Transcripts

Erik: Joining me now is Bianco research founder Jim Bianco. Jim, no shortage of things to talk about this week. Let's discuss the Iran conflict, what it means, what comes next? How are you looking at this.

Jim: Being that we are financially oriented and that's our real interest is we have to look at this from a financial standpoint.

What does that mean for financial markets and potentially the economy, global economy written in general? And obviously the answer is. What does it mean for the price of crude oil? And in the immediate short term, we've got a problem in that the crude oil is not moving. Crude oil is like the circulatory system of the world.

It, it gets pumped, it gets put in the storage, it gets put on the tankers, it gets sent to refineries and the system. Constantly has to be moving. Right now we have a big blockage and that blockage is in the strait of Hormuz. Now, the good news is we have not really done any damage to the system.

Not that I've seen in terms of stories. We haven't blown up a bunch of infrastructure or pipelines or wells or ports or anything that would cause an extended period of time to repair it. We've got a bunch of ships sitting around waiting. For the ability to go through the straight and keep that circulatory system moving.

So the hope is that this is a short term problem. Short term being two to three months, a couple of weeks to get this resolved, and then six weeks to two months to maybe get that circulatory system moving. The concern is the longer this goes. The more we keep lobbing missiles at them and they keep lobbing missiles at us or their neighbors, the higher the probability that they're going to break something that will take a significant period of time to fix.

And that will create a bigger problem for the energy markets. So for right now, the hope in the energy markets, and I share that hope for right now, is. All we're doing is we're waiting for the Strait to get hope in so we could start moving that the moving the crude oil again we haven't sunk any of these ships or anything, but the concern is the longer this goes in the middle of a kinetic war, the longer it goes, the higher the risk is we break something

Erik: Let's talk about what the impacts are. If something does get broken and it delays the ability to deliver crude oil, it seems to me like obviously there's a cost to the economy, which is the most immediate effect of all a sudden energy costs much more, and it's crippling on the productive economy, but I think there's a lot of knock on effects. The first and biggest one in my mind is the inflation wave that creates. Inflation tends to be self-reinforcing, so you get the potential that you've started a fire you can't put out. And then there's probably several other feedback loops.

So when you think about what if they do break something that results in even after the the piece has been made. It's gonna take a long time to fix those broken things before we get the oil delivery system back to normal. What are the knock on effects that you see financially?

Jim: So first of all I'll measure the knock on effects in a very market oriented way.

If you look at the forward curve in the credit oil futures market, it is in record backwardation by Sunday night. On March 8th, it hit minus 25%, meaning that the six month out the September futures for WTI was 25% lower in price than the April futures, which is the current contract. And that is the most extreme that it's ever been right now.

So one way you can look at that is that the market is still pricing and hoping that this is gonna be a short term thing. If we break something of significance, how do we know it? I think you would see that backwardation start to narrow a lot because those deferred contracts would start to rally to meet where the spot contract is.

But you're right, if that were to happen, you're probably going to see. More inflation now. All things being equal, we've been doing a little back of the envelope calculation with the price of gasoline in the United States in the last eight days. The war, the day we're recording March 10th is the 10th day.

So we've got nine days worth of data. Price of gasoline is up 18% or 55 cents. All things being equal, that's probably is gonna give you a March CPI report of around six tenths or seven tenths. That is probably gonna push year over year inflation over 3%. For March. Now, every economist will say, oh, but that's temporary, that's just an inflation thing.

Correct. Unless of course those deferred contracts and rally the backwardation narrows, and then you could start talking about April being elevated. You could start talking about May being elevated. As well. I don't think this is gonna produce big inflation like. Seven, eight, 9% inflation.

But what it can do, at least in the very short term of the next three to six months, if not longer, is keep the inflation rate around 3%, if not above 3% higher if the crude oil situation worsens. I've been arguing that the Fed cannot. Cut rates, if that's the inflation rate. We have gotten used to, and we are still used to that 2010 to 2020 period, where no matter what the Fed did, they couldn't get, or no matter what the economic circumstances were, the inflation rate never got above 2%.

In fact, it averaged around 1.6 during the 2010 to 2020 period. So at any wobble in the economy, print money cut rates to zero, print more money. And that mantra remains to this day that whenever markets or economies wobble print, you can't do that if we've got inflation. Because if you print.

What you're trying to say is the economy's wobbling financial markets are under stress. We need to create easier financial conditions by cutting interest rates or expanding the Fed's balance sheet. But in this environment, if you do that, then you're saying the bond traders. We don't care about your real returns.

You have a fixed income investment and we're willing to risk inflation going up. Even though your investment's fixed income, you should sell bonds right now. And so if they were to try and be easy in this type of environment, you could wind up with higher interest rates and actually making things worse, making it actually tighter.

So one of the things about the higher inflation. Is it takes the fed off the table, even if we get worsening employment numbers, even if markets start to wobble a lot more, because the re the reaction would be, oh, markets are in trouble, or the economies just weakening. We have to cut. Yes. And then if 10 year note traders run away from the 10 year note and those rates start soaring.

You've made things worse. They're gonna want some assurances that they're not gonna lose money because inflation's gonna go up. So that's where I think the the nuance is gonna come in. This is not the 2010 to 2020 period, and if we have enough inflation now because of the rising crude oil that we've seen in the rising gasoline, we've seen now to keep the inflation rate above three.

The fed is just off the table. They just cannot step in and start cutting rates under that environment.

Erik: Jim, at the risk of nitpicking semantics, I wanna come back to your language around saying the Fed cannot cut rates. I think you just made an extremely good argument for why they should not cut rates.

Are you really convinced that they won't?

Jim: Oh, yeah. I guess you're right that in a semantic argument I would argue they should not, because the risk is they make it worse. That's what I meant by cannot, is that. They need to be very careful. Now, obviously, if things were to deteriorate to the point where you would argue that they would overwhelm whatever higher inflation you would get, that the economy would be so weak that even with higher energy prices, it would offset that, that you could then see the fed cutting rates but.

We're talking about like a, almost like a rerun of 2008 or 2020 in that type of scenario. And as we're talking now, the stock market isn't even 5% off of, its all time high. So we're nowhere near that type of scenario. But you're right, I should have said they really should not, because the risk is that in the attempt to try and make easier financial conditions by cutting rates, they spook bond traders.

They're not acting in their best interest. They sell rates go up and you actually wind up making tighter financial conditions and you wind up making it worse.

Erik: Jim, let's take that a little bit further and talk about the next step with Warsh. Taking office as Fed chair, you'll have to refresh our memory on exactly what date that becomes effective.

It seems like we don't have a really clear signal. A lot of people thought he was more hawkish, but then again, it seems like he's extremely loyal to Trump. He's gonna give Trump whatever he needs. I agree with you and what you said about the reasons the Fed should not cut here. I don't think President Trump got the memo on that and if Warsh is gonna do whatever Trump wants. And I'm not sure if that's the case. It seems like there's a potential that the Fed does cut. Am I missing something?

Jim: No, you're not missing anything at all. Just as a quick aside I'll remind everybody that, donald Trump is a real estate guy, and I've yet to meet a real estate guy who has not met an interest rate that he doesn't think should go lower.

So I'm not surprised that at every turn he just keeps demanding lower and lower interest rates. 'cause every real estate guy does that. Now, as far as Kevin Warsh goes, you're right, the problem. We face right now is we're all saying he's hawkish, and why do we say he's hawkish? Because we're going back and looking at what he was saying in writing.

Back when he was a Federal Reserve governor during the financial crisis. I hate to date us all, but that was 20 years ago, 19 years ago. At this point, and we don't really know where his thinking is currently, because in the last eight months he's only given two public appearances and he was vague on where he stands on this now, hopefully.

When they do get his confirmation hearing scheduled, he'll have an opportunity to explain his thinking a little bit more fully. And as far as the date goes it's May 15th is the last day. For Jay Powell. So all things being equal, Kevin Warsh would be the chairman at the June meeting. So that would mean the next two meetings, the March 18th meeting and the early May meeting will be Jay Powell will preside over those.

So he's got two meetings left and then we'll have Kevin Warsh, unless there's a snag in his confirmation hearings in any way. The bigger issue I think he's gonna face other than, he will articulate a comment or a view, I assume, that will say that we should be cutting interest rates, is that the Federal Reserve has been changing its stripes.

The individual members of the Fed have been really talking a lot more independent than they've ever been, and they've really been acting more independent. We've seen. Way more dissents in the last three or four meetings than we probably saw in the last five years combined. And I don't think that's a fluke, and I think that's gonna continue so much that I've argued that Fed watching is no longer about parsing the individual words of what the chairman says, but it's really about listening to all the voters and putting them in the cut hold or hike column and asking the question.

Which one has seven votes and whichever one has seven votes, that's what the fed's gonna do. And as of right now, as I look at the Fed's speech broken down, of the 12 voters, fully 10 of them have made hawkish comments. Basically Stephen Marin has made he's still pretty dovish. And you might argue Chris Waller is on the fence, but the rest of them are pretty hawkish. So given all of that, if we had a Kevin Washer Fed chairman right now and he said, look, we have to cut rates. I would just turn around and say, where are the other six votes you're gonna get to approve that rate cut? 'cause if they're gonna vote the way they're talking, and I assume they will.

I don't see where those votes are coming from, so I think that's gonna be the next big thing we're gonna see when we get this new Fed chairman is how much of it is really gonna be about parsing his words and how much of it's gonna be really just about vote tallying and just trying to figure out where all the votes are coming from.

Erik: Let's talk about the broader economy and where the market was headed before this whole oil shock happened. Even before the decision was made to go ahead and have an attack on Iran, it felt like the market was rolling over and, maybe we're heading into a soft patch here. We've just tested the 200 day moving average at least very briefly in the overnight session on the S&P.

Is it over? Is it at all clear or are we really just back to where we were of wondering if it's time for this market to run outta steam?

Jim: I think you, when it comes to the economy, that there's really an issue that is difficult for a lot of economists and a lot of other people to really get their head around.

And that continues to be the story about labor supply. We got the February employment report back, last week, the week before we're recording, and it came in at a stunning number of minus 90,000 jobs. And yet the reaction in the market was very muted. You would've thought, you would've saw interest rates, plunge, and you would've thought, you would've saw maybe the stock market, take it poorly.

And it largely didn't. Now, part of that might be because it was still wrapped up in paying attention to oil, but I do think that it really comes down to the other issue, and that is what is the biggest driver of labor? Because labor is the most important aspect of any economy. How many people have jobs?

How many people are gonna be able to get a job and. The biggest aspect of labor I think comes to population growth. And we have no population growth because of the slow of what's happening at the border. And there's arguments to be made that the number of jobs that the US economy needs to create is somewhere around zero to 50,000.

Probably with an average closer to 15 to 25,000 jobs a month, that's all the US economy needs to create. Right now, it's not 150,000 like it used to be a couple years ago. And again, that's because if you don't have population growth driven by immigration, the number of 15 to 64 year olds, or 16 to 64 year olds, excuse me, that's the working age population isn't growing.

And if that's not growing, you don't need to create a number of jobs. That's why I think we also have this other instance where if you go back to the summer of 2024, the US economy on a 12 month average basis was creating about 150,000 jobs a month in the year ending July, 2024. In the year ending in February of 2026, that fallen from 150 to 9,000, but the unemployment rate hardly moved.

It was a 4.2% in July of 2024. It's 4.4% in February Of 2026 up two 10th while we lost all that job growth. Now why isn't it higher? 'cause we don't need that many jobs, is really where I think it is. And that really gets to the other issue too, is that. If we don't need that many jobs and none other than Jay Powell talked about this at his last press conference, maybe at these very low numbers that we're seeing with employment, we are still in balance and if we are still in balance, the risk you face is that if you overreact to these supposedly weak numbers and cut rates too much, again, that could be perceived as overstimulating when the economy.

Doesn't need it. So I do think that when you look at the market, I don't think it's necessarily looking like it's gonna roll over on the idea that the economy's weakening, because I think that the numbers have so fundamentally changed here right now, and it's a, admittedly, it's a hard thing to get your head around because, when you say that the population growth is down, then people ask, can you be more precise? And the answer is not really, because demographers have never been structured to give us high frequency updates in the population of the United States. 'cause they've never had to. And so what about, labor force participation, those numbers are constantly revised. But we do know that the population growth has come from immigration 'cause of the low fertility rate, and we do know that immigration is most likely negative right now. More people leaving the country than entering the country.

Erik: As we're recording on Tuesday afternoon, we're looking at about 5,200 on the gold price. Something I reported last week on Macro Voices is, feels like there's been a change in the reaction of gold to geopolitics. We had last Monday we had a situation where. Bombs are dropping, oil is going straight up, and gold was down literally $400 over the course of just 10 hours.

We saw the same thing on the Sunday futures open, where it was just a moonshot on on oil prices, in reaction to escalation over the weekend in the straight of Hormuz and so forth. And obviously oil is the direct affected commodity. But you didn't see the expected gold up with oil.

It was actually gold down. Feels like somebody is either selling gold to raise money to cover their losses on something else, or selling into strength or something. It feels like there's been a disturbance in the forest with respect to precious metals. What do you think is going on?

Jim: Sometimes the easiest answer might be the best answer is that first of all, gold and silver, as we know from early February, had that massive reversal and while they haven't followed through on the downside, their up their upward momentum is stalled.

So you've got a lot of people that have a lot of unrealized gains in those. And when you look at markets wobbling and you wonder that if people need to sell something, there's the old adage on Wall Street, you sell what you can. Now what you want and what you can sell is the thing that has big unrealized gains and no momentum.

So whether it's to meet a margin call or a perceived margin call, like Sunday night when futures S&P futures were down two and a half percent at their worst point, or in oil because of the big whipsaws we've seen in it. So somebody's gonna get hit with a margin call. Where are they gonna get the money from?

They've got this other thing here. We assume that they're holding, that they've got a big unrealized gain and they can sell it. So I think that there might be some of that going on with gold because you're right. Normally speaking, all things being equal. If you've got geopolitical stress, the textbooks say gold and silver or precious metals are the place to go.

But they have definitely not been the place to go since February 28th because they have not been responding to this.

Erik: Jim, that, as you said, was the the old school adages precious metals. Of course, the new age version of that would be cryptocurrency. How has that fared since February 28th?

Jim: It's been more of the same.

It's really struggled to do anything right now. Now it's very volatile. You could say it's up five or 6%, but in Bitcoin, five or 6% is an average day. So it hasn't really done anything to establish any kind of an uptrend as well. But I also think that they're also stuck in a.

Different type of cycle as well too. Bitcoin peaked at the end of October, $126,000 at its lows. In February, it was down 50% from that high. So it is definitely broken momentum as well. And I think the narrative. Behind Bitcoin has been changing. Right now. The narrative used to be that institutions, retail investors through wealth managers, and everybody's gonna buy it through these new products like the ETFs and.

They're all gonna say the old gold story. Remember, if all, if only anybody, everybody owned the old, 5% of their portfolio in gold, it would go to the moon. That was the argument that they were using with Bitcoin, was that everybody just bought three or 5% of their portfolio in Bitcoin.

It would go to the moon. I think that narrative is over with right now. Now the potential for a new narrative is out there, and I think the new narrative. If that old narrative was permission that the regulators were giving you permission with it, that Wall Street was creating products to give you permission to own it.

The new narrative for it might be replacement instead of saying, 'cause I've seen on social media a lot of bitcoin enthusiasts saying don't worry. Larry Fink and BlackRock are talking about tokenizing every asset in the world and that'll be bullish for Bitcoin. I was like. Why are you waiting for Larry Fink to do it?

Why doesn't the Bitcoin development community do it instead of him? So maybe the next narrative will be replacement instead of waiting for regulators to approve it, waiting for Wall Street to create products for regular people to trade on it. Why don't you create an alternative system and say, this is better than the old system.

Let's go play on that game and let's play it in this way.

Erik: Jim, you told me off the air that you heard my interview recently with Michael Every about stable coin statecraft. And that comes to mind with what you just said because talk about an asset to tokenize that's already been tokenized. It's the US dollar.

What if Trump and Bessant were to say to the whole world, look don't worry about what your government is telling you. The rules are in your country. Don't worry about what your banking system says in your country. You can skirt the whole system and just buy us. Dollar stable coins on your cell phone regardless of what your country's rules are, and you're backed by the US government that could potentially replace the petrodollar system with the stable coin system and shore up the US treasury market.

Do you think that's a realistic scenario and would it play into what you just said about, the market, creating those tokenized assets without waiting for anybody?

Jim: I think that in that case, that is a realistic scenario. And in fact you could argue that has already started to happen. If you look at countries like Venezuela, Afghanistan, even Iran, and other hotspots around the world. I'll take Venezuela as my example. If you wanted to go and find out what is the black market rate for the Venezuelan Bolivar, their currency, the most credible source that I have found is ance, giving you a tether to Bolivar rate rate. In other words, a stable coin. A stable coin is really where they, where that they operate.

And when you dig deeper into it, you'll find out that in countries like if Afghanistan and Iran to some degree, and Venezuela, definitely those are dollarized economies, they are now trading in commerce in dollars, but it's not. Stacks of a hundred dollars bills. It's on their electronic wallets.

They're owning the dollar stable coin, and they're trading it back and forth. So in the respect that the dollar is going to get a leg up on remaining to be the reserve currency in that, it's going to have a digital version of it in the crypto universe in a stable coin. I think that's already happened now.

It's gonna be a while before we see that. Come to say Europe or the United States because. Our financial system is more stable. We don't go to bed every night worrying that our banks are gonna fail and we don't go to bed every night worrying. I'm talking about Europe, the United States, Japan, that our currencies are gonna get seriously devalued.

At least we don't yet. Or maybe I should say we don't now. But. So we don't really need it, but in a lot of places around the world they do. So I agree that's coming and I agree that to some degree it's already here. Now the second part of that is what Scott Bessent is trying to argue is this will be hugely beneficial for lowering interest rates in the US because as trillions of dollars of stable coins are created.

They're gonna have to be backed by US treasuries, and that's gonna create a demand for them. The problem I have with that argument is. Where is that money coming from right now? That money that would go into a stable, into a dollar based stable coin was probably already into some degree in the financial system to begin with, and it was already backed by a dollar.

So if the argument is we need to pass the Genius Act, and once we get the Genius Act passed, that Americans are gonna start opening up electronic wallets and they're gonna be buying hundreds of billions of dollars worth of stable coins. I understand that argument. I just don't know whether or not a stable coin will be more attractive than a current bank account is, at least not now.

But even if that were to happen and they start buying hundreds of billions of dollars worth of stable coins, where's that? Hundreds of billions of dollars coming from. It's gonna be coming out of the banking system that's already backed by a treasury security. It's gonna go into a new secure, a new instrument, a stable coin that's backed by treasury security.

So it's purely a substitution effect is what you're gonna get. You're not gonna get any really big net buying. Now, you might get net buying out of places like Venezuela, Afghanistan, Iran, because they're not backed by dollars and they put their money into a stable coin. But, They're not gonna be enough to move the needle when you have a $40 trillion deficit.

It's really gonna be the developed world that's gonna be able to move the needle, but I just don't see where you're gonna get that net new money. But let's go back to the first part, the fact that everybody is now using stable coins and they're using them through electronic wallets and they're using them.

In order to affect trade, the dollar is maintaining its dominance as the reserve currency. It's just that if you're looking at the traditional numbers of currency and circulation and how much trade is going on, how much are being held by the banks in reserves you're not gonna see it.

You're gonna start, you're, but you're seeing it at the margins where they need it the most in the countries that are most vulnerable. And that's what people are doing is because remember that in, even in the poorest countries in the world. Cell phone penetration. Smartphone penetration is still 80%. Even in, you could pick the poorest countries in Africa, 80% of the people have a cell phone and they could download an electronic wallet and they can hold a stable coin and add electronic wallet and they could transfer it to another phone, and that's how commerce is being done, and it's all backed by dollars.

Erik: What do you think about the statecraft argument of it where scent and trump intentionally basically tell the rest of the world? Look, the model that we used to have where you guys thought your central bank was in charge of things like managing your own currency, now we're in charge. Now we're going to just tell the entire world that the settlement.

Currency for all international transactions is US dollar stable coins, and we're gonna bypass any monetary policy that other countries try to implement because we're calling the shots. Is that scenario something they would do intentionally?

Jim: I think in a fact that is the scenario that we're having now.

Whether they're trying to intentionally do it, it's very possible. But, the idea is they are giving you a frictionless version of the dollar that everybody can own. And more importantly, unlike the old system that you're, that cannot be regulated by a different country. So if you're in Iran and they wanna say that you can't use dollars because the government will punish you if you use dollars.

In the old system, yes, it was hard to do that you couldn't hold it in a regulated bank account in that country, if you wanted to use dollars, you had to physically carry around money with you, a sack of a hundred dollars bills, and you were subject to crime, somebody trying to steal from you. But now you just walk around with a phone like every other person, and they have no way to know whether or not you own that.

So they are providing. A global standard to the rest of the world, and they're saying to other countries, if you run your financial system poorly. Or you try to devalue your currency a lot. We don't have to say a word. Your population is gonna migrate to our currency, the dollar through a stable coin, and the Federal Reserve will become the World Central Bank by default, whereas your central bank will then start to lose influence.

So I definitely think that's effectively what's happening. I'll assume that's what they. Don't mind happening, but they haven't said it directly, but that's in reality what we're getting.

Erik: There's another topic where it feels to me like the winds are changing, Jim, and that's artificial intelligence.

I don't mean recent developments in ai, although there have certainly been some of those. What I'm talking about is the public sentiment and reaction to it until very recently was, oh boy, this is just the coolest thing ever. It's gonna, enable so many things, it's gonna be great. I'm hearing a lot more of the fears of, it's taking our jobs, it's putting us out of business.

We're going to end up losing a lot of industries, losing tens of thousands of jobs, and it's going to make our electric bills triple because we're competing with AI data centers for electricity and there's not a lot electricity to go around. So you've got the public sentiment seems to be changing. And meanwhile, the military sentiment toward the AI developers, if you look at the pissing contest that Anthropic just had with or is still having with the US State Department.

It seems like we're getting to a showdown where the US government is saying, no, look, we're gonna tell you what to do. You don't get to decide what your technology gets used for or what you wanna sell it for. You're gonna sell it to us on our terms, whether you like it or not. It seems like things are heating up on, on both fronts.

Where do you see this going?

Jim: Yeah, you're right. There was a recent poll done that was put out in the last week or so asking people their favorability, unfavorability of of certain topics and. AI scored near the bottom of the list. The very bottom of the list, by the way, was people's opinion about Iran.

So at least people like AI more than Iran, that's all they've got really going for them at this point, but not much more. And of course, as you pointed out, the real reason that AI is look down so much is we've been told by the media it's a threat. It's either a threat for our job. Or it's a threat for our electric bill that we're, that our our local utility is going to be, we're gonna be competing with the data center in order to pay for, putting the lights on in our house.

Right now. And bear in mind that in some places, and I'll give you the state of Wisconsin for, as a matter of fact, state of Wisconsin has a lot of data centers in it. Very popular place to put those. The electrical consumption of data centers in the state of Wisconsin is larger than the 6 million people.

Residents of Wisconsin. Now, to keep this number in perspective, about 60 or 70% of all electrical usage in the United States is commercial and industrial and data centers are part of commercial and industrial, but they're larger than residential UDI usage right now. So that's part of the thing that gives people a lot of pause about AI Now.

I have a little bit different view on it. And, just by background I've said this before. I subscribe to the pro version of every data, of every AI right now. I use all of them and I'm learning that they're not all the same. It's not like switching from Coke to Pepsi. If you go from open AI to Claude with this Anthropic they all have their strengths and they all have their weaknesses depending on which one you wanna use.

But what has changed in the last 90 days that has really brought this on forward is what's called agentic AI. In other words, we're all familiar with when Chat GPT, went to its free service in late 2022, it's called generative AI. That's prompt and response. Ask it a question, get an answer. It's Google search on steroids.

But what Agentic AI or AI agents is. Give the AI control of your computer. Tell it. It has the ability to read your files, change your files. Execute commands without you doing it. So don't tell me how to do it. Just go do it. And that has been the thing that has really opened up people's eyes why the software stocks have been tr struggling because the most o obvious application is as in coding and in development right now, that people have been using AI to basically.

As an assistant as opposed to just something you ask questions for, and I do think that is going to be transformational. Now, as far as jobs go, I have a different view on it, not necessarily a unique view but what is a job? A job is a series of tasks. You do a number of things and put 'em together, and that's your job. Now...

Some of those tasks tend to be boring and tend to be repetitive, and you don't wanna do them. They're usually around compliance, accounting, answering emails, putting together slide decks, updating Excel spreadsheets. I'm speaking from a financial point of view filling out expense reports and all that.

AI can be very helpful in all of that stuff, in streamlining or automating a lot of those processes in order so that you don't have to do 'em. Now, that's gonna free me up or anybody else up that uses AI to do more of the higher end stuff. Collaboration, creativity communication. These are things that humans are clearly better at than AI.

If your argument is. Oh, if AI's gonna do all this other stuff, answer some of my emails, help me, take the one hour process of putting together my slide deck and make it five minutes, filling out my expense reports automatically. I could go home every day at one o'clock 'cause I don't have to spend the other three hours at work doing that other stuff.

Then your job's in trouble. But if you say, no, I have three more hours to do more higher end stuff at my job, then your job necessarily won't be as much in trouble. But, so I'm not of the opinion that it's necessarily something we should be afraid of, but I understand why everybody is because they're only told you're gonna lose your job and you're gonna pay more in your electric bill.

And most people haven't yet fully recognized that this Agentic AI is here. And they're saying, for what? For a Google search, why am I gonna lose my job over a Google search? Why am I gonna have to pay more in electrical bills over a Google search? And so I do think that this industry is moving so fast.

I'll give you one fun anecdote and somebody told me to do this with Claude. On on Claude. If you asked AI. Right now, how do I use you? How do I use AI? It'll give you instructions on how to use it, which are three months old, which is not even the latest version, so it's moving so fast, it can't keep up with itself right now.

Erik: I couldn't agree more with that. I use Claude and chat, GPT both extensively. I agree with you that they're completely different in their, I hate to say the word personality, but I don't know how else to describe it. They're completely different tools with different characteristics.

There's something that nobody's talking about though, which I think they should be, which is, we've heard one side of this argument, which you just articulated perfectly, and that is. The argument in favor of AI is that it enables humans to do much more than they ever could have done before. It means our economy could be much more productive because you can literally write and publish a book in a week or two using Claude that just.

Wasn't possible previously. You can do a lot of things. The thing is the energy consumption side of it, and it seems to me that the solution to this is if you change the rules and you told the tech companies, look, you guys are really good at innovating and doing things more quickly than a lot of other industries are.

The new rules are we're gonna open a whole bunch of doors for you. We're gonna take a lot of barriers outta your way, so you can have the growth in everything you want, but it's a two for one. Not only do you have to build your own energy to support your data center, but you have to build double the amount of energy that your data center needs and sell it back to the grid so that.

In the course of getting your AI running and doing everything you're doing, you're supplying more energy to the rest of society, not consuming net energy that we can't afford to spare if we un. Regulated a bunch of things so that Google was allowed to build power plants all over the countryside and could do things like work with, acquiring an advanced nuclear company, investing.

We just talked to AALO last week about mass produced entire nuclear power plants. If the hyperscalers. Could buy into something like that and start building nuclear faster than electric utilities can do it because frankly the tech companies are pretty good at innovating technology and deploying it quickly.

I think you could see the AI industry supplying net energy to the rest of the world. Problem is, there's protections in place that only utilities are allowed to build power plants and so forth. I think we should re-architect this and open the door for high tech to build more than enough energy to, than it consumes.

What do you think of that idea?

Jim: I think not only do I agree with it, I think that most of the high tech is on board with that idea full scale, that they would be more than happy to

They're trying to do

Jim: it right,

but the rules don't really

Jim: allow it. And the biggest problem with the rules is that you now run into the environmental lobby and the environmental lobby is full sail against a lot of these rules.

Because one of the things, as you mentioned. They're saying, yes, I'm ready to do that. Yes. We actually will build up energy sources to not only power our data centers, but overpower our data centers so we can sell back to the grid and they'll go You one step further. The energy sources that we have don't produce any pollution.

You go okay, what is that energy source, small nuclear reactors? And that's when the, the environmental groups then throw up the wall and go, hold on a minute, hold on a minute. We're not building more nuclear reactors. And they're like, oh, yes, that is the answer. These small nuclear reactors, they're the size of a two car garage and they will produce tremendous amounts of energy and they exist.

Their safety record is very good. They'll try and demagogue them by that. This is the environmental groups and saying that they're dangerous and that we shouldn't be using them, but they, but there's no reason to think that they are dangerous right now. It would just be demagoguery that we would say it, but, so that's really where the blockage blockages.

Now maybe there is a sign that this is coming because in the last week. The Trump administration has given at least Department of Energy approval, if I've got it right for a new nuclear power plant to be built in the United States. The first one in 50 years that's gotten approval doesn't mean it's gonna, it's not done with all the approvals, but we are moving in that direction.

So I do think you're right. If you allow the tech companies to, build your power, build your data center, bring your all, and then construct the power to build it, they're all for it. You've gotta let them do it. And you can't say we're gonna do it, but then we're gonna go through the same rigamarole that we have right now.

You wanna build some power plant to, to palm fund it first we have to have 10 years worth of studies done. Then we have to have five years worth of public hearings, and then maybe we could build it, if you're still interested in doing it at that point, cannot have that game being played anymore with this.

So that's really where the fight is gonna be is really with whether or not the environmental lobby will allow this to happen.

Erik: Yeah, that announcement that you're talking about was terror power and their sodium cooled nuclear reactor. It's the first time in the 52 year history of the Nuclear regulatory Commission that they have ever approved a civilian power reactor that was cooled by something other than water.

They're finally moving off of 1952 technology to something more modern, and the NRC is not in the way as they've been in the past. So I think that's a breakthrough, and I hope that we see more of it.

Jim: I agree, and I really do hope so too because we need it for a lot of other reasons too. Because as AI comes not only.

There's a thing called Jevons Paradox, that when the cost of something goes down, you get a lot more of it. So if the cost of creating software and the cost of using a computer becomes easier, and I'm talking about a. My personal cost. Your personal cost that we're just at the point where you just talk to your computer and it does things for you, or it runs things for you automatically.

You're gonna have more of these and you're gonna demand more of it. And we're gonna have more power demands for us, not just for data centers, but even for our personal use too. So as you make the cost of things go down, you get more of it. And we're gonna need more power in order to meet those demands.

Erik: Jim, it seems like you and I agree on a lot of the Jevons paradox example, as well as just the big picture of AI as a good thing, not a bad thing, but I think there is an angle we haven't acknowledged yet, and that is we already see a lot of divisiveness in the US and in the western world in general.

Let's talk about what AI really does. It enables smart people to be a hell of a lot more productive, but it also does, I think, legitimately eliminate a lot of jobs for dumb people. The office worker that had to do the grunt work, the. Because the smart executive, needs that assistance.

Yeah. Smart executive can pretty much be self-sufficient with AI and doesn't need the grunt workers anymore. Does this create a further worsening of the K shaped economy where the people who are well educated, intelligent enough to know how to leverage AI and use it to their benefit, start to really do well?

The guy who's not smart enough to figure out what it is really in trouble.

Jim: Oh yeah. You can even think about I read this a couple years ago, and I assume it's still true, that the IRS puts out these lists of whenever you fill out your tax returns, they ask you what your occupation is and you write it down.

And they did a study of that. And the biggest occupation listed in the United States is the word has the word driver in it. Taxi driver, truck driver, forklift driver, bus driver, fill in, whatever. But the word driver, like millions and millions of jobs all autonomous driving is coming and AI is gonna power that.

AI is going to power 50% of all. Of minimum wage jobs have the word cashier in them. That's gonna be done by AI as well. So you're gonna see a lot of these lower end jobs that can be automated away. Now the funny thing about AI is the more science fiction side, you could argue that AI can help scientists cure cancer.

But if you asked AI to power a robot to fold laundry, it's still struggling to do that part of it as well. So there's gonna be other roles that are gonna be, that it can't really do right now, but the concern that I have with it is, and we saw this during the Industrial Revolution, that as we first get this new technology, industrial Revolution, AI, it automated away a lot of jobs.

200 years ago it was, farming jobs and the like, and all you saw was job loss first. And then the job creation came second because keep in mind what we're talking about. If you automate, I'll use my example of driver. If you automate driver and all, and the world is reduced to 50 million or 75 million autonomous taxis that run 24 7, 365 in autonomous delivery trucks.

The price of transportation is going to plummet and it's gonna cost you practically nothing to ship either yourself to the airport or a product somewhere else. That is going to make business models that are not economic now. And we don't even think about 'em 'cause they aren't. Will be economic in the future if you want a near term example of that.

The Apple I store opened up business models such as Uber, Airbnb to be able to compete with taxi drivers and hotels. Because they had this new technology that you could now put an app out and people could use the app to book book somebody's room in their house or book a private car to take you from A to B.

And so it created a lot more jobs. So I do think that. What technology has always done, and I do believe is a net creator of jobs. So ultimately, yes, we might lose that driver job. We might lose that cashier job, but we're gonna create whole new industries and we're gonna need those people in other industries, the concern is the jobs get lost first.

The new jobs get created later, and in that gap. People get angry. All they wind up seeing is job loss. All they wind up seeing is what they perceive. Is it making things worse? and in The 18th century when we had the industrial revolution, we got a pushback. The pushback was Frederick Engles and Karl Marx writing the Communist Manifesto and pushing back against the capitalist system.

We might get a pushback against this now. It won't be communism. That was a pushback to a different era, but it'll be some kind of collective socialistic type of argument to put up a barrier from putting this together. So I hope that the AI industry, and I hope that the AI proponents understand that if all we're going to do is say, great, we can automate this and fire all these people and everything is better, it won't be better in the long run.

It might be better for the very short term, but if it's gonna be, we're gonna create new opportunities at the same time. You lose your job here, but there's gonna be this new industry here begging for people to help doing whole new things that we haven't figured out yet because of that new technology. I think that transition will be much softer, but that is a real risk right now.

Erik: Jim, I can't thank you enough for a terrific interview. As always, before I let you go tell our listeners who are not familiar with what you do at Bianco research a little bit more about what you're up to. You've got WisdomTree now following your work with an ETF that basically follows a fixed income index that you created.

Tell us more about that, how people can invest in it, as well as your Twitter handle and all that stuff to follow your work.

Jim: We put out Bianco Research, which is an institutional research product at biancoresearch.com.

If you're interested, you can sign up for a free trial there. Otherwise, I'm very active on social media, under my bussiness name Bianco research on Twitter X, on YouTube, on LinkedIn. And also we started a couple of years ago an in fixed income total return index, which has its own website, Bianco advisors.

It's a Managed index to try and beat the benchmarks in the bond market. And we have an ETF with our partners as WisdomTree as you mentioned, WTBN, WisdomTree Bianco, Nancy as its ticker symbol that tracks our index as well too. So you can find out more about it by looking up more about WTBN or looking at biancoadvisors.com.

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

Erik: Joining me now is Matt Loszak, founder and CEO of Aalo Atomics, a company that proposes to mass produce not just modular nuclear reactors, but entire modular nuclear power plants in a gigafactory for the express goal of rapid deployment at scale. Aalos initial market focus will be on data centers where rapidly deployable power solutions are most critically needed.

In the interest of full disclosure, I am personally a private equity investor in Matt's company, Aalo Atomics. Matt, it's great to have you on the show. Thanks for joining us today. 

Matt: Thanks so much for having me. Great to be here. 

Erik: I wanna start by playing devil's advocate and describing the most commonly held view in the conventional nuclear power industry, despite the fact that I personally disagree pretty strongly with that view.

The common wisdom says that the pressurized water reactor originally designed for the Nautilus submarine back in the early 1950s has evolved to become the gold standard of nuclear power alongside its close cousin, the boiling water reactor, most seasoned. Nuclear industry professionals share the view that the operational experience that we've gained from running these lightwater reactors as they're called for several decades now, is the most important safety consideration that we should think about.

And so they question why anybody in their right mind would even consider deviating from what's already been proven to work for nearly six decades. Thousands of reactor years of commercial service. For those reasons, they strongly advocate focusing the formative nuclear renaissance on building more of them, more lightwater reactors like the Westinghouse model, AP 1000.

And a lot of these people think that experimenting with different reactor designs, involving coolants other than water, is just asking for trouble both economically and from a supply chain perspective. Matt, you and I disagree with the consensus view. What's wrong with the narrative shared by. So many of your peers in the nuclear industry that we should just stick with what we already know, which is lightwater reactors that have been proven to work for decades.

Matt: If we had to boil it down, I'd say it's that essentially the current solution is a local maxima, but not a global maxima. So if we think about some of the problems that have happened in the past 20 years of nuclear deployment, we saw Vogel go 10 years over schedule, $15 billion over budget. And essentially the problem is that you have a industry where every reactor that's been built in the past.

75 years is bespoke. They've been one-off projects. And in that world, the best way to try to lower cost is just make the reactors bigger and bigger, and stick with the same design you've been doing before. but as we know, there's two ways to optimize economics. One is make things bigger, and two is make a lot more of that.

The interesting thing is the idea of making a lot more of nuclear reactors has really not been attempted properly. In other words, there's no single large factory we can point to globally that is mass producing along the lines of Henry Ford's cars nuclear reactors. The reason to switch off of water is essentially this emergent realization when you start to explore and ask yourself.

What is the best design to mass manufacture? And if you're no longer just going bigger and bigger and you wanna get a better design that can be maybe transportable on everyday roads, then you start to look at these other coolants things like liquid metal, sodium molten salt, or even gas. And especially sodium and molten salt.

Allow you to make the the vessel of the reactor much smaller. So in other words if the vessel was the same size for all these coolants with sodium and molten salt, you'd get around anywhere from two to 10 times more energy out of it. So you can imagine that's much better from a mass manufacturing perspective.

And so you also get other advantages, things like, more Inherent safety. And something I think we might talk a bit more about later around when you can achieve higher temperatures, you can service things like industrial process, heat and so on. But those are some of the core reasons for exploring other technologies beyond just water-based gigawatt scale reactors that we have today.

Erik: Certainly the high tech boys have recognized this case, and I know that's where you're focusing a lot of your business. Help our audience understand what this advanced nuclear industry really is all about. One of the most commonly held views among institutional investors is, look, we don't wanna invest in science projects.

We don't wanna mess with unproven technologies. So even if you're onto some great idea, that's gonna completely change the course of human history. Eh, it probably belongs in a research lab at MIT. Not in a startup company like Oklo or Aalo that proposes to actually be selling nuclear reactors to data centers in the next few years.

So we really only wanna invest in stuff that's already been proven to work and proven to be deployable in a commercial context. How much do we really know about all this advanced nuclear technology and to what extent is it proven to be viable and how much technology risk is involved in deviating from that accepted norm of, essentially lightwater reactors forever, which is what a lot of the industry wants to focus on.

Matt: I think a lot of people don't realize that advanced reactors actually do have quite a bit of operational history. So water cooled reactors definitely have the most to the tune of thousands of cumulative years of operational history. But sodium still has around 400 operational years. Gas has maybe a hundred and molten salt has on the order of just a few years, it's the least one on molten salt. But the, these have been built before. And the interesting debate in nuclear is why these technology branches on the tech tree weren't fully explored. And, our argument essentially, my belief is that it was largely for political reasons.

If you look at the history that these reactors did not get further explored. And one interesting anecdote is EBR2 which is one of the reactors that we take the most inspiration from operated from essentially for 30 years at 20 megawatts of power. And it was a real success. When they decommissioned it, the sodium had bit, the look of metal had been so compatible with the stainless steel that the welder's etchings were still visible inside the pipes.

And it operated with a very high capacity factor for that time as well. And interestingly, they did a test where they basically tried to make the reactor melt down by removing all the backup power and leaving the control rods, the brakes on the reactor fully open and or the operational open level and what they found.

Is that the reactor was able to safely shut itself off inherently 'cause of the physics of the system without depending on human control. So it demonstrated good capacity factor, good safety, but you'll never guess what happened 12 days after that test occurred. Chernobyl. It's some of these different sodium reactors had different political challenges that caused them to slow down development.

But I think that, taking a step back, the thing to realize is these advanced Fision reactors are not really for example, fusion, where there's Nobel Prize winning discoveries that have to be made, or new science has to be unearthed in order to make it feasible they've already been deployed. And the kind of best analogy in my mind is.

Some of these advanced coolants, like sodium are like SpaceX with landing a rocket. Is it easy compared to water? No. There's a bit of extra engineering challenge, but if you can do it, it unlocks a holy grail of economics. And if you get a smart team together with a bunch of capital and the right environment with the right customer, in this case, AI data centers we think you can really make this work.

And so I think that's what's most exciting about this technology. 

Erik: Matt, you mentioned a holy grail of economics, and that's what I wanna focus on next. Not so much what's possible in the next few years, but let's zoom out and talk about the future of nuclear energy and what it's going to take to truly change the course of human history and deliver a new source of energy that will eventually be able to replace fossil fuels and give us a cleaner, greener, better future.

The more I've learned about all this nuclear energy technology. And more that I've come to realize two things. Number one, we're never gonna really and truly change the world and be able to scale nuclear up enough to replace fossil fuels until we get to something called a breeder reactor economy.

The second thing though is that breeder reactors at least. As they've been developed and deployed to date, have generally not proven themselves to be economically viable for commercial deployment. So that's a real conundrum. Let's start with what is a breeder reactor in the first place? Why is that important?

Why do we need breeder reactors to eventually change the world completely with nuclear energy? And then what are your thoughts on how we overcome the fact that. Frankly, breeder reactors haven't proven themselves. Economic, at least not yet. And how do we get to that eventual infrastructure that we need?

How does the evolution occur and why is that important? 

Matt: Currently the nuclear fuel supply chain is primarily based on uranium 2 35. And if we were to burn all of the known resources on U235, it would probably have a similar life span to oil and gas and lasting us another 200 years maybe. But if you can do a breeder, it unlocks different fuels still in a nuclear reactor like thorium.

And uranium 238, which are both much more abundant than U235. So essentially that enables you to expand the usable fuel lifespan of known reserves on Earth to 4 billion years. That's what's really exciting is when you think about scaling up in the future of energy production on earth really it almost seems inevitable.

That this will become the main source of energy that replaces oil and gas on earth. And certainly inevitably within a 200 year timeframe, but we think much sooner because of the demand from AI data centers and nuclear being the best fit for powering them. That's the kind of bottom line now. So if that's the case, why are we not doing breeding right now?

The answer is it's a bit more expensive right now, and there's gonna be a crossover point in the supply chain of U235 and U238 when it makes sense to actually do the extra step of recycling and reprocessing the fuel to access the resources within spent fuel and to switch the mining supply chain to beef for thorium and U238.

So there gonna be an economic crossover point when that occurs. For the time being, the cheaper, faster, short term path is to use standard low enrichment. 5% uranium dioxide which is what we're doing at our company. But yeah, that's essentially how we see it is it's an inevitable move that'll happen in the coming probably couple decades.

But for now, the cheaper, faster approach for the customer of the day data centers is to use the existing supply chain and the existing reactor technology. 

Erik: I think there's a point here that a lot of people don't fully appreciate, which is they've heard about these breeder reactors being able to use this fuel.

The, only less than 1% of uranium that's mined out of the ground is U235. The kind of fuel that's actually used today, the other 99.3%. U238, and when people think about it, they hear, okay we're wasting all of that U238. We're not putting it to use, but hey, the cost of the uranium's not really that big of a deal to run a nuclear power plant.

Let's not worry about it. What I don't think people really understand is we're not just wasting it in the sense of not putting it to good use. We're literally creating so-called nuclear waste spent. Fuel waste is mostly all of that. U238 that. People think is just this horrible, awful, toxic stuff that stays around forever really.

It's perfectly good nuclear fuel that we could have used to make energy. We just didn't do that because we didn't build the style of reactor that we've known about. Since before I was born that can use that U238 fuel. So I want to talk about this nuclear waste. Now a lot of experts say, don't worry so much about it.

It's a public perception problem, but technologically speaking they shouldn't worry 'cause it's not as big of a deal as they think it is. And I think that those technical experts are missing the point because the public perception that this nuclear waste is horribly dangerous is really I think the biggest thing that's holding back the growth of nuclear energy.

So talk to us a little bit about, and we've been hearing these stories that some companies are coming up with technology. They can actually take the stuff we call nuclear waste that's been sitting around for decades, burn it up and use it as fuel in order to make more energy, which covers.

Two, kills two birds with one stone. One is we're making energy that we don't have to mine new uranium for. But the other thing is we're getting rid of all that nuclear waste that everybody's so concerned about. Are we back to science projects here? Is this brand new unproven technology or is there really a way that's available today that we could get rid of those 250,000 metric tons of spent nuclear fuel waste that's sitting around in dry cask storage all around the world and get rid of it by actually making power from it.

Matt: So there, there definitely is a way. And again, coming back to EBR two, the reactor we spoke about earlier that was actually the first time we demonstrated what's called closing the fuel cycle. Essentially the way to think of this is as follows. First of all, nuclear waste. The fears of nuclear waste were somewhat propaganda driven by, in large part the oil and gas lobbyists in the seventies and eighties.

That created fear around something that really hasn't ever harmed anyone. Is pretty easy to store and there's tiny amounts of it. I have to be empathetic to. Fears of nuclear meltdowns and radiation, causing relocations. And that's something we also can avoid through technology.

But the nuclear waste issue, I think is almost entirely propaganda and not really at all technological, technologically, it's a solved issue from a safety perspective. But to your point, it's not just about keeping it stored safely.

It's also about the fact that when you have nuclear waste, it's actually a very useful substance. There's still 95% of the energy still in there what's happening around the world today is France is currently recycling most of their fuel and they're extracting. So once fuel is burned, some of the, what's called Fisile isotopes, like U235 and plutonium are still in there.

You can make what's called mixed oxide fuels by recycling the fuel and just extracting those leftover facile isotopes. But, With the approach of using breeder reactors, we can then tap into the other 95% of the energy that's still in there, which is the U238. And in doing so, you can really get a lot more energy out of the fuel and also reduce the volume of waste that you have to even store to begin with.

So to give you an anecdote the entire history of nuclear power production in America. So 70 years for 20% of on average, 300 million people has produced only a football field of waste stacked around 10 yards tall. And if you were to do waste burning and use the useful stuff in that leftover fuel, then.

The height of the true waste would only be six inches on that whole football field. It goes to show you, a waste is not really this existential problem for nuclear. It's actually one of the main selling points because everything produces waste. Oil and gas puts waste into the air we breathe.

Solar panels have an end of life and must be, put under the earth or expensively, recycled. Same with wind turbine blades. So everything produces waste when it reaches end of life. But nuclear's, main selling point, or one of them is that there's such a small amount of waste and it's so easy to maintain.

And what we conceive of as waste today is actually, like you said, a very useful substance. It's a very valuable substance that we actually want to to use in future reactive. 

Erik: Matt, you and I share a vision that the way we get from where we are today to the point where nuclear energy finally becomes cost competitive with energy from oil and gas, is that we need to mass produce.

Not just components to build modular reactors, but we need to do factory assembly line mass production of entire nuclear power plants in Gigafactories, so the whole power plant just gets set up and configured on site like IKEA furniture as opposed to having to be custom built on site the way we've built all of the nuclear plants that exist today.

I'll save my own reasons for thinking that's important for another podcast. What are yours? 

Matt: At a high level what we're trying to do. I think what the ideal solution here is to turn nuclear from being a project into a product. And I'll give you a few examples of that. But the key advantage, if we're asking why does it make sense to do this for the current customer of the day data centers, it's all about speed.

And if you can mass produce your nuclear power plant, again, not just the reactor, but the whole plant in the factory, you can do a lot mo more in parallel and essentially deploy hundreds of megawatts in under a year. Whereas normally it would take five or 10 years eventually. The goal is to be deploying 10, 20, 30 gigawatts per year by doing a lot of sites, a lot of reactors, a lot of nuclear product in parallel.

But that's essentially what's the key unlock for AI data centers who will pay a real premium in return for speed. Clean is nice and base load is important, but speed is really one of the most important things there. In our view, the key to achieving this is extreme vertical integration.

And maybe we can talk a bit more about this later, but that's a really key part to achieving that scale and speed and essentially cost reduction will follow from that scale and speed. And nuclear, a big part of the cost today is actually interest. 'cause it takes so long to build all this major hardware.

So if you can build it much faster in a more predictable, repeatable way, costs come down. And then that unlocks a whole bunch of other markets for whom a gigawatt scale nuclear plant would've been just too big and too expensive and too slow. But when you get faster and below a certain cost threshold, let's call it seven to 10 cents a kilowatt hour, then it opens up all these other markets like large industrial onsite loads.

For example, desalination, industrial process, heat, small utility, even large utility, and then microgrids for powering EVs hydrogen production, ammonia, et cetera. So those are some of the biggest reasons to mass produce a slightly smaller nuclear product that. C major cost reduction and then unlock entirely new markets that were not previously available to nuclear.

Erik: I wanna stay on this topic of scale 'cause I think it's the single most important thing we have to think about. It's been a lot of hype in the industry about, Hey, we're gonna triple nuclear by 2050. Sounds great. A lot of people are skeptical that's even possible because that's a lot of old school nuclear power plants to build.

If you build them the old way, the thing is what you'd need to replace fossil fuels is not tripling nuclear. It's literally 25 times the amount of nuclear that we have in operation today. So my view is the most important thing is get the cost down to the cost of energy from coal and gas. Because when you do that, it unlocks what I call the nuclear Henry Ford moment.

And you alluded to Henry Ford and his automobiles a little bit earlier. I think this is really what the game is all about because there's 10. Terawatts of nuclear generation capacity 25 more than we have today that could be deployed if we could somehow get the cost down to where nuclear costs the same as coal and gas.

I, I don't think it's at all an exaggeration to say we could change the the course of human history in a way that it is more impactful than the industrial revolution. If we could figure out how to get the cost down and really scale this up so that we could actually build 25 times more nuclear than we have today.

But we're struggling right now just to get back in the business of, building nuclear power plants. So I wanna talk about the future. Do you think that vision can ever be realized? And is it mass production that gets us from there, from here to there? And if not, what else do we need to worry about in order to achieve that vision?

Matt: It's gonna be really hard. But I think it's possible. If you think about the pathway in going from 10 reactors per year to a hundred to a thousand to 10,000 and in doing so, you go from, at our reactor output, a hundred megawatts per year to a hundred gigawatts per year. You can imagine a lot of different things in the supply chain will break along the way.

And I think this is all very doable, but it requires a very ambitious effort from a company really thinking about the future and how to break down those barriers in the supply chain at every step along the way. So if you think about what it takes to deploy 10,000 reactors a year, for example. In the short term, you can deploy a bunch of reactors let's call it 10 per year with the existing fuel supply chain, pump, supply chain, turbine, supply chain, heat exchanger, supply chain.

But different parts of that supply chain will break as we go in that journey. For example, in a hundred reactors per year. Vertical integration on the heat exchangers becomes important. At a thousand, the company will have to make its own turbines and at 10,000 a company using sodium might have to create its own sort of industrial conglomerate that does things like sets up a reactor at Salt Lake City to separate sodium from chlorine and the salt that's there and manufacture its own sodium at scale.

So none of this is really impossible from a first principles perspective, it's all very doable. It just takes the right team, the right effort.

What this unlocks, if you look at some of the technical economic models, is you can very rapidly get below 10 cents per kilowatt hour. Let's call it n equals 20 reactors. By then, you could probably get below 10. And then to get to, for example, maybe 3 cents one day, which would really unlock a whole bunch of new markets and really beat oil and gas across the board.

Call it two to 3 cents, might require a different kind of learning. For example, to get down below 10 might involve just construction learnings turning it more into a product versus a project. Building most of the modules in the factory and keeping onset construction to basically a very simple concrete slab with no excavation and really productizing nuclear.

But then to get it down to 3 cents might require, much more of a, I just referenced with the extreme vertical integration in the supply chain to achieve way faster greater scale, faster deployment, lower costs. But I think that is the core way to. Allow nuclear to really do stand a chance of replacing oil and gas almost wholesale in the next century or so.

Erik: Back in Henry Ford's day, automobiles were like, private jets are today. Everybody knew what it was. Everybody wanted one, but nobody except the super rich could afford to actually have one. And I've contended that the same thing is true of nuclear energy. It's the safest, cleanest, greenest form of energy that's known to man, but it frankly just costs too darned much.

It seems to me, if you think about Henry Ford's challenge, he wanted to bring the cost way down, but he needed at least a small number of rich guys that could afford the bespoke automobiles in order to get his business going before he could really build his assembly line and bring the cost down to the point that the common man could afford one.

It seems to me, if we take this analogy forward to the 21st century, the hyperscalers. And their AI data centers are the rich kids who can afford to buy private jets. They're the guys who could afford. If you said, look, we can deliver your data center energy from an auto atomics nuclear plant that we can roll out in a period of months rather than years, they can afford to pay extra for that, is that the strategy is to use the budget of the data centers to get this started and then eventually scale it up to mass, really big mass production from there.

Matt: Our kind of top secret master plan is to start by servicing data centers because they have a high willingness to pay with a lot of urgency. So they'll pay a premium for speed. And as we come down the cost curve, we can go after all these other markets that we talked about. Industrial process, heat desalination, large utility, small utility.

For whom, if you go and talk to them today. They would say, come back and talk to us when you're below 10 cents per kilowatt hour. But once you get down below 10 cents, it really opens up this whole other set of markets. And like we were referencing earlier, eventually you can imagine going after the developing world with around 3 cent per kilowatt hour electricity to bring the world out of energy poverty.

So in the long term, that would be our goal. I think that's a good goal. But, I think it's important to realize, like we talked about earlier, there are two main ways to make nuclear cheap. You go bigger or you go more numerous, and the beautiful thing is the hyperscalers have a huge amount of demand.

We're talking a hundred gigawatts in the next five years. In the US alone for a it's a huge amount of demand for a very consistent product, and they want a reactor that's a bit smaller because then you can deploy a fleet of smaller reactors and have a higher availability. Meaning if you have a single gigawatt scale reactor, it has to go offline for refueling for a month, every two years.

So you lose the whole gigawatt, which puts a big strain on the grid. And then you see data centers being bad Samaritans with their local communities, putting a strain on the grid. So if you have a fleet of these smaller reactors, you can refuel one by one and essentially always have power available at a high availability.

So it's cool how these customers, they want exactly this product, which almost is inventing this new nuclear product that can then, once it comes down the cost curve, go after all those other markets we talked about. Essentially allows you to go from large bespoke reactors to small, repeatable mass manufacturable ones.

And the fact that it's clean is essentially a nice to have right now, but frankly will benefit everyone in the long term. That's the last kind of, benefit of doing this approach. But yes, I think the hyperscalers are arguably the core unlock to this new model in nuclear that we haven't really seen done before.

Erik: Now I want to touch on what has to be the hottest marketing trend in the nuclear power industry. Something called SMRs, small modular reactors. I have to confess my naivety, when I first heard that phrase, I assumed that they were talking about nuclear reactors that would be both small and modular. Given the name Small Modular Reactor frankly, I don't think either of those things are true for products like the Westinghouse AP 300 or the ge Hitachi BWRX 300, which seem to have taken over that marketing phrase of small modular reactor.

So let's just talk for a minute about why would small be better than large? In the first place. 'cause as you said the whole trend of the 1960s and seventies was to go to much larger reactors for the sake of economy of scale.

So why do you want to go from large to small in the first place? And how small does it have to be in order for that benefit to actually be realized? And do these SMRs, like the AP 300, achieve that goal? 

Matt: In terms of achieving the Henry Ford vision for nuclear, there is a sweet spot in terms of size and that size of all the modules for the reactor and the whole plant.

But if you think about it, a reactor that's too small will have very bad economics for physics reasons, it has a very poor neutron economy, and if you go too large, you can't ship it on normal roads. So if you're trying to build one reactor a year. Then, yeah, I'd say build a bigger reactor. But if you're trying to.

Ship 10,000 reactors per year. You've gotta have something that's the right size to ship normally on everyday roads and the rest of the global transportation network. So that's the thinking between that's the thinking behind what is the optimal size for mass production and for rapidly achieving the scale that data centers are desiring.

But the other kind of thing to highlight, so the SMR term you correctly highlighted that. They're not small nor modular, but in my view one of the other major disconnects and maybe the biggest flaw in the SMR vision so far in terms of how it's been expressed is that traditionally those modules all come from different factories.

So a single company for example Westinghouse or Okolo, they could be a reactor. Designer, but something that often surprises people is ok. Low, for example, is a fully remote company. They don't have a factory. So what happen is the reactor designers send the design of their SMRs to dozens of different companies who each have their own factory.

And when those mod modules come together at site, they don't fit. They have reworks and slowdowns, and that's why Vogel went 10 years over schedule and $15 billion over budget. So if we think about. The best approach to SMRs in our view, what that would be a single factory that takes raw materials in and outputs modules that we know will fit together.

In fact, we've integration tested them in the factory, and then when they come together at site, it's way faster and way easier. And by the way, they're all sized properly for mass transportation. That's what we think is really the proper incantation of the SMR vision. And so that's what we're working on at all though.

Erik: I think we're very much aligned in our thinking because I've always said that what matters about small is it's small enough that you can ship it in the existing container, ship based and, flatbed, truck based global infrastructure of logistics. But the other side of this is. The time to actually build the onsite part of it.

And it blows my mind when I see Westinghouse bragging about this is gonna be great because with the AP 300 SMR, we're going to be able to build the entire reactor in only four and a half years. And I'm thinking, wait a minute, isn't that how long it takes the Koreans to build a conventional nuclear power plant?

It seems to me, Matt, that we should be striving for four and a half months at most to take a entire nuclear power plant that was factory built and set it up and hook it together and I don't mean the site work and grid connections, but once you've got the site prepared and you ship in all the stuff that comes from the factory, I think it should be months less than a year to completely set it up, hook it up, and get it running.

Is that realistic? And how long will it take to realize that vision? 

Matt: I think we might talk about this a bit later, but our first power plant we are building currently. All in, it'll be under a year in terms of start to finish on turning that thing on. And the whole goal here again is to turn nuclear from a project into a product.

And so if you're doing more in parallel in the factory it allows you to, at the site really reduce the work that's involved. For example. If you're trying to make nuclear deployable more quickly and more predictably, a really dumb way to start is by digging a gigantic hole. Because different sites have different water table, different rock hardness, and that can introduce a lot of variability between sites, which can slow you down, and you really wanna try to make it so that every project is the exact same.

As predictable as possible, and that's where you see the speed benefits. So yes, we believe that it will be possible and it almost already is to deploy these reactors at this scale in under a year. And that's even accelerated further by some of the new licensing pathways under the current Trump administration around DOE authorization, categorical exclusions for NEPA and more.

So the somewhat short answer is yes. That will be possible, and it's gonna have to be to keep up with the pace of development that the hyperscalers are demanding. 

Erik: Matt, you've mentioned something called industrial process heat a few times in this interview, so I want to come back to that and understand in a little more bit more detail what that means.

Only 38% of global energy is used to make electricity in the first place. What we normally think about when we're discussing nuclear reactors, of course, is making electricity. Now another 25% of global energy goes to transportation fuels, but almost a full quarter. Of global energy consumption. That's nearly as much as we spend making all of the transportation fuels that we need combined to power the entire global economy. The rest of that last quarter of global energy production goes into something that's called industrial process heat.

Examples of that are smelting, steel, making concrete, and so forth. Why are light water reactors poorly suited to delivering process heat? And what's better about advanced nuclear reactors in order to better solve that problem 

Matt: with light water reactors, the reason they can't go to as high of a temperature is because water is the coolant and water boils at around a hundred Celsius.

So the. The way that water-based reactors have essentially made their designs to date is they apply a lot of pressure, hence the name pressurized water reactors, to allow the water coolant to go up to as high as 300 Celsius. But if you look at industrial process heat applications, most of the applications occur at temperatures greater than 300 Celsius.

So with advanced reactors using high temperature gas or sodium, or mold and salt. You can achieve temperatures in the range of 500 to 800 Celsius, and that unlocks essentially roughly half of all industrial process, seed applications globally, which could be decarbonized and replaced and powered by nuclear in order to reach the higher temperatures.

Still, you could. In theory, you use more advanced nuclear designs or electrical assistance to reach those higher temperatures. So it's still possible with nuclear. But at the lower temperature from 500 to 800, you get a really nice benefit on efficiency. Because traditionally when you make electricity with a nuclear reactor.

Two thirds of your heat energy overall is going to waste heat and only a third is converting to electricity. But if you are doing industrial process heat, you can essentially use the heat coming straight outta the reactor and use a hundred percent of it or much more of it using, much more efficiently than than the electrical use case.

So it has extra economic benefits there as well. But yeah, fundamentally you can think of it as data centers will be the ideal initial customer to bring the cost down and it unlocks all these other markets to help bring industrial process heat to be decarbonized with nuclear around the world.

Erik: Matt, I can't thank you enough for a terrific interview. But before we close, I want to give you an opportunity to pitch what your company is working on, because frankly, you're the only advanced nuclear company that I've found that shares my own vision for mass producing, not just nuclear reactors, but entire.

Nuclear power plants in Gigafactories for the sake of cost reduction. It's that Henry Ford concept of bringing the cost of nuclear way down by mass, producing it in a gigafactory, so that all that has to happen on site is setting it up and hooking it together as opposed to any kind of custom building of anything.

Again, listeners, in the interest of full disclosure, I am an investor in Matt's company. Matt, give us the elevator pitch on Aalo Atomics. What are you working on? When will your technology be ready for commercial deployment? And where can our institutional investor audience find out more about your company and its business plan? 

Matt: Thank you again for having me on this. This has been a real honor and privilege. We are all atomics. We're mass manufacturing nuclear power plants that are purpose built for powering AI data centers.

We started around two and a half years ago, and at that point we were two people. Now we're 140. To date, we've raised 180 million and we're on pace to turn our first nuclear. Power plant on in under Just a few months. I can't say exactly when that's confidential, but it is very soon. So hopefully when I say that, the audience is shocked.

Because going from fanning to fission in three years is very unprecedented. But right now we are raising our series C. It'll be 500 million to a billion, and the use of this fund will go towards the first gigawatt factory. So scaling out our 40,000 square foot. Pilot factory space that we've already built into a million square foot facility that will have the ability to mass produce at least one gigawatt per year initially, and then scale up to five and then 10, and then likely around 20 gigawatts per year per factory in the not two distant future.

So essentially we're turning the first plant on in the next few months. It's a 10 megawatt plant that's purpose built for powering and data center at the end of the year. It'll achieve full power operation. And that's the aggressive internal goal on powering the world's first cot, nuclear planted data center.

And it'll be a great demonstration of something that I think we'll see a lot more of in the years to come. Yeah, thanks again for having me on and it was a real pleasure. 

Erik: Matt, I'm really excited about what you're doing. That's why I invested in it. But I just want to probe a little bit on the business plan because first of all, I think you're doing exactly the right thing, but selling a nuclear power to data centers sounds to me like selling private jets to rich guys.

Is your strategy eventually to get to the point where you can bring the cost down enough mass, produce these nuclear power plants at a price point where you don't have to be an AI data center to afford one. And can you give us a rough sense? I know it's it's probably an unfair question, is that two years out, 10 years out, 20 years out, when do we get to the point where factory mass production brings the cost of nuclear down to the point where it starts to compete with the cost of fossil fuels?

Matt: So I think the interesting is right now, if you look at the Hyperscalers builders of data centers. The price point they're seeing for net new natural gas production is in the 10 to 15 cents per kilowatt hour range. We're seeing as the current pipeline gets tapped out, new fracking, new pipeline expansion has to be.

Built out. And that also adds costs and delays. So the interesting thing is, even at the speed that we're talking about right now for, and the scale for powering data centers today we can come in at a price point right around that same range initially. So by, by many measures coming in right off the bat, being competitive with the ideal oil and gas solutions for this customer.

But as in order to. Displace much more of oil and gas. It'll have to get cheaper. And we believe within n equals 20 to 40 or so. So in other words, after the first 20 to 40 reactors, which would be around, five, call it five to 10 pods getting well below 10 cents is fully within range.

So it doesn't have to be in the thousands to see a very good price point, but in order to eventually get to 3 cents, which is a very aggressive number, it's our, essentially our company mission. That is more of the multi-decade effort, but I'd say probably in the early 2030s to mid 2030s getting below 10 cents is very achievable.

Erik: Matt, I'm really excited to be investing in what you're doing, and I just wanna say that I hope that other companies will come to the table and share your vision and my vision of mass producing nuclear energy in factories so that all you have to do is set it up and hook it up on site as opposed to custom building anything on site.

And I think it's really going to be important that the western nuclear industry embrace this idea because frankly, the People's Republic of China. Gets it. And they're working hard on this too. And if we wanna be competitive in the west, more companies need to follow the lead that Matt's company is taking.

So that's my soapbox for this episode. I wanna move on now and encourage everyone to stay tuned for our post game segment. After the feature interview, ironically, we happened to go a little bit off of our usual macro theme for this nuclear focused episode in a week where the world went To Hell in a hand basket.

And we've got lots to talk about around Iran, the evolving geopolitical situation and so forth. And that's coming up when Patrick Ceresna joins me as Macro Voices continues right here at macrovoices.com.

Erik: Joining me now is Jeff Currie, partner at Carlyle Group, and also well  known as the former Commodities chief at Goldman Sachs. Jeff, it's been way  too long and it's great to get you back on the show. Since you're Mr.  Commodities, I've gotta ask you, I think what we're seeing is the stock bull  market of the early 2020's is giving away to even bigger commodity bull market  of the late 2020s, is that what's happening? And if so, what's the macro driver?  Why is it happening?  

Jeff: Oh, absolutely. I think started back in October, 2020 through the middle of  22. You know, oil got up to like 130. We saw a big run up in commodities  during that time period. The drivers of, you know, we, in fact, we made a call  when I was at Goldman, you know, for a commodity supercycle. 

In October of 2020, and I'd argue every point that we made at that point in time  are valid, even more so today than it was then. So if you liked it, then you really  gotta like it out. So why don't we just kind of go over the big drivers and, you  know, from a supply perspective, you know, it. You know, the, the  underinvestment, you know, you know, years of poor returns going back to  2014 saw capital redirected into other sectors, you know, like, like tech. 

And as a result, you know, you look at like, whether, if it's metals or, or oil or  yeah, agriculture. Most of these real assets have faced years of underinvestment  with, like with oil. This year is the last time you have. Big surge in non OPEC  production. In fact, it was in, you know, this coming month of March. 

That's it. There's really nothing behind it. Refineries, there's nothing behind it.  Copper. I can go down all the metals, you know, you, you, the underinvestment  thesis it's been in place since then. Still very much in power. And when you  look at metals, they've just been a straight line since 2020 actually, you look at  the equal weighted you know, commodity indices, like, you know, the  underweight oil, and we'll talk about oil a little bit later. 

It's just been a straight line since, since 2020. So what were, you know, the, the  drivers on the demand side and I really the same three are there, and it was  deglobalization. Decarbonization. Well today you call it electrification, but let's  call it electrification for current term, current terminology. 

And then the third one was redistribution. So another way to say it is the you  know, the deglobalization is the war on free trade. The decarbonization was the  war on climate change. And the redistribution is the. War on income inequality.  So let's go with the first one. The, on the, you know, the, the, the  deglobalization.

It is so much further than what I ever envisioned. You, you know, whether, if  it's defense spending supply chains, you know, like to say we've weaponized the  periodic table. It's gotten so severe since then with, you know, China curtailing  critical mineral supply in 22 natural gas you know, even more recently with the  US sanctions on Iranian and in Russian oil, you know, all of it's been  weaponized. 

So that story, that theme is just turned up in volume. And that's even what's  driving gold because ultimately. You de dollarize 'cause you don't want any  own, any dollar assets. 'cause the Americans can employ sanctions on you  through the Swift system. So even gold is going up because that, so that de globalization theme you know, alive and kicking and you know, again, another,  actually another data point Europe. 

5% of GDP committed to defense spending. It's all commodity. So anyway, that  theme as, let's go to the next one. You know, we called it decarbonization in  2020 today called electrification Turbocharge. By the way, US, I'm putting US  Europe and China record installation of renewables in 2025 and 2026. 

And in China, as you and I are one of our favorite topics to talk about, nuclear  capacity installation. China is just leading the world in that. So electrification  that story, you know, is, and then you throw data center demand on top of that  electrification story. It's far stronger than we ever dreamed of in 2020. 

And then the, the third one, the redistribution. And that really goes to fiscal  policy. And the need to you know, redirect capital into lower income groups to,  to deal with the civil unrest and the problems that are associated with which are  all over the world right now. And when we think about the spending, and this is  the argument and you, you and I have talked about in the past, Eric, is when you  money goes to the lower income groups, you get a proportionally larger spend  on commodities. 

So you put it together you know, demand even in oil. Surprising to the s upside  for many different reasons. We'll talk about oil later, but we're seeing across the  board, and I just wanna address one last point here before we leave this topic. A  lot of people are gonna go, you know, curry, you're so wrong on oil. 

Yes. I was so wrong on oil. It went down. And we think about commodities, all  the ones that have a atomic number associated with them that are in the periodic  table and the, I like to say the weaponization of the periodic table have gone  straight up anything that has a carbon hydrogen into it. Really struggle.

What's carbon? Hydrogen hydrocarbon. So oil gas in coal carbohydrates like  corn, wheat and so forth. What do these organic chemistry commodities all have  in common? Affordability. They drive inflation. And when we think about.  What, you know, the primary driver of every politician in the Western  hemisphere in the Western West is get inflation down at all costs. 

And so we think about what happened is that we go back to 22, 23, and we saw  that the drop of inflation was globally synchronized. It occurred against record  demand of commodities. Very strong US, GDP growth, relatively good GDP  growth in China. So it really could not have been demand, it had to have been  supply. 

Because again, globally synchronized strong demand. So where did they get the  supply? Turn a blind eye to Russia, Iran, Venezuela. Hey guys, turn up the  volume. And then you look at immigration. Where did, how did you get the  wages down? I mean, just tell anybody, go back and look at immigration across  us, Canada, Europe, and the rest of them's a line going straight up. 

Get your wages down. How did you get the food prices down? We don't care  about what's, you know, the palm trees in Philippines, or you know, the, the  land in Latin America, just harvest as much as you possibly can. Turn a blind  eye to environmental. Regulations. So they did that. Now, what problems are all  these countries facing with right now? 

Well, US went into Venezuela. You got a problem in Iran, you got a problem in  Russia. You're not doing that trick again. These guys are producing at max.  Then you look at, and so you're, now you're turning them off again. And then  you look at what happened with. You know, with immigration, you know, by  the way, places like Canada were up, I think like two or three X, and here in the  UK was up like a hundred percent. 

US was up 50%. And now you're getting the backlash from that. So, you know,  I'm not gonna say, you know, I'm not there. I know there's a lot of sensitivity  around immigration. I don't wanna put it down, but, but I think the key point  here is those CH commodities, those affordability, anything associated with  affordability was forced out. 

Eventually you're running out of those tricks. There's no more insurance  policies. Next, this next time around, you're not gonna be able to open the  floodgates on immigration. You're not gonna call up Iran going, Hey we don't  care. Start exporting again against the sanctions. This is not happening again.

Anyway I think you get the point here is that story started back at the beginning  of this decade, continued on in the, in the metal space in the Organic chemistry,  the ch commodities, grains, and oil and food and fuel. It was delayed. And I  think what we're witnessing right now, and especially with the hype of AI  settling down that commodity supercycle is reasserting itself. 

And as you point, I think it's not, it's, it's a continuation story, and it's only  gonna get bigger as we go to the end of this decade. I can say, where are we in  this right now? We're in the foothills of the Himalayas,  

Erik: Jeff, A quarter of a century ago, you wrote a piece called Revenge of the  Old Economy. You were diagnosing what went wrong with the.com bust and so  forth. 

You told me off the air, you've recently written a piece. I'm not sure if it's titled  The Revenge of the Revenge of the Old Economy, but basically the same theme  is back. Why is it recurring now? What. The new piece about,  

Jeff: Yeah, we just bas I basically was a cut and paste of what we wrote back  quarter century ago,  

Erik: a few years back. 

How's that?  

Jeff: Yeah, yeah. Okay. Alright. All right. But the, but I think, let, let's talk  about what we observed there. By the way, at the time I thought it was a one off  and I'd seen something that, you know, and now I realize it's a cycle, so let's go.  What I thought about in 2001 is that the story we told was due to poor returns. 

In the in the old economy. And by the way, the stat that we had for it in in, you  know, 2019 99 was that US emps destroyed 27 cents on every dollar they were  given during that decade of the 1990. So they, they, they returned, they kept 73  cents of it. You know what that number is? In the 2000 and tens all the way up  to 2021, 54 cents was destroyed. 

That means they kept 46 cents of it. So you know that that's the type of wealth  destruction that that occurred back in the, in the 1990s on that slide. So all the  capital chased where the returns were, which was the new economy. Eventually  you choked off so much investment into the old economy, you got shorted.

And by the way, that bull market really started in the late nineties, early two  thousands. And then took a breather around September 11th, and then the whole  thing came crashing down in, you know, late 2001 2002. And then you had that  rotation. The story, why we called it the revenge of the old economy was pretty  simple. 

Lack of investment in old economy. You starve to the capital it needed and then  you are off to the races. Then you throw in a demand shock like China on top of  it, and then it got turbocharged. Now let's go back, and I'm gonna say at the time  I thought, oh, it's unique. Then we started realizing, no, this stuff happens all the  time. 

And what are the two most important industries in the global economy?  Technology and energy. If you can't, you know, if you can't turn the lights on  nothing ever happens. If you don't innovate, you never progress. So technology  and energy are the two most important sectors, and all we do is rotate over time  between technology and energy. 

And in fact, I saw somebody put this chart going, what are the big themes in  investing? You look at it, you know, they don't really observe. They call it, oh,  it was China, or something like that. But reality, you're always rotating between  those two. And lemme give you, so I really realized it was about 2022 or 2023. 

It's not old economy, new economy. It's actually asset light, asset heavy. And by  the way, in what is a commodity supercycle. Or a, a asset heavy boom or an old  economy boom. It is nothing other than a CapEx cycle. Really simple. And if  you, you look at some of these charts we have just look at the CapEx cycle and  that's, these are, you know, 25, 30 year cycles and that's what, what, what  happens here. 

But I wanna go back to the nifty 50. Let's start there and why do I wanna use the  term asset light? So we, we, we begin the 1960s. We have excess commodity  supply from the rebuild from the, the, the, the second World War. This put  downward pressure on on interest rates, so you got low and stable inflation and  boy equity markets like low and stable inflation le leads to low interest rates. 

You know, you had LBJ Browbeat, Arthur Burns get interest rates down as  much as you possibly can, and then he started spending. And so that you laid  the foundation of those low interest rates. Now, what do low interest rates do? a  lot of people think low interest rates should lead to CapEx boom because  money's cheap.

No, it leads to a duration. Boom. You go, you, you wanna buy growth way out  in the future when interest rates are low. And what were the nifty 50?  McDonald's, Coca-Cola, they're all brands franchise. Think about McDonald's.  It's identical to Microsoft. It was infinitely scalable at zero marginal cost  because it was a franchise. 

So it had that long-term growth story. It was all the same stuff in that 50 as the  dotcom boom was in the nineties because it was all long-term growth.  Technology companies, again, software infinitely scalable, zero marginal costs.  And then in the 2000 and tens, when you had the low and stable inflation, it was  like Google. 

And so you look at the rotation in like 1968. Coca-Cola was the most valuable  company in the world, and like Exxon was at the bottom. Fast forward to 1980  after you ran out of commodity supply, you had a huge inflationary shock.  Exxon was at the top end. Coca-Cola was lower down. But I think the point  here is don't underestimate the demand shock. 

What was the demand shock that caused that inflationary boom in the, in the  seventies? It wasn't you know, OPEC just turbocharged it with the Arab oil  embargo, but the real cause of it. Was LBJs great society. Remember guns and  butter. And then we go into a period of a commodity. Boom, you, we  debottleneck the energy. 

And then you go into the, you know, the eighties and the nineties interest rates  low. You get the.com boom. Now it's Microsoft at the top, Exxon at the bottom.  And then you run out of supply. And then your big demand shock was ch, was  China. Note that all those demand shocks were policies. It was LBJ in the late  sixties with his, you know, war in Vietnam, plus the the, the, the war on  poverty. 

The Chinese one was a decision by policy makers to let them into the WTO.  And then you get to the, the the twenties. It was COVID, you know, it was a  shock to the system on their investment. Now what is it gonna be this year?  2026. Big, beautiful bill. Germany with, by the way, you have a fiscal policy  bonanza this year. 

You've got big, beautiful build. You have Germany, you have Japan, you have  China. I think we, we haven't seen this big of a global synchronous pop to the  system, actually, I would argue since, since COVID and look what COVID did.  So I, you know, I, you know, I'm taking a long thing about why these cycles  here.

So just, I think the way we, I could think about it now is it's. Rotation between  asset light, asset heavy. Asset light is usually tech. Asset heavy is usually  energy and, and commodities. Now there's one last twist, and I know I'm, I'm  dragging on here, Eric, so bear with me. Is that if you can think about the, the  asset light booms being driven by bits and the asset, heavy booms being driven  by atoms. 

One thing that is really different, and this is the core, the twist in the piece we  put out. Yesterday is this time the bits meet the atoms. And how do you get the  bit atoms take about? Think about what is AI compute? The, the technology  companies are becoming asset heavy. They're putting steel in the ground and as  they put steel on the ground, the bits meet the atoms. 

You get a bit atom commodity called AI compute, by the way, you know, it sits  on your Bloomberg screen. You can trade it. AI compute, send I think dollars  per hour. And you have cryptocurrencies or mining where you're burning vast  amounts of atoms to get a bit. So we're in a new world where the bits meet the  atoms, so they have, that may be a normal rotation. 

But I think it's, we're in an exciting new world and, and I think it's just gonna  create even more demand for the physical world. Think about AI requires less  labor, more commodity. So this one's gonna be bigger than the ones in the past.  But I think around a long answer to your question these are big cycles. 

We're in the beginning of new one. I'd say it's the bottom of the first ending.  

Erik: Jeff, you mentioned China several times. I want to come back to that and  I'll get to AI and energy demand in just a minute. But first, let's just touch again  on China. They are stockpiling everything like it's going outta style. 

Actually, let me correct myself. They're stockpiling everything. As if they are  preparing for either war or major sanctions and embargoes. Is that what's  driving this? I I, I, you know, are we headed imminently toward a US China  conflict and what will it mean in terms of commodity markets if it happens?  

Jeff: By the way, everybody's hoarding. 

It goes back to the geopolitical. Going back, what was one of the key drivers to  the supercycle call? It's the deglobalization. And, you know, deglobalization in  the war on free trade, you can't get it. And if I'm China, think about this. I'm  China. I watched the US go into Venezuela, just cut my oil.

I put a hundred billion dollars into that country to develop all that oil. And they  just stopped it and they, the Russian escort to the tanker just got stopped, pulled  over. My supply is being curtailed. And by the way, I, we wrote a piece recently  talking about Venezuela, Russia, and Iran. These guys are all Chinese colonies. 

I mean, let's just be blunt about it. But I think the key point here is if you are a  consumer of oil, you're China, you're India, you are Europe world's really  dangerous because the US just cut your supply off. 

You know, there's these sanctions, particularly if you're India or China. So  whatcha gonna do, you're gonna hoard, what did President Trump just announce  the vault? He's hoarding critical minerals. You know, I can go down the list. I  mean, if you're, if you're sitting there and you're, you're procurement officer in  one of these companies, you gotta be going, Hey, how does my supply chain  look like for tomorrow? 

So I, I think what you're, you're arguing whether you wanna say you're  preparing for war or whatever. Bottom line, the world's more dangerous. And  let's put gold into this story. Why is gold into the moon? You're hoarding gold.  Why are you hoarding gold? Because owning dollars is dangerous. So it's all of  the same story. 

Look at the US in the Comex it's hoarding all of the world's copper into the  Comex. Why fears around tariffs? So the list goes on and on and on. So you're  absolutely right. China is hoarding all sorts of commodities, but we're seeing  this everywhere and people go, oh, what's going on in, in, in China? It's gonna  end tomorrow. 

Let me remind all these listeners that the US hoarded oil like this in the 1980s,  late seventies, from 77 to I think to like 88 or 89, for over a decade, it doesn't  stop. And so when we think about how long this can go on, it can go on for an  incredibly long time. And by the way, we, I don't, in fact, I do wanna get into  this oil glut narrative. 

I've never seen that a narrative take hold with zero credibility or evidence  behind it. You know, 'cause this stuff is demand. It's real demand. And I think  gold is the one that's most sim symbolic of it.  

Erik: Jeff, I definitely want to come back to gold and silver and the oil glut. But  first I want to go a little bit deeper on what you said before about AI and the bit  atom connection.

It seems to me like AI is something that has become an existential, if you will  an arms race of AI technology. Its military implications are so strong that. You  can't just say, oh, well AI started to take off too much energy. Let's scale it  back. They can't scale it back because it's an arms race. So I think we're gonna  get into AI becoming the bad guy on the public stage that used up all the energy  and made everybody's electric bills, you know, double. 

Is that a realistic fear? And if so, how do you see it playing out  

Jeff: by the way, the, the digital demand for, for power. It is just a steady,  upward trend. It was crypto before AI. It was big data. It was cloud, big data. It  keeps going back. This has been going on for two decades. People talk About,  it's just a steady upward trend. 

It's just becoming so large now that it, it, it's now starting to put some demand  growth in places like the US where we haven't seen it before. Am I willing to  say it's going to be the primary driver? I mean, at the edge we're talking, you  know, moving from flat to two to 3% or maybe even 4% starts to put a lot of  pressure on it. 

But I, but I think that people are underestimating the technological innovation  and the ability to do this stuff. You know, I look at the, the, I always compare  AI to the shale revolution. You know, on the eve of 2014 or 13 on the eve of  the, the collapse in oil prices you know, everybody was investing in shale  because they, it was gonna be the demand. 

Everything's gonna be there wasn't the demand that destroyed shale. What  destroyed shale is the engineer pumped out three times more than what anybody  ever thought. They, you know, I had to say, don't bet against an engineer. Give  them enough time and money. They, they'll solve the problem. By the way, in  2013, they loved energy and they hated tech. 

By the way, there was a tech supply glu back then. You didn't, it was peak pc.  Demand. Didn't wanna go near it. Just wanted energy, energy, energy. But the  reality is. Did those engineers create an oil supply glut in 2014 and 15? I think  when we think about what's going on in AI today, I would argue, you know,  

that, that by the way, you look at AI compute, yeah, it's going down because of  obsolescence, but that price is weakened from like three bucks down in like to  the $2 range. 

And part of it is they just get better and better at. So I would be cautious about.  Ai, by the way, where everybody's focused on the oil supply glut today, and 

nobody thinks there's an AI compute glut. I'd be a lot more worried about an AI  compute glut because these engineers are so bright than I would be of an oil  one. 

Erik: You're worried about an AI compute glut, too much computing capacity,  including the energy to run that computing capacity? Or do you just mean too  many computers  

Jeff: too, too many that the price of compute goes down. By the way, if it goes  down, they'll even use more of it and use more energy. But the the, the ability  to, by the way, every single one of these technological revolutions always ends  in tears for the equity guys always. 

You and I live through the, through the shale one. And by the way, the shale  one looks identical to the AI one. Even the SPVs, the, the structures of the  financial engineering identical. It's like they took the pitch books from the shale  guys, rubbed out the names of the energy companies and wrote in all of these  open AI and the rest of it and just redid it. 

'Cause, think. They had the MLPs. The only difference is, is the oil guys went  downstream into the MLPs Here. The data center guys go upstream into the  power guys. Other than that, it looks identically the same. So, you know, I I, I, I  look at, that's why, so I wanna say it, AI compute blood. I'd be less worried  about energy collapsing than I would the price, because remember, there's a  commodity called AI compute. 

It's H hundred. Look at silicon H hundred on your Bloomberg terminal. It's gone  up. It's at 2 42, but it's still well off the $3 range. So I think the, the key point  here is I would be, I'd like to say don't bet against the engineers. Give them  enough time and money they can really surprise you  

Erik: on that theme. I'm convinced that the give them enough time and money  for the AI compute demand ultimately is going to lead to a really increased  nuclear renaissance, because that's the right technology solution for AI energy  demand. 

The problem is until we get off of conventional lightwater reactor technology  onto something better, and that's gonna be a while. It takes just too darn long to  build a new nuclear power plant. I think it's going to create a natural gas boom.  It's an interim boom. You know, from now until we can really build out the  nuclear, I think we're gonna have to figure out how to build more energy some  other way.

And I think natural gas is the obvious benefactor. Would you agree? And if not,  why not  

Jeff: a hundred percent agree with that? And by the way, I'll be very careful.  While I say the price of computes going down, it doesn't mean I'm saying that  it's, it's gonna lead to less energy demand. I just think they're gonna get more  efficient at it. 

But the, when we think about the, about the demand out there, ultimately when  we think about AI, where are the bottlenecks gonna be? It's gonna be the natural  resources and the data you feed the LLM bottles, that's it. Everything else, that  margins are gonna get crushed. And so you wanna own the commodities and  particularly power, and you wanna own the. 

You wanna own the, the, the data that gets fed into the LLMs. And so if you're  think about power, you know the place that you're gonna get the, the, the most  efficient increase in power is gonna be through, through nuclear generation. So I  absolutely agree, but that's not gonna happen for another two decades or decade  So what's your best bet for today? 

It's gonna be natural gas. It's the easiest, fastest way to bring on power. So I,  hundred, you a hundred percent agree, but I know people who put that trade on  last year and it's been a really rough, rocky road we went up to. $7 recently and  came crashing back down to three 20 of where we are today right now. 

But I think the, yeah, the key message there though is I think you're absolutely  right. You start to get the summer of this year, summer of next year. I think  natural gas is gonna see a lot of upsides.  

Erik: Jeff, let's go back to gold and silver. We just had a, I don't know what to  call it, a gut wrenching correction. 

$1,200 correction in gold. The catalyst probably that triggered it was the market  misinterpreting the Warsh nomination. I think it was really just the, the market  was so overstretched, it needed a correction. I thought with something of that  magnitude, surely it would take months and months and months to consolidate  before we could move higher. 

But the news, I think this week, at least so far as we're recording this on  Wednesday afternoon, is gold has moved above the 61.8% Fibonacci  retracement. The, the old adage in technical analysis is once you're past the 61  8, you're probably headed to a hundred percent retrace. If we get a weekly 

signal, if we're above 5166 on gold, and I'm looking at 5224 as we're recording,  if we're above 5166 at the end of the week, it says to me that, you know, maybe  this is already recovering and headed higher. 

Could that be true this soon after such a big correction?  

Jeff: Absolutely. And if you think about the period in the 2000 supercycle, it  was incredibly volatile. I like to point out. You know, these, these super cycles  are just sequence of, of price spikes. You know, I, they go, oh, you know, it's  down, and then you catch, here's the way I like to think about what happens,  particularly in silver in this case. 

Is the, the system gets overstretched. Investors buy it and they run the price up  so high and demands pushing up against supply constraints. Eventually, the  demand gets so high, demand collapses underneath it, then it falls off, the  supply constraint comes crashing back down. Then people go, oh my God, this  is cheap. 

They start buying again and boom, smashes into the supply constraint again.  Explodes. And it just does that over and over and over. And by the way, that  discourages the investment. 'cause everybody gets scared. Oh, it's gonna  collapse again. It's gonna collapse again. And so you don't get the investment on  a long-term basis. 

And that's why you know, the initial phase of these super cycles, they get really,  by the way, you remember like aluminum and power back in 2001 and 2002. It  was that same type of dynamic. It was like you're going up and down and up  and down and it makes it nearly, you don't trade this stuff and you don't, unless  you absolutely have to. 

And so I think, you know, that's, this is gonna be what you're seeing in gold and  silver is we're gonna see this across the the, the com commodity complex. And  that's what all these super cycles. It becomes a common feature of, again, the  equities. By the way, the equity trade for the, for the metals and energy has been  a nice, smooth, easy ride. 

So, by the way, if you, if you want this nice, easy, smooth ride, own the  equities, don't own the commodity but the commodities, it's gonna be, it's gonna  be a rough rock. Like we're just talking to natural gas, seven bucks to three 20.  And by the way, we, all it takes is, you know, get you throw in some more  weather and, you know, put some data center demand on it.

You'll be up the races on that one too. So, you know, I think, hang on and on  gold this, I don't see how you come up. It's not as price sensitive as silver or  natural gas. And the underlying theme there in this environment, it's like the  Swiss Franc as strong as it's there's, there's no end in sight. 

And I, you know, what the demand is coming out of. Not only people hedging  themselves against the Debasement trade, but you have de Dollarization going  to buy central banks all over the world afraid to own dollars for sanction  reasons. And then you gotta own the stuff for diversity reasons in your  portfolio. 

Everybody's still under invested this space. You know, I could point out the  metal space. 200 billion a market cap. You know, so, you know, you start  throwing money and it's explosive. Anyway, I think this is a feature of a, of a  Subaru cycle and expect to see a lot more of it. And I, we're gonna go higher. 

Erik: Let's talk about silver. Some people have suggested the dynamics there  are different because silver had really gotten ahead of itself before the  correction. Some people thought that that was really a result of the people who  were pimping it, the Wall Street, silver, and all that kind of stuff. And. 

Maybe after that blow off that we saw it was certainly, it, it, it is recovering, but  it's not recovering on a percentage basis as strongly as gold is. And it was  outperforming gold before the correction. What do you see ahead for silver?  

Jeff: I mean, you're, you're back to 91 right now. Yeah, it briefly got up above a  hundred and hit I think 120 at, at, at, at the high. 

You know, long run, you know, it's a turbocharged version of gold. I mean, that  was one of our favorite picks back in 2020 when, when we first made the  supercycle call because it, you know, it has the same underlying precious metal  dynamics as gold, but it's a key input to all this electrification. 

Back then we called the decarbonization today, we call it electrification solar  panels, and, and it's a core input. To all of that electrical equipment that places  like China make, and again, China short this stuff, which is part of the reason  why China has been, you know, a big buyer of it. And again, the demand from  corporates to afford it and things of that nature. 

I'm not in the forecasting visits anymore, but some of those banks I think it's  BOFA, Michael Wi, I think, does he have like 170 or something like that? He's 

been doing this as long as you and I have. So I, I, I, I think there's a, you know,  the potential here, there's, there's a, you know, for significant upside still. 

Erik: Jeff, let's come back to the inflation outlook, which you mentioned earlier  in, in your first answer. With all of this appreciation that we're seeing in gold  and silver, what are we really seeing? Is the price of gold going up because of  greater central demand, are we really seeing the value of the dollars that gold is  priced in going down? 

Jeff: I think it's a combination of both the, the initial surge, the de dollarization  occurred the first time the Trump administration used sanctions against the  Russians back in 2018. That was a shock to the system and you realize you own  US bonds, you got problems. Then it, then after you look at when it got  turbocharged, soon as the US sees the Russian Central Bank assets in 2022,  after the invasion we're off to the races that is d Dollarization. 

You don't care. You're getting rid of your dollars. 'cause you don't want to get  sanctioned in votes on you. And at this point, emerging markets are doing this  all over the world. And now they just continue to add to the reserve. That's not,  that has nothing to do it. The debasement demand, which is mainly from  investors. 

That's what you're talking about. But you put the two together, it, you know, I  like to point out dollar. Yeah. It's trading what, 1.34 against the pound sterling?  Well, 1.17 against the Euro. The only, the only currency out there that it's just  been, you know, slaughtered by is the the Swiss bank. I think it's trading 0.77  against the dollar. 

So there, yeah, I think a story you're talking about the rest of them, you know,  it's, it's, it's not that big of a shift. And when we think about the, you know, the  dollar you know, it's, it's weakened, but in nowhere, think about an oh eight at  the end of that commodity supercycle, it was trading 1.61 against the Euro. 

The Euro. That was the peak of the dollar against the euro. And so we're at 1.17  today. That's a long ways to go. So the answer to your question, there's been a  little bit of it, but this is real. Like, hey, all these currencies are in a bad shape.  Another way to think about this is, this is not the dollar being singled out as  being the bad character. 

this is FIAT currency been singled out as the bad character. 

Erik: Let's come back to the oil glut narrative that you said you wanted to  debunk. I couldn't agree with you more that the notion that there's a  fundamental oil glut is crazy. I think that the long-term fundamentals for oil are  extremely bullish, but hang on. 

Between now and the midterm elections, president Trump really doesn't have  anything more important on his agenda. Than keeping energy and affordability  prices low through the elections. So it seems to me like there's likely to be a, a  lot of invisible hands at work trying to keep energy prices low for the next six  months. 

Would you agree with that or are we looking at fundamentals that nobody can  manipulate?  

Jeff: I'm gonna have to answer that question. Is I think there is gonna be a, a  tipping point where it can't be manipulated, but there's no way. How, how do  you manipulate it? I, I look at back at this. And I asked myself, how did this  happen? 

I've ne I've, I've been doing this 30 years. I've never seen a narrative without  any real fundamental evidence. And when you look at the actual fun, the real  data inventories are low. You know, they're in the OECD countries today.  They're lower today than they were a year ago. A lower data a year ago. 

That's, that's the real data they have. Yeah. You may have the satellite data.  Some, and even there, they showed that the inventories floating at sea have  turned over. The curve has been very backwardated. You and I both know a  

backwardated curve is bullish. Refining margins are really wide. Spreads are  early. 

Yeah. The OSPs of the, the, the, the OPEC countries have come off, but they  come off from relatively high levels. I'm just going, what are they looking at?  And I don't know where the narrative it, how did they get started? And where  did it come from and how did it get it go on for 18, 19 months? You know,  

when we think about AI in the productivity gains. 

You know, the one thing is that is, is that you, you gotta verify the results of ai.  We don't know if it is, is telling the truth or not. And as people in workplaces  start using it more and more and more, you need more humans to actually verify  that what they're doing that's not measurable is right. And you could think of it  about the same way in in markets, you have more markets being traded by  algorithmic trading than we've ever had before.

They tee off sentiment numbers and things like that that can drive it down  because every other measure that you and I know says this oil market is bullish  except for the flat price. But the flat price can trade off the sentiment, but there's  nothing there left to verify because it's too expensive to verify it. 

And I think that's, you're gonna see that in the productivity. The, the workshop's  gonna go, Hey, the cost to me to verify this is so much, and the potential for it  error becomes so great, they're just gonna quit using it. And it's the same thing  going on in oil that is being driven by algo's trend followers and the sentiment  to a point.  

Where it cannot correct itself unless you can go down underneath and go at the  micro level and create enough upside to it. Maybe it's the, you know, an  invasion in Iran or something that gets us outta this trap. The price level is  driven by liquidity. 

Not by fundamentals or anything like that, and the liquidity's been drained out.  People are just, they don't want trade. I thing is that a lot of people have lost a  lot of money trading oil, whether it's short or long over the last two years. But to  answer your question, it's gonna happen. When is it gonna happen? 

And the you a crude awakening. And so yeah, it's, you know, is it between now  and the midterms? Is it, you know, a potential with Iran? It could be. But I think  it, it's definitely it's not a question if it's a question of when.  

Erik: Jeff, final question. You told me off the air that you're expecting an  explosion of liquidity. 

What's that about? And the other thing I wanted to follow up with you on is  you've been in touch with our good friend, Josh Crumb, founder of Abaxx  Technologies. Those guys were doing some really exciting stuff specifically  around liquid Natural gas and futures trading and so forth. Do you have any  update? 

'cause we've had a lot of interest on our listeners for an update on what Abaxx is  up to.  

Jeff: Yeah, I think they, the, the, this discussion just goes hand in hand. You  know, when we think about the liquidity explosion, I like in, you know, what  we've seen in the Genius Act Web3 0.0, I don't like the word crypto.

Call it DLT, distributed ledger technology, or whatever it might be in ai. You  put those three together, it's just like the CFMA act of 2000 and Web 1.0 that  unleashed a liquidity explosion in commodity markets like we had never seen  before in the two thousands. Why? Because the technology allowed you to go  

downstream and trade things we could never trade before because of Web 1.0  was big data and what we're on the cusp of right now. 

You put, you know, Web3 0.0 combined with ai, combined with the Genius and  Clarity Act, I think you're ready to unleash a, a liquidity explosion like the  world has never seen before. And what's really gonna be allow us to get down.  Really what it's gonna do is allow us to go downstream and trade things that  we've never traded before. 

And how is it going to do it? Is, is, is Crypto was never made for human beings.  It was made for machines. It's clumsy, it's hard to do. We're gonna have AI, bots  trading, crypto, or trading you know, tokens. I don't like the coins. I don't like  the crypto. I like the d the, the technology. I like the tokens that are in  commodities like gold and silver, real world assets. 

Tokenized real world assets that we can partition into levels that are going  downstream, unlike ever before. And like to point out in the first wave. At  Goldman Sachs, we could never trade plastic because we couldn't get  downstream enough into the plastic markets because they're so fragmented.  When you put AI and crypto together, we're gonna be able to go and make  markets there. 

And we take somebody like, like Abex, and it's doing this in natural gas and  getting into markets that you couldn't make before. The technology is allowing  us to, to make market in natural gas, LNG hubs all over the place, getting into  lithium carbonate power markets that are further downstream. So, you know, I,  I'm really excited about the future of trading. 

You know, I'm. I'm a NED and a, you know, a non-executive director at, at  Abaxx. And you know, I, I, I think the technology is extremely well positioned  as we go into what we have to say, a liquidity explosion.  

Erik: Well, Jeff, I can't thank you enough for another terrific interview. Before  I let you go, please tell our listeners what you do at Carlyle Group. 

I know it's only institutional, so you can't help our retail audience directly, but  for our institutional listeners, what services are on offer there? 

Jeff: I'm with the energy teams and, and do work with like the aerospace and  defense team. And going back to this, this supercycle theme and theme around  deglobalization, let's forget, you know Carlyle caught space in the aerospace  defense sector. 

So Carlyle's extremely well positioned as we go into this commodity  supercycle, whether if it's in, you know, the energy team. You know, he is got a  long history of, you know, developing assets in, in, you know, the upstream and  refining and, you know, obviously given the defense spinning going around the  world. 

So I, I'm super excited about the opportunities at Carlyle,  

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 the Economics and  Markets team for Rabobank. Michael, I've really been looking forward to this  interview and getting you back on the show because frankly, I've noticed that  you have an uncanny ability to translate what President Trump says into what  he really means and even go. 

The next step is to intuiting what maybe he intends to do next. Frankly, I'm  confused by a lot of the things that are going on right now. It seemed like the  president was signaling that he was. Really gonna go just Max Dovish on his  choice for Fed chair. Then he picked Kevin Warsh, which surprised a lot of  people. 

Then we had absolutely positively striking Iran. No, wait a minute. The entire  fleet's on the other side of the planet. We're repositioning the fleet. Now we're  gonna strike Iran. Now we're not gonna strike Iran. Oh, maybe we made a deal  

with Iran. I, I don't get it. Can, can you help me sort out the geopolitics and  what's going on? 

Michael: Thank you very much for that hospital pass, as we say in, in British  football. Yes, I'm very happy to be back on the show and very happy to try and  be some form of Trump whisperer there. But what I would say first of all is A  welcome to 2026 and B, welcome to President Trump because these are, these  are things we have to get used to when we're dealing with both of those  particularly, you know, conflated together. 

Let's start. With what you mentioned in terms of Kevin Warsh, I've, I've  mentioned already in writing that I really think that the market got things wrong  in terms of portraying this as a hawk dove decision because. First of all, let's get  down to the brass tacks of it. Everything that Trump looks for in a new  appointee is loyalty, first and foremost. 

And you know, Warsh has a close relationship with Bessent at Treasury, which  is incredibly important. And he's the son-in-law of one of Trump's friends, Ron  Lauder. So, so that already speaks volumes in terms of why Trump may have  wanted to look to him. Secondly, and this is, you know, more in terms of a  political economy, architecture above and beyond the fact that we now have one  where being close to somebody matters more than it did in the past. 

Although, although I think it always did matter, to be honest with other  presidencies too, is that what we are going to see unfold this year. And in 2027  and 2028 as well, I'm quite sure is a new fed because if we have economic state  craft to the fore now as the driving force in the US and we've spoken about that 

on more than one occasion recently, so I don't want to go over that again, but I  think you understand what I mean. 

And I hope most listeners understand what I mean by economic state craft. It's  really completely irrelevant or just a complete tangent to reality, to worry about  whether the fed is hawkish or dovish. In fact, it reminds me of that old adage of  you know, the from feminists in the sixties, a woman needs a man, like a fish  needs a bicycle. It's just two different things that you are looking at because  where interest rates need to be low is abundantly clear in the US economy. 

Where interest rates probably need to be high. If you're trying to reshape the US  economy in a certain direction, which Trump is and Bessent, is he's also  abundantly clear and you don't have one interest rate to do that. I, I, if the Fed  were to be really Dovish and slash rates to 2% or 1% purely hypothetically, I  think, you know, you, you would be immediately eager to say where you think  markets would go and where the investment opportunities would be. 

But that's not economic statecraft. Economic statecraft is where do you need the  USA Inc to be? What does the ship of state need to look like and maybe parts of  it get where they need to go with a one or 2% rate, and parts of it do completely  the wrong thing. So in other words, Warsh is being brought in A, because he's  

loyal to Trump. 

B because he's friendly with Bessent, but C because. Obviously, although he  won't say it out loud and he shouldn't do politically, he is going to be  completely on board with this new reshaping of the Fed into a very, very  different institution with a very, very different toolkit, which I think will sit  under treasury, under Bessent, under economic statecraft to try and make the US  and the world around it look very different.  

Erik: Ok, that's a huge difference from the theoretical and I, I do emphasize  theoretical concept that the Fed was designed entirely for independence. It's  theoretically not even part of the government. So you're saying it becomes a  subordinate under treasury, you know, do what you're told kind of organization.  

Michael: It already is to a degree. 

In fact, I, I,  

Erik: well, I've noticed that, but they, they used to pretend that it wasn't, 

Michael: well, pretend is the accurate word, because let's not get into real  conspiracy theory stuff here. Okay. But let's just be honest. So the Fed is much  younger than most other central banks. Most other central banks in the western  world was set up. 

A long time before the Bank of England, of course being, you know, the  grandfather or the grandmother, the old lady at Thread Needle Street as they call  it, that was set up specifically to help the government fight a war against France.  So there was no pretense whatsoever of it being independent until 1997 which is  pretty recent, you know, even in market terms. 

And the FED even thought there has been previous iterations as you know in  american history. Only got set up in 1913. It's always been a quasi-government,  quasi-private entity. If you actually look at the architecture of it, it's not  structured like modern western central banks, which are purely in the public  realm. It's always been a, a kind of hybrid. As soon as it gets set up in 1913, it  gets dragged into World War I. 

Well, there's an opportunity for a bank to show that they're only interested in  market forces. He said sarcastically. So of course it was involved in statecraft.  Within a year of being set up. Then we have the 1920s, which are absolute  chaos globally. Then we have the 1930s with the Great Depression, which are  absolute chaos globally. 

Then we have the 1940s and World War II, in which the Fed proudly says on its  own website, they helped win World War ii. Nothing to do with being  independent there, and it isn't until 1951. We actually have any kind of compact  where the Fed turns around and says, you know, in the Korean War, if we have  to finance that, finance that too. 

Now that the economy isn't locked down like it was during World War ii, it's  gonna be really inflationary. And only then do we start moving towards any  kind of pretense. Of independence. But what I want to add on top of that is in a  piece that I wrote fairly recently looking at the structure of the US economy, I  said, if we are really genuinely cynical and realist and take a step back, the US  economy now is overly financialized. 

And I think you would agree with that, that term most people objectively would,  but the part and parcel of that is that asset prices in the US have to be high if  you want. Cash to flow in from the rest of the world, capital to flow in from the  rest of the world to fund your trade deficit. Whether that's a good thing or a bad 

thing, and we can have a separate conversation about that, you need to have  assets for them to go into. 

Ergo, those assets can't just crash left, right, and center. So the fed's role is to  make sure that assets are un affordably high, to foreigners effectively. It doesn't  say that anywhere. It talks about financial stability. So I, I really think we have  to be quite cynical and realist in terms of how we're framing it and recognize  that that role of the Fed doesn't help the US anymore because the trade deficit  doesn't help it anymore. The capital inflows from large exporting countries like  China don't help the us. They're a hindrance as it needs to re industrialize. Ergo,  there is no way, shape, or form. The Fed as the tech quote, neutral, apolitical,  technocratic animal that it pretends to be, which it's not, is gonna be able to  carry on with the same techno Babylon gnostic nonsense that Greenspan and,  and his ilk were coming out with year after year. 

And whether it admits it or not, it's going to have to be part of usa, Inc, Inc, to  try and get it out of the foxhole that it's currently in.  

Erik: So it sounds like your perspective is essentially Bessent sits down  probably behind the scenes with wars and says, look, if we make you fed share,  do you understand that the name of the game in 2026 is economic state craft? 

We're, we're changing the world. We've got a big agenda. You work for us, you  do what you're told and you're gonna be part of our negotiating toolkit. Do you  get it? Warsh says, yeah, I get it. And that's how the nomination comes about.  Obviously it wasn't quite that blunt, but is that. The gist of what you're saying,  

Michael: well. Let's try the conterfactual to that because when you put  something forward like that people may immediately push back. Let's put it the  other way. You have a US administration, which I think everyone would  recognize is running really radical policy in almost every direction  simultaneously, whether it's in terms of domestic things, economic things,  international things. It's really pushing the envelope everywhere, all at once. 

And you think against that backdrop where it's trying to reshape everything it  can. They're going to appoint a Fed Chairman and say, most important thing in  the world for us is 2% CPI, oh. And keep the stock market out please. But apart  from that, do whatever you want. Make whatever political statements you want  you know, adopt whatever position you like. 

We really don't care because that's the most important thing. I, I really think I've  a bridge to sell you. I don't mean you personally, Eric, but I mean anyone 

listening who thinks that's how the world actually operates. Very clearly what  you just said is what did happen.  

Erik: Okay. So if that's the agenda, help me with the next step, because it  seemed like, and this is very much consistent with what I'm trying to understand  of the president's style of diplomacy, which as someone recently said, is kinda  like. 

Throw a hand grenade into the room before you enter, and then as the dust  settles, sit down and say, Hey, you wanna make a deal? It seems like we've had  a lot of really heavy messaging. Boy, you don't want to be Iran. They're about to  get hit. That's it. It's a strike. It's, it's coming. It's coming. It's coming. 

We're moving the fleet into position. Then there's a tweet over President's Day  weekend saying. Maybe we're gonna make a deal and there's an economic you  know, transaction to be had here. Maybe there's an investment. Was this whole  strike ran thing a, a lead up to a negotiation on some economic front? 

Michael: On that one, we have to wait and see. I think we won't have to wait  long to see vis-a-vis the fed, even though it's still a few months until Warsh  officially gets in, I think from Iran. We'll have to wait and see another few  weeks at least until all the pieces are in place. You can absolutely understand  that Trump doesn't want to get sucked into another Middle Eastern war because  if his one thing ahead of the midterm elections that wouldn't go down with  either independence or his base, it's, Hey, we're in war in the Middle East again. 

But that didn't stop him bombing Iran last year and very pointedly in the run up  to it. The media were completely fooled, completely fooled you know, that  there was a disagreement between the US and Israel, whether there was or  wasn't going to be an attack. And people thought that the US had basically  chickened out and wasn't prepared to do it, and had talked tough and wouldn't  attack. 

'cause no one actually well at least in the mainstream press, thought that he was  prepared to bomb Iran's nuclear sites because of what they saw as the, you  know, the fat tail risks there. Is that going to be repeated here? I think in his  heart of hearts, Trump would very much like to avoid doing that because  Venezuela with Maduro went as well as something as risky as that can possibly  do. 

And while Venezuela has not been quote unquote dealt with or sorted out, the  message was sent globally. The geostrategic and geopolitical table was. 

Definitely reset in a way that many people were shocked by. And if he tries  again in Iran and that fails, and you do get sucked into a war, the US is very,  very significantly weakened. 

E. E equally if you knock out the Iranian regime, but what you get coming back  is ISIS in the broader region, an absolute chaos. That's not such of a big win for  the US either. But if he can manage to get them to agree some kind of deal, and  I actually think the chances of that are extremely low. But if he were able to do  

that without any fireworks, that would be a geopolitical win. 

Where again, the US can say, look, I talk tough, didn't have to do anything.  Now I've gotta Iran on board. That's, that's something he would aim for. And if  that doesn't happen, if you look at the continuing day by day movement of  military power. Into that region as we speak. That's continuing to go on, and I  would imagine on the day this podcast goes out, it'll still be going on in the  background. 

It seems very hard to climb down from that tree because all the geopolitical  credit as a, you know, as a tough guy that he got from acting completely by  surprise in Venezuela, and even though he had a fleet off of Venezuela, it was  still a surprise when it happened. That would be squandered if you then move  everything to the Middle East and actually don't do anything. 

So I would say that the local intelligence in that region still suspects that you  have an irresistible force meeting an immovable object when it comes to Trump  and Iran, and that will end up with military action. And then we have to see  what happens on the other side of that.  

Erik: Let's talk about the road in this environment as you describe it, of  economic statecraft, the road from here to the midterm elections, because it  seems that one thing is very clear, which is President Trump is not the  personality type to say, Hmm, seems like the Democrats don't really approve of  everything I'm doing. 

Maybe I should back down and moderate a bit. That's not his, his mo. So. It  seems to me that he's very committed to the Hail Mary, passive. He's gotta do  something to win the mid midterm elections, because let's face it when he was  impeached twice, they didn't really have a whole lot of dirt on him at the time. 

The Democrats, regardless of whether you think President Trump is right or he's  wrong, or he is the best or the worst president ever there, there's really no room 

to debate that His actions in this presidency have been. More aggressive and and  more radical as you put it, radical policy than in the past. 

So if we get to the Democrats taking the House of Representatives, and  especially if they got both houses of Congress it seems to me that we're back to  impeachments and gridlock and nothing but that. Would you agree with that  forecast? And if so, does that mean that the economic statecraft is all going to  be focused on somehow making sure that Republicans keep the House of  Representatives in November?  

Michael: Yes. And yes, because on one hand it's crystal clear that were Trump  to lose, first of all the house and of course the House and the Senate. It would be  a political disaster. It would be for any sitting president and very much so given  the, the radicalness of what he's trying to achieve on multiple fronts. 

All at once. So on that basis, it was very clear to me from last November when  the special elections didn't go very well for him that he would pivot  immediately to being as radical as possible on all fronts. But that includes  focusing on affordability. Now, I'll admit the messaging on that I think is not  getting through to some of his base. 

For example, if you say the DOW is up to record levels again. That doesn't  speak to people who haven't got, you know, a couple hundred bucks to put  together. And that's exactly the kind of language that we saw from president  after president in the past, which just sailed over people's heads and actually  ended up with people like Trump elected, but that doesn't mean he isn't actually  trying to move things significantly to genuinely put money in people's pockets.  Let's just go through a few. Obviously there have been a couple of different  measures floated, but not yet acted on housing to try and get mortgage rates  down. I expect we're going to see a lot more being done on that. 

Over the next couple of months, we've had attempts to try and get credit card  rates pegged down to 10% temporarily. Again, very controversial. Obviously  credit card issuers don't like it. I'm not making a judgment, I'm just listing that  makes a big difference for some people's income. Short term, you've had tax  against meat packing companies, particularly foreign owned ones. 

Of course, that's a long-term issue. But again, it's focused on affordability.  You've got this new discounted drug company where you know you can get the,  the fat jabs. Much, much cheaper now than they were previously, which is you  know, an interesting policy move. But you can actually join that one up in a  couple of ways because if people have more money in their pocket because 

they're not spending money on other drugs because they've managed to bring  their weight down to a manageable level rather than being really big well on  that level they have more money to spend on other products. 

And guess what? You might be able to afford a Made in America one if there's a  one-off price shift. Cost basis that you know, if it's made in America one off, it's  gonna cost you more than in China. And then after that it will level off. The  price will maybe even start to drift lower so you can join lots and lots of  different dots. 

And in fact, it's a no-brainer, an absolute no-brainer if you understand what  economic statecraft is to see that it would be foolhardy to think of anything  other than that being the policy backdrop for the next couple of months. And in  fact, I think that would be the case in any normal election anyway that you want  to do within November. 

But doubly triply, so this time.  

Erik: Well, let's talk about what that's going to mean for financial markets then,  because as you said, the Trump administration has already taken a bit of a risk  by, you know, telling everybody, look, stock market's at record highs, that's all  because of me. Which means if that starts to reverse in any way you know, it's  going to be a loss of credibility. 

But it seems to me markets don't like uncertainty and. If you assess this  situation objectively, again, regardless of whether you love President Trump or  hate him, you know the best that can be hoped for is if his radical policy works  and he is able to save the midterm elections so that Republicans keep both  houses of Congress well. 

The best you can hope for is his political opponents will be even more pissed  off, and we will have gone through a period of great uncertainty because until  that election is actually over, nobody really knows that that's the outcome. On  

the other hand, the market, I think, is going to start discounting well, wait a  minute, what if he doesn't keep? 

And particularly what if he loses both houses of Congress? Then we're going to  have basically I think a hard stop on all of this radical policy as a new Democrat  controlled Congress intervenes to block it, and we end up with the last two  years of this presidential term basically being a gridlock.

That's about, you know, the next 17 reasons for impeachment. So. How do we  get to here to November without the market really being subject, I think, to a lot  of headwinds from uncertainty?  

Michael: Well, there are only two things that I would add to that. The first one  is that were Trump to suffer that political setback. 

The logical thing for him to do is if he can't enact as much policy as he'd like to  just move over to executive orders, which he's already relying on anyway, and  then probably have to be even more radical again. To try and use them to clear  the way through to 2028 for whoever succeeds him. And at the same time, of  course, presidents traditionally, when they have trouble at home, do even more  internationally. 

So that can also be very radical because there are lots of ways in which what  happens internationally now directly interfaces with what happens in the us like  trade deals, for example. I wouldn't think that it ends just in November. That's  the first thing I would say. And the second thing, and this is not in any way to  try and segue because I think you're asking a very good question. 

I'm making a very good point. It's this, a lot of what I think we're seeing in  terms of market volatility over the past few weeks. Even though it's very related  to Trump's agenda at core isn't actually being driven by anything he's said or  done specifically, it's much more to do with the AI effect, which is something  that Trump, of course, is very aggressively backing as I think any US President  would in this particular situation because it appears to unlock so many magic  boxes as well as Pandora's boxes. 

But that. That destabilizing impact, of course, is just rolling through markets  like a herd of elephants. And that I think is going to absolutely guarantee  volatility going forward. Even if we were to see Trump suddenly have a  complete change of heart and say, okay, here's complete predictability over  everything I'm going to do, and no one's gonna stand in my way or do  something bipartisan, even if those very unlikely scenarios were to unfold. 

That wouldn't change the fact that on a almost daily basis you are seeing  suddenly some new sector of the economy where people hadn't thought up until  recently, well, that doesn't need to exist anymore because of AI suddenly  thinking, well, maybe that doesn't need to exist anymore because of AI. So  yeah, it's, it's, it's, it's already what you were saying, but it's even more on top.

Erik: So what would the opposite scenario be? 'cause frankly, I'm having a hard  time seeing one. I do see where there's significant left tail risk to markets.  Things could get uncertain heading into the election. We're, we're definitely at  nine months out now where we're in the scope of where the, the timing is right  for the election outcome to start. 

Impacting the market. I see the left tail risk. Is there a right tail risk where  economic statecraft is somehow fantastically victorious and somehow takes us  to, you know, much higher highs on stock markets?  

Michael: Well, yes and no. Let's, let's take the yes part first of all. If you  actually look at the leading indicators, not on your Bloomberg screen, but  looking at logistics, and this is, this is publicly available. 

I'm not talking about proprietary sources. Freight companies are now saying that  they are seeing the signs, the early signs of a really significant industrial pickup  in the us But what they're finding interesting in terms of the amount of freight  that they're shipping is, it isn't coming in from US ports as it traditionally  would. 

IE. The US is importing more, particularly from China, for example, as a  precursor to the fact that it's gonna invest more or consume more? No, no,  actually this is shipping freight around within the US as part and parcel of  

making things in the us. You are starting to see that, you know, just under a year  into the admitted chaos of these new Trump trade deals and Liberation Day,  some of the dust is settling and potentially it's, it's, you know, it's not a done  deal yet, but they're starting to see it could be, we are going to get a genuine  endogenous pickup in US manufacturing. 

Now, a lot of that may be driven again by robotics. A lot of it may be driven by  AI. It may not be as labor intensive as it used to be, but it's exactly what  economic statecraft aimed at. So watch that space really carefully, because if it  were to unfold, it is a significant feather in the cap, for Trump and whether it  can be translated across to a voting populace, I dunno, but it's really important. 

Where I was going to say no though, is at the same time, alongside that, you are  seeing, of course, extreme price pressures and overheating in some sectors of  the economy. Again, primarily led by AI, but also linked resource areas. And on  one level, people will turn around and say, well, that's where I'm going to make  my money.

I'm not gonna be able to make my money in services anymore, which is where I  thought I was gonna, or in it because AI is destroying that. But I can go into raw  materials. But statecraft again, isn't about making easy money. It may sound  completely character intuitive 'cause Trump obviously doesn't dislike the stock  market and doesn't dislike people making money far from it. But, statecraft as a  whole even if it's not Trump's iteration of it 

Is not the kind of entity or thought process which says, okay, the Fed's gonna  cut rates to 2% because of statecraft. Therefore you need to invest your money  here, here, or here to make a 10 or 20% return. I've made that point to you  before. I don't think that's the game anymore. And if it looks like, well  resources, that's the area to go. 

Well, no. The state will step in and say, we're capping that we we're gonna do  everything we can to make sure that price inflation doesn't get outta control one  way or another. And so expect a lot more. Leaning on, or you know, fingers on  the scale there, which will again, make it more difficult to invest because what  you're looking at logically and rationally within a free market environment isn't  the environment you are in anymore. 

Erik: I wanna come back to something you said a couple of minutes ago, which  is when things are not going ideally well in the United States, a lot of presidents  have tried to divert attention by getting much more active internationally. Okay.  Well, the usual way that tends to go down is Middle Eastern wars, but as you  

said, president Trump is strongly incented not to do that. 

So are you thinking when you said that in terms of a military escalation in other  parts of the world, or are you thinking about. Trade deals or, or tariffs or, or  what kind of international distraction would would come to mind.  

Michael: Well, I'm in no way thinking of a wag the dog scenario where a war is  started to distract people's attention because even though you can get a rally  round the flag effect, I, I don't think that would last very long. 

And I think it would be a very, a very foolish move. And certainly one that, you  know, any American. Would tell you he's unlikely to play well with Trump's  space, which he needs to motivate. What I was implying instead, or what I I'll  state openly rather than implying is that yes, this sits firmly within the world of  trade and investment deals, and particularly what I expect to be with a new Fed  chair on under Warsh a shift towards dollar stable coins as part of the nexus of  US trade.

And of foreign investment flows coming back into the US as part of those trade  deals, which we're now starting to see crystallized, particularly vis-a-vis Japan.  South Korea, South Korea, we are starting to see those two countries in  particular being given blueprints of, we need your money to go into these  sectors right now. 

And by the way, they're not the 10, 20% return sectors that you might do if you  are a private sector investor, just trying to maximize your return, you know, in  the shortest possible time. These are long-term strategic plays, which are good.  

The USA Inc. Which will therefore be good for Japan Inc. And South Korea  Inc. 

And I think a lot more of those will be Inc. And one of the levers to get us there  will be dollar stable coins.  

Erik: You know, that really set a light bulb off in my head when I joined that.  With what you said earlier about the outlook for Kevin Warsh and the Fed, are  you imagining a scenario where Kevin Warsh takes office and says, okay,  everybody first press release or pre first press conference? 

I have a slightly different view than Jay Powell. The Fed is going to lead. The  charge on replacing the US dollar as the world's global reserve currency with,  you guessed it, the US dollar stable coin. And the Fed is going to champion this  and it's going to be a new digital CBDC type of move that we're making. 

But it begins with US dollar stable coins, which are tied back to the US  currency and we're going all digital. Is that the, the kind of thing you're thinking  of?  

Michael: Lemme caveat that. I don't think it will be CBDC, which is a central  bank digital currency. I think quite the inverse. I think it will be private money. 

Very similar to what we had pre World War I. In, in Europe in particular, but  globally, which were called Sterling Bills of Exchange, where the most  commonly used trade currency was tied to sterling, which was tied to gold, but  it wasn't the Bank of England issuing it. They were just basically promissory  notes issued by private sector firms, banks. 

Trading houses, individuals, etc, etc. And everyone thought they were as good  as gold and they were literally, but the Bank of England had nothing to do with  it. So I think that's what will be replicated. But yes, it'll be digital. I'm not  forecasting this will happen to be abundantly clear.

Okay. But if it were to happen, I would just whistle and, you know, look eyes at  45 degrees, like, wow, who's surprised by that? Because it's entirely logical.  Were that to happen within Thes a of what we have heard from Bessent from  Iran. What we are seeing being chatted about in Warshington in terms of how  they want stable coins to work, where we only have one piece of key legislation  waiting. 

To be finalized, which is the Clarity Act, which is going to determine whether  stable coins can effectively earn a yield or, and it won't be called a yield. Of  course, it'll be called a fee, but whether you can get paid a fee for holding them  similar to a bank deposit. And of course, banks don't want that. 

But the, and what the Fed thinks banks should or shouldn't be doing in the US  will be part of this equation. Once that's passed, you've got the new Fed chair,  you've got the Clarity Act. Following the Genius Act, you have these new trade  deals. You have these pledged investment schemes coming in, which are  basically capital controls being steered into the US at the highest geopolitical  level and geo-economic level, and a very, very good guardrail or mechanism to  encourage that capital to come in where you want it to go and to make short  term borrowing costs in terms of Tbill, much, much lower, which will therefore  of course mean you have a low Tbill rate inside the us, but. And this is getting  technical, but not necessarily the same low cost of borrowing offshore. 

It could be a significantly higher interest rate in dollars and stable coins  offshore, which is an interesting weapon for the US to have, interesting  arbitrage opportunity for some. If you were to have all that, it makes perfect,  perfect logical sense within Statecraft. But again, if you're not starting with  Statecraft, every single point of that will appear madness and unconnected. 

Erik: Now, it occurs to me that there's an angle here that I'd have to think  through, but you know, all investors understand there's a profound difference  between holding a large. Cash balance in US dollars as a bank deposit versus  holding Tbills, which you know, carry the, the full faith and credit of the United  States government. 

And you, you don't have to worry about bank failures and so forth. Do you  envision a stable coin being engineered that has all of the same safety  characteristics of a tbi? But you can transact it more like a bank deposit because  it seems to me that could be somewhat revolutionary. And if the Fed were  driving it and basically saying to the world, look forget about swap lines.

We're going, those are antiquated mechanisms. We're gonna replace it with this  new idea of the US having a major stable coin reserve. That's, that's backed by  US Treasuries and anybody who holds those stable coins both. Earns a yield  like they do on a Tbill, but they also have the same safety characteristics of  holding T-bills as opposed to a bank deposit. 

That would be revolutionary.  

Michael: It would be. And it's what I think they're aiming towards. And just to  add to that, of course, banks don't like that. Of course they don't. I mean, this  feeds back to, you know, investment angles. And should you, shouldn't it be  holding the financial sector? I don't give advice on that, but I'm just talking  thematically. 

Lemme ask you a question before I, I continue. Making this point off the top of  your head, Eric, do you know what percentage of US bank loans actually go  into productive capital in terms of capital stock? As in we're gonna build a  factory here. We're gonna build something with a machine that makes  something have, have a guess what percentage of US bank loans do that? 

Erik: Productive capital, not consumer capital. So we're not counting buying  SUVs. A, a very small percentage. I don't know a number, but not much.  

Michael: Yeah, it's around 20%. So four out of five bank loans don't do  anything to help build up the capital stock, which is absolutely crucial at the  moment. They are for consumption or they are just to other financial entities. 

So it's just money for money on money. That's just financialization for you  basically. So if you are the Fed. And you have got statecraft in mind because  that's what the treasury has in mind. Obviously, you don't wanna blow up the  financial sector, that's the last thing they want to do. But what uses of financial  sector, if four fifths of it, don't do anything for you if, if four fifths of it are  doing everything to inflate the parts of the economy, which you have the least  use when you're trying to take on China in any different dimension over any  timeframe. 

What's it for? And that, that of course flows back to the question I asked you  when we first talked. You know, what is GDP for? That's what economic  statecraft is all about answering. So it wouldn't surprise me to go back to that  stable coin if you do end up with something whereby it is a form of threat to  banks to a degree, because banks then have to get with the program, they have 

to realize, okay, we can't just have this asset base, which is purely consumer and  financial. 

We need to be getting approval from the treasury to actually start doing more  useful stuff, and then, then we get a gold star and a pat on the head rather than  being hit with the stick. And that's a way in which you can use a market  mechanism and it's still a market mechanism to actually achieve a statecraft  outcome, which is what it's all about. 

Erik: Do you think there's an angle to that that plays out as part of this now to  the midterms timeframe? Because I could imagine Kevin Wars coming in as the  new fed share and then the White House making an announcement saying look  with the, the new Fed in place don't put your money in the bank. You can now  buy these, you know, consumers. 

Can get a much better return on your savings by just directly buying stable  coins. You don't need banks anymore. Now, Scott has been messaging pretty  hard that it's time for Main Street, not for Wall Street. Is there room that the  Trump administration kind of does a frontal assault and says, screw the banking  system. 

You know, we're gonna fix the money system through our reforms in a way that  Wall Street's not gonna be happy about. But we're not here to take care of Wall  Street. We're here to take care of Main Street. By the way, make sure that you  vote for us and. November I I is, could it all happen that quickly? 

Michael: Thematically and logically, I think it could. I'm not saying it will, and  obviously you're walking a razor's edge doing that because this is a fed, which  everyone knows, has always been there for the financial sector. That's what it's  there for. I already made that point earlier suddenly saying, that's not what we're  there for anymore. 

That's not who we're there for. And you know, the, the, the pushback would be  enormous, particularly in terms of lobby groups going into the midterms, if  nothing else. Also looking at, of course the, the macro effect and the market  effect. But I do think that is the logical game plan. The question being how you  get their, you know, with, with the least bumps along that particular road, and  they would be the best arbiters of that, those individuals, they would've the best  read on the economy. 

But I, I think there's, again, taking the counter counterargument, which is how I  try to do everything. Nothing else makes sense if they're not going to do that. 

And this is the same fed with a different person running it, just moving a  mechanical fed funds rate, which is less and less used to anybody, less and less  of a guide to anything up and down, which is either inflating all of the economy,  the good bits and the bad bits, or deflating all the economy, the good bits and  the bad bits. 

How does that help anyone achieve anything? Not just in the midterms, but but  longer term? So yes, logically I think we go there. Yes. Logically, I think stable  coins are part of that journey, and I can't tell you how few people actually grasp  this yet. And I understand why. It took me a long time to get my head around it,  and I'm, I'm not even looking at the technology of how it works. 

I don't even focus on that side of it. I'm not, I'm not a tech bro like that, but I'm  just looking at the geopolitics, the geoeconomics, and the balance sheets of it.  And if you can suddenly get. A flood of funds going into T-bills and not just  from within the US but internationally too. 

So you have a flood of dollars going into the US, a flood of dollars going into  T-bills, which pushed down the TBI rate significantly. You can refinance a lot  of treasury debt, the short end of the curve at a much, much lower rate, and  suddenly you can be spending a bit more into the midterms too or you can be  pumping up the military industrial base and getting back into shipbuilding, etc,  etc, or at least saying, vote for me. 

And we continue to do this. We've just broken ground on that. We need another  couple of years to, to really get, you know, the, the steel pouring. I think it's a  very, very powerful combination with big risks, with big caveats that it can be  done wrong, but again, I think it's a more logical outcome. Than forward, just  going back to where we were and moving something mechanically up and down  and hoping for the best. 

Erik: If these stable coins are transacted internationally on open digital markets,  does that open up a whole new realm of investment capital for the US treasury  market? In other words, in lower yielding countries where, like Japan until very  recently, where the, the interest rates are next to nothing. There wasn't a good  way for the average, you know, individual investor to buy US treasury bills. 

If they were a sophisticated investor, they might figure out how to do that, but  it's not something the average guy knows how to do. If buying these stable coins  was simple enough that everybody in the world could do it on their iPhone, does  that potentially create a whole bunch in of indirect US treasury paper demand?

Michael: Trillions and while there may be large entities where it doesn't play  well, and I, I would think Europe, for example, it won't pay particularly well in  Europe for, you know, patriotic, political and even economic reasons that you  have the Euro. So why would you look at anything else? Fair enough. But in  most of the emerging world, which is a big, big slice of the global population,  provided that they can manage to make them attractive enough that su supply is  less than demand. 

And yet supply is still significant enough to help the US achieve what it wants.  Yeah. You can manage to make sure that there's a decent yield on that, which  competes with any local currency. And as you said, it's on your iPhone outta  reach of the tax man outta the bank, even so no one knows where it is and you  can still transact in it. 

Domestically within that network and internationally, and you've effectively  dollarized much of the global economy alongside, you know, the existing Euro  dollar network, which frankly operates for the financial system and for the, you  know, the global commodity trading system and at the highest level. But for the  man in the street, unless you are somewhere like, you know, parts of Africa or  Southeast Asia where they still have physical dollar notes, it doesn't work the  same way. 

Now, it can, as you said, it can be on your Android phone, on your iPhone.  Trillions and trillions, trillion. And then on top of that, just to add to that, you  can even start saying that US importers, you know, huge, huge import demand  globally, start saying to people, well, we're gonna pay for you, sorry. We're  gonna pay you in stable coins. 

So for example, a US importer instead of sending dollars to a factory in  Southeast Asia, hypothetically, they send dollars to a stable coin issuer in the  US who use them to buy a Tbills again, Tbills go lower. They get that stable  coin and they send what is a digital token, not a dollar, a digital token backed by  a Tbill, which stays in US hands in the US funding the US government at a low  rate to that Southeast Asian entity. 

And from there, that can flow on and on and on. You can either say, okay, we  now want you to bring that back into the US as investment capital and build a  shipyard here for us because you have your government assigned a trade deal  with us, and that's part and parcel for that. So it's buy one, get one, and you get  

it invested back into the us.

Or you can say, do whatever you want with it. There are no guardrails. Just  don't send it to this country or that country because if you do, we'll, cancel it,  because electronically the US can. So amount of power. That puts in us hands  potentially if it's done right, is phenomenal and it is market moving in a way  few people realize. And it takes us from a two dimensional world into a three  dimensional world. 

And most balance sheet thinkers can't conceive of how it's going to work, but I  can assure you it could, and I think it will.  

Erik: Michael, the, the light bulbs going off in my head are just phenomenal in  this interview. I'm just thinking from all of my travels around the world I've  never met anybody in Latin America who trusted their own nation's currency  and who didn't want to keep any savings they had, although most of them don't,  unfortunately, have very much savings. 

What they do have, they want it to be on US dollars. In a lot of those countries,  the government restricts banks and doesn't allow them to offer. US dollar  denominated accounts to to retail banking clients and so forth. But you could  easily see the Trump administration go on a crusade to announce to the world  on X that look a lot of the world's corrupt, and we're gonna fix it for you. 

And the way we're gonna do that is by making it possible for anyone on the  planet who's got a cell phone to invest in. Something that is, first of all,  eliminates the foreign currency risk of staying in your own home country's  currency. You can invest in US dollars, which across most of the world, most  people trust much more than their own country's currency. 

And you can do it all in your phone and your government can't stop you and  your government can't even know what you're doing because we are going to  engineer the system So you can. Deal directly with us, the US government, and  our banking system, and our stable coin system. Oh, by the way, there's this  fellow named Don Jr. 

Who just might be launching a a business associated with that pretty soon. And,  and that would make Trump a hero in Latin America. That would mean that a  lot of the Latin American immigrants that maybe were otherwise inclined to  vote Democrat in November might change their vote. There could be all kinds  of consequences to this. 

Michael: Absolutely. And in fact, you've hit the nail on the head. I'm glad the  light bulbs are going off because I do get, for example, resistance from some 

people who, you know, very, very smart people who have said, well, you're  basically just substituting a Euro dollar for, you know, a token, a digital token  rather than an actual dollar outside the us. 

Why would anyone agree to that? And I said, for the reasons you've just stated.  

Erik: I never met a guy in Chile who was buying Eurodollar futures. I know  lots of people in Chile with cell phones that would love to buy US dollar  denominated savings that their banks and their government doesn't know about. 

Michael: Well ex exactly my point. But secondly, I mean, these tend to be you  know, from Europe, these people. But then they turn around and say, well, you  know, well we wouldn't want that. You know, we are happy with euros. Why  would we accept that? And I'll say, because the US can make you because of  nato, because of others, you know, other forces, energy, etc, etc. 

But above and beyond that, it's even more devious or clever or cunning than that  because think about the balance sheet dynamics of it for a moment. I know this  is really dull and dusty, but just for a second, indulge me. Imagine you've got  one of these countries, you know, country X, and within Country X, somebody  wants to hold that dollar stable coin and they've got local currency. 

Well, the way it works is they're going to have to contact a stable coin, stable  coin issuer. They're going to have to basically transact and give them their local  currency. That local currency at some point is going to be given back to their  central bank. Their central bank is gonna swap that for the requisite number of  dollars. 

Those dollars go via by the stable coin issuer to the US Treasury, which issues  the T bill. For the stable coin, which it's given to the individual who's buying it,  right? You follow me? That's a very simple dynamic, but what are we having  there? The dollars are sucked out of that economy. FX reserves disappear, and  they're replaced by stable coins. 

So not only do you have this liberalization where everyone can get hold of  them, and they will do, but the, the financial tier, which again goes back to  banks and the 80% of their loans are financial rather than productive. That  global tier of Euro dollar liquidity at its at the base of collateral, the actual FX  

reserves starts a decline. 

So suddenly countries which are reliant on the Euro dollar have a euro dollar  squeeze, which pushes up the interest rate even more, which makes a stable coin 

even more attractive. So, so you basically lock others into a spiral where they're  just rewarded more and more and more for doing it. Now can it blow up? 

Sure. Can it go wrong? Absolutely. They, I'm not, I'm not here to say there  aren't ways it couldn't go wrong. Right. But I think it's a very, very, very  misunderstood. And a tactic which I think is likely to be deployed well, as I  said, as soon as this Clarity Act is passed and of course you can see why  lobbyists who don't want it to happen, don't want it to happen because it upends  so much of what remains of the global system, but it will be a very different  system on the other side of it. 

And I think one in which America sits a lot prettier and potentially so does Mr.  Trump.  

Erik: Michael, this just tracks very closely with a lot of the, between the lines  that I've been trying to read from Scott Bessent. It's very clear that they have an  agenda to do something big, and I wasn't sure exactly what it is. 

And, and you've just painted a, a picture in my mind as to what it might be. I do  want to move on to another topic before we close. At the beginning of the  interview, you said that you think the market got the message wrong about the  worst nomination. Now, one of the things that happened in reaction to that  nomination was just a huge correction in precious metals, both gold and silver. 

Just really took it on the head. Did the market get that wrong? And I, I think  clearly they were, they had been on a, a, a very overextended run, so they were  overdue for a correction, but. Did the market misinterpret that? Is the market  still misinterpreting that? You know, should, should we expect this to continue  for a long time? 

Or is this gonna be, oh, wait a minute, we got that wrong. And we move back to  the trends that we were on before?  

Michael: Well, we were just discussing one kind of revolution. And let's be  clear, everybody who's piling into gold and silver, unless you are just a trend  follower, you are of course, and, and, and very often openly banking on a very  different kind of revolution and saying that fiat money is over. 

We're going to go back to a gold standard or a silver standard, or some kind of  biome, Methodism, etc, etc, and everything around us, which is based on fiat, is  done. That's a really revolutionary stance, and we take it as normal because that  faction have always been in the markets. And if you look at the, the debt levels 

in many Western economies, and if you look at the, the bill for, you know,  reindustrialization and for building up a defense base, again in most of them to  say nothing of, you know, future welfare requirements, you can understand why  some people are voting with their feet like that. 

But it's still a revolution that they're marching towards in doing it, whether they  recognize that or not. And what worries me is that while the logical arguments.  Is there number one, you are talking about something which is supposed to be  the ultimate safe haven and which, you know, gold bugs in particular will  always tell you, you know, under gold we didn't have any inflation. 

That's not true. Actually. On average you didn't, but you had massive inflation  followed by massive deflation. And so that the, you, the average was low, but  you had incredible swings up and down. And ironically that is what you're  seeing here. Now, you're seeing something that's supposed to be a safe haven  trading. 

Trading like a crappy meme stock. Which is not very reassuring. So that's one  thing that I think everyone should be cognizant of. Whatever they, whatever  they're doing with their money. But the other one is this. If we are looking at  this potential revolution via stable coins, and I think we're, but again, you know,  that's open to debate. 

And you've got issues over Bitcoin in the background, which is having a terrible  time a bit. But you know, is the US gonna potentially move towards using that  in some form too? That remains to be addressed. They promised they would,  but they haven't so far. 

Gold in particular is still being held up by some as a potential new architecture  as I just said. But I wonder how many potential new architectures you can have.  So if for example, you backed the view that I just put forward, that dollar stable  coins are gonna be a big thing, is there really room in the marketplace for that  and for gold at the same time? 

Erik: Well, what if it was dollar stable coins and gold stable coins and Bitcoin?  What if those were the, the three digital assets and the Fed was actively  promoting all three of them, including a strategic Bitcoin reserve?  

Michael: Well, okay, that's, that's an interesting question. I think you are more  likely to see a duality in the US where you have dollar stable coins and Bitcoin.

And where that would happen, for example, to give a very complex answer very  quickly, is that I think people who US allies will be using dollar stable coins.  And if they're not allies, now by dollarizing them, they'll become them. And  people who really push back and say, we're not going to allow that to happen. 

Capital controls, you know, whatever is necessary to stop that happening, fine.  We're not dealing with you. You are gonna use bitcoin. You're not gonna get  Euro dollars from us the way that you used to. We're just gonna switch to  something neutral instead. So that's what I think the US may do, but that has yet  to unfold. 

And at the moment, as I said, Bitcoin's having a bad time of it on a lack of faith  in that which, which may be justified. But in terms of gold, I don't think that the  US is going to do that because dollar stable coins are still fiat, but a digital  token for fiat. And so you're expanding the Tbill supply albeit into what you  hope is productive sectors rather than financial areas or consumption areas, but  it's still fiat, so then go to gold at the same time. 

Seems to be really. Mixing your metaphors from a monetary policy perspective,  I don't see that helps the us I can see there may be revaluing against gold, which  is a separate argument people make, but then basically cashing in and walking  away from it. It's other countries I believe, that have been leaning towards  talking about maybe trying to do some kind of stable coin back by gold, but  that, and this is a critical point to make in 30 seconds if that were to occur. 

We don't have a global architecture anymore the way we do now. We have  multiple. Global architectures. We have different currency blocks the way we  did in the 1930s, a US block, a US stable coin block, and a gold back block  doing their own thing, their own way, and not trading so much with the US  block. But that's the risk that's always been there. 

And that is certainly something that still should be at back of mind and in fact,  front of mind when you're looking at these assets move. 'cause it's ultimately  about who you think has the power and who sets the rules and draws the board  game for the 21st century. That tells you what you should and shouldn't be  buying. 

Erik: So if I draw an analogy to the 20th Century Cold War arms race, we  could be looking at a 21st century stable coin arms race where the US says,  look, the, the answer here is US dollar stable coins, Russia and China. Partner to  counter and say, no, no, no, no. That's, that's basically stable coins for fiat  currency.

What you really want is stable coins that are backed by gold and we're the ones  that are gonna give that to you. And you end up, as you said, with blocks where  there are some countries that are. Gold-based through a gold-backed stable coin  and others that are US dollar based through a US treasury paper backed stable  

coin. 

And you have very similar dynamics to, as you said, the 1930s and different  country, different economic blocks in different parts of the world. Is that part of  the future that you foresee?  

Michael: Again, not a forecast. It's a, it's a tail risk, which I've been warning of  for over a decade, which you can start to see. 

Gradually emerging. Just a few caveats that are really, really important. If were  that to happen, what you will immediately see is the other block. Basically  saying what you use is not tradable here, so there's no clearing. So in other  words, if you're using dollar stable coins, don't even try and get a market  exchange rate on your screen for our Gold Bank stable coin into that dollar  stable coin. 

They're just different things, which you've had in the past. We did during the  Cold War, you couldn't transact between the Soviet ruble and the US dollar.  Except very narrowly at a ridiculous exchange rate via a couple of guys in  Moscow. So if that were to happen, supply chains from upstream to midstream  to downstream, downstream have to fragment because you have to have two  different blocks for everything with everything you know, in contained within  them. 

That's the first point. Second one is, of course, you know, in China's case, they  still have massive fiat. I mean, you know, they, they're borrowing and printing  money, like no one's business, just like everyone is. So it's not as if I would  actually be You know, gold based in the way that you would expect. It's just  that because they run a huge trade surplus, they can afford to, you know,  nominally peg to whatever they want because it flows to them, except it  wouldn't flow to them from the us. 

There's no exchange rate here. Which would allow trade to clear. That's the  clear, that's the key point. Don't think that if China were to do that, somehow  the US devalues against that and therefore the US and China are friends again,  just at a different exchange rate. No, they're separate. Don't talk to each other.

Berlin wall between them and, and the last point very quickly is you've probably  seen the headline that came out last week. There are rumors going round,  although they haven't been substantiated, the Russia is already saying they want  back in onto the dollar system and walking away from any talk doing something  China. 

The big players potentially are more flexible than one might think.  

Erik: Michael, I always enjoy our conversations. I'll look forward to the next  one. But meanwhile, before we close, I want to touch on what you do at  Rabobank. Tell our listeners a little bit more about the services on offer and  what your team in the global strategy in economics and markets is all about. 

Michael: Sure. Well, that's the easy part. Basically, it's what I was just talking  about to you there. We don't give investment advice. We talk to stakeholders  from, you know, farmers to the C-suite, trying to help people understand what's  going on in the very chaotic world around us. And trying to explain what we see  as the underlying themes and drivers that are emerging and to try and translate  that into effective strategies for them to then implement because it's as much  about risk mitigation as it is looking for opportunity, and both of them have to  go hand in hand. So that's that part of the story. And of course, Rabobank is the  leading one of the leading banks in the Netherlands and the world's leading food  and agri and energy bank and is attempting to, you know, grow a better world  together. So those two sit alongside each other.  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

What do you think of that thesis? 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

How long does that last?  

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

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

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

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

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

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

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