B (4:23)

Yeah, let me put it. I mean, the traits that were on top of the leaderboard on Friday, they have had a very bad Monday. So, I mean, there's still time to, to participate.

A (4:36)

There's no, there's no exiting them. So, so that's, that's a very, very good point. Anyway, that's going on. Remember, we, we have a very, very strong week for you this week on Real Vision. We will obviously be, be, be following all the developments on the Iran war. We're posting notes throughout the week where you're publishing your standard signals. Today, Andreas. I'm publishing in the drill. I'm looking Bs that we might be seeing from the Trump administration on military. The timelines for those military solutions. We might be looking at tomorrow. We have a macro meets micro show. Andreas. We're trying to find out what stocks to buy amidst all of this. It's going to be very, very tricky. We're going to probably have to look a little bit long on a slightly longer horizon than most people are focused on right now. But always a great show where we go over our model portfolio that you can also follow on Real Vision. We obviously have, as I mentioned. And then remember on Friday, even if you're not a Real Vision subscriber yet, or if, you know, if you're not a paying subscriber, we have our free for all drinks with show. And so last time we didn't really do drinks. We were both on, on baby duty essentially. I don't know about that. On Friday I think I have, I have my daughter covered. I don't know about you, Andreas, but it's, it's, it's always a lot of fun. A little bit more shooting the shit then. I don't know. We're also shooting the shit every Monday here. But anyway, that's coming up on Friday. Free for all.

B (5:59)

As, as I've told our editors already, I mean, I'm pretty unhinged without drink in my hand. So if we allow me like 60 minutes of airtime drunk, I'm not sure where that ends up. Maybe we'll get sued.

A (6:12)

I don't know. We'll have to see. Maybe That's a good point to throw in our usual disclaimer here that especially in times where we're trying to essentially do prognosis of an ongoing war, we try to be as actionable and honest as possible. But our predictions might be sometimes may

B (6:31)

be good summertime, it may be shit.

A (6:34)

Absolutely. Okay. I want to start in a completely different realm than Iran for the laugh of the week. So you and I have talked a lot about what's going on in Dubai. It's relatively close to Europe. We have a lot of business partners and people we know living there. It's a very, very tough real estate market. Looking forward, maybe one place that's worse to own real estate than Dubai right now. It's this. I don't know whether this is ironic, but the Metaverse. Andreas, this guy mentioned that he owned four properties in the Metaverse. He bought one of them for over $200,000. It was supposed to be the Next frontier and the frontier closed last week. It seems like Mark Zuckerberg and Meta just able to move on from this. I mean they renamed their entire company. Maybe it was A good timing to throw this out during an ongoing war. I don't know, but very, very happy. I didn't cash out on property in there. Did you own anything in the Metaverse, Andreas?

B (7:35)

No. I'm not sure which one is more empty, Dubai or the Metaverse at the moment, but I thankfully never got involved in it. I actually help some sympathy for the view that we could interact socially with each other in the metaverse, but I, I'm probably also an introvert by nature. So, I mean, I would love to see, yeah, I would love to see all of my meetings move into such an arena. But in any case, yeah, it's probably no longer valid.

A (8:10)

No. Okay, Andres, enough about the metaverse. Mark Zuckerberg, he'll, he'll get some rest for this week and onto Iran. So, Andres, we've been scrambling to try and understand what's actually going on the, this morning, during today, obviously over the weekend, we had the threats, Donald Trump posing threats that he would begin attacking Iranian power plants within 48 hours if they didn't reopen the strait. That deadline was, was, was moved ahead five days towards the end of the week here in, in the light of emerging talks between the US And Iran. Then we had the Iranians completely debunk this. They had no, no knowledge of these meetings. Now we're getting an understanding of what's. And I'm happy we didn't do this show three hours ago because then we would have been even more in the dark. So what we do know, Andreas, is that there have been what we call indirect talks. So the trio of Pakistan, Turkey and Egypt have had talks with both Steve Witkoff, the US envoy and most likely either the Iranian Foreign Minister, Arabagi or Gali Ba, I think his name is. Sorry for mispronouncing that. I'm getting those confused a little bit. But anyway, the, the head of the Iranian parliament. So we know these indirect talks have been happening. We know that there are plans to set up a summit later this week in Karachi in Pakistan, potentially with Steve Whitcomb, Jared Kushner, maybe even J.D. vance, which is interesting. Participating and some folks on the Iranian side. The big question here is for me, do these guys represent Iran? Are these sort of back channel talks because Trump has sort of been signaling this as a quasi regime change. We don't know that, but there are some talks going on. For some time this morning, I thought this was complete by Trump. We have to admit some talks are going on and that justifies some of the market, some of the price action we've seen today, in my opinion, Andreas. So maybe bring us up to speed, what's the current sentiment in markets right now and how do you see these movements today?

B (10:14)

It's obviously a big relief rally. I basically think that what is happening right now is that we've priced out the risk of these tit for tat attacks on energy infrastructure that was otherwise sort of the base case just a day or two ago. Right. So in that sense, we're probably back to where we were on Thursday. It's not like we're back to where we were at the beginning of the war, which is entirely fair. Much of the analysis that we've done, and it's very difficult to write longer research papers amidst this because it's happening so fast. And I saw my friend Dario Perkins tweeted that, you know, it's a crisis when you just accept staring at the screen, monitoring the situation without really writing anything, because what are there to write? But having said that, one of the things we've had a look at, which is obviously very important now, is how much damage has already been done. Even if we turn back time and assume that the strait will be open, is there still damage? And the answer to that question is yes. Now, I mean, you cannot just turn back time before the crisis started because we do have some lack consequences of what's been going on. And as I've written the past few days, the clock is starting to tick now, if you know what I mean. The countdown until this turns really bad basically starts right from today because there's a lag between the beginning of the war and until you see the actual supply shortages. And to take the simple example, it takes approximately three weeks to sail from Qatar to Japan. A little bit more than three weeks on average, probably meaning that all of the ships, ships that left Qatar just ahead of the war really starting to spiral out of control. They have basically arrived over the past few days here. So the real consequences on ground will be seen from today and onwards, roughly. And maybe that has impacted the whole process here. Maybe the Americans have been told by their Japanese counterparts when they met, was it late last week, that it's starting to bite. Now maybe that is the real reason why we're starting to see some back channeling. I don't know. But in any case, I've held the view basically since the onset of this war that as long as we could solve it, say within four or five weeks. So this week or next week, we will get through this without any major shock to the business cycle. You know, there are already ramifications for prices, etc. We'll get back to that. But as long as we solve it this week or next, I think we'll, we'll manage. But the countdown is starting to bite. We really need to see some, some progress and we admittedly have seen some progress today, but we're not there yet.

A (13:20)

No, absolutely. I think just, just to give, give us a little bit insight into my thinking on this now, but I'll elaborate on Wednesday in our weekly article there. So it's very clear from the US Perspective, they have achieved most of the objectives, depending on what you define as objectives. Have they managed to take out the Iranian nuclear program? No. So that's still left for discussions or for negotiations. I don't think they can feasibly do that. And then there's the Strait of Hormuz question, obviously, that they need to solve. Other than that, Trump is pretty happy to walk away from this. So that's the one side of it. Then there's the Iranian side. And it's interesting because obviously, as we've talked about, the Iranian response to the US Israeli attack was much, much stronger and much more asymmetrical than what we've seen earlier and probably what the US Was expecting. So where is Iran now? Well, they're fighting for the regime's survival. So this means that there are only really two things that can ensure their survival. One is a nuclear weapon. The second is a hostage, and that hostage is right now the Strait of Hormu. So, so the Iranians either have to keep that hostage to make sure that the US don't attack them, or they need something to replace that. So they need some sort of security guarantee that covers not only the US but also Israel. That is very, very simply what Iran is going to be looking for here. And if they have to give up their dreams of a nuclear weapon, they have to get something very, very tangible in, in return for that which would correspond to some kind of security guarantee that probably also involves someone like Russia, China guaranteeing this, which makes it very, very complicated because do they trust the words of the U.S. do they trust the Israelis? It's very, very tough. On the other hand, this is a very, very clear cut deal. You're not talking about exchanges of territory, you're talking about the Iranians. They don't want to get attacked anymore. The US don't want them to get. The US Wants no nuclear weapons at an opening of the Strait. So, I mean, these things can be worked around. I think there is A way to a deal. There is also a way to a deal that Trump can somewhat victory back home. He has set back the Iranian ballistic missile program. How important is that when they have drones? We can discuss that. He has done that. He's taking out the top leadership. He can argue that this is some new sort of Iranian leadership. It's not a regime change, but it could be sold as such. So I see a way forward here. And what we also know, which is a bit underreported, is that inside Iran you have massive rationing of both foreign currency, especially food, fuel, everything. So the Iranian civil society is very much beginning to feel the pressure of this. They can probably stomach this for a few more weeks. After all, we're talking about a war survival for the regime, but obviously they are taking their toll as well. So, yeah, maybe we're looking at the exact timeline that Donald Trump told us a few weeks ago. We should have just stopped listening to all the bullshit in between that to be a three to four week war and then it's going to be over. I don't know. It's, it's been a hell of a ride. And let's, let's see where it goes. It's very, very tricky to predict this.

B (16:32)

These things.

A (16:32)

We have to admit.

B (16:33)

Big I know that a lot of people ask questions around this as well. While you were talking, we just got a headline on Bloomberg here stating that the Iranian state TV said that the US Tried to negotiate with Iran by these intermediaries, but they decided not to respond to those approaches. So how do you read the communication from the Iranian side? They're obviously at least publicly refusing to acknowledge what Trump is saying. Is that to be expected or is that also optics in terms of how they present this at home?

A (17:12)

Yeah, I think two things here. One is that they're obviously trying to up the price here. What Trump did today was essentially lower his price in these negotiations, showing a great willingness to get this done. Iran is trying to signal that they can wait. Essentially, it's the Putin strategy. It's also possible, I don't know this. It's possible going back to what I talked about a few weeks back, that we are seeing some power struggles within Iran, that we are seeing some power struggles between the clerical side, the priests and the irgc, and then the civilian leadership, the secular leadership, on the other hand, that is very much. It sounds like that from what the US Is telling us, if it's happening, who knows? It's very, very tough to say inside. So it's possible that we see some sort of power shift. We expect the Ayatollah to be removed or changing the flag or whatever. It's going to be a bit more silent behind the scenes. But we could see a power shift away from the IRGC and the priests over to the secular side of things. That would make it a lot easier for the US to do a deal with them, a lot easier to sell this as a semi regime change and a better future for the region. So, yeah, that's the hopeful version. Also, just one final point to address this new five day deadline is interesting. First of all, five days from that or when that deadline hits, the markets are going to be closed for the week. That's one thing. Second of all, at that point we're going to have another U.S. marine Expeditionary Unit arriving in the Gulf, probably in place to invade Car Island. So, so we have some sort of fog in the road coming up where the US will have to decide on escalation or negotiations. And the same for Iran. So that is probably also part of this play that the US are putting more military units in place over the next days and weeks to, to escalate here. So it is an escalation game and the US has to be very, very careful not to fall in an escalation trap.

B (19:04)

But let me say a few things, Mikul. You know, I don't get a lot of friends by saying this, but last week we had this discussion on whether the Iranians managed to hit more targets and do more damage than what they did during the first couple of days of the war. And a lot of people claimed that. I was just listening to the Iranian authorities and not to the Israeli and US authorities on that question. And my answer to those people claiming that is that you cannot trust either side for true information in times of war. I'm not saying that the US is not decently close to the truth, but you cannot take information at face value amidst the war. That's also the case at the wars in Europe. That's always been the case historically that you of course, try to paint the picture that you want the public to know about. Right. And it is very difficult to get verified numbers on the nominal amount of say, drone attacks or ballistic missile attacks on the uae, on Qatar, on Kuwait, et cetera, because who's there to verify it? So what I've used is these so called open source OSINT sources which, you know, at least I think they're directionally correct on many of these things. Whether they are nominally correct is a very different question. To answer. But yeah, I just wanted to remind people of that. It is incredibly difficult to find information that is 100% accurate in times of war.

A (20:36)

Absolutely. Absolutely. Andres. Okay, so let's try and look a little bit beyond the situation on the ground here. Look at the macro picture here. Andreas, we had the Fed meeting last week. I wanted to bring up the good old dot plot here. So no interest rate changes as expected last week. A raise of the inflation expectations. So what were your takeaways from that meeting and how much of that is caused by the Iran war?

B (21:08)

So two things. First of all, they have the same forecast for interest rates as they have ahead of the Yuan war. I think that's very telling for the Federal Reserve compared to some of the European central banks which kind of panicked in their communication last week, especially the bank of England really created some volatility with their press release. We're dialing back some of that today with a big drop in interest rates in the uk But I think it is unwise to tell people that you're going to hike because of the two or three week crisis in the Strait of Hormuz. You simply need to wait to see what happens until you take a decision. And I think it was very clever that the Federal Reserve basically did that. They upped their inflation forecast as they had to given that the oil futures were much higher than ahead of the last meeting. But other than that, they basically kept everything intact. Fact, our good old friend Stephen Mirren still expects four rate cuts this year. He even defended it live on Bloomberg earlier today. And the average participant sees interest rates a little bit lower come year end. So they still have their cutting bias intact. And if we, you know, if we manage to solve the crisis, say within a few weeks, I actually think they will end up cutting this year. And I know that it's a very contrarian call right now. The market is now moving in the direction of rate hikes in the US as but I don't think they're keen on doing it and for good reasons. I think it's outright morality to just react to high oil prices because of a 2, 3 week closure of the Strait, as it seems to be the case that the big European central banks want to. So that was the first thing I wanted to say. The second thing I wanted to say is what we have on page 11 because interestingly, amidst all of this we've actually seen a pretty, I'd argue, conciliatory development in US money markets. We're close to breaching what I typically label as pain levels for the amount of dollars available between banks. And on top of that, if you look at the yellow line here, which is the spread between the sulfur rate, which is basically a repo rate, and the effective fed funds rate, we're now back below zero or very close to, which is basically where we came from before the whole funding crisis of the government back in October, the landslide in crypto and so on and so forth, which coincided with that. Why do I highlight that? Well, it goes to show two things. The money market is less levered than it was ahead of this crisis because basically all hedge funds, they've had to degrass their books. So in this kind of environment, if you're running a hedge fund. We've been running a hedge fund together, Miggle. We have plenty of experience running levered books. You cannot run put directional risk because you basically tell your clients that you don't make big swings in your portfolio while stuff like this is happening. So you basically have to close the direction of your book. And that is why we see the yellow coming down now. Because when you see a deleveraging event among hedge funds, it basically also means that they have to borrow less in the repo market. And that's part of the reason why we see a much more benign development. If we pair that with continued additions to the money market liquidity, the way is actually paved for a big spike in risk taking. If the fog dissipates, if you know what I mean. If there is a little bit more clarity around the direction, we'll see a lot of risk taking on the back of that because books are roughly square out there. And it is also important to highlight that this is probably also the reason why we haven't seen material short selling. Because you simply need clarity for the direction or at least as much clarity as you can to run a levered short in this kind of environment. And as we can see today, we're, we're always only one treat away. Tweet away from, you know, completely.

A (25:17)

That's it.

B (25:18)

Get you from completely getting run over by a bus in either direction. Right. Which means that you cannot take a lot of risk in this. And therefore we will. If this continues, if we don't get, get a resolution, we'll end up seeing a slow grind, lower in risk assets. I don't think it will be violent because it's very difficult to take large directional risks in this kind of environment. And it remains the case in both directions given the risk surrounding both tails here.

A (25:44)

Very interesting, Andreas. And obviously in our show Tomorrow, macro meets micro, we'll dive a little bit more into where you can try and position yourself for this increased risk appetite because that is very much the mindset we're in on the portfolio that we're running here. Okay, Andreas, I just wanted to round off on a list of question here. We've had a lot of list of questions on the outlook for the Iran war. I think we have covered that, but this one I know you have some opinions on. Scott Besant did an interview Meet the Press, I think it was on Sunday here. Pat Cash, our listener here, is calling it a terrible performance. I would tend to agree with that. Asks, I can't imagine Trump likes his cabinet to look that bad on tv. Is there a risk that Bezzin days are numbered? That would be a market curveball. How do, how do you see that?

B (26:34)

So my honest answer to that is I don't think Scott Bessant has ever been good at addressing TV questions. Never. I don't think he's particularly good at it, but I think he's a great Treasury Secretary and I'll stick to that view. What I think went wrong is it's very, very difficult to rhetorically defend a U turn of the size that we've seen from the Trump administration on this Iran question and the question of getting involved in wars in the Middle East. I mean, they've aggressively toured with the opposite view for more than a year, especially during the campaign. But also after getting into office, you can just Go search on YouTube or X or whatever and you find plenty of sound bites and video clips with Trump, Vance, Peasant, etc. Stating that they cannot spend U S tax dollars fighting in endless wars in the Middle east and you name it. So I don't think that they're going to blame him for this U turn and therefore I would expect him to stay on, on board. But I have to agree that it was very difficult, difficult for him to defend how to fund this war because they've said the exact opposite for a year. I think all of us would have struggled with that. Unless you're a pathological liar, you cannot just make that kind of U turn without sounding stupid. I mean, I'm sorry, but it's just impossible. They've said the opposite 12 months in a row. So of course there will be some hiccups when he, when he needs to U turn.

A (28:08)

Yeah, I saw some comparison comparisons of the, the $200 billion bill that's being pushed for the Iran, the total tariffs collection in the fiscal year of 2025 which was $195 billion. So it's probably not going to be dividends for Americans. It's probably going to be used on a war. I don't think that was the plan, but yeah, you could probably argue that it financed it, had other people finance it. I don't know how they're going to spin that board, but I agree with you. Yeah, go on.

B (28:42)

And then Scott Besson started referring to them having a trillion at hand, which is not entirely wrong. I mean the treasury general account is I think at 860 billion, something like that. As of today they have a few more war chests out there. So they have a trillion. That's true, but it's obviously that funded trillion. So.

A (29:01)

Yeah, yeah, that's

B (29:04)

is true that they can easily fund this. I mean, of course they can, but I don't necessarily think they're willing to run the ttamt. But it would be very interesting for liquidity if they were to. As you can see on. Maybe we can bring up chart 11 again with, with the TGA that Scott best referred to.

A (29:20)

Yeah, yeah. Actually the deadline here shows essentially. Yeah.

B (29:23)

So I, I guess they have a target of, you know, roughly 800 billion in. In the TGA and you know, they're running a little bit above that. I think we should expect it to run. Yeah, closer to say 700, maybe a little bit below 700 over the next week or two and then we'll probably stabilize closer to 800 by the month end of April. Yes, they have some cash at hand and it would be very interesting if they started using it. Not that it will change everything if the war keeps going, but it will at least alleviate some of the concerns around leverage on the other side of the Warpone address.

A (30:04)

Okay, that's all we have for you this week for our Macro Monday show. So much stuff to unwrap that we have to do a few more shows this week, so it's a good thing that we have them. As mentioned, macro meets micro for pro users on Real Vision tomorrow where we run through our model portfolio and give you some tips on where to hide amidst all this or where to find some alpha on the tail end of this on Friday. Our drinks with going to be a lot of fun. That's even if you are a paying subscriber to Real Vision. So thanks to you Andreas for joining and thanks to everyone for pitching in with questions and listening for another week. We'll be back.