those periods where was periods where the US asset markets underperformed their peers certainly for a US investor, right? So you were you were better off being in the Nikai or the DAX, you know, in euros or in yen.”

Even in a relatively benign dollar-weakness scenario, no one is priced for a recession; there are significant recession risks given the setup (weak labor market plus equity correction), and a standard recession produces 30% correction in US stocks based on 90 years of historical data.

“even if this is a relatively benign scenario right and we were certainly not priced for a recession anyone tells you that is is wrong and I I'm not saying we're going to get one I I think there are quite significant risks around a recession. Um but a standard recession if you look back the year at 90 years worth of data and actually factor has been more recently remember it's very big corrections in the equity market and coming coming from where we are coming in terms of the height of where US assets are. I don't think it's impossible but it's just a standard average correction in US stocks in a recession is 30%.”

The Federal Reserve faces an extraordinarily hard job because if recession hits, it will kill inflation (allowing rate cuts), but if recession is avoided, inflation may stick (preventing rate cuts), making the Fed's decision function unclear.

“And that's why I think they really want to kind of sit on their hands and just wait to see is this going to be recessionary or is this going to be inflationary and then they can kind of move accordingly. Because if we get a recession, it will kill the inflation. That's what recessions do. If we don't get a recession, the odds are it will not kill inflation. And then maybe the Fed will have to make the decision. Or if the Fed has been replaced by some flippity floppity fled by there because of Donald Trump, then I suspect the bond market will make the decision for the US.”

If the US goes into recession, US rates will be cut while European rates are cut less (or cut later), causing a relative interest-rate differential that weakens the dollar; current account deficit shrinks in recessions (Americans stop spending on travel), further reducing capital needs; so the mechanics mechanically push the dollar lower in a recession.

“if we go into recession US rates are going to get cut. Now I'm not saying that European rates are not going to get cut. They are but this is all relative right? This is all relative. Uh all the money is here you know uh the the current account I mean if we go into recession the current account deficit will shrink. It always shrinks right because Americans don't go on holiday to Santorini you know and ruin it for everyone else.”

Companies are hyper-financialized: they were rewarding companies without profit a few years ago because yields were zero and investors wanted revenue growth, which is the same formula that failed in the dot-com bubble and in recent SPAC companies.

“a few years ago, you remember this. We were rewarding companies that didn't make a profit because we didn't want to profit because yields were zero. We just wanted revenue, right? Revenue. Oh, we've discovered this new formula or we discovered it in the dot bubble. It didn't work well then and it hasn't worked well for a lot of these these, you know, these spack companies or those sorts of equivalents, right?”

Multi-year trend lines in major currency pairs (EUR/USD, USD/JPY, USD/CNY) have been broken; this is a structural shift, not a temporary move.

“I mean this is this you know we've taken out multi-y multi-year trend lines in the euro dollar Swiss um dollar yen um dollar stocky um blown through these trend lines. So could we go back and test them? I'd love that. I'd love to get that that sort of opportunity. But those trends look like they have truly truly broken.”

Private equity faces structural pressures because every year limited partners can be called for additional capital; if deals can't be exited, LPs will be forced to sell other assets to meet capital calls, creating spillover selling.

“So I'm I'm actually quite worried by the private private equity space. Um, if we if we are moving into an environment where they just can't offload these deals. I mean, I think people forget that private equity in a kind of a way is the gift that can keep taking. So you know every year you can get a call from your private equity guy and saying we need another 100 grand against your deal or well obviously not for your Harvard it's many you know so then you have to sell what you can and what you know”

Balance of payments accounting is a double-entry system: if you run a large current account deficit (trade deficit), you must run a large capital account surplus, and shrinking the trade deficit mechanically means less foreign capital inflows into US assets.

“people do not understand and in this sense Elon Musk is absolutely correct. Peter Navaro is a Um when it comes to um balance of payments accounting, right? This is just double entry accounting. If you run a very large current account deficit, so a trade deficit, you must run a large capital account surplus.”

Approximately 50% of all consumption in the US is now coming from the top 10%, per Moody's survey data, making the wealth effect from stock declines disproportionately powerful.

“we know we've seen recently um from surveys Moody's did one where sort of 50% essentially of all consumption now is coming from the top 10%”

Partisan divisions have become extreme; for example, Republicans now report 0.1% inflation expectations one year out versus Democrats reporting mid-60s inflation and independents reporting even higher (70s), suggesting people's inflation expectations are driven by political belief rather than economic analysis.

“the Republicans say well the Michigan University of Michigan consumer confidence survey that's just totally invalid and you go why because they give you the breakdown of opinion by voters I mean does that make the data invalid because you're in there Republicans are in there it's just but you can see the extremes when I think the number for the um Democrats now for inflation one year out is like mid60s or something maybe. I think independents were even higher at in the sevens and Republicans are 0.1 right year over year 0.1”

The average correction in US stocks during a recession over 90 years of data is 30%, and a standard recession with 30% correction is not impossible from current valuations, especially if the US is not priced for a recession at all.

“and I'm not saying we're going to get one I I think there are quite significant risks around a recession. Um but a standard recession if you look back the year at 90 years worth of data and actually factor has been more recently remember it's very big corrections in the equity market and coming coming from where we are coming in terms of the height of where US assets are. I don't think it's impossible but it's just a standard average correction in US stocks in a recession is 30%.”

Private equity has been operating under the assumption that negative interest rates would persist forever and leverage could be financed indefinitely, an assumption that broke when COVID surprised everyone but then rates stayed low; now with rates rising, that model is broken.

“it's once again it's emblematic of this assumption which was never our assumption back in you back to 2014 and 15 and 16 that negative interest rates were here to stay and we could just finance stuff forever and we were just saying the cycle we're at the lows this is it right you know if it hadn't been for co I don't think we just the low in bond use would have been in 2016 Jack you know so in a way we kind of you lucky I mean that's the wrong way to put it but you know you've got that next down pulse only simply because of of co”

Private equity structures assume negative interest rates will persist forever, allowing indefinite refinancing and leverage, but if interest rates normalize, the entire model becomes challenged because capital gains can't offset higher financing costs.

“I'm actually quite worried by the private private equity space. Um, if we if we are moving into an environment where they just can't offload these deals. I mean, I think people forget that private equity in a kind of a way is the gift that can keep taking. So you know every year you can get a call from your private equity guy and saying we need another 100 grand against your deal... this assumption which was never our assumption back in you back to 2014 and 15 and 16 that negative interest rates were here to stay and we could just finance stuff forever”

Michigan University of Michigan consumer confidence survey shows extreme partisan divergence in inflation expectations: Democrats expect mid-60s inflation one year out, Independents expect sevens, Republicans expect 0.1% year-over-year

“the number for the um Democrats now for inflation one year out is like mid60s or something maybe. I think independents were even higher at in the sevens and Republicans are 0.1 right year over year 0.1”

The US labor market has been weak since Q3, with hiring dissipating and underemployment rising; combined with the recent equity correction, this creates a momentum play where employment weakness increases recession risk.

“we already had arguably since the third quarter quite a weak labor market like we haven't been hiring many people right we haven't fired them which is Okay. But we just the level of hiring just has dissipated. So if you look at lots of metrics of you know you were working full-time and now your boss comes to you and says you have to work part-time for this thing called part-time for economic slack. That number is just steadily steadily inexurably rising.”

Companies optimize for stock price, not profitability; this was visible pre-COVID when markets rewarded companies with high revenue but no earnings.

“A few years ago, you remember this. We were rewarding companies that didn't make a profit because we didn't want to profit because yields were zero. We just wanted revenue, right? Revenue. Oh, we've discovered this new formula or we discovered it in the dot bubble. It didn't work well then and it hasn't worked well for a lot of these these, you know, these spack companies or those sorts of equivalents, right?”

Apple employs 140,000 people in the US, pays no tax, and Brigden believes the Trump administration would be justified in imposing 100% tariffs on Apple products unless Apple brings manufacturing back or pays 30% corporate taxes.

“If I were the president of the United States, I would call Tim Cook in I would say, you employ 140,000 people in this country, you pay no tax. How about screw you, I'm going to put 100% tariff on your product, and you can, here's your choice. You move it all back, or your tax rates 30%. And I'm closing down all those loopholes.”

If high-yield spreads blow out dramatically, the edifice of private credit and structured credit broadly (opaque and not well understood by most investors) will come under severe strain, threatening the deals and financial engineering that Wall Street relies on.

“So I you know it's it's a very uh difficult sector to get any sense of to your point of what's of what's going on. Um the opacity is very low when you look at that space. But I I tweeted out the other day and I'm deeply suspicious about this. Um this desire to get 401k money to be able to p buy private equity. Um I'm not the only one. The OCD came out with a report the other day where they talked about how higher interest rates have tracked a lot of private deals.”

Fiscal dominance occurs when the bond market becomes disorderly and unwilling to buy government paper, forcing the central bank to prioritize government solvency over inflation/employment targets, leading to QE and currency debasement

“fiscal dominance is very simply central bank typically inflation employment certainly the Fed most other central banks just focus on inflation. But there comes a point if you get to a point where the bond market is disorderly and they are not willing to buy your paper and it's beginning to threaten to some sort of doomloop solveny situation where your banks are under pressure because they own a lot of you know we saw this in Italy right in in the u in the debt crisis in the early 2010s um where the the bond on banks are under pressure because they own a lot of US treasuries where there's no bid for the long end because they're not they don't think the US is either good or the dollar's too weak or whatever. So what does then happen is you can get to a point where the central bank is forced to cross a rubicon where it goes from prioritizing employment and inflation to going to prioritize as my good friend Mike Taylor talks about the solvency of their boss right which is government and at that point you get QE”

Certain analysts (e.g. Raoul Pal) still believe rates will return to low levels and the economy will follow a Japanese model; Brigden fundamentally disagrees, believing the structural trend is toward higher rates.

“I still think there are people you know RA still believes that we're somehow going to get you know back to those sort of lower levels and and you know that we're following some Japanese model and I think it's fundamentally wrong. I think, you know, we could get back there as I said, but it'll be because central banks will have to come and cap yields and that will have other consequences.”

The real villain causing middle America's decline is corporate America's decision to outsource for profit maximization, not China or other countries—those countries are just accepting the deals offered.

“the evil villain is the seauite of corporate America. China and Vietnam and and Mexico are the recipients of decisions that were made in corporate America to outsource maximize profit, right? They're the ones that screwed middle America. It wasn't the Chinese.”

Foreigners own close to $19-20 trillion of US equities, and Europeans own almost half of that proportion, which represents an enormous amount of capital that must be redeployed when conditions shift.

“Foreigners own close to 19 to 20 trillion dollars worth of Euro stocks. like a third and Europeans own a very large proportion of that like almost half of that.”

The Fed has very limited options on bonds: it can shift issuance to the front-end or ask for favors internationally (like asking Japan to show up at auctions), but can't do that many times; it doesn't control the deficit, which is being debated in Congress.

“for the bond market they have nothing they can do on the bond market really. I mean they can they can shift more issuance to the front end. This is government right? Treasury can ship more issuance to the front end. They can kind of ask some favors around the world. You know, Japan, will you show up at the auction? But you can't do that many times. Um, they don't get to control the deficit, per se. It looks like they're already they're running into problems in in Congress, you know, and getting those those spending cuts through and Doge's expectations have been scaled back.”

Americans have extreme consumption behavior relative to Europeans and very high marginal propensity to consume; when Americans do well, they import heavily, which requires foreign funding of trade deficits

“as we've seen when America tends to do well we love to spend money right our marginal propensity to consume is like double uh say European uh and uh that we tend to import quite a lot as well”

The 2002-2008 period was a period of dollar weakness and saw a biblical rotation within equities from tech (which dominated the 1990s) to energy, mining, and metals, even though it was not the end of the world for the global economy.

“That was a period of dollars and it was a period of like literally biblical rotation within the equity market from the prior decade where, you know, we'd had the dotcom bubble. So, tech had done exceptionally well, right? tech just massively underpor energy which hadn't done anything in the dotcom bubble massively outperformed from 2002 to 2008 mining metals all of the things that people didn't own going into the to the bubble high”

Tariffs create stagflation initially (prices up, growth down) rather than recession, with Empire PMI price data showing spikes consistent with PCE above 4%, making it demand-destructive because of consumer impact.

“This is bluntly very simply initially and we don't have to think about the good stuff yet, right? The inverse of Ricky Jave saying, 'Oh, you're still thinking about the bad stuff.' We don't have to think about the potential for the good stuff yet. We have to deal with the bad stuff. And this is stagflationary, right? You can see it this morning if you look at Empire PMI prices paid prices received it spiked enormously. It's commensurate with PCE being back above four. Um and so this is just uh this is going to be inflection. It is demand destructive uh because of that impact on consumers.”

S&P 500 PE ratio could compress to 15x if foreign money leaves, as much of the multiple expansion has been driven by foreign inflows and there are no longer demand pressures to support current multiples.

“Just think about if you're a US investor, just think about what the rest of the world is doing because it's the rest of the world that's driven the PE multiplication that we've had in the S&P, right? the money goes home, the PS could go down to 15, right?”

Tariffs use temporary levers (6 months) that allow time to complete longer investigations before permanent tariffs are imposed, creating ongoing uncertainty rather than one-time adjustment.

“unless you create certainty and I look I think the they had various different tariff levers that they could kind of pull the ones that they they picked are are temporary. they could really only run for uh six months and so I and that sort of stuff and then that gives them time to complete these longer investigations so that we come to a permanent tariff.”

US treasuries are an 'instrument of confiscation' (negative real yields) for most developed bond markets around the world; this structural reality suggests upward pressure on yields and a secular bear market in bonds.

“where I think you know frankly treasuries are an instrument of confiscation as indeed most they are for most developed bond markets around the world. And I think we also should understand that you know Europe is spending an awful lot of money. They're issuing debt. Uh China is issuing a lot of debt to offset its spending. And we're in a world where one of our structural themes, Jack, is that we're in a world of shrinking global savings. And that just means that the general trend for bond yields is up and to the right for the next 20 years.”

The Trump administration's goal of a lower dollar does not mean a weak dollar—they want an inherently strong dollar with sound economic fundamentals but at a lower exchange rate, similar to the Nixon shock in the early 1970s and the Plaza Accord in the mid-1980s.

“you know, they want to put a talk on the dollar and you know, they want the dollar to be inherently strong, but just lower. And they're not the same thing, Jack, I want to stress, right? Just because you want a lower dollar, it doesn't mean that you want a weak dollar. You want an inherently strong dollar, right? Uh economically sound dollar, but you can just have a lower exchange rate.”

Of every dollar globally that has gone into equities, 70 cents has gone into the US, creating an extremely reflexive cycle where the purchase of US assets in dollars underpins the economic fundamentals that justify their prices.

“Bridgewater did some great research uh recently. They said of every dollar globally that has gone into uh equities, 70 cents has gone into the US, right? I mean that's with pretty extreme and what it's done is we've created this kind of we call it a reflexive cycle in the true Soros sense of the word.”

Tariffs have three objectives: (1) revenue generation (baseline 10% raising ~$2 trillion over 10 years), (2) strategic re-shoring for critical industries like semiconductors and pharmaceuticals, and (3) punitive tariffs to incentivize compliance with the administration's agenda.

“I think there are three objectives of tariffs and I think we have to take a step back and we've been writing about this for a while. So there's a there is a uh a revenue element of tariffs, right? There is a key revenue element in the Senate budget um proposal has penciled in $2 trillion of revenue from executive orders aka tariffs right so that I think is kind of that 10% baseline tariff. I think there are some strategic objectives re on shoring to ensure uh control over strategic industries uh that are domestically um uh satisfied. So whether that's um semiconductors or pharmaceuticals or whatever, right? And then I think there's the um I don't like you. I want to achieve something. I'm gonna just bash you around a little bit kind of tariffs and those are some of the extreme.”

China holds massive domestic savings (about 28% of global savings) and could theoretically reallocate those savings away from external finance toward domestic consumption (health service, pensions), which would eviscerate rest-of-world bond markets.

“The big thing that they have is they have huge amounts of domestic savings, right? So they can redeploy those, right? God forbid for the rest of the world if they do because they make up basically 28% of global savings, right? So if we wake up one day and China said, 'Oh, we're going to do a national health service. Oh, we're going to give everyone pensions to retire, right? And we're going to spend all our savings to do that.' the rest of the world's bond markets get eviscerated right”

If rates are capped by central banks (to maintain government solvency), it will require QE, which will weaken the currency, parabolic gold, and potentially Bitcoin—a world nobody wants but that is possible.

“central bank is forced to cross a rubicon where it goes from prioritizing employment and inflation to going to prioritize as my good friend Mike Taylor talks about the solvency of their boss right which is government and at that point you get QE and the problem is that has other consequences right then the currency, unless other countries are doing it at the same time, gets annihilated. That's when gold goes parabolic. That's when silver goes parabolic. That's even when potentially, even though I'm not a huge fan, Bitcoin goes parabolic.”

Empire PMI prices paid and prices received spiked enormously on the day of the interview, commensurate with PCE inflation moving back above 4%, indicating immediate and visible price pressures from tariffs.

“You can see it this morning if you look at Empire PMI prices paid prices received it spiked enormously. It's commensurate with PCE being back above four.”

The US currently runs a 7.3% of GDP budget deficit (as of morning of interview) and DOGE/administration has scaled back deficit reduction expectations from $1 trillion to $150 billion, meaning deficit is likely to rise not fall

“we are running a now as of this morning like a 7.3% of GDP budget deficit, right? This thing is not going down, it's going up. They've just downgraded what they think they can say from Doge, right? From a trillion to 150 billion, right?”

Europe will face a rotation from exporters to domestically-oriented companies as money comes out of US equities; US defense umbrella has been removed, forcing Europe to increase defense spending, which supports consumption and helps offset tariff impact

“you've seen a response now certainly uh courtesy of the fact that uh the US defense umbrella has been removed from Europe um pretty clearly um that the Europeans are going to kick up defense spending, you know, so you get this rotation out of exporters into more domestically orientated economies. I think as the money comes out of US equity markets and starts to go into European equity markets um to take advantage of that that will help to underpin uh European consumer confidence”

Dollar models suggest another 10% lower in one year from current levels; Brigden could see another 15-20% beyond that, potentially pushing the euro to the mid-130s or 140s and dollar-yen below 120.

“when we look at the dollar, we think, you know, our models are already suggesting sort of a year from now, like another 10% lower, Jack. Um they're dynamic model, so they could increase and they only go out like a year. I could see, you know, another 15 20%. maybe, you know, so we get sort of the euro back into the mid30s, maybe possibly 140s. You get dollaren down to 120, sub 120.”

A global fund manager who was long US stocks benefited from the diversifying effect (stocks down, dollar up, which dampened portfolio volatility in foreign currency), but this time that hedge broke, creating a new risk in the portfolio that forces redeployment.

“if you were a global uh fund manager, the models were telling you you could own even more US stock because they diversified and lowered the overall portfolio risk because when stock sold off the dollar rose so in your currency it acted as kind of a damper and oh that didn't happen this time right”

If the next five years look different from the last five years (which they should given the Trump administration's shift from consumption to re-industrialization), the structure of the economy is changing and markets will not resemble the prior period.

“if you're positioning your poorly portfolio for the next five years right it's not going to look like the last five years if this is what we are trying to achieve right and it looks like the Trump administration is pretty serious about climate achievement to crime right it's very very different world”

Brigden would, if he were president, threaten companies like Apple (which employs 140,000 Americans and pays no US tax) with 100% tariffs on products unless they move production back to the US or pay 30% corporate tax, because the 'evil villain' is corporate America's decision to outsource, not China or Mexico.

“I mean, to be brutally honest, Jack, if if I were the president of the United States, I would call Tim Cook in I would say, you employ 140,000 people in this country, you pay no tax. How about screw you, I'm going to put 100% tariff on your product, and you can, here's your choice. You move it all back, or your tax rates 30%. And I'm closing down all those loopholes. I mean, this is what this is what people don't understand. I mean, I think, you know, people get wound up about uh oh, you know, it's it's China and then Mexico and they're the evil villains. No, the evil villain is the seauite of corporate America.”

If stocks go sideways (not rising), CEOs will cut capex and employment because they solve for stock price, not earnings, which would be bad for the economy even in a benign scenario.

“I just worry that if we go into, as I said, even a benign scenario where stocks just go sideways, we've seen this sort of game in the past. I mean, CEOs will just go, 'Well, my earnings aren't rising and my stock price isn't going up, so I better cut some cost.' And they smash the glass and they reach into that box and they grab that, that fire axe, and they just go capex. and um and employment”

Trump administration officials believe the good easy choices are over and the US is at a devil-or-deep-blue-sea moment: either rebalance (painful short-term) or continue on the current trajectory (which leads to a faded empire, worthless dollar, worthless treasuries).

“they thought that these imbalances had to be addressed. They thought that the US had gone past the point where the good easy choices were over, Jack, right? where the painless options had gone and that we're essentially at a sort of devil or the deep blue sea kind of moment that if we'd have carried on on the trajectory that we were you know we would have been a faded empire the dollar would be worth nothing treasuries would have been worth nothing you know we the analogy is always you clipping the corner off the gold coin like the Romans did kind kind of thing like monetary debasement”

The US is making assumptions about its inherent strength without realizing it lives in the biggest glass house and has a big mortgage to the rest of the world; by pursuing tariffs and weakening the dollar while foreign investors hold trillions in US assets, it is throwing rocks at its banker.

“my concern is is we're making these assumptions about our inherent strength of the US consumer in the US economy, not understanding that we're basically at the same time chucking rocks at our foreign banker, right? And and I think we, you know, I've used the analogy, we may wake up and realize that we live in the biggest glass house on the block and we have a big mortgage to the rest of the world.”

Brigden is bullish on gold and silver structurally and secularly, but warns against chasing tech targets like $12,000 gold ($1,200 silver) without understanding the world that would be required to create those prices (currency debasement, fiscal dominance, central bank QE); gold is currently extended after strong rally from year-end lows, with potential near-term pullback to $2,600-2,800.

“So structurally very very bullish, secularly very very bullish on gold. Uh, very bullish on silver too. Uh, I do warn people that some of the technical targets, you know, like some of the technical guys that I really like have been talking 125 and say silver, you like 1,200 bucks on gold. I I worry that and you get some of the enthusiasts like who and I'm like uh just temper that enthusiasm because you may not like the world that is necessary to create $1,200 bucks uh sorry $12,000 for for gold.”

A 'sell the US moment' (selling dollars, US stocks, and US bonds simultaneously) has occurred about five times in Brigden's 40-year career, generally demands policy response because it is untenable, but most do not last long—the recent bond market weakness triggered such responses and policy makers had levers to play.

“I will date myself by saying that when I was at Lehman Brothers, which you know in the uh in the early late 80s, early actually um we used to have this expression called a sell the US moment. So a sell the US moment was you sold dollars, you sold US stocks and you sold US bonds. And I've probably seen them five times in my career. They generally don't last Jack because they demand a response from policy makers.”

The good easy choices are over for the US; policymakers know the imbalances (fiscal deficits, current account deficits) had to be addressed; tariffs are a logical but painful choice between the devil and the deep blue sea.

“I truly knowing some members of the Trump administration, particularly some key officials, I know going into this that they thought that these imbalances had to be addressed. They thought that the US had gone past the point where the good easy choices were over, Jack, right? where the painless options had gone and that we're essentially at a sort of devil or the deep blue sea kind of moment that if we'd have carried on on the trajectory that we were you know we would have been a faded empire the dollar would be worth nothing treasuries would have been worth nothing you know we the analogy is always you clipping the corner off the gold coin like the Romans did kind of thing like monetary debasement so now that's the devil the deep blue sea. I mean, it's the logical choice, but it doesn't mean you survive. And it doesn't mean it's a painless process, right?”

There are trillions of dollars worth of foreign money that will be sold, hedged, or brought home; the money leaving the US will be the catalyst for the next leg of the equity decline.

“I think that is why when I look at this setup with US domestic investors, I worry they're getting all enthusiastic and they don't realize there are literally trillions of dollars worth of foreign money to be sold or hedged or whatever and the money is going to go home and that's when you and I'm not, you know, this is something that we were talking about, you know, a few months ago and we talked about in the first quarter, but now I mean if who if you look at you know standard US bank city bank right just cut their expectations in the US they double upgraded I don't quite know what that is double upgraded Japan and they upgraded Europe right we just had I was listening to Bloomberg this morning invesco huge global fund manager sell the US by the rest of the world and the dollar is the is the lynch pin that does that Jack”

The Trump administration's argument that a lower dollar via tariffs will hurt China and Europe more than the US overlooks that the US imports 50% of goods, so tariffs are a big drag on US consumers; moreover, even if long-term GDP rises, Germany and China don't export 50% to the US, so the comparison is flawed.

“the first the first thing to note, Jack, is we import 50% of our goods, right? So here in the US, so whacking on a whatever the tariff comes down to be ends up being I mean a big drag on US consumers, right? I mean Germany doesn't export 50% of its products to the US, right? So in that sense I don't agree.”

The uncertainty created by temporary tariffs and extended investigations allows businesses to delay relocation decisions; they may wait out the 6-month temporary periods rather than committing to long-term re-shoring.

“I think we've created hyper uncertainty I would say in the nature of these tariffs. Right. If you were if you were a garment producer and you were like, 'Oh my god, I have to get out of Vietnam.' Now you've just gone, 'Well, I can leave another 6 months, right? I you know, let let 90 days. Let me let me kind of see.' Right?”

Don't listen to CNBC cheerleaders who ignore the dollar and focus only on fundamentals; the dollar drives everything, and if it's declining, US assets will underperform.

“stop listening to these talking heads cheerleaders on CNBC because it's always about the flow of money and it's always about the dollar. And Julian, that quote you said of Wall Street's done well, it's time for Main Street to do well. That is a quote from Treasury Secretary Scott Besson, who is viewed as one of the most moderate voices in the Trump administration when it comes to to tariffs. Julian, when you came on Monetary Matters uh one to two months ago, you said that you were confident in the outperformance of foreign stock markets over the United States stock markets.”

The US is acting like 'The Sopranos,' demanding protection money from the world's largest saver (China) while the US runs deficits; this is diplomatic and financial overreach given US vulnerabilities.

“we are kind of acting I mean to be brutally honest like the Sopranos right we're just demanding protection money and the biggest global saver in the world we've actually launched a true economic war on right 100% tariff is an economic war at the same time we're tightening restrictions on the export of the technology and all this sort of stuff right this is an economic war and as I said we have our vulnerabilities too”

A Liz Truss moment for the US would occur if the bond market turns around and says it will not buy more paper, threatening a fiscal solvency dooloop—the US is frighteningly close to this scenario.

“if you got a situation where you know what the professional market calls kind of that Liz trust moment where the bond market turns around to you and says uh no like no you are not running any more deficit. You are not increasing the deficit. You are not we are not interested in buying your paper. And I think we're frighteningly close to those sorts of things.”

A strong dollar and a low dollar are not the same thing; the administration wants an inherently strong dollar (economically sound fundamentals) but at a lower exchange rate, a distinction most people don't understand.

“they want to put a talk on the dollar and you know, they want the dollar to be inherently strong, but just lower. And they're not the same thing, Jack, I want to stress, right? Just because you want a lower dollar, it doesn't mean that you want a weak dollar. You want an inherently strong dollar, right? Uh economically sound dollar, but you can just have a lower exchange rate.”

Overnight session (non-cash) price action in the S&P is revealing: if the market opens weak overnight and the dollar is soft, and then domestics buy the dip in the daytime session rallying it up, only for it to be down again the next overnight, this indicates real money foreign selling with domestic dip-buying unable to sustain the rally.

“we've suggested to clients that you look at the price action of the sort of S&P uh in the overnight night session. So the cash session runs from 9:30 to you know 4:15 or whatever it is. Uh your US trading hours basically and that's where most of the of the uh domestic execution gets done and a lot of fun stuff. But there is this sort of overnight session. S&P trades all 24 hours a day. Um and um that price action it can be quite an interesting tell in that overnight session. So if you run into a period where which is what we've been seeing that you open up and and the market is weak then and and the dollar let's say is soft at the same time in that overnight session and then domestics come in and go oo it's cheap I'm going to buy a bit more and then they sort of rally it up in the trading session then the following day it's just down again on you and it's down again on you then that's to me it's that's real money foreign selling uh you know selling and I I would caution any US domestic investors to stand heavily against that.”

Foreign investors have accumulated a decade-plus of gains in the S&P and also benefited from currency gains as the euro and yen weakened against the dollar—a two-for-one trade that has resulted in enormous total returns.

“when I look at foreigners, foreigners have had basically I mean at least a decade plus of gains in the S&P and they've also had huge currency gains, right? The euro has weakened against the dollar, the yen has weakened against the dollar as they have bought US stock. So they've had this two for one trade where they've made out on US stocks and their currency has weakened. So they've they've made even more.”

The dollar weakness is not caused by just two weeks of tariff implementation but by foreign investor sentiment realization that they were overextended in US equities and are now rebalancing back to benchmark or potentially underweight, which is causing the rotation.

“it's not like you know two weeks of tariffs has has caused this massive rotation mechanically. It's just that uh it's caused a a a a stampede of money out um by investor sentiment. Right. Yeah. So I think as I said I think I think that as the equity market has corrected I think people have realized that they were over their skis. I think as you know we've had a a degraing in the hedge fund space. The real money is now getting back. They were overweight US. They're now getting back to benchmark to the US. Um could they go underweight? I think that's entirely possible”

In a benign slowdown scenario with gradual dollar weakness under the shadow of a new Plaza Accord, foreigners will hedge FX exposure and reduce US equity exposure, taking years to play out rather than happening immediately, as large institutional investors execute time-weighted average price (TWAP) orders.

“if you have a slowdown and the dollar continues to gradually weaken under this sort of aura of the plaza accord is coming right I think it's going to take I look I don't think Tomorrow, the Japanese and the US are going to walk out and go, 'We're done. That's it. Dolly Nen 120 tomorrow. Wham.' Right? I think it's going to take some while to to get out there, but the but the plan is there. Right.”

Brigden is deeply suspicious of efforts to get 401k money into private equity and worried about Trump administration steps around college endowment taxation, as these will reduce the capital available to private equity and structured credit.

“Um this desire to get 401k money to be able to p buy private equity. Um I'm not the only one. The OCD came out with a report the other day where they talked about how higher interest rates have tracked a lot of private deals. Uh I'm very worried as well by some of the steps um in the Trump administration around college endowment funds. These guys are big users of private equity and you know there was this comment about taxing Harvard.”

The Trump administration's 'put' in equities appears to be at the short-term level (the recent rally from 5,000); if equities bounce and fall again, the administration has few options other than rolling back tariffs, which would abandon their agenda.

“Now, where's the put? Look, we obviously found the put in the equity market, the short-term put, but if this thing bounces and goes back down, there not many options that they can achieve. I mean, how do they they don't get to I mean, they can roll back the tariffs, right? But this is a that would mean abandoning their whole agenda, Jack. And I think that's just not good.”

Brigden had a leverage degrossing event (VR event) and basis trades deteriorating recently, but this was not sovereign money selling; the bond spread (Bunds-Treasuries) blowout indicates real money sovereigns were indeed selling treasuries and switching into Bunds.

“So hedge funds you were long treasuries which was quite a popular trade had to kind of kick those into touch but did we see some real money sovereign selling and I think the answer is yes Jack because that's when you look at the bond spread and what the bond spread did say between buns and 10-year treasuries it blew out in a way that suggested that far from being up the euro should have been down against the dollar. And that suggests to me that that was real money going, I'm out of my treasuries. I'm switching into burns and selling my and I'm doing the FX commercial.”

US domestic investors have aggressively bought the dip; ETF shares outstanding have doubled since the election and are at absolute highs despite equity declines, suggesting retail is fully in, while foreigners have suffered enormous currency losses and are likely to take profits.

“it looks to me like US domestic investors have just once again aggressively bought the dip, Jack. I mean one of the things I like to look at some of these ETFs and you can look at the shares outstanding and a lot of these ETFs which tend to be bought by domestics. You can see the the shares outstanding have doubled since the election and are now sitting at absolute highs despite the fact that these guys have lost water.”

Most countries have reacted to US tariffs by not escalating (following Scott Bessent's prescriptions), but Brigden fears China will not back down—they are 'in it to win it' and have cards to play because they are the largest provider of savings in the world.

“Most people have reacted as kind of you would hope they would. So they they've done what Scott Passen advocates so they haven't uh escalated. So we've seen a calming down. I I fear about China. I think the Chinese are in it to win it. I think uh they are not going to back down. I do not think they're coming to the table and I think they are quite capable and you can see it in what they're trying to do fiscally of at least sticking this thing out. Now we can make a decision that 5 years from now they've lost. We've won. But I think it's very naive to assume that they haven't got cards to play out, right? When they are the largest provider of savings in the world, right?”

Tariffs are stagflationary in the near term: they are demand-destructive through higher consumer prices but also inflationary, creating a damaging combination that is not recessionary *yet* but creates mechanical conditions for recession.

“this is stagflationary, right? You can see it this morning if you look at Empire PMI prices paid prices received it spiked enormously. It's commensurate with PCE being back above four. Um and so this is just uh this is going to be inflection. It is demand destructive uh because of that impact on consumers. Um and so the risk is that consumption will weaken.”

Private credit and structured credit spaces are opaque and face deterioration if high yield spreads widen; the push to get 401k money into private equity is suspicious, and higher rates have already stalled many private deals.

“So I you know it's it's a very uh difficult sector to get any sense of to your point of what's of what's going on. Um the opacity is very low when you look at that space. But I I tweeted out the other day and I'm deeply suspicious about this. Um this desire to get 401k money to be able to p buy private equity. Um I'm not the only one. The OCD came out with a report the other day where they talked about how higher interest rates have tracked a lot of private deals.”

If US domestic investors want to keep equities rising while the capital account surplus is declining (less foreign money available), they must drop their own consumption and raise savings rates, which is structurally good long-term but bad short-term for the economy.

“you're asking Americans to to to your point earlier Jack if the if the capital account surplus is down and more of it has to go to FDI foreign direct investment building factories and by the way funding the government right because that money they're not managing to shrink their need right that even less or less goes to equities which means that if Americans want to keep that equity market rising they have to drop consumption and raise their savings rate right which wouldn't be good either for the economy right I mean structurally long- term Yes, but short-term, no.”

China faces significant obstacles but has huge domestic savings that can be redeployed; if China spent its savings on social programs (national health service, pensions), global bond markets would be devastated because China makes up 28% of global savings.

“I think China has significant significant uh obstacles. They've got to go. They've got a very unbalanced economy. We know that's the case. The big thing that they have is they have huge amounts of domestic savings, right? So they can redeploy those, right? God forbid for the rest of the world if they do because they make up basically 28% of global savings, right? So if we wake up one day and China said, 'Oh, we're going to do a national health service. Oh, we're going to give everyone pensions to retire, right? And we're going to spend all our savings to do that.' the rest of the world's bond markets get eviscerated right”

There are three objectives of tariffs: a revenue element (the Senate budget proposal pencils in $2 trillion from executive orders/tariffs, corresponding to the 10% baseline), strategic objectives for re-shoring sensitive industries, and punitive/leverage tariffs against countries that don't cooperate.

“I think there are three objectives of tariffs and I think we have to take a step back and we've been writing about this for a while. So there's a there is a uh a revenue element of tariffs, right? There is a key revenue element in the Senate budget um proposal has penciled in $2 trillion of revenue from executive orders aka tariffs right so that I think is kind of that 10% baseline tariff. I think there are some strategic objectives re on shoring to ensure uh control over strategic industries uh that are domestically um uh satisfied. So whether that's um semiconductors or pharmaceuticals or whatever, right? And then I think there's the um I don't like you. I want to achieve something. I'm gonna just bash you around a little bit kind of tariffs”

There is a 'sell the US moment' in Brigden's experience (seen 5 times in his career) where investors sell dollars, stocks, and bonds simultaneously; these moments demand policy response and usually don't last, but represent extreme price action and untenable situations

“when I was at Lehman Brothers, which you know in the uh in the early late 80s, early actually um we used to have this expression called a sell the US moment. So a sell the US moment was you sold dollars, you sold US stocks and you sold US bonds. And I've probably seen them five times in my career. They generally don't last Jack because they demand a response from policy makers. It's like an untenable, you know, the Armageddon out of here kind of Armageddon type uh move.”

If the Trump administration succeeds in policy objectives (lower dollar, smaller capital surplus), this mechanically means US stocks underperform foreign stocks and other assets outperform, which is all investors need to understand regardless of policy justification

“Think about what they're saying. Think about you can argue well they won't be able to do it. They they might not be able to do it. But if they do it guides it means a weaker dollar. It means lower uh capital account surplus. It means at a bare minimum US stocks underperform the rest of the world and other assets outperform. And that's really all you've got to think about, right? and stop listening to these talking heads cheerleaders on CNBC because it's always about the flow of money and it's always about the dollar.”

This dollar move is happening rapidly, and Brigden is concerned that US domestic investors have aggressively bought the dip; ETF shares outstanding have doubled since the election and sit at absolute highs despite equity losses, indicating retail enthusiasm despite downside moves.

“I do think that some of the moves are happening quite rapidly and you and this is one thing that we've been stressing to our clients. Um, and one thing that sort of worries me when I look at positioning in the equity market, uh, it looks to me like US domestic investors have just once again aggressively bought the dip, Jack. I mean one of the things I like to look at some of these ETFs and you can look at the shares outstanding and a lot of these ETFs which tend to be bought by domestics. You can see the the shares outstanding have doubled since the election and are now sitting at absolute highs despite the fact that these guys have lost water.”

There are two paths to foreign equity outperformance: 'nice' path where European/Asian stocks rise while US stocks go sideways, or 'nasty' path where all stocks fall but US falls more, narrowing the divergence between valuations.

“How do you rotate? You look at a divergence right between European stocks down here, US stocks here. How do you narrow that divergence for one or two ways? You have it nice, so European stocks just rise, US stocks go sideways, or you can have it nasty where these drop really hard and European stocks go down a bit. And this is what we've obviously seen because this was the one that was out. US stocks worked. European stocks were not as heavily owned, right? So, you sell what you own.”

Now is not the time to be invested in tech or in the US; the Trump administration's stated goal of rebalancing suggests money is shifting away from globalized tech winners and toward re-industrialization.

“this is not the time to invested in tech this is not the time to be invested in the US this is absolutely the wrong time and we haven't had that flush out jack.”

HYG (high yield ETF) put spread (78 strike/75 strike) was a timing-specific trade exploiting suppressed volatility; recent moves have validated it, but the broader point is that credit spreads face structural pressure.

“So, we've used HY in the past because it's it's actually a really nice uh trading vehicle because it tends to track sideways for long extended periods of time that tends to lead to V getting quite suppressed Jack. So if you catch it right and we've got some metrics that we use that have historically worked out quite well and I will say actually we jumped the gun a little bit because we thought it was going to go and it was the right thing to do but we still don't technically have our sell signal yet.”

Brigden is structurally bearish on long-duration bonds and doesn't like the long end, but is willing to hold short-end bonds for cash or is favorable on bond market steepener trades (long 5y/30y spread).

“I do think the inflation pulse is coming. So, I don't really like the long end bond market. I don't mind being invested if you've got cash in, you know, in the shorter end of the bond market. And if you're trading the bond market, I'm in favor of steepener. So, yields relative long-term yields versus short-term years. We've looked at 530s. Um we think those continue to rise.”

Citbank and other major banks have recently upgraded Europe and Japan while downgrading the US, and Invesco, a huge global fund manager, announced selling of the US and buying of the rest of the world, signaling that real money (not just retail) is already rotating out of US assets.

“standard US bank city bank right just cut their expectations in the US they double upgraded I don't quite know what that is double upgraded Japan and they upgraded Europe right we just had I was listening to Bloomberg this morning invesco huge global fund manager sell the US by the rest of the world and the dollar is the is the lynch pin that does that Jack”

The $2 trillion revenue from tariffs (roughly 7-8% of imports depending on import substitution) is meaningful fiscal impact, but the US is running a 7.3% GDP budget deficit that is expanding, not contracting, and the Doge cost-cutting effort has been scaled back from $1 trillion to $150 billion, so deficit reduction is not happening.

“And we are running a now as of this morning like a 7.3% of GDP budget deficit, right? This thing is not going down, it's going up. They've just downgraded what they think they can say from Doge, right? From a trillion to 150 billion, right?”

The Trump administration expected tariffs to be aggressive and to have significant economic consequences; they went through a three-stage rollout: first, people thought it would be like the first administration; second, soft data looked good and confirmed the narrative; third, at inauguration, reality would hit and hurt.

“we wrote to our clients and we said we're going to have this sort of three-stage process on the day of the election. We said it's going to break some eggs. People don't realize this is going to be much more aggressive. They want to reshape the economy. This is a radical agenda. But we'll go through this phase where everyone will go they'll assume it just look like the first administration. Woohoo. And then we'll get this kind of confirmation period as all the data picks up and the soft data looks fantastic. And then we'll get to the inauguration. And then we said reality is going to hit and it's going to hurt.”

Treasury Secretary Scott Bessent has sound rationale for tariff policy and administration economic goals, but execution has not been smooth; the quote 'Wall Street's done well, Main Street hasn't' reflects the administration's equity division.

“but I do worry that in a world where the dollar is less attractive, where we are not dealing with the fiscal deficit, despite the spin from Doge, it's not happening. Where if we go into a recession, our needs for funding will rise because the deficit will increase as as automatic stabilizes, welfare payments, this sort of thing, unemployment kicks in and tax revenues decline.”

BFA's flow survey shows retail investors were the most active 2-3 months ago and have kept the faith despite losses, demonstrating US domestic commitment to US equities.

“We saw it in some of the the market data. So BFA has that fantastic flow show survey where they showed retail investors like the most active ever two or three months ago. And these guys have just kept kept the faith, right?”

The administration's ideal scenario would be the US equity market going sideways for the next 5 years while the economy re-industrializes; this is a benign outcome but unlikely.

“I mean, you know, as I said, I'm I'm not overly surprised if we go into recession that we could see 30% top to bottom in the US equity market. I think that would be a relatively standard scenario. But at that point then the Fed put comes into place and then the Fed is cutting rates and you know we get a standard recovery. Um for the bond market they have nothing they can do on the bond market really. I mean they can they can shift more issuance to the front end. This is government right? Treasury can ship more issuance to the front end. They can kind of ask some favors around the world. You know, Japan, will you show up at the auction? But you can't do that many times.”