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- [00:00]
A
New week, Big moves.
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B
You ready? Andreas on the data maker on the floor. Turn the headline into trade. You can know from yields to inflation, every chart, every trend. Get the story, get this set up. From the open to the end. They try to be as actionable and as honest as possible. But keep in mind that their predictions might be sometimes maybe good, sometimes maybe good. Sometimes maybe sometimes maybe.
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C
Summertime it may be good.
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A
Summertime it may be.
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It's Macro Mondays. Big picture Clear play. Stock bonds, fx, crypto on the way. Get context. Strategy right now on your screen. Macro Mondays. Level up your week. Oh yeah.
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C
Hello out there. Welcome to Real Vision. Welcome to Macro Mondays. We have a great show for you today. We're going to be talking about why Andreas is reminiscing 2021 all of a sudden and whether we should worry or not about the hantavirus. We're also going to touch upon the inflation numbers tomorrow, the XI Trump meeting and everything else that's going on. So great show for you today. My name is Mikael Rosenwald, your usual host and as usual I have with me Andrestino. How are you doing, Andreas?
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A
Good. I'm not suffering from the hantavirus yet at least so.
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C
No, no, very happy to hear that. Address we have a great show today. We're going to touch upon the hantavirus. Not too much, I promise you guys that, but. But a little bit. We got to have some fun at least. Address. You're doing another show this Wednesday. I just wanted to plug. It's at 3pm Eastern time, the monthly State of the Union show. I'm skipping it this time, but what can people expect from that if they are pro tier subscribers at Real Vision.
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A
So we're going to look into the inflation wave, whether we should expect it to also slowly but surely filter through to other goods than the energy basket of the consumer inflation basket. We'll have inflation out from the US tomorrow. Highly anticipated report and it probably won't look pretty. So we'll spend most of Wednesday's show looking into how this will pass through to everything from foreign exchange market to interest rate markets to the whole macro picture across the globe. So a very important one to watch.
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C
Absolutely. On Thursday we have Shooting the Shit with roland Julianne at 12pm Eastern at New Eastern. So lots of good stuff to look up to, look forward to if you are a subscriber at Real Vision. Remember, this is our weekly free show where we give you a sneak peek into our view on the world of macro. We have a bit of fun and we try and Give you some ideas of how to navigate this crazy, crazy world of ours. Things are moving very, very fast. This is obviously the exponential time age. So remember that even though we try to be extremely actionable and accurate in our updates and our ideas that things might be summertime, it may be good summertime, it may be shit, that's the way it is. Okay, Andreas, let's kick off with one of our rules. We have a lot of rules of thumb here on the show. One of them is the Fauci rule, and we've used that. We've mainly applied that to oil analysts during 2026 here, because, you know, Andreas, remembering back to the COVID days, you had a period of time towards the end of COVID where all of the experts were sort of clinging on to this sudden wave of attention that they had, including Mr. Fauci here. And to poke some fun on some of the oil analysts, we've seen some of the same during the Iran war crisis, some geopolitical analysts as well. I'm not afraid to take that. But now we're back in Fauci territory. In true Fauci territory, Dr. Fauci has been quoted for saying that it might be time to start wearing masks again and maintaining social distance. So how do you rate this, Andreas? What are the chances that we get into a new lockdown and all the turmoil that came after the last pandemic here?
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A
Andreas, so thanks for allowing me to don my inner armchair virologist here. It's not necessarily my area of expertise to put it like that. Having said that, I think it is very unlikely that we'll enter lockdowns this time around. That would just put it like that. I basically think we should spend our time on other topics than the Hansavirus. For what I've been able to gather so far, incredibly unlikely that this is going to spread fast between humans. And therefore, I think we have six confirmed cases on Earth, and I think the first case broke roughly 10 days ago now. So it's not like I'm scared of the exponentiality in what we've seen in terms of confirmed cases. It's obviously a very nasty virus also, given the empirical evidence that we've been able to gather so far. But let's let me just put it like this. And it could be my famous last words. I wouldn't spend a second discussing this from a macro or market perspective. And, yeah, I probably should refrain from commenting on what Fauci said.
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C
I want to get in one thing, because we had a few questions during the Week on what is the Hansa virus bet? Aside from Moderna doing 30% or so, you could probably guess that the real sleeper bed life here. Andreas, we've already hear all across X that Ivermectin is obviously the solution to Hantavirus as well. It's the solution to everything from, from a common cold to, to, to AIDS or I don't know, it's, this is, this is a place where Europe and US is very, very different address because when I talk to Europeans almost everyone laughs at the cyber mixing stuff in the U.S. it's, it's, it's quite big. I've been here about people building up stocks of Ivermectin to combat whatever the next pandemic might be. So possibly not the worst bets of all to get into that. But it's not part of our portfolio. Let's just leave it at that. Andreas. No, I've been poking a bit of fun also in the title of this show that is beginning to look a lot like Covid. It has nothing to do with the hantavirus to be honest Andreas. It's much more to do with the outlook in US dollar liquidity and the macro outlook. So tell me Andreas, why is it that you are reminiscing 2021 suddenly?
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A
So I mean I actually had these thoughts about everything playing out right now looking a lot like 2020, 2021 before we even heard about the Hansa virus. So it was kind of an odd Quincy that we suddenly had a virus to compare it to as well. But if we look at the setup right now we have the so called non profitable bets in Wall street, all of the say tech companies not making any substantial revenues or profits for that matter, yet outperforming stocks with incredible cash flows for example. That's a thing we saw back in 2020, 2021 as well with a lot of non profitable bets outperforming classic value bets. And we've seen that to a large extent, especially over the past six weeks, we've seen signs of recycling of dollar liquidity to an extent that I haven't seen outside of say April, May of 2020, right at the peak of that panic QE during the first lockdown. And it is very related to this so called ESLR reform, the supplementary leverage ratio reform, which basically allows banks to run more leverage without setting capital aside. What does that mean? Well it basically means that they set aside a lot more balance sheet to low risk transactions such as repurchase agreements in treasuries. Why is that important from A liquidity perspective. It's very, very important to watch repo trends as they basically tell you how easy it is to recycle the same dollar into more than one asset. Think of it this way. A repo transaction is basically a short term borrowing transaction. I agree with the bank to post collateral, for example a Treasury, and in return for that Treasury I get short term funding. I can then use that short term funding to buy a new Treasury. And then again, same logic, I can use that Treasury I just bought to borrow against in a repo transaction. So you can actually recycle the same dollar, albeit with a haircut, every time. And the more balance sheet the banks set aside for this, the easier it is to buy a lot of Treasuries with the same dollar. And we've seen an incredible increase in the repo transaction activity since this SLR reform. It was put in place around 1st of April. So I think this is at least to some extent reminiscent of what happened during 2020. And therefore, you know, it, it, it, it reminds me of some of the mechanics of 2020. It's not like that we have a lockdown. It's not like that we have a, a meaningful pandemic. I don't think we'll get one from the hands of virus either. But we have this cocktail of very easy access to money paired with, in my opinion, a very underappreciated re acceleration of the U.S. economy. We got another decently strong labor market report on Friday, right? It was the second consecutive strong report which we haven't seen for a year or so. And it kind of goes against all of the doom saying that we've seen from energy pundits since 1st of March that we see an acceleration now. But it rhymes very well with what we're observing in our now casting. And at the same time we have a Federal Reserve that is pretty reluctant to do anything about the inflation spike that we've seen, that is pretty reluctant to tighten policy into the acceleration of the economy that we're seeing. So in that sense we have this easy monetary policy relative to inflation that we also saw back in 2020, 2021, and it will probably end in an inflation wave also in other goods than energy. But it may take say six to nine months from here for it to really show up in the US economy outside of energy.
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C
And that's a very interesting similarity because back then you obviously had the big inflation wave, especially hitting in 2021, especially into 2022. It also came from sort of exogenous shock back Then it was obviously the pandemic today. We might not have a pandemic right now, but we do have that exogenous inflation shock, or at least the expectation of it from the Iran war, from oil prices. So let's maybe zoom in a little bit on that. Andreas, what do you expect from this inflation report and how far along are we in that expected tsunami of inflation?
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A
So we'll probably see peak energy inflation in this report at least, unless things worsen in Iran, meaning that we'll get relatively close to 4% in headline inflation. I'm currently looking into the details, but probably between 3.7 and 3.8 in headline terms. Of course, again, very driven by energy this time around. But we're also starting to see some of the spillovers to the broader goods basket. For example, fertilizer prices are up a lot.
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C
We bring up the chart here.
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A
Yeah, Slowly but surely that's, you know, it is basically a pre warning of what's going to happen to food prices. Right. We know that there's a scarcity of fertilizer. I'm not the kind of pundit that expects that scarcity to show up in the west through actual shortages. I think we'll import the price increases and then leave some of the poorest emerging market countries without any supply. That's typically what happens. It's the cynical truth of the capitalistic world. So the whole notion that we'll see shortages is outright wrong, but we'll get some second order effects through prices and we're going to see the first glimpse of that tomorrow. And I probably even underestimated rhetorically by calling it a glimpse because it will be quite nasty what we'll see tomorrow. But it is expected. It's not like it's truth bomb that we'll suddenly see energy inflation tomorrow. Everyone's been at the pump over the past month, so we know what we're dealing with and we also know what the solution is. It just doesn't seem like Trump and the Iranian regime are able to agree on that exact solution.
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C
Right. No, let's dive a little bit into that. Andreas, we had less Monday Hopio, as you usually call it this week, mostly continue the bad news. I'm still struggling to understand, to be honest, the exact dynamics of what's going on and especially the US strategy is a little bit bewildering for me. At the end of the day, it's not really driving markets anymore. Yes, we have the inflation wave. It's not going to going to be completely over until we get a solution to this. It seems like both parties have more or less found common ground in sort of containing the disagreements or limiting them to the nuclear question, sanctions and then obviously the strait. And so to some extent, we're back to square one. Before the war, they discussed sanctions on the nuclear question. Now we also have the Strait of Hormuz to tackle. So it is still a game of patience, essentially. We don't really see any signs of interventions or pressure from China, as you could have expected. They're just leaning back and letting this happen. The US is. I mean, yeah, you're going to have a hot inflation report, but again, Trump can live with that for a while. The Iranians are sort of trickling oil out, so no real pressure from either side, at least economically, financially. So this fiscally, politically, it is becoming a little bit expensive for both sides. But yeah, not the biggest market driver, though. What could be a bigger market driver, Andreas, in geopolitics this week, and it surprises me that it is so underreported still is the Trump Xi meeting. I know a lot of other stuff is going on. We're going to touch a little bit on Ukraine maybe in a moment, but Donald Trump is going to meet Xi. That's a big thing. It was the main Trump economic driver or driver of the economy, 2025, the trade war with China. We've heard some reports of what, what's, what's going to be agreed upon. It seems like a much more well prepared meeting than a lot of the stuff that happened in 2025. So I have my expectation, my base case is that this is going to be a very, very smooth meeting. A smooth meeting means it's, it's not, it's not, it's not a big market driver. There is always the potential that Trump decides to throw in a hand grenade into the meeting, blow everything up, start a new trade war. More likely, I think we will see an announcement of board of trade, board of investment type of thing, some sort of framework for dealing with, with, with, with trade between these countries. There's been talk about naming it G2 Corporation. So crystallization that this is the driving relationship of the world right now. And I mean, all that should be good for markets. I don't believe we're going to get a big solution on rare earths or chips. So that's still going to be there. We may see some kicking the can down the road, some extensions of the ceasefires that are running for another six months. I don't think we're going to see any solutions at Least not publicly about these things, probably not about Taiwan either. But we might get some wording that China is sort of obligated to bring down their trade surplus, et cetera, but that's just worse. At the end of the day, my base case is a relatively smooth meeting, some good news, and a framework to discuss these things. And usually as we've seen with other of these geopolitical tension points, that's all market needs to know that things are being handled, to know that things are now in a bureaucratic process that's going to ease markets a lot and it's going to take a lot of the geopolitical risk out of this, in my opinion. So potentially very, very bullish case, in my opinion, or perhaps more of a slow bullish case from this, obviously with the potential that Trump decides to throw a hand grenade here. So just how do you view this from a portfolio standpoint? Should you prepare for this? Should you just await the news? So what's your take here?
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A
So I mean, practically speaking, what we've done is that we hold I think roughly 15, 16% of the portfolio in what I call decoupling bets. So companies that thrive if the US and the Chinese economies drift further and further apart, which even with Some sort of G2 high level agreement is still what's ongoing on a trend basis, that's unstoppable. Yeah. And such companies will obviously do even better if they decide to throw hand grenades at each other or whatever you labeled it. So one example is obviously companies working with bringing the supply chain of rare earths back home to the West. There are a couple of obvious choices there. I think a couple of the domestically focused solar companies in the US are very valuable assets in a portfolio given the situation between the two big powers of the world. They've by the way, been doing very well for us these solar bets over the past say six, nine months. And solar is still incredibly cheap relative to some of the other power sources that we've seen on a tier basically since 2025 to 2024 and onwards, like nuclear fuel cells and stuff like that. So I think solar is a good US China bet. I think rare earth supply chain bets are still very valuable. Then of course you have this whole notion that the risk of decoupling between the US and the Chinese economies also increases the odds of global south central banks accumulating metals. That story has been put to bed a little bit due to the Iran war, but it's not over flow wise. We saw a very nasty march for metals accumulation. We saw rebound in the accumulation of metals in April and I suspect that we're seeing a resumption of that trend through May here as well. These metals have stabilized and I even went as far as tweeting, I think it was on Friday that actually looks like we could get another silver rally here. Even though I've been more, more of a foe than a friend for the silver community since New Year's.
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C
So love, hate relationship.
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A
Yeah, yes, exactly.
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C
Without the love.
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Yeah, without the ah, to some extent. I mean they've called me fat and retarded over and over.
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C
That's a bit of love, isn't it? Self love.
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So having said that, I think, you
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know,
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from in sort of a priority ranked order, rare earth bets probably serve as the best hedge against what's ongoing between Trump and she and then solar is the second then, you know, broader metals and mining bets probably also work.
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C
Yeah, yeah. I mean some of these bets could take a bit of a tumble if we get good news out of this summit. Still very, very valuable bets for the long term. So, so I mean that's, that's probably my, my bottom line here. Yeah.
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A
And you know, I, I agree with that. But roll back, turn back time is it six, seven months back in October when this official communication came out from China that they were going to implement sort of a licensed regime for everything related to their rare earths. Right. If, if you had any, you know, traceable, just mist of rare earth in your product stemming from China, you would have to report that directly to the ccp. Right. Or the Communist Party. You cannot make a U turn from that strategically. As soon as you've weaponized that to the extent that the Chinese were willing to last year, you can no longer be counted as a supplier of any sort of loyalty over time. And I think that is crystal clear to everyone involved in this supply chain in the US now. And therefore, no matter what they agree upon, I still think this warp speed operation to bring some of these supply chains back home is fully intact on a trend basis.
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C
But I mean, Andreas, just zooming out a little bit here. 12 months ago or even during the fall of last year, we were talking about this continued increase of tariffs against China, 200%, 250, 300, where we're just throwing new numbers at each other. Even talk about the E word, the embargo word, a trade war, we haven't heard a lot about that. The tariffs are getting outlawed one by one. And whenever we talk to institutional investors, there still seems to be a lot of fear that the global trade could be disrupted, et cetera. I have a feeling that this is going to lower the geopolitical risks combined with what we're seeing in Iran and Ukraine. And you can argue that these are problems that Trump made for himself. But again, if these problems are more or less solved towards the summer, should be, should be fuel for the rally, in my opinion. We're not going to be diving too deeply into the Ukraine stuff. I'm going to write more on that on Wednesday. My the Drill article for the Protea subscribers here. But we are hearing very, very good news, especially also from the Russian side. We have had that before, but it sounds like both parties are more willing to talk now. And I mean, if you get a solution in Iran, a solution in Ukraine, solution on the trade war with China, that should be fuel to this rally in red.
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A
Yeah, it should. And I'm just trying to look up my trading account. Everybody a little bit interested in how things are going evolving today. But you're right. And my, my gut feeling is a lot better around the prospects of, of getting a peace deal in Ukraine that it's than it's ever been. And I explicitly refer to my gut feeling here because, you know, what tangible, tangible evidence do I have? Right. But rhetorically, Putin has certainly softened and Ukraine is no longer in a position where they can just relentlessly deny any negotiations around their territory. I mean, they don't have the backing from the US on the Armory anymore. So that's obviously a big thing when you look at, you know, nine, 12, 15 months ahead. So the cynical analyst in me tells me that there is a window of opportunity here in terms of striking a deal, but we'll have to see.
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C
Yeah, again, the investment angle here is to be ready to invest in Ukraine whenever we get a peace deal because that is going to be a rally. There are going to be lots of opportunities. Also a lot of volatility probably in that. But obviously a country coming out of such a massive war going to have a lot of possibilities. So we'll dig a little bit into that on Wednesday Mother Drill article and possibly touch upon that in future shows if we indeed do get closer to a piece in Ukraine. I just wanted to end off the show, Andreas, with a little bit of a teaser or putting some words into a new thematic that we've put into the model portfolio that we run because we've obviously talked a lot about both electricity bets, semiconductor bets, photonic bets, all the AI bottlenecks, but essentially gone one step further in the thought line here and Introduced a thematic that we're calling end consumer scarcity. And early in the show you told me there weren't going to be going to be any scarcities on energy. So what on earth are we talking about here?
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A
I made a sketch, I think it was during the first couple of weeks of the war on page 16 on how long does it take for various production lines of semiconductors to be faced with disruptions in a so called no helium supply scenario? Helium gas is used to cool wafers. And by the way, Qatar is probably the biggest exporter in the world of helium gas. Many of the new production lines, those used in the semiconductors for AI and data centers, they basically more or less recycle the whole helium gas supply. So it's not really a biggie for them. But some of the oldest production lines, for example mosfets for cars, so the power chips and stuff like that, stuff you put in your mobile or in your laptop, they'll be hit earlier by some of these constraints. And on top of this, which is a very ongoing issue, we've seen that within the memory chip space, you know, all of the demand is moving towards AI, meaning that there's a wafer cannibalization ongoing from lower margin production lines towards those with high margins used in data centers. Right. And therefore, for example, in memory we've seen a much smaller production capacity set aside for some of the old DRAM memory chips that you use in various consumer electronics. And instead they've obviously focused on servicing that massive demand for memory in the data center space. We're seeing some of the same signs out of the power space now that you're basically redirecting capacity in the production lines towards some of the chips that you intend on selling with higher margins to Iron and Cypher and whatever they're called, all of these data center suppliers, and therefore it's basically a guessing game exactly when we'll see scarcities. But it is very likely that we'll see scarcities in some of the consumer linked products first. And that's why the chronology still works. From this sketch I made on the helium supply back in March, it basically means that cars, mobile phones, laptops, etc. Will to some extent be faced with some supply disruptions. Again, I'm not talking about necessarily a shortage, but there will be a tremendous value embedded in these companies that have secured supply chains. Apple is a very good example of this. Right. I don't think that's a hidden story. They have their own secured supply chains of everything that goes into their phones. And therefore they'll probably be able to get through such a period with an extreme degree of pricing power if some of their competitors struggle a little bit with these supplies. And they'll probably even be able to increase margins during such a period. So I think this is a focus area for the next six months that, you know, all of the demand that is sort of from AI, that is sort of sucking away production capacity in many of these semiconductor companies towards higher margin production lines included in data centers will eventually lead to some sort of day of reckoning in the consumer space where those suppliers that are well equipped to deal with these small disruptions and scarcities, they will have a tremendous pricing power and they'll be able to deliver the laptops, the mobile phones, the cars to some extent that are still needed. And remember that we're still in an accelerating consumer economy, which is. It's kind of hard to grasp given everything that's ongoing, but it's very true.
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C
It's what we've seen. Numbers, absolutely interest. Very, very fascinating stuff. Very actionable here.
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And we're by the way, off to a tremendous start in this theme. I started buying into it last week and oh boy, what a start.
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C
Absolutely. Andres, to see the specific names. I'm sorry, guys, you're going to have to sign up for the approach here with Real Vision and get access to the macro model portfolio that we run in there. But hopefully some inspiration for your portfolio out there, what to invest in for the next legs of what's hopefully a continued rally here. That's all we had for you this week. Remember not to Ms. Andreas's state of the Union on Wednesday and all the other good stuff we have for you on Real Vision this week. And if nothing else, we'll see you next Monday. Take care of yourselves.