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- [00:00]
A
Summertime is maybe good. Summertime it may be. It's Mac. Stocks, bonds, fx, crypto on the way. Get context strategy right now on your screen. Macro Mondays level up your week. Oh, yeah.
- [00:22]
B
Hello out there. Welcome to Real Vision. Welcome to Macro Mondays. My name is Migl Rosemold, your usual host. And as usual I'm joined by Andres Dano. And while I'm sending to you from rainy Copenhagen, Andreas, you're live with us from the warmth of Corsica. Andreas, before I get to ask you about the elephant in the room behind you, let's start with the other elephant. Do we need to worry about oil again? I thought the war was over.
- [00:49]
A
Well, I don't think you should ask me that question, whether the war is over. I think I've called it over like three or four times. But I actually don't think the oil math looks that bad compared to say, March or April. So I'm not worried as we speak. But, but of course we cannot live with the close rate for the rest of the year. So it depends on your time horizon. Mikkel, that's, that's the long answer to the short question.
- [01:14]
B
And what's the big trade you're looking at right now, Andreas?
- [01:18]
A
I think the big trade that everybody's looking at is the memory stocks. You know, we have, we've had, we saw volatility on Friday and on Monday here again in, in some of the names that everybody's involved in. So, you know, I, I think we're approaching a point where it looks incredibly tempting to buy the dpier in memory.
- [01:38]
B
Absolutely. We'll dive much more into this, including a look ahead at the prints this week and all the news that we're going to be getting on the inflation picture. They're obviously heavily influenced by oil. Remember, this is our free show on Real Vision. Uh, that is, uh, across platforms. We publish a number of articles and exclusive shows on Real Vision as well. So do check out your options on realvision.com for even more content, including Andreas, your oil Flash update. We will be digging a little bit into it, but if you want the full picture of the photo analysis and all, you need to sign up for Real Vision's pro chair for that. Andreas, let's dive straight into it. We had this message from Donald Trump just an hour and a half ago. I think that Donald Trump wants to, to wants the US to run Hormuz and we're essentially in a position address where the past, for the past week or so we've had increasing attacks from, from both sides Leading up to the point where Donald Trump first of all declared the the ceasefire for over initiated heavy attacks on the IRGC over the weekend and we didn't really get any Hobio Andres we didn't really get any talk about returning to the negotiation table. And now this news that the US wants to run the Strait of Hormuz. Now let's start with geopolitics here. Andreas I wrote a piece last week and you can check it out on real vision on why we got to this point, why the US miscalculated in the Memorandum of Understanding. It's actually there are some logic steps you can follow game theory wise as to why the Iranian Republican Guard ended up essentially disrupting the memorandum and the peace process. But now we're at this point in address the US wants to run the state of Hormuz. I don't know what that means. How do you run a block of water? Do you run the coastlines on each side? Possibly. Do you take some of the islands within? Do you blockade it navally? We don't know. In any case this speaks to further disturbances to the flow of oil. How do you gauge the market reaction to all this, Andreas? And have we seen the worst yet?
- [03:54]
A
Yeah, I mean if we look at the oil price live, we're not even above Thursday's peak, so I mean it's not that bad. And speaking of the flow, I mean we're not talking about a closed straight at least I borrowed a, a chart from our good friend Rory Johnston. So a big shout out to him. He's really, really good. Follow when, when it comes to the flows in and out of, of the Strait of Hormuz and it's been clear to me for a while that the flow was better than reported everywhere basically. So if you look at the left hand side here we have the west to east flow out of the Strait of the Moose of tanker ships. Right. And we had a lot of unaccounted dock transits basically through June, most of July. We still have those still waiting for the point where Donald Trump admits to Abu Dhabi being behind these dark transits. Right. And I still think that it remains the case that the flow is actually okay. Ish. I mean there is at least a flow. Having said that, I think basically the beige bar here, the Omani route, is what triggered the response from the military side of the Iranian leadership. So the US effectively managed to create a transit together with the administration in Oman. It is now not used again. So I mean they have at least effectively managed to officially close that part with the attacks that they've made the ERJTC over the past days here. So, I mean, there is a flow, it is incredibly difficult to gauge it in real time. As I've said over and over, I think the best way of gauging it is to look at a lot of very technical, technical price spreads in oil markets. I can show you a couple of them in just a second. But having said that, Miguel, I don't think the market response points us in a direction where we should be overly worried about the oil flow, especially since we had a pretty massive flow out, say, over the first two weeks of this ceasefire and those ships are basically in transit now. So we know that a lot of oil will arrive over the next four weeks, both in Asia and elsewhere. And if we look at the current setup, I've tried to calculate backwards, if you know what I mean, on page 14, how close are we to some sort of normalized oil flow out of the region? And my best assessment is that we lack 4 million barrels a day. Is that manageable for the US and China in cooperation? Well, they managed to fill a void of, say, 8 million barrels through April and May. So we're basically talking about half the damage of when it peaked. And we still have time, but we're still using strategic reserves both in China and in the US to fill this gap. And there is obviously an end date to such a policy mix. Having said that, that end date is not anywhere near. We're talking three, four, five months from here. So there's still time.
- [07:21]
B
And that is the true long term picture of this, Andres, because obviously the Iranians, the Republican God essentially especially, they're really trying to push their leverage on this. They feel like this is their chip to both make a lot of money, but obviously also to secure their position in the future. But there's a limit to how much they can push this. We've discussed this a lot, Andreas, and not only are they pushing the patience of the Americans, they're also pushing the patience of China. And the rest of the world has learned by now how to address this. So if the strait gets closed, yes, it's a problem. We know how to fix it. China just stops buying oil. And in the future we're going to have a lot more ways to fix this. We already heard talks about the US investing massively in shortcuts around or in alternative routes to get both oil and other commodities out of the Gulf and rest. So so far, not overly worried it seems to be. Also you address, once we hit $100 in oil. If we get there, people begin to get very, very, very creative. And that's not even accounted for here.
- [08:30]
A
No, but my best guess would be that we won't even get close to $100 again. I think the equilibrium right now is probably 80. And having said that, Miggle, the issue is not oil, the issue is products. So jet fuel, diesel, etc. We're talking about a situation where we've managed to bypass the straight of a move on oil, but we haven't managed to bypass the straight of a move on jet fuel. Right. Products. Because we cannot move the refiners. And that's still an issue. We're talking record high crack spreads in the US because refiners have moved marginal capacities of jet fuel instead of gasoline, diesel, etc. Right. So it's still an issue that the strait is closed, especially when it comes to the consumer inflation. Because as long as the strait is closed, you cannot pass on the full price disinflation from the barrels of oil because of a lack of refiners capacity. Basically.
- [09:33]
B
I have a feeling, Andreas, looking at the numbers in your analysis, that we were getting very, very close to the price of the pump finally dropping and now it's probably been postponed a few weeks at least here. I'm not overly confident that we're going to have an improvement on the political situation here, but the fallout from markets seems to be a little bit more compressed this time around. Not perhaps as dramatic as we saw earlier this year. But let's have a look at inflation. Obviously we have inflation rates coming out this week. The, the big Prince. We've talked a lot about your expectation that inflation will roll over. We're seeing it in our now costing. Will we get evidence of that already now or do we need to wait another month for this to kick in?
- [10:23]
A
So if we look at the June inflation from Europe to begin with, we already have some evidence from Europe a couple of weeks back and it looked pretty benign outside of energy. So it wasn't really an energy story that surprised the market. And my best guess we run our now casting across all of the subcategories in the inflation index is that we get a pretty soft report. Broadly speaking, it's not an energy story. Of course, it's partially an energy story, but it's not a standalone story. My best guess is that we get a report that prints 0.2 percentage points below the consensus tomorrow, which should be a pretty big deal, especially given the chart that you just put on the screen here. Right. Because we had the FOMC meeting minutes out. Was it Wednesday or Thursday last week? And it was probably the most hawkish message from the Federal Reserve since 2022 where they had this hiking cycle. Right. So a lot of members are clearly concerned about the inflation outlook, but it's still an outlook thing. If the outlook improves, then my best guess is that they'll wait and see. So I cannot put enough emphasis on this inflation report. If it prints soft, it should massively reprice the front end of the curve in the US because everyone is so concerned about inflation within that committee. So they'll probably change their mind if inflation comes down. Right. It's not like they've changed their reaction function. They've changed their outlook. And that outlook is probably wrong if you ask me. So I see it more as a forecasting error than a policy error, if that makes sense.
- [12:04]
B
Yeah. And a matter of time lag of when these reports are assembled and counted together. Okay, so we had the Last print at 4.2%, consensus around 3.9. What's your bet to make this very, very specific so we can hold you up on this next week?
- [12:18]
A
3.7 for headline and 2.7 for core. So, yeah, it's a little bit less than 0.2 percentage points below consensus. A big surprise in case we're right.
- [12:30]
B
An ice cold print if that's what we're about to get. Very, very interesting address. Maybe the Iran story still, the restart sort of of the war in Iran. Maybe that gives Kevin Walsh a bit more breathing space before the pressure mounts on him to begin a new cutting season. I still think the political pressure will emerge at some point, but right now, obviously he has the best excuse of them all, which is disturbances and the energy market address. So very interesting. Andreas, let's get to a few of our laughs of the week. We like to throw in a few of them on the show. Andreas, first of all, you posted this picture, you sent it to me yesterday because we've been talking a lot about AC this year. Obviously we're both living in Europe. We're living in the part of Europe where it's only really hot for a few weeks every year, but it's been exceptionally hot this year and a lot of Europeans have been traveling to the US for the World cup and experiencing what AC is. It's like they've crossed the, the river into Narnia and see, seen what's over there. And you, you seem to be really enjoying your AC down in France. Andreas, how's it working out?
- [13:40]
A
Yeah, But I just posted this picture because when I started talking about a lack of AC in Copenhagen, you know, my inbox was full of these. Oh, you're just a Europore messages. Right. And this is a heat pump, slash an AC in, in the house here in France. So it is possible here in Europe. I just wanted to confirm that it's from just outside window here so we, we can actually, yeah, figure stuff out here.
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B
It's.
- [14:11]
A
It's not, it's. It's actually, I, I think you put it very well when we had this discussion on AC here in Europe, Michael, that it's actually because the demand hasn't really been there to a large extent in Northern Europe that the solutions are not pretty good. Right. So in that sense, I guess it's a matter of time before enough people will demand AC for us to get there. But let's see.
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B
Absolutely. Tress. Just to confirm all the notions about Europorus, I went to an open house on a house builder over the weekend. I asked them about what's it going to take here in Denmark to build complete AC covered house. Not going to happen. If you apply for permit to build that, it's just going to be turned down. So still a bit of work to do here in the north of Europe, but happy to hear that you're enjoying it, Andreas. And I know you've been enjoying this chart as well. The complete K curve of hyperscalers and semiconductor companies. That's really making rounds on Twitter right now and really got you agitated from, from, from the pool side there, Andreas, what are we looking at here?
- [15:24]
A
Well, I, I think the chart is pretty interesting in itself. Right. You know, hyperscalers are spending all of their free cash flows to buy semiconductors. That is essentially the story of 2026. This was. It was partially the story of 2025 as well. And I think it will be the story of 2020. The guy here, Puro, is a decent fund manager, but he's a part of the very vocal crowd right now, admittedly having the upper hand in price action on these things at the moment, calling for mean reversion. Say this cannot continue. Fair enough. And then he explicitly states that you should never buy cyclicals, in this case, semiconductor companies around peak earnings. And I'm like, should you ever buy anything around peak earnings? Right. It's like water is wet, that statement. Having said that, Miguel, don't buy the peak.
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B
That's.
- [16:17]
A
Yeah, no shit, Sherlock. Right. But having said that, the discussion is not whether to buy a cyclical at peak or not. I mean, that's just a silly part of that discussion. The discussion is whether we've peaked or not or whether this will continue to accelerate. And I simply don't see anything that points in the direction that we've peaked. If you look at the underlying spot price of semiconductors, for example, we're still accelerating. If you look, it's on page 22. So even since we've got the updates from Micron, Hynix etc, we're probably up another 20% or so. And one of the smaller players, Taiwanese semiconductor player last week was, was quoted for saying that they expected the big players within that space to hike prices 30 to 40% in Q free. And I mean that's certainly not discounted. If you look at the forward earnings, most market participants expect the semiconductor companies to peak in Q1 next year, something like that. So that's the discussion. Will the cycle run for longer than Q1 next year? If you look at the communication from the hyperscalers, it will run far further. If you look at the communication from Hynix for example, itself, they say we basically have a solid orders book until 2031. So I mean, there's a huge divergence between what most of these bearish PMs currently expect and what the companies involved in this free cash flow transfer from hyperscalers to semiconductors say about it because they communicate that 2027 will be wilder, way wilder than 2026. So I'm of the view that, you know, we're currently in a setback for a lot of momentum trades, basically all of the trades that have worked so far this year. But it's very driven by this shot from the policy forecasting error from the Federal Reserve earlier in June. We've had higher dollar real rates for a while. A lot of people are a little bit scared whether we'll get interest rate hikes, et cetera. So if we get that off the table again, then I think people will start staring at these spot prices for memory chips once again and conclude that we're far from, we're far from peaking. My best guess is that we peak maybe late 2027, early 2028. If, if I should give a guess right now, but there's just nothing pointing to peak right now. If you look at the underlying price trends.
- [18:56]
B
Very interesting, Andreas. We're obviously covering that in a lot of our publications on real vision. If you want to dive into all these charts and even more on that, let's go to your favorite number, Andreas. The extra export numbers out of South Korea People love it when we bring this on also because it's such a high frequency number. Are we seeing a rollover right now?
- [19:19]
A
Well, we've had data from the first 10 days of July and it looks a little weaker than June. June was extraordinary on all scores. We had the results from TSMC early this morning, also showing that June was probably the most bizarre month in financial history in terms of exports of everything semiconductor related. So sure. Are we seeing a slight rollover in July? Yeah. But is it a big surprise? I mean, half of the globe is on vacation. I mean, I'd like to see more to state that this is a chart that rolls over, but obviously it's one of the charts that we have to watch on a running basis here because when this chart rolls over, the memory trade is done. We all know that. So again, the question here is whether we've peaked in terms of sales, in terms of earnings, in terms of margins, et cetera. The question is not whether the sector is cyclical or not. And I wrote a long, long story on Friday on why memory is probably not a cyclical in, anymore. For those of you interested in that, I actually spent the time investigating, researching on the underlying trends hardware wise, while Michael Burry and his crew, they just say mean reversion, mean reversion, mean reversion, mean reversion. They've said it two years in a row. I consider that analysis lazy, to be honest. And I've, you know, I've been stuck in a Twitter battle with Michael Burry for, for a while at least, at least I'm spending my, my, my vacation on something fruitful here. Right?
- [21:01]
B
Am I, at least you're arguing with him and not your wife. That that's, that's a positive. Andreas.
- [21:05]
A
Oh, I, I, yeah, I've told her a lot of times during the past week that the memory trade has not peaked.
- [21:10]
B
So that's good to hear. That's great to hear, Andreas. So, so just to compress this a bit, Andreas, still confident about the inflation picture. We'll have to see what happens in the, in the straight of Hormuz. If that can disrupt that. I'm sure it's going to be used as, as an excuse to, to, to postpone that. Still very bullish on the inflation picture. Still bullish on the memory picture. The question we get a lot here, is it too late to enter the memory trade in red?
- [21:41]
A
I get why it's difficult to enter it if you haven't been in it. I get that. Especially since the momentum trade has really suffered for two weeks running. I'm not speaking from a strong position right now because my book is suffering. I have to admit to that. Again, I cannot put it more transparently than what I do. I think everything spot wise points in the direction of the further acceleration of prices. To me, that's still strong evidence that there is more to go on these trades. And I don't consider the memory trade to be as cyclical as it once was. So I have 9, 10% of my portfolio in memory stocks, something like that. If you include other semiconductor companies
- [22:31]
B
past
- [22:31]
A
25% of my portfolio, that is the most transparent way of saying it. I mean I have my money in the trade, so I think it will go up.
- [22:42]
B
Looking ahead to next week address. That's also something we like to do in this show. Obviously we're heavily focused on the CPI print any earnings. Anything else to gauge the memory trade or the momentums that you're watching?
- [22:58]
A
We got some numbers from tsmc, right. And we, we have the, you know, the earnings season opening with all of the banks tomorrow, Tuesday alongside the cpi, as you know, Citibank and Goldman and all of those. Then on Wednesday we have our good friends in the Netherlands, the ASML reporting. ASML is probably the only gauge you have in, in Europe on, on the AI momentum. Right? More or less. But of course an important global bellwether as well also since they, you know, it's always tricky to figure out how much they're, you know, truly selling to Asia and you know, they were, they're always at risk of China getting hold of their, their technology and all of that. So, and I mean there, there are kind of two sides to that report. Both we'll obviously look at the earnings trends, but we'll also look at the orders book and where it goes. And on top of that, you know, it's earnings season now, so, you know, we cannot hide anymore all of the discussions on whether we've peaked. I mean we'll get the evidence over the coming month or two. Right. So I'm, I'm, you know, the, the expectations are much higher than in Q1, but for good reasons I still think, I still think that we'll see a beat across the board.
- [24:21]
B
Okay, Andreas, we have time for just one more topic that I know you're very, very anxious and it's a bit unfair to leave it to you with five minutes to go. But this is a chart we've been talking about a lot for the past few years. A basket of the most critical and strategic metals exports out of China or US imports from China as a percentage of total imports. We had a few weeks back a seemingly positive, productive meeting in Beijing, Trump and Xi. There was talks of trade ceasefire, a detent even in the relations. What are you seeing in these markets, Andreas? Is the decoupling that we've had as a trading bet not working anymore as a consequence of this or what are you seeing?
- [25:08]
A
Well, quite clearly a couple of the decoupling bets we had in our portfolio have suffered from this ceasefire. And you actually had that right. At the time I was a little bit more skeptical. But sometimes markets, they trade off narratives instead of what's actually going on beneath the hood. The trade relationship is as frosty as it's ever been. Every single data point you in that direction from the standpoint of making a conclusion. This data is updated until 1st of June, so it's, you know, it lacks a little bit because it's export data. But you know, the three, four weeks that followed the ceasefire in Beijing basically didn't lead to any whatsoever reversal of that trade relationship. I know that the US will probably just buy these metals via third party. Right? It's, it's not like, remember when, when we were all not allowed to trade with Russia all of a sudden because of the invasion. Right. I mostly agreed with that conclusion, by the way. But in any case, we started trading with Russia via third party countries. It's probably the same that happens here, that China sells these things to Malaysia or another party that holds good relationships with the U.S. so, so it's not like I'm, I'm overly scared of, of a scarcity within that space, but it still goes to show that the US needs to, to sort of retain control of its supply chain and Europe for that matter. We're just waiting for the US to do this for us and nothing, nothing points in the direction of this trade relationship rebounding. Nothing. I, I, you know, I think they had to, to sort of agree on a ceasefire because they had, they had a common issue with the straight of a move that they had to deal with. If we move on the other side of that straight of a moves issue, probably take a while, then this could probably resurface. Right. But right now, and I'm very curious to hear your thoughts on that. It seems like both Xi and Trump agree that they have to, to take it a bit easy given that they're both dependent on ensuring that the oil market is balanced. But I can assure you that the Chinese, they hold a pretty decent card if they start buying a lot of oil Just before the midterms because they can move the needle now. They can really move the needle if they want to on oil prices ahead of that election date, which is something that they have to account for. That risk at the White House. I haven't really heard them talking about it, but probably since they're scared of talking about it.
- [28:01]
B
Yeah, absolutely. There's a limit to how much the US can do to counteract that. So. So I agree with you. It seems like the US and China found a common problem and that's often what you need to get to terms and to set aside your crawls. But, but it's still right there underneath the surface. This is the big strategic rivalry. The big strategic problem is the dependence on China and especially these metals. So that decoupling bet is going nowhere. It's long term bet, but it's going nowhere. We're going to see, no matter who's elected in both the EU and the US we're going to see enormous investments in solving this problem. The EU is finally getting to grips with this problem as well, has essentially taken over the Trump playbook as we talked about a few weeks back. Maybe at some point this will be the common problem that unites the EU and the US are getting again. That's always been my idea that both the EU and US have this problem in common. So why don't we work together on it instead of waging separate trade wars against China on and off. So yeah, maybe we'll see that in the coming years.
- [29:09]
A
Yeah, but maybe. One thing I'll add here, and that's basically the thing that we've been waiting for, maybe say two, three, four weeks in a row, is that this trade, this decoupling trade in metals, it won't work as long as we have a strong dollar and as long as we have high energy costs. Maybe the inflation report tomorrow is basically the timing to get into all of these metals trades. We started trading that theme a little bit last week, but we're a bit cautious in terms of adding a lot to it until we see a weaker price action in the US dollar. And it basically requires a softer inflation picture and a turnaround of the current rhetoric from the Federal Reserve. This is one of the timings where it gets really tricky as a strategist and a pm, because our data is screaming in one direction, inflation down, softer dollar, everything related to that. But those in charge, they haven't really acknowledged that and we need them to acknowledge what our data is telling us for it to work. So I'm an eager beaver, but I'm really trying to be patient here because we need Kevin Warsh to play ball before we can get into this short dollar trade and all of that. I still think it's a little early, but we'll see tomorrow. Hopefully the inflation report is sufficiently solved for this to gain some momentum.
- [30:37]
B
Yeah, you could argue this is where you're supposed to be when you're doing your own data research, that you should be ahead of the official acknowledgment. But sometimes it's a bit of a patience. But let's see what happens tomorrow. Absolutely. Let's see what happens tomorrow and let's see where everything heads. Andreas, we're waiting for a very, very interesting July. No rest for the wicked here. Have a great final days of your journey to Corsica. Andreas, we will be back with a lot of content on Real Vision. Even though you're down there, Andreas, we're still producing a lot of content on there. We have my weekly the Drill Geopolitical article out on Wednesday. Later today we have the Oil Flash article and then we have our weekly portfolio update out on Friday as well. So lots of good stuff to look out for. That's all we had for you this week. But remember to tune in to Macro Mondays every Monday live on real vision x YouTube and wherever you might elsewhere find it. So thanks for today, see you next week.