Transcripts

Erik: Joining me now is HonTe Investments founder and bestselling book  author Alex Guravich. Alex has a new book out, of course, the first book  everyone remembers is the Perfect Trade. The next book is called The Next  Perfect Trade. We'll talk about that at the end of today's interview. But Alex, I  want to jump in and start with your specialty, which is fixed income. 

Boy, talk about a moment in fixed income markets where there's a lot of variant  perceptions. Some people are saying, look with Jay Powell going out, Trump is  gonna get his way. We're headed toward much lower interest rates. At the same  time there's other people saying no, it's it's the opposite. 

Too low of a policy rate is going to ignite inflation fears. We could see a crash  in the backend of the bond market. What's your take? How should we  understand the fixed income market and the outlook for bonds?  

Alex: Eric, thank you for having me here. It's good to be back. And yes, let's  start with a fixed income market because I think US fixed income market lies at  the heart of everything, and it responds to probably the most robust set of  economic data, which is US economic data. 

Though admittedly economic data in the US over the last few months has been  quite confusing. Even like to think of the Government shutdown, which  disrupted various economic statistics reports and made them very distorted and  a lot of conflicting data. We could dig into this a little more, but just to look at  the big picture. 

The data has been inconclusive. As for the fears that over easy policy by the Fed  will crush the long end of the curve, I think it legitimate to expect serious  steepening of the yield curve. The beginning of every easing cycle. It's not that,  for example, when people were giving an example, people were talking about  how last year there was a bunch of easings, but long dated yield didn't budge. 

That is actually not strange at all for someone. Who traded almost 30 years of  fixed income markets like myself, I've seen this picture many times over,  starting from, for example, the years like 2001, 2002, when there were periods  when the short term interest rates fell dramatically. But the long term interest  rates were sticky, causing a steep yield curve.

That's a somewhat normal picture. What happens? At least in my experience  that first should't rate and interest rates go down and then long and sticky. Then  eventually, when rates stay low for a while, people get excited about going out  on the curb and picking up the carry and that carry hogging if you wish, leads at  some point a very intense rally in the long end. 

Which is usually also overdone, like it was in 2000, beginning of 2003, ended  up in a sell off. It was overdone during Partially in 2016 and of course overdone  in 2020. All of those, in hindsight, overdone. So those overdone long end rallies  come, but they come much later. So I don't think we're very different from that  playbook so far. 

Just in terms of behavior of market itself. Now a separate thing is to discuss is  what is actually under the hood and how is this economic environment  different?  

Erik: Alex, let's keep that thought going and dive a little bit deeper.  

Alex: There is a concern about the Fed being over easy and creating inflation  with this administration. 

Now I'm probably fall on the side of not being too concerned about the facts of  Fed policy. Different constitution or different like slight hawkishness of ishness  of the Fed, about, I'm not too concerned about this having a major impact. Why  

is that? So I really believe that the difference between hawkish and dovish fed is  at most 50 basis point range for a couple of meetings because eventually the  data dictates. 

One way or another. The reason there is a little bit of range of outcomes right  now, because this data is ambiguous, if the data becomes unambiguous. For  example, if we have inflation continuing to moderate and employment  continuing to deteriorate, any FED hawkish or dovish will take rates down and  eventually take them to zero until the situation rectifies. 

So the difference between dovish and hawkish Fed is really how quickly they  get to inevitable policy, inevitable convergence of policy. Now of course, you  could argue that is the history of the Fed operating on a somewhat reasonable  assumptions versus highly politicized FED I really cannot give you a full 

picture on this because we dunno if the Fed will be completely different.

My intuition for now is that it won't be that different. That's the first thing I'll  start with. And the second thing is what is really gonna win? Inflationary  deflationary impulses on the economy right now.  

Erik: Alex, let's go ahead and dive into those economic drivers. Then, as you  say, we'll set the politics aside and talk about the fundamentals. 

Alex: So what really drives interest rate? Let's start with a very simple principle  that the Fed has dual mandate inflation and employment, and inflation, as we  know has been particularly high, but not necessarily deteriorating even probably  there are many signs of softening inflation and employment. On the other hand  is softening, but not yet convincingly, there is no convincing down spiral. 

So we have that picture of somewhat push pull, both not very strong push pulls  on either side. So that's what creates ambiguity. Now I have to confess, I have a  confirmation bias because for a couple of years now, I've been pounding my fist  

on the table to say that this higher real interest rates will lead to eventually  deterioration in employment because once you make money more expensive,  the balance sheet. Balance sheets start shrinking and people are incent less  incentivized to expand and employ people. 

That's just a normal process. So I was waiting for the cycle to happen. So as I'm  seeing the cycle happening, I'm of course getting a confirmation. Yay, I told  you. The job market is deteriorating, however, it is not de deteriorating awfully  fast. I cannot really claim victory. There are many indications that show it's still  being relatively stable. 

Furthermore, there is a little bit of ambiguity. How much of it's AI Now I fall  into the camp that AI has not yet made a significant dent in the job market, but  will in the long run. That's my view of the situation. I believe that AI will lead  to tremendous deterioration of job opportunities, which is, and again, we can go  into this deeper, but very differently from any other past technology. 

In some aspects, it'll act similar to past technologies in technological advances,  but in some areas it'll act differently. So it's not a single one way how AI will  affect job market. So there will be areas in which AI will do, which past  technologies did, which just change the texture of the job market and in sa and  change the structure of certain economic activities, but without actually taking  them away in certain areas AI will eliminate a whole categories of economic  activities and that interesting it might be headwind not just for employment, but  for GDP as well. This is where I'm not sure, like everybody talks about 

explosive AI growth, and as a person who believes in singularity, of course I  have to subscribe to long term explosive AI driven growth. 

It's hard not to subscribe to it, but I not necessarily see explosive AI driven  growth in the short horizon.  

Erik: Alex, I wanna ask you how you think about where AI fits into the  economy and how it's gonna play. 'cause some people say, ah, AI, it's an  interesting trend, but once they figure out how much the energy's gonna cost,  it'll probably fizzle out. 

I don't see it that way at all. I see AI as being. A cold war like arms race thing,  where it's going to be so important from a military perspective that  governments, particularly US, Russia, and China, are going to recognize that  whoever wins AI was just like, winning the space race in the 1960s was all  about military dominance. 

Once you controlled space, you could drop nuclear warheads from space on the  other guy. I think AI is gonna be that important. And I think that whether you  like the fact that it's going to create an energy crisis, and I think it will or not it's  going to happen because it's going to be a matter of national security. 

Am I just being a conspiracy theorist to say things like that, or do you think it's  gonna be that important?  

Alex: I would say I wholeheartedly agree with you. I think it almost  mathematically impossible to be otherwise. I think that already we're already at  the stage when being skeptic about AI role in the military developments is a  thing of the past. 

There is really almost no room left for skepticism about what you're saying. It'll  almost inevitably will be an arms race in terms of ai. What is interesting, I was  even thinking, which is completely independently of what you just said.  Specifically this morning I was thinking about the impact of AI, and military,  and I was thinking that paradoxically, it'll probably increase dramatically  military budgets because of this AI paranoia. 

But on the other hand, it actually will increase employments because eventually  we're not gonna need ground troops. I think we are outliving the age of ground  troops or just generally military personnel? I think people pointing and shooting  is very close to becoming a thing of the past. And actual human troops will be  used more like mediators.

Peacekeepers rather than as assault force because like it's moving much more to  I think, Autonomous weapons and autonomous weapons will not far function  without complicated AI. And there's just no way a human being can push  buttons as quickly as AI can. So there will be no competition. You cannot have  a human army fighting a robotic army. 

If anybody reads murder Bot diaries, which is popular books this day, so watch  the show. They can feel that humans cannot. Fight against bots, it's not gonna  work. That's kind. But that's my view on the military. So I think it's almost  unavoidable. And I think it touched on something which I think a lot about and  also agree with you, is the energy crisis. 

Erik: Let's move into energy next then, because these are so tightly related. I  think that we're headed toward an energy crisis before AI hit the stage. With AI  hitting the stage, I think AI is gonna become a really big deal. A lot of people, a  lot of regular mom and pop Main Street folks are gonna say, Hey this AI thing  is using up too much of our energy. 

It's making our electric. Bills double in price. We gotta shut AI down. We've  had enough of it. We want our energy bills back to what they were. And the US  military is gonna say no. We absolutely have to keep the emphasis on winning  the AI race because it is an existential threat in the new world, and we have to  continue. 

I think it create, I think it exacerbates an energy crisis that was already certain to  happen. And I think that energy crisis is gonna be. Bigger political topic than  the energy crisis of the 1970s. Do you agree with that? And if so, what's the  outcome and which energy sources do we see need to see the most investment  in where the investment plays? 

Alex: first of all, I will say that like the actual structure of energy market. It's  very hard to predict it. As a macro trader, you almost have to be a scientist,  right? Or a futurist because you don't really there is a political factor. For  example, certain things like Thorium reactors, right? They might be, they  probably feel, we probably all know that they're feasible, but the adoption of  them, there is various political aspects and problems of adoption of various  types of energy could be an issue. 

However. There is a lot of like scientific questions. We don't know what kind of  energy sources will become most efficient or cheapest in the future. How  quickly we're gonna be able to build energy efficiency of computation. So I do  not know exact structure, what's gonna happen, but what I think is undeniable is 

that compute is growing and okay, you could say, I told you I have to say I have  tons, I've been pounding my fist on the table over there for probably about a  decade long before I even knew anything about LMS and chat GPT, it was  always in my head that when I look at the growth of compute, that eventually it  would consume the vast share of energy of humanity that was unavoidable now  for decades. 

The only reason why it was not noticeable, because compute was taking very  small portion of all overall energy, but the way it was growing, it was very clear  that the charts were undeniable. It would overwhelm everything. And I think it's  continuing to, it. It's continuing to grow and it overwhelm all other energy  demands. 

Like there and no, and there is no way, at least in my mind, technology, whether  it's. Renewable sources or introducing more nuclear sources or even fusion will  be able to catch up with it because I know that you tend to be more skeptical of  fusion than I am, but even in the most optimistic prognosis of introduction of  fusion, like even if you're the biggest fusion enthusia, by the time you put fusion  online and actually the actual capacities of fusion, I think the demand for  compute will outrun it. 

And even with the most optimistic view of energy efficiency, improvement of  compute, still compute will grow faster than any of other stuff. I just don't see  how and what would stop that, I think that train is off the rails. So energy will  unavoidably become a bottleneck. What has been a conundrum for me? The  

question that you ask, how to invest in energy. For example, a couple of years  ago I was reasonably constructive on oil. 

I was not long front oil contracts, but I was for long deferred oil contracts. But  and for a while the trade worked okay because whatever the front end was  flopping around deferred oil was earning carry from backwardation. I was able  to sit on it, but last year it went all into downtrend and I just got out of oil. 

I had to wave a white flag there with oil. And my question is now will oil even  be meaningful in terms of powering the compute of the future? Does it even  matter what the oil price is? For now obviously it does, but will we just, the  other sorts of energy become so overwhelming that oil does not even matter? 

Now I've obviously an interesting place to look at has been uranium and it has  been done doing very well, and I've been constructive on uranium mining and  remains so. But then we can see will that be efficient enough? Should we look  at some other chemicals elements, so should we look at other sources of energy.

So overall, the demand of energy will continue growing. That's, for me, that is a  given for me. It's very likely that energy will be the bottleneck for civilization,  for the growth, for I think energy, what we're gonna run into. To me that's the  most likely stumbling block for the next few decades. But the last question. 

What kind of energies actually will be mining and will prove to be most  profitable? I feel a little bit outta depth because. There is a lot of scientific  questions there.  

Erik: It makes sense. Alex and I couldn't agree with you more, that the most  important thing is going to be a thirst for energy and a shortage of energy. 

I see it as a competitive issue between nations and frankly, this scares me a bit,  but China is kicking ass. China is building more. They have more planned and  under construction conventional lightwater reactor based nuclear plants already  

in the works than the entire US fleet of nuclear plants. They are doing more  with, you mentioned thorium reactors earlier. 

They're doing more with molten salt and thorium reactors than anyone else, and  they've advanced the technology that was developed at the Oak Ridge  Laboratory in the 1960s and taken it to the next level. Already, they've already  announced a fleet of container ships to be powered. By thorium reactors, they're  doing on both the conventional and advanced nuclear more than anybody else. 

Meanwhile, they're building out wind and solar and and every kind of  imaginable power plant, and they're doing it. At a pace that's not constrained by  the, in North America we have to have public hearings and consider the  implications on the Native American tribes and so forth before we build  anything. 

They don't follow those kind of rules. The government just says we're gonna  build and build like crazy. And that's what they're doing. And I don't see how  we're going to keep up in what I think is a race for who can build enough energy  to power AI to create military dominance, which is what I think this race is  really about. 

Alex: Yes, I would agree. This is scary. The only thing I would say is that the  history shows when a communist run country starts, this kind of by decree build  out of anything, it usually goes sideways. The history of the Soviet Union  shows, even if it at the moment, it is terrifying, but it's not none less, no less  terrifying.

Those build outs are terrifying. They just in the end sometimes for reasons  which are very hard to predict and that being pointless or useless. Or obsolete or  dysfunctional. So I will not completely, I'm not completely certain that China  will succeed, at what're doing not waste end up huge. Failed state debacle. That  is, at least that's what the history would suggest is gonna happen. 

But first of all, it could be different this time. And secondly, it's terrifying  nonetheless, because failed states can become dangerous as well. 

It's more like the arms race itself is terrifying. It's as you mentioned, this  situation, when there is such a counter position, it is definitely something to  really worry about. I don't know how to trade that, but it's definitely something  to worry about. 

Erik: Going back to what types of energy and maybe things that we could  trade. 

Let me run my thoughts on this past you and get your feedback. It seems to me  like the AI crowd has already figured out that the right strategic long-term  answer is nuclear, and they're already doing a lot of investment on that. But I  think what they're going to find out very quickly is, although that is exactly the  right long-term solution, it. 

It takes longer and costs more to build than you bargained on, and particularly  the takes longer part, I think is going to become debilitating for the hyperscalers  that are used to doing things on a much more immediate timeframe. It seems to  me what's coming is there's gonna be this moment of reckoning where  everybody says, oh boy, we gotta figure out. 

At any cost. What can we build quickly from available fuels that doesn't take as  long as nuclear? And I think the answer is natural gas fired power plants. And I  think that probably the biggest bottleneck is going to actually be the gas  turbines. Those great big turbine machines that are used to create the dual cycle  gas turbine plants, the efficient gas. 

Fired electric generation things, there's like a six year lead time to order those.  Somebody is going to have to massively ramp up production of those. And it  seems to me that gas fired power plants as an interim solution until nuclear can  be built is likely to be a really important investment play of the next decade. 

What do you think of that thesis? 

Alex: It makes a lot of sense for me especially because US definitely has some  natural gas. So that is not probably, as you say, it's probably natural quantity of  natural gas we could get is probably not gonna be the first bottleneck. And it is  also true, yes. Nuclear plants have a 10 year cycle to put them online. 

I don't know if it's correct, but that's my impression. So there is definitely  something like this might happen. The thing that I would say that my take on  this Military Cold War ramp up crisis situation? I think the current, the way the  current wind blows and with the current administration, I feel like us will have  some flexibility to just declare with the various, with our military production  acts to clear some of the obstacles and make things happen much faster. If  they're if they're on the same page as those hyperscalers who are trying to do,  then they could clear a lot of regulations outta the way. That's my impression.  So things might go faster than they have in the past, even in terms of nuclear  power, but in, but that could also pertain to production of those turbines you're  talking about. 

Erik: I think that is already happening in nuclear power. And for anyone in the  audience who's not aware, normally the Nuclear Regulatory Commission has  been in charge of all things nuclear and frankly they're a bureaucratic  organization that I think, has done more to stand in the way of progress than to  regulate it over the 50 or so years that they've been in business. 

The DOE, the Department of Energy is literally end running them and has  introduced their own. Regulatory process to say if you wanna bypass the NRC  completely, you can go for a DOE approval maximum. I think right now they  just increased to 30 megawatts thermal nuclear reactor energy can be prototyped  in a DOE permit without NRC approval. So that's, I think, the first time in the  history of the United States that a that a private sector company could apply for  taking a nuclear reactor critical that means actually making, nuclear energy  from it without an NRC approval. You can get it from DOE now, and as I  perceive this, it's basically some political infighting where DOE says, we're not  gonna wait for the NRC to get its act together. 

Provide the people who need it with an alternate path to, to get to nuclear  energy. And already a bunch of companies have jumped on that. Now, that  doesn't allow you to build the gigawatt power plants that we need, but it does  suggest that maybe we're on the path to getting there. And what I think is gonna  happen is we're gonna realize, it still takes years to get some of these new  advanced reactor designs figured out and scaled up and ready to really build at  scale. In the meantime, we need a whole bunch more natural gas. We got plenty  of gas. It's not gonna be a question of there not being enough gas and. As I 

understand it now, it only takes about a year and a half to build a new natural  gas fired power plant. 

Once you've secured the the turbine the turbine itself, there's something like a  six year backlog to order those things, and that's where I think somebody's  gonna have to do some, as you say, wartime kind of thinking to dramatically  upsize the capacity for building. More natural gas, fire power plants quickly,  and I'm trying to figure out what the investment play is in order to get on top of  that one. 

Alex: Yeah, definitely that would be an interesting play. But under this thesis,  anything related to energy build up where the nuclear natural gas could be a  good play because both of them could work out because as a, you could argue  that if energy demand will grow as far and as rapidly as we think. Any marginal  energy will be good. Any sort marginal source of energy, any incremental  energy will go up in price. That could be one argument, but another argument  would be that certain energy sources will just go outta style and nobody will pay  attention to them. That those are the two arguments I'm torn between. 

But definitely energy is an interesting sector and whatever happens in energies I  wanna reiterate, I do think that will be the bottleneck.  

Erik: Let's move on to another sector, which boy is really getting your attention  if you are long, precious metals. We've just seen a whipsaw in the precious  metals market as well. 

It's a whipsaw in gold. It's more knocked out and down for the count in silver  and bitcoin. What's going on with precious metals? Why, a lot of people are,  were saying that it was caused by Kevin Walsh's nomination. I don't believe  that. I think it may have been a catalyst to bring about a, an overdue correction. 

But what do you think happens next here for precious metals and what caused,  what just happened?  

Alex: Yeah, first talking about the nomination to me. It is more likely as what  you're saying, and that's what I wrote in my recent investor letter, that if you  notice, the nomination didn't really impact the dollar or the interest rates that  much. 

Everything moved just a tiny bit, but there was no real big repricing. So clearly  precious metals were reprised because there was some vulnerability there and  it's unsurprising given, like how huge and relentless was the rally in, for 

example, silver that probably some people are very long silver and then they  had probably some trailing stops and, which as people often do, when you have  a market on which you have huge gains, you don't wanna quite give them up. 

So you put a trailing stop, right? But then when as trailing stops starting getting  taken out, suddenly markets starts gapping down and it has to clear at the level,  which is more like. Close to the long term trend. I do not honestly know if that  signifies the end of the precious metal cycle. 

It's hard for me to say because silver ran for, I was constructive on silver for  very long period of time, but it ran much further than my price targets. It  reached my price targets in 2025 and went past them and went further and  further. Like I did think that silver would get to 50-60 I didn't really have. 115  penciled in for January, 2026. 

Not that I said it couldn't go there, but my conservative price targets were lower.  To me the most interesting about precious metals is they have very long, multi year cycles and they're not simultaneous. There is gold wind. Much earlier than  silver. 

And while gold was making new highs recently, it definitely slowed down  compared to silver. And silver was dormant forever, and then silver took off and  overtook gold. If you look at gold silver ratio, it went from extremely high to  actually to the lower end of the range in January. Now Platinum was sitting  dormant for even longer. 

Platinum was basically sitting at $900,000 forever, and then it took off in 2025  and started trying to race to catch up to silver, but it's still way behind now.  They all corrected, but to me gold seems to be a flatlining. Silver is trying to  decide. Platinum I think is still early in its cycle. Of course we can also go to  Palladium, which I'm working, watching currently slightly less, but also  interesting metal. 

And it has to do like platinum palladium ratios have to do with, of course EV  adoption and like the industrial use. But platinum has pretty solid underlying  other, some store of value demand, some jewelry demand. So there are, it  cannot be just attributed all to. Automobile industry usage. So I think it's very  hard to pinpoint what moves precious metals on a given day. 

It's easier to just look at the charts and see what are the price ranges for them.  And to me, if you look at historical range, I see silver might have done the full 

cycle. Gold has gone further than one would've expected, and platinum has not  yet gone very far.  

Erik: Alex, let's move on to Japan and the Japanese Yen. What's your take of  what's going on there?  

Alex: There has been, like, if you really think about global macro markets, the  moves in Japan are probably away from the volatility and precious metals.  Japan had probably the most movement, the most interesting movement, and the  interest rates. Rose dramatically in Japan with curve Steepening. 

Who would've thought that like some bonds yield in Japan will touch 4%? I  think like a few years ago it would be completely unthinkable and yen in Japan  actually running persistent inflation and yen significantly weakening. Against  dollar and even more so against other low yielding currencies you could look  like, for example, Yen weakening significantly against China, against Swiss  Franc is probably the most dramatic currency pair. 

That trend has been relentless and it seemed like every single thing that  happened in Japan on the political front reiterated this trend, like the elections,  the new election. Iteration of the power of the current ruling party. All of this is  like more spending weak again, strongest stock market higher interest rates. 

That seems to be the theme. I do think that we could be at an inflection point of  this theme because now I think all of this is priced in and also all of this is  priced in. And also besides. The story, there's also location. We're seeing very  high interest rates in Japan and extremely weak currency. 

Typically, we develop market currencies. There is some sort of pendulum that  eventually slows down and starts swinging in that direction. And one of the  things I started to think of about, and particularly recently is, okay, we got  strong stock market, very pro growth policy. We have high bond deals, why  wouldn't people wanna invest in Japan right now? 

And if people wanna invest in Japan. Either by repatriating money to jbs or to  foreign foreigners buying JGBs or people trying to still get a piece of Nikkei, as  it keeps rallying and Japanese stock market or investment, why wouldn't that  eventually lead to stronger yen? And just over the last couple of days, that  sentiment seems to have shifted in that direction. 

I still don't know if it's a long term Tectonic shift, just a blip compared to the  overall trend. But that is something for me, interesting to look at. And what is 

interesting for me is that in my first book, the next Perfect Trade I talked about,  certain perfect scenarios that occur sometimes. And one of the great trades of  the past was in 2014 to be long dollar when dollar was very weak and long US  bond market when the shortterm interest rates were low. But the curve is very  steep and we have the setup in Japan right now. We're having very steep yield  curve and very steep yield curve. Still low. Very low real rates because of  inflation. 

Very low nominal rates in front, steep yield curve, and very weak currency. And  we have the situation that if BOJ is not going to tighten you just make money on  the roll down of the long end of the curve. But if BOJ continues to tighten,  eventually it'll strengthen the currency and the long end of the curve will  probably be fine anyway because the curve will just flatten.. 

So I'm seeing that. Seeds of the really positive situation to long currency.  Maybe you should belong everything stock market there too, but I'm a little  more ambiguous on stock market, but long currency and bonds in Japan.  

Erik: Alex, you just mentioned your first book written in 2015, the Next Perfect  Trade. 

I wanna come back to that. That book got a lot of attention when it was first  published. You talked about being a macro trader and really broke down what  you did and how your process works, looking for dislocations in markets. Then  in 2022, you wrote another book called The Trades of March, which was all  about the COVID pandemic and the trades that you had to make in March of  2020, and what that process was like. 

You've got a new book out. You've gone back to the original title, which is, it's  not the same book. It's a new version of the Next Perfect Trade. Why now for a  sequel to your first book and what's it about?  

Alex: I wanna go back to what always bothered me about strategy books. It's  them survivorship bias. 

So when I wrote the book in 2015, which came out, I was writing it 2014-2015  It's was a strategy book it is a set of strategy principles, how I choose trades,  which are more likely to make money in the long run, how to make myself be a  casino rather than a gambler. Basically turn the how to gain the edge in the  market, in my favor in the markets, regardless of whether my economic views  are correct or wrong. So I was trying to focus on how not to figure out the  economic outcomes, but how to structure.

We need trades which bring you positive expectations. So that was what my  book was about, but by definition, this book arose from the fact that I had some  success trading up to that point. And people who don't make any money,  generally, it's much harder to get your people to read your book. So but it had an  element of looking back and just saying that worked for me and hence I'm  proposing it. 

So the question would have to remain with the readers. Whether the principles I  laid out in this book would continue to work going forward. Do they actually.  Have value or is it just a coincidence that those principles worked prior to the  time the book was published? 

Now, in, in when I wrote the trades of March about COVID trading, I refer to  my first book a lot and like how the principles lined up, they popped up, but it  was not in a systematic way obviously a very unusual enviroment and  navigating those highly unusual situation, and I did talk about how I drew from  the experience of previous crisis such as September 11th or global financial  crisis, what I've learned and the mistakes I made back then and how I was, what  things I was able to do better in 2020 and what things came up again. But that  was more of a feel of a trading diary. 

Now I went back and wanted to do a second edition of my first book. Because I  wanted people to really be able to judge objectively how my principles did  actually work out, and also I wanted to be judged whether I'm occurring to  them, myself or not. That's one of the reason, going back to the trades of March. 

That's one of the reason the trades of March that published our internal trade  chatter without reductions so people could see all our screw ups, all our  successful, so people could really be in a cockpit with us and see the process.  What I'm doing here, I wanna put more like intellectual cockpit and say, okay,  this is my text on 2015. 

This is what I said in thousand 15. And then I added notes from 2025. Saying  this did indeed work out correctly here I was wrong. Or this principle, I've  actually succeeded in applying in such and such situation. And this principle I  failed to apply. And those are mistakes I actually made even. 

According to my own strategy, which is probably the worst kind of mistake, the  worst kind of mistakes, which you laid out your own strategic principles and  then ended up not having the discipline to follow them. And I'm totally open  about the fact, and I think really every trader has to be open about the fact that it  does happen to all of us.

We all have our vulnerabilities, our moments of. Either stubbornness or  confirmation bias or laziness or procrastination or fear or whatever it is that led  us or succumb being succumbing to external pressure, which leads us to deviate  from what we think is the absolute best we can do. All we can strive is to be the  closest we can to the best we can do, but none of us can do it perfectly. 

And I'm trying to really delineate in this book where and how you can notice  both the successes and the flaws of my thinking of 2015. The ideas were quite  current I believe that artificial intelligence will step in to augment everything we  do. But what I said back then that there was a certain horizon, in my opinion,  left for discretionary trading. If anything, I think the horizon shot on the bit  because artificial intelligence grew even a little faster. 

Then I expected, even though I was always optimistic on artificial intelligence,  but it went unscheduled and I'm giving this as an example to trace my thinking,  was my thinking aligned with what happened afterwards, and was my trading  aligned with my thinking? 

Those are two separate questions, but both of them are important.  

Erik: Alex, I really wanna salute you for the honesty that you show and the  approach that you take of highlighting your own mistakes. As you say we all  make them. There's nobody who's exempt from that. What's quite unusual  though, is Wall Street guys admitting their mistakes publicly. 

So many people in this industry, just to highlight, look at what I did here. I  made this incredible winning trade. Hooray for me, without acknowledging that,  their actual long-term trading record is not nearly so good. So I really applaud  you for. Are, taking this open book approach to doing things for people who are  fascinated with this. 

Help us understand, though, because this new book is really a rewrite or a new  version of the original next perfect trade. Does it make any sense at this point to  read the first one? Should people start by reading the new edition of the Next  Perfect Trade and then maybe the trades of March? Is there any reason at this  point to, to read the 2015 book? 

Alex: No, I think people should read the current book because all the material  which was in the first book is still there. In fact, I mostly kept the wording of  the first book, even though I could have edited it more because I wanted people  to read what I wrote back then and what I wanted to be very exact about.

This is what I was thinking back then. And then I have a note. This is what  happened Now. So I take everything, all the content, everything you can get  from the first edition, you can have in the second edition. So now it's the second  edition of this book that is for sale on Amazon and that's what, or in other  venues, and that's what I encourage people to purchase. But however, if you  read the first book, you can still find a lot of value to in reading the second  edition.  

Erik: And the second edition is very reasonably priced at only 10 bucks on  Kindle right now. I assume that's an introductory price. It looks like the the  normal price is 32 bucks and it's 10 bucks right now. 

How long does that last?  

Alex: I think Kindle will be there for a little bit. It's $32, I think it's for hard  covers. So there is like a hard car or paperback, Kindle versions. There will be  Amazon. You know, I cannot really control honestly the prices. So that Amazon  does always, because Amazon does its own things. Yeah, just I incur, I'm just  asking people to give it a shot. 

And if you read it please leave reviews on Amazon. It's very helpful and also  generally helps me to know what people think about it.  

Erik: And of course Alex, when you're not writing books, you also run a very  successful hedge fund for our accredited investor audience that's able to invest  in hedge funds than our institutions. 

How do they get a tear sheet and more information about your fund?  

Alex: People who wanna find out more, either about my fund or about any  other. Any of my writing or publicly available information should go to my  website, Honteinv.com It's HONTE INV .Com. And there will be like a publicly  accessed areas with various articles and books are published and everything like  that. 

And also for qualified purchases they could apply to get kind of Insight and  discuss investments, but that's not something that is open to general public.  

Erik: Alex, I can't thank you enough for a terrific interview. Patrick Ceresna and I will be back as Macro Voices continues right here macrovoices.com.

Erik: Joining me now is Uranium Insider, founder and newsletter editor Justin  Huhn. Justin, great to have you back on the show. I can't believe it's been a year  since we've had you on, folks. Justin prepared a slide deck to accompany today's  interview. You're definitely gonna wanna download this one. You'll find the  link in your research roundup email. If you don't have a research roundup email,  just go to our homepage, macrovoices.com. Click the red button above Justin's  picture that says, looking for the downloads. 

Justin. Wow. First of all, I want to give you credit just a few weeks ago, this  correction that we saw in uranium stocks. I think you called the bottom of that  exactly to the day in the newsletter. 

And that was a great help to me and your other newsletter subscribers. I wanna  move on though to another call that you've just made in the last few days. You  guys are starting to trim some positions just because, boy, this, as much as I'm  incredibly bullish, we've had such an incredible run the last few weeks. 

I look at the Stochastics now that we're extreme oversold on both the daily and  the weekly charts. Eh, now they're falling into overbought territory. So what do  you think is are you guys trimming just because it's discipline and you've done  

so well? Or is it maybe a turning point where we're about to get a swing trade  lower? 

Justin: It's definitely the former. First of all, happy to be back. Thank you so  much for having me on. Always enjoy speaking with you. I know you guys  have done a lot of work in this space so always enjoy these conversations. Yeah  the space right now has had a stellar start to the year. In fact, the fast four weeks  have basically been straight up for the uranium equities. 

The ETFs are up 30 plus percent to start the year. It's pretty, been a pretty  incredible move. We have as a trading portfolio that we established last year  that did extremely well for us last year. In fact we established it in February of  2025, and it's up over a hundred percent since inception, and that involves  swing trading, a basket of highly liquid stocks in the space. 

So for us, this is more of a chart and interpretation as well as some influence  from either the physical market and or sentiment. So sentiment is definitely  heating up here. That's one sign. But the physical market is chugging along. We  just had the UXC print today over $91 a pound up from the low eighties to start  the year.

So it's been a solid move so far in physical, we think that move has plenty of  legs. So as far as trimming positions, that primarily is the swing trading  portfolio for the most part. We do have a bit of cash in both portfolios, but we're  very net long here and expecting further moves. So not expecting a big trough,  the broad market is not necessarily my forte, but if that, loses some momentum,  we could definitely see some downside here for the equities. 

But for now it's looking very strong. And Sprott here has a war chest. They're  gonna end the day with over 200 million in cash and that's a lot of money to buy  physical uranium. And luckily they're not the only players in the spot market  right now, but we can dive deeper into that if you want. 

Erik: Yeah, let's go a little deeper on that subject because SPUT, this sprott  physical uranium trust. I think most investors don't understand how pivotal of a  role it plays when SPUT is trading at a discount to NAV. It does not have the  ability, somebody buying some more SPUT is not. Like buying uranium in the  market and taking any supply, off the market. 

But when SPUT trades at a premium to NAV like it is right now, every, share  that somebody buys where this trust itself can issue a new share and raise cash,  that's cash that you would think is immediately in the most immediate sense. In  the moment that you buy that share. 

You would think that's buying uranium on the spot market, but that's not really  how it works. There's a lag effect there. SPUT built up a war chest, as you said.  Why are they doing that and what happens and when will it happen that they  start to put that money to work? Because for, for the longest time everybody  was saying SPUT's not raising money. 

That's the reason we're not really seeing the spot price moving. Now we are  seeing the spot price, moving SPUT is raising money, but they're not putting the  money to work. How come.  

Justin: So they bought, the monthly average of the prior negotiated limitation  of annual purchasing of 9 million pounds in January, already 750,000 pounds. 

And in our estimation, they were doing this because they needed to do a couple  of things before they could come back in and raise a lot more money or buy a  lot more pounds, which is reestablish their ATM and renegotiate the, not only  the shelf prospectus and file the shelf prospectus, which they did for 2 billion.

And their ATM now has a fresh 1 billion, but also renegotiate that annual  limitation with the Ontario Securities Commission, which I believe they are in  process of doing right now or if not in, in the coming weeks. Either way, they  are back in the market doing some purchasing today, but leading up to filing  that new prospectus. 

Negotiating with the OSC, it seemed like they were treading lightly, so they  weren't issuing as much as many units as they normally would when trading at a  premium. And as mentioned, we've had a very equities risk on environment for  the entire month so far, with the exception of a couple of days. 

And so they just traded at an increasingly large premium to their net asset value.  I think the highest closing nav that they had this month was pushing 9%  premium. So yesterday, once we saw that their ATM had been re-up to a billion,  we saw SPUT trade down pretty heavily, taking it all the way essentially back  down to nav. 

And what that was SPUT actually ising issuing units into the market. They  raised almost 20 million yesterday. As far as we can tell, they've probably raised  north of 50. I think they've raised somewhere between 60 and $70 million today  alone on Tuesday the 27th as we record this. So the war chest is basically a  factor of them not buying uranium because they were treading lightly prior to  negotiating again with the osc. 

So that is all coming to a close and they're gonna be back and it feels to me,  Eric, there's a bit of a Wall Street awareness of some type of kind of uranium  squeeze environment here. In fact, we're seeing multiple elements in the  physical market that are resembling Q3 of 2023, which is essentially, we had a  firmly established trend in the spot price and the sellers started to hold on a bit  more tightly to their pounds. 

And we started to see that, that dynamic over the past, let's say week or so.  Wasn't there to end the year, not in the beginning of the month, but it's not just  spud in there buying, we see traders in there as well. Other financials, hedge  funds and banks are in there as well, and utilities also. 

Some of the utilities are chasing the spot price here, and there's decent activity  in the term market, so all signs are pointing to further tightness in the physical  market and higher prices. 

Erik: So just to recap all of that, the story of the last quarter of 2025 was  basically, look the fundamentals are really terrific for the uranium market, but  unfortunately the spot price just isn't moving for some reason. 

And until it does, this thing can't really be unleashed. Then you get all of a  sudden SPUT raising all this money. They've got the cash to buy a much more  uranium, they're not allowed to do it because their agreement with the OSC  limits the amount that they can buy. As a result, they're getting all of this cash  built up, and despite the fact that they're not allowed to put that cash to work in  the spot market, we're still up 30% on the year in January is not over yet. 

So when they hopefully negotiate with the OSC and are allowed to invest the  money that they're sitting on, the cash that they're sitting on it potentially is a  big pushup on prices. Now, what I want to come to next, because I think it's  really important for investors to think about is a lot of people have been saying,  look. 

If you look at the charts as much as the the uranium miners have done  fabulously well, that seems to be a lot of speculation. The spot price of uranium  wasn't really doing so well, and therefore, the smart money ought to not be  buying any more uranium stocks. We ought to be buying SPUT and other  proxies for direct investment. 

In not uranium miners, but uranium itself because it's the commodity as  opposed to the stocks that hasn't moved yet. So you really ought to be doing a  sector rotation, if you will, out of the uranium miners into Spot and other  proxies for uranium itself like YCA and the other tickers that are just uranium. 

Now that's a pretty popular view. I don't agree with it. Justin, what I think is  going on is the commodity market has to balance itself in real time. The stock  market is forward looking. The stock market saw this coming. That's the reason  you saw such a big appreciation in the miners, and I think the miners have been  at a point where they can't get too far ahead of SPUT. 

Is SPUT finally takes off. I think the miners are set to explode higher. Which of  those views is right? 'cause there, it really affects where you're gonna put your  money in this sector.  

Justin: I think that the, an investment in SPUT or physical uranium, let's say  here, a proxy for physical uranium is a very strong risk reward proposition.

The downside for the spot uranium market here is relatively minimal. Of course,  you can have markets go risk off and SPUT can technically trade at a much  larger discount to n as it has a few times in the past, pushing a 15, 16, 17%  discount. I would argue the downside for spot here is, 15 to 20% maybe in a risk  off environment. 

But spot price is highly unlikely, at least right now, to be moving down at all,  let alone, a five or $10 move down. Now we will see this move up eventually  peak and eventually pull back probably to a higher low. The low of last year  was in the low sixties. Then we had a floor move up into the seventies, and I  would argue the floor now is probably in the mid to high eighties as we're  trading 91 here. 

So the confidence in SPUT moving higher is very high. And so your risk reward  for spot is extremely attractive. Your downside might be 10, 15, 20%  maximum, and the upside here could potentially be a hundred percent, maybe  even more if things get really wild. So it's a very, it's a much safer investment. 

It's very liquid. So for large institutions that don't want to take on individual  mining, stock risk buying SPUT is a no-brainer. With that said, I agree with  you. I think that Q4, Q3, late Q3 into Q4 of last year was the equities market for  the Iranian mining stock. Looking over the valley and expecting the prices to  eventually move and that was a pretty consensus type thought back then and  still is. 

We had the term market start to move up after 15 months of consolidation. We  had the spot market slowly start to mo move up. Like I said, we saw the floors  move from the sixties into the seventies. Over just a few short months, we were  seeing evidence that utilities were starting to step back into the term market. 

And in particular last summer, we saw large, very large utilities placing very  small RFPs into the term market, seemingly dipping their toe in the water,  testing the market to see where, what sort of responses they would get. And all  of that tightening has, one obvious conclusion, which is a move up in price. 

So are the equities technically overbought? If you're looking at unbiased view of  the charts? Yeah, sure they are. But what is the backdrop? How do you value a  company like NextGen, like Denison Mines these emerging producers. If you  price in $120 uranium, instead of going back to their feasibility studies pricing  in 50 or 60 uranium, it's a very different environment.

So I agree with you. I think the equities are looking over the valley expecting  this price move that we're currently in. I would argue the early stages of. I  would say yes, and I own both. I think it's a, if you're gonna buy uranium  stocks, that's best to, diversify. I think that just the classic investment capital  preservation tactics are, you shouldn't spare those. 

If you're investing in uranium, definitely be diversified and don't go all in on  one mining stock 'cause it's still mining and crazy stuff happens in mining. You  can have permitting risk, you can have all sorts of things, accidents, Etc, Etc. So  diversified basket of miners plus a reasonable holding in a Sprott, physically  random trust or yellow cake, I think is really the way to go to allocate long hair. 

Erik: Let's look at some of the charts in your slide deck, which is excellent. On  the first page, you're talking about nuclear growth projections, and I think this is  really important to get into because as much as you and I are both extremely  bullish on this sector I think it's the trade of the decade, if if not longer than a  decade. 

But look, our job as professional investors is to take the contrarian side and say,  how could we be getting this wrong? It seems to me like the growth projections  for nuclear. We have to ask ourselves, okay, what could turn this trend around?  Because as your chart on page one shows, it's just. 

Crazy high projections in terms of what's likely to happen, especially if the  Trump administration continues to get its way and is able to promote the  nuclear Renaissance as much as Secretary Chris Wright has been seems to me  like we do have a political risk here in the sense that President Trump fronts that  are completely unrelated to energy is maybe starting to not have as much  unified support in the Republican party for all of his policies. 

Do we have a risk that maybe the Trump administration won't be able to pump  this as hard as they have been, and we're going to have some of these  projections come back down?  

Justin: The good thing with Trump's proclamations in this particular case is that  this is something that the industry actually wants. 

So you're seeing utility interest in building new nuclear. You're obviously  seeing the Trump admin highlight the absolute imperative to increase electricity  generation capacity domestically. Not only just the growth of AI and data  centers, Etc, but just the growth of electrification and demand for electricity.

Even X data centers is set to grow significantly. So they see the problem, they're  trying to invest in it, they're trying to do what they can to support it. But you  also have the tech companies and the tech companies have extremely deep  pockets, arguably almost as deep as the government itself. 

And they're investing directly in nuclear. And there's a further slide on this as  well, a slide number three if you wanna jump to that. A tech company  investment is huge. We're seeing meta Oracle, Amazon Microsoft, all invest  billions and billions of dollars either with power purchase off takes from nuclear  utilities that are currently operating or restarting island reactors like  constellations deal with Microsoft to restart three Mile Island. 

And we're actually seeing big tech companies make direct offtake deals like one  Amazon made a deal with Rio Tinto for copper supply. And I highlight this  question here, just throwing it out there, but it really is more of a tongue in  cheek statement is, will big tech companies secure fuel for their nuclear  investments? 

I think that they will, I think that's an extreme right tail. Driver and potential  catalyst for this investment for the price of uranium is to actually have a tech  company make some sort of deal with a producer or an emerging producer to  

secure pounds as an offtake for future production of uranium, an eventual fuel  for these reactors that they're either funding to life extend or funding to build. 

So how many reactors will we see the United States build in terms of new  capacity is difficult to say. It's obvious. Been a, obviously been a challenge for  many decades. Clearly there's support not only from the federal government, but  from all the entities I already mentioned. So I think if it's going to happen, it's  probably going to happen now and soon. 

Will they be able to have 10 large AP 1000 reactors under construction by  2030? I think so, but it remains to be seen. And this graphic, of course, goes out  all the way to 2050. That on page one here, and the big red bar is government  targets. So anytime you're modeling that far out, you have to make a bunch of  plugs and a bunch of assumptions. 

But the, which, the World Nuclear Association, arguably, a pro-nuclear, but an  unbiased analyst in terms of uranium demand, like they don't necessarily want  to see more uranium demand or whatever you might say on that front, but  they're taking all of the government targets and factoring those into this  extremely bullish graphic.

But if you even go over to 2035, so a 10 year picture. There's barely any plugs  for those government targets on that 10 year timeframe. And in our own  models, Eric, just looking at what's currently operating, what is likely to be life  extended or already officially approved for life extension and what's currently  under construction and expected to hit the grid over that timeframe. 

That's the demand We actually model out for out to 2035 with very few plugs  besides China continuing on the pace they're currently at now. That's how we  model it. That's what we see for demand. Obviously the WNA even going way  out like this is a, this is more than a three X in global nuclear capacity by 2050,  will we hit those targets? 

It's hard to say, in my estimation, it doesn't actually matter for the length of time  for this investment thesis, in my opinion, but. Clearly there's an enormous  amount of momentum, not only in the United States, but on many other  sovereigns that are looking to build nuclear here  

Erik: On this theme of tech companies. I want to touch again, on another  potentially bearish risk factor, and again I couldn't be more bullish on this  sector, but if I think about what could go wrong, one of the things that could go  wrong is Russia has a very large percentage of the enrichment capacity. So even  if we can mine all the uranium that we need, and we can't, but the uranium  bullish thesis is based on the idea of growing. 

Demand not for raw uranium, although it can be raw, uranium can be used in  just a few reactor types. Most of them require enriched uranium and we're very  dependent on foreign sources, particularly Russia, for that enrichment capacity.  It seems to me that if the tech boys could figure out how to help, let's say,  improve the pace at which something like laser enrichment is being adopted. 

By improving that technology, it could take a risk factor out of the market and it  could accelerate demand dramatically. Because if I look at what the demand for  the next 25 years for uranium is gonna be, it seems to me like, there's no  question in my mind that there's gonna be more demand than we could possibly  build mines for. 

If we can figure out how to refine and enrich it, and it's that enrichment capacity  that I'm not so sure about. What do you think in terms of maybe the tech players  getting more involved in enrichment or investing directly in enrichment?  

Justin: I think it's definitely possible. With that said, we're seeing a lot of  investment at least domestically here, coming from the US federal government.

We just saw three $900 million awards to general matter centris and Orano  which is ironically a French company that wants to build enrichment capacity  here in the us. And a smaller award for global laser enrichment. It's certainly  possible. I'm honestly expecting the tech companies to get more involved in  direct investment in the fuel cycle now that they're putting billions and billions  of dollars down to build out the actual new nuclear capacity for the data centers.  So that has yet to really hit, we have heard kind of whispers over the past year  that the tech companies have been poking around the fuel cycle and now seeing  this direct offtake investment by Amazon with Rio Tinto for copper offtake. 

I don't think it's a wild estimation to believe that this is going to continue to  happen on the uranium front. But yeah, the enrichment capacity I think is an  interesting one. We're definitely seeing some being built out in China. Russia  still has the largest capacity. The French are building some, there's a bit more  being built out in the United States. 

Will it keep pace with the existing demand in the market? It seems to be, will it  be sufficient for these lofty projections like that graphic on page one of the slide  deck? No. So if we're going to meet those needs, we're gonna have to see much,  much more capacity of both conversion and enrichment built out. 

Assuming that this build out is largely light water, boiling water or advanced  reactor designs and not heavy water, which so far it has been not a whole lot of  heavy water being built besides in India. And those are smaller reactors, much  smaller capacity. So a lot more of the fuel services fabrication, enrichment  conversion is going to be needed to meet these targets. 

Again, these targets are also based on a lot of the reactors that haven't started  construction yet either. So we hypothetically need that capacity right now based  on what's under construction. It does appear that we see growth of enrichment  capacity relatively in line with the growth of nuclear capacity. 

Erik: Ultimately what really matters the most is whether the buyers are buying  and whether the sellers have enough to meet the amount they wanna buy. Let's  move on to page four. Talk to me about what the history of this market has been  and how it's evolving in terms of the attitude of fuel buyers. 

Because it seems like for a while, the last couple of years, we just had this buyer  strike where the buyers were convinced that increasing uranium prices were just  a blip, that the prices were gonna go back down, and they seemed to be waiting  it out. Is that changing finally? 

Justin: It does seem to be changing. 

It's very difficult for the investor mindset to, to fully comprehend how utility  fuel buyers generally operate and think about this market. You have fuel buyers  that in many cases have been working in this industry, sometimes for the same  utility, for multiple decades. And the history of this market is very different  from the present reality of this market. 

So if you go back, go back into the nineties and the two thousands following a  huge price spike in the seventies where you had a, just a gigantic nuclear build  out. You had 40 or 50 reactor construction starts per year in the mid seventies. It  was a huge build out and in a massive mine supply. 

But you had utilities clamoring for uranium, you had the US buying uranium,  you had the Russian buying uranium. It was crazy. Just an absolute huge price  spike in the seventies with the oil crisis. Then you had the price crash because  

we had so much secondary supply. So starting in 1993, we had a, the Megatons  of Megawatts program with 20 million pounds of Russian down blended high,  enrich uranium into fabricated fuel that was sent over to the United States fleet,  20 million pounds a year for 20 years. 

So the history of this market is big fluctuations in price, but most of the time,  with the exception of a few spikes, one in the seventies, one from oh four to oh  seven, and one theoretically potentially happening now, although I wouldn't  argue that this is a temporary spike being driven by either some, exogenous  event or financialization. 

I think the financialization is influencing things here, but I just think SPUT is  buying the marginal pound. We're seeing a hundred thousand pounds, 200,000  pounds move price. It shouldn't be happening if it wasn't such a tight market,  but the fuel buyer is looking back and saying, okay, forever there's been all of  the uranium I need at a relatively reasonable price. 

With very few exceptions. And their view of 2004 to 2007 was a massive  commodities run. The Chinese did a decent amount of buying for a couple of  years there we had some mine floods and we had Uranium Participation  Corporation, which became SPUT in 2021, buying uranium along with some  hedge funds. 

It was a temporary spike, came right back down after the GFC, but it started to  grind higher again because the fundamental drivers were there. So that was a  contracting cycle going back, and you can see in the graphic page four, that we 

had greater than replacement rates. So replacement rate essentially is how much  uranium is being burned up in the nuclear fleet on globally on an annual basis. 

So going back to 2005, we had 250 million pounds contracted, but we probably  had about 170 million pounds burned up in the reactor fleet. So greater than  replacement rate contracting, big volumes. And that really led to that big move  in price. Following that, following Fukushima, Japan shut off all the reactors. 

Germany started shutting them off. A few other countries had phase out plans  like Belgium and Taiwan. And you had an abundant amount of uranium that  was just hundreds of millions of pounds of oversupply. Liquid mobile inventory  globally. The price crashed and utilities did not need to contract. 

So this is long-term contracting. This is a, these bars here are utilities calling up  Cameco, Kazatomprom, Uranium One, Orano and saying, I want a contract for  a few million pounds a year, delivered out for a five year period, whatever it  might be. They didn't need to do that because there was so much uranium  floating around the spot market. 

They engaged in in hundreds and hundreds of carry trades and not thousands  where utilities engage with a trader and say, I want a couple million pounds  delivered, let's say 2, 3, 4 years out. They're usually more midterm, usually  slightly smaller volume, and the trader goes and buys that material in the spot  market. 

The carry trade went a long way to cleaning up that mobile inventory. Those  mobile inventories are largely gone. In fact, UXC, which is the primary nuclear  fuel consultant in the space. Has essentially was warning, let's see, this was  August of 23, so two and a half years ago, they were warning that the age of  inventory overhang is over. 

The buffer is largely gone. So fuel buyers here are starting to see that liquidity  in the market has largely dried up. You can still buy in small volumes in the  spot market or the carry trade if the math is right, based on the forward curve.  But their options are running out in terms of what else can they do besides  stepping up and signing large long-term contracts with the primary producers,  which is what they're starting to do. 

So we saw 71 million pounds added to the long-term tally in Q4 of 2025 alone.  A lot of tenders came into the market. A couple of large contracts were signed.  And so how much can be bought in the spot market and carry trade? That 

number is diminishing. Secondary supplies are diminishing. Inventories are  diminishing. 

They can only flex up on contracts so much. So the flex provisions that were in  these contracts that signed back in late 20 teens, early two thousands that are  still being delivered on now, those flex provisions were for contracts that were  majority, if not entirely base escalated or fixed price contracts. 

So if you signed a contract in 2020 for 80% fixed price and 20% market  referenced at the time of delivery, and that fixed price was $40 a pound, and  you're taking delivery now, you flex up, whatever's allowed in the contract,  20%, 30% flex provision, sometimes volume. Now that we're shifting to mostly,  if not entirely market reference contracts, those flex provisions start to look less  attractive because you end up paying the same amount as the market reference  delivery for the added pounds. 

So not only are there fewer flex provisions in the contracts signed last year or  the year before this year and moving forward, but the types of contracts have  shifted. So all of the signs are there that we're shifting from a buyer's market to  a seller's market. And this is a really difficult position for a fuel buyer right  now. 

I'll give you one example just to finish off this thought. These fuel buyers and  these utilities are signing other fuel buyers. The utilities are signing power  purchase agreement off takes with electricity consumers. And oftentimes these  are long-term agreements, 10 year agreements that basically fixed prices with,  inflation adjustments so they know what they're going to be earning on the  electricity side of things, right? 

With these agreements. Then they go and they call up Cameco, whoever it  might be, and say, I need to buy uranium to, to feed into this, right? So Cameco  says, okay, we're here at $91 spot. We'll sign a contract at $85 floor, 150, $160  ceilings reference to the market at the time of delivery. We're talking 50, 60,  $70 spread between the floors and the ceilings. 

It's very difficult for utility to know what they're going to be bringing in on the  revenue side of things to not know what they're going to be paying on the fuel  side of things. Really what it comes down to is they don't really have a choice  and they're going to have to pay that. And they're starting to come to, let's say,  an acceptance.

They've moved past the denial stage. Now they're moving into that acceptance  stage and signing these larger, higher price contracts that are largely referenced  to the market at the time of delivery. And why are they referenced to the market  at the time of delivery? Because producers want exposure to higher pricing  environment, which they're all very confidently betting on. 

And that really should tell you more than my pontifications, more than anyone  else who's analyzing this market. What are the sellers asking for and what are  they getting in their contracts? If you want stability in an uncertain market,  you're going to sign fixed price contracts. 

If you want exposure to what you are highly confident, it's going to pan out.  You want reference to the market with ceilings that are sometimes close to a  hundred percent higher than where we are here. So that's what we're looking at.  Utilities are slowly coming around. Fuel buyers, from what I'm hearing that  have been multiple fuel buyers for large utilities that have been largely reliant  on the spot market and carry trade for literally decades are shifting their strategy  and focusing on security of supply rather than pulling every lever they possibly  can to get a little bit here, a little bit there, as cheap as they can. 

That strategy is shifting and that's important as we go forward for term market  volumes. Term market pricing, ultimately spot pricing.  

Erik: I would think that the seller's confidence has also got to be increasing  with just the mechanics of what we're seeing in SPUT right now. Because if  you're Cameco and you're asking for those really high, a floor that's just barely  below the market, a ceiling that's way above the market. 

And the guy on the other side of the table is saying, don't pull this crap on us or  else we're gonna pull a buyer strike. You can just say, no, you're not SPUT is  just awaiting regulatory approval to unleash a huge amount of cash that they're  sitting on, 

which will easily support the spot market as long as we need to. You guys are  not in a position to negotiate anything shut up and sign. It seems like all of the  sudden Cameco and the other big uranium suppliers can engage in I'll go out in  a limb here and say, Trump style negotiating tactics of you don't have a choice. 

You're gonna do what we tell you to do.  

Justin: Sure, yeah. The confidence in where this market is headed is very high  amongst producers. And I think that the financialization of the sector is 

certainly supporting what the producers are wanting. To your point and like I  said, SPUT being able to buy a hundred thousand pounds here, 200,000  thousands pounds there in a highly liquid market, that shouldn't really matter,  but it's that marginal pound is moving the price here. 

And that, that alone is as evidence of how tight the market is. And, there's  always some production coming into the spot market. It's not the static bucket  that once it's gone. It's just a settlement. It's a, it's a surplus settlement market.  But for the producers seeing the SPUT activity. 

Seeing the pressure on the spot market is certainly something that, that supports  them wanting market referenced contracts that they're signing with utilities here.  And like I said, seeing how high these ceilings are going, that actually is  literally telling you where they expect the price to go and who's done more work  on the sector than the actual producers, especially the big producers that are  having to sign these binding contracts for delivery 3, 4, 5, 6, 7, sometimes 10  years out. 

This is very important to their shareholders, very important to their bottom line.  And they're seeing shareholder pressure that, that wants them to capture more of  the upside in the future. And you see some of these brownfield restart  companies that sign base escalated contracts at 80 bucks a pound, were coming  under fire from their shareholders. 

Stop giving this away. We know the price is going higher. Hold out and capture  that. And shareholder value is something that I think the utility fuel buyers don't  really give enough attention to. These companies don't exist to break even. And  they all went through hell from, 2008 all the way till, just recently. 

So these companies went through ab absolute hell, shareholders had been  diluted to oblivion in the 20 teens. Finally, the market is returning to bring some  value to the actual producers and they're going to be beholden to their  shareholders. And the shareholders want exposure to these rising prices. 

And that's something that utilities definitely have to understand going forward.  

Erik: Something he said earlier, Justin, was that the alignment of the industry  with government policy meant that, you're not getting a lot of pushback. One  place, I think there might be some pushback if we move on to page five, is the  talk of a strategic uranium reserve.

Intuitively you'd think the industry would be all for that. From what I hear, the  utilities don't want there to be a strategic uranium reserve. What's that about?  

Justin: It's just about the government being, potentially a price insensitive  buyer and adding pressure to an already tight market. 

The utilities are fully aware of the financialization of the sector and that you  have, very aggressive financial entities. And SPUT is just a vehicle. It's really  the investors that are coming into that and providing it with the capital to raise  cash. But you also have hedge funds and banks and plenty of trader  commodities traders that are all positioning net long. 

So the utilities are aware of all of this and they don't see a strategic uranium  reserve being in their best interest. Despite the fact that the spirit of the reserve  potentially would be to hold, a bunch of uranium for harder times in the future  when perhaps that uranium could be sold or distributed to those utilities. 

That's really the spirit of the potential reserve and the existence of the reserve as  it is now with this tiny amount of buying needed a few years back. Our  understanding is that the buying that the SUR did, let's see, I think this was  2022 when they did buy from a couple of US producers that uranium is now in  possession of the DOD. 

That's my understanding. So we believe that the Department of Defense actually  is on the lower side in terms of their inventory, and that's not just for weaponry.  That's of course with the nuclear navy and nuclear aircraft carriers. They're  building multiples of these very large multi-billion dollar ships currently. 

Take a lot of uranium, actually it's very highly enriched uranium that goes into  these subs and these aircraft carriers, and they're fueled once and we're talking  many millions of pounds for a single fueling for one of these ships. So we, we  think that there's pressure coming from that, but yes, of course the utilities have  

a strong lobby and I guarantee you they're doing what they can to put pressure  against this establishment. 

So we're not necessarily betting on it. We're just going off of what we're hearing  for the administration. They did establish, or there's a proposal currently. In  Congress for a two and a half billion dollars stockpile of critical minerals of  which uranium is one. And we hear Christopher Wright mention multiple times  that they're considering a strategic uranium reserve.

So maybe it happens, maybe it doesn't. It obviously would be intelligent for the  security of the nuclear fleet of the United States to do that because the US  utilities typically only hold about two years of inventory. So whether it happens  or not really, not sure, but you're absolutely right, utilities don't want it to  happen and are doing what they can to pressure pressure, interest in the US  government to, to keep that from happening. 

Erik: So the government wants to underwrite free of charge and insurance  policy to protect the nuclear utility industry from hard times by providing a safe  haven resource of available uranium so that those utilities don't have to absorb  the cost of holding those long-term reserves themselves. And the utilities are  objecting to that because it potentially interferes with what the prices are in the  next three months. 

Sounds brilliant to me.  

Justin: Yeah  

Erik: just genius. It's and about and not at all out of character, from what I've  heard from Mike Alkin about these nuclear fuel buyers. It sounds like exactly  their mentality.  

Justin: Yeah, it's and I think the spirit of the reserve really is more of an  acknowledgement of the reliance that 20% of our grid is on foreign entities. 

We're mining a couple million pounds of uranium and consuming 50 highly  reliant on Russia for conversion and enrichment. Highly reliant on Kazakhstan  for uranium, and then secondarily Canada. So it's more of a just wanting to  establish that to support the uranium miners in the United States than it's  necessarily a basket of uranium for utilities. 

But to your point. Utilities. Again, looking at that W&A graphic on page one,  looking at the analysis that we do, that Goldman Sachs has been doing, that a  number of other entities in the space have been doing, showing a clear and  obvious very large growth in demand and struggling supply response. 

On the uranium side of things the utilities and the fuel buyers don't really pay  attention to that. And now that's speaking generally they, there are a few fuel  buyers in the United States that I know of personally that are very ahead of the  curve. Their utilities are very well covered. They've done their own supply and  demand modeling, for example.

So they get it and they're well covered and they know and believe that prices are  coming. Higher prices are incoming for most of the rest of the utilities. They  buy what they need to buy when they need to buy it, and they have to get  approval to do so from their upper management that has a budgeting committee  and their bottom line matters. 

If the US strategic uranium reserve announcement causes a $5 jump in spot, and  then the actual buying causes another few dollars. Jump in spot. That's tens of  millions of dollars to their bottom line that they're looking out for not only on  deliveries, but for their future purchases as well. 

So I understand why they're pressuring, but at the same time, it doesn't really  feel like it's in line with kind of the spirit of what's happening here.  

Erik: Justin, you mentioned some of the international aspects of this. Let's talk  about the other side of slide number five here, where you talk about a huge  amount of demand from China and India for uranium. 

They're engaging with Canada for uranium supply. As soon as I saw that, I  thought, well, wait a minute. Last time anybody tried to sell anything to China  or India, president Trump intervened and said, no, you're not allowed to do that,  or, I'm gonna hit you with tariffs. 

Is there a risk that the US government in for the sake of America first policies,  tries to veto or nix those deals and say, Canada, don't sell your uranium to India  or China. It is only sell it to us. Does that potentially affect the market?  

Justin: It's hard to say really. It's hard to really predict exactly what Trump will  end up doing on this front. 

Obviously he wasn't happy to see that Kearney was meeting with Xi and trying  to establish a critical minerals, deal selling, selling uranium and a number of  other elements to China. I think that he's trying to influence that deal, not  necessarily to make more uranium and other things available to the United  States, but also just to throw his weight around and influence these decisions. 

And I think that there's, a lot of this stuff with Trump and in my personal  opinion, there's just so much more that's going on behind the scenes that, that  any of us have any idea of. So what's really behind this, I have no idea, but we  do know that China is scouring the globe for critical minerals, uranium  included.

China. China as a sovereign, has the largest inventory of uranium by a long  shot. Their numbers are huge, like north of 600 million pounds of uranium. But  importantly, that's total strategic commercial inventory. It's not just utility  inventory. That also includes military inventory. So how much of that is  actually allocated for the, for their new civilian nuclear program is harder to  say, but they also have the more, most aggressive builds, and that uranium is  never leaving the country. 

This is strategic. Once it's on their shores, it doesn't leave. The only exception is  that is sometimes they buy and then resell. So for example, they been buying  Russian enrichment and reselling it into Europe and the United States. Those  volumes are small, but they engage in that type of trading. With all of that said. 

Simply seeing both the Chinese and the Indians. And most importantly to this  point is that they're both sovereigns, right? The Chinese utilities state owned,  the Indian nuclear operators are state owned. They are looking at Canada for  supply, and Canada has been the most reliable supplier to the west by far  because Kazatomprom has been perfectly reliable, but they've had trouble with  their shipping routes when the West is trying to avoid shipments out of Russia. 

And they've had much more business engagement with both the Chinese and the  Russians. So Canada is really our best source of uranium in the western world.  And to see two Eastern sovereigns start to negotiate with Canada and potentially  with Cameco directly especially on the fa on the side of India, should be and is  somewhat of a wake up call to multiple Western utilities that the sovereigns are  stepping up because you have these private or publicly owned utilities that are. 

That are hemming and hawing about large procurements and mu much more  price sensitive. And then you have the eastern sovereigns just stepping up and  I'm your huckleberry and let's get it done. So this is something that I think is  going to be a trend going forward is, we're seeing that general trend anyways,  just globally right now. 

We're going much very quickly away from a multipolar world to more of a  nationalization type of world. And I think that a lot of countries are starting to  look out for number one in a way that we haven't seen in a number of decades  forth turning type stuff. So will we see more sovereigns engage in, america first  type policies for themselves. We've heard the EU talking about having a  strategic nuclear fuel stockpile. I think more of this is coming. And importantly,  Eric, this is all right tail. These strategic stockpiles, this secondary demand is  not something that is very modeled out.

So in our own models, that secondary demand, we have a plug number of 10  million pounds a year. Last year we saw the financials do almost double that  alone. That's not talking utility inventory restocking. That's not talking  sovereign stockpiling, that's just the financials. So that secondary demand is a  very potentially large number. 

I think more of this is coming in the near future.  

Erik: Now we've been talking about western supply. Let's also cover the  Eastern Hemisphere supply. Russia has, as we discussed, most of the  enrichment capacity, but they don't produce a whole lot of uranium in Russia.  It's Kazakhstan. That's the big producer in that part of the world. 

Tell us what's going on here on page six.  

Justin: Yeah, this, I think, is a really interesting element of this market that is,  is emerging. And, the table on the left hand side came from some analysis that  came out from Ocean Hall. So I wanna plug those guys. They did some good  work on this front. 

So Kazakhstan is by far the world's largest producer. They produce about 40%  of the uranium supply on an annual basis right now. And what happens in  Kazakhstan affects this entire market. Now, the graphic on the upper right of  slide number six shows their existing production profile. They expect their  production to peak in the next, two or three or four years. 

And that is based on a very large project, the Budenovskoye project, which is a  joint venture with Russia. So Russia, like you mentioned, has the largest  capacity for both conversion and enrichment and conversion is the process of  turning U308 or mined uranium into a gas uranium, hexa fluoride so that it can  be enriched in a gas centrifuge? 

Despite the fact that Russia has the most capacity for conversion, they net  buyers of UF6, the product of conversion. That's how much demand they have  for their enrichment services globally and how short they are on the uranium  front. So they need uranium and they need it now, and they need it badly. 

So they're putting a lot of pressure on Kazakhstan to develop this large JV. If  you look at the production volume ladder with these new mineral extraction tax  hikes, you know that Budenovskoye project, it's max capacity, a hundred  percent of subsoil use is 6,000 tons a year.

So assuming they reach that, which is possible we model out that they do, but  it's no guarantee that they do, they'll have an 18% tax on that. And look at the  uranium price, we're already above $90 a pound. They could potentially be  paying a 20.5% tax on the uranium coming out of the country. And this of  course, is a move on behalf of Kazakhstan, which is the state is 75% owner of  Kazatomprom and 25% publicly floated on the London Stock Exchange. 

The state is trying to do what they can to establish this taxation and ownership  of the joint ventures as well to maximize what they will be earning and  benefiting out of these limited deposits in the country. Yes, they're very large.  They'll be able to produce for decades going out into the future, but they want to  capture this lightning in a bottle. 

So what this means is that the Budenovskoye project in the second largest is the  Katco JV with the French, who are also very short uranium, and that can  produce potentially up to 4,000 tons. So the two largest projects are gonna be hit  with the largest levels of taxation coming outta Kazakhstan by the two entities  that most need uranium globally. 

The French and the Russians. They need it, and they need it very badly. They're  both very short with pipeline problems for the uranium projects. I don't see this  increase in the MET. In lowering production out of those projects, I see it  affecting price, so they're going to wanna do what they can to ramp those  projects, which means prices have to go higher based on that. 

This is all to say that Kazakhstan is limited and you can see their own  production profile going out into the future. Yes. They don't have years on this  X axis, but this is about a 2050 graphic. So after peaking, you can see it declines  very rapidly. Some of their existing legacy projects are already in decline, many  more hit de sharp decline rates in the next 5, 6, 7 years. 

So they need to invest a lot of money in establishing new deposits, which of  course are less attractive than the deposits they first started to develop back in  the two thousands, 2000 teens. And this all plays into, the, just the looking at  this price graphic at the lower right of this slide is, this is inflation adjusted. 

And so if you look back at the inflation adjusted spike, even the term price went  to 150 inflation adjusted back in 2007. And now we are at $88 term with a  much, much more favorable environment. And all of the elements I've been  discussing today, including these high mineral extraction taxes and the  increasing moves that the country is making to to increase their ownership of  their joint venture projects when they renegotiate the license for the joint 

ventures so that some of these projects, all these JVs that are existing now have  to be negotiate renegotiated over the course of the next 10 years when they are. 

Ownership goes from many cases, 50 50, 49, 51 goes to 90 10 Kazakhstan, and  the new developments for the JVs is automatically 75 25. So Kazakhstan is  starting to take much more seriously the ownership of their mineral wealth, and  that is only going to have a creative pressure on the price.  

Erik: Let's jump ahead to page eight where you talk about secondary  commercial inventories. 

First, let's define that term, what we're talking about, but then explain what this  trend is about, where it seems like everybody had plenty of inventory and all of  a sudden they don't. Why don't they?  

Justin: A lot of that inventory drawdown has simply come from the lack of  procurement in the long-term market and the lack of supply response. 

Erik: Let's just start with a definition of what we mean by secondary  commercial inventory. Who's holding what inventory of what, where?  

Justin: Sure. So this is a little bit tricky because this data and this graphic  comes from UXC and UXC counts inventory drawdown as secondary supply.  They've come under a little bit of criticism for doing that over the years because  they're technically double counting, right? 

That those pounds come out of the ground and year X and that's counted as  supply and then when they're draw down, that's counted as secondary supply.  The reason they do that is because we're not seeing reactors actually not be able  to operate because there is no fuel. So anytime you see the purchasing volumes  on any given year, less than the burnout rate, that gap is quote unquote  inventory drawdown and or secondary supplies. 

So in this case, you see that giant orange bar in 2021 as inventory drawdown or  secondary supply that was largely influenced by SPUT buying, right? We had,  what did they buy? 20 something million pounds in 2021. So they were buying  

excess inventories that were in the market. And so these commercial inventories  is basically just any inventory that's held by any commercial entity. 

And so in 2021, a lot of that came from traders who were holding pounds in  carry, meant to deliver to utilities. The following year, two years, three years  down the road, the spot started buying the spot price spike. These traders sold 

those held pounds to spot and then went back into the midterm market to  procure from a producer. 

So that was this reverse carry trade. And the reason why that inventory that  inventory number and that secondary supply number is so big for 2021, but  secondary supplies, they're always a part of this market. And so you can put  

those in two different buckets. One is actual mobile inventories that are held by  somebody commercially somewhere, and the other is actual supply coming into  the market. 

That's new secondary supply. Now that would primarily come from enrichment  underfeeding or tails reen enrichment. And without getting super geeky with  this is a number that was pushing 25 to 30 million pounds annually just five  years ago. This is probably closer to 10 million pounds a year right now. 

And this is basically when there's excess enrichment capacity. What Enrichers  will do is they'll actually spin those centrifuges down to a lower tails assay than  what was. Dictated in a contract that the utility has to provide to them the feed  stock for that enrichment contract. So they spin to a lower tails, they have a  little bit of extra feed and they under feed the centrifuge and sell that excess  feed stock into the market as UF six. 

That is underfeeding tails. Reen enrichment is actually when there's really a  trough in enrichment demand, they can actually take tails material and spin it  back up to natural UF six and sell that into the market as well. So that is, that  has literally been cut by two thirds over the past five years. 

The other bucket is just these buffer inventories. Utilities hold them. In some  cases sovereigns hold them, and this is just material that's been sitting around  from decade of overproduction in the 20 teens. Now that material is largely  gone. But utilities will always hold some inventory. And the reason they do that  is because the fuel cycle takes so long for uranium to go from mine out of the  ground into fabricated fuel takes at least 18 months and most commonly 24 to  sometimes even 30 months. 

So because it takes so long, utilities will always hold inventory and they usually  hold it across the fuel cycle. So every utility will at least have one extra core  load of fabricated fuel onsite at all times. But they'll also hold some uranium,  some UF six at the conversion facilities. They'll hold some enriched uranium. 

And then, like I said, the fab fuel. So utility inventories are kind of always there  and what you're seeing when this UXC is projecting this out into the future is 

that buffer inventory is gone. So all we really have is a small amount of utility  inventory that can buffer some, some temporary swings in price or some  temporary issues around supply, whatever it might be. 

But it's not this enormous amount of material that's overhanging the market.  And as you see these big numbers, 21, 22, like I mentioned, August 23, the age  of inventory overhang is over. They can see that, and that's why they're  projecting this out into the future. They're just no longer is that buffer and the  conditions are absolutely there for this market to be disrupted. 

I say this all the time, Eric, you don't really have to even know exactly what is  going to be the disruptor. Just that the conditions are there for something to  disrupt this market. And I'm not necessarily betting on disruption, but it's so  obvious to me that something will disrupt this market. We don't know where the  eventual supply is going to come from. 

The balance, the market and the inventory side of things. The secondary supply  side of things are so tight that. A shock to supply, whatever it might be.  Whether that's the announcement of a stockpile from some sovereign, whether  it's one of these large development projects like NextGen's Arrow, the entire  nuclear industry is expecting this to be producing 29 million pounds a year,  starting in 2031. 

That isn't happening. They don't know it yet, but that's not happening. Will it be  producing eventually? Absolutely. How much and how soon is harder to say.  But even by their own timelines, we see 2032 as first production and that would  be ramp up. And the company is already taking advantage of the power of the  narrative here and the power of the story of this deposit because it's so  fundamental to the supply. 

Even approaching anything balanced in the 2030s, which it will maybe barely  do if it comes online on time and on budget, but they're already saying, Hey, we  will be producing according to the market signals. Such a low cost high grade  project, they can cycle that production up and down as they see fit and  essentially control that narrative and they're starting to express that to the  market. 

So it's just very fragile. Something's gonna disrupt it. You don't have to know  what that something is, just that the conditions are there for it to happen.  

Erik: Okay, so to summarize all of that, because I wanna make sure I'm  interpreting this right. If I went back 10 years and I said, oh my gosh, this 

uranium trade's gonna be great because boy, look at the balance of supply and  demand. 

If just one mine went offline, they could unbalance the market and the price  could skyrocket. People in the know would've said sorry, it doesn't work that  way. There's plenty of inventory hanging around. If the price goes up to the  point that incentivizes those people to sell it, they'll sell it. 

There's plenty of buffer to absorb something going wrong. That was how it  worked until last year that it stopped working that way. Now it really is back to  if just one mine went offline, we'd be screwed and it would rocket the price  much higher. Is that right?  

Justin: Absolutely. Yeah. I don't know if I would necessarily agree with the  statement that we'd be screwed. 

I do think that there's sufficient inventories out there to buffer something like  that. But the price response would be massive. And, this could really happen at  any time. I think the most likely disruption is these very important larger  development projects not panning out exactly as the industry expects. 

And the industry is basically looking at what the investors are looking at, right?  They're looking at the feasibility studies. They're looking at what the company  is telling investors that what they'll be producing and when, and of course, that  historically speaking, especially in the uranium world just never happens. 

These mines are never built on time. They just aren't. And that disruption is  highly likely to pan out, but are there inventories? Yes, of course. The problem  is those inventories largely are not for sale. So what are there, I remember  there's a very popular uranium investor out there. 

I'm not gonna mention him by name, but he basically was bearish at this  moment in time over the past couple of years, basically saying there's, there's  1.3 billion pounds of commercial inventories. It's yeah, okay. Half of that's in  China. The rest of it is distributed around the global nuclear utilities. 

So US utilities of two years of inventory, EU utilities of three years of  inventory. They don't draw those down besides maybe a five or 10% draw down  here or there to try to buffer what they might feel is a temporary price spike.  And that's it. They're not gonna draw them down to zero. Yes. If we go to a  hundred dollars, $115, $130, $150, will we see supply shake out here and there?

Absolutely. We will see some inventory be sold in the market. We'll see some  profit taking. There's a decent amount of positioning here on behalf of hedge  funds. They're not holding those pounds into perpetuity. They will sell them  eventually. So there's always a little bit, a tiny bit of flex, but the big buffers are  gone. 

There's no megatons of megawatts. Underfeeding is almost entirely gone. In  fact we would expect that we'll potentially see some overfeeding in the coming  years, which has the opposite effect, extra demand for that enrichment process.  And then of course, commercial inventories are on the low end, historically  speaking as well, because Adam proms at a 10 year low in their own  inventories. 

So just the general buffer is very small here.  

Erik: Justin, final question. We cannot responsibly both be as bullish as we are  without asking the critical question of, okay, what could happen to turn this all  around? There has to be something, obviously, I guess the big one would be a  worse than Fukushima sized nuclear accident that completely changes public  sentiment globally around nuclear energy. 

And that could happen if somebody blew one of these things up as an act of  terrorism. In the world we live in it it's not at all impossible. Aside from that,  what else can go wrong that could derail the extremely bullish hypothesis that  both you and I share?  

Justin: Yeah, the nuclear accident potential. 

It's always there. I, in my opinion, the industry is. Has much, much better safety  checks in place following the Fukushima Daiichi disaster. So that was  something that happened, had no fatalities, but it did affect the industry. It  caused Japan to shut off all the reactors and a number of other countries do the  same. 

So it had demand destruction effectively, 10 and eventually about 15% of global  demand that was there in 2010 was gone by 2015. So demand destruction of  some form or another is probably the biggest potential to turn this investment  around because we don't see, at least in the near term, let's say the next five  years, where supply is going to change the investment thesis. 

Eventually are we above 150, $200 and it stays there for a while and all of a  sudden we see, phosphate projects producing uranium and all of these marginal 

producers eventually get in production. Yeah, it will be a, a natural commodity  cycle. This will have a peak someday. We don't see that happening in the near  to the midterm. 

So the only thing that we could see that would change this thesis for us, would  be some kind of demand destruction. It wouldn't necessarily be because of a  nuclear accident, because that doesn't necessarily mean demand destruction  depending on how the accident actually would pan out. 

Certainly it'd be terrible for sentiment, at least in the near term, and probably  really bad for the equities in the near term. But would we see. 50, 60, 70, 80  reactors shut off because of that. I don't really know, and I don't really think so.  With that said something else, like if China all of a sudden says, okay, we're  done building nuclear, we've reached our goals, if that narrative is going to hurt  and if they change their actual demand projections and their growth projections  for nuclear, that affects the bottom line in terms of the supply and demand  calculation. 

So a change in demand projections for whatever reason, is really the only thing  I can see that's going to derail this in the near to the midterm. But like I said,  eventually this will be a commodities trade where high enough prices for long  enough incentivizes enough supply that will eventually cap that price move and  eventually will turn the price down. 

How soon that happens, I can say very confidently. I don't see how that happens  in any way, shape or form. Assuming the demand stays as what we're  projecting, which I believe that it will in the next 5, 6, 7, 8 years, I really don't  see that happening. So even if we were at $150 uranium next week, it's still  gonna be years and years and years down the road for these marginal projects  that could be profitable at that price to actually be producing into the market. 

So I think we have a strong runway here, Eric. I know that you agree with me  there, but hard to say what would cause that demand destruction, but that's the  only thing that we would be looking for to actually change this trajectory.  

Erik: Justin, I can't thank you enough for another terrific interview. 

Before we close, tell us about what you do at Uranium Insider. You publish a  terrific newsletter. I quite enjoy receiving it. You got videos and all kinds of  stuff. What's involved? How much does it cost and how do people sign up? 

Justin: Yeah, thanks Eric. Appreciate the support on that front. So yeah, we  basically cover this sector in and out on a daily basis. 

We've got a small team behind us. We've been doing this since 2019. We put a  lot of focus into the physical market. This, in our estimation, is the most  important thing to fully understand if you're going to be invested in the sector.  So we have multiple price reporters, multiple services, multiple connections in  the industry, fuel buyers, traders, and we're communicating with these folks on  a daily basis. 

We wanna know what's happening out there in the physical market. The equities  markets will definitely fluctuate. Sometimes they get way overbought relative to  physical. Sometimes they get way oversold relative to physical, but generally  speaking, they move. At least directionally with the price of uranium. 

So that's the most important thing that we follow, and we track that and we  report on that to our membership on a daily basis. We have a very in-depth  monthly newsletter. We do weekly update videos for our membership. We do a  daily data sheet that follows the ETF and spot flows, as well as the most  important pieces of news on the physical market on a daily basis. 

We do a weekly watch list that does a technical analysis of the stocks that we  cover. And I do a physical uranium market report once a week. That dives much  more deeply into what's happening in the spot, the term markets. And in my  estimation, if you have a decent amount of money along this sector you have to  have this information. 

It's an absolute must to stay on top of what's happening here. And like we  mentioned at the top of the interview, we have something called the dynamic  model portfolio, which is a trading portfolio, which as I mentioned, we  established last February, 2025. And that portfolio is up over a hundred percent. 

So that aims to track physical sentiment and charting to give us trade signals  buying and selling to trade this sector because even though we are directionally  very bullish for even the long term, we do have very strong swings to the upside  and the downside. It's a very tradable market. 

So that's been a huge success for us. The newsletter is 7 99 a year, which I think  is a pittance compared to what this sector offers in terms of upside potential, if  you have even a small amount of money invested here. 

Erik: Patrick Ceresna and I will be back as Macro Voices continues right here  at macrovoices.com.

Erik: Joining me now is Craig Tindale. Craig is a private investor, longtime  Macrovoices listener, and has recently penned an article called Critical  Materials, a Strategic Analysis, which has gone absolutely viral. The Financial  Times reported that it has gained the very direct attention of the White House  and the Pentagon. 

So this is really just incredibly great work that you've done. Craig, as as a long  time listener, this is not. The first time that our listeners have heard concerns  about how China's dominance, in terms of the supply chain has considerable  strategic implications. But I think you've done a far better job than anyone else  of just concisely writing about exactly what the issue is. So congratulations on  that. Why don't we dive right in strategic diagnosis of what you call the end of  infinite materiality. What is this article about? Why is it important?  

Craig: I guess it's the ultimate genesis of state capitalism versus stateless  capitalism. 

You've got on one side a a state that is intent on dominating all areas of  commerce internationally. And on the other side, you've got a free market.  Philosophy that is gained by, price. And so the Chinese are basically the system  by lower the cost of refining and smelting so that they gain control. If you look  at 50 to 98% of the critical metals needed by the west to, to go forward with all  their electrification, their data centers, their the EVs, just about everything, you  can think of the, even the nuclear build out, it requires critical metals. 

Without those critical metals, you can't go forward. And what the Chinese  supply chain has done is grabbed it in the middle and directed it towards itself.  And it's done that at multiple layers. The one layer is the smelting refining,  which I just mentioned, the other is the Offtake agreements and the mine  ownership which directs towards those smelters. 

Another area is, the ownership of the actual mines. If you look at Xin Jing and,  and some of the, the Chinese state owned mining conglomerates, they've  gradually bought everything in the west, in particular gold, silver and copper  and many of the others and then directing those outputs. 

Until the last few years, those outputs haven't been used by the west. They've  been used by China. They now control everything that we need to control to  reshore, everything. And it's Alexander Hamilton, I think pointed out in 1791  article of manufacturers that went Congress. That liberty and freedom exists,  not by itself.

It's a contingent on having a manufacturing and a supply channel that allows it.  That at that stage, Hamilton was looking at the dependence on the english And I  I guess I put it today that we're looking not at the English, but at the Chinese  and that all his assumptions about the importance of that existing and the  manufacturing existing is actually, you know, conditions precedent 

For the West to be successful. And without that, we'd be, we'd become  enslaved. We're almost serfs in the whole global supply chain. I guess I, I frame  it like this, that we have a, financial balance sheet, and we're good at that. 

Putting claims upon claims. But we've disconnected from the physical or the  balance sheet that matter. And so these two things are separating as we speak  and as they separate the ability for us to control our destiny becomes less and  less.  

Erik: You write about the feedstock paradox. 

I love that terminology. You're describing this phenomenon where it seems like  there's something about human nature, that people think about the raw material  as the strategic asset. President Trump has clearly become aware of the  importance of rare earth elements, but. He's talking about where we can mine  them and the reality of the situation is China's got you've done some fantastic  statistics, so I shouldn't speak for you. 

Give us a perspective how much of the refining and Processing that's necessary  in order to get any benefit from these raw materials. How much of that does  China control today? And what would it take if the United States were cut off  from that Chinese supply? What would it take for the United States and the rest  of the West to recover if that event were to happen? 

Craig: They've got 50% to 98% control depending on the category of the metal.  90% is, things like scandium, I'll start at scandium. Scandium is used in an  aluminum alloy, and that aluminum alloy is I guess relevant to the new combat  drones. And F 35 was built on the physics of G force 9 because that's all human  beings can connect with 

A combat drone can do 20 to 30 G because there's nobody sitting in it and the  alloys required of that are a new industrial material. The whole west produces  15 tons of scandium per year at the moment, and they need hundreds, if not  thousands of tons of scandium to build these combat drones.

The only source of that scandium at the moment is virtually China. And so if we  wanna build our combat drones and defend ourselves and not create incentives  for war, that is, there's two sides of this. One side is we have to defend  ourselves. I think what people miss is if we can't defend ourself, we create a, an  incentive for the more powerful nation, the foreign nation, to take advantage of  that and having a good defense is, is important to creating a world piece as  anything else, but copper's the same. Copper goes into almost everything, , in  some of these ultra high voltage Cables per kilometer. There's about 60 tons of  copper. 

I read an article yesterday there's 2177 tons of copper in Microsoft's new AI  data center in Texas. The US planned to build 13 to 15 of these. That's a lot of  copper. Everything we look at the physical intensity of copper is apparent in it.  The, and it go, and not just the copper, it goes into everything. 

Siemens at the moment have 138 b euro back order on equipment, things like  the major transformers the major transformers are taking four to five years to be  delivered. So we can build as many nuclear power stations as we want, but if  you can't put the transformers in place to actually move the electricity, and if  you can't put the UHV in place that is the ability to transmit over power lines.  They're stranded assets, these nuclear power stations. That's why a lot of these  new these new AI data centers are being set next to nuclear power stations  because they already have equipment in place and they don't have to wait. 

So you end up in a situation where they control our destiny they've already  licensing a double licensing program and, it was a few days ago, they decided  that they work gonna supply rare earth to Japan for the defense industry. You  know on, the other side of it, Siemens with their 138B Euro back order 

Relies almost a hundred percent on rare, heavy, rare earth from China. The  order book from China is about 15%. You can really imagine China going well,  if you want your rare earth, we want our transformers first. So they, they layer  upon layer the ability to dominate the supply chain just by the, their initial  influence. 

And, this happened in history if We look, go back to 1914. There was a thing  called the zinc crisis. A company called Metallgesellschaft German company  was established as the major refiner of zinc and copper and a whole bunch of  the other industrial metals. They had subsidiaries in North America and they  

had subsidiaries in Australia.

Ironically called Australian Metals and American Metals, and they basically  took the off takes from those mines and sent 'em to Germany. And the Battle of  Algiers in 1914, the French were overrun because they ran outta shells. A lot of  people don't understand why the French got overrun so easily. 

A lot of people say, they lost to the old generals were relying on horse cavalry  and things like that. The reality is they ran outta shells. And Lloyd George the  Future British Prime Minister was made minister for, munitions in those days  because the fear was that they wouldn't be able to supply themselves. 

So this has happened before many times. It's not actually a unique thing in  history. It happened, you go back in the 16th century Spain, the Spanish had, all  the gold from the Americas and silver as well. But they couldn't, eventually they  couldn't buy, anything because the Dutch were making everything and Europe  was making everything and no take their gold because they couldn't  manufacture anything themselves. 

And eventually the Spanish Empire fell, even though they had, a mountain of  gold. So you, we've got rhyming right through history of this kind of thing  happen. We just haven't had that happen at this scale. Now how can we fix it?  That's a complicated subject. It obviously depends on will. 

Whether we can optimize the political skills to do that. I think President Trump  obviously sees it and I think he's probably seen it intuitively. He's almost  hamiltonian in his regard of manufacturing and Reshoring the future materials  and manufacturing capacity of the USA, he almost follows a complete  Alexander Hamilton playbook. And Hamilton came up through, intense conflict  and so he knew the importance. Eisenhower was similar. Everybody reads their  Eisenhower speech and says, watch out for the military industrial complex.  Eisenhower was even more interesting if you read the rest of the speech. 

He was worried about the manufacturing complex and the ability to be self sustaining, and that's what he warned about. We take one message it's similar to  this freedom and liberty. It's an ideal, but we forgot what the foundation of that  ideal was, and that's interdependence. 

If we're beholden to foreign powers. We risk that liberty and freedom right  across the west because we become beholden to the supplier of our goods. And  they can withdraw them. They can stop our reassuring, they can do all the things  that they need to do. 

Erik: Craig, I think that your focus on the midstream, in other words, it's not  where the rare earth elements get mined from, it's who's got the ability to  actually separate those rare earth elements and produce the final product that we  need for all of these applications. 

Some numbers taken directly out of your article, and by the way, I should have  mentioned at the beginning, folks. Craig's article is linked in your research  roundup email. It's free on his substack, and I very strongly recommend that  everyone read it, start to finish. It is cover to cover, just an outstanding piece of  writing. 

But if you look at something like Gallium, which is essential for certain kinds of  military radar and 5G networks and semiconductors and so forth. China controls  98% of gallium production, not where it's mined, but where it gets refined and  produced. Magnesium smelting, 90 to 95% rear earth separation, 90%. 

The high tech magnet production, which is the heart of electric vehicle motors  wind turbines for for wind powered energy and so forth, and the actuators in  defense mechanisms. More than 90% controlled by China graphite. Anode  production for lithium ion batteries, more than 90% controlled by China. 

Tungsten production, more than 83% controlled by China. And there's a long  list that continues after that. Craig, what would it take? If president Trump were  to get together with other Western leaders and say, boy, this leaves us exposed  to where if China cut us off from all this stuff, we would be completely  helpless. 

We can't have that vulnerability. Let's reshore and rebuild all of that capacity so  that we're not dependent on China for any of this stuff. How many years and  how many dollars would it take to eliminate this dependency?  

Craig: Short answer is trillions. I think it's variable because there's a lot of stuff  on foot at the moment. 

They can already see this, the White House and Congress and the Department of  War as they call it now. I track a lot of companies who are receiving funds. You  know as far back as two or three years ago to develop our capacity to refine rare  earths and all these metals. 

If you look at a company like UCU UNICOR I think they've received  something like a hundred million dollars already to produce a rare earths  capacity in Louisiana

Which has gone into initial production, I think this month or the or next month.  You've got companies, an Australian company like IPX, Hyperion X. Now  they're producing titanium. Outta Virginia. And they've got a new process that  they took from the University of Utah from a, a scientist called Zach Fang  which I is a delightful name. 

He works in the University of Utah. He's like the Steve Jobs of. Of materials  science, he's come up with a way of making titanium powders, at 80% less cost  than the current method. There's another company that comes from Metal is also  Australian lead. 

It takes the, technology and the IP from James Tour outta Rice University. And  they use a thing called flash dual heating, which heats everything up to 3000  joules, injects some chlorine into it. You get a methyl ox oxide out it that then  can be separated into its different streams. 

You know, not many people realize it but, the department of energy tend put out  just before Christmas for three $25 million worth of funding to take rare earth to  titanium gold and silver out of fly ash out from from coal fired power plants, for  every coal fired power plant is billions and tons of fly Ashes sitting around it  

that were, the output of the burning so much coal. , they all have a a significant  amount of minerals still in them. They just have to be extracted. There's a  number of innovations that we're doing, and it's like fits the old American,  Yankee knowhow innovation cycle, that a lot of this stuff is coming to the floor  But what it take is lowering the cost of capital for these projects. These projects  haven't, flown in the past because, we've been funding things that give quarterly  results. Like social media, like a lot of the software's gonna eat the world type  stuff. You learn the code type of stuff where the cost of capitali not Not high at  the start, and once you've built the software, you just have to incrementally add  to it. 

It's not a 10 year return and it, the return is fairly significant. So we haven't, we  measure bread and milk as far as inflation, but we don't measure the asset  market as inflation. 

So we measure bread and mild but we don't measure the price of shelter. And so  when bread and milk have gone up, we've raised the cost of capital and not  notice that a lot of the industrial projects have been killed off. It be, as soon as,  we go to four and 5%, the industrial projects, die on the vine. And we go back  to the kind of hollowed out economy that the Fed policy.

Creates for us. And it's the Fed policy that's, at the core of the problem, the core  of the problem is that industrial projects just don't get the funding that they  need. Now the other one is weaponized pricing. We've gotta deal with that.  Weaponized pricing is, every time, at the moment there's great example is  copper melting in China is being done at negative cost. So if Peru and Chile  ship their copper to china they're getting paid $50 a ton to, to process it. Now  you imagine what that does to the copper refiners in the west. They can't  compete. It's their method of, gaining complete control. They send us broke in  the key areas that we need to evaluate. 

I think one example is the chairman of Palantir has put together another startup  called Epirus, and Epirus basically shoots a gallium gun, microsecond at drones  drone and they just fall out of the sky. It fries their internal electrics. You put  these gallium guns in low earth orbit and you can fry the electrics of an ICBM  inside the silo. 

So they have very consequential, you, if you take it away from us because it  changes the, the pathway of our defense. You know we talked about copper, if  you cannot put the copper in place. The end product it you can't build anything  that we're talking about. So we need to do what we did in 1914 and what we did  in different other scenarios and bring that onshore now. I think there is a  pathway to do that. I've got another paper coming out on how to change the fed  to do that and separate the Fed's ability to price control consumer prices, but  separate out the infrastructure and industrial items so that they can survive. 

So they're not measured as part of inflation. And, we may even have an interest  free bond or something like that type solution where we offer. Not an interest  free bond. A tax free bond where we offer pension funds, an alternative to  investing where a pension fund would flow money into an industrial project and  it wouldn't be paid by the treasury. 

It would be paid by the industrial project and a tax free rate.  

I guess the industrial project owners would be would part, would, partner with  the state like the Chinese do to produce the industrial output that they need to  do. There's no other way of doing it. State capitalism on the Chinese side I think  is, 50 points ahead at half time. 

And has got, we're not playing well enough to make a comeback.  

Erik: Let's talk about how the AI trend plays into this, because a lot of military  experts have opined that basically the AI race between the US and China for 

leadership on AI is akin to the US Soviet arms race because AI has such  profound implications in terms of its military applications and so forth. From  reading your article, it sounds to me like we're headed, this is 1947. We're  headed into an arms race, not with the Soviets this time, but with China, and it's  about AI, and the strategy is gonna be that we'll buy our nuclear warheads from  Moscow. 

What? That doesn't make sense. How much of you know you gotta do two  things to build an AI data center, you've gotta have all of the copper and all the  materials that go into building that data center, and then you've got to power the  data center. How much are we dependent on China? If China, th thought that the  str, if we be ever did get into a kinetic conflict where we're actually at war with  China and they decided to cut us off. 

How much would that impair our ability to build AI data centers?  

Craig: It could potentially totally impair, you'd end up with a situation where  you've gotta do rationing on the western side to make sure that they get the  materials they need, build the data centers. If we. If we start looking at AI not as  a consumer device I guess Michael Burry sees it, and as a weapon system which  you've just outlined then, it becomes a different equation because. 

If you can't build these ai da data centers and they're weapon systems, the arms  race takes a whole different feel, look, and feel, and all of a sudden, you return  on investment and the various metrics that you would put on it as a con, as  consumer item go out the window and it becomes a must do. 

OpenAI to me is a weapon system manufacturer of the future to  reconceptualization. But You know, it, it essentially is. And so a lot of this  Michael Burry thing about, it's a bubble. It doesn't equate properly with where  it, it actually sits. It's making it sound like it's a new Google. 

Where in fact if they don't succeed. The West might not succeed either. Now,  individually, they, they may or may not succeed. But I think the workloads that  are potentially coming onto these, systems are so important that, we can't look  at them as a consumer device Now. If you've got Transformers taking, four or  five years to get to you from Siemens or Hitachi and the rare earths they're  depended on, and then you're in quite a chokehold you need to find that stuff  from somewhere else. 

And, I think in the article I outlined. Potential areas that would probably  unthinkable today, but they won't be unthinkable tomorrow. They, it's 20 grams 

of silver in a solar panel. I propose that you tear all them up if you get into real  desperate circumstances and use them for data centers and weapon systems. 

The same goes for gallium and all the other things. Where we have to reframe  the world to some extent. The world is not how we see it or how we've seen it.  The world is a different place and we have to, reframe our conceptual building  

blocks to, to look at the world this way because a denial by China or Russia  because trust Russia control some of these, these things as well, in particular  titanium. 

That framing changes how we look at capitalism. We have to adopt some type  of state capitalism and everyone will think that's nationalization. It's not  nationalization, it's just an admittance that stateless capitalism that followed  price to the point of efficiency so far that letting our foreign power supply the  things that are crucial to the ongoing perseverance as, as the west, it's that  important. And the density of copper is significant. The density of silver is  significant as well.  

Erik: Now you wrote this article, Craig, from the perspective of geostrategy  and basically trying to get policymakers attention to recognize how vulnerable  we've made ourselves to being cut off by Chinese dominance of supply chains,  but. 

You actually got to this through your own research. Not trying to research  geopolitics, but research investments. So let's talk about where the trades are  and where some of the opportunities are. I hate to take such a grim topic and try  to make a buck out of it, but, that's what we do here on Macrovoices sometimes. 

Craig: That's what I do too.  

Erik: Let. Let's talk about that. I wanna start with silver, which you mentioned  a couple of times. Most analysis that I've read recently about silver says, okay,  look, what's going on here is silver is basically gold on steroids. We've got  central banks buying up a lot of gold because they're concerned about US policy  that's just causing the bubble in silver that's about to blow off. 

There's really nothing substantial behind it. I think you've got a very different  perspective from reading the article. Tell us about silver's atrategic importance. How does it play into the rest of everything that we're talking about? And is this  a bubble that's over in silver or is it just getting started?

Craig: It's, yeah, let's just do some numbers. We've been 5,000 ton of silver  short For the last four years, I think the overall it's 24,000 tons. Since 2020.  When we're in deficit, we have to drag it outta vaults or people's cutlery drawers  in order to pro provide it, silver is actually central to the whole electrification.  The AI, there's 20 to 40 grams of silver in a major missile. There's eight tons of  silver in a data center. There's almost, in the robotics world, if Elon's gonna  build these robotics armies there's a good percentage of silver. 

In each robot. So it becomes a substantial input. Now, 70% of our silver comes  as an off take from copper, zinc, and lead refining. That's 60% happening in  China. Now we are already in deficit, let's take that into account, even with the  chinese output. Now just before christmas they put some licensing in that  basically said that all silver would be licensed to the end supplier. I think there's  43 different Chinese companies that can output silver. 

Now, what if they decided to cut all that off from us, from the west? All of a  sudden the 5000 ton a year deficit turns into maybe 10000 ton a year deficit or  more now they all must have to come from the cutlery drawer so one analyst  says there are 200000 ton in inside people's cutlery drawer . Like I doubt that  because I actually don't think anyone knows how much is in the cutlery drawers  and the jewelry drawers. But we would have to drag it out the vaults and that's  gonna send silver. Obviously skyrocketing because the net cost of silver in  some of these products is marginal anyway. 

There's a lot of silver in an EV, but, if silver doubled it's only gonna add 1% or  so to the cost of the EV And then we've gotta prioritize what silver goes into  what, we if we look at AI as weapon systems rather than consumer items, they  would get priority over an EV. 

I'll give you another thinking model. And this is triggered by what happened to  BHP recently. BHP were told that they were gonna take offshore C&Y.  

As payment for iron ore and BHP refused for a month. And then they decided  that they would accept the offshore C&Y They were the last holdout of all the  iron ore producers. What if China said to us you can have these rare earth  minerals but we're gonna require offshore C&Y to pay for them. That would  introduce a really weird dynamic because all of a sudden you've gotta have  industrial companies in the west trying to reshore the AI companies building the  data centers, the defense companies trying to sell C&Y in order to pay for these  things.

I noticed there's a number of gold producers being acquired by, if you look at  the quantity of that, it's getting quite significant. What if they gave for golders  money and they backed the C&Y with gold and they require all of the rare  earths and critical metals to be purchased under offshore C&Y. They could still  run their internal renminbi. As a currency that was fiat and then they run the out  outside currency as a as a reserve currency, so to speak. 

All of a sudden you, the tables change. There's, doesn't mean that USD would  crash or Euro would crash or anything like that because they're still required to  service debt, but it would change the whole dynamics of the currency market.  Still put them in a place because, you even go down to the machinery level. 

Linus Metals put out a note. A few months ago, basically saying it's all well and  good for us to start building these refining points in Texas. But we need the  Chinese machinery to do that because we are not making in the west, the  machinery to refine these metals. We're beholden to them for even the  machinery. 

So we've gotta learn how to do that. So that puts a lot of gap, that puts a lot of I  guess risk in the west, climbing back into a situation where they enjoyed for the  last four decades, and that is dominance over, Hegemony, the over the east.  

Erik: As you look at this picture overall, where do you think the most  opportune trading opportunities are? 

We talked about silver briefly, but what else is going to get scarce? As much as  the solution to this problem would be for governments to make big investments  in reshoring, you've also said in the article that you don't think that reshoring  will be. Profitable for a lot of American companies in the short term. 

So it's not the actual reshoring that you want to invest in. You probably wanna  invest in scarcity. First of all, would you agree with that? And if so, what other  things besides silver that, silver's already seen a huge move. What hasn't moved  yet? Where's the ripe trading opportunity? 

Craig: Isaac's, the ripe training opportunities are the ones where our own form  of state capitalism starting to show their face. You know, I mentioned a few of  them before where, the Department of War and the Department of Energy are  starting to finance some of these companies, and I think they give us, the trails  to follow about the companies that will flourish in this new era

You know, the, the new scandium plays, the new gallium plays. There's some  winners being picked and being subsidized with state capital from the West, and  that's happening right across Canada, and it's happening in the Australia as well.  And they're the, I guess they're the sense to follow to, to good returns. 

Some of these companies that I'm sitting on at the moment have already had,  you know, four, five hundred up to a 1000 percent near term increases in price  as far as stocks. MTM for instance, I think I bought at 8 cents and it's near a  dollar at the moment. I wouldn't be surprised that goes to $50 at some stage. 

Now that's crazy. I know, but they're the kind of returns I think you'll get from  this circular economy. IPX that I mentioned, basically uses some IP out of the  Rice University. And what it does is it heats up fly ash and e-waste so all the  circuit boards and that, is sitting in millions of tons in the US and it, he heats  them up and injects some chlorine into it and makes a chloride, metal chloride  mix outta it. 

And then you can separate it at the chloride stage. I can envisage a company and  then, I just don't mean this one. There's a there's a dozen of these types of  companies where all of a sudden, we're processing the e-waste. They just made  an agreement to take 2,500 tons of e-waste off glencorp. So they're fraternizing  with the large industrials and they take that e-waste and, out a ton of e-waste is  about 500 grams of gold. Out a ton of e-waste is about 300 grams of silver. I  mentioned fly. The same thing is if you heat it up. 

And in that add the chlorine mix, you get this chloride that all of a sudden  makes it a circular economy. We can start processing these things. And this  kind of fits the mode that we've used in the past in war situations under, under,  under conflict where we've had to use our own resources and I think ultimately  it serves us because it's gonna teach us to be innovative. There's another one  Hyperion X that's gonna make titanium outta Virginia. 25% of an F 35 is  titanium. I don't know. The, we're letting the, I guess the. The capabilities, even  now downgrade. 

But they've been given $115 million outta Department of Defense to, upscale  this titanium capability so that they can produce titanium oxides. Now, this is an  innovation story. We've just had the two last two decades where we've  worshiped at the altar of, Zuckerberg who I guess is, main claim to fame. This is  hypnotizing our attention and distracting us where we've had, real scientists  developing IP that hasn't been recognized yet because they can't get it off the  ground because they can't get the capital. Now if you look at some of these 

places they're moving from pilot to commercialization and you've obviously got  that risk element there. 

But if they can make it through the commercialization stage, and they've  virtually done that, certainly in the IPX case. These are the industrial companies  of the future. These are the materials company that have to emerge. If the West  is gonna survive. There's no other way to do it. 

If you think of all the paths of doing this it's gonna be innovation and it's gonna  be reestablishment of this materials capability onshore. Whether it's, whether it's  in Australia through the allies, or whether it's onshore in the US. It has to be  developed. 

There's no other way of doing it, and you're not gonna do it the same way.  That's not the American way. They'll do it in a more innovative way, to stop the  pollution. One of the reasons that we offshore everything is that we didn't want  the pollution tax the, we didn't want the pollution in our country. 

I think Ricky, Gervais, know, made it great analogy About you, slavery being  relocated to Foxcon factories with nature around them that, just because we  haven't got ships and we're not bringing people over we're still enslaving them  in their own countries. Now we can divert past that with innovation. 

We can, I, me, I mentioned UCU. I'll mention them via symbols because I'm an  investor first. There in Louisiana they're developing an amazing closed loop  system that doesn't have any heavy, rare earth pollution with it. But throughput  is lower costs than the old metric. 

Now obviously the, the limitations on this is, we have a limited skill base. We  have a limited education base. We're teach, we're telling everyone to learn to  code a few years ago, and now we should be teaching them, learn to go to  chemistry or learn to go to engineering in order to create the, I guess the  industrial age 2.0. 

There's a number of these companies I mentioned Linus, they're building a,  they've got the go ahead in Texas, they had ESG problems in Texas. You've got  all these I guess folks who are worried about the development of some of these  capabilities in US states slowing the whole process down with. 

Agreements and bureaucracy, they're now starting to be taken out the way. So  you know, Linus has been trying to get this thing off the ground in Texas as a 

rare earth refining project for a few years. And now they're going forward and  we have to get these things out of the way for them. 

But I think it's just common sense. I would go down the rabbit hole of all of  these critical mineral plays, and chemical plays too. We're gonna need the  chemical. There's a lot of a chemical association with critical metals plays, and,  if you go down there you'll find that, that's the future of investment. 

The future of investment. This era is, pivoted to a critical metal survival.  Industrialization 2.0 that provides the feedstock and supply chain into the things  that we've talked most about in the greater financial environment, investment  environment. We keep talking about an AI bubble. 

In order to do an Ai, whether it's a bubble or not, and I don't think it is. I think  it's a military capability. We need to, understand the conditions precedent to  creating those massive AI data centers and those, and the, all the electrification  that goes with it, the energy, the gas the nuclear needs, copper. 

Like I said, the, that one, that Microsoft one, I just read a report on 2,177 tons in  one AI data center and there's 20 of 'em around the world. That's a lot of copper.  That's but I think we have to be, careful of where this is not an automatic  commodity play either because China's gaming that system too. 

I put a note out yesterday about iron ore the Simon the the Guinea iron ore play.  For China and Rio Tinto, they've put $20 billion into an iron all play. It's, I  think, a large percentage of that goes into a railroad and, $20 billion. And it's  not something that we would've risked in the west because we'd have to have a  return of 20%. 

If you look at what China uses, they use about a billion ton of copper a year In  all their industries for 20 billion, they get, I think, stage four and five. They get  up to about 60,000 ton By the, when the mine's fully operational, they get to  about a hundred thousand ton per annum. But that's at 65% mineral  Concentration.  

You if you look at something like fmg, they're at 56% mineral concentration.  Now that nets out that you've gotta process 8500 tons more. In ore, in dirt to get  the same amount of via ore out, sorry, I think I said copper. You've gotta get the  same amount of via ore out. 

So you've got this thing where if they finance it they might lower the cost of,  iron ore They might lower the cost of iron ore by 10% Say $10 a ton. And that 

$10 a ton will give them an overall saving across their their iron ore usage of 10  billion dollars. 

And that $10 billion gives them an ROI of 50% of their investment straight  away in, inside, say, 12 to 24 months. You know that's a significant difference  because if their return on investment. Also looks at the price. It means that the  iron ore they, that they, them investing in iron ore production and making these  mines and making an oversupply is pay pays them back. 

Their ROI is differently configured to our ROI and so where we're saying the  copper demand's going up. Significantly so the price will go up. That's old  analysis. The new analysis says the copper demand's going up. They have  complete control of the supply, so our copper costs might go up. But their  copper cost, if they decide to, stop refining it for us and giving it to the, and start  giving it to themselves exclusively, means that they've lowered the cost of  copper from all their supplies. 

And that changes everything because it changes the valuation of, a company  like Escu fmg, it changes the valuation of bhp. It changes the valuation of Rio  altogether because Rio, all of a sudden, even though they own 45% of the,  similar, our mine, they're in a cost plus situation. 

They're not in a, an iron all price situation.  

Erik: And Craig, you've got an entire section in your article, which is about  disruptive technologies and where some of the investment opportunities are. So  again, I very strongly encourage all of our listeners to read the article. Craig,  you told me off the air you're not really promoting anything as a private investor  other than reading your articles. 

Tell us where your substack is and if there's anything else you'd like to tell our  listeners about what. You do  

Craig: well, my Substack is just my name, Craig Tindale. You'll find it there.  Same with my @ctindale for X. And then you can find me on LinkedIn as well  because I'm publishing there as well. 

Just my name again. All I'm asking from anybody. I've done pretty well at  investing over the last decade and I don't really need to promote anything. What  I'm really trying to promote is our own survival and awareness of what we need  to do for our own survival. So it's pretty pure in that context.

I just ask you to read it thoroughly because it's important to every one of your  investment portfolios out there and to forward it to other people because we  need to get the word out. We need to change the way we're thinking about  things in the west to so that we. We become resilient, that we survive as a  culture, as a civilization. 

And that if we don't do that we have a different future than I think we're all  we've grown up with.  

Erik: And again, folks, the name of the article is Critical Materials, A Strategic  Analysis, and you'll find a link to that article in your research roundup email.  Patrick Ceresna and I will be back as Macrovoices continues right here at  Macrovoices.com.

Erik: Joining me now is Commodity context founder Rory Johnston. Rory boy,  we live in interesting times. We've got the situation in Venezuela, and I think a  bigger picture to talk about, which is overall President Trump has. Described an  agenda, which is, Hey, we've really gotta get oil prices down. It's very near and  

dear to his heart because it's one of the most important things for him to do in  order to secure the potential of not losing the house in the midterm elections. 

How would you score the the president in terms of using the best tools available  to him to bring prices down?  

Rory: It's a great way to kick it off and thanks for having me back on the  podcast. Eric 2026 is off to quite the start. So this question about Donald Trump  and using the various very real levers of the presidency in order to reduce the  price of oil, I would say that the president's actually been really bad at this to  date. 

I think if the president did nothing. The oil price would be considerably lower  today than it is right now. I think it's important to walk through why that is,  because I think that's actually a fairly, this is a claim that gets me a decent  amount of hate online. That people are like, no, of course listen to what Donald  Trump says. 

He clearly wants lower oil prices and look, he just conquered Venezuela in  order to get lower oil prices. Whatcha talking about? But what we've seen is  that. One of the things we've talked about, routinely, I think that we talked about  this last time I was on the podcast, that the global oil market has headed in  2025, particularly the latter half of 2025, into fairly pronounced oversupply, at  least on paper, that supply considerably outran demand by upwards of 3 million  barrels a day, which is for those that watch the oil market, a very large glut in  the oil market. 

But while prices have been broadly under pressure, they are by no means under  the degree of pressure you'd expect if that kind of surplus was bearing down on  stocks. And while there have been a couple different things that have prevented,  I think the. Full transmission of that glut into prices and term structure. 

So far, I think un undoubtedly the most important variable there has been  president Trump's considerable increase in both the volume and enforcement of  various sanctions throughout the oil market. Both, on Venezuela, on Iran, and  on Russia, and across all three of these countries you've seen considerable  buildups.

There's essentially really two ways you can judge. Efficacy of these sanctions,  and that's by observing both the price that these producers are getting, or  essentially what price their crude is clearing the market, and also looking at oil  and water, essentially. How much are their logistics getting backed up? And oil  and water has surged through the latter half of last year and in the last quarter of  last year. So Q4 of 25, you are building oil and water at a pace of around three  quarters of a million barrels a day across the three of those sanctioned  producers. That's a lot of oil and that alone takes almost a third of that of that  supply glut right off the market. 

And I think even though PE people will say look. Their barrels are obviously  being produced, which is true. But they're not. This is the difference between  production and supply. They're being produced, they're ending up on tankers,  but they're not actually available to supply any piece of the market. 

So you're getting that kind of double whammy of it not happening and also  rising on the side. So this is preventing or blunting that supply from hitting the  market, and that I think is the most direct way. The president has actually  affected the oil market to date is essentially by taking off a bunch of supply that  otherwise would've been there. 

So to that point, I think that if you're grading him on his ability to keep oil  prices low, I would say he has been to date. A bearish factor on oil prices sorry,  a bullish factor on oil prices. And prices would be much, much lower if he, or, if  Kamala Harris had won the presidency 'cause and presumably she would not  have been quite so harsh on various angles of this sanctioned kind of buildup. 

Erik: Now one of the counter arguments that you would hear to what you just  said is, Rory, haven't you been paying attention to the news? President Trump  just announced that Venezuela is about to hand over 32, maybe as much as 50  million barrels of oil right away, which has got to help the market. Rory does  

Venezuela have 50 million barrels of oil to hand over to Donald Trump. 

Rory: Yes and no. And I think it really depends on how we define what we're  looking at. And Eric, I think you and I actually interacted earlier this week or I  guess late last week on this question of like how much oil is actually floating  around out there on Venezuela. 'cause we were talking earlier about a lot of  Venezuela oil backing up on water. 

That's, I think, a piece of what the president has talked about, seizing his, what  I've called his kind of like pirate booty of his conquest of Venezuela. Is this 30  to 50 million barrels now. One of the things, and I think when you look at what 

he said it's very clear that at least in the president's mind, part of what he will be  grading himself on. 

And I think what we should also be grading him on, is whether or not you have,  whether or not Venezuela's oil production actually begins to recover. He's  basically said that Venezuelan oil production, the industry is essentially rotted  away for lack of foreign capital and because of domestic mismanagement,  which is all true. 

So presumably he wants that production to rebound fairly quickly, which again  goes to his claim of wanting lower oil prices. So one of the issues with  Venezuela and the blockade that he imposed is that you essentially backed up a  lot of pressure on those systems and without tankers to get rid of the crude. 

And with domestic storage tanks overflowing, you saw more and more pressure  for PDVSA, the national oil company to shut in production, which is going the  opposite way of what the president wants. So I think what Trump is saying or  claiming here is that, while before they even figure out what's happening with  all the sanctions and the blockade and everything else, we're just gonna quickly  take off that, 30 to 50 million barrels to relieve some pressure on the system  Now. 

You can cobble together, very charitably, a way to do this, but it's unlikely we're  gonna see that full volume of crude delivered to the Gulf. But I think regardless,  markets are now, I think, acting in a way where that is beginning. To show up  and in prices you've seen, for instance, while global Brent crude markets I, I  think are rising rallying pretty aggressively. 

And the backwardation at the front of the Brent Curve has turned decisively  bullish. Again, WTI is lingering on a weaker back foot, not quite able to get that  same bid. You've seen, especially heavy pressure on things like Western  Canadian select or heavy crude oil benchmarks in the US Gulf Coast, where  essentially from November levels you've rise you've widened from a differential  of about $4 a barrel under WTI for WCS at Houston to roughly around 8, 7 50  $8 a barrel in WTI at Houston. 

So that is, I think, is your evidence that there is some pressure coming there, but  this now we can get to the whole question of what does this mean for the future  of Venezuela? And is this a problem for Canada and these, incrementally, I  think the future of Venezuela is probably better without Nicolas Maduro at the  helm than with him at the helm.

But I think it's obviously much more complicated than just all of a sudden  Venezuela and oil production's just gonna start mooning going forward.  

Erik: It seems clear, Rory, from both President Trump's comments and as well  as Chris Wright's comments that, the agenda is very clear here. It's going to be  the government of the United States does everything possible to encourage US  oil companies, if not subsidize US oil companies to make massive investments  to rapidly bring that production in Venezuela back online. 

And the thing that seems. I guess surprising to me is most of the other things the  president has done seem to be temporarily focused on the midterm elections  now, at least according to our mutual friend, Dr. Alhajji. He did a podcast or I  guess a Twitter space is about this. He thinks that the most aggressive, no matter  how much money you throw at it. 

It would take at least three years to get just 1 million barrels per day of  Venezuelan production back online. And I don't think anybody disputes that  Venezuela has the, more reserves than anybody else. So over a long period of  time and a huge amount of investment, there's lots and lots of oil there. 

But Dr. Alhajji says. At best it's three years to get just 1 million barrels a day of  additional production. What's your take on that? Does it take that long? Does it  take less than that? Longer than that? What do you think?  

Rory: No, I think that's about right. I think one of the big questions is where are  you measuring the growth point from? 

Because I think one of the things that's happened with Venezuelan supply and  production in the market is that it's changed a lot over the last couple months.  So for instance, whether, Trump could claim a much larger victory, a much  larger growth pace if you're measuring off the low point of shut in production  due to the blockade, right? 

Trump can just remove the blockade and some of that will just bounce back  naturally. Now. If we're talking about, say, how can we get incremental growth  from say, October levels from before the blockade was really imposed, that I  think is gonna be a much harder sell. And I think that's where you're gonna get,  three, five plus years before you can really get a million barrels a day of  production. 

And again, this is talking, this is with 50 plus billion barrels of investment. This  is with everyone beginning work very quickly or immediately none of which is 

currently happening. But I do think that you can probably get. A piece of that,  say two, 300,000 barrels a day, probably quicker than that. 

Maybe, a year, maybe 18 months. That would be more mostly focused on  Chevron's operations and essentially squeezing out what else you can get from  the current system. But I think. After that immediate low hanging fruit is  exhausted, that's when you move to this question of, okay, now we need to  repair pipelines. 

We need to fully begin to refurbish fields. We need full workovers, we need, all  the other things. We need more diluent coming in the market. We need  upgraders back up and running. This is when you start to get this really heavy.  Mountain of pent up investment demand that has yet to be kinda satiated. 

And the further you go down, the harder and harder it gets because eventually  you run into things like the Venezuelan power market, like the power grid is  deeply. Unreliable and, prone to blackouts, that's not a good way to run  upgraders and refineries and various other components of the industry. 

So when you get to that stage, that is obviously you need to fix like the entire  country's power grid. So these are obviously extremely difficult, expensive  things to do, and that I think is where you're gonna start to run into more  pushback or reticence among the people and the companies that would be  required to do that investment. 

I think you saw that this past Friday when Trump and Wright, Etc, all had the,  collection of oil industry executives gather for this press conference about what  the future of Venezuela was. And you saw a fairly broad spread. You saw  everyone there. You saw everyone from upstream companies, service  companies, refiners, trading companies, Etc. 

And I think each of those. Had a very different view of how optimistic they  were coming down the line. For instance, Chevron, which most listeners would  know has been in Venezuela, never left Venezuela, was able to work at a deal  with the Chavez and then, and the Mado government, and was able to cut  sanctions, waiver deals with, the Biden administration. 

And now again, the Trump administration, they think that, I think reasonably so  they can get, it's all upside for them because they've held on. Against all odds to  their Venezuelan assets. That I think will be some upside for them. But other  companies like Exxon is the one that coming outta that meeting had all of the 

headlines about it was saying it was, the quote was that Venezuela in its current  state is uninvestible. 

And talking about, the long, slow work of rebuilding institutions and rebuilding  the rule of law and rebuilding a culture that respects contracts and kind of  continuity of government. These are obviously. Much more difficult things and  things that the President can't just snap his fingers and say voila. 

Other companies, I think, I'm sure, trading companies are gonna be all over this.  You had Trafigura and Vitol at the meetings were very enthusiastic about,  essentially acting as the White House's broker of Venezuelan, repossessed and  resold Venezuelan oil. They're very enthusiastic with that. 

Unsurprisingly, I think overall, refining companies seemed happy to have more  heavy crude availability. But in terms of companies that were jumping over  themselves to get in and really make those hard investments, no, that happens  much slower. And then we get to this question of, okay would you have  subsidies? 

The one thing that they said in the. The meetings was, Trump committed to  some quote unquote security guarantee, but obviously the next day the State  Department advised all Americans to leave Venezuela because of the security  situation. There's a carton that a horse and a cart situation here, and I don't think  the president knows which one comes first. 

Erik: Let's go back in the short term to this 30 to 50 million barrels of oil that's  supposedly about to be handed over. First of all I think there's a psychological  effect that we're used to talking about oil supply in barrels per day of  production. This is not per day. This is a one time thing. 

So if we did hypothetically get 30 million barrels all at once, okay, that's 1  million barrels a day for just one month, and that's it. And so in terms of  context, it's not very much oil, but even if we said. Okay. 30 million barrels still.  That's, something to throw at the market, at least short term. 

Maybe that'll bump the price down a little bit and overcome some of the upside  that we've seen in the last couple of weeks. But hang on, where is this oil, first  of all? Does it exist? And if it exists, where does it exist? Because from the  Twitter exchange that I had with you and Dr. Anas. It sounds Anas was saying  there's really only about 11 million barrels is the most that they have.

And then somebody else, I don't re remember if it was you or someone else said  wait a minute. No, they've got more. It's in floating storage, but it's not in  Venezuela, it's in Asia. And I'm thinking to myself, oh yeah, so the Chinese are  gonna say, oh, that's Venezuelan oil. Send it back. How does this work?  

Rory: You know if you're looking at the barrels, actually physically off the  coast of Venezuela, you're probably looking at somewhere between 10 and 15  million barrels, depending on whose estimate you're using. But it's not  obviously the full 30 to 50, you've probably got another 10 or so at various  stages of transit throughout the world and floating around, waiting to be  delivered into China. 

I think that's probably what is being referred to by the president here, mixed  with some additional. Volumes that have built up on land in Venezuela as part  of this attempt to not shut in production. So they've been filling onshore  production and or onshore storage in production areas. So I think that's probably  what we're talking about, but just again, to reiterate. 

So far this, this volume of oil, it's been taken off the market by Trump in the  first place. So this would essentially be a debt almost that's being repaid. So it's  only a million barrels a day for a month. But that theoretical, I think you it in  another way. You could say that, let's say Venezuela starts producing and  flowing again, that could theoretically double Venezuela supply to the market  for one month. 

I think it's another way of framing the same thing, which again, to this point that  right now we're feeling a lot of these weird idiosyncratic, seemingly one-off  supply disruptions, whether or not it's Venezuela. We're gonna talk, I'm sure  about what's happening in Kazak flows. The CPC terminal or , Russia or Iran. 

These are all theoretically supplies that have been lost to the market that will.  The assumption is not that they're going to be permanently offline, so eventually  they're not just going to come back online. But in the case of Venezuela's  floating storage or built up oil and water, you could theoretically double the  pace at which that supplies for a certain number of months. 

Erik: Okay, so really what we're talking about is Trump took a bunch of oil off  the market with his blockade. That oil got trapped in Venezuela, and what he is  really saying now is about that oil that I trapped through my military operations  and prevented you from exporting that you've got. Piled up however much there  

is there, and let's inflate it, then exaggerate the amount by a President Trump  factor.

Whatever that number is we'll take it and you'll give it to us. And that's what's  going on there. But it's probably not a full 50 million barrels. Now. Meanwhile,  in other news president Trump seems to be encouraging Iranian protestors to.  Continue protesting and it seems like he's almost trying to spark a bigger  conflict or even civil war in Iran. 

I think most people are assuming that is a precursor to some kind of military  intervention from the US and Iran. Do. Would you agree with that? Do you  think that's what's coming next and in what timeframe?  

Rory: I think it definitely seems like that's what the market is currently  assuming, and I think at this stage, given what we've seen both from. 

The Prime President Trump regarding Iran as recently as last summer where  they dropped 14 bunker busters on various nuclear Iranian nuclear facilities.  And then we obviously saw a fairly unprecedented capture of Nicolas Maduro  and Venezuela. I think at this stage, he views those two interventions is wildly  successful as kind of proof of American power, which I think so far. 

Has only, and I think will continue to embolden him until one of these  interventions goes badly. So I would say at this stage it seems reasonably likely  that the president is going to do something here. And I, and while it's still, I  mean if we're just flashing back. To this past June when you had the 12 Day  Israel Iran War that's when obviously prices got really spiky again, I think for a  good reason. 

You had act, you had missiles flying around the region. But again, I think at this  stage when we, whenever we get to talking about Iran. You're talking about? I  think when we're talking about the price impact, and I think a lot of what we've  seen over the past, call it three, four days of trading in oil as we've rallied  roughly $5 a barrel higher. 

A lot of that has been a Ron risk, particularly running into a fairly overstretched  short. Positioning market positioning situation in the oil market. And just for  those, again, for those that don't know that, we're always talking about massive  amounts of oil traveling through the strait of hormoz. 

So even though it remains this like really. Minuscule tail risk. I think even a  one, two, 3% move in the probability of something happening in or around the  strait is worth a lot to the oil market, particularly in what we'd call this sense of  like precautionary demand. So you have these companies traders, Etc, that are  bidding up the front, particularly the Brent Curve, worried about.

The loss of these barrels. I think particularly coming at a moment that we're also  seeing, still tightness in Venezuelan supplies tightness in Russian supplies,  tightness in Kazak, supplies outta the ccpc terminal. All these things are keeping  the market tighter. And now you have this worry about the situation in the,  again, and all of this. 

It's, if it's starting to sound a lot like 2015, I think you're paying attention. It's  the same idea that. We have this overarching consensus view of. A surplus. It's  about to hit the market at any moment. It's this freight train running at you. And  then each single month you have some kind of shock that comes in it, whether  it's whether it's a CBC terminal outage, whether it's the Venezuela blockade,  whether it's before that the sanctions by Trump against Rosneft and Luke Oil,  Russia's two largest oil exporting companies. 

These things are still having these ripple effects to the market are keeping. All  that prompt supply tied up in knots in ways that it's really not able to fully bear  down on prices. So again, back to this point of is Donald Trump bullish or  bearish? I would say, again, he's bullish for prices because absent these knots,  we would've a lot more barrels trying to actually clear the market. 

But as of yet, they're all still, wrapped up in varying degrees of logistical legal  sanctions. Red tape.  

Erik: Now Rory, you are based in Canada. You're a Canadian citizen. I want to  ask you an awkward question, which is look it used to be that if someone said  the United States sometimes engages in regime change operations for the sake. 

Of taking oil from from countries by removing the government that's in charge  and replacing it with a different one. That was just crazy conspiracy talk. It  seems like the president's not really hiding the fact that his agenda is very much  to resources and certainly the folks in Greenland are very, acutely aware of this  right now, that he's not afraid to say, look, we think that we should have this.  We think it's in the world's best interest. We think we've decided that it's in the  Greenland people's best interest. Not necessarily checking with them to see  what they think, but just deciding for them it's in their best interest. 

It's best for everybody, and it's really important because it's really about the  development of the Arctic, including. Oil exploration in the Arctic. What  President Trump is saying is, we need Greenland because in, in it, please, what  President Trump is saying is the United States needs Greenland because if they  don't get it, if the United States doesn't get it.

Then Russia and China will, and it's gonna change the balance of power in a  way that's unhealthy for the world. And hey, I'm just doing the, president Trump  feels that he's just doing the right thing for the whole planet by telling the  people of Greenland that this is in your best interest, even if you don't think so. 

How do you guys in Canada feel about this, considering that you also have the  other big landmass that goes up into the polar region? If you were talking about  Arctic exploration acquiring Canada and President. Trump's words as the 51st  state would seem to achieve that goal just as well as getting Greenland would. 

It used to be crazy to think that there would ever be any overt pressure or forced  action for the United States to want to annex any part of Canada anyway, for  heaven's sakes. We're we excellent allies? Always have been. What are  Canadians thinking these days about all of that?  

Rory: It's certainly not lost on, on. 

Canadians, I think what's happening? I think. In a way it's Canada is both as  large heavy oil resources like Venezuela does, and it has a obviously large  mining and arctic kind of territorial expanse, much like Greenland does. So  there's obviously a lot of parallels here. 

I think the way I think about it is a couple different ways. I think on the first.  Simplest, geopolitical lens. Yeah. I think if we're, if you view kind of North  America as your risk board Venezuela kind of secures your entrance to North  America from the south and Greenland, from Europe. 

Canada's obviously an important piece of that entire continental control. So  yeah, that's obviously an obvious point of concern I think. In terms of assuming  that the level, I would say that we still feel relatively safer that our, no matter  what opinion you have of Canadian Prime Minister Mark Carney, I don't think  anyone believes that he's, the head of a narco terrorist syndicate. 

So I think that, you would at least need to create some other pretext there. But I  think what we have seen is this discussion increasing. The next thing that's  gonna be bearing on US Canada relations is going to be the renegotiation of U S-M-C-A or a Canadian call north of the border Uzma. 

We put the sea at the front, of course. Which is, I think, again, your sign of how  unified that that trade deal was. I think that each of the countries had their, has  their own name for the same deal. But that's the, that renegotiation is what's  going to be coming next. And I think one of the interesting things that's 

happened over the past year it wasn't, it was just a year ago that we were talking  about how, Trump was thinking about imposing tariffs on Canadian crude oil  experts in the United States. 

And despite. Pushback from essentially every corner of the industry. They  actually did impose tariffs on Canadian crude access for a day or two until the  U-S-M-C-A exemptions kicked in. But I think that, there's this feeling of, did  Trump feel like reality put him in a bind? 

I think there was a similar feeling of when he tried to go really hard against  China and then there was this, that rare earth's kind of export ban blow up that  kind of felt like he got, kinda got his hands tied by these physical mark  constraints. I think one of the things that's interesting heading into these  renegotiations is. 

I will, I can tell you many different ways in which Venezuela does not replace  Canada in terms of the US' crude slate in terms of energy security, Etc, Etc. I  think what you've seen is amongst the coalition of actors underpinning President  Trump, call it the broad MAGA movement, you've seen a very heavy anti  Canada kind of political tone take hold, and particularly after Trump. 

Captured Nicolas Maduro, last weekend, two weekends ago now. Ever since  that happened, you basically, there were comments around how, oh, now we  don't need Canada because we have another country with very large heavy oil  resources. But just on that, just I have to do my Canadian duty to 60 seconds  and say that's, you can. 

You're gonna see additional competition in the US Gulf Coast, but those  Venezuelan barrels, Venezuela produces less than a quarter of what Canada  exports regularly to the United States. It can't get into the Midwest because all  the pipelines point south, Etc, Etc Etc. But I think that what you have seen in  the Trump administration is that reality doesn't always. 

Bind as we've seen even with talking about Trump and and what he wants  international or US oil companies to do in Venezuela. It doesn't really matter  what they say. It matters more like his perceived vibe is. And I think right now  there's a perception among his coalition that having Venezuela as potentially the  51st state, so Canada would get bumped to, the threat of 52nd State. 

That I think becomes a, they believe that to be a point of leverage. So even if it  isn't physically a point of leverage, I don't think that matters. I think that the 

Trump administration's gonna come into these renegotiations with a feeling of  an advantage in Venezuela they didn't have last time around. 

Erik: Now one of the ideas that's been floated by Chris Wright, I think, or  maybe it came from President Trump, I'm not sure, was using any oil from  Venezuela to refill the strategic petroleum reserve. That actually seems like a  strategically good idea to me because the oil that the US is most dependent on,  in addition to the oil is produced in the United States, is blend stock. 

The heavy blend stock that's needed into mix with that very light. Bachan shale  oil in order to to be able to refine it in our refineries. What do you think about  the idea of using Venezuelan oil to refill the strategic petroleum reserve? Is  there enough supply from Venezuela to actually do that? 

'cause of course, the SPR is much bigger than the 30 to 50 million barrels that  they're talking about. Is that a realistic thing? And if so, is it a good idea?  

Rory: I think, to your point, I think that as an example, like this 30 to 50 million  barrels, I think, if we're talking about what the most strategic thing the United  States could do with it. 

Yeah. I think given that we've consistently talked about how one of the  limitations to limiting or to refilling the SPR is the lack of congressional  appropriations to do the lack of money to actually buy the oil. Suddenly. If  Trump claims that, Venezuela has turned over 30 to 50 million barrels, that is,  roughly market prices, two and a half billion barrels, sorry, two and a half  billion dollars on the upside. 

That's the 50 worth of oil, which is actually double the amount they even  initially tried to get from Congress in the last, kinda a big, beautiful bill before it  got hacked down to I think only a hundred something million. But yeah, I think  it's actually it's not a bad idea. 

The trouble is that, to my knowledge, and I've chatted with a few people that  know more about the SPR than I do. But I think to my knowledge, the merry  crude or your kind of heavy Venezuelan crude exports don't really match the  spec well of what's in the SPR, which is typically more of a medium sour barrel,  

more like your. 

Mars or Poseidon Barrel your ASCI kind of blends if those that are more  familiar with the US Gulf. But I think what could be interesting is there is  precedent before that the, oil that has been. Let's say put into the possession of 

the United States Federal government in the past that could be, for instance,  through royalty in kind programs where, the government actually got physical  barrels in exchange for production royalties rather than a cut of profits. 

In the, in prior moments that has been essentially exchanged a barrel for a barrel  or a barrel for a fraction of barrel or whatever for grades that are more  conducive to the US SPR, I think that is an interesting possibility here because  obviously the administration has not been very successful at getting those  congressional appropriations to refill the SPR. 

They've had other budget priorities whenever that's been going on. And I think  this, given that the, Trump administration has so front and center frame this  around oil and strategic energy security and everything else. I think that  obviously makes sense from a narrative kind of cohesiveness point. But again, I  think they would need to do some kind of. 

Roundabout maneuver in order to do that and end up with crude, that's actually  useful to the SPR.  

Erik: So let's try to bring this conversation around to things that our audience  can actually trade. We've got a pretty I don't know, it's the first time in how  many months that we've not only. 

Come off of that $55 very strong support level, but we're above 60, at least as  we're speaking on Tuesday afternoon as we're recording this, when's the last  time we were above 60 on WTI? It looks to me like we just barely touched it  briefly sometime in Dec early December. Before that, it goes off off one of my  charts I'm looking at, I'd have to look back to what sometime in October was the  last time before that.  

Rory: Yeah I'm looking at Brent the last time. We're at 65 40 on Brent right  now, which the last time we were there was in late October.  

Erik: Is this, has this rally got legs? Is this the beginning of something big? Or  is this one of those geopolitical rallies that you wanna fade? Because as soon as  the geopolitics come down, you know we're gonna retrace the whole thing back  down to 55. 

Rory: So my bias here is that it's the latter. It's this geopolitical again, this is  Iran, this is CPC. And again, we, I keep mentioning the CPC pipeline. So just  again, 60 seconds of what I'm talking about there. The CPC or the Caspian 

Pipeline Consortium Pipeline, which is essentially the way. 80% of  Kazakhstan's oil gets to market. 

This was, it's a pipeline that comes outta Russian territory that has historically  been safer than some of the other Russian ports. But in Nov in late November  Ukraine bombed the loading points the single point moorings that the facility  

uses to ship on. And essentially that's had this massive blowback effect and  taken upwards of a third of kaza production off the market in January so far. 

So there's also this there's a bunch of these compounding supply losses that are  keeping the market much tighter than it would otherwise be. So I'd say all else  equal the assumption is that those will not remain forever going forward. That,  

that, right now. LA based on later number that I'm seeing, you're looking at  Kazakhstan's production down to roughly a million barrels a day through the  first half of January, down from 1.75 million barrels a day in November. 

So that's, we're talking huge chunky losses. Presumably then Kazakhstan's  gonna wanna get that back up. So as long as Ukraine doesn't continue to bomb  the CBC terminal or tankers as they did today, that were heading to the CBC  terminal that should normalize. But I think the challenge with saying that is that. 

We've been saying that for a little while now, that these one-off things keep  happening repeatedly, and I think to a degree it's useful to just think of just a, a  theoretical regime to talk about how we're, how, what we're seeing right now,  which is we have a fundamentally weak oil market, which in my mind has  emboldened and facilitated particularly President Trump to take ever more  volatile, destabilizing policy actions in the market 

Yes, eventually this should all roll over and then we get the glut and the prices  grind lower and we go fully into Contango on the curve. But so far, these, he's,  Trump seems quite committed to continuing to pressure these various countries  

and I think as we've seen him emboldened by his, at least ostensible, thus far,  success in Venezuela. 

How far is he gonna go? In supporting the Iranian protestors, how far is he  going to go in, pushing harder on Russia. And I think all of this in the context  of, I don't know if you saw Eric earlier today but Donald Trump came out and  said that he really wished he could see oil go back down to $53 a barrel again. 

That's a very specific target in the president's mind, which I'll note is $3 a barrel  higher than his target used to be? So maybe that we can, maybe he is  acknowledging his own his own bullish slant on the market over time. 

Erik: Rory, could it be that? What's going on here is President Trump is trying  to do a calculated, risk management move where he says, okay, what he really  needs in terms of oil prices is that $53 number that he's talking about before the  midterm elections. 

And therefore, let's go fast and furious, bill. China shop, Donald Trump style,  do all of the geopolitical upsetting that he might be inclined to do early. Get it  over with in January, and then give the market time to calm down as we get,  into summer driving season. And the other pressures that tend to take us back  up in oil prices have it all over with so that we're in the blow off phase and  we're retracing, as you said. 

Could it be that he's just trying to get all of his, geopolitical upsetting, done and  over with.  

Rory: It's not a bad idea. If that was actually, what if there was a, a National  Security Council meeting or a National Economic Council meeting and like  someone said this should be the strategy. 

I think it's not a bad strategy because again, I think that this is the period of the  year where prices are going to be weakest when balances were weakest. That  provided you additional fundamental support for doing various supply side  destabilizing moves. I think even if you wanted to go one step further, even  more galaxy brained here, I think there's a factor that, Trump obviously says he  wants low prices speaking to that consumer sentiment around cost of living and  pump price pain, Etc, Etc. 

But I think what you've seen. If you're, if you wanna be purely rational about it.  I, I've come to really like this theory of essentially this like parabola of political  price pressure. That when you get. Over. So there's really compelling research  that was done by Brookings that showed negative media mentions that  essentially as you get above $3 and 50 cents a gallon for us pump prices,  negative mentions in media, which I think both reflect and further drive  consumer sentiment around these pump prices builds up rapidly after you hit  above three 50. 

But that doesn't, it basically flat lines under three 50. Like you don't get this  commensurate. It's not like people get happier for $3 or two 50 gas. So that I  think is interesting because it, you, your downside payoff is less it's almost like  a prospect curve that the, consumers overweight their losses and they don't  really give you the benefit of their upside.

If it's better than that. On the flip side, you have us producers that, if they go  from $90 a barrel to $60 a barrel on crude, maybe they go from making  gangbuster profits to only scraping by. That's obviously unpopular, but it's much  more painful to go from 60 to say. 40 or 30 where you go from, not it, it is from  breaking even to like outright bankruptcy or worrying about layoffs and  winding up your company, that becomes much more painful. 

So I think if you got much below 50 for any durable period, even below 60 for a  durable period as we saw, I think the pushback from. Trump's base in the oil  sector, which I think has felt reasonably and understandably burned, but I think  still naturally gravitates towards. Coalition for, let's say the upcoming midterms. 

So I think there could be an attempt to balance those competing factions and  don't get too offside on either one of those kind of rising parabola of pump price  pain or or barrel pain on the producer side. But I think at the end of the day, the  one thing I'll say is that I think all of this we can. 

Trump does so many things and says so many things that I think it's easy to  overfit a theory onto him. But I do worry that this, I think the other side is that I  think it's just reasonable to think that he is just winging it, that he wants pro, he  wants prices to be lower and you know he says that, but he does a bunch of stuff  that increases the price with sanctions and everything else without fully  recognizing why. 

And he'll just post about how, if you were a patriot, you would bid the price of  oil lower or something like that. So I think I, I do worry about overfitting and  giving him too much credit for having a consistent strategy here. 'cause I just  don't know if that's the case. 

Erik: I wanna get a little bit more technical here because this is where I think  the best trading opportunities are in this market. Last time I had you on, I don't  remember how long ago it was or maybe it was two interviews ago. You and I  had both noticed something that we thought was quite unusual in the shape of  

the forward curve, the term structure of WTI, crude oil, which is all, it's they  call it a curve for a reason. 

It's usually curved. And what we noticed, both of us was, eh, it's funny. It's like  there's really, pronounced backwardation right to one specific contract. And I  think it was actually right now around January of 26, and then all of a sudden  there's like a, a very sudden bend in the curve and it's all contango after that.

And we were both kind of scratching our heads saying, why that specific month,  why not the usual curvature that you would see there? It's happened again,  Rory. If you look at the WTI curve right now it's exactly as you and I predicted  at that time. You and I have said, wait a minute, that contango that you see after  January of 26, that's gonna flip into backwardation, at least at the front of the  curve. 

That's exactly what's happened, but now it's March of 27. Just about one year  out. 'cause we're just flipping from the February to the March contract and the  contract role that's coming in the next week. All of a sudden, that's the inflection  point. Why are these funny shaped curves happening at odd months where all of  a sudden that there's that abrupt shift from backwardation to contango? 

And specifically what you and I thought at that time was okay, it means the  trade is. To buy the spread that started at that time in January 26th. By January  26th through January 27, that calendar spread and expect it to flip from  contango into backwardation is the it would be the the H seven. 

H eight the March of 27 to March of 28 one year calendar spread, which is all in  contango. I, is that a ripe trade to expect that over the next year to switch into  backwardation? And if so how does that compare with trading the front, the flat  price on the front month?  

Rory: So I think one thing that's interesting that you've seen, and you've seen  this almost. 

Almost every month since April, since last, since last April when Trump  announced his Liberation Day tariffs. And this is, I think when this whole, at  that point you got the add-on of opec adding all that, crude back to the market.  This is when the global glut thesis really took hold very rapidly. 

And what you've seen really interestingly, pretty much every single month  since, is that for the first half of the month. The front of the curve weakens you  basically flirt with flipping into prompt contango, and then something happens  in the middle of the month, whether or not it's Ukrainian attacks on the CPC or  it's Trump sanctions against Russian oil majors or anything else. 

This, it's just the moment that you basically get the shock higher, and then  basically at the end of the month you always end back and fairly pronounced.  Backwardation only for that to begin sliding again the next month. And  essentially it's this recycled, it's this yo-yo up and down.

Flat prices had I think a bit more of a range, like a trend to it. But if you just, if  you're just looking at prompt time spreads or or even let's say the front couple  time spreads along the crude curve that has been a cyclical thing every single  month that it goes. Lower and then higher and lower and then higher. 

And I think I've joked with some, friends, analysts that are they're watching  someone in the White House is watching for when this curve is about to flip  into contango. And that's when they're like, aha, that's when we'll announce the  next section against against Roz n Luko or whatever. 

And I think that's something that's been thoroughly consistent. Now what's  interesting about this cycle is that. Got started much earlier in the month, about  a week earlier than it has in prior months, and this is when Iran got started up.  So I think if we were to follow this back to it, if this was to repeat itself, I would  expect this, us to remain heavy and hot on the, at the front of the curve up until  the end of the month. 

Then begin to essentially fall back down again as the market says, okay, is this  the month when we finally begin to see that surplus arrive on shore? And again,  until it, it's going to happen eventually. It's just a question of how many more  months we kick it down the road because each one of these crises, for most of  them at least it's not a complete change in narrative. 

It's just a, essentially you're either delaying that barrel from going to the market.  Which means you get a double whammy down the line or you're just,  preventing it from hitting right now. And I think that's what we're looking to see  is that these barrels will eventually hit. We just don't know when. 

So I think the market's gonna keep waiting every single month to say, is this  contango month? Is this contango month? And then as soon as something  happens, in this case, Iran and prior cases, it was something else. It was  Venezuela. That I think is the cycle that we're gonna keep following here. 

Erik: Rory, I want to come back briefly to this whole regime change question  that we discussed earlier in this interview, just because of some news that's  happened while we were speaking and now of course, the idea that the US  would ever engage in regime change operations for the sake of getting the oil is  obviously preposterous, ridiculous, crazy conspiracy talk that could never  happen. 

However just after the market closes on Tuesday as we were speaking, Chris  Wright announces, quote, the US would happily partner with Iran on oil if the 

regime ends. Now this is not a regime change operation of course, but just,  hypothetically, if the regime did end, the US would happily partner with Iran on  oil. 

Any comments on that? And as a Canadian any concerns?  

Rory: Yeah, I think I, I'm even, I haven't even seen the comment come across  the line yet, but it sounds very similar to what we've heard from other what  we've heard from Wright and others about Venezuela. 

I think there is this definite interests, and I think we haven't even really talked  about what these subsidies or, they also talked about potentially putting like  equity investments into US oil companies. Like we're going down this weird.  Kind of state capitalist, fusion line that I think is like very unfamiliar to more  modern markets but is like very almost cliche to like imperial markets. 

And I think that's what this is starting to feel like is, regime change with the  kind of the catch of and will get, traffic and vitol or whomever to market your  crude for whatever regime replaces you, But I think The thing that we have  seen, and I think this is something that has been relatively consistent despite  Trump's kind of bravado on foreign policy, is they have not like the, we're still a  far ways away from, say, your Bush era neoconservative democracy, promotion,  regime change kind of sentiment that. 

Very briefly was the thought in Venezuela with getting rid of Nicolas Maduro.  Obviously, Marco Rubio Secretary, secretary of State, has been a very long  running Venezuela regime, change hawk, and I think representing a fairly core  constituency of that kind of South Florida vote. Whether it's Venezuelan,  diaspora or Cuban diaspora populations, but again, what we've seen very  quickly there is that, very quickly Trump decided, actually no, we're, we don't,  it would be harder to deal with, say, a new Democratic opposition taking power  in Venezuela. 'cause that's destabilizing and that's messy and that's hard. So  mine as well, just, even in Venezuela, it's, we're just dealing with Delcy  Rodriguez, who is the Maduro's vice president and oil minister, notably here. 

That I think is, it's easier. That's let's just deal with the people we know. And I  think there's this question of like, why would that be any different in Iran? So I  think right now it's taking this this sound of democracy promotion and  supporting the protesters. But what we've seen historically from Trump is like a  fairly, rote willingness to.

Collaborate with whomever ends up being holding the keys to power at the end  of this, in which, in, in this case is, would that just be the IRGC or whomever  else? It's not necessarily that the protestors going to automatically get the keys  to the government, and I don't know if Trump is interested in the messy long  term post conflict reconstruction work that would be involved with something  like that. 

In Iran or Venezuela, which is, I think right now we're in this moment where  this stuff could turn into just a game of musical chairs and, the next strong man  goes into power and that strong man's a little bit more favorable to Trump and a  very, very familiar kind of, coup to desperate that's more favorable to  Washington vibe that we've seen from the United States over prior decades. 

I think that's not, at least what we're hearing from the White House right now.  So it'll be interesting to see where this goes, but I don't think that he has the  appetite for the kind of follow through that would be required there. And I, who  else is gonna be controlling Iranian oil after the Ayatollah Falls? 

Again, I don't think it's any of the protestors at this point.  

Erik: Rory, I can't thank you enough for a terrific interview. But before we  close, I wanna ask you to tell us a little bit about commodity context, your  company, what you do there. I know that you just wrote an excellent piece,  really giving your readers a, a, a. 

A perspective on this whole situation in a little bit more depth than we had time  to cover here on what's going on with Venezuela. Could we have your  permission to share that with our listeners in the research roundup email? And if  so, we will share it with them and please tell us what you do and how people  can find out more about your services. 

Rory: Absolutely. I, appreciate you sharing the research and for anyone that's  interested, commodity context is a research outlet where I provide all of my  thoughts on oil markets evolving as this market continues to roll forward. Got  three main different types of research on commodity context, which is a oil  context weekly, which is published every week around Friday at 4:00 PM  Eastern after Markets close. 

That kind of brings a roundup of essentially what nonsense has happened the  week and how oil markets have begun to process it. I've got three different  monthly data heavy reports, which are called data decks which are on global oil  balances, opec production compliance, everything else as well as a more 

detailed look around flows around North America, as well as on top of this, I  also offer an advisory service to higher touch clients and a data service for those  clients as well that look, they wanna provide a kind of a deeper data driven  backend that drives my own research head over to commoditycontext.com. We'd love to have you and and let's keep following this market together,  

Erik: and you can find a link to Rory's report on the situation in Venezuela in  this week's research roundup email. Patrick Ceresna and I will be back as Macro  Voices continues right here at macrovoices.com.

 

Erik: Joining me now is 42 Macro founder Darius Dale. Darius, prepared as  always a slide deck to a company. This week's interview for our regular  listeners, you already know this, but for everyone else, the way this works is  Darius has a huge slide deck which he shares with his paying subscribers. He's  kind enough to share the entire deck with us, with the condition out of respect  for those paying subscribers that we have to redact the slides that we don't  actually use. 

So please forgive any blank slides that you find in the download link. You can  search. Certainly get all of it by subscribing to 42 Macro. We only provide you  with the slides that are discussed in this week's interview. Darius, I wanted to  get you on the show, very first guest of the year because boy, back in 2022, I  think we had you as the first, or maybe it was the second guest of the year. 

Everybody was bullish. Boy, sounds exactly like today where everybody's all in,  running it hot and you actually were bold enough to use the words crash year  and say guys, I think there, there's a lot to be worried about. You've nailed that  call in 2022. It turned out not to be the very positive year, everybody thought. 

Let's start with the real high level. Is this gonna be a crash year or is everybody  right to be all in?  

Darius: Ooh, that's a great question. Way to start us off Hot Eric. So thanks  again for having me. It's always a pleasure to be with you and your wonderful  macro Voices community. I'll also add just one quick highlight. 

We also had the same view coming into last year, 2025. Recall that we thought  the Trump administration would kitchen sink the economy from a policy  sequencing standpoint. And ultimately we thought the markets would crash to  price that in. Ultimately recover very sharply and violently to the upside. 

And that's obviously exactly what happened last year. Kudos to the team at 42  Macro for getting that getting into answering your question I'll jump right into  sliders, hop right into it. We'll go to slide 115 where we show our the latest  refresh of our positioning model, which we refresh daily for our clients. 

And right now we're observing a historic degree of crowded bull positioning.  Which makes me very uncomfortable as an investor because typically what  happens when you get to this extremes, incredible positioning. You tend to have  bad outcomes in financial markets. That doesn't necessarily guarantee a bad  outcome in financial market, but it certainly increases the probability of one.

So when we look at, the positioning cycle indicators that correspond to the short  to medium term time horizon, in which are the AI bulls bear spread and the  National Association of Active Investment Manager Stock Allocation survey.  Both of those the latest values for both of those time series are breaching their  respective bull market peak thresholds. 

Going back to the early late eighties for the AI bulls bear spread , early two  thousands for the name survey. So that's that indicates that there's a high risk of  a correction over a short to medium term time horizon, which in our risk  management nomenclature is one to three months. 

If you look at the indicators on the far right of that table, on, on the right of slide  one 15 where we show the AI stock allocation survey the AI bond allocation  survey, the AI cash allocation survey, we use that to proxy investment advisor  positioning. We look at the S&P 500 3 month realized volatility to proxy,  systematic fund exposure positioning. 

We look at implied volatility correlations to proxy the gross exposure of our  market, neutral hedge fund clients. And then finally we look at the S&P500  press the next 12 month earnings multiple, as well as investment grade credit  spreads, and as well as economic policy uncertainty to proxy various cohorts of  the broader buy side and their crowd and their crowded positioning, whether it  be bullish or bearish. 

And right now, the. The compendium of indicators are enough of those  indicators are breaching their respective bull market peak thresholds. That  suggest that there's, some bumps likely ahead of us over a short to medium term  time horizon and potentially a medium to longer term time horizon as well,  purely from the perspective of the positioning side. 

And one final thing I'll say on this, on slide 116 if you go back and look at all  those indicators and just look at them in terms of the percentile of implied  crowd at bullish positioning based on the latest values, this is about the third  highest crowd at belows positioning we've ever seen on a median on a mean  basis and the second highest we've seen on a median basis. 

And that would seem to suggest that we're gonna have to have a lot of good  news accumulate for markets to power through this through this dynamic.  

Erik: It seems to me that there's a lot of parallels here. Going into the 2000  trading year, boy, quarter of a century ago. I guess I must be getting old or 

something, the thing that seems similar to me is everybody was betting then on  the internet being a really big deal. 

They were right about that, but it just got so far ahead of itself that we ended up  having to have dotcom bust before we could, a couple of years later get a  recovery. And of course they were still right. The internet was a really big deal.  It still is. It seems to me the parallel there is AI. 

It seems like it's the big driver in the market. Everybody's right that AI is gonna  be a really big deal, but it also feels really overdone. So how do you see, and I  guess the, the challenge there was. Almost everybody knew there was a bubble,  but nobody knew how to time it. So how do you see this crowded positioning  that you're describing on page one 15? 

Resolving?  

Darius: Yeah, that's an excellent question. I'm so glad you brought up the early  two thousands market cycle. 'cause it's very akin to what we're experiencing  here here in 2026. Historically when you have these CapEx bubbles going back  to the 19th century railroad, build out the 20th century consumer durable goods  build out as well as the 20th and 21st century internet CapEx build out. 

You always tend to see those mar those CapEx bubbles tend to precede. Secular  bear markets, and oftentimes, significantly adverse outcomes in the economy as  well. The panic of 1873 led to the long depression. The 1929 stock market crash  ultimately led to the Great Depression. 

We obviously saw the.com bus lead us to the jobless recovery and then  ultimately the housing bubble, which ultimately gave way to the global financial  crisis. I think if you take a multi-year time horizon and perspective. Things  aren't great, I'll just leave it at that. But from a medium term time horizon  perspective, which is set of three to 12 plus months, three, three to 12 months in  our risk management nomenclature, we do see this historic degree of bolus  positioning resolving itself positively. 

But this will probably the last gasp higher in that, from that perspective. If we  could turn to slide 24 where we show the latest refresh of our macro weather  model, which we again, alongside our positioning model. We refresh six days a  week for our clients here 42 Macro. What we find is that if you look at the  current constellation of the six key macro cycles that matter, with those being  growth, inflation, monetary policy, fiscal policy, liquidity, and positioning.

Four of the six are currently headwinds for the market. Now again, this model is  designed to help project the dispersion within and across asset markets, or really  mostly across asset markets. Over short to medium term time horizon, which is  again, one to three months in our risk manage nomenclature. 

And so that suggests that right now we're probably due for a correction and or  some violent chop to burn off some of this crowded bull positioning before we  can set the stage to a meaningful move higher. And looking at what's currently a  tailwind growth in inflation. 

They're both currently tailwinds as determined by the the features in the model.  But when we look at the things that are currently headwinds. Ultimately, we  have to see these things transition to becoming tailwinds for us to, make new  highs on a durable basis and really any meaningful and or explosive move  higher, which still may be in the cards, by the way. 

I don't think the AI CapEx cycle's done. We certainly still see a tremendous  amount of fundamental support for the market, aside from this Credis position  dynamic. So let's unpack the. Monetary policy, fiscal policy and liquidity cycles  independently because those are headwinds that we ultimately expect will  transition to becoming tailwinds over the medium term, which will support an  unwind, a positive resolution to this current credit bull positioning, which is  likely to remain a headwind until this market peaks. 

So on the monetary policy side of things we had a strong easing impulse in the  Fed funds rate. We had a weak easing impulse in the two year nominal treasury  yield. Fed funds rates spread. We have a strong tightening impulse in the Fed's  treasury holdings to marketable treasury debt ratio. We have a strong tightening  impulse in commercial bank reserves to commercial bank assets ratio. 

And then we have a strong tightening impulse in the SOFR IRB spread. So  ultimately we think the fed's. Response to the tight conditions in the repo market  will ultimately be one that is more balance sheet expansion, more reserve  management purposes, and ultimately we expect the structural forms that the,  that we've been forecasting at the Fed for years now. 

We expect the advent of those structural forms will ultimately push the Fed  funds rate lower. And make the market more right? With regards to established  policy bias. So ultimately the monetary policy cycle, which is currently a  headwind for of risk assets and broader financial market risk taking will  ultimately transition to becoming a tailwind at some point over the next three to  six months.

So that's why that's one dynamic that could change, that could help this credit  bullish positioning resolve positively. On the fiscal policy side of things we  that's currently a headwind. We have the strong tightening impulse in the  sovereign fiscal balance to GDP ratio. We got a weak tightening impulse in  Charlie 12 month federal revenue. 

We have a strong tightening impulse in trailing 12 month federal expenditures.  We have a strong tightening impulse in the church of general comp balance.  The bank reserves ratio 30%, essentially an all time high. The bills. The  marketable treasury debt ratio is a weak easing impulse, but not enough. 

To offset the current headwind that is the fiscal policy cycle to, to broader risk  taking in financial markets. Ultimately, particularly as we get past the kind of  late Q1, Q2 of this year, early Q2 of this year, we're gonna start to see these  these indicators transition largely as a function of the one big ugly bill and the  fiscal stimulus that we're likely to see from that our math has the deficit  expanding by, three to $500 billion. 

This year and perhaps doing that again in 2027 as well. So we're in this kind of  u-shaped fiscal policy dynamic where we've seen a tremendous amount of fiscal  retrenchment in the economy, which we can unpack later. We've seen a  tremendous amount of fiscal retrenchment that ultimately more of transition to  fiscal easing. 

And so the fiscal. Policy cycle, which is currently a headwind for the financial  markets, is ultimately gonna become a tailwind, a high probability tailwind at  some point. Let's haul it in the next three to six months as well. And then lastly,  with the liquidity cycle, which is the other cycle that needs to to, to transition  from being a current headwind to a tailwind at some point over the medium  term to get us outta this awkward position that we're currently in as a function  of the positioning cycle. 

If you look at our global liquidity proxy that's a strong positive impulse. Our 42  macro net liquidity, that's our US liquidity model. That balance sheet, T-J-A-R P that is a strong negative impulse. Now we got a strong easing impulse in the  move index, which is biomarker volatility. We have a strong tightening impulse  in the 10 year treasury term premium. 

And then we got a weak tightening impulse in the broad nominal dollar  effective exchange rate. We got a modest head wind right now, the liquidity  cycle. Ultimately we think that'll transition to becoming a tailwind over the 

medium term if we're right on the transition on the inflections in the monetary  policy and fiscal policy cycle, which we see as high probability outcomes. 

Erik: Darius, so many things I wanna dive a little bit deeper on, on this slide  24. Let's start with the monetary policy aspects of this. Something our regular  listeners know I've been stuck on for the last several weeks is it seems to me  that a dovish policy error by the Fed is a near certainty this year. 

And the reason I say that is President Trump is being extremely heavy handed  in terms of just demanding that anybody he allows onto the FOMC board is  going to have to. Vote for a reduction, a continued cutting of policy rates. And  as Jim Bianco has warned, at some point if you cut too much, you end up  having that blow up in your face. 

I don't think the president fully understands that. And you end up with the back  end of the curve revolting as the bond market starts to get afraid of runaway  inflation. How does that thesis fit into your model and how does that jive with  what you're thinking?  

Darius: Yeah, that's, I think that's one of the key risks in financial markets. 

However, I think that risk is dissipating at the margins. If you look at slide 54,  where we show trends in, in, in key inflation operates, we've been declining for,  a couple quarters now across the one year. Two year, five year, and 10 year  tenor. Of these these inflation swap rates, which suggests that the bond market  is getting less concerned about the prospect of a federal reserve that is  ultimately makes a dovish policy error that reignites inflation. 

If you look at slide 55 where we show various estimates of our various market  based estimates of neutral and R star, if you look at the second panel on this  chart here, where we show the floor Fed funds rate. At three spot 11% 3.11%.  That's the market in our view. 

That's the market's estimate of the neutral policy rate, which is again, the  minimum value on the OIS curve about five years. Given that we're in a, given  that we're in an easing cycle, we'd be using the terminal rate if we were in a  hiking cycle. And if you look at that value relative to the effective Fed funds  rate we're still about 64 basis points north of that in effective fed funds rate  terms above neutral. 

So it's highly unlikely that the Federal Reserve creates any sort of meaningful  inflation without at least getting the policy rate to a easing bias. Right now 

there's at least a couple, two to two and a half rate cuts, if you will between the  current effective Fed funds rate and neutral. 

So it's very likely that the Fed is still actually applying downward pressure upon  the economy and labor markets and ultimately upon inflation. And if you got  one final thing I'll say on this is the, if you look at the bond market. On slide 57  the bond market is not overly concerned about sticky inflation either. 

So right now the 10 year treasury yield is currently about 4.15%. Historically  with data going back to the early seventies, the 10 year treasury yield tends to  be about a hundred, 120 basis points above the fed funds rate. So that's  essentially saying the bond market is, it thinks the Fed funds rate should already  be somewhere close to three three and a quarter. 

Right now would be totally fine with that outcome based on its current pricing.  And so that kind of leads me to the next few slides which says, okay, what  could actually go right on inflation? We're also concerned about tariffs, which.  Our math and our analysis has always suggested that tariffs were a, regressive  hit to aggregate demand that would ultimately wind up in lower aggregate  demand and ultimately lower inflation. 

The San Francisco Fed eventually published a paper confirming what we had  already signaled to our customers back in April when we were telling them to  get along. The, if you look at on slide 58 if the middle panel on slide 58 where  

we show Zillow rent index, strong positive, a strong negative impulse in the  Zillow rent index. 

With the three month annualized, we had a change of 1.8%. That's gonna  continue to drag down shelter inflation and housing, housing, PC inflation to the  levels that are below. Trend. They're already modestly below trend currently,  and we ultimately think the trend of disinflation in shelter and housing inflation  is likely to remain ongoing. 

And then finally, on slides 59 and 50 and 60, we have to remind ourselves that  this is a labor market, but the unemployment rate is still gradually increasing.  And a labor market where the unemployment rate is gradually increasing. And  you have on slide 60, super depressed low labor market turnover is evidenced  by the structurally depressed private sector hires rate of 3.5%. 

Below the pre COVID trend, the structurally depressed private sector quits rate  at 2.2% below the pre COVID trend. And then the the structurally depressed  private sector layoffs and discharges rate at 1.2%. That's below the pre COVID 

trend. We know that this is a labor market that has a very limited turnover, is a  labor market that also has a gradual increase on unemployment rate. 

So ultimately the labor market that should, if you look at slide 59, have slower  wage growth. Workers who change jobs tend to experience faster wage growth,  which by definition workers who do not change jobs tend to experience a  slower wage growth. So we're essentially replacing workers who are changing  jobs with workers who are staying put and or being fired and put into the ranks  of the unemployed. 

And so ultimately we think their, the wage growth dynamic is disinflationary,  the housing inflation dynamic is disinflationary and obviously we continue to  see a disinflationary impulse across. The energy complex which is which is  deflationary as well.  

Erik: I wanna come back to slide 24 now and talk about some of these short to  medium term outlooks, the one to three month traffic lights that you have in the  center of the slide there. 

I appreciate these are. Short term outlooks, one to three months. I'm very  curious on some of these asset classes, how that compares to your longer term  outlook. Because I certainly I don't have any reason to, to dispute what you say  in terms of short term cycles, but it seems to me something like commodities, a  lot of notable people who I respect feel that. 

In the bigger picture, we're at the, maybe the ending stages or final stages of an  equity bull market and the beginning of a secular commodity bull market.  Obviously you've got a red light here on commodities, at least in the short term,  so I'm curious about longer term. And then I look at something like gold. 

Okay. It does feel like it's up an awful lot recently. Maybe it's overdue for a  bigger correction than we've seen. At the same time, if I look at the  fundamentals, it depends, on the reason that you think gold has been so strong.  A lot of people think it's been so strong because central banks are losing trust in  the US government. 

And they want some independence from US Treasury paper as their primary  reserve asset given geopolitical developments of late I, I don't see that trend  reversing anytime soon. The other reason that. People will cite for buying gold.  Is that it's really just about the size of the debt.

Reaching a point where it's unserviceable and you've got a serious concern  about the long-term viability of the US treasury market. I don't think that  argument's going away either. So how do these short-term signals jive with your  longer term views?  

Darius: Yeah, great question. I would invert them. From a longer term  perspective, not even necessarily a longer term. 

So just from a perspective of the median term, which again, in our risk  management nomenclature is three to 12 months. Yeah, I think the next few  months could easily be choppy because we don't have enough accumulated  good news from the perspective of each of these six key macro cycles, namely  the five that aren't the positioning cycle to cause the markets to, make us a  meaningful move higher over a short to medium term time horizon. 

However. If we're right that the monetary policy cycle will to inflect from a  headwind to a tailwind, if we're right, that the fiscal policy cycle will inflect  from a headwind to a tailwind, and ultimately both the confluence of those two  things. With the ongoing tailwinds and the growth in inflation cycle persisting,  then it's likely that the liquidity cycle will inflect from a headwind currently to a  tailwind. 

So ultimately if all that it becomes true, where you have five of the other six key  macro cycles, exposition cycle all being tailwinds for asset markets, then you're  obviously gonna see an inversion of the the traffic lights in the middle of the  page There. You can have green light for stocks, green light for gold, green  light for bitcoin, green light for commodities, and red lights for the bonds and  the US dollar. 

So that, that. That is what our fundamental research summary is currently  anticipating. If you go to slide six in this presentation, we don't have time to  unpack the, everything on the fundamental research summary, but one thing I  call out on slide six is the words the color coding of the words is is associated  with dynamics that are bullish for risk assets being green, and dynamics that are  barriers for risk assets being red. 

So from a fundamental research perspective. And this slide on slide six  summarizes everything in this 160 plus slide presentation. Most of the stuff that  we're, pitching to our clients and have been for since since late April, since we  altered the paradigm C theme in late April of last year.

Most of the things have been bullish and are likely to become increasingly  bullish over the medium term. And so that's why we have so much conviction  that the monetary, fiscal, monetary policy, fiscal policy, and liquidity cycles on  slide 24 will inflict from headwinds to tailwinds. Answering your question,  going back to this you touched on something briefly on slide that, that is near  and dear to my heart and is the guiding principle for our. 

Research it has been for a few years now which is this geopolitically driven  supply demand imbalance in the treasury bond market. If you go to slide 73,  where we show the approximate next 12 month marketable treasury debt supply  as a percent of global savings. You can see that we have a meaningful deviation  from the long run mean of this time series in terms of the latest value of 39% of  global savings in terms of how much percentage of the flow of global savings  that the US government is capitalizing itself at. 

From the perspective of rolling over maturing debt the the annualized fiscal year  to date budget deficit, as well as the annualized divestment for the Fed's  portfolio, which obviously is since is now actually a tailwind from that  perspective. But a very modest tailwind in terms of 40 billion a month of arm. 

It's about 223% of us the flow of us savings. And so obviously both of those are  about a double relative to their long run means. So we have all this debt supply.  But we don't necessarily have the same de demand dynamics that we used to  throughout the great moderation. And ultimately the period of time that, we  created the that created that, that featured the conditions, that created the dual  broad performance of the, let's say 60 40 portfolio. 

If you go to slide 95 where we show some of the foreign dynamics in the  treasury market we've been losing foreign ownership for over a decade now.  Foreigners peaked out at 56% of the total marketable treasury debt market.  Back in back in June of oh 08'. 

We're now at 31%. Currently if you look at slide 50, or sorry, my apologies,  slide 102 where we show, these various cohorts of the marketable treasury debt  market. We see that the fed, the blue line of the fed's share of the marketable  treasury debt market has been declining for a few years now, it's now down at a  lowly 14% from peaking at a route 25%. 

In mid 2022 we see commercial banks. Share of the marketable treasury debt  market has been pretty stable over the past couple of years, but it's still at a very  structurally depressed level of 15%, which is down from a, a high in the early 

two thousands of around in the low thirties. And then obviously the black line,  which is foreign official sector treasury holdings. 

So foreign central banks their reserve management that's declined from about  40% to 13% since peaking out in oh eight. And so the residual of all that  declining flow from these price insensitive buyers. Because central banks  manage buy treasuries for reserve management purposes. They buy treasuries to  implement monetary policy via QE or some other form of a large asset  purchase. 

And then they commercial banks, they buy treasuries because of regulation,  banking regulation, you are losing all these price insensitive buyers and  replacing them with price sensitive buyers, which are the light blue line in this  chart which are now at 58% of the total marketable treasury debt market up  from 36% in late 2021. 

So this is not a good dynamic and this is a dynamic that is likely to sustain this  structural uptrend in term premium on slide 103 that we highlight if you had a  normal level of term premium in the bond market and normal being somewhere  around, let's call it just five 2%. If we had a normal level of term premium, the  bond market, the 10 year treasury yield will be five and a quarter as opposed to  4.15%. 

And so ultimately the excess yield that we should ultimately be having in the  bond market is being replaced by gold, by the capital appreciation by gold. And  this is something we explicit, explicitly forecasted and called out and helped our  clients position for starting in the summer of 2023 when we first authored this  fundamental research view, this geopolitically driven supply, demand and  balance in the treasury bond market as part of our investing, doing a four  turning regime framework. 

And ultimately this is why you saw my fellow Yelly, Janet Yellen. She pivoted  to dovish ne financing policy in the summer of, in the shortly after this  presentation was printed. And then you had our fellow Yelly treasury Secretary  of Scott Besson get on the job after you 18 months of lambasting the Dovish  Financing Policy actually rubber stamp it and promise to keep it going for the  foreseeable future. 

Now that he's on the job. In our view, we think we're right on this supply  demand. I balance and as a function, as that supply demand, I balance, we're  seeing institutional investors, which is something we called for. Institutional 

investors increasingly adopt gold as a diversifier away from the treasury bond  market. 

Erik: So if I can just assimilate everything you've said so far, it sounds like we  should interpret your view as saying, look, there's some really good reasons to  be cautious about, oh, let's say the first quarter of 2026, maybe as being a  choppy time time for some overdue corrections to, to play out, but. 

Beyond that longer term. If we go back to page six, which is your longer term  fundamental outlook, really it's almost all green. So you're very much still long term bullish, but also feeling like we're overdue for some corrections before that  can continue. Is that a fair summary?  

Darius: That is an absolute fair summary that the relative frequency of green  words on the page in slide six in our fundamental research summary relative to  the red words in the page, implies that from a fundamental standpoint. 

Based on everything we know today and could forecast today with any  reasonable degree of precision, suggest that we have an incredibly positively  skewed return distribution. With regards to the medium to longer term time  horizon. Doesn't mean the market has to go up every day between now and then,  or even has to go up. 

It just implies that unless something changes in a material manner to, to alter the  relative, frequency of red and green words on that page, it's highly likely that  this. Current crowded bull positioning that we're all very concerned about right  now gets resolved in a meaningfully positive manner. 

When you look out, let's call it six to 12 months.  

Erik: Darius, let's talk about President Trump, who has been, let's say, not  bashful about implementing policies that are quite bold and non-consensus. He  doesn't seem to be going too far out of his way to keep the opposing Democratic  party happy. 

They're getting more and more upset, it seems as we near the. Midterm elections  later in the year. It seems to me the closer we get to the midterm elections, the  more markets are going to start to get sensitive to, Hey, wait a minute, what  happens if the Democrats take the house in November? And that really starts to  weigh on the President's ability to continue to press some of the bold policies  that he's been pressing.

How do you think about how politics and fiscal policy plays into the whole  outlook for the next year or so?  

Darius: Excellent question, Eric. I think the outlook for bold fiscal policy is one  that requires a rear view mirror. If you go to slide 91, we already passed the one  big ugly bill, and the vast majority of the impact has yet to be felt in the  economy. 

Most of it is likely to occur in 2026 in 2027, where we're likely to see a one to  two percentage point positive fiscal impulse in both years. And that's a  meaningful delta relative to consensus expectations. Transition from slide 91 to  slide 26 here. If you look at slide 26, the our consensus short run potential real  GDP growth estimate that's the blend of 26 and 27. 

Right now, it's only at 2%, and I'll tell you. We're gonna go to slightly, maybe  slightly above two here in or back in 2025 with a, three to $400 billion tariff  shock with the highest average annual level of economic policy uncertainty as  measured by the Baker Bloom Davis Index with time series back to the mid  eighties ever in the time series. 

And oh, by the way, a guy who can't stop tweeting changing policy every five to  10 minutes. I don't know how we don't grow at least three, perhaps even 4% in  2026 and 2027, 4% seems a bit much, and we probably need to see some sort of  productivity boom, which I think we should touch on after we hit on fiscal  policy. 

It's very likely that we're gonna grow three, at least 3% in 2026 and 2027 as a  function of what we highlighted on slide 91. And we're already starting to see it.  If you look at slide 88 where we show our fiscal policy monitor if you look at  the impact that the tariff policy. 

And the tariff really largely, the tariff policy has had in terms of reflating the  federal tax revenue tax revenues up 9% on a calendar, year to date basis through  November in 2025. Whereas expenditure's only up 1%. So you've had this  significant fiscal retrenchment that, led us to minus 5.4% budget deficit versus  in 2025 on a calendar year to date basis versus 6.8% for 2024. 

So we've had 130 ish percent basis point fiscal retrenchment in, in, in 2025,  which is pretty meaningful. It's very meaningful. The thing about, looking ahead  with, in, with regards to the impact of the one big ugly bill that's going to  reverse and reverse meaningfully in 2026 and 2027.

If you look at slide 89 where we show the our fiscal policy monitor on a fiscal  year to date basis. So we have a couple of months of fiscal 2026 in the data  already, we're gonna, at the bottom there that one of the bottom rows there, a  federal budget balance. We're going from a 5.8% deficit to GDP ratio in fiscal  2025 to a 9%. 

Deficit to GDP ratio in the first two months of fiscal 2026. Now, it's not gonna  say at 9% it's gonna go down from 9% to something that's probably closer to  7% or maybe even seven point half 8%. But this is a meaningful fiscal  expansion that's taking place. As a function, partially as a function of the one  big ugly bill, but also as a function of what our friend, our mutual friend Luke  Groman, over a forest for the trees caused the the true interest expense. 

The runaway freight train that is true interest expense. If, and that's for those  who may be new to the framework. That's the aggregated sum of Medicare  national defense, debt interest and social security. Together, they're about, on a  fiscal year to date basis. They're about, four point $7 trillion annualized two  thirds of the federal budget. 

They're 16% of GDP and they've been compounding growing at about nine 10%  per annum. Whether you look at, on a, a fiscal year to date basis on a calendar,  year to date basis, so we have double digit growth in two thirds of federal  expenditures. Which we know are, have a low probability of ever being  legislated down, let alone flat, or, sorry flat, let alone down. 

In fact the signal that we got from the one big ugly bill legislative process was  that these things are untouchable, and then when they do get touched, they go  up faster. And so in our view this is a runaway freight train from a fiscal policy  standpoint from a messy and uncomfortable fiscal policy standpoint that will  ultimately require some very creative solutions and erosion of a further erosion  of central bank independence, which is something we've been explicitly  forecasting since we altered. 

That investing doing. Afford attorney regime presentation back in the summer  of 2023, which featured that geopolitically driven supply demand imbalance in  the treasury market. Analysis.  

Erik: Let's continue on that topic around central bank independence and go  more into monetary policy since we've been talking fiscal policy here. 

It seems to me like there's a lot of room, especially as we get to potentially a  changing mix. If the Democrats take the house, if there's confirmation 

difficulties after that of the President not getting his way with who he wants to  put in various, FOMC positions and so forth what could happen with respect to  fiscal policy if we have a revolt, if you will, against some of the president's bold  policies. 

Darius: Yeah, look, in our view, it's highly unlikely that we get a revolt  partially as a function of our jobless recovery thesis. We are of the view that AI  is productivity enhancing and ultimately will be job replacing maybe not at a, at  an alarming rate, at least in 2026, but on a multi-year, taking a multi-year time  horizon. 

And it's very likely that this technology causes some meaningful societal  disruption in the form of a higher unemployment. And if we're right on that  view, or even partially right on that view, you're talking about a federal reserve  that's going to see a just a consistent and persistent threat to its maximum  employment mandate in a way that essentially forces it to do what the president  wants. 

If you throw slide 79, pre fed chair, Powell already started alluding to this at the  December FOMC press conference. Where he highlighted, some of the  structural changes in the economy. He didn't say what I just said, but I'm not  even sure the fed chair or anybody the Fed is allowed to say what I just said. 

But the reality is, what I just said is, in my opinion, in our opinion of, 160 slides  of research that we pump out every month to our customers it's a high  probability outcome. So let me walk you through that thesis here over the next  couple of slides. So the slide slide 80. 

Shows the blue line in slide 80 shows labor share of national income where we  show nominal employee comp compensation divided by gross domestic income.  That's down at an all time low of 51.3%. We show capital share of lash national  income at the red line, which is corporate profit using corporate profits as a  proxy for that as a share of gross domestic income. 

That's up at 13.2% an all time high. We've had a secular downtrend in labor  share of national income. Without AI, a technology that can replace people. Just  due to globalization, just due to among other things, the neoliberalism era and  the various forms of tax treatment that caused this, that, that have contributed to  this dynamic. 

Obviously things like NAFTA and China joining the WTO as cause of this as  well. We've had a secular bear market and labor share of national income 

without a technology that can literally replace labor. It's already replacing labor.  If you look at the youth unemployment rate, it's already replacing labor. 

If you look at slide 41, the bottom panel is slide 41, where we show the long term unemployed as a percentage total. We're up at a structurally elevated  24.3% which compares to a long run mean of this time series of 16.4%. When  you get fired now or you lose your job, for whatever reason, it's very difficult to. 

To find a new job. And this is because every company in the world is  incentivized to wait and see, to see how much of their biggest cost expense. The  biggest, expense in most businesses is labor. To see how much of that expense  they can take down with the with the development and adoption of ai. 

And so ultimately, if you go to slide 81, where we show how this is likely to  impact the economy. Know this top panel shows the the time series of non-farm  productivity in, in, in, through meth annualized six month annualized, and you  rated change terms. And then in this kind of the third to fourth panel show, the  third panel shows the time series, the same dynamics of unit labor costs  inflation. 

The light blue horizontal line show, the pre COVID trends of each and you, we  somewhere around 2% for both. The promise of AI is that we go from a trend  2% productivity economy to a trend. A 3% productivity economy, which  ultimately implies that we're going from a trend 2% unit labor cost inflation  economy to a trend 1% unit labor cost inflation economy. 

And so ultimately we're talking about a significant tailwind for corporate  profits. We're talking about a significant headwind for inflation in terms of how  in productivity has historically impacted both of those cycles. And every  company, whether they implicitly understand what I just said or what, they all  inherently understand this as business owners and as business operators. 

And so ultimately we just think this, low, higher low fire environment, whether  unemployment rate continues to gradually rise, particularly as more and more  companies that throughout the economy adopt ai and find creative ways to use  AI to, to hold back labor their most their biggest expense. 

We think this dynamic is gonna be ongoing. It's a secular dynamic that will  ultimately require. The Fed to implement dovish monetary policy regardless of  how politicized they may appear to be in the context of what the signalling that's  coming outta the White House. 

Erik: Darius, let's pull all of the things that we've talked about together into,  okay, where are the trades for our investor audience? 

Because we've talked about monetary policy, fiscal policy, there's so many  different things you're talking about. Really, a very. Bullish longer term outlook  with some serious cautions about the next three to six months. So how do we  position for that?  

Darius: Yeah, that's a great way to put it. I, maybe not even the next three to six  months, I think by, but certainly by six months and probably by three months,  we're, it's likely that we could be resolving our way through this uncomfortable  setup from a crowded bull's positioning standpoint. 

But again, that does imply we're probably gonna chop around perhaps violently  in the interim, if not even correct. Again, when you're in this. When you're at  this extreme in terms of incredible Bullish positioning terms, it doesn't take  much. A squirrel could get hit by a bus and markets could correct. 

So I want investors to be aware that, just because the, frequency of green words  relative to the frequency of red words and the fundamental research summary  on slide six is over overwhelmingly positively skewed from a return distribution  perspective. It doesn't necessarily mean that, we're outta the woods yet. 

However, when it comes to how we think investors should be positioning for  these emergent and developing market risk, the fundamental research has no  bearing on that answer for us at 42. Macro as you know from our previous  discussions, Eric, we're systematic investors. 

We rely exclusively on our institutional grade risk management overlays to help  our clients and myself as someone who uses our KISS model portfolio to  manage his entire liquid net worth. We rely exclusively on that as it relates to  what investors should be doing in their portfolios at any given time. 

I'll just briefly touch on kiss and ultimately touch on the KISS system itself.  And then I'll conclude with where KISS is currently allocated. So if you jump to  slide eight, just real brief kiss, there's three core elements of our KISS model  portfolio, which is short for keep it simple and systematic. 

Number one is our factor selection. So this is a 60 30 10 quantitative trend  following strategy that is designed to expose investor portfolios to productivity  growth. And it's also designed to help investors outperform outrun financial  oppression and monetary debasement via allocations to gold and bitcoin.

And where KISS really shines is in its risk management. We use our market  regime now casting process to incorporate volatility targeting into the strategy.  And then we use our volatility, just momentum signal to incorporate dynamic  position sizing into the strategy. And the, anybody on the buy side understands  that, volatil targeting and an AM position sizing. 

These are the two of the core hallmarks of institutional risk management that  KISS uses. To create a positively or skewed return distribution in investor  portfolios and in my own portfolio. So if you look at, jump ahead to slide 12. A  couple numbers I'd hit on in this, on this back test is rolling out a sample back  test. 

If you look at KISS relative to 60 40 60% stocks, 30% gold kiss has an upside  capture ratio of about 300%, and a downside capture ratio of about 60%. So  you're essentially getting. 60% of the downside of 60 40, 300% of the upside  effectively. If you wanted to compare KISS to a naked long portfolio, 60%  stocks, 30% gold, 10% Bitcoin, which is what KISS is when it's maxed out, it's  not always maxed out, but that's what KISS is. 

When it's maxed out you'd have an upside capture issue of about 90% and a  downside capture ratio of about 50%. So you're essentially getting 90% of the  return you would have in these high beta asset classes. With only about half of  the downside which obviously creates an incredibly positively skewed return  distribution from the set of investors with a very minimal max drawdown,  particularly relative to the frequent crashes that we've seen in 60 40 and 60 30  10 stocks go Bitcoin naked long. 

So where we are today in Kiss. Kiss is 10% cash on slide 13. It's at 10% cash.  It's at a hundred percent of its maximum exposure of 60% stocks. Both the top  down and bottom upper manage and overlay are giving it a green light to be  fully invested in the equity market here. Gold. It's at a hundred percent of its  maximum exposure of 30% in gold. 

Both the top down to bottom upper percent over there, giving it a green light to  be fully invested in gold as well. And then it's at 0% of its maximum social of  10% in Bitcoin. Neither the top down risk manage overlay's, giving Bitcoin the  green light, but the bottom up risk manage overlay, which again, we use to  feature dynamic position sizing into the strategy that's giving it a red light. 

And right now KISS is, more or less, let's call it 90% invested. We think that the  gold position can do reasonably well in a choppy market environment. 

Obviously if stocks are choppy and or correct, that's not gonna feel so great. But  ultimately we think the kiss is. 

What markets, what the risk management systems that feed into KISS are likely  looking ahead to is where we started this conversation on slide 24, which is four  of the key six key macro cycles that influenced the momentum and dispersion  within and across asset classes are currently headwinds. 

Ultimately we think based on our fundamental research, which again is  summarized on slide six, based on our fundamental research, we think three of  those four which are currently headwinds, will eventually transition to tailwinds  and ultimately make Kiss right over a medium term time rise of perspective,  which again is three to 12 months. 

And our risk manager nomenclature, I think all bets are off when you get  beyond 12 months. Like I said, when we started this conversation, it's highly  likely that this bull market. Concludes or transitions to a secular bear market as  we've seen historically at following all these major technological revolutions  that you know, that feature CapEx bubbles. 

Erik: Darius, I can't thank you enough for a terrific interview. As we close, tell  us a little more, this slide deck that our listeners have seen a snippet of that's  actually more than 160 pages. You send this out to who this is for, what kind of  investor, who's your service for how do people find out more about it? 

Darius: Yeah, I wanted Eric thank you for this brief opportunity to embellish  what we do. I'm, one of the things I'm most proud of in my entire life is the  breadth and depth of our customer base. When we started 42 Macro, half a  decade ago, it was done, designed with the express intent that, I just, I don't we  don't believe that the gatekeeping exercise that is institutional insight and  institutional risk management process. 

That is either kept via prime brokerage gates, or, two and 20 or three and 30  accredited investor gates. We just don't think those gates are appropriate in a  kha society, of which, I come from the very bottom of that K-shaped society. So  we, we built 42 macro to break down those gates and supply an institutional  grade insights and more importantly, institutional grade risk management of  portfolios to every investor on the world. 

In the world, and we do so at price points that meet people where they are in  terms of what they can afford, as opposed to what we would prefer to charge,  what could, what we easily could charge if we wanted to, gate this thing up and 

turn it into a hedge fund. And we're very proud to say that many of the world's  top financial institutions across the asset manager, pension fund, insurance fund  spec cyber wealth fund space, or customers of ours in so much that, the your  barber could be a customer of our, your Uber driver could be a customer of  ours. And they very likely are we're very proud to say we work with some of the  best investors in the world, and we work with many of the ver more, most  novice investors in the world. 

They're all here benefiting from built. And I'm incredibly proud of that. As  someone who, like I said, comes from the very bottom of the bottom. I wanna  make sure that, we're lifting everybody up with these insights and these risk  management signals.  

Erik: We'll look forward to having you back on later in the year after. 

We see how the this choppy period that you're anticipating plays out Patrick  Ceresna and I will be back as Macro Voices continues right here at  macrovoices.com.