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Foreign.
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Hello, everyone, and welcome to another edition of Macro Mondays presented by Real Vision. My name is Migo Rosenwald and I'm your host for today as usual alongside you, Andreas. Welcome to the show.
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Yes, thank you, Michael.
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We have a great first, a great show for you today. Remember that this is a sneak peek into the analysis that we do at Real Vision. To get full access, you need to sign up for the Pro Macro package, which involves both your weekly editorial, a piece on geopolitics and commodities. We have a weekly preview which we release every Monday called We Get a Glance. And this is sort of a sneak peek into some of the analysis that we do. Also remember that we have two upcoming shows this week, actually we're doing the Pro Macro talk with Raul on Wednesday and on Thursday I'm hosting the great Jacob Shapiro for a talk on Jeff Geopolitics. So a whole lot to look forward to this weekendreas. It's been another exciting week and I want to start off in something completely unrelated to macro. Okay. There is a Danish phrase I know you and I look to love to use it called a ramp.
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Yeah.
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You know what that means?
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A
Yeah.
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You and I both have some versions of it. It's a bit easier to see if we take off these headphones. It's of course, the haircuts I'm talking about because, Andreas, you were really, really, really excited to see the haircut of Howard Lutnick when he was in the Oval Office here. It's sort of the ramp is obviously the slick. What do you call it, turned back here. Howard Ludnick has the one that begins. I don't know what it's called in the middle, sort of right on the apex of the head and then goes back. It's a little bit easier to see in this picture, perhaps. It's one that I really, really like. He has great teeth by a lot. A lot of great ramps. In this trouble you got.
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You've got to love this guy because he's not giving up.
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No.
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And you know, I would probably have given up quite a while ago if I were him. But, you know, kudos to him, you know, especially the, you know the clip where he's laughing in the background when Trump signs the executive order on, on plastic, whatever it was. And you know, he's just laughing there and his hair is just jumping around in his neck. You're going to love it.
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He hangs on by thread there. I've got a couple of others here. You get to decide the best one. This is Pete Navarro, the president's advisor almost into what we might call a seagull. Very popular among footballers in the 90s. Also hanging on the logo.
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Yeah, exactly.
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Probably the winner right now is this guy, Scott Besley. This is a great, great, great ramp, as we would call it. Also loving the salt and peppers coloring in there.
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It's more. It's more like a Gryffindor cut than a slithering cut. Right. If you know what I mean.
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Absolutely. That's an incredible picture, by the way. Incredible mock shot or official shot? Obviously none of them living up to the great Anthony Scaramucci of the past Trump administration. So give us your inputs out there. Who did we miss of the greatest haircuts in the Trump administration?
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We missed Baron.
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That's true. Yeah, that's true. That's a great one. That's a great one. No one gets to see it because it's so big.
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You know, the haircut that he donned during the inauguration, you know, he would have. That haircut would have survived the hurricane. I've never seen so much gel in hair before.
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It was.
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It was amusing.
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That's another decision. I'm more into the wet ramps or the dry ramps. That's Scaramucci. Very much in the dry camp of that one. Anyway, Andres, let's get on with, with the macro before we get to talk about people's hairs here, but it's great to see. You wrote a piece yesterday. Reciprocal tariffs are actually good. What on earth do you mean by that?
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Okay, I think we. We kind of mentioned it a week ago that there's a potential for these reciprocal tariffs to, you know, orchestrate some sort of race to the bottom of on tariffs globally. And over this weekend, Trump explicitly stated that if counterparts bring down their tariffs and their VAT rates, then the US Will do nothing or maybe even lower their tariffs and sales tax rates. I guess this is an offer basically, to the rest of the world. Why don't you cut taxes? Why don't you cut tariffs, and we'll do nothing. And as I said last week as well, Trump's analysis is right in the sense that the average tariff applied on US Goods leaving the US and crossing a border outside of the US Is much higher than the equivalent tariff the other way around. So he's basically trying to create some sort of level playing field on global trade, and I think he'll get one, at least to some extent. Right. If you're Modi and you're running the business of India, so to speak. Right. And you're currently stuck with tariffs that Are say five to six times as high as the equivalent tariffs in the US and you get this message right, we'll put a tariff on you unless you cut your tariff to the same level that we have against you. What would be your response? Would you increase your tariffs? I don't think so. Really. So I actually think that there's an end game here that is pretty positive. Of course there will be some noise in between and, you know, lots of headlines and some hostile negotiations potentially. But the end game is good.
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B
Yeah. Especially for the countries that are more reliant on exporting to the U.S. than importing from the U.S. most countries are obviously relying on both because there's some tech you can only get in the US but, but if it's a backbone to your economy that you're exporting either goods or services to the US and this is, this sounds like a no brainer, I was a bit surprised by this bad thing because we're very, very big on that in Europe. And apparently Trump. Trump plans to include VAT in the calculation of what he considers to be tariffs. Yeah, that's going to be tricky for the EU to pull down because taxation, and that is not part of the EU mandate, it's a national mandate. Just like in the states, you have federal sales tax and you have statewide countywide sales taxes actually. So it's going to be very, very hard to bring them down across the board, but it's going to be part of negotiations.
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Maybe. Mikkel, we can show the overview of the levels that we are faced with across the globe in terms of tariffs. I did this overview yesterday. Right. And if you look at China to begin with, at the top of the table here, China is actually in a pretty benign, almost a sweet spot here due to what has already happened. Right. Because if you look at China, they received this 10 addition to tariffs, was it a few weeks ago from Trump. It is already in place. And if you look at their sales tax, value added tax, call it whatever you want, it's relatively low compared to Europe, for example. And if you look at the average applied tariffs rate to the left in the table, we're also talking about an average tariff rate that is not too far off what you see in the US So at least if you take this calculation at face value, we're talking maybe maximum a handful of percentage points between the US and China and they already impose 10%. So I mean, I don't think tariffs will be implemented on China from here. At least if you take what Trump said at face value. They will not impose further additions to the tariffs on China. So China is looking good, at least from this perspective. Right. Then you have India just below that. Terrible. Right. More or less the highest tariffs on Earth. Relatively high value added taxation as well. So if you calculate the spread between India and the US they'll probably face tariffs of 10, 15% at least as a retaliatory measure. Then you got the US Just below that, just for comparison. And I tried to calculate the average sales tax in the U.S. it's a bit tricky, but we're talking 6, 7%, something like that. And you need to compare that to the UK and the European Union just below, with value added taxation at 20 to 25 ish. That's a huge gap. That would be equal to a tariff of, say, 15% ish on Europe overall. That's pretty big. But maybe there's a scope for the European Union to make some sort of a deal with the US here, especially given everything that's ongoing in Ukraine.
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Absolutely.
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And we've already seen rumors around a military package being mulled by the European leadership. So basically you can call it an aid package to the defense sector across the Union. Obviously, that is something that is probably designed to tee up the negotiations around who's going to put boots on the ground in Ukraine and all of that. So I don't know whether you have a take on that. Nikol, can Europe orchestrate a deal on trade via some sort of defense deal in Ukraine, if you know what I mean.
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That's my thought here. I think we have three things in play that can be packaged together in some sort of US EU deal or Europe deal, which you'd rather say. So you have tariffs, you have Ukraine. Trump is very clearly pushing his Ukraine plan. He's pushing toward an Easter truce. That's by the end of April. I think it's very, very realistic that he gets that done. Obviously, he can always get derailed, but I think it's looking very realistic. They're into very serious talks with the Russians. We'll delve into more of this in our show on Thursday, but it looks very, very serious. The Europeans are not invited to the table, but still have a very important role to play in this. I'll just try and find this image from the Daily Mirror. It's a good Overview. We're not 100% the details here, but the idea is essentially to freeze the current front lines, some minor adjustments back and forth, and then have EU and UK soldiers guarding that front line in exchange for Ukraine not joining NATO so this means that Ukraine will not be able to join NATO. They will have the second best thing which is European soldiers manning the border crossings essentially which makes it very, very hard for Russia to do anymore, gives Ukraine a lot of security. But obviously this is a huge TAS for, for the European Union. We're talking 50, maybe 100,000 men in, in uniform down here and it's, it's going to take a lot of, of military purchases which goes into the RH metel trade you've been pushing for, for real vision users as well. The third thing here, and that's also extremely relevant to, to the VAT is the tech sector. JD Vance spent, spent quite a bit of his, of his Munich speech on the tech sector and how the EU is issuing censorship, is limiting the tech sectors, limiting AI. I think it's very, very possible that some sort of VAT decreases or special issues, special statuses for the major tech companies. The big social media in Europe could be in place in these, could be a part of these negotiations. It could be exemptions from some of the EU data regulations, et cetera. Would be a huge set setback for the eu but that might be what it takes to avoid huge US tariffs essentially. So very, very interesting to see and I just wanted to focus on a couple of other charts we've been doing on the effects of tariffs that's already being already seen in markets. People are front running it. One example is the divergence between bond yields and oil where you essentially label this tariffs premium.
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Yeah. Okay, so let me put it like this, right? If I'm right, that we're basically in the very early innings of some sort of global race to the bottom on tariffs, right? And these reciprocal tariffs ending up being a nothing burger in terms of the economic effects and all that, then the market is basically caught wrong footed ultimately because there's clearly a tariff premium in bond yields. So the spread between everything traded on exchange in relation to energy inflation, swaps and such stuff, they're trading very far off what we see in bond yields right now. And if we take the typical correlation between oil and 10 year bond yields at face value, we should probably trade closer to 4% in the 10 year bond yield in the US while we're trading 50 basis points above that ish. So I think there's a scope for bond yields to come lower into this April truth in Ukraine and with a kind of standstill on tariffs. Nothing implemented as long as we negotiate and all of that and the dollar is also starting to sell off against some of the peers, especially versus the Japanese yen, another trade that we've flagged and made money on. So I think overall this is starting to resemble, or it's starting to look reminiscent of what happened in 2017, basically. Remember when Trump took office back then, he's an eager beaver by nature. He wants everything done during the first quarter of his presidency and then he wants to play golf for the rest of his presidency. That's how he, I'm exaggerating things, but that's how a typical CEO works. Loads of executive orders, strategic direction, visions, and then it's up to his staff to solve it, to implement stuff.
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Yeah.
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And you know, we will get all of his strategic visions laid out now and then as soon as we have all of those fears baked into the market, we'll slowly but surely see a return to fair value, basically. And I think that was what happened in 2017 as well. The dollar started weakening, bond yields started coming lower alongside Trump sort of leaning back a little bit after all of his early messages. And that's ultimately very good news for risk taking as well, in my opinion, if the dollar weakens and if the terrorist premium is priced out.
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B
So one major factor in that, Andreas, is the fiscal deficit of the US you just mentioned that Trump is looking to get everything done quickly. We know that Doge has a two year mandate essentially can be change. Obviously it seems like we're already seeing some effects from it.
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We are. And I know this, this is a slight chart crime. Let me just disclaim that up front because a couple of people already got annoyed with this chart after I showed it in some of the research pieces that we've written. But the point here is that since the inauguration, we've actually seen a change of trend in the fiscal deficit. It is partially driven by seasonality in tax receipts. But if you detrend this and this is a statistical exercise, we're talking about a larger positive Trend compared to 12 months ago. I'm pretty sure that they're onto something with this Doge project. My best guess is that they've managed to remove 50 billion ish from the budget deficit already in three weeks. I mean, that's a lot.
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That's nothing to sneeze.
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So. And I mean, take a live look at the listed prices of, of real estate in Washington D.C. it's a landslide. And you know, we're laughing, but no, but you know, they're cutting expenses at least and it's very, very visible. So no matter whether you like this Doge project or not, I Have sympathy for it, but it's changing the direction of the deficit a little bit here. And after months in a row with negative news on this deficit, this is exactly what the bond market needs right now to calm down. And Scott Besant, the guy we basically gave the trophy of the best haircut in the administration right now, he's, he's also calming markets down with his rhetoric. Right. No increase to the long end bond issuance. That was his first message to markets. This, his second message to markets was that we're looking to bring long term bond yields down. Very calm guy. And I think he's maneuvering things well. So far, so much better results here in, in than in his hedge fund.
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B
At least to turn this curve around. It's obviously very, very significant. To make major headway in this, you probably need to cut into mandatory spending, as we've talked about. And that's going to be the big challenge I think here, but also where the big potential lies. So very, very interesting to see some actual results. This is going to be a chart that Donald Trump loves. I mean, it's so clearly cuts off on this inauguration, even though it's maybe not completely fair, as you mentioned. But anyway, it's going to be a great looking chart for him.
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You know, I was kind of hoping for him to retweet it, but he never did, so.
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B
Okay, Andreas, we've, we've got a bunch of important numbers coming up next week. We'll get to that in a minute. I just wanted to touch upon a number of interesting charts you put up. We'll, we'll discuss some of them more in detail on Wednesday as well. You had one on soft commodities. We don't talk too much about that. Uh, you had this one on, uh, I think it's sugar, right?
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A
Yes. And it's actually breaking higher now, the sugar price. You could have shown a similar chart on corn, for example, or wheat, and to some extent soybeans. So I think this is a clear sign that the dollar pressure is weakening now or is softening because soft commodities obviously trade in dollars. So if you get a softer dollar, it leads to a larger demand for these soft commodities as they're measured in dollars from the rest of the world, basically. And I think it is an overlooked detail in the negotiations between the US and the rest of the world that Donald Trump wants to export some farm products. The US Is actually not particularly good at exporting farm products for a lot of reasons, especially as import tariffs are incredibly high on especially farm products, even in your area. Where I showed you earlier that import tariffs are not particularly high. But Europe is trying to safeguard its own farming sector. India is trying to safeguard its own production of food. We're starting to see the same in some other Asian countries. So this is a battlefield in many ways. And if they start exporting more and the dollar softens alongside it, it's a big bull flag for the local traded commodity prices of sugar, soybeans, et cetera in the us. So this is one of the things that we see as a great theme of 2025 now that we'll get some sort of return to normal in food prices, especially the traded ones, because, for example, wheat is trading at very low levels compared to what we saw. 21, 22, 23. Same goes to a large extent for corn. Right. So I'm not necessarily scared of the inflation impact on households and all of that, but I think it's a very good trade here.
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B
Okay, Andreas, one very big topic on X right now is gold. Everyone and their mother seems to be buying other physical gold or talking about Krugerrand or what have we. I think this chart is very, very interesting. The gold inventory data, you tweeted that once this tops, you should get the hell out of it.
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A
Sure. I mean this is the physical storage data from the comics exchange in the US and it's just out of the ordinary to see so much physical gold on vault there. So I mean, to me it's, it's a symptom of like private banking advisors telling their high net worth individual clients to bring the gold to the US in anticipation of tariffs. Right. Typically this gold would be stored in Switzerland or London or whatever. Right. So across the pond. And you know, the trend is extreme right now. Gold had a bad Friday, but we're starting to rebound today again. And I think the market is sort of honed in on the 3K strike. Right. $3,000 for gold. I think we'll get there within a week or two and then I'll probably consider whether to exit this. There's a final window here before the tariff negotiations conclude. Right. After that you have some clarity. And I think the storytelling is no longer as solid around this gold trade. And we know that gold is very sentiment driven trade. It's hard to explain it with fundamentals. So currently we're seeing a lot of positive storytelling around gold to some extent silver as well, but also other metals. When I went to the US a few weeks back, every single commercial in the taxi was about gold and silver. We don't have such commercials here. I can guarantee you that. So there is a very, very strong storytelling around gold right now due to tariffs. So utilize this last window of opportunity and then I think we'll have a sort of sideways period for metals after that.
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B
Before we get to some of the numbers this week and how we preview those, remember out there to post your questions, whether you're watching on Real vision X or YouTube or wherever, please post your questions. If we don't get around them today, we will have time for a few. But if we don't, we can also pick them up in the pro macro talk. Then you have to sign up to get the answer. But that's how it is.
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A
But Miguel, one of the things that I'm, you know, stuck in negotiations with myself about basically is whether to buy the gold miners. Yeah. Because for once there is actually a growing margin for these gold miners. Otherwise it's been, you know, on a trend basis it's not been a strong trade despite gold going up. Right. Because the margin that they get from harvesting the gold has been, you know, under pressure over time. But for now we're actually seeing a decent widening of the margin. So I think there's a decent catch up trade left in miners as well. We've traded a few ourselves and we'll obviously discuss some of those single names in the Pro Insider talks on Wednesday. I think that's a good place to look right now for some late value in this gold bet.
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B
Very, very interesting address. Let's talk about this week that we've just entered. We're getting a bunch of numbers from the uk, so I just wanted to touch upon. It's been a while since we touched upon our regime model for the uk. How are things looking over there?
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A
It's actually the only major economy on earth not having momentum right now, in my opinion. You know, Keir Starmer and his administration is off to a terrible start. And if you look at approval ratings and stuff like that, they're basically on the floor, if not through the flow. It looks as bad as it did for the Conservatives before they basically called for an election. So I think we're into some sort of permanent political Crisis in the U.S. sorry, in the UK here. And maybe if we get snap elections, I'm not sure whether it's in play, but they'll probably try to avoid them. But then all of a sudden we have this new party reform in the mix and currently they're polling as the biggest party, not sure whether they're anywhere near getting a majority. There is a big difference between being the biggest party and getting a majority in the UK even in this first past the post system. But it's probably the economy that deals with the most political uncertainty right now. And on top of that, when we talk about tariffs and trade frictions, the UK is an obvious vulnerable target as the UK is very dependent on imports, on everything from energy to food. I mean, the UK wouldn't survive a week without imports. It's an absolute catastrophe. They have a five day storage of nat gas, you know, in, in. I mean we're very far from it right now and especially with the peace talks. Right. But in the third World War, I certainly wouldn't put my money on the UK given how they've constructed their imports and exports right now. So I think that's why you see a weak performance of the economy right now, that it's very vulnerable to these tariffs, headlines and all that. And the uncertainty is not healthy for the economy, especially when you look at the political picture. So as you can see in this chart, growth is low. From an outcasting perspective, inflation is not coming up. So we have inflation from the UK this week as well. I think it will look very soft. By the way, let me disclaim that I was wrong on the US inflation looking soft last week. But anyway, bond yields were down and yeah, I think that kind of sums it up on the UK right now. It's one of the few places where I don't see the momentum. Look at the traded momentum in Europe right now. Sorry, I should say the European Union. I keep forgetting that they're part of Europe now that they've left the Union. But pardon to my friends in the uk, but the momentum in European stocks overall, if you set the UK aside, is incredibly strong right now. But the case is not as solid in the UK by any means.
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B
Okay, Andreas, let's just grab a few listening questions here. One from Danny. Is there a possibility that gold is revalued or is that a conspiratorial idea that's being circulated? Is it not fair that gold will continue to rise over the rest of the cycle as liquidity expands?
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A
But I think this question relates to the official holdings of gold in the U.S. right. We obviously have the storage in Fort Knox and I think Elon called for some sort of official audit of what's even in that storage. Can we revalue it? And behind the scenes, and we've seen a couple of stories on it, Trump is even discussing whether to back the dollar with some sort of gold standard. Again, in my opinion, it would be a wrong choice, but at least it's something that's being mulled within the administration. So yes, I think this is an option and if we get some sort of return to a gold standard, whatever is installed for us here, it's obviously massive news. I would argue that if we get to 3k in gold and these stories around the gold backed dollar start emerging right, left and center from the administration, I think they're probably best played via some sort of option because will they actually implement that? The Fed will likely have its say and all that. So I consider it an outside chance still rather than the base case.
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B
Address. Completely different topic here.
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A
Yeah.
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B
Any long term views on energy and more specifically on the renewable energy market, offshore wind, etc.
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Well, thanks for that question being at least we see Copenhagen, where we are sending live from, as the capital of offshore wind in the world. Whether that's fair, it's another discussion. But we at least we have a couple of the big players in that market globally with and they're not doing too well. No, they're not. They're not doing well at all. I mean Trump is crystal clear in his message on this. We're not going to buy any wind turbines.
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B
This, they don't work.
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A
No. Well, that's basically what he says.
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B
That's what he says.
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A
And during this inflation scare, this whole energy scare, we've basically seen a lot of the offshore projects struggling from an economic perspective, even in the uk, Germany, Denmark. And I'm not overly optimistic right now, especially since the political backing is not there and it's not even really there in Europe right now. I mean everything is on the margin moving towards nuclear and they'll struggle to set up a lot of offshore wind farms without the public backing, basically. And the last few attempts of doing so both in the UK and in Denmark ended without any bids at all. So interest rates are just too high for that. Of course, you could argue that. Can we find anything more negative to say about this right now? Is there some sort of value play here? Because if you look at the big players in this market, we're basically talking about a drawdown of 60, 70% since peak in 2122. So I get why there's some chatter around this being a value play, but we need bond yields down a lot for it to come into fruition.
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B
A lot. Or some sort of separation of interest rates to create special and green interest rates, which is essentially essentially government subsidies.
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A
Yeah, but you know, the European Central bank could do something like that. I wouldn't rule that out.
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B
No, but it's not high on the priority list for the EU right now.
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A
No, but in the US I mean, offshore wind, you know, it's. It's like trying to sell a cannon. Whatever. You're right. It just seems like it's. Yeah.
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B
Two decades ago. It's all about solar and nuclear now, it seems. Okay, just one last question here from. Yeah, I don't know his name, actually. Awi how many rate cuts in the US are we expecting this year and will that be coupled with global liquidity increase to be bullish overall heading into Q2 to Q4 2025?
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A
So on liquidity, let me start with that because I know we have a chart in that miggle.
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B
We do.
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A
We obviously cover this topic on a running basis in our research papers. And I think this chart on the private credit creation is the one that is worth watching right now on liquidity. Because if you look at private credit creation, we're talking about liquidity additions from private banks here. I think this is essentially the source of liquidity that you need to rely on this year because Powell basically said it last week, we're not going to do QE as long as bond yields are way above zero. I mean, QE is something you. Yeah, it's a weapon of choice when you're at zero, not before that. And then they could obviously come up with some sort of creative solution to add some liquidity to markets. But this chart on the private liquidity creation from banks is the one that you need to watch. So yes, we'll see liquidity additions, but from private banks, not from the public sector. With the deficit shrinking due to Doge and the Fed not really willing to play ball, this is what you need to rely on. So I mean, yes, liquidity is doing fine and it will increase, but. But it will not increase in a gung ho style like in 2021. So I think the further you get out the risk curve in altcoins, the less likely you are to see some liquidity tailwinds because this is a slightly different form of liquidity from central banking liquidity additions, but still it's better than nothing. And the trajectory is okay. It's just driven by private credit creations.
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B
In the coming season. Is that already over? Other than.
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A
No, no, no, no. So they need some clarity on tariffs before they move and they'll probably get that by April, May. So I think we'll get one cut this, this first half of the year and then maybe one or two in the second half of the year. So I still think it's fair to price it more than what's in the curve right now.
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B
Very interesting. That's all we had for you this week in Macro Mondays. I completely forgot our usual jingle. Indra is. But it's always important to remember that our ideas and trade recommendations here, they.
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A
May be summertimes, may be good sometimes.
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B
Maybe always important to get generic.
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A
But Miggle, they've been sometimes maybe really good over the past two weeks. So finally, if we forget about playing this disclaimer on a weekly basis, it's because we're on a roll. Yeah. So that is a disclaimer on the disclaimer, basically.
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B
Very valid point. Address. So obviously, as I mentioned, tune into our pro insider talk with Raul on Wednesday. Tune into my show with Jacob Shapiro for everything geopolitical on Thursday. We're going to be talking a lot about war and peace there. Any final remarks? Address no.
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A
Good luck out there. I mean, I think these reciprocal tariffs will ultimately end up in a race to the bottom on tariffs, so no reason to be scared.
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B
Absolutely. Have a good one out there. See you next week.