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- [00:06]
A
Hello out there. Welcome to another edition of Macro Mondays. My name is Mik Rosenwald and we're sending to you live here from Copenhagen. I'm your usual host and I'm joined as usual by my good friend Andreas. Welcome to the show, Andreas.
- [00:19]
B
Hi Mikael. It's good to see you.
- [00:21]
A
Yeah, likewise Andreas. Lots of good stuff today on the show. We're wrapping up from Black Friday we have some numbers not from the Real Vision. Black Friday seems to have gone well, but hopefully. But on the on the market from Black Friday we're going to look towards Japan and we're going to look a little bit at Venezuela as well and then a couple of listener questions and you can still there's still time for you to get in with your question. If you're watching, whether you're watching on X, YouTube or at Real Vision, we are sending this live. So please post your questions and we'll try and bring them along. We've got another really packed week ahead of us here in Real Vision. On Wednesday we have Ash Bennington hosting Kyle Rehead, he's the co owner of Milk Road and co founder of Impact3. We have Sanjay of Al hosting Brent Johnson. Very interesting talk on Stable Coins there. And On Thursday at 11, Andreas you're hosting Michael Howell for an extremely interesting talks that's been really requested a lot. And finally for all our free members also on YouTube and Twitter we are expanding the coverage a little bit or the the content that you get. We have the on Wednesday at 1 we have the Trading the Market show with Chris Bullock and Bijan and on Friday we have Rec Vision with Mando hosting Ijaz. So also a lot of free stuff out there for those of you who haven't signed up. If you want access to Andreas, talk with Michael Howell. If you want access to our full package of research, Real Vision you there's still time to get in on the Black Friday deals. I was told it's apparently Cyber Monday that's still, still happening. So there's still time to get in on some very, very nice deals there. If you want our Andreas and my full, full access to our content, you'll have to look for the approach here and there but lots of other good options to join the real community that's really building especially on the new platform. So lots of good stuff to look out for in there. Andres, maybe before we get started we should just do our usual disclaimer here that especially in these times we we try to be as actionable a direct direct as possible in our Research and also in this free content. But remember that our trade ideas might be.
- [02:27]
B
Summertime, it may be good. Summertime, it may be.
- [02:31]
A
There we go. The same goes for his national team, I suppose, but that's, that's for another day. Okay, Andres, let's, let's get the first chart of the week here up on, up on the screen because I thought we had quite a good week last week. The mood was getting better, good vibes. I was feeling good. And then I woke up this morning, European. Time to punch in the stomach. The demon candle, as it's been labeled. Over course of three hours, Bitcoin lost $5,000 of value. Do we even know what happened?
- [03:05]
B
I guess at least this coincided with the governor of bank of Japan Ueda starting to talk about the December rate hike more clearly than what he's done lately. Someone texted me on X saying to me, well, it just seems like bitcoin is correlated to everything that goes down as dollar yen did this morning. The yen strengthened versus the dollar. But I still think it likely trigger this bank of Japan rhetoric on a firm rate hike here in December. And why could it matter at such a timing? Well, I've said this over and over and over. When you have a 24.7market, you spread out liquidity over a larger number of hours. That's quite simply what happens, right? In sharp contrast to, for example, the equity market, you concentrate the liquidity on a shorter range of hours. So when you run leverage in, for example, Bitcoin, Ethereum or other related assets, you also run the risk of market news appearing during an hour with exceptionally low liquidity relative to peak hours. Or at least if you had fewer open hours, you would have much more liquidity to absorb those market news. So my point here is that this is something you have to accept as a feature, not a bug of a 24.7market. That's also why the hit to these markets is substantially larger than the hit to, for example, nasdaq, even though the futures were open. Right. But we, we obviously sold the spillovers to other risk assets, but, but not nearly to the same extent as, as we did in bitcoin and crypto space. And I think it is due to excess leverage paired with this 24,7 market open hours. And yeah, there are pros and cons of, of having a shop that is open throughout the day in that, in.
- [05:15]
A
That sense, be careful with the leverage of their kits. That's, that's one of our catchphrases as well. Could be. Okay, Andreas, before we get back to The Japan story, which you're also posting a very, very interesting article on the pro tier today. I think it's just out now or should be after the show. I just want to give you perhaps the laugh of the week or maybe this is actually serious. I found this. We've been talking a lot about data centers and trying to figure out the best bets on how to, to create some, some, some, some value from this. A guy on X or company did an analysis on all the, all the parameters, all the work you need to do to keep the data center running, and they concluded that the best bet is the cleaning staff. The cleaning companies is the big winners of, of the data center bets. Power, chips, cooling, all that, Forget about it. It's all about cleaning. It's the biggest revenue, it has a very nice revenue growth and it's really, really cheaply evaluated, perhaps because it's such an unsexy investment. So, so there you go. Andreas. I don't know if we can find any cleaning companies that specialize in data centers, but the guys with the brooms, that's, that's the way to go. I thought this was a really, really funny, funny little ex. Do you have any thoughts on cleaning in data centers?
- [06:36]
B
No. I mean, my impression is that you don't have a lot of people running around in data centers unless they close down as the CME data center on Friday.
- [06:44]
A
Right.
- [06:45]
B
So why do you need cleaning all the day?
- [06:48]
A
I mean, generate some dust perhaps. I don't know. Just a fun little bit here. Andres, we'll get back to some of the hot takes we've also brought in, so some more laps for a little bit later. But I, I just want to zoom back to the, to the Japan story. So perhaps one of the reasons we saw this big sell off yesterday or this morning, Asian time was the, the, the announcement or the indications that we're going to see a rate hike from the bank of Japan. You wrote a lengthy piece. Could you just give us a quick intro to it and what you're seeing happening in Japan? Why are they, they, they so eager to, to, to hike the rates out there?
- [07:29]
B
Well, we still have inflation pretty much entrenched in the Japanese system, especially everything related to wages. We have inflation roughly beneath the hood running around 2.5% to 3%. It's actually kind of the same picture as we see in the US but maybe even more entrenched in Japan. And that's such a dramatic regime shift compared to what we've been used to from Japan. It was a country where probably most people concluded that they would never get out of this spiral of no inflation, debt growing, et cetera. And now we're to some extent seeing the opposite. I've seen both my inbox from investment banks, but also Somi macro commentary being full of a lot of pundits comparing the current setup to what happened in 2007, 2008 in Japan, because that was basically the last time where they dared hiking interest rates to any major extent. We also had one year and two year interest rates around 1% in Japan back at the time. And that's basically roughly where we're at again. So is this a late cycle signal? Well, historically I would have been tempted to say yes. I mean, Japan hiking interest rates doesn't get any more late cycle than that. Right. I think the difference here is that sharp contrast to 2007, 2008, we've seen a structural change in both liquidity, but also price pressures that makes it more likely that this is just the start of a trend rather than a late cycle signal. And to give you a few examples of why, look at, for example Nikkei or Japanese banks in particular, or Japanese construction bits. I mean, everything that has a cycle cycle to it. We've seen the Japanese equity market performing very well alongside higher bond yields, alongside bank of Japan withdrawing their support for asset markets. I mean, it's in sharp contrast to what you should have expected, all else equal, before those things were about to happen. Right. If I told you that 10 year bond yields are now roughly 2% in Japan and Bank of Japan is buying maybe a quarter of what they did at the peak a month, would you guess that Nikkei would have been, I don't know, 100% higher than it was before they started this process. So I think something has structurally changed. And remember this, as an equity investor, you should actually salute inflation, because what does inflation tell you? It tells you that companies can actually raise prices. And I think the sweet spot is basically somewhere in between 1 and 4% inflation for investors. If you have more than 4% inflation, you start to see very weak equity markets. But if you have below 1% inflation, you also see weak equity markets. Remember that. So by the end of the day, having brought inflation back in Japan, and now we're seeing that entrenched inflation, I actually think that's good. It's at least very much better than an inflation environment of say, zero to half percent inflation per year. So all in all, I think there's a regime shift happening in Japan. It's not just a cyclical Shift. Those of you who remember the summer of 2024 also remember how the turning tide in the dollar versus the Japanese yen turned into something that was a big scare for everything from NASDAQ to. I think the big difference to a little bit more than a year ago is that this carry trade in the dollar versus the yen is not particularly participated in by the levered fund space. So we had a three standard deviation long in dollar in the late summer of 2024, while the positioning is roughly flat now, which is a big change to a year ago. So you know those players that will turn the book very fast if we see a sudden shock to the dollar yen exchange rate, they're not as active in this market as they were a year ago. They learned their lesson there to some extent. Of course, there's a more structural element to the carry trade. Not least that you see Japanese life and pension funds buying fixed income around the globe, or at least they did. And of course, if bond yields, they turn much higher in Japan, especially if the curve steepens in Japan, they'll be more inclined to buy local bonds than global bonds. And I think we're on the precipice of a move that is sufficient to bring about some spillovers to the US treasury space. We've already seen that today, but it very much depends on the steepness of the curve because you remember that the spread between bond yields in Japan and the US you'll have to adjust that for the running cost of hedging your FX exposure if you're a Japanese life and pension fund. And therefore it is the relative steepness between, for example, 10 year and three months interest rates that matter. And if I'm right, but the Reserve caught here in December and caught a couple of times more already during the first quarter of next year. There's nothing to worry about because that will steepen the dollar curve more than the Japanese equivalent, meaning that the Japanese life and pension funds can continue buying Treasuries. But we're on the precipice of something here. Unless the Federal Reserve cuts interest rates.
- [13:16]
A
More interesting. So just to sum up, also to link it to what happened last night or this morning, Asian time, it seems to me that these announcements that the Japanese BOJ is looking to hike, it's not based on their weddings, not necessarily a new hiking season they're opening. They're committing to perhaps one hike and then we'll see they have a new government, new prime minister who's probably not so fond of this. It still seems like a very, very dramatic price reaction in Bitcoin. Is that due to the squeezed liquidity that you talked about earlier or why did it have such a harsh effect on Bitcoin?
- [13:57]
B
Yeah, I think it's a matter of the liquidity during those hours. But it's probably also a matter of Asian accounts taking more notice of this than for example, European or US accounts. I think it's very early days to conclude that the tide has turned on the dollar yen trade. We'll have to see the bank of Japan. They've hiked interest rates a few times this cycle, but they've been very careful each time. So remember that in the run up to those meetings, we've typically seen a stronger Japanese yen. Ultimately after the meeting, those hopes of a more hawkish central bank, they've basically vanished into thin air because they've been so careful rhetorically of not promising further hikes. We'll have to see what happens now that we've done one and done kind of hike. And I think it's the same here. They'll do 25 either December or January and then they'll wait a long time time before doing anything again.
- [14:58]
A
Interesting. Andreas. Okay, let's zoom back to Friday. Andreas, to Black Friday. I don't know if this is relevant in a macro perspective, but it seems to me that comparing this Black Friday to last Black Friday is a very, very hands on specific measurement of the economy. So the numbers that we are having so far is a rise of 4.1% compared to last year year, that's including inflation. So it's, it's a 1% rise, but still not worse than last year. Online spending up 9.1%. Is this a bullish indicator, bearish indicator? What do you make of this, Andreas?
- [15:39]
B
It has to be seen as a pretty solid sign of, of a consumer that is still active. If anything. I mean, it depends on whether you're a consumer glass half full or glass half empty kind of guy. But of course, if you see a lot more discount buying, it's not necessarily the strongest signal for the consumer. I typically track on a running basis the spending in discount stalls versus luxury stalls and that's typically a strong ratio signal if you see a lot more spending in discount shops. But in any case, now that we're comparing discount to discount, I consider this as a sign that the retail sector is still doing okay. I would even argue that it's more than a 1% inflation adjusted return because if you look at the goods inflation, it's still lower than services inflation and you buy more goods than services on a day like that. Right. So pointing case. At least the economy is not declining. It's not. When you see stuff like this happening, it's certainly not. No, no.
- [16:45]
A
And I mean, again, zooming back to Liberation Day to April, this was exactly what we expected, a huge collapse in Black Friday sales. And we're not seeing that it's not emerging for a number of reasons. A little bit of a detour here, Andreas. I saw that the AI traffic to US retail websites grew 805% on Black Friday. So this is the year where AI traffic to retail websites directing traffic for consumers broke through. And this is now outmaneuvering search engines, etc. Just an interesting little tidbit. I'm not sure I have an investment angle in this, but, but very, very interesting for me that search engines are out essentially when it comes to Black Friday and consumption here.
- [17:33]
B
I don't know whether I prefer anecdotal evidence or not in cases like this, but personally I've, I, I ask ChatGPT about everything. Yeah, everything from okay, I slept poorly this night, what can I do to change that tomorrow? I asked ChatGPT for advice on the sizing of the shoes that I bought on Black Friday, for example. I asked it about everything. And if you look at various statistics in the usage, I'm certainly not the only one. Right. So we still see an acceleration, especially in the retail consumption of AI agents, while we probably don't see the same, you know, acceleration in the non retail consumption of agents right now. But I think that that's because it lacks basically.
- [18:22]
A
Yes, yes, yes. And this is an entirely new channel. I know most digital marketing bureau agencies are all over this, but if you're working in old school search engine optimization, you might need to consider your line of work essentially. Anyway, Andreas, one more topic before we get to some listener questions here. I wanted to bring up this tweet from Pete Hex, the US Secretary of War. He's called now he drew to the front of a children's book of Franklin targeting knockout terrorists outside of Venezuela, supposedly. So, Andres, I wanted to stress this and I posted this in Real Vision and I'll be discussing it in more in length in my the Drill article this Wednesday. I think investors in the market is currently underestimating the risk or the likelihood of a US strike on Venezuela. I'm building on this sort of ladder of escalation that we can have here. So essentially the US has been building up its military forces, been threatening the Maduro regime, all in an attempt to increase the pressure in the hopes that he will resign. Essentially the next step was establishing a case of Bella as it called it, reasoning for war. You may remember back in, in the happy Bush days you had Colin Powell before the UN with the vials and the satellite photos that was established in the grounds of war. The next step is to actually do something and now we have sort of the reasoning. Maduro has been labeled as a terrorist, as a drug cutter leader. You can discuss whether that's relevant but he is, he has been designated as that. So I think there is an increased risk that we might see strikes in Venezuela even during this week. And it's. I don't know if you can position for it but you need to watch out for it and need to consider it to be very specific. Perhaps we've discussed sort of exiting the European defense trade. I know a lot of guys also in real vision have been in the Rheinmetall trade etc. I think that thematic is weakening as we are heading towards peace in Ukraine. But you might want to make a pit stop and some US stocks that the this, this week or next week just, just in case you get a U.S. defense stocks just in case you get an get an attack on Venezuela. Because I think, I mean if you look at the face value of what Pete Hex and Donald Trump are telling you, they're telling you they're going to attack Venezuela and sometimes you need to take these things at at face value.
- [20:53]
B
Mig, let me ask you a question about Venezuela, right. Because you know, not that I'm saying the run up to this is reminiscent of the invasion of Iraq or Iraq. Sorry for my pronunciation but is this about oil or at least it will be a very important event for oil markets, right? So the question here is is it bad or good news for the oil price? Will the oil price go lower or higher if they attack Venezuela? My best guess would be lower but I'm interested in hearing yours.
- [21:23]
A
I mean if we're talking about what I would expect the next step in this escalation is would be a drone strike on military strike on some military installations, some, some drug installations or whatever. I think that would send oil prices up in the short term but in the longer term another bet on this is the western companies that can swoop in if we get a new regime in Venezuela and help them reestablish their oil business. Because right now if you cut off the Venezuelan oil supply, it's not really disrupting oil markets that much. On the other hand, as you're alluding to if you get it up and running again and if you get, if you begin really drilling and, and, and getting the oil production running down there, that's another massive supply flow to the markets. So absolutely, in the longer term this could drive down oil prices even more. And that's obviously also what Trump is looking for here. This might actually be a war for oil, if anything, also is very much political. Of course the US has a lot of reasons to dislike Maduro. He's a terrible guy. I'm not defending him in any way, but it's interesting. I don't think we're going to see an Iraqi style invasion here. The US has deployed around 15,000 troops to the region. That's not at all enough for this type of operation. You need at least 10, 20 times that. But obviously the target is a regime change. Maybe they can force one through increased pressure. Something to note as an investor in any case. So we'll be following and expanding on that. Andreas, I want to head over to some listener questions because we've had some nice ones here. I don't know if you saw this earlier today, the announcement from strategy around US dollar reserve. We have a question here from Europa Crypto. Do you have any initial, initial thoughts on this establishment of the, the their dollar reserve? It's $1.4 billion in terms of implication for strategy in Bitcoin.
- [23:18]
B
So I have a lot of thoughts on, on microstrategy, not only on this dollar reserve. First of all, you know, I think it was yesterday he tweeted out that what if I add a green dot to this chart? Typically he's been tweeting about orange dots every time they bought Bitcoin.
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A
Right.
- [23:36]
B
It was obviously related to this. Right. That's point number one. Point number two is that we've seen this updated guidance from the MSCI on how to understand digital asset Treasuries in the context of MSCI indices. Right. And they've basically classified that every company that holds more than 50% of their balance in, in digital assets is to be considered an investment fund rather than a single stock. I think that's, you know, it was out October 10, basically coincided with the big sell off in Bitcoin. And I think it was related partially to that, not least since it makes it a whole lot more difficult to imagine a scenario where these digital asset Treasuries trade with a premium to their underlying asset values. So I think overall this MicroStrategy case looks slightly shaky and I would personally prefer the underlying to debts in the Bitcoin space and by the way, also in other crypto assets as a consequence of what happened with this MCI update to the legal status. I mean it is bound to be implemented during February next year. Of course still subject to change, I guess, but. And yeah, by the end of the day we'll also have to see what the SAP says about it. But I think the question marks line up here. So I would much rather prefer the underlying to the DAPPS right now.
- [25:21]
A
Makes sense. Okay. A listener sent me this tweet from a guy called Cryptonobler here. We sometimes like to look at the week ahead. This guy has, has the week essentially lined up. It's not the usual economic calendar. Maybe we can get the, the tweet on the screen here. Here we go. So essentially this is this week's schedule. Today the Fed shares beat tomorrow. QT ends Wednesday, QE starts on Thursday. You have the balance sheet, then you have a 15 billion liquidity injection. And then on Saturday Trump signs the Bitcoin reserve bill. So there's the week ahead of you. We got this. I put this as one of the hot takes of the weekenders, but is there something to, something to any of this is essentially the question from our listener here.
- [26:04]
B
Well, QT ends. Yeah.
- [26:06]
A
Tomorrow.
- [26:07]
B
Yes. Let me put it like that. That's a good Wednesday QE out of two. I mean Wednesday QE starts. We need an announcement between now and now and Wednesday for that to happen. So no, most likely not. I guess to quote Jim Carrey, there is chance because the New York desk, they've talked about adding civilians to the balance sheet to avoid the repo stress between now and early next year. So some sort of light QE could happen here in December. I actually think it will happen. But QE as we knew it, forget about it. It won't even happen next year. I'm almost certain about that. And it's almost certain, so certain that I'll promise it. The reason is that we've seen a big change to the legislative landscape on dollar reserves and treasury holdings of banks called the eslr. And for those of you who want to read about the ramifications of that legal change, you'll have to to dive into the article I just released in the pro tier at Real Vision. But the short story is that more than 1 trillion in reserves like capacity will be released by this new piece of legislation, meaning that the Fed can run a smaller balance sheet. So they don't need to do qe. They'll rather stay where they are.
- [27:42]
A
That could lead to a liquidity injection. So maybe the Friday is right. I don't know about Trump signing a bitcoin reserve bill on Saturday. That would be, that would be a joker to this. But, but let's see, I mean if, if, if, if the crypto gods allow this to happen Monday through Saturday, they're allowed to rest on, on the Sunday, I would say. And that the markets do the work.
- [28:02]
B
Yeah, I, I just think that, you know, this tweet is very telling for the current sentiment. You know, you have a lot of people absolutely sure that the four year cycle is playing out. We had the peak in early October, while you have a number of accounts pushing fake news trying to push up bitcoin at the same time. And it's this odd cocktail of bearishness and then fake news trying to pump the market again. And no one's really trying to make a solid case for why we should have a, I don't know, five or six year cycle. We just had the ISM PMI while we were talking here, Mikkel, and it didn't really move this month either. So we're still waiting for that business cycle pick above 50 and everything to play out. And I, as I've said many times, I consider all asset markets macro asset markets, meaning that you don't see a major peak in assets unless you have a cyclical peak in the economy. And we haven't seen a cyclical pickup even so why would you expect the economy to peak here when we haven't even seen the acceleration first? So my best guess is that 2026 will be much different to what many pundits currently think.
- [29:21]
A
Christoph Andreas. That's all we had time for this week. I just want to mention again that there's still time for you to catch one of our Black Friday offers at Real Vision. You can get full access to Andreas's brain almost and all the other great content that we have on Real Vision. I hope you guys like the show. Thanks a lot for you for joining. Thanks to you Andrews, for tuning in. We'll see you next time.
- [29:43]
B
Weekend.