A (3:03)

Yeah. Yeah. Nasdaq is up 1.6% or so by the time of this show. Again today, new all time highs, we see new all time highs in Japan, we see new all time highs in China, et cetera. So things are moving forward in a pretty solid fashion from a return perspective against all odds. And let me just reiterate why. We've seen a professional community of investors being incredibly reluctant to buy into this rebound. It's probably the most hated rally that we've seen in years.

B (3:36)

I love that term, the most hated rally.

A (3:38)

And a lot of people are still stuck with that. Oh, it cannot be true that the Trump administration can sort of oversee these kind of returns. And that's especially a narrative that is present when you go outside of the U.S. i mean here in Europe and also when I travel Asia, a lot of people remain in that mode and say, okay, that kind of behavior towards trade partners, et cetera, we cannot understand why that needs some returns. But it doesn't really matter as long as the earning cycle, the business cycle picks up amidst all of this turbulence and noise. And that's exactly what's happening. Right?

B (4:13)

Yeah, there's a kind of, I've mentioned this picture before, kind of a bumblebee feeling around the US economy. It isn't supposed to fly, but no one has, has told it that. So it's so still flying. We're getting very, very close, however, to the hence Seaba window. Our great compatriot is very big on X with promising the the greatest recession in a, in a century. It should be coming up mid October. So, so, so we're still looking forward to that. Andres, we'll get the Fed decision and the expectations for markets here because that is going to be pivotal for the rest of the year. What the Fed decides to do. Before we get to that, just a reminder that this is our weekly sneak peek into all the analysis that we publish at Real Vision. We are part of a great community, Real Vision. We have joined it with full force after the summer and we're very happy to be there. To get full access into Andreas Takes and trade ideas, you have to go to the pro tier at Real Vision, but there's great value in the other tiers as well. So go check out that that. Remember, however, that even though address, you've been right about September, that our trade ideas may, as we usually say, be summertime.

A (5:22)

It's maybe good summertime. It's maybe shit.

B (5:27)

Always good to have kinetic or tuso in Their address. So address. Let's, let's touch on a couple of other topics before we get back into the Fed decision here. We often talk about where are we in the cycle? Are we at the top of the wave right now? And then you posted this front page of the Economist. We can get it on the screen here, which kind of worried me. This signals to me top of the wave stuff. Now the economists are in on the AI bit. This is probably the time when you hear cat driver begin talking about AI stocks or what do you make of this address?

A (6:06)

Well, usually yes. Right. At least we're not early cycle on a narrative or a topic when you see a front page of the Economist covering that topic. I think there's a caveat this time around to that very simple view and that is the lack of positioning in the AI bet from the biggest professional investors out there. As part of our weekly editorial on Friday, I collected the data on the leveraged positioning across all of the major US equity indices from mainly hedge fund clients, but also family offices with access to futures, those capable of actually levering up their nominal when they bet on US equities and other asset classes. And net net we're actually still in a zone where those levered players are net short mostly because they're net short Russell so small cap indices, but also to some extent because of a lack of positioning in AI. And I think that's incredibly striking. Of course we have some of the momentum players chasing this rally higher. Now several of these names are present buying stocks day in and day out because of the momentum that we're seeing. But the discretionary funds, they're not super long probably as they can, you know, read the tea leaves in the sense and say okay, this, this looks a bit exhausted in many ways, both when you look at multiples, when you look at, you know, use value of it and so on and so forth, especially after the Economist is now has now jumped the bandwagon. Right. But ultimately Miguel, okay, the three three trillion that on AI. I haven't read the article in the Economist. It's been more than a decade since I subscribed to that shitty paper. But sorry, pardon my French, but the point here is when you look at the CapEx cycle or the investment cycle in AI, we're still talking about a hockey stick cycle with a big hockey stick towards the end of Trump's presidency, right? If you ask Mark Zuckerberg when will this capex show up in the size that you promised? His response, and he even said that out loud at this White House dinner is that, well, we'll see that towards the end of your presidency. Right. But he kept it within the window of the presidency. Right. So I think the surprise here could be that we actually see that hockey stick moving forward in time. I mean, could we see a positive surprise in 26? I think that's likely. Could we see a negative surprise in 27, 28? I think that's likely as well if you look at typical cycles. So for now, it's too early to call the top end surprises on this AI investment thesis. And what's even more interesting is that we have an obvious ongoing CapEx cycle in AI, but we have no CapEx cycle to be seen anywhere else. And my best guess is that the rest of the corporate space will have to catch up to the capex cycle seen in AI and not vice versa right now because we're likely going to see a forced capex cycle in everything from manufacturing to farming to all of of the sectors really in need of automated solutions now that tariffs are in place.

B (9:50)

Yeah, yeah. So what you're suggesting here is that we're currently in a data center capex cycle where every last bit of free capital is being thrown at data centers. At some point this will have to filter down through the economy to robotics, to accounting software, where we'll. What have you done? That's the point, right?

A (10:13)

Yes. And on top of that, and I know we'll get to it in a second when we'll discuss the. I don't know whether we should call it the impossible triangle, but when you look at the current state of affairs in the U.S. we have very, very lukewarm CapEx plans from manufacturers, farmers and many of those working in the real life economy, if you know what I mean. And I think it is driven by the uncertainty around the tariff levels. Are they on, are they off, will they be annulled by the Supreme Court and all of that. But once we really settle on a tariffs regime which I think is maximum a month away, it will be a major eye opener to the corporate community that you simply have to invest and we're not there yet. So it's a very asymmetrical outcome space to the upside for the CapEx cycle because the CapEx cycle is very, very underwater outside of data centers right now.

B (11:13)

Yeah, a lot of people have been holding back money for months. Obviously, perhaps underscoring that potential timeline is the reason you're using drives today that we're getting close to a TikTok deal. And I think TikTok is a footnote in that. I mean, it's a huge company, huge deal. Perhaps more of a symbol of the much improved US China relations despite this trade war ongoing, that you're actually getting solutions done on contentious topics like TikTok. And potentially this is a trigger of a larger deal, a larger understanding on tariffs as well. And it underscores the point you've been making about quite benign relationship between the Trump administration and China or how do you view this?

A (11:59)

Yeah, so I mean, when you look at the secondary tariffs imposed on India due to their large oil purchases from Russia, the first question you should ask yourself is why? Why haven't they imposed secondary tariffs on China? Because they're buying almost as many barrels of of oil Russia as India, but yet they haven't targeted China with these secondary tariffs. So at least something is ongoing, is going on there. And since the spring standoff between Xi and Trump, my main take has been that the US Kind of learned that it was impossible to just cut off the supply chain from China in one go. It will have to take years. And that's why they've decided on a slightly more conciliatory path with Beijing, because they simply have to. So in essence, I think China kind of holds the cards against the US in this discussion for now. But still, if you look at trade flows, Mikkel. Right. One thing is that we've seen a kind of reopening versus China. We've also seen a more conciliatory path of the negotiations, but we're still talking about trade flows that are very subdued, very, very subdued compared to just a year ago. So we've seen a lot of rerouting, we've seen a lot of new Chinese export markets. And for example, we've seen no Chinese buying of US Soybeans. It's part of the reason why farmers are stuck in a mess in the U.S. so sure, I agree that at least on the surface, they're talking to each other in a slightly more conciliatory tone. But the trade patterns are not particularly strong right now. And therefore my best guess is that we're still on a path towards trend fracturing of geopolitical ties between the US and China. But both parties have accepted that this needs to be managed. You cannot just, you know, pull the rock from under that relationship in a matter of minutes. Both parties have kind of agree on that.

B (14:07)

Yeah, so, so absolutely. Andreas. We, we, we might not get, get around it today, but I'll be covering it in, in, in my Drill article later this week. We all Obviously over the weekend we had Trump for the first time linking tariffs on China to the, to the Ukraine Russia war, but only in wording. I'm not really confident that he's going to push ahead with the 50 to 100% tariffs that he mentioned on China over the Ukraine war. It's probably the only way to get some real traction on the Ukraine war. But the China issue is so much bigger than that for him. So just an interesting footnote here and.

A (14:43)

Miguel, the question is whether you should see it as a direct threat or an out from the promised sanctions on Russia. Right. Because absolutely. As far as I read that communication, also the stories that emerged from the G7 call between high level ministers. Right. Or high level secretaries. He told the rest of the west that okay, I can impose this on China, but you need to impose it as well. And you need to impose it on India as well. Right. So tariffs would need to be backed by all G7 members and that's never going to happen. I mean it would probably even need to include Japan adding tariffs on China now, which, which is a very, very big deal for them. It would have to include the EU adding import tariffs on China. Remember that the EU is much more reliant on China in many ways than the U.S. so I think it was a way for Trump to tell the rest of the west this is probably what should be done, but I know you're not going to do it.

B (15:50)

And also at the very core of it was his promise that, oh, I'll increase the sanctions of Russia once the European countries stop buying oil and gas from Russia. And that's not going to happen. Under no circumstances ready Europe as a whole to stop buying Russian oil and gas. That's the sad nature of it. So anyway, we'll dive much deeper into that on Wednesday. Andreas, let's get back to the Fed meeting. As our main theme of the show, Andreas always like to pull up polymarkets. So has a 90% chance of a 25 basis point decrease, 9% of higher than that meaning less than 1% chance of no cut. Basically the, the, the likelihood of LeBron James becoming or Mr. Beast becoming the Democratic presidential nominee. I'm looking for those. Or, or Jesus returning before end of year. I think it's, that's, that's in that ballpark as well. So, so is this a given or could be. I still can't lose the feeling that Jay Powell is so is would love an opportunity to, to, to really rattle the cage here and do a no cut. Is that completely off the table.

A (17:10)

In my opinion, it is the speech at Jackson Hole was a forward guidance targeted towards this meeting, probably also the upcoming meetings in October and December. So what we have in the market pricing right now is less than three cuts, priced until the end of the year, a little less. But the market is pretty honed in on sort of a new cutting cycle commencing. And what I do know from my many years of of central bank watching is that they don't want to start a cutting cycle in order for it to be completely reversed in a meeting or two from now. So when they start cutting, they typically mean business, right. They'll put out some sort of trajectory saying, okay, we intend on cutting more next time we meet, and so on and so forth. So unless he completely pulls the rock from under that trajectory, I think we're in safe zone here, if you know what I mean in terms of the market interpretation of what's going on. But it would be the first time in a long while where a crystal clear cut in the market pricing is not delivered and they are painfully aware of the consequences of doing so. So of course, if he wants to leave with that kind of legacy, being the guy that pulled the rock from under the Trump presidency, whatever, sure. I'm not sure central bank has worked.

B (18:37)

Like that's the nuclear scenario. I still think what we've seen from is that he tries to work very, very much middle of the road, working the data. And I mean, it's obvious even though inflation is not exactly where they want it to be, it's under control. And when unemployment is rising, that's where they look. That is still the priority for the Fed, I think, to combat unemployment. So absolutely, by the end of the.

A (19:08)

Day, Mikkel, right, when unemployment is ticking up, even though it's not really a big uptick yet, that becomes a priority for Powell as well, even though he's probably politically incentivized not to do anything because his legacy would be haunted by, you know, creating some sort of job market recession. And I don't think he wants that kind of legacy. He'd much rather prefer his legacy is actually pretty okay. Now, if he manages to get to the finish line in one piece next year, which I think he's on path to do, if he delivers sort of a middle of the road does exactly what the market is telling him to do, right? Not more, not less, just want to keep it at that.

B (19:53)

So say that we get the 25 basis point cuts everyone is expecting. How do you think markets will react to this? Will we have Sort of a relief that now it's done, or will it be like, okay, that's what we expected, let's move on.

A (20:06)

It all depends on whether we can safely pencil in that they'll cut more next time they meet because the 25 basis points should be done and dusted for Wednesday. So what I'll be looking for is first of all, already when the press release is out, is there a clue that they'll take the next step next time they meet. And as long as that clue is intact, I think the market will do just fine. The only caveat would be if they start discussing, okay, it's not given that we cut every time we meet, one way of forward guiding is that, you know, could it be every other time that would be bad.

B (20:47)

I think it's a matter of how many cuts are the time for this year. Can they get to the expected three cuts or whatever? Yeah. So you brought along this chart, Andres, which surprised me. Then you covered this one in the beginning that a lot of economists are putting no cut at a higher likelihood of 50 basis points. And they're both unlikely. But does this indicate to you that there's still some positive momentum coming out of if the Fed keeps up the expectations of three cuts, that we still have some positive momentum, some positioning still shifting after that?

A (21:26)

Yeah, that's kind of my base case now because you have a couple of the pretty important voices such as Bloomberg Economics calling for a no cut. Also Royal bank of Canada. It's not, it's not like it's small institutions. Right. And they typically have a pretty decent voice out there, especially Bloomberg, since they've had a pretty decent accuracy in their forecasting for the past few years, especially on inflation and labor markets. So I think it's an interesting build chart this one, even though it's pretty centered around that 25 basis points cut because you see the skew to the right side. Right. More professional forecasters see them moving nowhere than doing 50 basis points. So that's pretty telling in relation to the chart you showed on poly markets odds. It's not that given that 25 basis points is fully priced in interesting address.

B (22:18)

We'll, we'll be covering this obviously during the week and in our shows. No real vision, especially if we get a surprise there. But let's see if we, if we can get that that cut this time. I just want to run by a few other charts addressed that you showed up that are u. Yeah, a little bit off topic, but really, really interesting here. Do you want to start with the, with the one on, on payments.

A (22:41)

Yeah, we can do that. I just wanted to highlight a tremendous chart.

B (22:45)

This is from Jamie Kooch.

A (22:46)

Yeah, yeah, from, from, from our colleague Jamie. So I, I think a lot of people, you know, remain stuck in this old narrative that well, transactions are not really happening on chain. But here you have transactions on chain versus Visa, MasterCard, PayPal. Right. As far as I understand the data and probably very feasible that we actually have on chain activity exceeding that of the big payment systems already say in 2026. So beneath the surface we're amidst the tectonic shift also in how the typical fiat system interlinks with crypto and this was an eye opening chart to me so I just wanted to highlight it and please have a look at Jamie's work.

B (23:45)

Yeah, it's a massive shift. It's worth noting that many of these SAP payments are still Visa, MasterCard, MX payments, but they're much more tokenizable if not already tokenized. So it gives you completely, truly incredible chart here. Andres. Very, very interesting stuff on this level. We also have the dollar positioning. I just wanted to get around as well, Andreas, because we get this question a lot, especially perhaps here in Denmark. We have a lot of businesses doing business in dollars that they're very interested in where the dollar's going to go. Important for our business as well, to be completely frank and dress. But this chart tells us about the positioning in dollars. What stood out for you here?

A (24:35)

So a couple of takeaways and it's actually really worthwhile spending a few minutes on because I've heard it over and over and over and over and over and over for the past three or four months from all investment banks from the sell side chops that okay, everyone's already negative on the dollar, sure. But what you see here is that the positioning is mainly versus emfx. So think of the Mexican piso, several emerging Asian currencies and so on and so forth. Right. It's not like we have a major bet against the dollar versus the euro or versus the sterling versus the Japanese yen versus the Canadian dollar, et cetera. Likely as we've seen idiosyncratic stories for each of these currencies lately. As you can also see, we've seen an uptick in the dollar position in the white line here versus yen euro on aggregate. Right. Japan is stuck in a political mess. We've had the French political mess unfolding over the past month. We obviously have the two quarters in a row with negative growth in Canada. We have Australia stuck in a mess where they try to reconnect with the west while their bigger trade partners are right next to them. This whole fracturing geopolitical environment, many of the big currencies in the G10 basket, so euro, Australian dollar, Canadian dollar, Japanese yen, et cetera, they've had idiosyncratic bad stories. I actually think that the next leg is going to be much weaker on the dollar again versus these currencies, not as much versus the emerging market currencies. And I think that's been kind of a missing link for the next move higher in everything debasement related, if you know what I mean. So Bitcoin, Ethereum, you name it. We've kind of needed some momentum in the dollar trade versus the other G10 currencies. And I think there's a scope for us to get there now, especially since as I wrote about in our editorial on Friday, and you should go watch all of our now casted data, it's starting to look like we get a pretty uniform upswing globally. So a growth uptick in the US growth uptick in Europe, a growth uptick in Asia, and when we see such kind of uniformity in the growth picture, we typically see a weak dollar versus the other developed currencies.

B (27:06)

Okay, just rounding up, as we usually do, taking into account obviously the Fed meeting the dollar topic here, what's changed in your positioning since last week and what's on your agenda positioning wise.

A (27:21)

So I still think there's juice left in this AI trade, but the interesting thing is to look at the sub layer of AI trades below Nvidia and dos. We have a few of those bets in our portfolio right now. We're performing tremendously well at the moment. So you obviously need to go have a look at the pro tier to find out exactly which bets. I still think there is value left in fracturing bets within the global supply chains, everything related to inputs of raw materials, et cetera. Especially now that we've seen a weekend of potential escalation versus Russia. Let's see where that ends up. But, but it at least it does speak in favor of, of globalized supply chains of raw materials. Right. And the final thing I'll say is that I got a lot of feedback for taking a victory lap on the first couple of weeks of September being much better than predicted by many. And the most common feedback I got was you need to remember that the bad seasonality in September is only the last couple of weeks of September. So we never said that the first couple of weeks of September would be bad it's only the last couple of weeks, so let's see after Wednesday. But I think they're wrong again.

B (28:38)

We'll follow up on that that next week. Great week to look forward to. We have the Pro Insider talk, I believe this Friday. I'm having my calendar up right now, but you should check in for that if you're on the pro tier. Lots of great content to watch as always on Real Vision. And thanks to you for joining, Andreas and thanks to everyone for tubing in with with your questions.

A (28:57)

M. Let me say, let me say one final thing before you round off. You know I said I did send it to you earlier today. I consider buying a cap with Stino was right about everything and I can guarantee you at the time I'll show up with that cap here in Macro Mondays. That will be the true the Economist.

B (29:22)

Front page AI moment.

A (29:24)

If I'm donning that cab, run for the fucking hills. Right subscribe.

B (29:28)

I'm only considering buying that cab. Yeah, absolutely. That's great stuff, Andreas. We'll be looking forward to that next week. You can get a lot of Real Vision merch. That's perhaps a better way to go. Andreas, I'm looking at that fuck you hire T shirt. Still waiting on the big uptick in fog coin here, so let's hope that comes. Anyway, thank you for joining Andreas and thanks for everyone for listening and and contributing with your questions. We'll be back next week.