Transcripts

 

 

Erik: Joining me now is Energy Outlook Advisors, managing partner Dr. Anas Alhajji. Anas, I have to tell you, I'm so excited to get you back on the show because first of all I think a very strong compliment to you that you're not really even a macroeconomics guy. You're an energy guy, but you're one of the most valued among our listeners, on this macro podcast because of all the excellent interviews you've given us, and you've also been named the number three most influential voice in energy markets. So you're actually a bigger name in energy than Dan Yergin, although you come on Macrovoices. Whereas Dan likes to play hard to get congratulations, sir.

Let's move on to, the topic of the day is the group of eight OPEC Group of eight met this past weekend. They're talking about unwinding the production cuts and basically increasing oil production. Apparently all of the sudden Saudi Arabia is seemingly leading the way on an effort to bring energy prices down.

What's going on? 

Anas: Sure. So let me explain this, especially for the audience who are not familiar with these issues people are familiar with the name OPEC, which is the organization of petroleum exporting countries. OPEC is this year is 65 years old. And OPEC in 2015 when the prices, when old prices collapsed.

They looked around and said, okay, I cannot do it alone. And the reason why they couldn't do it alone because there was major producers who are not OPEC members, that includes Russia, Kazakhstan, Norway, of course, the United States. And they said, look, I'm not going to cut production. I'll leave prices down unless non OPEC producers come to me and literally cooperate with me and all of us will cut. And that resulted in what is known right now as OPEC+ because 10 countries being in this new group or added to this group. So we had 13 members from OPEC+ 10 members from outside opec. The total is 23, and that's what we call OPEC+.

Part of this new group is Russia and Kazakhstan in 2022, late 2022, all demand was not as high as they expected. Growth in all demand was weaker and inventories started building. As a result, they met and they decided trim by 2 million barrels a day. So we have this cut from the whole group, OPEC+ of 2 million barrels a day from late 2022.

Here comes 2023. The market was weaker so they met again and in April of 2023, but they couldn't agree. And the charter of OPEC and OPEC+ that any agreement has to be by consensus, which mean that any country has a veto power. So they couldn't agree, but the Saudis and the Russians knew that they need to cut.

So eight members, at that time it was nine. But Gabon basically withdrawn. They met and they decided to voluntarily cut production by 1.65 million barrels a day, a 1,650,000 a day. And the whole idea was, it'll be only few months and then I'll bring it back. But the situation deteriorated further.

And in November, 2023, they met again. They decided to go for a cut of 2.2 million barrels a day, starting January, 2024, and ending in March, 2024. So just for those who are new to this, I have three groups. I have OPEC, I have OPEC+, and I have the group of eight. And I have three cuts. The first cut is 2 million barrels a day is done by OPEC+, and the agreement now is not to bring it back until early 2027.

And then I have the first voluntary cut, which is 1.65 million barrels a day that was extended until early 2027. But we know now from yesterday that they changed the date to October, 2025. And then I have the 2.2 million barrels a day cut, and they are already done the N one, all of that. And they are, they will be completely done by the end of this month.

So the 2.2 is already out of the way. They are left with 1.65. It was designed to come back online in early 2027. They decided yesterday to expedite that, basically bring it forward and start in October, 2025. So that's what happened on Sunday. If you go a back a week ago, this was a surprise.

If you go back to Thursday or Friday, it wasn't so they agreed to start doing this, but there was some conditions to that. And one of the things they've done is they did not give any guidance for the future. So although they took 1.65 divided by 12 months, which means that their plan is to do it over 12 months.

They ended up with 137,000 barrels a day in October. Additional production ceiling, and I'll explain that in a minute. They did not say anything after that, but they are emphasizing the point that we are going to go month by month, and we are going to assess the situation. We can stop unwinding.

We can cut or we can expedite. What they did with the previous 2.2, so all the options are still on the table. In this case, the idea of unwinding is extremely important because the 2.2 again was designed to come back online on April, 2024, and they delayed it for a year. And for this 1.65. It was supposed to be only three months, and it's been there since it's been there for a year and a half.

The justification for it is very important and is very important for the audience to think to, to understand what are the triggers for these unwinding OPEC and OPEC+ ministers. Cannot talk about prices. They took this decision based on lawyers' advice in 2016, so they cannot talk about prices. They cannot react to prices.

In general we end up with situations when, let's say prices decline in one day by four or $5, and I'll get those messages and I'll get the comments on Twitter. Where are the Saudis? Where are OPEC cuts? Why they are not responding, why they are not making statements?

Again, they cannot talk about prices. That's number one. Number two, everyone has to understand that the Saudi price. The average monthly has nothing to do with the changes during the day. It's the average monthly, so this is very important to realize. So the idea here is, okay, what are the triggers? There are two triggers for unwinding. The first one is a major decline in inventories, global oil inventories, and the second one is strong growth in demand.

What we've seen that when they decided to unwind in April, they looked at the inventories and inventories were low and they declined substantially. So the first condition is met.

The second one is a growth in oil demand. And according to OPEC and their view, especially the V8 or we call that the group of eight or the V8 V for voluntary, they saw an increase in demand and that increase in demand, part of it is related to the sanctions, especially on Venezuela, Iran, etc.

And the reason why it's related to sanctions, because we always have companies and traders who panic. They want to make sure that they have enough supplies. So the demand for oil from the group of eight increase, especially from the Gulf of Saudi Arabia and its allies increase. So for them, the two triggers are met and then they decided to unwind, and that's what we've seen.

Then they expedited that because they saw the situation can handle the additional oil. At the same time, they want to get rid of the headache of overproduction coming from Kazakhstan and Iraq. Now for the one, the 1.65 that they agreed on yesterday, the question is very clear. Anyone who is looking at the data, I'll say, look, I need to do this and I need to do this for various reasons.

One of them is among the whole. Group of 23 countries, only four can increase production. And here I would like to emphasize the point that the unwinding and the numbers, we hear about the 2.2 and 1.65. These are for production ceiling, these are for quotas. These are not actual productions. Actual production is way lower because some countries cannot increase production.

On the other side, what matters to the market is not really production. They talk about production because OPEC Charter, when it was written in 1960, it talked about production and they are still with it. But what matters to the global oil market is exports. And if you look at OPEC+ exports. They are about half of the headline number.

So in this, so we know that the headline number is 2.2 million barrels a day, but what we saw in the market is about half of that. Now, the situation for 1.65 is going to be even a lower number or lower percentage simply because there are fewer countries that can add production. 

Erik: Anas, you mentioned only four countries are capable of increasing production.

I'm guessing that starts with Saudi Arabia and United Arab Emirates, who are the other two? 

Anas: Iraq and Kuwait. But Iraq and Kuwait capabilities of increasing production forward is also limited. So a few months from now and it's over they'll max out. And everyone else is maxed out, including Russia.

So that will leave only Saudi Arabia and the UAE. And here I would like to point out to the audience that it is not necessary that Saudis and the Emiratis will increase production up to the maximum anyway. They are free to do it because they have no agreement but. They may not do it. And if we look at Saudi Aramco, based on history, it is very comfortable producing between 10 and 10.5, 10,500,000 barrels a day.

And right now they are probably around 9.4, 9.5. So they can add probably 500 to a million. And that's really the range of comfort for them. 

Erik: Now, back in April when the decision was first made to unwind the 2.2 million barrels, that was basically a panic moment in markets. Everybody was bearish saying, okay, this is gonna crash oil prices.

I think you were the only voice that I can remember, at least for from that timeframe, going back to late April, early May, and we had you on Macrovoices on May 8th talking about this very issue. You were very outspoken saying not only is it not bearish, but it might. Even be bullish. And sure enough, it seems like the price action has actually supported your very, uncommon view.

What happened there? How were you able to see that? Why is it that that you were able to see something people didn't see there? 

Anas: Yes. The analysts who were bearish, basically, they did not, look at the real situation on the ground, for example. The Hajj, which is the pilgrimage that we talked about in that show on May 8th, where millions of Muslims fly from around the world to go to Holy City of Mecca and Medina.

In Saudi Arabia oil consumption increases substantially within Saudi Arabia. Because of that. So gasoline, diesel, jet fuel, oil, etc, because you're talking about millions of po of people going to the same place at the same time. So they usually it takes a year to plan for these things and that increases the demand within Saudi Arabia.

So they need that oil, but the world is not going to see it while those analysts counted the increase. And or the unwinding as a net supply to the world. While the world did not see any of that at the same time, they missed another point that most of the increases, especially in the first period that oil was already in the market because of cheating.

So what they did in April and May basically just legitimize that cheating. So it was on paper, so they missed that point too. Then they missed the third point, which is the demand for oil increases substantially in the summer. And that demand could add up to about 1.2 million barrels a day. So basically domestic consumption between hedge and domestic consumption.

And oil was already out there that most of the unwinding. So it was clear from the beginning, but they did not see these things. 

Erik: Now Anas, you have used the phrase manufactured bearishness in some of your tweets and substack posts lately. Why are you using that particular phrase? What do you mean by manufactured bearishness?

Anas: You look at the IEA forecasts and they predict that next year we'll have the largest surplus in history. Right now they are talking about a surplus of 1.8 million barrels a day. You look at Goldman Sachs, Morgan Stanley JP Morgan, etc, and there are some really strange stuff going on here because the same narrative that the IEA is pushing, the same narrative is being pushed by the Chinese oil majors, which is very strange.

The Chinese oil majors basically are going public in English, broadcasting the view that oil demand in China is going to peak gasoline demand in China is going to peak, and that's what the IEA is saying. So to have a Western organization saying exactly what Chinese companies are saying, that's the first question mark there.

The second one is the Chinese are talking about peak oil demand. Peak gasoline demand. That means they have the forecast and they know what's going on, but they will never, ever release the actual numbers. What does that mean? That mean they are broadcasting something to the rest of the world, to the old producers, to the companies, to the US and everyone else what they wanted to broadcast.

Otherwise, if this was a normal thing, they would have published the actual numbers. So if you look at the IA forecast, for example, I'm please allow me, because I want to take my time show showing the evidence here. The first thing is the IEA. When we talk about 2025 and 2026, I'm just going to give you an example how this is manufactured.

The IEA predicts that US oil production will increase by 560,000 barrels a day in 2025.

We already have the data for the first half of the year, and there is no way you can get to 560. So what they did is they exaggerated US oil production, but the story is not on the production side. The story is on the demand side, according to the IEA. US oil. Oil demand would increase by 60,000 barrels a day in 2025.

You look at the data for the first six months, they are not double that. They are not triple that. They are quadruple that quadruple. And then you move to 2026 and all of a sudden they say, oh, there is no growth. Zero growth. Us all demand in 2026. No one on earth believed that except them. So right here we have several hundred thousand barrels a day that's being taken out and counted as surplus while it is an actual consumption.

So that's one. But the IEA expect. All demand to grow by I think 680,000 barrels a day, which is extremely low. Our number is 1.1 and OPEC number is 1.3, so you can see that the diverse is really large. But why we have the concern here, we have the concern on two fronts. First of all, we have something called circular information.

Circular information is when you have. Why spread news all over the world and people think, wow, this must be real because I'm hearing it from all over the place. But when you do investigate the source, you find out it came from only one source and then. Most of the media and social media, etc they will be coating like in a chain, like I'll say I heard this from CNBC and CNBC coded, CNN and CNN coded ABC and ABC quoted Wall Street Journal.

Wall Street Journal quoted the International Energy Agency. So we have circular information. Where is the problem? I'll go back to this point of circular information in a minute. After I explain where the problem is, you go back and look at the forecast of global oil demand by the IEA in 2022. The IEA discovered that all their numbers and all their estimates of global all demand where were way low and they revised up all demand back to 2007.

To 2007. So we're talking about 15, 16 years of data that's been underestimated all this time.

Then you move, so that was from 22 back then in May. This May last May, the IEA announced that, sorry, and they did not say sorry. Of course they'll never say sorry. But we underestimated demand in recent years, so we are going to revise up the numbers for 2022, 2023, and 2024, which is a continuation of the the era from 2007 to 2021 by how much?

350 million barrels, the total adjustment in those three years. 350 million, but that's the underestimation of demand by the IEA. So you start from 2007. They were wrong all the way to 2024. And just two weeks ago in its latest report, they said we are revising up Mexico's oil demand by a hundred thousand barrels a day and listen to this, back to 2020.

So what is the problem? First of all, we have a proven record of underestimation for almost 18 years. So why do we have to believe they're low estimate right now? While all the other evidence point to higher oil demand than their number? But to go back to that circular information. This data since 2007, does be revised.

Not every analyst paid attention to it. So many computers at many banks still have the old data and they are still using them. So back to that circular information, it the data being published by one source is still in news, and therefore when they do the forecast in term of growth could be correct. Is wrong,

so we do have a serious problem.

Erik: I wanna move on to India, China, and Russia, starting with India because the spin that the Western press has put on this is basically what's going on with the 25% tariffs. Why did the Trump administration just impose 25% tariffs on India? The reason they did that, according. To the news flow is it's all about the Russian oil.

Russia has been selling oil to India. They feel that's working around tariffs. So now the Trump administration is going to punish India for buying Russia at it, please. So now the Trump administration is going to punish India for buying oil from Russia according to the news. But according to Dr. Anas, you don't think that's really what's going on.

So what is going on? 

Anas: First of all, we have the 25% tariff, which is the general tariff on India, and then the Trump administration added another 25% because India is importing oil from Russia and Navarro, the White House advisor basically, accused India of supporting Putin in the war in Ukraine by buying Russian oil.

He was very vocal about it, and almost on daily basis, he kept talking about it, tweeting about it, giving speeches, giving interviews, etc. And right now the tariff on India is 50%. Here is the problem. Yes. India imports about 1.8 to 2 million barrels a day of oil from Russia, from, but that was by design.

And the design did not come from India. It was the G7 and the Europeans who designed that. So when they import the sanctions in the sanctions itself, that for the first time they agreed on this, they said that the EU and the United States basically can import Russian oil if it is modified and modified in the old business mean it is refined, all they need to do basically is find another third party to do that. India and China basically did that and some other countries. But the idea here is the Biden administration has no problem with it. Even Secretary Blinken at the G 20 meeting in New Delhi, basically he defended India for buying Russian oil above the what they call the price cap of $60.

So that was by design, but here is the issue that why it is really not about Russian oil imports. If the issue is importing from Russia and paying them, and therefore you are supporting Putin's war in Ukraine, then we have a serious problem because US imports from Russia this year increased over last year.

The second point is the EU still imports massive amount of natural gas via pipelines and large amount of LNG from Russia. In fact, if you, we just released a report the day before yesterday, and in that report it shows that in August, 12% of GA imports of the EU came from Russia, but no one accused the EU of supporting Putin's war and China imports everything from Russia since they import the crude.

They import coal. They import natural gas. And the Trump administration did not accuse them of supporting the war in Ukraine. But here's the bigger story. The bigger story is Turkey. Turkey imports the Russian gas and send it to Europe. Turkey, import the Russian crude and send it to Europe.

Turkey, import the Russian petroleum products. Send them to Europe and Turkish exports or petroleum products to Europe is larger than that of India. And what's strange about it is Turkey does not refine that, that those products, Turkey basically just transmit those from place to place while India, at least they refine it.

So why they pick on India in this case, it just does not make sense. There is more to the story than Russian production. For those who do not know, we still import enrich uranium from Russia until today. 

Anas 

Erik: I wanna broaden this picture out because on one hand we can talk about the supply and the demand and the cuts and the so forth, but it feels like the mood has changed.

It feels to me like OPEC+ and the group of eight were really working on an agenda that was not cooperative with the United States. It feels to me now, like some deal has been cut and for some reason the Saudis want to support President Trump in trying, at least in the short term. To bring energy prices down.

Quite frankly, that makes me wonder if they're doing that because they think energy prices are going up later because of perhaps some geopolitical things that they see on the horizon. So what's the broader picture of what's going on in and how the influence model has changed from the Biden administration to the Trump administration and the decisions that are being made?

'cause I have the sense that. The relationship has gotten better with the us but at the same time, they're preparing for maybe a relationship that gets worse over time. 

Anas: A few things here. If you want to talk about expand this to various areas including politics, I would be happy to talk about that.

The issue here at this, that first of all, oil prices declined in 2025. Mostly because of President Trump policies, not because of the unwinding of production by the group of eight. And to prove this point, the unwinding started in April while oil prices declined earlier, and even when the unwinding started in April.

The supply of OPEC+ declined in April and May. We did not see the increase until June. Even when we saw the increase in June. It was a portion of the what was expected, and then it declined in July and August. So you cannot claim the large decline in prices on the decision to unwind. The reason was the trade wars, the tariffs and other policies, the immigration policies, the visa policies, the treatment at the airports etc. We have even clients basically refusing to come into the United States for fear of being mistreated at US airports. The student visas, as because the, of the demonstrations, because of Gaza and others.

So that reduced travel substantially and reduced all demand. Why this is important. Because if you go back to our reports at the end of 2024, jet Fuel was the brightest spot in the energy complex, and now it tanked because of those policies. So that's the first part of it. The second part of the story is Bloomberg published something about.

Saudi MBS, the Crown Prince is going to visit with Trump in November, and therefore he wants to make sure that the oil prices are cheap, etc. Let's be clear on this because it is very important. Do the Saudis want to lower prices? No. Do they want to please Trump by lowering prices? I don't think so.

They can't please them in different ways. They can't just de dedicate a certain amount of investment like they did with the one, trillion or have trillion, whatever amount they want to invest, and that will be enough. It's not gonna be the oil, but what the Saudis want. We've seen this several times before, and I'm glad you asked this question because the point I'm going to mention is important for everyone to remember all the time.

What the Saudis want, and they've done it before, is to isolate oil from any discussions. They don't want to discuss oil. They are MBS is going to be here in the United States for a certain purpose, and they want to focus on it. When Trump visited Saudi Arabia. They wanted to focus on why he's there. They don't want oil to be the main issue.

When the president of China visited Saudi Arabia or the president of France, etc, they always makes made sure that oil is not on the table. So if by increasing production and keeping prices at current levels. That will isolate it. That's a big win for Saudi Arabia. The other issue is, and this is a reply to the Bloomberg article, when they mentioned that this is a political decision.

So what oil is a strategic commodity? Oil is a political commodity. It's always been. In fact, oil and LNG right now are part an integral part of US foreign policy. Why they are not saying anything about it. In fact, even if you want to look deeper into this, the US is using LNG and oil as weapons, and they are using, of course, the sanctions and everything else.

These are weapons and they are not saying anything. Why? When Saudi Arabia basically look to them as if they are low ending prices, all of a sudden it's something strange. But the main point here is. The Saudis want to isolate oil from the discussions. Oil is not on the table. And if that's what it takes, then they will do it.

The other issue here I would like to mention is when we talk about market and market surplus and what the analyst missed, there is a very important issue related to India of course, and the sanctions on the refinery that we have people saying, look. Inventories are not really that low. Like what OPEC is claiming.

Look at oil on water. It's the, all those guys even in, in April who predicted that oil prices would decline to 30, they missed the point. And I'm going to mention a real story here that tells the whole idea about two months ago there were six. Oil tankers carrying Russian Urals going to India.

Those six tankers belonged to a certain company. By the time the first tanker arrived to the Suez Canal, the Houthis hit a ship in Red Sea and sank it. So the Norwegian insurance company refused to insure the shipment. They told them, look, if you're going to go through the Red Sea, I'm not going to insure it.

So the company decided to reroute the six tankers around Africa. So imagine going back after they went through the Mediterranean, they have to go back and go around Africa to go to India. That increased the time to arrive to India by about three weeks. So oil on water went up. For those who focus on it as increase in inventories, all they see is increase in inventory and therefore we have a problem in the market.

No, this has nothing to do with the fundamentals of the market because if you want to do the balances right, then you have to subtract those six tankers from three weeks earlier to have the balance, right? So they missed that point. They added those. They the they did not subtract those tankers. They added them as , oil on water.

So this is one of the big problems. So whenever we have new sanctions imposed, we end up with this confusion in the market and tankers stop in their place. Basically, they get stuck at sea until they get more information from their management on what to do. So every time we have new sanctions. We have delays in shipping, and then oil on water goes up.

This has nothing to do whether we have surplus or not. In fact, we have a shortage because they are not arriving to their destination, and the analyst missed that. So in the case of the 18th round of sanctions by the EU, when they impose the sanctions on Nayara energy, refinery in India, there was a lot of confusion for about a week.

All the shipments going to NARA stopped and all of a sudden someone can claim, look, oil and water is going up, storage is going up. There is no demand. All of these things are political issues. They have nothing to do with the market fundamentals at all. And the other issue that is important to this discussion when we talk about politics that when MBS comes to visit Trump, of course, like we've seen in Riyadh, we have those major investments, we have major joint ventures, we have all kind of things, etc. And if you look at oil in that discussion, or even if it's brought to the table, it's something small relative to those big contracts, whether the defense contracts, the AI contracts, etc. Oil looks really small relative to it. 

Erik: Anas, let's move on to where this is headed a little bit further down the road, because some news that I found very interesting is China and Russia have agreed to develop what I think it's called the Power of Siberia 2 gas pipeline. So gas pipeline from Russia to China.

New investment. Now I thought that idea was dead. What happened? Why was it resurrected? And particularly I got a feeling that it fits into some strategy that I'm not fully, grokking yet here. Do you, have you figured this out? 

Anas: Yes. I think your feeling is absolutely correct. There is a big story in fact here early in the nineties when Russia basically they started reviving the economy after the collapse of the Soviet Union.

They realized that they have a lot of gas. There is not enough market in Europe for it, so they try to talk to the Chinese about a pipeline. So the idea is really old. It did not catch any any interest until 2007, 2008 when the Putin administration basically agreed that it should do that.

But nothing happened. But when. The the Chinese basic Chinese economy was picking up and economic growth was very strong. We're talking about 11%, etc. They needed the gas, so they agreed on one pipeline. But what we ended up with the case where Putin goes to Crimea, he annex Crimea, and the EU and the US and the G7 imposed sanctions on him, and that affected.

Gas sales to those countries. And he wanted an outlet and the Chinese outlet was there. So it was the sanctions that imposed in 2014 that opened the doors or opened the floodgates of Russian gas to China. So we had two pipelines. The Power of Siberia, one and Power of Siberia three and Power of Siberia two was proposed.

It's a massive pipeline but the Chinese. Found themselves in trouble because they said, look, I don't want to repeat Europe's mistake with Russia. Europe depended heavily on Russia and they got stuck. I don't want to repeat the same mistake to maximize my benefits and enhance my energy security and enhance my national security.

I need to diversify my inputs. So I'm going to buy LNG from all around the world, including United States. They ignored the Power of Siberia 2, from the Russian point of view. When Europe or exports Europe declined by 80%. They looked at the map and said, okay, the only two places I can send pipelines is Europe and China, and if Europe is not there, then I'm going to, I'm putting all my eggs in one basket in the Chinese basket.

If we end up with political problems, I am a hostage to that. And if the Chinese economy tanks, then I have to pay a very heavy price for it. So I need to diversify, but I cannot send pipelines to other places. So the only way to diversify gas exports is to focus on LNG. So they started building LNG plans just like the United States to export gas.

With the idea of diversification. So they built TML and then they built the Arctic LNG two. And after they finished Arctic LNG two, they, their interest in the Power of Siberia 2 basically became very weak. They were not interested because Arctic LNG 2 basically was the way out. So it wasn't So when you said it's dead.

Yes, it was dead because China has no interest and the Russians have no interest. China wants to diversify imports, Russia wants to diversify, export, but everything changed this year. First, we have the trade wars and we have the tariffs, and as a result, China stopped importing LNG from the United States last February.

So no zero imports of LNG since February. Remember, they wanted to diversify. They wanted to go everywhere, including the United States. Now, the United States basically being cut because of the trade wars and the tariffs. Now, China wants to sign contracts. Before their idea was, I'm going to sign contracts with the new emerging LNG companies in the United States.

Part of the diversification. Because of those trade wars and the tariffs, they did not sign it. Now they want to go somewhere else. Australia is maxed out. The only two places where they can get LNG is Qatar and UAE, United Arab Emirates, which is in the Gulf. And they did sign those contracts and the Trump administration got pissed off because of that, because they thought that they would get more contracts from China.

All of a sudden, Israel. Started hitting Iran and we started the Iran, Israeli Iran war. That was not a surprise for political analysts who were predicting this to happen for the last 20 years, and this is really not the big issue for China. The big issue for China was when the United States suddenly hit Iran, so in the Trump administration hit Iran and they hit them really hard.

That's when China basically started paying attention. Why? Because all of a sudden the western press, especially in the United States, started promoting the idea of Iran closing the Hormuz Strait

And China looked and said, hold on just a second. I cannot import LNG from the United States. Now I have those contracts with Qatar and UAE, and now I cannot import from them anymore. What is the alternative? The alternative is power of Siberia too. So that was the major change. And this fit with the Chinese policy of reducing energy imports via sea.

So they wanted ev all the Seaborn imports, or the Seaborn energy import to decline substantially. And the reason why, because they think if there is a war. Or there are sanctions or closure of Malacca's trade. Then they are ready. So they are building this massive inventory. Right now we are speaking about the highest oil inventory ever in China, 1.1 billion barrels.

And they have inventories of everything, being built. So for China, it was the US trade policies. The tariffs and then the US attack on Iran, and then the promotion, and I emphasize the word promotion of the idea that Iran will close the Hormuz Strait. If you look at it from a Chinese point of view, it's not Iran who is going to close the Hormuz Strait.

It's the US who is going to close Hormuz Strait, and therefore they needed the alternative. And the alternative is Power of Siberia 2, from the Russian point of view. Again, they had weak interests before. All of a sudden they have strong interests. Why? Because the US imposed sanctions on Arctic LNG two and all the tankers associated with it, and now Russia got stuck.

They want to diversify exports, but they cannot because of the sanctions. What is the alternative Power of Siberia 2. In a sense it was the US policy, whether you look at the trade wars, the tariffs, or the attack on Iran the promotion of the idea of closure of Hormuz Strait that pushed those two, two countries to cooperate together and to start building this pipeline.

And related to that, something we covered in the previous two shows, if you recall. And the question I raised, and I'm going to raise the question without answering it, the question I raised was the following. Most of the Russian Urals crude goes through the Red Sea, but not a single LNG tanker from Russia go through the Red Sea.

Every single LNG tanker have to go around Africa. Now in the summer, some of them basically go through the northern route northern route. But, for most of the year, they go around Africa, Qatar, when they, when it sends LNG to Europe, historically it went through the Red Sea. Now it goes around Africa.

So why no LNG shipments going through the Red Sea since January, 2024? Kind of one, one and a half shipment in a sense. One of them from Oman going to Turkey, but I'm mentioning this just for accuracy, but in general, there were no shipment, no Russian shipments going through at all. So why oil is a right to go, but LNG is not.

And now you look at what China is doing and the idea of LNG in the Gulf and the closure of Hormuz Strait, you, you start having an idea on how that LNG War. Is playing. So yes, you are right that this came out of nowhere. It was a dead idea, and now it became the center of attention simply because of the US policies.

Erik: Now if you look at the electric vehicle adoption rate data coming out of China, it's awfully impressive. The thing is, I don't think you believe that data, from what I've seen on your social media and so forth, what's going on there? Number of EVs on the road in China. Why would they exaggerate that?

Anas: We have a serious problem as we discussed in previous shows, because the media keep reporting. Sales. Sales do not matter. What matters is the number of EVs on the road and those who promote EVs or obsessed with EVs, they always literally mention sales and that's it. But they don't focus on ideas like I, my neighbor basically just bought a new ev new Tesla to replace the old Tesla.

Yet, they're still counting it as something new. So really you can see it's part of the PR for EVs to focus on sales. But what matters is we have to focus on the number of cars, or at least registrations in every country rather than the sales. But in China, we already have several scams being investigated, by the Chinese government.

And yes, or the day before yesterday, I learned about news scam in addition to the two that I knew about before. So I'm going to go over them quickly here. The subsidies to EVs in China are given to EVs in China, so the, those EVs have to be sold in China. So the first one is, of course, they have to create a system.

The, they have a tax system, they have a rebate system, and they have to create this bureaucracy, of course, to work it out. So how to define a new car that deserve a subsidy. Somehow they ended up with an exact definition that is controlled by a barrack, and the exact definition is you have to have zero mileage on it.

And some smart Chinese guys said, okay, that's fine. So they go and buy all those old junk EVs at a very cheap price, take them somewhere, play with the diameter, and basically bring it to zero. And then they bring all those old EVs. Count them as new and give them a new registration and then get the subsidies and the gang, whoever operating on this, basically they'll split the money.

So new vehicles being, or old vehicles being reported as new ones, and some of them probably sold multiple times. So that's number one. Number two, again, the subsidies are given to what is registered in China. So what they discovered was. Couple of manufacturers had an agreement with dealers or some shell companies belong to them.

They will literally take those cards from the factory and sell them to that entity and that entity within 30 minutes will have a registration and insurance on them. And immediately, of course, they will cash in on the subsidies and a few hours later, those cars will be on ships going to the rest of the world.

Whether Brazil or Kenya or Europe or any other place, what that means is those cars are counted twice. One in China and one as export. And the recent one I heard about a couple of days ago that all you get to do basically just show a purchase of the car. So some manufacturers basically c created their own companies and they buy from themselves, but under the new entity and they just park the car in parking lots and cash on the subsidy and that's it.

So the numbers are exaggerated regardless. And I know that some of your loyal listeners heard me saying this several times. Regardless of that, even if you take the headline number, you take the maximum number, you look at all of that and you look at the number of cars on in the world worldwide right now, it's about 50 million EVs on the road.

And the impact of that in term of replacement of all demand is only, and that is the direct replacement, only 1.3 million barrels a day. And that's it. All this talk about peak all demand does not make any sense at all because the impact on all demand is highly exaggerated. 

Erik: Anas, I can't thank you enough for another terrific interview, but before I let you go, I wanna talk a little bit about what you do at Energy Outlook Advisors.

Your substack has become really the the talk of the industry. Tell us a little bit more about what you do, where people can follow your work and what services are on offer. 

Anas: Thank you. Thank you very much. In fact, I was surprised that although. The Substack newsletter. We have a newsletter and we have the Daily Energy report.

The newsletter is intended for institutional investors and the Daily Energy report is for institutional investors and individuals. And it's cheap enough for individuals basically to, to subscribe to it. But I was surprised that the Energy Newsletter, although it is energy, it was classified among the top 15 business newsletters on Substack.

Which is a great honor, basically to be associated with some of the top people in the business. So that, that was really something made me really proud and happy. So we have those two. We have the newsletter, we have the the Daily Energy report. Of course all of those are sisters to Attaqa Attaqa in Arabic means energy, which is the number one media outlet.

In the Middle East and the Arab world that focuses on on energy and it is a very prominent publication. But the, aside from those really the big business for me is the speaking engagements. And now this is the time when companies plan their events, especially for their investors at the end of the year or the board meetings, etc, when they look for speakers.

I already have two two kind of speaking trips around the world coming up. But for those who are entrusted, especially to schedule speeches for the end of the year, I'm still available. 

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

Erik: Joining me now is Bianco research founder Jim Bianco. Jim, congratulations on uh, being the first of the five finalists that we are interviewing in our countdown to episode 500. I wanna start by clearing the air because I get almost as much credit as you get for having called. The COVID pandemic back in January of 2020.

I got it from you. I, I do take credit for being very smart. What I did was I was smart enough to know better than to not take Jim Bianco seriously. That's pretty much where my, uh, my expertise started and ended. Tell us a little bit about how you got that call. So right back, uh, five years ago, since we're, we're starting with your track record here.

Jim: Thank you Eric, and I'm honored to be, uh, one of your five finalists. It was, it was back in January of 2020 when. I saw COVID and I got very worried that this was gonna be a real big problem when I saw what was happening in China. And that was in January. And then you'll remember the markets ran to a new high in February and for a while there it looked like it wasn't gonna work.

And then it all came crashing down. But I also remember, I think it was late January, early February, 2020, I was on a podcast with you and I think Ben Hunt. And, uh, the, I forgot which podcast it was, to be honest with you. And we were talking about it back then at the time, and we were very worried, uh, that it was going to become, um, a real problem.

So, uh, that's kind of where the or origins of that came from. And I might add, as we go through and talk about some of these topics one of the underlying themes I've been using is that event, the COVID shutdown and restart of the economy. Is the biggest economic event of our lifetime. It is bigger than the financial crisis nine 11, the inflation of the early eighties.

It is really the thing that you could really, as I like to say, we are in a post COVID economy and too many people like J Powell keep talking about the economy normalizing, uh, or going back to pan pre pandemic levels. It's not, that's an old cycle. We're in a new cycle altogether. So that was. And continues to be a major event that people need to start thinking about that whether or not we're past the, the virus, which we are is, are we in a new kind of economy, a post COVID economy? And I think we are.

Erik: Jim, I couldn't agree more. So let's move forward into today's economy and talk about one of those examples of something where people might be expecting it to work one way, but it might actually work a different way. And that is the hottest topic going right now, which is the FED rate cut.

Everybody wants. Why does everybody want their rate cut? Well, obviously the expectation is you sure you, you cut short-term rates, that's gonna transmit into bringing down lower long-term yields, right? That's how it works, isn't it? Everybody knows that.

Jim: Except that's not the way it worked a year ago because when the Fed did cut rates a year ago, you did see that long-term yields went up.

Uh, you know, the fed cut a hundred basis points and long-term yields went up a hundred basis points. But you go, going back to the whole post COVID economy thing, if you listen to J Powell, if you listen to John Williams, the New York Federal Reserve President. They, in fact, John Williams gave a speech on this the week before we're recording, where he said it's very clear that he still thinks that the Fed's neutral rate is down around 3%.

And he said that's because nothing has changed, since COVID, that all of the metrics in all of the understandings of the economy are still the same. And J Powell seems to be saying that. A lot of people seem to be saying that. The sub 2% inflation world that we had for a decade plus before COVID is still in effect.

Even though we're now in month 54 of having inflation above 2%. Don't worry, we're still in a po. Uh, we're in a sub 2% world even though we're almost now five years into, before we've, the last time we've seen sub 2% inflation. So there is this. Resistance by a lot of people to say that the economy has changed.

Now I know why There's resistance. They, the reason that there's resistance is they'll scream at you, okay, how's it changed? You know, I need chapter and I need verse, and I need stanza, and I need to know exactly how it's supposed to work. And the answer is unsatisfying. I don't know all of the answers. I just know that the old playbook you were using from 2019, that one isn't working.

The new playbook that we're gonna be using post 2020, we're still in the process of writing it. So I still don't know exactly how it's gonna work or what is gonna be the, uh, rules of the road. I just know the old ones are not.

Erik: I agree with you. The old ones are not. I just wanna confirm, so you're saying cutting rates looks like maybe the risk is cut, short-term rates, higher yields.

You're saying you don't really have a solid explanation for that other than the expectation that you cut short term yields to long-term, ain't gonna work or hasn't worked recently?

Jim: Well, yeah. Let me be specific. I ba I guess I must have, uh, not explained myself well enough. The reason that you see last year when the fed cut rates.

Higher long-term yields, and you see it with the ECB cutting rates and the Bank of England cutting rates higher. Long-term yields is the market I still think is worried that we're in a higher inflationary world, and if we're in a higher inflationary world, cutting rates is supposed to be stimulative.

And what the fear is, is that we'll just stimulate more inflation and we already have too much of it to begin with. That's what you're seeing with higher long-term yields. Compensating for that expectation of more inflation. Now I gotta be clear, we're talking about three-ish percent inflation to four-ish percent inflation.

Long-term. You know, it might be higher, some periods might be lower. Not sub two. And why does that matter? Because in a three to 4% world of inflation and core, CPI is 3.1. So we're getting to the bottom end of that range. Again, we've been slightly below it for a little bit while, is that what suggests that four-ish percent inflation, uh, four-ish percent interest rates is about neutral?

It's about where interest rates should be. Well, that's where we're at. We're at four and a quarter on the funds rate. If the FED is gonna ramp up and start cutting rates, they keep saying that we're mildly restrictive. They're using their pre COVID models to make that statement. But if, if I'm right in this post COVID world and we're at neutral now, they're gonna go too easy and they're going to spark an inflation concern.

And that's what you've been seeing with long-term yields with all the central banks when they cut rates that long-term yields go up.

Erik: Okay, so the risk is that with an inflationary backdrop, that's where cutting short-term rates can result in higher long-term yields, potentially creating the reverse effect of the one that was intended.

So it's about the inflationary backdrop that really is driving it. Jim, it seems to me like the Trump administration does not share the view that inflation is a problem. Is this a setup for them to, uh, essentially shoot themselves in the foot by unleashing inflation? By pushing for this, uh, this cut.

Jim: Yeah, I think it is. You know, you're right. Trump has been very clear that there is no inflation. Inflation has been vanquished, and actually it hasn't been, like I mentioned earlier, we're at 3.1% core inflation. In 2019, 3.1% core inflation would've been absolutely unacceptable by any metric from the Federal Reserve or the federal government.

But today, now they're trying to tell me that 3.1% is no inflation. It's not. And again, why is that important? Because if it's 3% inflation plus some kind of premium on top of that, which the Fed calls our star, we don't have a lot of room to cut rates nor. Should we be cutting rates? But I also think the other problem is, and I'll, I'll tread very lightly here 'cause I don't wanna upset too many of my friends in the real estate business.

The absolute worst person to ask about interest rates is somebody who's in the real estate business because they would argue to you that the proper interest rate is zero and they should go to zero, and they should stay at zero all the time when you have an affordability crisis. We should have interest rates go to zero.

When you have falling prices on houses or real estate in general, that is alleviating your affordability crisis 'cause affordability. Crisis is home. Prices are too expensive. When they go down, interest rates should go to zero. When home prices are too expensive, interest rates should go to zero. That's the problem you have with somebody in the real estate business telling you where interest rates should be, is that they always think that they should immediately be going down and they should be staying somewhere near zero all the time.

And I won't just indict Donald Trump. I'll also throw Bill Pulte, the head of the financial, the FHFA, the, uh, regulator for Fannie Mae and Freddie Mac. He's been echoing similar sentiments too that interest rates should be on their way to, you know, something approaching zero immediately.

Erik: Jim, we've got the jobs report coming out Friday. That'll be tomorrow on the day that this podcast drops on, uh, on Thursday. We recorded this interview just for our listeners edification back on Monday of this week. Tell me about the jobs report, what your expectations are, but particularly how does that relate to the border? Something that might not be obvious.

Jim: I think that what we need to understand about job growth in the United States or any developed country is you have to start with two major factors that give you job growth. One is productivity. How productive is your economy? If it's more productive, it has room to hire more people. And the second thing is, what is your population growth?

This is what the Fed refers to as the supply of labor. Now, what's happened in the last four months or so? Four months now, pushes this back to April or May. Is the border's been shut? Trump has been talking about, that there's no more immigration coming into the country through the border.

And as a matter of fact, with all of the arrests of undocumented workers by ICE, there has been New York Times highlighted this about a week ago. We might be seeing net negative immigration for the first time in a hundred years. Net negative means more people are leaving the country than are entering the country.

The last time that happened was in the, during the Great Depression, uh, when a lot of, uh, Mexican workers left the country because there was no more job opportunities. Now, if we're having net negative immigration, let me throw in one other statistic. The fertility rate United States is at an all time low and has been for decades.

So all of our population growth. Is really coming from immigration. Well, we don't have any more immigration. We don't have any more population growth. So all you've got then is productivity to basically drive job growth. Now the American Enterprise Institute and Jed Kolko over at, uh, the Peterson Institute.

Uh, he's the former, Jed Kolko is the former head of, um, of Chief Economist at Indeed and Trulia. They've put pen to paper and have made the case that with this low level of immigration growth and with our kind of average to slightly below average productivity growth, that by the time you get to next year that the break even rate for jobs. This is a statistic we don't really talk a lot about because we've never had to. How many jobs does the US economy need to create? Well, the American Enterprise Institute is saved by 2026, which is only four months away. It could be as low as zero, or most likely could be 10,000 jobs that anybody, anything above 10,000 jobs a month is enough.

Now, the problem with 10,000 jobs a month is. President Trump just fired the head of the BLS accusing them of rigging the numbers for political purposes. I don't think they were doing that at all, but the premise there was 19,000, 14,000 jobs in May and June, 35,000 on a three month average was. Too low, unacceptably, too low.

And this is the hardest thing for people to understand is no, if we have no job, if we have no population growth, that's enough jobs. That's all we really need to be creating. And my fear is going back to the Fed, if they're still of the opinion. And I think Chris Waller, who's been one of the leading voices on the Fed, pushing for a rate cut, still thinks that this economy should be churning out a hundred plus jobs a month consistently.

Now you could do that. This month, you know, when we get the August numbers at the end of the week for a month or maybe two, but consistently without job growth, the only way you're gonna get that kind of job creation is if you take people that are not in the workforce and get them into the workforce.

Quick statistic, we always have this statistic called labor force participation rate. That is the percentage of the population between the ages of 16 and 64 that are, have a job. It's about 62%. The other 38% are either students, military, incarcerated, housewives. There's a reason they don't, they're not in the workforce.

They're disabled, uh, or they're independently wealthy. They don't wanna work well. They get those other 38% into the job market. You're gonna have to raise wages. That's wage inflation. That's just another level of inflation. So I think that the supply argument is, the problem with this is, and you'll hear this economist look at the numbers and go, 19,000 jobs a month, panic, the economy's going into recession, but they're not yet.

Really get their arms around the idea, what if the border's closed and we've got no population growth. Maybe that's enough. That's all we need. And if you're gonna try and stimulate this economy into 80,000 or a hundred thousand jobs a month consistently, you're just gonna wind up producing inflation.

Erik: Jim, you make excellent points, but hang on. President Trump's gonna go the opposite direction and say The fact that there's a low jobs report absolutely commands that we have to cut rates right now. Is that a setup for essentially unleashing inflation?

Jim: It could be it could be very much because he would be using that mentality that, 'cause let me back up.

Pre COVID, we never, ever talked about what is the potential number of jobs the economy needs to create. 'cause population growth was fairly stable, immigration was fairly stable. It was the same number, year in and year out, around 80,000, a hundred thousand jobs. And we just kind of got used to the whole idea that that's what the economy should do.

Well. 21 to 23 when we had millions of people coming into the country. There was an argument to be made that that number had ballooned up to 150 to 200,000 jobs a month. And that's why we weren't, even though we were printing 120,000 jobs at beginning of 24, we weren't creating enough jobs because of the ballooning population growth.

And that's why we saw the unemployment rate go up. That was last year when the Fed panicked about the unemployment rate was rising and that we need to do something and cut rates on that. Well, this year we got the opposite. Now that we've got no population growth, the unemployment rate is not rising.

It's the same level, 4.2% as it was exactly one year ago. That is a sign that labor demand is okay. It's just that the supply is weighed down. There's also one other thing that Trump has been doing, which I think is uh. He has been criticizing the Fed. And about a month and a half ago he wrote on X, uh, or excuse me, on uh, Truth Social that was reposted on acts like a handwritten note to J Powell with all of the central bank rates.

And he circled on all the countries that have zero. And it was like Cambodia and Japan and some other countries that are very close to zero. And he said, we're the hottest. We're the best country. We should be here with these countries, not down here at 4% where we are. The error that he's making is he's thinking that the United States is like the mortgage on Trump Tower.

The lowest rate goes to the best mortgage. Why do you get a low mortgage rate on your, on your office building in Manhattan? 'cause you have high occupancy and you have a desire for people to wanna be in there. In other words, what I'm trying to argue is. You have very little credit risk. He's arguing that the US has very little credit risk.

I agree with him. It has practically no credit risk that the federal government is gonna default, especially as a reserve currency. We'll print the money to pay you back, but we're not gonna not pay you back. Where interest rates for sovereign yields are set is not on credit risk. It's set on growth, inflation expectations and supply, and those are the things that are holding our rates up to 4%.

So when he's trying to argue, we're the hottest country, everybody wants to be here, what he's trying to say is, we're good credit risk. So it's just like the mortgage on Trump Tower. It should be lower than the mortgage across the street because it's a more desirable property and therefore it's less risk.

That's not how you set sovereign yields and that's what he's gonna have to, resolve in this issue. And I think that the market, understands that. And that's why we're seeing long-term yields still stay in this mid to high forest area. 'cause it's not about us being the best credit risk.

It's not about whether or not we're bad creditors in the UK or the, or France, or Canada or Japan. Japan has, you know, got interest rates that are still with a one handle, one and a half percent, and it's all because of their growth and their inflation aspects and their supply situation to suggests a much lower interest rate than the United States, not about credit or their ability to pay.

Erik: That's the basic theory, isn't it? Of, of macroeconomics is that, uh, on a relative basis, at least the performance of, of one country's economy versus the other, it's the strength of the economy that determines the relative interest rates. The higher interest rate goes to the stronger economy. No.

Jim: That is correct, and that is the way it works.

And that's why I use the word develop countries. Now, when you get into developing countries, that's what you know, then you can get into a situation where there can be a credit risk because there can be default. Venezuela famously is defaulted. Um, you know, some African countries have famously defaulted as well too.

So it is, it's a relative strength on your economy. So interestingly, when Trump says, we're the hottest economy in the world. I wanna say, you know what, you're probably right. And that's why interest rates should be going up, not going down. And Eric, there's another thing in, in, in this conversation that I should throw out there.

We've kind of gotten trapped into this mentality that interest rates lower, always good, higher, always bad. That is not the case when it comes to government yields. It's fair value is always good. When you deviate from it too low or too high, bad things happen. So the cost of money, which is what an interest rate is, it's to borrow money, you have to pay you have to pay for it to borrow money.

You wanna make sure that is at an appropriate level for your economy. If it's too high. You're paying too much. You're going to retard the amount of borrowing because that's the base level, the government yield and then you know, bank loans and corporate bonds are, have some other credit risk premium on top of that.

And then there's not gonna be enough borrowing in your economy and you're gonna slow it down. If it's too low, you're gonna overstimulate too much. Borrowing too much speculation, and you're gonna wind up with bubble markets and or inflation. So you wanna strive to be in that kind of middle. Fair value range.

So what I'm arguing here is down is not always good when it comes to interest rates. It's good if you make the case that we are fundamentally too high relative to the economics, and I don't think we are with a 3.1% core inflation rate. And that if you're going to force it down, I know everybody say, well, this is good.

Rates are going down. But it might not be because it could be too stimulative. Just like when rates go up, it might not be bad because maybe your economy's speeding up. You have a little bit more inflation, and they should be going up.

Erik: Jim, let's back out to the big picture of the Trump administration's policy goals and what they're trying to accomplish.

'cause let's face it, look at what happened with tariffs. They said there was gonna be some tariff action, and then we got shock and awe, one of the, the biggest tariff negotiation campaigns ever. Then they said they were gonna hold some of the previous administration, uh, officials to account for bad actions.

Now we've got what seems like a, a massive, uh, accountability, shock, and awe campaign. I think the next shock and awe campaign. Is yet to come, and I think it is one which will be under the command of financial Delta Force Commander, uh, Scott Bessent, who has already installed his spec ops commando Stephen Miran in the Fed to be the inside man there.

Don't forget, Stephen Miran is literally the guy who wrote the paper on the Mar-a-Lago Accord. And I think what they're doing, I'm not sure who they're gonna put into, uh, the Fed and other places, but I think what they're doing is they're installing the commandos that are going to do, uh, an assault or a take down on the global financial system and re-architect it.

To their own liking. And I think that's going to involve crypto integration, not central bank digital currency, but a stable coin based crypto integration. And I think it's probably gonna leave Don Jr. Doing pretty well in his crypto business. I know it sounds crazy. Is that nut case conspiracy stuff?

Jim: No, not really. I mean, there's a lot to what you just said, especially Scott Bessent played by Jason Statham in the next movie that they do about this. Uh, but I don't, he'll, he'll really appreciate I said that. But, um. I do think that you're right. Stephen Marin is the author, the architect of the Mar-a-Lago Accord.

He wrote last November when he was at Hudson Capital which has been kind of like one of the papers that's been driving what the, the Trump administration is doing. And there is a desire to wanna try and re orient. The entire financial system in to be more aligned with the trading system that we have.

And there's no doubt that crypto is going to play a big role in that, which is why they've been pushing, you know, the passage of the Genius Act and they've been pushing the Clarity Act, which is supposed to clarify regulations. But I think where you're going with this is what are they gonna do with the Fed?

Because you know, what we've got is we've got. Michelle Bowman and Chris Waller. These are two Trump 1.0. Uh, appointees, which have been basically those are the two that dissented at the July meeting. Calling for a cut. Chris Waller has been leading the forefront at the Fed for a cut. Adriana Kugler left the FED early.

She wasn't supposed to leave till January. She left in August, presumably. The reason is is that she wanted to return to Georgetown to be so she didn't lose her tenureship as a professor there. She couldn't wait till January. She had to be there before the school year started. So that means that Stephen Marin goes in as a third fed governor and now they're trying to fire Lisa Cook for cause.

Assuming that they get that done, and I'll assume they will, that would give Trump four appointees of the seven on the Federal Reserve board. Now, why is that important? For a number of reasons and including one of them will eventually become the new chairman in May of next year when Paul's term is done.

But I think it also is, gives them the ability to. Shape the Fed the way they want. 'cause a lot of people don't realize this. And be honest with you, I had to be reminded of it, that every Federal Reserve bank president has a term that, uh, it runs five years, it ends at the end of February and years beginning in one in six.

So in February of 2026. All 12 Federal Reserve Bank presidents terms expire. Now, that's been a formality for a hundred years. Their boards would reappoint them, and then they have to be approved by the Board of Governors. They need at least four of the seven votes to approve them. And in the last a hundred years, there's never been a no vote of any bank president ever.

Well, now the theory is they're all going to expire. Their boards will all put them up for renomination. And if Trump has four of the seven governors, they could start saying no. And effectively firing some of the bank presidents, the more hawkish ones or the ones that are not aligned with their policy with, uh, their policy aims.

And they could then force those boards to go back and find somebody that would be acceptable. To get past the Board of Governors and that could help remake the Fed as well too. Now, let me be clear. This is a possibility when you have four governors. It's not a certainty that they're going to do this.

And again, I'll remember the reason you've never heard this before is that no fed governor is ever voted no on the reappointment of a FED president. Uh, but that is something that has been floated out there as well, so that they could be remaking the Federal Reserve. The most important of the central banks into the image that they want.

So this is why you hear people talking about a loss of independence. So why is the market so sanguine about this possibility? I think twofold. I think one, it's still all theory and we'll have to see if this is actually a little bit too you know, we're, we're a little bit too over our skis with these theories maybe that they're not that gonna be that aggressive.

Second of all, I do think that the central bank has not done itself any favors with the way that they've conducted their policies over the last many years, not the least, which was cutting rates last September, 50 basis points. That was the first time in. Decades that they changed policy before an after Labor day in an election year.

Let me be clear on what I just said, changed policy. If they were hiking, going into Labor Day in election year, they could keep hiking. If they were cutting, they keep cutting. If they were holding, which is what they were doing going into Labor Day, they would keep holding. No, they reversed and they cut and they cut by 50.

And so. When Trump yells at them that they were political trying to get his opponent to win, you could quibble whether they weren't or were doing it or weren't doing it, but if they wanted to do it, try and sink the election for 'em. That's exactly what they would've done is an aggressive rate cut right after Labor Day.

And so the timing of it doesn't, the optics of it doesn't look good at a minimum as well, so. They've not done themselves any favors. So when the fed, when economists and fed officials keep, were fretting about Central bank independence, and I've heard some of them say, and the market doesn't seem to be bothered by it.

I don't know why. And it's like, 'cause you've done a pretty good job of showing yourself is to maybe not being as independent as you'd think you are and the market is. Open to the idea that the Federal Reserve needs change. And so if there's some change at the Fed, it will embrace it. If there's too much change, meaning a loss of independence, that the president is gonna start running monetary policy, it might get worried about it, but it probably get worried about it later on.

So what I'm trying to say is. I kind of agree with you. It's a red flag that or maybe a red flag's a little strong. It's a yellow flag. It's a yellow flag right now that could become red as this situation unfolds. And so, no, I don't think it's, you know, outlandish what you just said.

Erik: Let's talk about the role of digital currency and how it's going to evolve.

We started with the Bitcoin community, hopeful that maybe someday Bitcoin would compete with government issued money and, and you know, compete with the US dollar for global reserve currency status. I took the, the uncommon view that that was not likely to happen. The Central Bank digital currency was more likely to be invented, which it was.

But what I didn't see coming and what I think is now happening is the realization by the Trump administration that they can basically replace the Petrodollar recycling system with a stable coin. Recycling system that ties everything into US treasury demand, but still uses the Bitcoin blockchain in order to tokenize those assets.

Is that where we're headed? And if so, what would that mean? Both for, uh, the people in the Trump administration and for the rest of us?

Jim: Yeah, I think, you know, that is a way that we're headed. If, if there was one quibble I would give with that, it would be, maybe not the block, the Bitcoin blockchain, but the Ethereum or the Tron blockchain.

That's why you've seen over the last two months. Bitcoin's unchanged, Ethereum is up 70%. Now what they're attempting to do is with a stable coin, and the Genius Act also had another provision in it that really re relaxed the regulations for building payment systems. So. The analogy I've heard is the stable coin is the rails.

We're going to build rails, we're gonna build railroad tracks. And after those railroad tracks are built, we'll come to trains and the cars that will follow it. So if we're gonna build these payment system, these payment rails in order to, um, effectuate change, um, payments that then everything else will follow.

And the, the thing about the payment system, what they're hoping for is. That, uh, you know, let me give a another statistic here. 80% of the world has a mobile phone, 80% even in the least developed countries in the, on the planet, the majority of the population has a mobile phone. Why is that important?

Because everybody has access to an electronic wallet, even in poor countries. So what they're offering is, here's a stable coin. It's tied one for one to the US dollar. It's a digital representation of the dollar. You are in a country where you've got shaky banking systems. You've got currencies that are constantly devalued.

We're going to give you this tool that you can use that's on a decentralized platform and is permissionless so no one can take it away from you. No one can hack it or anything. You could store your wealth on that system, and we're hoping. That this will attract a lot of money that people will wanna, you know, instead of using the bank account, whatever bank, whatever country they're in, they will use this a stable coin, which will then be backed by a one for one by a treasury security, and then we'll create extra demand for treasuries.

Now I got two small quibbles with it. Understand argument well.

That's not gonna be the case for American investors and European investors or developed world investors. If Americans like you and me and everybody that, most everybody that's listening to this podcast, or even if you're European, you say, yes, I wanna keep my money in a stable coin. Well, where was it already?

It was already in a regulated bank that was backed by something. Like a US treasury. So you're just, you're just substituting it to another treasury backed security or treasury backed instrument. So there's no new net demand. So in the developed world, there's not gonna be a whole lot of new net demand in the developing world.

I could see that de that demand coming, but is there trillions of dollars? Of wealth that is being sitting around in Africa and Asia and in Southern Africa, Southern Asia, and Latin America. That's looking for a more stable banking system to park it in. I don't think there is that much money out there.

There was, they wouldn't be developing countries. So I think that the amount that they could very well get is going to be much smaller than they think. But let me also throw out something else about this whole idea about. Building rails that you know, payment rails that you will use a stable coin then to, um, be the medium of exchange on that payment rail.

We are living in a digital world and we have an analog banking system, and let me explain where we should be if we were, think of email and texts. You can send as many emails as you want and a lot of us do send bulk emails to lists or texts, and they're free. The marginal cost to send one is free and they arrive instantaneously.

Why isn't our payment system like that? Why can't I send money to everybody instantaneously and for free? And let me go you one step further. Why is it that if I agree on my paycheck, a certain amount of mon money per month, why am I paid lumpy once a month? Why am I not paid in real time? All the way through the month.

Every second, every microsecond, every minute I get money goes into my account for the amount that we agreed on that you're gonna pay me per month. Furthermore, my rent. My mortgage every second, every minute money goes out of my account for the agreed upon amount for rent. Now, why am I arguing that?

That's the kind of payment system we have, which we don't have with ACH, the Automatic Clearing House, or the Swift system, or this new FED NOW, we can't handle anything like this because ultimately, why do we all pay monthly service? Why do we all pay monthly fees to Netflix or to whatever else that you wanna pay?

Because that's the only thing our banking system can handle. We should, ideally, I'll use streaming services as my example there. You should have no account on a streaming service. You should connect your wallet. You should then watch something and every minute. Uh, you know, it takes a penny or two out of your account or a sub penny if it's a, if it's a lesser popular show, even a less than a sub penny.

And as long as you're connected to watching it, you pay. The minute you stop watching it, you stop paying. You go to the New York Times and you wanna read a story, oh, that looks interesting. Click on it. 3 cents comes out of your account. Or 5 cents or 10 if it's a more popular story, but you don't have any monthly fees.

That's the way we should be paying it. What I've tried to describe is a payment system similar to the way we send texts and the way we send emails. We could send an unlimited number of them is whenever we want. They arrive instantaneously and there's no marginal cost. So if I wanna get paid every second, and if I wanna pay every second, I should be able to I could send a text every second if I want to.

Why can't I get paid every second or send a payment every second without it incurring an economic cost. And that is the type of system that I think the digital economy wants. So I'm all for, what we're trying to do with this system now is the Trump administration, you know, trying to get in there with their world, the, you know, financial coin and everything else.

Sure they are. And the day we're recording, though. Wall Street Journal is saying that they've amassed $5 billion in wealth because of it. And yes, that makes me a little bit uncomfortable that they're doing that, but that doesn't detract from the idea that what they're trying to do is a worthwhile effort.

And it's so much of what Trump does is like this. The idea behind it is a very good one, the way he goes about doing it. Makes me wanna question it, you know, and stuff. Firing the BLS chief, I think the BLS has got some problems and if you wanna fire the BLS chief, I don't have a problem with it. But then accusing them of being political and partisan and trying to make them look bad and everything, that's when I start having par problems.

And then you're gonna replace them with a partisan who's just gonna basically monkey with the numbers so that they make them look good, as opposed to saying that there's been some real problems at the BLS with the way that they do this data and maybe we ought to fix it. So the intention, the idea there, you kind of agree with then it's the execution of the way they wanna go about it.

That makes me really question it.

Erik: Jim, final question. Think about the way they've taken this shock and awe approach to other policy objectives such as tariffs. What do you think the next shock and awe things might be? What are, what are the things we might be shocked with as they move forward on this agenda of doing something to reshape the global financial system?

Jim: Well, let's not forget immigration too, that they've done, you know, shock and awe on immigration as well. But I do think that the next shock and awe, if I had to guess, would be in the realm of taxes. Trump has talked about tariffs are gonna be this new thing called the External Revenue Service. He believes that they're gonna raise trillions of dollars in tariffs.

All right. Maybe they do, maybe they don't. I don't know if they are, but his, ultimately, what he's been arguing is that he wants to go to this idea where we could get rid of the Internal Revenue Service and replace it within an external revenue service, and therefore we don't have to ever pay taxes again.

I don't see us raising that. That's $4 trillion a year that the Internal Revenue Service, uh, raises. Could there be a reduction in taxes because of, of tariffs? Sure. But an elimination, that's a little bit too much for me to see, um, as well. And finally, as long as I'm on tariffs real quick I still have a question about how.

Successful this is gonna be is, I've joked, I've joked a lot about that. If Trump could find a way, all tax policies, always. We need to get some other rich person, not you to pay for our taxes. We're taking it to the ultimate extreme now. The other rich person, not you, to pay our taxes now as a foreign.

Through the form of tariffs. And furthermore, Trump wants me to believe that we're gonna get a lot of it from China so that they, they could take all that tariff money they got from China to buy weapon systems to protect us from China. And I said, you know, if he could pull that off and eliminate the external revenue service.

The Internal Revenue Service with the External Revenue Service, then let's just put him on Mount Rushmore right now. But I say that sarcastically thinking that, that it's, it's not gonna be the as big as it is. So while they got all these big plans on taxes, alright, I don't think they're gonna go all the way to no income tax, but I would not be surprised if you are going to see before the end of Trump's second term, some radical restructuring of the current tax law.

Based on the idea that we are getting some tariff revenue and that they could start making changes.

Erik: Well, Jim, I can't thank you enough for another terrific interview and for all of the previous terrific interviews you've given us over the years, making you one of our top five all time macro voices.

Guests, before I let you go, please tell our listeners a little bit more about what you do at Bianco Research, how people can follow your work, and what services are on offer for our institutional investors.

Jim: So two things. Um, my, my original job was I am a macro researcher at biancoresearch.com. You could follow me at Bianco Research on YouTube, on X Twitter, and at Jim Bianco on LinkedIn.

We do offer an institutional product. If you wanted to request a free trial, you could go to biancoresearch.com and take a look at it. Uh, if you're not a research, if you're not an institutional service. I do try to post a lot on, um, social media. The second thing we do, uh, is we do manage an index called the Bianco Research total return index. It's a fixed income total return index. Biancoadvisors.com. You find out more about the index. It's designed to maximize fixed income returns because that's ultimately where I start and still believe I still am as a bond guy. And there's an ETF that tracks our index. It's the Wisdom Tree Bianco Fund, WTBN is its sticker symbol

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

 

Erik: Joining me now is Michael Every, global strategist in Economics and markets for Rabobank. Michael, it's been a while since we had you on, obviously the really big topic this week is going to be the Trump Summit with Putin. Now we should let our listeners know we're actually recording on Sunday evening US time.

So it's just after the wrap up of that session our listeners are gonna have three or four days of news flow that we don't have yet in terms of what's happened afterwards.  I hate to put you on the spot, but based on what we know now, immediately after the the wrap up of these sessions, we don't even have all the news flow out.

What's your take on the big picture of where this is I is headed? Are we about to wrap up and maybe wind down this Ukraine war, or is this just President Trump as he puts it, weaving his deals and maybe not really expecting anything to happen quite yet?

Michael: In this job you and I are both paid to try and look well beyond three, four or five days.

So yes, there is gonna be news flow between what we're recording now and when people will hear it but hopefully what we have to say still has value over that particular, time gap. The view that I have is that it's likely to be not the end of the war per se, but the end of a phase of the war, and we could.

We could address it as a pause to refresh. And then the issue is who is it refreshing? Because obviously we all want a cessation of the terrible violence, President Trump does. Russia certainly does in terms of the fact that its economy is struggling at the moment and it needs that breather.

Ukraine is being ground down. Everybody benefits from the fighting, pausing. But where we go afterwards is a very different question. And I think there are multiple scenarios. But the most likely ones, which, we can unpack are that I think it's probably good for the US on balance. It may be a disaster for Ukraine or it could be very good for Ukraine.

And it could be very bad for Europe or extremely difficult for Europe, but something that it emerges stronger from in the end.

Erik: That's a lot to unpack, isn't it? There's a whole bunch of things that could go one way or the other way, depending. So we better dive into the, depending on what.

Michael: Basically I've been saying for a long time, that Trump would attempt to introduce what I've been calling a Noxin strategy, which is a reverse Nixon, because in foreign policy circles, they've been talking about a reverse Nixon.

I said NOXIN, that's an Noxin where you try and. Make nice with Moscow in order to peel them away from Beijing, which is of course what Nixon managed to do with Beijing vis-a-vis Moscow, albeit after they had already had a spat. And here the two haven't had a spat yet. So that makes geostrategic sense. Except of course at Moscow and Beijing are currently very tight.

And so I've also been making the quip for many months. That Noxin wouldn't work because it starts with no, and it's got Xi in the middle of it X I. So that still remains the underlying assumption, but that doesn't mean that Trump can't manage to patch things up with Russia to a certain extent by taking themselves out of the Ukraine loop and giving them some breathing space on that, both Russia and Ukraine.

So I think what we'll see at the summit between the UK EU leaders, president Zelensky of Ukraine and Trump on Monday. DC and it's Monday here in Asia as I'm speaking to you is Trump basically saying, look, the deal is going to be this, the land that Russia has already taken is going to remain in Russia.

Ukraine cannot get that back. Realistically, certainly not Crimea. And realistically, most of the other territory too is now effectively Russia. So the greater likelihood is that the border is drawn a along the river, Dnieper. And then there are questions over certain pockets like Donetsk, Oblast, for example, which Russia doesn't control all of, and Ukraine would say why do we have to give up all of that particular province when Russia Army controls half of it, Etc Etc.

So there are a few questions of where the line draws, but pretty much it's gonna be around 20% of Ukraine is going become Russian at this point, which is a victory for Russia. But for those expecting the US to say we're gonna, we'll fight Russia, absolutely. To get that back, which Europe has been very vocal about too.

Clearly, that isn't in the US grand macro strategy interest. They want to pivot to Asia rather than fighting Russia over Ukraine, which is of marginal concern for them strategically. So that's not gonna happen. And for those who say the US and Europe together should be sanctioning the hell out of Russia.

And putting secondary sanctions on everybody else who deals with Russia such that Russia has to surrender well, they have to understand. That means putting secondary sanctions on China, which means if you think you have an issue with tariff inflation coming ahead in the US it'll be enormous because you would have to basically lock China out of the global economy straight away to punish them for dealing with Russia.

And if anybody wanted to do that, they could have done that for the past couple of years. Nobody wants to, they're too integrated. The pain would be too great. So those sanctions are simply not gonna happen. I'm not saying whether this is a good thing or a bad thing, I'm just describing it. And the US isn't gonna step up militarily.

So then Ukraine is gonna turn around and say we need a security guarantee. We can't just sit here and give up 20% of our land for peace with Russia, because Russia can then use that pause to re-arm, which certainly will, and we'll come back and nibble again and again, and start taking more and gradually eat us whole.

So then what's the security guarantee? What's that gonna look like? And here, I think the US is going to say, Europe, over to you. We will sell you as many weapons as you need to defend Ukraine. So that's good for the US military industrial complex. That helps Europe also build up its own factories, again, which are really struggling at the moment, but very much as part of US focused Pentagon focused.

Supply chains supply. So that kills any hope of European strategic autonomy. Europe becomes a subset of the US from an industrial perspective. And at the same time, the US is already leaning on Europe and others as part of trade deals and saying, we expect you to invest hundreds of billions of dollars in factories in the US which surprise, surprise will be making inputs or directly those weapons, which it sells to Europe.

So it's what some, including myself are calling reverse Marshall Plan. Europe is helping to rebuild the US rather than the US rebuilding Europe after World War II. Now the the roles are reversed. So if that happens, then effectively the US can pivot to Asia.

It's selling lots of weapons to Europe. Europe is really subsumed into the US economy. It has to invest in the US and it has to buy from the us. The US is in a better position, and I think we'll discuss this shortly to roll out stable coins and Europe won't be able to say no because its economy and its security framework is based on the US so we can't reject them.

Hopefully Europe then says with that backing we are prepared to put troops on the ground in Ukraine and ensure that the 80% of Ukraine remains, a buffer state between Europe and Russia, but it remains perfectly safe and viable as an entity. And if it does that Ukraine may not, have a future in Europe in the immediate future or in nato, but it could certainly, exist If Europe doesn't do that.

If they can't agree, who's going to decide who's going to pay, how they're going to pay and who's going to fight? Because that's very much on the cards now, or at least in principle. Who would fight then? Who is gonna defend Ukraine? And then really you see that 20%. 20% of Ukraine becomes 20%, a 20% peace in our time.

If you think back to Neville Chamberlain, and it may mean only 20% peace, P-E-A-C-E in our time, which is an extremely worrying backdrop. So I've tried to give a very brief summary there. Lots to unpack, but there are huge implications for lots of different markets and for geopolitics as part of that.

Erik: What I found most fascinating was you used the phrase, pivot to Asia talking about where the US may redirect.

Some of its military might. It seems to me like really the Iran and Gaza conflict is going to acquire more US attention than China will, at least initially. Am I reading that differently than you are? Or how do you see Gaza and Iran fitting into the chronology of all of this as the US. Pivots toward Asia.

Michael: Remember the Middle East is part of Asia. Technically it's Western Asia. We often tend to overlook that what we've already seen play out in the Middle East vis-a-vis Iran. And what continues to play out in Gaza is the US attempting to put down a very strong footprint as minimally as possible from its own side.

And, but it doesn't want boots on the ground. It doesn't want any repeat the two Gulf Wars, but nonetheless, ensuring that oil rich, energy rich region stays very much in its pocket, not in Russia's and not in China's. And that is critical in order to gradually advancing towards China. And I would say again, just as what the US may be about to do today, my time tomorrow your time as we're recording.

Vis-a-vis Ukraine, which is gonna up upset a lot of people, particularly in Europe. But what I think is geo strategically advantageous for the US overall, and I'm not saying that as a moral judgment, I'm just saying that, objectively looking down helicopter view from above, they've achieved the same thing in the Middle East.

Because while again they may be very unpopular in terms of what's transpired recently, the actions vis-a-vis Iran demonstrated to Beijing. And to Moscow. When push comes to shove, even if the US doesn't want a major war, as Russia is currently carrying out in Ukraine, it's prepared to use enormous targeted force to get what it wants.

tIran was strutting around, a few months ago as part of an alliance with China, with with Russia, with North Korea, and trying to expand regionally by its proxies. It's really been put back in its box. It's rocking on its heels. And in fact, if you read them at least news, you'll see that at the moment, Iran is close to running out of drinking water completely.

And I'm not exaggerating that they really are running outta water. So on that basis what Trump did in striking Iran's nuclear program helps the lay footprint, which says to them at least, look, we are still here to stay and we expect you to be in our camp fully. Except Iran, of course, but Iran's gonna be in that box when push comes to shove.

If push comes to shove, oil is going to remain priced in US dollars, and we're not going to let China make any further inroads there. So I think people have failed to join the dots on what's already been achieved there, and Gaza still grinds on. It's a horrible process. Process. Once that eventually is resolved and hopefully very soon, then I do think you'll see a regional. Realignment politically, which will further back that US footprint.

Erik: Now, meanwhile, as all of this geopolitical stuff is going on in parallel with that, we've got essentially musical fed chairs where we're having a very, public and visible process talking about who might be the replacement for Jay Powell.

At the same time, Steve Bessent seems to want 150 to 175 basis points of cuts on Fed funds, and I get the impression that somebody has an idea to essentially re-architect the Petrodollar Recycling system as a stable coin recycling system. How do we integrate those things? It seems like there's this economic agenda that the President and Secretary Bessent are working at the same time as this big geopolitical agenda.

How do we reconcile those two things and figure out what the market does in between?

Michael: Great question. Let me try and unpack that like this. First of all, I have to rewind back to something we spoke about last time I was on your show, which is we can't look at any one policy area in markets or geopolitics.

Separately, we have to see all of them now as interlinked because we have left the previous world of economic policy where you talk about monetary policy, fiscal policy, foreign policy, and we've entered the world of economic, military, and political state craft where the economy, the military, and of course politics are all integrated together and every element of the economy is integrated together to try and achieve key strategic national security and foreign policy goals. So what I was just describing in terms of how the Middle East fits in with what's going on in Ukraine, vis-a-vis targeting China, and I think many people can probably join those dots once I've, put them on the page the way I just did. You have to understand too that the larger question that's always asked there is what is GDP for and clearly in the US cases to make sure that we stay number one and China is a long way behind relative to us and we stay global hegemon, that's what GDP is for. So if we accept that, what's the fed for? I can assure you it's not about 2% CPI. And it's not about purely maintaining financial market stability. It's not about maintaining a certain level of unemployment. And it's not even about maintaining, moderate borrowing costs longer term, which actually is part of its remit and people tend to overlook.

It's far more concretely about helping the US achieve that particular goal. Now, if you're a market purist, you can say the best way to do that is to keep CPI at 2% and low unemployment, and I would say rubbish, absolute rubbish. It may be a subset in certain fair weather, but your central bank with the enormous power that it provides has to be cognizant of what the US grand macro strategy is.

And has to work alongside the Treasury and the White House. It's quite insane to imagine that you're implementing a grant macro strategy similar to a wartime footing and the Central bank saying we're not part of this. We're just gonna look at 2% inflation. It's quite frankly, ludicrous when you describe it like that.

So very clearly, we have pressure being put on the Fed in terms of the floated appointments of the next FED chair. Many months before Powell is due to, to step down. And even some of the names being floated as current FOMC members, which would be incredibly awkward. Imagine you're sitting alongside in a meeting knowing you are gonna replace him in nine or 10 months.

What's that gonna do for dynamic? But this is all being done not just to pressure interest rates lower, which is clearly something that the US needs to do to keep paying its bills easily. That is a subset of it. I think most people in markets can understand that. But more broadly, to get someone sitting there who understands all the tools they have available to them, such as Fed swap lines, for example, and realizing that they can be used very effectively as a weapon.

And at the moment, the Fed doesn't do that. And I'm strongly of the view that at some point soon it'll start to do that. Now, let's go to the second part. I apologize, I'm going on a long time here. The stable coins issue, you mentioned the petro dollar. Now of course, that doesn't really exist anymore. It's been replaced by the Euro dollar, which is just the broader international usage of fiat dollars everywhere.

And the key point there is that offshore parties lend dollars to each other. They lend them into existence and you create a huge pile of offshore liabilities for the dollar, where only the actual US has the ability to create those real dollars. So you have anywhere, like no one knows exactly, but it could be 120 trillion of offshore liabilities in dollars.

And actually you only have around 7 trillion in FX reserves abroad. It's a terrifying ratio. And of course, the US via the FED And the treasury can, step up and pump liquidity in whenever they need to. But they're the only ones who can do that. Everyone else can rehypothecate, but the only actual dollars they've got are those 7 trillion and half of them are in China and can't be touched.

So that's already a powerful weapon. But the quid pro quo for that is that the rest of the world gets to create those dollars and in creating them part and parcel of that process very often is earning them from the US via trade and that has absolutely, even though you'll have a long list of other people on this podcast saying it isn't true, it's that has helped to deindustrialize the US because when the US runs large trade deficits, which are a quid pro quo for the fact that everyone internationally needs and demands these dollars, that sucks jobs and industry out of the US.

It's not the first country to experience it. It won't be the last. But it's an exorbitant privilege, which comes at a cost. And right now that cost means it can't actually produce enough military hardware on scale to maintain the top dog military position that it's used to having. For example, you've got a magnificent navy, but you are gonna be retiring ships far faster than you can build them at the moment.

So the long run horizon for us military power doesn't look good vis-a-vis others. If we carry on the path we're on now. Okay, so now we get to stable coins. What are stable coins? I was a skeptic of them for the longest time as I was most things crypto, because I couldn't see what the point of them was.

I understood what they were doing, but I couldn't understand why they were doing it. If you're now gonna create a legal framework, which you have with a genius act whereby US dollar stable coins must be backed one-to-one by T-bills, you are creating. A demand for both T-bills at a time when the US is funding itself more and more at the short end of the curve, and a demand for stable coins one-to-one.

So they both feed each other. Now it's good for the US front end of the curve, as I said, and that's good for, its for its fiscal framework, even if it would look very dodgy anywhere else. But it also means that stable coins can start to be used in international trade. The US could. Quite literally at some point soon turn around and say, right when you sell to the US we are only going to transfer to you a stable coin rather than the US dollar.

And the US could lean on Saudi Arabia and the UAE, who are now much more in its pocket again, after having bombed Iran and say, we want you to tell everyone who buys oil globally, they have to pay you in stable coins. Bingo. You've just managed to recreate demand for stable coins internationally, the way there's demand for the dollar now, and how does that benefit the US?

One for one, you have to start getting demand for T-bills while you do it. And alongside the tariffs that the US has got and the promises of innovative, inward investment from all the countries who are in the new trade deals, it's put together. You gradually start to build those countries and those economies into a US dollar or a US stable coin block.

Because people at home or even private businesses in Europe around the world will start having stable coins on their phone in an app outside the banking system. So you can absolutely not dedollarize as people are talking about, you can ize and the great joy of stable coins above and beyond. The fact said that they're one to one with T-bills is you can turn them on and turn them off.

You get to control the on off-ramp for them. So effectively you have created a walled compound within which your allies are forced to effectively dollarize and become part of your supply chain and value chain, which helps reindustrialize you to help keep you top dog militarily. So it's a pretty clever package if you see all of it together, but you are going to need a fed chair who understands how to play that game.

Erik: I'm gonna push back a little bit on this because I see it a little differently, which is, I agree with you that in the short run, stable coins, clearly the, especially with the Genius Act legislation are one-to-one, creating that demand for US dollars. Replacing the Petrodollar system, if you want to think of it that way, we've got the US dollar demand, but longer term, it seems to me what you're also doing.

Is you're training all the central bankers and other holders of reserve assets around the world about stable coins and how to use them. Once you've done that, it's so easy to just switch out of your US dollar backed stable coin into a bricks, backed stable coin or some other stable coin that's tied to some other currency.

So I see it as creating an off ramp further down the road to make it very easy to get. Out of the one stable coin into a different one if there's a competitor. I look at this as why is there no replacement for the US dollar? 'cause there's no viable alternative and I think we're creating one.

Michael: It's a good point, but let me push back on your pushing backing, If I may, in the part and parcel of what I think the US will be doing via this, is trying to create the largest network effect as quickly as possible. And as we know from anything tech related as well as finance, once you've got that network effect, it really matters.

It will be very hard, without Chinese style fi, Chinese style firewalls for countries all around the world to prevent people just having. US dollar stable coins on an app in their pocket. So countries that previously would never allow the dollar to circulate would, could effectively dollarize.

But I do think very specifically, number one, the US is aiming to use this for allies only. I actually don't think they want geopolitical rivals using this. They don't mind trying to maybe undermine them and have it in private sector pockets, but they don't want the governments having anything to do with it or having any kind of official role.

So I do think it's deliberately. Leaning towards a bifurcation. That's part of the strategy to make sure that there are US centric, US stable coins, supply chains and value chains and the other, and we don't go near the other. And secondly, while the BRICS can talk about it and the technology isn't that hard, I mean there are very technologically capable block.

If you look at India and China in particular, putting it together. So it works on the ground, so that you actually have. Economic block where supply matches demand, where you have upstream and downstream demand and where you don't have some countries running vast surpluses and everyone else running vast deficits because the US will be attempting to narrow its trade deficit by doing this so that its allies run more balanced trade with it.

So it's a more balanced US-centric block. The power is with the US, but not via running deficits the way it is now. I don't see how the bricks can replicate that. I've made that argument in detail for many years. If you do a very boring trade breakdown of who exports and imports what to whom within the BRICS, it's a very simple story.

Nearly all of them are major commodity producers. China buys the commodities, makes everything else, and sells them to everyone else. Now, on one level, you can call that hub and spokes, but it isn't good for India , an I within the bricks it doesn't help anybody else industrialize, and it means everyone else runs balance of payments deficits over time.

So it's one thing to say the bricks can adopt it. Sure. It's another thing to actually do that on the ground. And even if it did, as I started my, my argument here by saying the US wouldn't be unhappy with that, provided they get the lion's share of all the countries that they want, by hook or by crook. That's the kind of bifurcation, I think they're perfectly willing to live with.

Erik: Now, Michael, you've described this concept of a grand macro plan that sits behind the various day-to-day events in the macro economy is Steve Bessent architecting a grand digital asset plan, which incorporates stable coins and of strategic Bitcoin reserve and a Fed chair who understands this stuff and a bunch of other things.

All is part of some concerted strategy that comes together towards some unified goal. I'm starting to get a feeling there's more to this than just president Trump's son is interested in Bitcoin. It seems like it's getting bigger than that pretty quickly.

Michael: I've given you two very long answers, so now I'll give you a short one.

Yes.

Erik: Okay, Michael, that's fair enough. Let's move on to another topic that I think you'll have a little bit longer answer for, which is, okay, look, European Union and United States really since the end of World War II, that relationship has been pretty darn tight through thick and thin. Is it winding down and ending?

Is it changing in a permanent way? It feels at least in my lifetime, relations between US and Europe are, not looking really comfortable.

Michael: There's certainly not, if we actually go through the history of it, we've had repeated episodes like this. I vividly remember the whole episode with with Freedom fries rather than french fries and silly things like that.

So we've been here before, but maybe not to this extreme. And the ironic thing is everything that Trump has told Europe to do, stand up, spend 5% of GDP on defense. Stop only exporting to us buy things more, more from us. Narrow that trade imbalance are things that every previous US president all the way back to Kennedy had been saying too.

And yet they didn't happen for decades and decades. Now, I'm not trying to praise Trump, I'm just saying that's subjectively true. And Europe is now reacting to it. Now they're bitterly resentful and very unhappy. But they are. Finally pivoting under pressure. Now from the European side, there is much talk, and frankly, Europe does specialize in rhetoric.

Much talk about the fact that they're gonna try and strike out and achieve strategic autonomy. Now, the shopping list for that is very long. The bill is absolutely exorbitant, and I've always said the possibility of achieving it was like walking a razor's edge. You could do it. But incredibly hard to do and it's a very dangerous fall.

I decide. And if we look at what's likely to transpire in Ukraine today, or vis-a-vis Ukraine, I'm sorry. And if we look at the backdrop vis-a-vis stable coins, which is really accelerating quickly. I think the shopping list and the shopping bill for Europe to achieve strategic autonomy is now ridiculous.

I I don't see it as realistic anymore. So while Europe may be sullen and angry and resentful, I think that ironically the relations between the US and Europe will grow tighter, but not as equals. Europe will absolutely be, subsumed into a greater US production system. And as effectively the lieutenant responsible for guarding Europe within a, within a US security umbrella.

And they won't like that. They'll continually to be chiding about it, and that's completely natural. But I don't really think they have many realistic alternatives at this point. To put a specifically. I sat through many angry conversations with Europeans telling me that they absolutely would not spend 5% of GDP on defense on nato.

They all are, except for Spain and I think maybe Luxembourg, maybe Belgium too. Mostly they are and then Europe. Absolutely. Telling me again and again, we will not sign an unfair trade deal. We're just not going to do it. They did. We can be given the next set of, we are not gonna do X, Y, Z, in instructions and, and the real politik tells me that. Yes, they will.

Erik: Now, meanwhile, the Financial Times, I think used the phrase inflation nutter to explain who they feared might be put into the Fed position next, at the, US Federal Reserve. When. The FT is talking about the perspective next. Fed share as an inflation nutter tells me that their editorial perspective may have become a little bit I don't know, reserved about the, their perspective on US monetary policy.

What feels to me li like we're in this Europe is stuck. They have no choice but to cave. So they're gonna cave, but they're not gonna forget this. Is the feeling I'm getting. What could they do if they're gonna not forget this to eventually act on it?

Michael: Nothing. Now I'm being flippant, but let's, we have to be realistic. And i,

Erik: But I just wanna clarify. Are you disagreeing that they're really not gonna like it? Or are you just saying there's nothing they can do about it?

Michael: There's nothing they can do about it? No they really don't like it. But listen. I am absolutely on board. I want all listeners to understand this.

So I'm on board with very valid criticisms that appointed many of the things that the Trump White House is doing offending recent norms. Okay? I completely get that. I've worked in markets in nearly three decades. I fully get it. What I don't get, and I always try and point out in equal measure, is the absolute hypocrisy of the people saying that about not pointing out how equally ludicrous things have been done by many others that they didn't criticize at the time, and are still being done by many others that don't criticize too.

We have a slew of central banks that are cutting interest rates right now when there's no sign whatsoever. The core inflation is fully under control when there's absolutely every sign that the macro environment that they're living in, particularly in terms of the need for rapid re armament, is going to be inflationary, highly inflationary in some sectors, and yet interest rates come down.

Now you could say they dunno what they're doing. Fair enough. That's very valid criticism, but I don't see that as headlines. I don't see the financial time saying this Central Bank doesn't know what it's doing. Or you could say that they're just preferring to look the other way and hoping somehow that by lowering interest rates, they can paper over all the cracks and that everything I'm describing in terms of a grand macro strategy won't be necessary and we can just carry on doing things the way we always have, which I rather flippantly refer to as because markets.

Which, even as someone who's worked in markets, as I said most of my life, and having, a markets discussion here I still think is idiotic. The world is not about because markets, there are far larger battles at play, literally at the moment. And markets come secondary to that.

They don't determine the outcomes. So yeah that commentary, I just wanted to make that feedback on it. But there's nothing really that the rest of the west. Because if they were going to do something about it, it would revolve around a massive structural change in their political economy, but then they're exporters and they net export to the us.

Fair enough. If they want to massively expand domestic demand so that they don't need to rely on exporting to America anymore. There you go. Now you can suddenly be more in control of your own destiny if they decided to spend. Three or four percentage points of GDP on their military for the last 20 years rather than on social spending.

And I'm not making a value judgment. That's just what they did. They wouldn't be in a position to be begging America for help with nato. They'd be standing on their own two feet. If they'd acted more strategically in terms of energy resources, a long time back like China did, they wouldn't have be any kind of domestic energy shortages or energy price issues.

So all those choices were available to them decades ago. They didn't make them. And now when you put that conflation of different issues and problems together on the plate, and you say you've gotta digest all of this in order to really do something against America, it's almost impossible to conceive they're gonna do it because in order to win, they would've to get involved in a multidimensional spat with America, which would hurt them far more than just having their wings clipped, which is what's happening at the moment.

Erik: How should we interpret President Trump firing the head of the BLS? Obviously, his critics are saying, look, he didn't like the data, so he is, don't like the message. Shoot the messenger or castrate the messenger in public ceremony to make sure the next messenger knows better than to, to make that mistake.

But wait a minute. I think you've pointed out in some of your writing, the BLS was pretty darn screwed up. Maybe firing the BLS head wasn't such a bad idea after all.

Michael: Yeah, look again, in terms of commentary, I absolutely understand why the market is freaking out about the fact that the head of the BLS was fired and that we've got a new guy in who, is not exactly a fan favorite, shall we say, within the statistics industry.

Fair enough. And that certainly fits a certain profile of, banana Republic style economy, but equally, as you were just alluding to. From to my mind when I'm talking to people who, work in markets, those who understand the BLS have been a banana, a public style joke for a long time anyway, even with the best of intentions sit in one camp, and another ones I prefer talking to and everyone else who thinks that every piece of data you're getting from America is absolutely kosher, transparent, completely trustworthy, and absolutely captures what's really going on.

I really don't have any time for them because they dunno what they're talking about. It's not been like that for the longest time. One very simple fact, and again, I'm not trying to be political here, but let's look at the payrolls report. We all know how important that is. Markets still revolve around it.

I presume they probably always will, unless they stop publishing it, which is what the new guy is threatening to do. But it's a joke. Payrolls is a joke as a number. You've got like a nine digit. Say 50, 60 million, something in that particular range. That's the official number anyway. You're talking about a monthly three digit change, and the market trades off of the derivative of that, which is normally a two digit differential from a three digit number based on a nine digit number.

This doesn't mean anything. It's a rounding error, and we're taking it as some kind of signal. They're constantly revising it. It's based on a birth's deaths model where they assume jobs into creation. It's got a very low survey feedback right now. So they're having to impute or guess more and more it doesn't capture structural changes in the economy.

And most incredibly, of course, and again, I'm not trying to be political, but it's a, it's a widely accepted fact. Anywhere between 10 and 20 million people arrived in the US in the past four years who aren't officially in the statistics, but are somehow being captured. Or maybe they're not.

In which case we're not even capturing 10 to 20 million people. Either way, it's a joke. But no one seemed to be prepared to say, this month after month, traders all sit down, wait for that number to come out and trade off the back of it because it's what we do. It's just what we do because markets, it doesn't fit into a grand macro strategy.

So I certainly hope we don't go the Banana Republic route, where every single month we get a great jobs figure and everything's wonderful. That would be a joke. I certainly think what we have now is also a joke, and it would really behoove both America and the rest of the world and everyone to have really good real time economic information that we could use to try and understand where our strong points are and where our weak points are.

Erik: Let's try to assimilate everything that we've talked about into outlooks for markets. It seems like a lot of the things that we're discussing are related to geopolitical risk, hedges, things like gold, Bitcoin, Ethereum silver and so forth. I've been trying to decide where some of those risk hedges are headed anyway.

'cause on the one hand, you can make the argument if we're really maybe about to wind down the Ukraine war, that should be risk off for gold you know, it's a risk hedge, we should be unwinding it. But wait a minute, if what we're doing is winding down Ukraine so we can pivot to the next war in a bigger theater, that's not time to, to sell your hedges.

So is this, a bullish or bearish moment for precious metals and other hedges?

Michael: First of all, as I don't give investment advice. So full caveat on that, we're just having a hypothetical discussion. I think you frame it very well. In the, when you see the word peace coming through, one's initial market reaction might be in one direction.

But if you take a bigger picture view and understand that's only part of resolving one issue, and actually by the way, passing the buck to Europe and saying yours so that you can then focus further east and that the underlying pressures for a bifurcation of the global system. Which is what I keep emphasizing here arising then, yeah, it still makes a lot of sense to be looking at all kinds of hedges for all kinds of products in all kinds of ways.

The very simplest kind of market call that you can see ahead is the fed's gonna be forced to cut rates, ergo everything goes up. Yeah. Obviously there's some very simplistic validity to that as if things haven't already gone up enormously anyway, which they have. But we are entering uncharted territory.

Because nearly everyone who's working in markets now, and I think I made this point to you last time we spoke, it just by dint of their age, has spent all of their working career in an environment in which it was a one world economy, one market. And sure, there were certain areas where you had to get in or get out of tactically, but the assumption was everything was fully integrated.

And it's just, where do I pick up yield? We're going to be heading to a world where certain sectors can't be traded or where returns are fixed by the government, either at a higher or low level, usually low. And where certain environments are just completely, untouchable. For example, if you look at what's happened at Bridgewater recently reading that particular headline and suddenly, reversing position on China, very belatedly by the way.

We can probably expect to see a lot more of that happening if we are moving towards a world in which one has to make geopolitical choices, which will be part and parcel of currency systems and clearing systems. And payment systems. So if you're going to be within a US stablecoin system, maybe you don't get to be in other systems.

And if you're in other systems, maybe as I said, you don't get to be in stable coins. Or if you do, it's via a VPN being naughty in the background rather than with any kind of government permission. And, will markets find a way? Sure, markets will find a way, but it's not going to be the same, flat world structure where you've got a world map on your wall in most offices and you can put a pin in where whichever part you like.

It's gonna be complicated. And one very clear example of that, just to wrap that point up, is, previously few years ago, tariffs weren't an issue unless you were dealing with one particular complicated emerging market where you have a lot of paperwork to do. You didn't worry about what the tariff was.

It was gonna be so marginal, you could ship from A to B. Have you seen the table of US tariff rates now? But the exemptions and potential changes coming up and country by country, sector by sector, it's a telephone book. And that's absolutely deliberate. That's the strategy. Make it complex, therefore make people do things more locally.

And where you are doing things more locally. Money will eventually change hands more locally.

Erik: Michael, before we close, let's touch briefly on oil prices. We're on the low side at least compared to the last year or two. Are we headed higher as some people think? We got plenty of backwardation in the markets, so I'm not sure what to make of this.

Michael: We have a really interesting standoff in terms of the go-to research on it, like the IEA versus OPEC+ and what they're, what they're both printing. I think, again, no geologists whatsoever, so I'm not gonna get into that side of it. You need to look at the geopolitical backdrop. Now, obviously, we had that spike earlier in the year around Iran, and of course prices came way off once the US got in and got out and sent that message without getting sucked into a war.

And I think we need to recognize that low energy prices are a key plank of the Trump grand macro strategy. How that's going to work out within the US energy sector, because obviously low prices mean people don't wanna produce and Trump doesn't wanna be importing. He wants the America to be exporting or at least producing, even if prices are low.

That remains to be seen. There will have to be some jiggery-pokery to get that to work. I can assure you there will be, but the secular envelope. Is that Trump wants to see low energy prices because most upstream commodities to him energy, most and many others are seen as inputs to more value added production downstream.

So in other words, let's get cheap inputs so we can make more cheap outputs and more of those outputs. It's no longer every sector of the economy from upstream to downstream being equal. Because markets. some people now are just not as important as others. Some people are there basically to do the equivalent of serving you drinks for very low tips and that's unfair. It's not very nice. That's the way life is.

Erik: Michael, I can't thank you enough for another terrific interview, but before I let you go, tell us a little bit more about what you do at Rabobank, how people can follow your work, and what your Twitter handles and so forth are.

Michael: Sure. As global strategists in economics and markets, my job is to think cross asset, cross geography, and cross disciplinary, to be honest.

To try and draw out what are the big picture themes. So it's not just about whether you're, long this or short that, that's not specifically what I do. It's to try and draw all dots together to say what is actually happening. And if you assume that's what's happening logically, what would then flow on from it?

So your narrative building to an extent rather than telling people how to manage money. But it's been a very very successful strategy for the past couple of years in that, not. Seeing the bigger picture has really been problematic and I think it's gonna be more and more important going forward.

Even if I'm talking my own book a bit, doing that talking my own book there. In, in terms of where you can follow me, I am on LinkedIn, for Rabobank clients Rabobank knowledge would be the place to go and check out, but you do need to be a client to get our good stuff there. And I enjoy conversations and interaction with people on these topics.

On X and my handle is @themichaelevery, all one word. And yeah, please do just come and join that conversation 'cause I'm always keen to interact with others and to see what you are thinking because when you've got a global role, the more input you have, the more voices you have, the better your view of that picture becomes.

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

Erik: Joining me now is Saxo Commodity Chief Ole Hanson. Ole prepared a slide deck to accompany today's interview. Registered users will find the download link in your research roundup email. If you don't have a research roundup email, just go to our homepage, macrovoices.com. Look for the red button above Ole's picture that says looking for the downloads. Ole, before we dive into the slide deck, let's start with the big picture In the wake of Trump's, tariffs and everything else, where do we stand with commodities? It seems like in general the theme is very much toward hard assets over financial assets ought to do very well for commodities.

Some are doing quite well, some doing not so well. How do you think about the overall market?

Ole: Hello Eric. And yeah, thank you very much for having me back. Interesting times to say the least. And and also developments that obviously are impacting the the commodity space as we, we see it.

We've seen some big moves already this year. A lot of that is is obviously to do, the world as we see it. It's the uncertainty that, still prevailing, that's driving demand, for hard assets, especially for the investment metals. We're seeing an energy sector that is, fairly stable.

The questions about the, lag of oversupply in the short term. Also, a bit of a difference between, I would say, what the forecasters are looking for and what the prices are currently telling us. So there's a bit of a mismatch there that needs to be explained. We have shenanigans going on in some of the markets.

Some of that driven by Tariffs, which is really creating in, some uncertain times for traders. Great opportunities for some and big losses for others. So that's also part of developments. And then. I would say from an inflation, from a food perspective, even, I don't think, many people really feel that food prices are behaving nicely.

I think we if we look at the prices in Denmark, it's they're really going in the wrong direction. But actually looking at the producer level, we are having another very strong production here. So key crops are at multi lows. We've got ample supplies.

We also know there's a story in the US where cattle prices are have gone through the roof as well this year so generally a mixed bag where we. We're trying to, not to get too involved in the day-to-day noise. But at the same time we also have a market which is trying to work out what's gonna happen to to FED policies, what's gonna happen to interest rates what's gonna happen to the energy transition. How's that gonna impact? How's, what about geo geopolitics, the de-globalization, the reindustrialization especially in the us. So a lot of things which I think ultimately Eric in the short term creating a lot of noise, perhaps not the best or the strong moves that we would perhaps have been looking for.

But I think ultimately still setting the foundation for strong gains in the future. And also, creating the reason why investors should be not big, ignoring commodities, but at least have that as part of their portfolio.

Erik: Diving into the slide deck, we've got the commodity performance overview chart on page two.

Precious Metals, the big winner this year, orange Juice, the Big Loser. What's going on in, why don't we just talk through the, these first few slides that, that talk about the commodity performance generally, give us an overview of where we're headed in this market.

Ole: If you look at precious metals, it is a phenomenal returns.

We've seen 30 this is just this is more or less up to date. And again, these are total returns, so we have to remember that one thing is what the futures price were was at the beginning of the year comparison. Now you have to just to take into consideration the. The rolling of contracts and the the cost to carry and so on, and also whether there's tightness or not. So these are total returns. Gold is up 30%, still the same with silver. So they're really having a having a strong year. There's a bit of a pause right now. I think we are waiting five.

The probably Jackson Hole is the next major potential trigger. But then also whether we are seeing a dovish tilt from the FMC towards lower rates that could lead to the next move higher. And I think one one, which I think we're, I've been calling it Sleeping Beauty for quite a long time.

And finally it woke up and took off and that was platinum. And really it is the best performer this year. 50% we.

Perhaps still some further upside to be had there, especially if gold continues to higher, because then platinum looks historically very cheap. As I mentioned, the brand, the energy sector is is fairly low. But it's interesting there to note that the WTI Brent, on a total return basis are down a couple percent.

But if you look at the futures prices, probably down more than close to 10%. So that's obviously the backwardation in the futures market that supports a long position there, which is which is underpinning and of reducing the. The loss that the price action otherwise has dictated the copper market or that industrial metals in general?

Doing very well. We can talk about the tariffs and the big jump we had in copper, but it's, it seems like data from China is holding up. It is still the world's biggest consumer raw materials and that's providing some underlying support. And then this whole weakness across the grain sector I was at a party at the weekend. I met a farmer who's got a massive production here in Denmark and he was complaining already. And that's how it is when prices are too high. That's, that tend tends to be seeking, low production, which is not good, but now prices are low and that's seeking

Very high production. And he says, I just have to work even harder because I have to shift all this production to, to make the money. I would've do in another year where price were higher, but perhaps where the production was lower. But that's good for the consumer.

Ultimately, we have ample supplies for the coming coming winter. Then elsewhere the livestock sector is really one about, it's really US or these are US traded contracts and they really mostly reflect what's happening in the US market, where there's some tightness right now.

And then the software, some of these massive moves, which were rather related in cocoa and coffee. They have abated somewhat recently, but still holding above long-term averages.

Erik: Let's move on to page four, where you're showing the supercycle concept. Why would we expect commodities to have longer overall cycle patterns than we see in the shorter, business cycle and therefore market cycle and equity markets?

Ole: Because commodities tend to these are long cycle markets because you don't increase or reduce but, or you don't increase, especially production overnight and production requires a certain amount of revenues in order to be increased. So generally we see these long cycles where periods of Ample supply lowers investments and that sets up the next stage where.

Where we then run into period where production struggles to keep up with demand. And that's where we see the big moves. And and literally since 65, I'm not disclosing my age, but we're not far from that that starting point. We've had a few major moves in commodities and it also highlights that, the, commodities can, as a whole be boring for decades for quite a long period of time. But when they move, they do move quite substantially. Obviously there's always big moves within the individual sectors and individual commodities. But as a whole, we can see we had these three major or two major moves since the mid sixties.

And and right now what we are trying to work out right now, whether the next major cycle that that is really the fifth cycle that we had since since modern day. And it started in in 2020, whether we can call this a green transition the rally in the market simply because the green transition requires.

So many different commodities in in, in major, in, in major quantities in order to be achieved. That is part of the story behind the the next cycle that we potentially could see has started to unfold and we are. We have doubled up in, in price terms since since the low point, which obviously happened around the Corona or the COVID times which is so maybe a little bit cheating when it comes to that.

But generally we are higher and we are looking for that green transition over time. But I think also. The way the world is developing right now, we are dis, we are seeing a world that's dislocating. We are seeing production is no matter, no more a question about where is produced cheapest.

But it's a question about where is produced safest or closest to home. So you don't so you don't run into supply problems. And that basically means that that we will see some investment going into to commodity and co and to the ability to produce commodities in the coming years.

That may not, and that may not necessarily be the cheapest, but but there are basically other reasons why we are, we're seeing this and just talk about the, we talk about the US the reindustrialization, whether they will succeed or not. That will obviously require a lot of investments into the US and and that will require commodities.

Erik: Let's talk a little bit more about that green transition commodity demand and how it translates and when it's gonna translate. Because it seems to me like what's going on is with the transition to the Trump administration, the immediate emphasis on climate mitigation I think is coming out of the system to the point where that doesn't exist.

But what I think a lot of the market is not yet seeing and it's coming is. AI demand and everything else is gonna create so much electricity, demand, and so much demand for copper. That aspect of copper demand, which is driven by something else, I think is gonna be even bigger than the than the climate driven copper demand that was perceived previously.

What do you think about that and how long do you think it takes before the market figures that out? Because I don't think it has yet.

Ole: It will take some time because because it doesn't happen, it doesn't happen overnight. But I think we are well into the, to that transition.

And I think also, yeah it's really important to, to call it the energy transition, not the green transition because it's not all a question about that we all that it's all energy has to reduce from unreliable sources like solar and wind. But it's simply that, that we are electrifying the world for various reasons.

Demand pattern moves more and more towards electricity per from some of the fossil fuels, the fossil fuel based energy forms that we have been used to for decades. And as you mentioned, the the one thing is the increased need of electricity for data centers.

I can just, at the. Given my, at my age and I'm an old hack. I've been around for a long time. But when you then could progressively go down and be to the younger people, they obviously much more digital savvy than probably I am. But if I just look at the kind of way that I use AI already than imagine what younger people younger generations, what they are using and it just means it all boils down to a lot of

Power that needs to be produced in order to produce all that data that is being requested every single second of the day. So that's one thing, but but then we have the, the electrification as such is also a question about the a, a global population that is still rising.

It is the industrialization of emerging countries. It is the move from country to to, to cities. It is the need for more cooling as the as. Certain parts of the world heats up. Then, so it just all boils down to more, the more demand for power and that demand, that power has to be produced.

And that's where we the kind of the. Some part of the sector really don't like the green part of it, but it's it will continue to grow. And I would say probably solar, especially because that's technology. The other wind is just mechanics. But technology can be improved.

So that will continue to grow, but we need some more power and we need that to come from gas and we need that to come from uranium. And then one thing is to what the demand for the power is. Another thing is actually how do we supply the power? And that's where you. What you mentioned about copper area comes in because we need the we need the infrastructure to supply all that the electricity.

And and that's why I put in on actually we a little bit further down when we get to the copper that some of the big winners this year is in the last year is not is not the actual underlying copper is up, but it's not up that much. But those, that has to provide or to build that infrastructure, these are really some of the.

Big winners that can easily compete with some of the big tech companies because they're running flat out to with orders to build power stations to to build out the the infrastructure. So I think it's a fascinating and very interesting part of the space. And copper is one thing, aluminum is another one.

Natural gas over time will be be one. And when will it happen? I think the next it could happen sooner than we expect especially if we start to see the. Supply of these commodities struggl to keep up. And that's really where the focus, I would say is in for something like copper.

Where the the, it is a mined metal. We just recently saw the accident in Chile and how suddenly a certain amount was was caught offline. But if the numbers that are being thrown around in terms of hubs, how much more copper we need in the coming few decades compared to to the past.

Then we are, we will be struggling. We will be very busy and copper needs to reach levels that really incentivizes miners to go all out or go all in.

Erik: Ole with respect to copper, I want to talk specifically about page 10, because this has been bothering me. Something that's very clear to me is that President Trump and Secretary Bessent clearly they've got some policy objectives that they feel are very important for the country.

That's great. I don't think they're taking seriously enough the collateral damage that they're doing in markets, because as you're showing on the left side of page 10 the European LME copper market looks just fine. It looks like a healthy market. The US copper market looks like a nuclear bomb just went off, and it's all a result of this market being effectively whipsawed up and down by President Trump.

Intentionally giving misleading, bluffing as part of his negotiation around tariffs. And I guess what's on my mind is, look the president has the authority to bluff about such things if he wants to. Do they understand what it's doing to markets? And would you agree with me that the damage that happened on this technical chart, I mean that triggers a lot of technical funds.

A lot of CTAs, trend followers, they're going to be potentially doing things in markets that create. Recession invoking risks is a result of what I think. I'm on a soapbox here, obviously, is what the President and Secretary Bessent just did to the American Copper market. Am I crazy? Am I over? Am I exaggerating to have this reaction?

Ole: If you're crazy, you're probably both crazy. Because it's the it's the line of thought that that I have as well because it tariff is, has become a very popular weapon to to get your to to, to use as a negotiating tool. Obviously tariff only works if you really are sure that you have the alternatives in place because tariff is all about, yeah, one thing is to make some extra revenues, which again, can always be discussed who's paying for it.

That, I don't think we should get into that. I think we, I think most people has a clear understanding of who pays for tariffs. But another thing is if you raise a trade barrier, that is obviously in order to incentivize. Production at home. And and this is where it, this thing just went off rail because you even contemplating adding tariffs on a metal, which is paramount important for the us as everyone, as other, every other country in the coming years.

Not only given the the re industrialization that the US wants to embark on, but also this being being number one within AI and data centers and so on. This simply doesn't make any sense that you suddenly make domestic copper prices 10, 20, 30, 40% higher than what what your competitors elsewhere are paying.

The fact that the, you can increase production in the in or an increase in production in copper in the US may take five to 10 years. The, at the minimum, the fact that refining, which is obviously a major issue because a lot of copper in, no, not refined, the scrap copper in the US is being re-exported simply because there's no refinery.

Capacity in the US to to chair to switch the scrap back into into a refined copper. And so that's where, really, where they should start. But who, who wants to who wants to run these businesses? And so all in all, this is, this was a, this was one step too far. This was certainly hitting a market where the the potential or the gain they wanted to to achieve from raising tariffs were not going to be successful or going to be achieved.

Anytime soon. And the only thing you you would succeed in was raising prices domestically at a time where for critical metal that is, will be in, in hot demand. And yeah it has created some some major disruptions now across the global market and it's clear for all to see that.

That the winners here are the physical traders who are, who've been able to handle or source copper around the world depleting stocks levels in Europe and in Asia, and shipping it to US sell the futures against as long as you get the copper here onshore before the tariff war was was was erected.

And and that basically creates a windfall. But but. As the tariff were suddenly removed or took, taken off the table then obviously the spread had to come back to a normal. And in the short term, there's probably risk now that the US is stuck with a lot of copper that they don't need.

And that is now that now needs to find its way back into the market. So we could potentially see a period where us traded copper or highgrade copper futures may trade at, or perhaps even below international prices.

Erik: It certainly seems to be the case. I, my call on this was, boy, the way we just got whipsawed here.

This is a buy the dip opportunity on copper. I think I'm the only one buying this dip. It certainly feels that way.

Ole: It will take us, it'll take some time to to even out. But at the same time, as long as the cost of storing it is not too high, then then yeah, demand will, will be there in, in the coming years.

But but it was a way, it was a bit of a, I would say a wake up call for for the administration that tariffs cannot be applied to. It doesn't work for, it doesn't fit every product that the us would like to to, to onshore.

Erik: Ole, I got so excited about copper that I skipped ahead a little bit.

I wanna go back to page seven where you brought up rare earth elements. That's stuff like neodymium that they make the magnets out of and so forth. This graphic on the right is a little bit disturbing to me. You've got 70% of what we rely on. And by the way, some of what we rely on this stuff for is weapons systems like important national defense stuff.

So 70% of this we get from China, that's the country we're. Trying to start a war with 13% comes from Malaysia. That's a country that would, in a war situation with China almost certainly fall under China's pressure that we wouldn't be getting any favors outta Malaysia. What could go wrong in this story?

Ole: Well, a lot of things can go wrong. And and what the, what China has obviously realized that they, that even though errors in terms of in terms of turnover, in terms of monetary value is relatively small. It's, it has a paramount, it is paramount important and the same thing goes for europe, they've fallen sleep by the wheel

The production of rare earths is done in China because they have the refinery capacity. But the rare Earth is not rare as such, it's found across the world and can be dug out the ground. But the rarity comes when it, in the production of, or the refining of the, all the material in order to to get these these small amounts of individual errors.

And that's really where China holds a lot of cards right now. And, and we'll see how that plays out. But but they do have a they do have a, you can almost call a weapon that that the US cannot mitigate anytime soon. But we have obviously seen some steps being made, both in the US and I, but in general outside at China.

And that's where probably I hit myself a little bit over the head with with something because it's clear that there would, there was going to be a very. Big focus on US production capacity or ability of rare earths. And there's really only one major company, which just a few years ago were almost non-existent MP materials.

It's gone up 300% since late May. And because they've also made a contract, I believe, with Pentagon. And they will, they'll get all the, they'll get all the finances they need to to try to achieve some of this some of this independence from. From from China, but there's also other countries around the world where, which will, which probably will become in, come in focus in terms of being able to deliver some of these rare earths, but again, rare earths that we all put 'em into one box.

But as you mentioned, a lot of these are. Are specifically used for in, in high? They are all in high technology, but also within the weapon industry. And some of these are just extremely difficult to to get hold of. It is, for now it's the probably China, one of China's biggest cards that hold against the us.

Because of the importance, even though in, in terms of size it's very small.

Erik: It seems to me like there's a potential speculative trade here, which is I think President Trump very much wants to secure America's access to all critical things when he figures out that there is a a problem here and frankly I think he thought that he was gonna negotiate to get Ukraine's rare earth elements.

Took a while before he figured out that Ukraine doesn't really have rare earth elements. Despite Javier Blas jumping up and down for weeks on Twitter saying, Hey guys, it doesn't make sense. What. What would be the play? Let's imagine that President Trump figures this out and says, we can't be just reliant on China for rare earths.

We've got to go and make a deal with Country X and get all of their rare earth and lock 'em up for us because we can't have this risk with China. Where would the play be? How do we front run that and get ahead of President Trump figuring out this play?

Ole: Oh, that's a difficult one. And again the, it would probably have to be some of the countries where there are established production already, but again, it all boils down to who wants to build up?

This refinery capacity, which which as far as I understand is extremely polluting and is a very dirty job. hence the reason why the countries in the west had basically said let someone else let someone else take care of this and we'll just buy the finished product.

I don't, I haven't got the answer. The only thing I know is it's going to it's going to be extremely expensive. Because setting this up and from an environmental perspective, there also has to be some compromises. I think found in order to to be able to set this up.

And the same thing goes some like copper refining. Again it's not it's not the cleanest of businesses that you can find out there, but it, if it becomes paramount important, then it probably will be done, but. The question is who will do it and where it can be done. I haven't got a, I haven't got a good answer to it, but I think it, it'll still take time and in, in that in that meantime it probably means that the rhetoric towards China we obviously getting close to the next deadline here around mid August.

That we have. We're probably not going to see the same kind of militant response, I'll say from Trump because again, they learned from this as well. And what what kind of cards the Chinese Chinese hold. And we just saw overnight that, that Trump basically was asking the Chinese to quadruple their purchase of soybeans as a way of bringing down the deficit.

The only problem there is that China hasn't booked one single cargo for soybeans from the us as a vendor, as the end of July for the new season. So something really big. Dramatically needs to change there on, on that front. So really it's, so us wants to buy the high tech at the same time they what they can offer.The other direction is low tech.

Erik: Let's move on to page eight. Talk about the oil complex.

Ole: Yeah. What is that to say? Really, Eric? I'm just a little bit confused, but at the same time also and confused in terms of how well the market has actually been holding up. Considering the fact that we have been that OPEC has has increased production.

I at least has agreed to be able to increase production by two and a half million barrels now since. Start of the year. There's obviously few, a couple things happening there. First of all, some of these are currently producing above their agreed quotas, so they will not increase.

That's countries like Iraq. At the same time some others have been struggling to to, to increase as per that new quota. And then we just gone through I would say quite a strong demand period during the peak season in terms of summer demand. And that's also helped disguise some of these, this increase in, in, in production.

But I think in. I listened to one of your previous guest a couple weeks back. And I think it's very very important to, and I agree to decipher between short, medium term developments and longer term develop developments because the question is really whether we are.

Whether we have the en enough appetite for the continued investment into the sector, because I think it's clear to see right now, oil demand is not gonna fall off a cliff. We are still seeing an in increased demand for energy around the world. Some of that is is obviously due to living standards, but also demographics the industrial industrializations and urbanization and so on.

So the demand for crude oil is not going to work. Disappear anytime soon. And that basically means investment to find the next barrel needs to be there. And that's really where you can start to be a little bit worried that in, in, in four to five years time, that we may struggle on that front, which potentially depends.

Then could see oil prices trade higher, but at the same time oil at 70 bucks. Now I'm looking at Brent. I know others like to love the WTI. Brent is really just also looking at expectancy, positioning. Double tier positioning is quite weak. It's being used it's, it has become a little bit of a domestic market even though it's still the main futures market, Brent is, has been trying to to preempt any impact of potential secondary sanctions against Russia and and and also this increase in production from OPEC.

So I think the. I think it would be struggling above 70, at least in the short term. But I think the longer term trajectory is still for higher prices. And that, that also means that even though we are, even though we are not seeing seeing the price really moving going anywhere fast, we still have a market that is in is somewhat backwardated.

And that basically means that as I as I mentioned earlier, even though the future's return so far this year is around. Minus 10, 11%, the total return is actually only down 2%. So you, it's not costing a lot to try to bet on higher prices in the future, but at the same time I'm still a little bit concerned that as we move into the autum months, that we could see this overhang of supply start to have a negative price impact.

And we potentially could trail back down towards the low end of that. The, that brains we have established. And as you can see on slide eight, what we don't know at this point in time when we're recording this is what will happen on Friday in Alaska Between Trump and Putin. Whether we are going to see any deal that that is tolerable by, not only by Ukraine, but I say also by Europe and what kind of impact that potentially could have on sanctions and and whether that also on, on prices.

So I, I think in the short term, there might be some risk of of lower prices. But I think the long term outlook is for higher prices simply in order to. Make sure that production is being incentivized in a world where demand for energy is not going to go away anytime soon.

Erik: Ole let's talk a little bit more about the backwardation that you mentioned in this market. I find it absolutely fascinating. I don't know if I'd quite go so far as to say it's unprecedented, but it seems striking to me that at a time when really I don't think $65 oil is particularly expensive.

It's not really high prices yet or anything close to it, but boy, the backwardation in the market is. Pretty darn significant. What do you make of that? It seems to me, given various other risk factors, there's more backwardation at this price level than I would expect.

Ole: That's true. And and there's also and I think sometimes we say that the prompt price can be can lie because the prompt price is there's a lot of other factors impacting the prompt price speculative interest and so on.

But the curve is seems to be a little bit more of of a, of the smart guy in the room. That tells us a better story than what the prompt price is doing. And the curve is. It's telling us that right now, that there is a demand that in the spot market that is, is strong enough to to to make traders pay a higher price than what they can they will have to pay in the future.

And looking at the, if now we're flipping a little bit around, but yeah, we just to, if you take a look at on slide 14 where let's talk about the cut report. We can talk about that later. But just on the far right hand side of the, of this table, which I produce on a weekly basis, I just show the one year.

Spread between yes, basically between spot the for front contract and the one year. And you can see in, in the crude WTI. We and Brent we are picking up a small premium. It has come down a bit, but but the fact that it's still positive does indicate that the market is is still recently tied, obviously, where the most of the time has been recently is in in gas oil and and the products.

Where. Where where some of the storage levels has been quite tight and that, that really has kept that backwardation quite quite high. But talk about that. It also indicates why some of the other markets are really suffering. Look at natural gas.

You natural gas prices in a year's time has to be at least 29% higher. Before you start making any money we have the metals, which is mostly about funding. And then you have the agricultural sector where again, prices needs to be before and we need to see a 15% rally in in corn in the next 12 months before investment worthwhile.

And that really is attracting short sellers, whatever. There is a pause in the market. We are seeing rallies from time to time, but as long as you stay in the contango, as soon as the market. Runs outta steam and the contango is still there, then you are being rewarded for rolling a short position on a monthly basis.

And you can see those that are highlighted in red. These are the ones that, that, that continues to struggle. amid this this focus in the market on how you make return from either being long or short.

Erik: We covered copper earlier. Let's move on to gold on page 11. What's the take there?

Ole: Gold is only that several things, but first of all that it's it's taking it's having a bit of a break. It's having an extended summer holiday. We're struggling and not struggling, but we're stuck in I would say 200 range. 3250, 3450 big numbers. And and it's taken quite a lot of the recent use on the chin without really attracting much much in terms of movements.

I think the, you can argue that they, it's a, it that's both bulls and bears can can argue that case, but I think the bulls probably have it right now because having run up by 30% and then only managing. Actually then only managing to trade sideways. Not even correcting lower, gold could go down to 3000 and will still be in an uptrend.

The fact that we haven't corrected much in the last three to four months basically means that the, it looks like the correction in gold for now is just a sideways or is just a consultation, not a correction. But at the same time it just tells us that, that. Market is looking for more in terms of the, of a trigger to to get some life back kicked back into the market.

And I think that's where we need to look ahead to, to action from the FMC, we need to see whether we're gonna get this double shift. We are need to, we need to see whether the, might increasingly get worried about the US debt situation. That they are, that they're just prepared to to, to support the market through through cutting rates, but with, without thinking about what happens in the long end and what happens to inflation. So that would be key as well. And then I think the central bank demand physical demand probably dried out a little bit just like everyone else with I think if you are a fiscal buyer, you're probably sitting a little bit on your hands here.

You just really want to see it. Can, it really makes does really make sense that we're not having any 10 or 15% correction after such a big run up. I think there will be some. So that's why if we once if, and once, and if we take out these these highs, which I think we will some time into the autumn months.

The next move could be quite quite significant. And I put in some of the reasons why precious metals are still such a, as such a demand. And I think the really, the key is it's political neutral. It's it's compared to other investments, it's recognized and it's not linked to any countries credit worth and there's not, I think that would probably be an increased focus in the coming years.

Erik: Now some people are saying, okay, this gold market has already had its move. Silver has been lagging. Boy, the trade here has gotta be silver. You want to be in silver because gold already had the move. Its silver's turn to catch up. The counter argument is, wait a minute, what's driving gold is primarily been central bank purchases.

They're not gonna buy silver. There's no reason to expect them to buy silver. Stick with gold. What's your take on that?

Ole: Has been that has been one of the reasons why the gold silver ratio has been ticking higher simply because silver has not enjoyed, not been enjoying that underlying demand.

And that also means that whenever we've seen a small. Correction in gold, silver has corrected by a lot because it just felt anyway, every time there was a correction in gold, there was this big clunking fist just being put in under the market, just picking up whatever there was was came to them.

That was silver. Didn't have that luxury. So it is still gold. It, but on steroids and that basically means that it, the movements are big, but also the rewards are similarly similar, big as well. And I think at this point in time, we're 55% from industrial applications. Some of them that we still see will be, is a.

We we experienced an increased demand in the coming years with over, above ground inventories stock levels, relatively relatively weak. And with the production not being price sensitive, simply because silver is mostly produced as a byproduct from other mine metals. So it's not as if suddenly price silver goes through the roof, that you'll increase production from mining.

That has to be tied with some of the other metals. And I think just recently, the the fact that silver's been holding up as well as it did after the collapse in the copper price in New York, that that also speaks speaks volume. So both silver and a gold currently up 30% if a bit more than that.

And you just have to look at the chart that going all the way back to 2010. For, in order to buy gold these levels, you have to believe that it will hit a new record high if you buy silver. Here we are still. Quite a few below that high from 2010 or 11, which also makes it an easier proposition for some to to trade.

Erik: Let's move on to grains on page 13.

Ole: Yeah, it's as I mentioned it's it's been a it's been almost been a perfect storm of bearish News this year. It started up just as we started the planting season, there was a few concerns not only the US weather wise, but also in, in the around the Baltic Sea, but that really, no, not about the Black Sea, but that really has has been.

Put to rest. And we are, we just got a, we got a monthly report coming out from the US government on Tuesday, I believe just before this one goes out, which would give us an indication of where the US government sees production this year of corn and soybeans and some, and now we are looking for some bump upgrades.

What does that do? It basically means that. That if you are short in grains you are not only seeing the prompt price moving down, but you're also seeing a monthly or whenever you roll your contracts being profitable. And so we, we need to see a, we need to see the tightness in, we need to see some tightness emerge in the spot market for this trade to to unravel.

But and that for now that we are not gonna see that for at least next six months. We now with the next. Big season is the next South America season. We need to get so I'll say six months down the line. So obviously there can be movements in between. Again, if China signs a deal with the US to buy a massive amount of soybeans, that could that could shift the tone.

But right now, speculators are holding onto. To quite elevated short positions in corn and wheat. Wheat has been short. They've been holding short positioning wheat, as you can see on that little insert all the way back since 2022 for three years nonstop. There's not been a net long position in the wheat market, and that just highlights the predicament that this market in is in.

So the combination of prompt prices on the pressure and the contango in the market basically makes these very profitable trades for speculators in the futures market. One of the most powerful tools that we have in commodities markets for gauging investor sentiment is the commitment of traders reports published by the government.

Those reports in the raw form are pretty cryptic and hard to read. You provide a free service completely free, as I understand it to anybody who wants it. To basically reshape that data into a much more user-friendly graphical form as we see here on page 14. Tell us a little bit more about that, including where people can get ahold of it.

Yeah it's as you mentioned, it is, it's data that is provided by or given to or demanded by the CFTC on a weekly basis from the large from the last clearinghouses. And and sometimes and often get asked why do you only look at money managed money account? Because that's obviously only a part of the.

Part, the open interest, but we have to look at the futures market. And that's really where it's it commodities I think is fascinating because one thing is looking at the S&P future or the the 10 year, 10 year future, there's so many other things going on. So whether the market is long or short, you can't really read anything into that because quite often there's a trade on the other side.

But when you look at the the futures market for commodities think about the open interest as the cake, as the full picture. And then you can break this cake into into participants. And that's where. We tend to focus on managed money account. I used to be a I used to trade for hedge fund in London back in the days.

And and some of the way that these funds behave today is also how we were taught to, to trade market. So it basically means that they are not married to the positions. They seek a divorce if something goes wrong. And that means as well, they're most, they're very responsive to any change in the technical or the fundamental outlook.

So that's why we keeping track of what the managed money traders are doing, that's the hedge fund, CJs and others. Basically doing trading for leverage trade trading the investment on, on, on the leverage. And it, it boils down to obviously long and shorts and with the nets.

And what we watch is the obviously how the net position, how it develops over time gives us a idea about how extended or if something starts to get a big. Bit extended, then there has to be a darn good reason to, for that, to to happen. And, but the same time also gives us a warning sign that if there is any change in the outlook, then then potentially there could be a bigger than expected move simply because some of these positions that need to be be reduced.

And these are big, a lot of these traders are like oil tankers. If they see that they need to change direction it doesn't happen. It's not a u-turn. It takes quite a while. So hedge funds, they can easily take two or three weeks to to, for, to, to change the position around.

So quite that means that if you suddenly have a week where there's been a big move. Opposite direction of the position. The position reduction may not actually be that, that big because it takes time. But if it stays at those new and changed levels then that, that will continue to attract either short covering or longer, long liquidation.

So that's one thing. Open position relatively to extremes, that's just relative to the highs and lows we've seen within the last year. Price change in recent weeks. Long, short ratios quite liked by some, just indicating how extended is the market. That basically means let's say go for instance, right now, there's a long short ratio.

Six, six to six to two six. One, two to one basically means for every short, there are six six longs. And that is in. It's good to know, maybe not so much for gold again, because there's a lot of different other activities. But if it, if there is a market where really the go-to place is the futures market, then if that ratio becomes too too large in one direction, that basically means that if suddenly it changed around let's say in the example of, we can take feeder cattle or yeah, feeder cattle towards the bottom, or actually take hawks. Right now there are 12 longs per each short. If suddenly that if there's market starts to trade turnaround, then these 12 longs. We'll be looking for a very small amount of shorts that wants to close their shorts out, and that's adding some pressure to the downside.

So that's why long short are interesting. And then just finding the forward curve as we talked about earlier, Eric how the the ang backwardation also impact how investors they look at these markets.

Erik: Just to make sure that I understand the long short ratio. For every long futures contract, there has to be exactly one short futures contract to match it.

So what we're really talking about here is the long short ratio within the managed money category. And that's the reason it doesn't have to balance out one-to-one.

Ole: Absolutely. Because what you, quite often you will find that who's, who tends to hold the short position. That tends to be the one who producing the damn thing.

So they're short they're short a commodity in order to hedge their physical production. So that's so even if the market goes up, they may not necessarily want to they may not necessarily need to to buy it back. But if you look at the other side of the equation, the if, whereas the managed money account they would be much more responsive to to any move if, especially if the position is very overextended.

Yes, it is the longer short ratio within this. Managed money category, and you'll quite often find that the opposite is is found among the producers and consumers, not producers.

Erik: Ole, I can't thank you enough for another terrific interview, but before I let you go, please tell us a little bit more about what you do at Saxo Bank where people can follow your work.

And particularly you have a podcast, a daily podcast that's just about commodities. How can people follow that?

Ole: Yes, indeed. I've, I work at Saxo Bank. It's based in Copenhagen. I've been working there for 17 years. I've been covering commodities for the last 15. Just trying to make heads and tails of the market and put that in rain rising towards our clients client base, which is global.

And just trying to help them navigate these markets. And also what to be aware of when when things starts to starts to unravel. You can find what everything we put out is obviously on a, on the Saxo trader. If you're not a client yet, you can find it on analysis.saxo that will, that's where me and my colleagues put out everything that we produce. You mentioned the podcast is run by my colleague John Hardy. We just recently changed it back to a daily format. It's getting a lot of traction already. I tend to join him. When something breaks or something happens, or at least then on a once or twice a week.

Do see that as well. And obviously finally I'm still on x where I where I take information in, but I also try to give as much relevant information back as as I can.

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

Erik 

Joining me now is Tresses, Chief Economist and fund manager, Daniel Lacalle, Daniel, it's great to get you back on the show now, the standard introduction pattern for the first August interview on any financial podcast goes something like, well, Daniel, you know, it's the dog days of summer. There's nothing going on in markets. There's nothing going on in geopolitics. There's nothing going on any place to talk about. What are we going to do? I don't think we're going to have that problem this week. Are we?

Daniel 

I don't think that that will be the case. There's plenty to talk about.

Erik 

So why don't we start with the big picture of where we are, and one of the things I really like to pull you in for specifically, is we have so many of our American guests, we kind of get an American centric perspective, sometimes from a European perspective, how this is being viewed by the rest of the world. How far along do you guys think we are in this story? Obviously, President Trump and Secretary Bessent intended to go and kind of renegotiate the tariff relationship with the rest of the world. Are they just getting started on policy adjustments, or are they finally wrapping this up?

Daniel 

I think that we are 75% into wrapping it up. Why? Because the main frameworks of agreement have been set up. And I think that by now, once the European Union, Japan, South Korea, Australia, in agriculture, or the United Kingdom, etc, all have agreed upon very significant changes for the trade relationships. I think that what is basically left is small details, like which sectors are going to be slightly more delayed in terms of zero tariffs in the case of the European Union, or when and where is Japan going to dedicate its 500 billion investment, All these things. So I think that it's basically very, very close to the end of what would be, I would say, a very successful and quick trade negotiation spree. Think about it. It's very, very difficult to achieve so many trade deals in so little time. And obviously many of them start, like all trade deals, from ballpark and general terms perspective, and then it goes to the finer details, but it's close to 75% I would say.

Erik 

Daniel, let's talk about the market cycle as well. We recorded this interview on Monday morning, so we're a few days before the audience. We may not know what the market has done, but last week we had a couple of down days. A few people were saying, Okay, finally, this is it. The market is topped. It's all downhill from here. Monday morning, we're actually bouncing a bit. So that hasn't played out yet. Where do we stand in this cycle? Are we nearing a market top, or is it just the beginning from here?

Daniel 

No, I think that we are in an upward trend for global markets, driven by the increase in money supply and driven by an absolutely brutal pace of rate cuts all over the world, by central banks, more than 20 central banks cutting rates and money supply growth at a global level that is rising at around a 12% per annum rate, which is insane. So obviously those two things added to an earning season that may not have been the best earnings season ever, but was significantly better in terms of earnings surprise and earnings growth than what many expected, and the fact that a lot of the concerns on the macro environment with these trade deals are sort of left at least as something that the worst case scenario is way, way, way out of investors mind is going to likely generate a lot of money going back to equities, fundamentally, because, as you saw, the record level of money market capital in money market funds was absolutely brutal, so money supply growth, cutting interest rates and the earning season added to a more at least, I would say, transparent or easy to predict macroeconomic and trading environment. All those things indicate that we are in a bull trend.

Erik 

It's interesting that you focus on how many different central banks are all cutting rates. Of course, on the other side of the pond, we're so focused on the fact that the Fed is not how is that perceived? Obviously, it's been politicized between President Trump and Jay Powell from the European perspective. How are they viewing this? And how do you think it's going to be resolved?

Daniel 

Oh, for the Europeans and the Japanese in particular, but also for most emerging economies, it is an absolute present. It's a beautiful, beautiful present, because when the Fed keeps elevated rates at the same time as other central banks are lowering them, what it basically means is that for international investors, investing in treasuries is very expensive and the hedging cost is too high, and it completely eats away the yield of the Treasury. Therefore, what the Fed is basically doing is almost an early Christmas gift to emerging economies, the Euro and the yen. Remember that the Euro and the yen were at all time lows, the 40 year low of the yen and the euro almost close to parity, and the decision of the Fed to maintain rates predicated on a view of tariffs and inflation. That is obviously not happening, and certainly, in my opinion, is quite misguided. It's generating a very, very significant reverse carry trade that is basically allowing a lot of investors to benefit from those elevated rates in the United States in order to look at other options that are not so expensive.

Erik 

Daniel, I think the criticism that could be leveled there from what you said is, well, wait a minute, what's going on really is there's a political conflict between President Trump and Jay Powell, and at least from President Trump and his camp side, the argument would be, therefore Jay Powell is risking a US recession through this politicizing of monetary policy, and we have an elevated recession risk As a result, is that a valid argument? It certainly is a political argument. But does it have any economic merit?

Daniel 

Obviously elevated interest rates slow down the US economy, because we have to remember that the Fed was exceedingly wrong about inflation on the way in and on the way out. And there is something to be said about a monetary authority that is supposed to be using the most advanced technology and predicting applications and methodologies and got so wrong inflation on the way in, and is getting inflation wrong again. So the big problem of that is far more dangerous than just the current debate about whether there should be a rate cut now or not, is that the Federal Reserve hurt families and small businesses in the 2021 2023 period, by keeping very, very low rates and maintaining until 2022 the purchases of treasuries and of assets, and therefore being exceedingly dovish in terms of policy that generated a very elevated inflation. And basically what is going on is that on the way in, families and businesses have been hurt by elevated inflation, and now on top of that, they're suffering from high rates. My perspective is different from the current debate. It's not whether the Fed should do this, or should do that, is that the Fed should not dictate interest rates, is that the Fed does not have the tools, and certainly is ignoring all monetary aggregates and does not have the tools to set rates appropriately, and by doing what they're doing right now, they Create boom and bust cycles. So is there a risk of keeping rates high for too long? A problem? Absolutely, it is. We are seeing it in employment. We are seeing it in investment. Those are areas that are certainly suffering from higher rates. But it's also very important to open the debate about whether the Federal Reserve is doing things appropriately. Because for months, for years, we heard the Fed saying that there was no risk of inflation, and then inflation went through the roof. They said that printing trillions of dollars would not generate any type of inflationary pressure, and that it would be transitory. And it wasn't transitory, and certainly created very big problems for US citizens. So for me, the debate should start to be that the Federal Reserve, like the European Central Bank, etc, in. They should not be fiddling about with interest rates, because they create aggressive boom and bust cycles. And the booms, they don't pay attention to them, and the busts become very, very aggressive, and both of them, both cycles hurt the backbone of the US economy, small and medium enterprises and families suffer from the inflationary pressures and then suffer from the decision to hike rates aggressively when the damage has already been done.

Erik 

Let's talk about the relationship between the United States and the European Union in the wake of this tariff negotiation from this side of the pond, Ms Von Der Leyen did not really look happy to be caving to a tariff agreement with President Trump and the United States. It appeared that that was kind of a we're stuck. We have no choice. We have to make a choice that's unpleasant for us, but let's get it over with. Where does that leave us with respect to the EU attitude toward US, diplomacy, specifically with respect to looking forward to the future? A lot of people have said that this Russia conflict, Russia, potentially allying with China, is eventually going to force Europe to sort of choose between the United States as its ally and and other allies. How is this being perceived in Europe?

Daniel

Yeah, I think it's. It's a bittersweet perception of an agreement. On the one hand, it gives certainty and it reduces the risk of complete debacle, reduces no eliminates the risk of a debacle in terms of trade and in economic terms. And on the other hand, a lot of people are saying, well, we're still getting 15% tariffs, and that is obviously not ideal. Let's start by the last point that you made, which is very, very important within this agreement, in the EU United States agreement, there are two exceedingly important points. One is the energy agreement, and the other is the microchip and technology agreement. Those two are certainly deals that are going to reduce the possibility of the European Union, let's say, as you said, falling into the arms of China and Russia, the European Union in 2024, imported record levels of Russian liquefied natural gas, and this deal, what it basically shows is that the European Union needs to choose between the United States or Russia plus China, and that obviously, if it chooses the second, that would certainly lead to more aggressive negative position for the European Union exporters in terms of the deal, I think that it reduces the dependency of the European Union in terms of Russian liquefied natural gas. It also reduces the risk of being dependent on Chinese microchips and technology. And it certainly is hugely beneficial for the United States, but ultimately, what it shows is that the European Union needs to choose between one and the other, because the European Union does not have energy or military or technology leadership. Therefore, unfortunately, the reason why so many commentators are negative about this agreement is not because the agreement is bad in itself. I think that it's a positive agreement. The reason why they're angry is because it shows that the European Union did not have any aces in this game of cards in order to try to squeeze better trading terms from the United States, it did not have, obviously, the possibility of moving its exports to other markets. It is obvious that the EU negotiators at least analyzed that option. It is obvious that they that the European Union does not have the technology and energy leadership that would give them the advantage to negotiate in different terms, and it's certain that the United States is a much more important market than what we were led to believe in Europe. Therefore, I think that the reason why the European Union, commentators and economists are mostly mentioning this agreement as a negative, is not because it is a negative, but because it basically simply reveals the truth about the weaknesses of the European Union, and at least, from my perspective, this gives certainty and gives a good framework for improving in terms of security of supply, in terms of management of the number of suppliers, and also in terms of reducing dependencies. 

Erik

You mentioned energy prices a couple of times in there, so let's stay on that theme for a few more minutes. We're in kind of a funny spot here. I think 66 handle on WTI, as we're recording on Monday morning, really low oil prices considering President Trump has issued a 10 day ultimatum, basically saying, you know, there will be hell to pay if there's not a resolution to a war that's been been pending for years now doesn't get resolved in 10 days. You'd think there'd be more going on, but there isn't. What do you what do you make of energy prices? Where do you think they're headed?

Daniel 

 I think that it's clear that OPEC+ are happy with lower oil prices, if we think about what they have been doing in terms of strategy, it seems counterintuitive, but it actually makes quite a bit of sense. If you think of what they've been doing, is that once there was an evidence that there was a significant geopolitical risk building up between Iran and Israel, and if you go back a little bit more than what people believe this basically came when the organization of atomic energy issued a very aggressive statement resolution against Iran. Immediately, OPEC announced the largest increase in production that would that would ultimately absorb any type of geopolitical risk simply by putting in the market 1.5 million barrels a day more than was initially expected. So I think that the strategy from OPEC+, and from Saudi Arabia in particular, but also from the countries that I would say share the same strategy with Saudi Arabia is to remain the global central bank of oil and to maintain their position as the As the supplier of first resort, and also as the most reliable and affordable supplier. So the strategy is both to show to consumers that it's that oil suppliers are not going to hurt consumers, that they're not looking to increase prices for no reason, and at the same time to try to show that the alternatives in the energy world are not as affordable and as competitive as some would have expected, particularly in the renewable sector, etc. So the position of OPEC+, and I think it's very important to remember that Russia is included in this decision. And I think that what you mentioned prior, which is the relationship, strategic relationship, strong strategic relationship between Russia and China, is also a way for OPEC+ to show to China as one of the main importers of oil that they're not looking to hurt them in a situation in which there are these trade negotiations and in which exporters would not be welcoming another abrupt increase in prices. So it's a very interesting strategy that we have seen in the past, that in which OPEC+ is basically trying to prove that they can live with low oil prices and at the same time, show to their customers that they're the most reliable and affordable option compared to what obviously, from the perspective of OPEC+ members, is less reliable, shale oil, or alternative energies, renewable energies. 

Erik 

Now President Trump has introduced the notion of secondary sanctions. So the direct sanction would be, you know, if we're sanctioning Russia, that means we do something against Russia. The secondary sanction is, if we're sanctioning Russia, saying they can't sell their oil, then whoever buys their oil against sanctions, we're going to sanction them in order to get even with them. What are the potential economic knock on effects? I mean, is that just a threat that President Trump is using, or is there a potential here for you know, India continues to buy a whole bunch of oil from Russia, and then the US actually does something significant in terms of sanction action against India. That changes, that is that is that coming?

Daniel 

I think that it's very difficult to enforce. I think that it's very, very difficult to enforce because India does not buy  Russian oil because of a geopolitical position or because any, let's say, strategic advantage provided by their relationship with Russia. It's basically because they buy any and every amount of commodities that they can from where they can it's a fast growing economy with a tremendous thirst for commodities, so I think it's very difficult to enforce. And I think that when I look at it from the way that it has been presented, or at least the way that I've read it, it looks to me like it's a way for President Trump to Force India to get a trade agreement as quickly as possible, rather than a fully enforceable sanction package. Because we must also remember, from what I said before about the European Union and its imports of fossil fuels from Russia that in 2024 exceeded the aid to Ukraine now is that it's very difficult to put barriers to such a liquid and global commodity as oil. And obviously a lot of a lot of oil moves from through different countries, origin, washing refined products, all of that. So I think it's I think it's difficult, but I think it's a tactic to do two things. One is to force Russia to reach an agreement with Ukraine, to stop, or at least reach a ceasefire in the Ukraine war. And two, to Force India to speed up its position in terms of reaching an agreement with the United States.

Erik 

Daniel, I want to get your take on this just huge whipsaw that we've seen in copper. And I want to say specifically, I'm talking about American copper, the HG befutures contract, which is for delivery in the US. I think that's way out of sync with LME copper, and the reason is President Trump's tariffs. Where do we go from here? It almost feels like so much damage has been done technically to this market, and you can see that it's all as a result of just Trump and ent. You know, obviously don't care too much about collateral damage, so I don't think the fundamentals have changed, but, boy, on a technical basis, this chart is really, really ugly. What do we do about this?

Daniel 

I think it's very, very dangerous, because it's proven that, unlike other prices, this was, this was a level of of a bullish trend that was very much predicated on expectations of a very, very strong and robust demand in the future. We think about oil prices, natural gas prices, even aluminum, for example, they tend to move more with the changes in supply and demand that are very short term more than the long term perspective. In the case of copper, what we have seen is that the front end of the curve actually was moving very aggressively on expectations of electric vehicles, of expectations of renewable rollout, etc, all these tremendous demand driven bullish messages. So it seems that it was easy for Trump and Bessent to prick that. Let's say that trend with a couple of messages, because they were not predicated on, let's say, step by step, views about supply and demand. So I would be very, very cautious about thinking that this is a bottom and it's going to be as going to assume the same bullish trend as we have seen in the past. It may maintain a certain level of strength from the past five years, but it's very unlikely to catch up to the levels at where it was only a couple of months ago. Because that level even being on the on a contract that was supposed to be discounting the supply and demand of 2025 there was a lot of bullishness about about very long term and probably unchanged trends, but I would be cautious to take a bet against something that was so easy to unwind from few important and relevant messages that need to be included in those assumptions. So I would be cautious about that, without ignoring that the long term aspect of supply and demand for copper remain relatively bullish, because there is simply not enough copper at all, and we need to mine a lot more if the expectations of electrical vehicle rollout and renewables rollout are going to be achieved, a lot of people also are starting to question those trends and whether the implementation and of electric vehicles on a massive scale was going to be something that we are going to see in 2028 2029 and maybe moved it to 2035 2040 which is obviously huge in terms of net present value on the price of a commodity.

Erik 

Let's talk about how all these policies are affecting the dollar index. It seemed like we were coming out of the Trump and Bessent EU tariff negotiation. Maybe we were about to start the long overdue counter trend rally in the dollar. I thought it was maybe going to have legs. We got a perfect test of 100 on the DXY last week. Looks like it failed there. We're back down to 98 and a half, as we're recording on on Monday. What's happening here is the dollar just in a new secular downtrend that's not going to break. Or should we expect some counter trend rallies? Or what should we look for?

Daniel

I think that the problem with fiat currencies is that nobody, no central bank, and certainly no government, is defending the purchasing power of the currency. The Trump administration is not particularly comfortable with a weak dollar, but is not comfortable with a very strong dollar either. The European Central Bank and the European Union are perfectly happy if the Euro starts to weaken, because it's basically going to be a very significant counter effect to the tariff impact for exporters. And certainly we don't have to even debate that the Japanese government needs to continue to destroy the purchasing power of the yen in order to maintain the illusion, the monetary illusion, of its absolutely nightmare, fiscal and debt situation be in a world of relatives, I think that the bottom of the DXY was achieved once the perception of markets about trade deals, was that there was either not going to be any, or that those trade deals would be negative for the United States, which is obviously something that I found quite amusing. But I don't think that we are going to see the DXY go to 110 so I think that the trend, if you look at the trend, it's moving basically a like a ladder, between 2008 2012. The DXY was much lower than where it is today, also at the beginning of the Biden administration. I think that it's likely to remain between the 98.5 to the 100 level. I don't think it's going to go up massively unless the Federal Reserve starts to massively cut rates and leads to a huge move in terms of financial flows into treasuries when hedging becomes much more attractive, and the combination of the hedging cost plus the yield makes global bond investors prefer to buy treasuries than buy Japanese or European bonds. That is something that happened, if you remember, in the in the pay, in the in the path, sorry, to the 50 basis points rate cut of September. And could actually happen as well if the Fed changes course. But obviously that is something that we need to pay attention to, because you would need the Fed changing course, and you would need the massive outflow of euros and yens and inflow of dollars from the trade agreements that to kick in. And that is more a 2026 story.

Erik 

Well, you're lamenting some of the challenges of the relativity of the dollar index relative to other currencies. That, of course, begs the question of precious metals for the absolute comparison. Seems like the gold fundamentals really look pretty strong. Here are we about to see what looks like, maybe a breakout of the pattern we've been in the triangle pattern and new all time highs.

Daniel

I think we will see new all time highs of gold as the decision of central banks of purchasing more gold and less government debt from developed economies accelerates. We are seeing more. And more central banks all over the world balancing their asset base with more gold less Euro denominated reserves, ie less debt and less treasuries. So I think that that is one element that tends to coincide with the September to December period, which is when central banks try to readdress their challenges in their in their balance sheet, if they have them. And also, I think that is very evident, that the growth in money supply that I was mentioning before, plus the very loose policy of most central banks would be with the Fed changing course. So if you have all those central banks cutting rates and increasing money supply, and on top of that, you get the Federal Reserve cutting rates and significantly, then obviously that is going to generate a tremendous move into gold in order to generate more capacity for investors to have stable and de correlated reserve of value in their portfolios. Most, most investors remain very, very underweight gold, and at the same time, central banks are purchasing more gold. So I think that gold, silver, to a lesser extent, and even other precious metals I would look at with a benign view, but more I would certainly be very comfortable with the long gold position at these levels.

Erik

 And how do you feel about the reserve currency status of the US dollar at this point?

Daniel

I think that the reserve currency of the status of the US dollar is unchallenged. The US Dollar is the world reserve currency in the Fiat world, because there is no alternative. If you think about what could be the alternative, the euro. It has redenomination risk. It has enormous fiscal problems, much larger fiscal problems than the than the United States, in countries like France, countries like Greece, countries like like Italy, like Spain, etc. And on top of that, it has issued debt, which is the, let's say, the top of the iceberg, but very few people look at the bottom of the iceberg, which is enormous, which is the unfinanced, committed liabilities of governments, which in some cases exceed 500% of GDP. Therefore, the Euro is is a great currency, and has been doing phenomenally well as a reserve currency despite all of its challenges. But it's not an alternative to the US dollar. To be an alternative to the US dollar, you need to have independent institutions, transparent, full transparency in capital markets. Obviously you cannot have currency controls and capital controls. You need, you need liquid and open capital markets. It's very difficult to be an alternative to the United States dollar in the Fiat world, and it's also very evident by now. I believe that China does not want the yuan to be an alternative to the US dollar. They may want the yuan to be used in more global transactions than currently, but not to be an alternative to the US dollar, because they don't want to eliminate the capital controls, the currency controls, the financial controls that they have in their economy. And the idea that Brazil, Russia, India, China, South Africa, are going to create a currency that will dethrone the US dollar is also very, very challenging simply by looking at the way in which their own state owned exporting companies behave, which is to continue to use the US dollar in everything that they do. And also from my personal perspective, which is an unpopular opinion, but that is obviously why I give my opinion. I don't think that China wants to have a currency with Brazil, Russia, India and South Africa. I think that China wants to increase the use of the Yuan with those countries, but not adopt their inflation and monetary policies within a similar framework. I don't think that the Chinese government sees itself as one that is going to relinquish their position to provide some escape to the inflationist policies of Brazil, for example.  

Erik

I want to run a thought experiment past you, because first I agree with you, the only reason, or the primary reason, that the US dollar is still the world's global reserve currency is because. Cause there is no viable alternative. What if I were to suggest to you, there is a viable alternative, it's stable coins that are tied to the US dollar. Well, you'd say, wait a minute, that's not an alternative, because it's still the US dollar. The stable coins are backed by US dollars. They still create demand for US Treasuries. Yeah, okay, I get all of that, but think about the reasons that we care about this reserve currency status in the first place. You think about triffins paradox and the issuance of currency and the demand and so forth, the creation of artificial demand for the reserve currency by the rest of the world. Hang on a minute, if what is actually being used as the reserve currency are stablecoins. It's not the reserve currency issuer, but rather the stablecoin issuer that's going to start to derive a lot of those benefits of being the reserve currency issuer, or a lot of the benefits that we've historically associated with being the reserve currency issuer, having essentially an unlimited amount of demand where, you know, economic fundamentals don't necessarily matter, just everybody has to have us dollars all of a sudden. What if it was everybody has to have your stable coins? I think that changes the game. What do you think?

Daniel 

No, I think that it does. And I think that it's quite a long term option, obviously, but I think that decentralization is certainly the future in the monetary system. The reason why we find it difficult to believe that there's going to be an alternative to the US dollar or alternative to the euro, etc, is because we need to sort of think of this matrix type of construct, which is the fully centralized monetary system. But what you very well say is that if stable coins take the place of the US dollar, they would continue to support the US dollar, as I would say, the leading fiat currency, but they but the benefits of being the reserve currency would be in the country and the issuer of those stable coins, and obviously the underlying asset can also change. Can move to be gold or others. I agree that is a likely option, but it requires a number of steps, a number of significant steps, which include the fact that you could, for example, have multiple bank accounts in multiple currencies and trade with between them. That is obviously something that needs to be looked at from the perspective of, you know, what is the future going to look like? But it's obviously a long term future, because the commercial banking world as we know it, and the monetary system as we know it, all of them work in this fully centralized position. But certainly, what I would say is the following is that the rise of stablecoins is a very good idea that the US administration has in order to cement the position of the US dollar within the fiat currency world and to maintain and strengthen the demand for US Treasuries, no question about it. But obviously the future would be that those stable coins, and definitely the ones that reach enough level of liquidity to start to be viewed as pure currency, ie reserve of value, unit of measure and generalized mean of payment. All those are something that is going to come from the decentralization of the commercial banking system and the decentralization of the way that we look at money.I think it's inevitable. I think it's inevitable, but it's am I going to see it in my lifetime, maybe, but certainly not in the next five, seven years.

Erik 

Well, Daniel, I can't thank you enough for another terrific interview, but before I let you go. Please tell our listeners a little bit more about what you do at Tressis, also your Twitter handle and so forth, how they can follow your work.

Daniel 

Thank you very much. It's been a great, great conversation. My work is, I'm the Chief Economist at Tressis. I'm also the CIO of alpha strategy consulting, providing strategic and macroeconomic advice to numerous companies. And what I am not just the chief economist, but I also supervise and advise in terms of the funds that we manage. The way to find me, it's very, very easy. You have two Twitter accounts, x Accounts, one in Spanish, one in English, @dlacalle in Spanish, @Dlacalle_IA in English. And you also have my website, which is also in Spanish and in English, and my YouTube channels in Spanish and in English. So as I always say, it's easier to find me than to avoid me. Just key in Daniel Lacalle in Google, and you will find all the alternatives. But always remember that if you come across the Spanish language one, there is an English one as well Available.

Erik 

Patrick Ceresna and I will be back as macro voices continues right at macrovoices.com