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- [00:00]
A
Summertime is maybe good Summertime it may be. Oh yeah.
- [00:23]
B
Hello out there. Welcome to Real Vision. Welcome to Macro Mondays. My name is Migl Rosenwald and I'm joined as usual by my co host Andreas. We have a great show for you today. We're going to be talking about the sinus wave of warfare in the Middle East, Scott Bessant's to do list and maybe try and provide you with some situational awareness on the global world of macro if you get such a little hint there. Andreas, before we get into the depths of global macro, I was thinking on my way over here and I wanted to get your take on this. We're running a research business. We're monitoring a lot of situations. By God, we are spending a lot of money on various subscriptions. There's a new SaaS in town, the Trump Media API. Do you think it's worth much? Should we get that? What's your take? We didn't have time to discuss this over lunch. Address?
- [01:18]
A
No, but I think the pricing is 100k dollars. It is. Per month. I mean. Yeah, per month. Okay. I thought it was annual.
- [01:27]
B
It's company wide though.
- [01:29]
A
Yeah, yeah, but that, you know that we're only the two of us right now. Right. So having said that, it is obviously worth a lot if you're running a high frequency trading disc. Right. So I guess it depends on your style given that we're, you know, a little bit more forward looking, bit more cycle based. I don't think we could use it for a lot. But you know, if you're an oil trader, I guess it's a must have.
- [01:57]
B
That's it. I think it's, you know, all the criticism we can get back to why this is a horrible idea. But as a business idea, this is quite a good idea. This is good things. I was thinking about, Andreas, some feature requests here. Since this is a SaaS, obviously I would probably as an investor be looking for an add on that includes a presidential pardon because can you really trade on these informations? Is that, is it truly legal? It's a bit of a gray area but if you get a presidential partner with a subscription, I mean then you're good to go. And then another add on. Andreas and I wanted to get your take on how valuable this would be that would probably make it even more relevant for the core ICP Here would be an add on that gives you immediate access to Scott Benson's meeting notes. Because that seems to be worth even more. Or what?
- [02:48]
A
So, okay, two things. I had a laugh when I saw this because I think it was Reuters. A photograph from Reuters. And I can tell you two things. First of all, it's obviously interesting that this was an actual notepad from Scott Besson's meeting during the weekend before he intervened the Japanese yen market. But I can also guarantee you that Scott Besson didn't write this. And the reason why is that Scott Besant has traded a lot of fx. If you're into FX and FX lingo, you would never write Japanese yen and spell it out. You would never do that. You would only write the stuff in the branches, right? Yeah, exactly. You would never do that. So Scott has not written this. I'm 100% sure it's probably a troll.
- [03:35]
B
But why does he want to buy Japanese yen there? Andreas, let's use this as a pivot to Scott Bessant's to do list. What's going on in the Japanese yen and why Scott Bessant got involved here.
- [03:46]
A
It's been on a weakening path for a long while. The Japanese authorities have struggled to regain the momentum and they needed some help. This is kind of the reverse of what we saw in 2011, where the authorities intervened against the strong yen.
- [04:04]
B
Right.
- [04:05]
A
And for an intervention to be decently solid, you probably need both sides to work together. And that's basically what happened over the weekend. Have they gotten something in return for this? We don't know yet. I mean, Trump basically just stated that Japan has been nice to us ex Pearl Harbor. So that was his exact statement, actually. So we don't know whether they're planning on asking for something in return, but given how the Trump administration typically goes about stuff like this, I think they will ask the Japanese authorities for something in return. But the Japanese authorities have been. They've been wanting this for a long while because without controlling the Japanese yen path, they obviously cannot control inflation, and they've struggled with exactly that for a while.
- [05:03]
B
Interesting interest. We might get back to that in a little bit. Obviously, you're releasing your weekly State of Signals flagship or your editorial this Monday, Andreas, and you were writing about the sinus waves war in Iran, and this has to be a recurring topic. Andreas, I know some people are sick and tired of hearing about the war in Iran, but it is still driving markets incredibly to some degree. I mean, not as it was initially, but it's still driving oil markets enormously. These weekend tweets and address. This weekend it was already Saturday, so a little bit ahead of schedule. We have the weekly Hopium down. Trump called off. What would he mentioned as would have been the largest attacks on any country since World War II. That's a lot. But let's leave that. Called them off because negotiations were apparently progressing very, very well. The Iranians apparently are not really involved in these negotiations. They're not confirming this, but it seems to do the trick for markets once again. And it seems like interest. You put up the sinus waves. Picture that we are essentially back to weekly schedule. This weekly role of getting some Hopium over the weekend. We're getting closer to a deal and then things slowly deteriorate during Monday, Tuesday, Friday, the trading week. So should markets just look elsewhere? Should investors just look elsewhere or what's your take in?
- [06:33]
A
I actually think that by now it seems like this sinus wave is slightly longer than the weekly scheduling that you just laid out, because we've seen this move before. Everything that happened in the run up to this weekend kind of resembles what happened late March, early April, where he talked about, I think it was annihilating a whole culture or whatever. He wrote Trump before calling things off. This time he stated that it would be the biggest attack since the World War II, and then he ended up calling them off. So I think we're past peak. That's kind of what I'm trying to say here. And does that mean that we have a second memorandum of understanding coming up? Probably not short term, but we're at least probably past the point where we get sequential weakness out of the situation every week and instead get sequential progress again. If we look at the oil market right now, it's actually a much, much better balance than most pundits would suggest. As we rightfully said when the attack started again, the market will never discount the same event twice with the same kind of panic. Take this example, the spread between the Houston Argus oil price and the wti. So basically a spread that tells you whether the export price of US Oil is higher than the domestic price or not. That spread will get very elevated if a lot of foreigners are willing to bid for the US Oil exports. And we didn't see that panic this time around. We saw the panic back in March and April. We didn't see the panic this time around, probably as a lot of people have gotten accustomed to this sinus wave war and people are just probably deciding to wait and see instead of panic bidding. Having said that, it's still the case that roughly 5 to 6 million barrels a day are sneaked out of the region via the Seaway. A very nice piece of anecdotal evidence I actually think is Very interesting because it goes to confirm what you've been saying for a while, Mikal, that markets tend to become very creative when there is an incentive to be creative. Iraq offers oil tankers a price of say, a little less than $30 a barrel if they're willing to go to Iraq, load up the ship and take it out of the Strait of Hormuz. Meaning that the ship operator earns that spread if they're not nuked on the way to the actual oil price. As far as I can calculate, that's an extra profit of 50 to 60 million dollars per ship. I guess you could convince a couple of Philippine captains to take that chance.
- [09:38]
B
You don't have to spend.
- [09:38]
A
That's what, that's what I'm trying to say.
- [09:40]
B
Yeah, no one's going to insure that. So you don't have to spend money on insurance as well. It's a complete all or nothing bet. Either you make double digits millions or you get blown up. Absolutely.
- [09:55]
A
What I'm trying to say here, Miguel, is that the market, and especially the oil market has found ways to maneuver this by now. So, yes, we're talking about a sinus wave war, but the relevance also dissipates over time. So, sure, we'll get the waves, but it will be less and less and less important in my opinion. Yeah.
- [10:18]
B
And Andres, we do still have a few months probably before we get to some of the inherent deadlines, the US petroleum reserves, the expected Chinese petroleum reserves, the midterms, etc. So, so what I'm seeing, Andreas, I think that more or less confirmation of that is also that the American side has been very realistic actually, that when you go back to. I'll just bring up the sinus wave again. If you go back to the climax in March, they had a long list of demands for Iran. They wanted to scrap their missile program, they wanted to cut funding to Hezbollah and the Houthis, they wanted to some level of regime change. They wanted them all these sorts of things that was essentially scrapped for the first Memorandum of Understanding that was boiled down to nuclear and the Strait. So the question is, what's going to be part of the next Memorandum of understanding? My best guess is that the nuclear question is out. They're not going to be making any progress or at least it's going to be very, very token progress. Trump mentioned it in his truth this Saturday, the nuclear issue, that they're still aiming for non nuclear armed Iran. But I think at the end of the day, the only thing that really, really, really matters to Trump here is getting the straight opened. That is the only thing he needs before he can simply let this happen and obviously getting Iran to stop shooting and stuff as well. So we are getting down to the very, very, very basics of what the US can, can offer and probably they're going to have to give you even more concessions. Maybe we're looking at the war reparations that were part of the first memorandum of understanding lifting sanctions. And the solution for the straight might very, very well be some joint venture set up between Iran and Oman, essentially the US out of the straits. So that's obviously a much, much worse situation than compared to pre war. We're not going back to the pre war status quo in any way. Iran has no incentive to do so. But at least things aren't getting out of hand, things aren't escalating and we need to praise Donald Trump a little bit for that. As I've also written on occasion it was a big mistake to enter Iran, but he's so far managed to avoid the escalation trap here. And everything we see confirms to me that Donald Trump really, really wants this to end. He's really, really eager for this not to spiral out of control, so to speak. I don't know if you read the CNN report and dress that the US General Staff, the military leadership has essentially written an email to its middle management asking do you guys have any idea? Because they're simply running out of stuff to bomb and that is as good a time as any to cut a deal. So let's hope we are indeed moving closer to that. Andres,
- [13:03]
A
quite the thing to run out of stuff to bomb.
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B
But essentially they what else are they going to bomb? Unless they're going to be bombing truly civilian targets, which I think Trump has no, no appetite for. And so Andres, I wanted to bring in the our macro regime because obviously what we're looking for here is with the restart of the war attacks, closure of the strait, do we get another inflation bump? We're not really seeing that in our numbers yet. And I was a bit surprised by this. I'd expected perhaps not quite what we saw in March, but hinting towards that. But in US Inflation at least the Eurozone sl slightly different picture seems to still be the chance of the inflation rising seems to be very, very low. Why is that you think so?
- [13:49]
A
Let me just be as crystal clear as I can. The inflation looks incredibly soft. Remember that we were the only ones in the world who had that inflation report from June coming out in July. Right. I think the report that we'll get for July in mid August will look as soft, maybe even softer. And I'm almost perplexed by this, but I think a few technicalities are in play here. The World cup hangover is really relevant here because we had a big build up and a lot of people forget that when you book tickets for flights and when you book hotels, etc. They're not necessarily mapped to the exact date where you will fly. They're mapped to when you book to some extent. Right. So there is a front running impact on inflation that fades, which gives a nice boost to the whole disinflation wave. Then obviously energy is still looking decent compared to what it did during the spring. But everything related to, you know, surfaces is, is very soft. And then goods, core goods look extremely soft. And the best way to explain that is the following. We had, you know, several quarters in a row with a lot of tariffs intake. We're now seeing a net tariffs release. Basically we're, we're paying back tariffs on a monthly basis. That happened in June. That, that has happened here in July again. So if you're, let's assume that you had to take decisions on pricing at sea level, nickel, Right. And you, you're certainly handed billions in return tariffs. I don't think you will cut prices, but you'll probably stand pat. Right? Because if you have a budget and you suddenly get out of thin air tariffs paid back, you're ahead of budget. And that's not the timing for a price increase, is it? It's probably also bad PR if you raise prices when you get tariffs paid back. So I think that's very practically speaking what's happening, that a lot of managers and executives, they take the decision to just leave prices where they are. And as was the case in June, it's the case here in July. Again, prices are basically sideways. So inflation roughly zero on the month. That is incredibly soft and it is so, so, so out of tune with the Federal Reserve. I cannot recall a timing where they've been this off in that direction. They were off in the other direction during 2021, 2022, where they kept saying that inflation was nowhere to be seen while it was going up. We could see that in our inflation data as well. And now the opposite is happening. So I think Walsh is off to a very bad start because by saying nothing, he's saying a lot right now because inflation is falling apart real time. And when he says that nothing is, you know, he basically says nothing, meaning that the Fed remains relatively hawkish while inflation is coming down that leads to higher real rates and I think that that probably provided the match as I wrote on Friday for this whole momentum route in July. And then it was obviously accelerated by King Leopold and all of his friends in Korea.
- [17:41]
B
We'll get back to that in the second address because you could argue that Kevin Walsh is keeping inflation in check and that that growth is beginning to look better in our models and address. We just had the manufacturing PMI coming in at 55.6, even better than the most forecasts and Princess, I believe so, so yeah, just another confirmation to this, to this picture that we're, we're, that we're seeing here that, that, that the, the activity, the growth might actually be, be quite decent as well. I think we have the, the PMI on screen here as well. So, so absolutely. Let's just talk a little bit about situational awareness. I promised that by the get go and maybe talk about where we are in the AI cycle based on that address because it seems to me that the AI trade is beginning to be more and more debt driven which pushes some of this leverage driven trading a bit when we are in a scenario where the path of the Fed is unsure. Was that what provoked this meltdown in situational awareness or was it simply just bad risk management?
- [18:48]
A
Oh, it was bad risk management, no doubt. But as I said, real rates have been increasing at an immense pace since Walsh took over and by saying nothing he said a lot given that inflation swaps are down so much. So the market has sniffed out a lot of what's going on in our inflation outcasts as well. By the way, having said that Miggle, I think it's very interesting to watch how the market responds to many of the hyperscalers reporting over the past couple of weeks here. So Alphabet laid out a very, I'd say honest quarterly report. Tremendous growth on the earnings side. But they're slowly but surely actually, you know, bringing the life cycle of their server parks down in their accounting. Microsoft did the exact opposite. They increased the life cycle of their server parks from 15 to 25 years. Meaning that they can hide some of the Capex because you know, by definition some of this Capex moves from being and operational to a financial lease. So it basically shifts category in the earnings and therefore it looked like Microsoft threw in the towel on capex, but it's just because they hide it. And Microsoft was celebrated while Alphabet was sold off. And in my opinion the quality of Alphabet's earnings were much higher than Microsoft's. They were both good But Microsoft weakened their credibility and alphabetical increased their credibility, and the market punished those who increased the credibility. So, as I wrote on Friday, this is the stupidest market I can recall having participated in, both on the way up and on the way down. You know, a lot of names that had no news were bought right, left and center in Q2, and a lot of solid, solid names with only good news through July have been sold off. So I think this is a time of great opportunity if you're not levered, because you obviously need to be able to withstand the volatility that this creates. A few interesting numbers and stats just for our audience here. Samsung is expected to print more than a trillion in free cash flows over the next three years. Samsung is worth roughly a trillion. So they can buy back the entire company over the next three years in case those assumptions hold true. That's bizarre. Micron is more or less the same story, right? And Hynix the same. So the market is still very convinced that some of these memory names are cyclical. And I'll just add one thing in relation to that. Next year, 2027, to the best of my assumptions, of the more than a trillion spent in CapEx, the projected spend in CapEx from the hyperscalers, around 75% of that will go to memory chips. So memory chips are currently, and I stress currently, way more valuable than GPUs. Nvidia is priced as a way more stable company than the memory companies. I think that assumption may be wrong and the jury is definitely still out on that story. But everyone I talk to with a solid understanding of data center setups, et cetera, they tell me that memory is more important than GPUs by now. And the more we accelerate the agentic economy over the next handful of years, the more memory we need. Agents need memory. They need memory a lot more than they need logic. Of course they need logic as well. But to take good decisions when you have a lot of background information, you need a lot of memory to have the right logic, right? So the split between logic and memory in a data center is moving fast in the direction of memory and the market is pricing it the other way around. I think that's wrong. But obviously the jury is still out. And therefore I remain of the view that this is the stupidest market I've participated in. But it's very expensive to just sit here and say that. For me, at the moment, you know, I haven't had a good July. Not as bad as, as Leopold, but
- [23:46]
B
yeah, he had a nice wedding Hopefully.
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A
Yeah, yeah. I, I, I hope she said yes. Right. At least we know it's, she's not in it for the money anymore but
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B
still looking decent enough. But obviously a big shock also that, that what a 30 drawdown was enough to take out his entire book. That is and I, but you know
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A
a lot of people say oh he's still up 80% on the year. Yes. Because of that anthropic position that they couldn't sell.
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B
Yes.
- [24:15]
A
So you know most investors in situational awareness they are at around zero because they had that anthropic position from the get go as far as I remember. So most that entered are basically wiped out.
- [24:29]
B
Yeah, it is something else with these unlisted assets that they hold. It's, it's, it's different, it becomes a different sort of fund when you have a lot of that but that's it discussion all to itself. Andreas, I forgot to look at the calendar. Andreas, is it on Wednesday that you host the State of the Union here?
- [24:47]
A
I can't remember this Wednesday or Thursday. Thursday.
- [24:52]
B
It's Thursday. Sorry hor horrible preparation on my sign address. I just wanted to, to, to put in, put in a bit of a, of an ad for that. What can people expect to hear more of? It's for the approach here at Real Vision only. But, but what, what can people expect in the State of the Union on Thursday?
- [25:08]
A
Yeah. So we, we give you a guided tour around the world of macro and you know currently there, there's a lot of opportunity outside of the US as well. So what we do is that we look at our now costs across India, China, Japan, Europe, et cetera to find the best macro opportunities out there. And maybe that's a good cliffhanger here. Everything that we see in our now casting right now suggests that the dollar has more weakness coming up and you know we've been leaning that way slowly but surely since the inflation data started softening in the U.S. but we'll give you more insight to that and how to trade the macro. Absolutely.
- [25:46]
B
Let us know in the comments what you think about our thoughts and what you are buying and selling in coming days and months. We love to, to really try and nurture that community and bring that into the show in, in coming weeks. So do leave a like and comment if you like to the show. Let us know what you're trading and what, what, what you think is, is overlooked in, in this crazy market of ours that we are all trying to navigate. Thanks a lot to, to you Andreas. Thanks a lot to everyone for tuning in. That's all we had for you this week. But we'll be back across the week on on Real Vision and if nothing else, next Monday on Macro Mondays. See you next week.