Michael Howell, founder of CrossBorder Capital and author of Capital Wars, told Aaron Hoddinott on Pinnacle Digest that the conditions supporting the stock market rally are changing. Liquidity that kept risk assets elevated is beginning to withdraw as money shifts toward the real economy, including AI infrastructure spending. Howell said the rate of growth in global liquidity peaked over the past twelve months and has since started to decline. For the first time the absolute level of liquidity is also falling, a signal he associates with approaching the bottom of the economic cycle.
He emphasized that capital markets are dominated by debt rollover rather than fresh investment. “Approximately 80% of all primary transactions in capital markets now relate to the refinancing of existing debt. All the financial crises of the past twenty or thirty years have been debt refinancing crises in one way or another.
If you don’t have the liquidity, you can’t renew your debts.” Past episodes such as 2008, the Asian crisis, the 2019 repo spike, and the edges of the COVID period all turned on the ability to refinance existing obligations. “Liquidity needs debt, debt needs liquidity, and so on. And when this relationship breaks down, we find ourselves in a financial crisis.”
The interview highlighted a persistent K shaped split. Asset owners have benefited from rising valuations while many participants in the production economy have not. Howell noted that since the gold window closed in 1971, U.S. federal debt and global liquidity have each grown at roughly 8.5 percent compound annual rates, while gold itself rose about 8.6 percent annually over the same span. He views gold as a direct hedge against monetary inflation and expanding government debt. China faces even heavier debt pressure and slower relative growth, reinforcing the case for hard assets in his framework.
On the AI boom, Howell pointed to companies such as CoreWeave as carrying classic technology cycle risks. He drew parallels to earlier infrastructure booms such as railways and fiber optics, where aggressive debt financing eventually produced margin collapse and bankruptcies once liquidity conditions tightened. Equity valuations have already begun to compress as price to earnings ratios fall even while parts of the real economy remain strong.
Howell sees short term support for bonds once the cycle turns. Ten year Treasury yields near 5.5 percent and real yields around 3 percent on inflation protected securities look historically generous if nominal growth slows from current levels. Commodities enjoyed a strong year, rising as much as 45 percent on average in some measures as real economy liquidity increased, but he questions whether that trade has further room once financial conditions tighten further.
Bitcoin receives special attention as “the most liquidity sensitive asset in the world.” Howell said he holds it for the long term as a hedge against monetary inflation alongside gold. He is watching the $70,000 level: a sustained hold above that price would be constructive, while a drop below it would change the picture. He continues to recommend owning both gold and Bitcoin rather than choosing one exclusively.
Howell directed listeners to his Capital Wars Substack and the Global Liquidity Indexes site for ongoing data. The core message is that investors who have enjoyed years of rising portfolio values should watch the liquidity backdrop, because the same debt refinancing dynamics that produced past crises are again becoming more binding as the growth rate of money slows.
