← Macro Voices
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- [00:08]
A
This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is bullish or bearish. No holds barred. Now here are your hosts Eric Townsend and Patrick Seresna.
- [00:33]
B
Macro voices Episode 538 was produced on June 25th, 2026. I'm Eric Townsend. Traffic is starting to flow through the Strait of Hormuz and many indications suggest that the Iran conflict is finally coming to an end. Although the jury is still out on the nuclear negotiations with U.S. and Iranian officials making diametrically opposing public statements about what has and hasn't been agreed to. And to my great surprise, the dollar index broke out to the upside and the stock market started to roll over slightly lower coincident with the news suggesting that the conflict is finally ending, which certainly wasn't what I was expecting. So to make sense of whether the conflict is really over and what it all means for financial markets, I'm pleased to welcome back best selling author and Macro Voice's all time listener favorite Lynn Alden. As this week's feature interview guest Lynn and I will discuss the Hormuz cr, what to expect from the Federal Reserve and its new leadership, budget deficits, the AI trade, and whether it's a bubble that's about to burst or a trend that still has legs, the demands AI will place on energy markets and much more. Then be sure to stay tuned for our post game segment after the feature interview, starting with Patrick's trade of the week based on Lyn Alden's interview. Due to my flight schedule this week, I'll be leaving the post game segment
- [01:56]
C
in Patrick's able hands and I'm Patrick Ceresna. We continue to see aggressive repricing of oil week over week. WTI dropped roughly 885 basis points, falling to 69.28 as the market continued to price out geopolitical risk and unwind the prior risk premium. At the same time, the US dollar staged a technically significant breakout, rallying 210 basis points to 101.54 on the dollar index and decisively breaking above a 15 month trade RA. Another notable move was the continued selling in gold which has now declined roughly another 900 basis points, falling back towards the 4,000 level we have not seen since October of last year. So some very important macro levels when broken this week. We'll take a closer look at those charts and the key technical levels to watch in the Post Game segment, this week's feature interview guest is best selling author Lynn Alden. Eric and Lynn discuss fiscal dominance, stablecoins and dol, the long term implications of persistent deficits and why energy infrastructure and hard assets remain central to the evolving macro landscape. Eric's interview with Lyn Alden is coming up as Macro Voices continues right here@macro voices.com.
- [03:27]
A
And now with this week's special guest, here's your host, Eric Townsend.
- [03:33]
B
Joining me now is bestselling author and Macro Voice's all time listener favorite, Lyn Alden. Lyn, you live in Egypt part of the year, very close to the Iran conflict. So I'm particularly curious to get your take. It seems like most of the world is celebrating. That's finally over. It's all wrapping up. It's ending. The secretary Chris Wright said on Wednesday that traffic has returned to normal in the Strait of Hormuz. Iran no longer has the ability to shut it down. It's over, folks. Celebrate. Yay. Pop the champagne. Is it really over? Are there still concerns? I know you wrote a piece about this for your subscribers recently. Can you give us at least a quick summary of what it said and what your take is?
- [04:16]
D
Sure. So first of all, thanks for having me back. Always happy to be here. I certainly hope for my sake that it's over. Back in April, Egypt had to do an energy curfew just because all these countries were scrambling for natural gas. So they had to do a forced pressure on companies to shut down at certain hours of the day just to kind of preserve energy. They were luckily able to get out of that in May. And I kept kind of watching the situation to say, well, I really hope this doesn't return. And so I think like many other people, I'd be happy to see that the conflict is resolved. You know, I still think the, I think this is unfortunately going to be a headline that continues with us probably for at least weeks, let alone months because you know, the memorandum of understanding still leaves a ton of details to work out. And even in kind of the opening days, kind of around the signing and around some of the talks that that go into some of those details, there are still pretty big divides. You know, what's going to happen to the enriched uranium, what's going to happen in terms of on site inspectors being able to go in like enforcement mechanisms, what type of funding? They talked headline numbers, but what kind of like in what form does that funding take? How do you manage political headlines around that funding? And can Iran toll the strait after, say a 60 day period. And so there's still a ton of moving parts here I think, you know, I would expect and hope that we are past the worst part of this. That's pretty consensus view I think. So it's not really breaking news there. But you know, as good of a step as this was, I think there's still a lot of work to be done. And unfortunately a lot of the, if you kind of just go down the list of the memorandum of understanding, a lot of it is basically trying to reconstruct the deal that was in place back from, what was it, 2015-2018 roughly that we left. So a lot of it is kind of scrambling to get back to a situation that already had a solution in place and by most accounts was being enforced and being monitored.
- [06:17]
B
Now as a result of the perception that it's completely over, crude oil has sold off to basically pre crisis levels or same level as where the crisis started, both time spreads and flat price. And as we're recording on Wednesday afternoon, we're actually below the 200 day moving average which is at 69, spot 92 on the WTI August chart. And we're only about a dime below that as we're recording. So it's not much. This is the price level that's held up the market really. We haven't traded below it hardly at all in 2026. Do you think that it keeps going? Are we done yet or are we going to find a bottom here in crude oil?
- [07:01]
D
Well, in terms of short term trading I would defer to you. You trade oil more directly than I do. I tend to invest in longer term positions in energy stocks, energy pipelines, things like that. My view kind of going into this was kind of before the war. I wanted to be long energy companies when they started to run up right ahead of the war and stay pretty elevated. My view was I'm not really chasing them here. I'm still going to keep holding, but I'm not chasing. And that so far that's been the right move because we haven't had, you know, the big oil spikes that many analysts feared that we would given this, this long of a straight closure. And so, you know, I think that it's really going to depend on what happens with the straight. I mean if a week from now it's all closed again and you know, some more attacks are happening and it does look like they're getting along, then I think, you know, we can see oil start to climb up again if the strait stays open. I think this is A kind of a near term rational place for oil to be from a price standpoint. I think over time it trends higher. Certainly for countries or buyers that have emptied reserves, I think this is time to not be emptying them and to be refilling them where possible, commercial reserves and things like that. Because I think one of the things that saved us during this time was pretty large reserve stockpiles across the world. In some cases strategic, other times commercial drawing down and especially, you know, like some of the markets that don't have a lot of pricing power. Like I mentioned Egypt with their energy, you know, with their energy curfew. You certainly want to this is the time to get contracts in place and to get storage in place going forward.
- [08:37]
B
Well, I definitely agree with you there. It's going to be really interesting to see whether the appetite to do the responsible thing and refill all of the strategic and commercial storage that was drawn down during this cris. Are we going to do the responsible thing and fill it all back up or are we just going to celebrate the low prices and wait till it's not an election year to think about refilling these things? It'll be interesting to see how that plays out. In any case, I want to move on to the Fed. We've got one meeting so far with new Fed chair Warsh at the helm. What do you make of. A lot of people thought he was going to come in and start cutting aggressively. If anything, the signaling in the dot plot seems to be more towards a hike in our future. What do you think? Think about both Fed policy, but also the changing character of the Fed under new leadership.
- [09:31]
D
Yeah, so a lot of people parsed there, I think. I mean, in a different environment, like if he came in a few months ago, before this war started, before we had a period of higher energy prices and kind of trailing rising inflation levels, then there's a very good chance that he would have taken a more dovish tone. Now he's historically been on the hawkish side, more so on the balance sheet, but also on interest rates and in kind of later as he's kind of auditioning for the federal to a president that is known to like rate cuts and what president doesn't? But he's been particularly outspoken about it. You know, he made arguments for a more dovish take, at least on interest rates, which was basically that AI and other productivity might over time have them be able to cut rates without kind of contributing to inflation. Even from someone who's historically not that much of a dove. But in Order to maintain credibility, in order to not look like a puppet that many people would criticize him as being not me. They had to come in and say, well look, the numbers are high. Obviously the market is way more worried about inflation right now than unemployment. That's what the metrics show. So it makes sense for them to take a kind of a hawkish but vague tone on what they're going to do. Now going back to the prior discussion we just had, is this war over? Is the strait going to at least mostly stay open most of the time and can oil stay and it's a little bit more comfortable range here. If they start to show that inflation's rolling over, we might start to see more patient language by the Fed. I mean there was no urgency here. Historically the Fed does tend to look through energy crises and so I think they're going to look at non energy types of inflation and make a decision. And as far as the balance sheet, I've been on record, I've been calling it for the gradual print scenario, which is that I'm fading kind of these narratives that there's like a really big QE around the corner and you know, crisis can happen. They're going to print a ton of money. I mean there's, there's certain tail risks that could happen. And for example, when the Iran war broke out, I was like, okay, what is the possibility this could lead to something like that? I was like, whatever chance it was just went up a little bit, but it still wouldn't be my base case. But I think we're, we're back in that just gradual print scenario. We're going to see what their task forces come back with in terms of balance sheet reduction options. There are a handful of things on the table that they could, but I would describe most of them as liquidity neutral, meaning that Treasuries have to be bought. They're not going to allow a liquid treasury market, they're not going to allow problems in repo and kind of those shorter term lending markets to persist. And so the way that the prior Fed fixed it was going back to balance sheet expansion at a gradual pace. Another option or a CO option is to find ways to let banks hold more of them. You know, kind of deregulation on certain kind of capital requirements to let banks and their fractions or balance sheets hold a little bit more. But that's at the end of the day that's similar to QE in terms of like just a pro liquidity move. So I think that there's Some kind of like balance here that ultimately results in treasury still going to be bought, still liquid and still kind of conducive to gradual growth of the money supply, which all else being equal, is still pro inflationary, just not as high as many of the alarmists would say. At least any sort of near term time horizon that I can cover.
- [12:56]
B
Speaking of near term time horizons, I am personally caught dumbfounded by the breakout to the upside on the US dollar index. It seemed to me like it was probably the conflict in Iran that was holding the dollar up as a safety trade as everybody was worried. Now they're getting unworried and the dollar's to the upside. What do you make of it?
- [13:18]
D
I think a lot of it's just the repricing of the odds of rate hikes for the rest of the year. You know, obviously the trailing inflation they've had plus the somewhat, as you mentioned, somewhat more hawkish tone from the Fed than the base case was. And I think the market is driving on that. In addition, the AI trade, at least for the moment, is still mostly alive and so there's still capital that wants to go into U.S. equity markets. And so it's a little bit of an aggressive move I think in the dollar. I wouldn't get in front of it right now, but I think the more it continues, the more it will pressure ironically not just international economies but the US economy and it'll end up just flatlining again, I think for the foreseeable future at least any sort of time horizon I'm monitoring, I think the dollar trades in this choppy band, especially given that if you're using the typical weighting rather than broader weightings, you know, the biggest comparables, you know, the biggest comparable is the Euro. And I mean not that many of us I think are super bullish on the European economy and the euro. So I look more at things like the dollar versus Chinese currency. I look at some of these emerging market currencies often more than I look at a very euro weighted type of index.
- [14:34]
B
Let's move on to a forgotten topic, deficits. We kind of spent a lot of money on this war and other stuff. Are we ever going to pay any of it back?
- [14:44]
D
I think that nominal debt levels are going to keep going up at a pretty aggressive clip. The treasury secretary, I think his recent forecast was that they can get back to 4% deficits as a share of GDP by the end of this administration. I'll take the over on that. I don't think they're going to get back to 4%. I don't think it necessarily blows out on a percentage basis any more than it is now. Unless there's something else unprecedented breaks out. I think we'll have a combination of kind of high nominal GDP growth but also still large deficit growth. And so you get that kind of mid to high single digits for deficit as a share of GDP and a pretty aggressive clip of treasury growth. If you ask a lot of bears over the past five plus years, why do they keep underestimating what the market can do? I think a lot of, I would say a lot of what they're missing is the fiscal side. Even when occasionally there are bubbles, I get concerned about little pockets of excess. I have a background tendency in value investing, so I'm always a little bit sensitive about valuations of things. But the North Star that I keep erring toward is that fiscal is more powerful than people expect. And so any sort of trimming of fiscal tends to be a pretty big force to the downside. And any kind of just ongoing surging of fiscal deficits or at least maintenance of existing large fiscal deficits is a hard thing to stand in front of in terms of wanting to own high quality assets, especially the really just big structural high quality equities, scarce assets, and they all take their turn with little periods of outperformance, underperformance. They have a good year or a bad year, but when you own a collection of them in this kind of run it hot flow fiscal environment, that's the North Star, I think that it's going to stay in that kind of mid to upper mid high single digits for any sort of time horizon that I'm looking at.
- [16:48]
B
Okay, now I just want to sanity check this because not that long ago, 10, 20 years ago, anything over 3% of GDP as a deficit was considered extreme emerging market, banana republic stuff. Is there a real fiscal reason that because the United States is such a large economy that it's okay to be running? I mean if we're trying to get down to 4% that's like a target low number. But you don't believe it's possible. You think it stays higher. What happened to the good old days when 3% was too high?
- [17:21]
D
Demographics is the big thing. Yeah. When we used the problem is terms like okay, there's a subjective element there. What does it mean to be okay? I think that the. We can break that into a couple different answers. One is that because the US has a large and diverse economy and in addition because we are the global reserve currency and there's plenty of international cross border debt denominated in dollars. It means there's a ton of inflexible demand for dollars and a lot. Most of that debt's not even owed to the U.S. i mean the U.S. is a net a debtor, not a net creditor. A lot of it's just cross border between entities in other countries that owe each other dollars. There's all this just persistent inflexible demand for dollars. And over the long arc of time, for example, if they buy a lot of gold in their reserves and gold goes up a ton, you can get out of that sort of debt trap. But that's just a very strong structural bid. If you take a country like Egypt, there's not a lot of structural external demand for the currency. Certain trading partners might use the currency. Obviously people in the country use the currency. Certain traders might at any given time find the currency attractive for a trade, but not that many entities around the world structurally need Egyptian pounds in the way that they need the dollar. And of course the dollar is even more needed than other developed countries. So that does give the US a longer Runway where you get something more like an acute crisis. I think people keep underestimating the depth of a problem it would take to really destabilize this to a complete spiral. That being said, the consequences are already partially being felt. But instead of being felt in terms of a failed auction or persistent double digit inflation in the near term, it's often felt in this two speed economy. So for example, kind of the two main reasons why we have this two speed economy, or K shaped economy people call it different things, is that if you're on the right side of either obviously AI capex or fiscal deficits, you're generally in a pretty good position. On the other hand, if you're not on the right side of either of those things, and if anything, if you're on the wrong side of restrictive policy on housing in terms of higher rates and affordability issues, that's where you're struggling if you're an asset owner. Again, we just talked about how these structural fiscal deficits are generally pretty good for the nominal price of assets. If someone is long assets and short a 30 year mortgage or other types of, if they're a corporation that took out 10, 20, 30 year bonds, they're generally pretty happy with the current status quo. But if someone's like a young family looking to buy a home, that's I think why we're seeing some of the kind of ongoing political polarization that we have in the US Is these very large fiscal deficits that are not necessarily directed at the young, are not directed at productive things per se. They're more directed at consumption and they're more directed at, ironically, those that already have often a decent amount of wealth. So I think a lot of this issue shows up not in these kind of spectacular debt crises, at least anytime soon. Instead, it shows up in just ongoing political dissatisfaction, rising populism, and all the other complications that we feel indirectly on a somewhat regular basis.
- [20:42]
B
Now. Our friend Michael Every over at Rabobank has told our listeners his view of essentially a new strategy where Secretary Besant and President Trump are really embarking on this stablecoin statecraft idea of using US Technology leadership around stablecoins to kind of rebalance the playing field in US Favor. We what do you think of that view and would it help maybe add to a sustainability argument that the US really can get away with bigger deficits than anyone else can, and can sustain that for quite a while?
- [21:17]
D
A good set of questions. I mean, I think the funny thing with stablecoins is they just have to not get in the way of stable coins and they'll keep growing. There are certain things obviously around the margins that they can do to let domestic entities get more involved in them, which some of these recent pieces of legislation are looking to address. But stablecoins are already growing. You know, I first wrote about how bullish I was on them back in, I think it was January 2021. It was like a $30 billion market cap. And I was like, I think this is headed higher, way higher. And now it's, you know, what, 300 billion and climbing. I think eventually we'll see well over a trillion in stablecoin market cap. You know, once we get to that number, I'll reevaluate from there. But there are certain like magnitude things that I think people somewhat overestimate, which is stablecoins, as powerful as they are, at least in their current form, they're mostly yieldless products. So anyone holding them is getting dollar exposure but no yield, which generally means that they're good for payments, they're good for working capital, they're less ideal for savings. But there's many businesses around the world that would happen to use them for working capital. One of the things I pointed out before is, is Africa has something like 40 currencies. Latin America has something like 30 plus currencies. Obviously many more currencies in Southeast Asia. You know, imagine if every state in the United States had its own currency. And anytime you were a business and you had customers and other business businesses across the country that you do business with, and if every border was a friction, a currency exchange managing kind of the differentials between different currencies, it'd be a really big solution to just be able to use a much bigger unified currency if it became available. And stablecoins are really good for many businesses and many users in many parts of the world that want to solve those types of issues. Obviously, anyone who sent an international wire more than once and has run into probably some frictions, it's opaque, it's often slow, it's often expensive, and stablecoins can just really speed that up. So I am bullish on stablecoins when you run the numbers. I mean, there was a, I think maybe a year ago, what was it? Citigroup Rank, a pretty detailed analysis. And they were calling for, they had like a bear case, a base case and a bull case on stablecoin market caps by, let's call it 2030 I think it was, and I don't have the numbers offhand, but maybe the base was in the trillion plus range, whereas the bull case was kind of closer to 3 trillion. And even the Treasury Secretary cited it. When you actually read that report, I think it was a pretty good report that Citi put together. For one, the Treasury Secretary cited the bull case, which, it's fair, but that was their bull case, that wasn't their base case. And when you actually look through their cases, they were kind of listing the different sources of demand where stablecoins might take market share from other types of pools of capital. And ironically, some of those other pools of capital that stablecoins were potentially taking market share from are things that own Treasuries. Right? So they're like taking market share from other things that hold Treasuries and then using that to hold Treasuries. Now, because of the way stablecoins are supposed to work, they generally have to hold a much higher allocation of Treasuries than other things. So that still is around the margins, net new demand for Treasuries. But if you just kind of run these numbers and we say let's over the past, call it five and a half years or five plus years, we've gone a 10x in stablecoins, but we started at a pretty low base. So we went from tens of billions to hundreds of billions. Now I'm on the record saying that I think eventually get over a trillion and maybe keep climbing from there. But let's say we do add a full trillion in stablecoin market cap over the next several years and then let's say a full half of that represents entirely fresh treasury demand. So 500 billion plus in new treasury demand from this trillion dollars of stablecoins, or let's say even more bullish, let's say 750 billion in new treasury demand out of that trillion in new stable coins. That's still, if you call it 500 billion, that's what, three months of deficits? If you use 750 billion, it's at four or five months of deficits. If you use say a full trillion, you're getting somewhere in a half a year of deficits. Just the size of the deficits relative to the stablecoin opportunity. They're both very big numbers, but I think when you compare them, I think stablecoins around the margins extend what is already a pretty long Runway for the dollar and the Treasury. But it's not like just a permanent band aid that just solves everything. I think that politicians kind of always need a narrative to point to, especially narratives that avoid hard trade offs. So if you can just make a kind of optimistic case for something, you're naturally going to use that a lot in talking points. And again, it's not without merit. I just think that as bullish as I am on stablecoins, the size compared to just the stock of US Debt is just, it's another variable. It's another type of buyer in many types of buyers rather than just some magical fix.
- [26:25]
B
Now one of the reasons that the US dollar has been able to essentially maintain a monopoly on global reserve currency status is that the depth of liquidity in the US treasury market is just something that nobody's ever figured out a way to match. So if another country tried to say, use our yuan or, or ruble as the global reserve currency, there's no bond market behind it that could possibly absorb central bank size capital flows. Is that true of the stablecoins that are built on top of the US Treasury? In other words, can you sell as many stablecoins as you can Treasuries without moving the price or are they a little bit more price sensitive?
- [27:08]
D
Well, I mean, so far stablecoins have been tested in the billion, the tens of billions and the hundred billions market. But I think that it's still a growing market. They do tons of volume, they are incredibly liquid. Now not all stable coins are the same. They're like little stable coins that have much less liquidity because they're issued by someone that people are focused on. And then there's the top two stable coins that are responsible for just tons of liquidity on the market. And for those, yeah, they have pretty high depth of liquidity. I mean, it's still not as big as, you know, repo or big as treasury liquidity, but they are very large and climbing. And if, you know, if one day the stablecoin market does go up 3x or 5x or it adds a full extra zero to its market cap, I would expect liquidity to have gone up a ton as well. There'd be way more businesses and individuals moving around stablecoins. You know, obviously there's some mechanisms of concern there. Like it makes sense that regulators are kind of watching that space because you know, if you get a rapid selling of stable coins, you can potentially obviously destabilize the assets underneath them. But yeah, I do think that stablecoins in general contribute to the dollar's liquidity network effect. But again, it's not a magical solution. But I do think that that's one of the primary reasons why all these runways, all these changes take a lot longer than many people think because people routinely underestimate the power of network effects. And I think stablecoins are just one more reinforcement for the dollar. And it mostly, again, it's a pretty organic demand. Like on the streets of Cairo, when people want to hold a foreign currency that they buy in the black market or the gray market, it's almost always dollars. Maybe sometimes it could be a currency from a surrounding country around the margins, but it's almost always dollars. And that's just bottom up demand. You know, in countries like Egypt, stablecoins have not really caught on yet. It's still mostly a physical dollar market. Whereas in countries like Nigeria, a little bit more tech forward, they've been very bullish and using stablecoins a ton. And again, a lot of that's kind of bottom up demand. So for the most part the countries have to get out of the way and kind of let that demand happen. The US can, if they wanted to go after all the stablecoin issuers, I mean they could maybe not necessarily eliminate them entirely, but they could really take the liquidity out of the market. If whatever reason the US decided it just wants to go after like, you know, the, the top five stablecoin issuers and say you just, you can't operate anymore and if you try to operate with our assets, we're going to sanction you and take them away. And just by not doing things like that and then around the margins by letting US banks kind of safely handle them, it lets the organic demand that's already there keep growing.
- [30:00]
B
Let's move on to another topic that you've written quite a bit about, which is artificial intelligence and the technology that it depends on. Boy, it seems like that's really the main thing holding up the market. How long can it continue and what's your outlook?
- [30:14]
D
The short answer, I think it continued longer than people think. I mean we just saw breakout earnings from Micron which are not that surprising. I think RAM demand is going to continue to be pretty high for several quarters. I touched on in my recent report, I actually touched on SpaceX because while I do think it's very overvalued, I think people should learn from Tesla how long some of these companies, if there's strong narrative momentum behind them, how long they can stay expensive. Tesla hasn't had revenue growth really in three years. And yet a company like Toyota trades at 0.7 times price to sales, whereas something like Tesla trades at 14 times price to sales again, despite technically growing slower than Toyota in the past three years. Obviously if you extend the timeframe then Tesla's growing faster. Some of these stocks can just levitate more than people think. And then the ironic thing is they can kind of mean themselves to solvency and success in a way because like for example, years ago Tesla had a weak balance sheet, but because they drove the stock price up so much, they were able to issue more equity and essentially fix their balance sheet. You know, we just saw headlines that, that you know, SpaceX was announcing a $60 billion all stock acquisition using what is, many would say overvalued currency. So it's like by being, you could say that, and I would say that, that the valuation's quite decoupled from the fundamentals. But then there's that feedback loop where the valuation actually impacts the fundamentals. It can shore up the balance sheet, help them raise more capital, help them buy things at pretty cheap levels basically. And so while I'm not a buyer, I think that bears that expect this to scroll over and die next quarter. I think that's premature. We've already seen for example, some of these chip stocks, you have a really big bull run, it gets completely euphoric. And then I mean whenever you have volatility upside, some of the pullbacks can be pretty violent. But it depends on the name. I mean especially the chip stocks, you know, if they, if they ever get pull backed enough, that's when I get interested. So I still think this, this whole Kind of capex cycle has legs to it, even though from an investment standpoint a lot of them are in my opinion getting quite concerning. And so I. But I think, I think entities on the right side of capex spending are probably still going to be happy for the coming quarters. I do think that what's interesting is that while we see some of these AI stocks go vertical, the other side of that is kind of like where's the liquidity coming from? What's being sold to fund them? I would say at the current time, I think there's a little bit too much bearishness on stocks that are seen as kind of on the wrong side of AI. They could be software stocks, they could be certain types of consulting stocks even. Like for example, we were just talking about stablecoins, the core software companies that provide the software that US banks run on. There's only three or four of them. They're pretty much all trading at six times earnings despite most of them still have flat to higher earnings growth. And so I kind of like how some of these AI names get ahead of themselves from time to time, even though the use case is there. In many cases, like say Micron, the revenue is there, but occasionally they'll get ahead of themselves. Some of the bear narratives also I think get ahead of themselves, which is like you can say, okay, this company is facing headwinds, is likely going to have slower growth, but at what point does the valuation get so cheap that it's kind of like the inverse of a SpaceX situation where SpaceX trades 100 times revenue. At what point is 5 or 6 times earnings for a technically still growing company overly bearish? And so I think that there's certainly a lot of stocks that I'm watching where I'm not looking to catch falling knives. There's two of them I dabbled in clearly a little bit on the early side because while their fundamentals are still good, I mean, the price just kept going down. So I'm just kind of, I'm making a pretty big watch list of a bunch of different types of companies that I would classify as companies that in many cases were growth stocks and are now value stocks, but they're kind of priced at deep value. Many times some of them have more cash than debt on their balance sheet, So a lot of them have fortress balance sheets, others don't. And I just think that for everything that's going vertical, there's often another stock out there that's going vertically down that maybe shouldn't be or at least maybe shouldn't be going down that quickly. So I think that I wouldn't jump in front of trends while they're still trending. And I think this still has some legs to it. But I do think that when this does start to turn, just think that always kind of invert the question. So what has gone up a ton and might be a short versus what has collapsed and might still not be dead yet?
- [35:06]
B
Well, I couldn't agree more that narratives can outlast everyone's expectations. And to my thinking that should be even more true in the case of AI, because I think it is at this point a national security issue. You know, we're in an AI arms race. We can't just decide AI is not important and let China be in charge of AI. That creates a national security imbalance that's intolerable. So it has to go on. But I kind of think the people at the dot com boom who thought the Internet had to be a big thing and had to go on were right. But it didn't stop the bust from happening in equities in the meantime. And it seems to me like, wow, we've got with Anthropic and OpenAI coming up and SpaceX already happened. Anthropic and OpenAI are the pure play AI IPOs. It's like $3 trillion between the three of those or almost $3 trillion. That's bigger than the United States entire national debt when I was a kid. It's a pretty big number all hitting the market. We've never had that much money. Have to be absorbed all at the same time with a new IPO offering. And of course the actual raises are smaller than the valuation of those companies. But it's not that much further out that the founder shares become unlocked and potentially people start selling. So are we setting up, I agree with you, it's not right now, but are we setting up in the next few years for an Internet like phenomenon where it is the correct bet that it's going to be a big deal for a long time but the market still got ahead of itself and we still had a great big bust because of it?
- [36:54]
D
I do think so, yeah. I think, I mean we've already seen, I think smaller versions of those. I mean there are times that Nvidia just went straight up and then literally got cut in half by a third or more and then just kept going straight up even higher. So those have been like mini versions. I think we probably do see a much bigger version. I think SpaceX is I think again like 100 plus times price sales is really kind of testing, I think market appetite. We've seen most of the hyperscalers go free, cash flow negative. They've aggressively issued bonds, they've even turned to non US markets to issue bonds because they have to scrape all the bottom of the barrel to get liquidity where they can for the build out that they're going for. In terms of it being a national security issue, there's already so much capital going toward it. I think that when that pullback eventually happens, I think that probably will be healthy for the market. I think one of the worst things that the US could do is kind of help blow the bubble even bigger and then get a worse bubble on the other side. Right now I don't see a lot of economic moat in the AI models themselves. I mean, as customers have shown, I mean they're pretty low switching costs. If one model was the winner and then another model comes along and is better. I mean customers and both individuals and businesses can switch over. So I'm not particularly super bullish on those, more bullish on the actual bottlenecks, the things that are harder to reproduce. Ironically, one of the few things that Bernie Sanders and JD Vance both agree on is they both talked about partially nationalizing AI companies. The US government taking shares in AI companies and their proposals, they are different. We obviously saw the pressure that the US put on Anthropic recently and if anything that slows down some of these centralized AI companies and is basically marketing for these open source AI solutions, many of which are non us. And so I think the problem is there's kind of mixed messaging at the moment. There's certain things that can be done to support them. There are certain things that can be done to give them headwinds. Some of these companies don't do themselves any favor because they just, they keep talking about like doomsday scenarios and then they wonder why they get like hit by a regulation or a sanction. And so obviously a ton of moving parts here. There are I think real cybersecurity risks just from kind of the rate of these tools that are able to poke around on code bases and find things that have been sitting there for a long time. I think it's problematic for DEFI because one hack can lose your funds forever. It's problematic really for any company, any sort of cybersecurity, any sort of data leak scenario. And so I think that's a real concern that in of itself is kind of a potential national security or corporate security concern. But I think that If a country wants to be a leader in AI, I think one of the things it can do is just for the most part let the private sector cook and build things and sometimes win and sometimes go bust and just be a relatively business friendly environment and then around the margins to see, okay, what is dangerous, you know, what, what certain protections can be provide, but realizing that whenever they go too aggressively at the centralized models, it's basically marketing for open source versions where businesses and individuals, you know, one is they want to be able to use the models and two, they often want some privacy for business secrets, just for personal data leak risks and stuff like that. So both individuals and businesses, they in many cases are going to care about privacy. And if the centralized ones have to collect additional identity information and log all sorts of stuff from their customers, again it's marketing for the open source ones, which in many cases are not in the US Some of them are, and
- [40:36]
B
not only are they not in the US but some of them are in China, which happens to be a country that frankly has a better thought out energy policy than the US and the concern that I see, or the storm cloud I see on the horizon for AI is even though there's a lot of really exciting stuff going on right now, there's AI companies that are making huge investments in advanced nuclear, which I'm really excited about because it's going to help accelerate the nuclear renaissance, which I think is essential to just the right outcome for humanity. Look, it takes 10 years for that stuff to actually come true. Meanwhile, what are we going to do to support this exponential increase in AI energy demand? And how do we avoid it becoming a gigantic conflict with, you know, the average guy on the street feels like his electric bill has tripled because of AI and he's upset about it and you know, he wants to burn the data center down. Meanwhile, in China they don't have that problem, partly because people don't have as much freedom and liberty as they have in the United States and they can't easily go burn the data center down. But also because they've got more power in China to power the data centers because they thought ahead for this stuff. What does that mean for the US dominance in this sector?
- [41:51]
D
Yeah, China has a tremendous amount of power and before even AI really broke out, I was highlighting that for the industrial base aspect, which is when we talk about the ease taking some of the huge industrial base that China has and either bringing it back to the US or otherwise distributing it to other countries and investing elsewhere. Part of it is that in order to do that, you have to move or recreate, I should say, really big power systems. You know, production not just electricity, but also just heat for things like steel making, especially for heavy industry. But even lighter industry needs a ton of power, and that's a huge economic moat that China has built. And then now it translates to AI just as much, if not more than the industrial base. So I do think that China's well positioned for that. I think the US Is at least better positioned than Europe. I think that we're nowhere near the back of the pack here in terms of what we could do with energy. And there, you know, there, there are some studies that have shown obviously right now, like, data center water usage gets a ton of attention, but it, you know, if you compare it to say, water for like almonds just. And how many people are at the current time are complaining about water for almonds versus water for data centers and the same thing for power for data centers. Some studies show that, you know, when data centers, like states with more data centers don't necessarily have higher power and even like the delta of what has happened to their power since data centers have kind of emerged there, there's not this like, necessarily clear data that says, you know, if a state opens up to power of data centers, then suddenly all the consumers suffer. I think some of these narratives are simpler than the, the actual numbers. But sometimes it's like a combination of multiple things. Like, for example, data centers in many cases are quite loud. So when you have something that's, that's loud, that does use a lot of power, that does use a lot of water, if at any point, at any of those variables, it disrupts too quickly the community it's come to, or if its politicians have kind of allowed agreements that allow them to kind of socialize the costs, you know, kind of like say, sound pollution, for example, push that on the community, obviously that's going to get pushed back. And I mean, realistically, that should get pushed back. And so I think it's, you know, I view that more on like a state basis or a community and a state basis where some places are going to be more unfriendly toward data center constructions and other places I think are going to be friendly toward it. And I think that obviously I would advise them to make sure that they're managing the costs properly. Like they're not, you know, letting sound pollution just, just filter out and things like that. But I view all of these as solvable problems. I think at least the US Has a lot of Natural gas that can help longer term. Like you mentioned, I think nuclear is a powerful solution. Ironically, part of why SpaceX has such a high valuation right now is because one of their narratives is they want to put data centers in orbit to use the fact that solar panels are a lot more efficient in space without the atmosphere, and then they get all that natural cooling. Obviously the challenges that that's eaten up by the launch costs and the lack of ability to do maintenance in space. So a SpaceX ball would say that the launch costs will come down and make that a viable solution, whereas the bears would say in any sort of decimal time horizon that's not going to happen. I'm not going to predict decades out, but just an investable time horizon. That's a no. But putting things like that aside, I think that China does have a massive advantage here. The US is not in the front of the pack there, but I think that compared to many other parts of the world, we still are viable in terms of our energy situation. And then when you add to that some of the best tech talent and at least for the current time still reasonably business friendly, that might be changing. I still think that we have a lot of pros and cons compared to China in terms of our competition. And I think it's not a mistake that China and the US are the top two in AI Lyn, you have
- [45:47]
B
an engineering background, so I'm curious to get you to go a little bit further on SpaceX and its viability. This is something I've thought a lot about, frankly. Frankly, the concept that it's much cheaper to take something that's hard to make economic in Utah and the backwoods someplace. Let's launch it on rocket ships into space, into orbit. And the cost of doing that, well, it's coming down, so don't worry about it. I think if you actually do the math there, it's pretty darn hard to justify any kind of scale because unlike the cost of RAM chips or something, there is a physical upload. Cost of putting something in orbit requires a certain amount of energy consumption in order to lift so many kilograms of weight. A whole bunch of orbiting data centers I think is a great way for SpaceX to make money on government contracts. But as far as it being cost effective to build data centers in space rather than on the ground, I'm having a really hard time buying it. What do you think?
- [46:54]
D
I would side with you. So I'm always cautious about fading ultra long term things. I mean, given enough time, humans can often figure stuff out but in any sort of investable time Horizon, call it five to 10 years, I would take the under from what the SpaceX bulls are saying on that. Mainly a variable that they have to get almost perfect is they have to radically increase kind of the reusability of their rockets. Obviously what SpaceX is known for is making these self landing kind of reusable rockets and a lot of that cost. Obviously there's the fuel cost which you don't get back, but a lot of that kind of cost is can you build a reasonable rocket that you can just use 10 times or a hundred times with minimal kind of maintenance to make that work? Because the greater the number of, kind of, the higher reliability rate of the reusable rockets, the longer average, the higher number of reusability numbers they get, which brings down the per lift cost. You have to be pretty aggressive on their engineering and just fix behind that in order to see that happening at any sort of scale in the next 10 years. So it's, it's. I mean I'm not investing in SpaceX now. I've been on the record that, I mean I've been, you know, I think that among that collection of companies like I generally liked SpaceX more than Tesla, they've been very successful on Starlink. So it's like, it's not that I dislike a lot of what they're doing, but yeah, I would take the under on how many orbital data centers we have between now and 10 years from now. So 2036.
- [48:29]
B
Well Lyn, I can't thank you enough for a terrific interview. But before I let you go, please tell our listeners a little bit more about what you do at Lyn Alden Investment Strategy, what services are on offer there and how people can find out more about your work.
- [48:43]
D
Thanks for having me. People can check out LynnAlton.com I have free newsletters there, as well as low cost research services for institutions and individuals that cover macro conditions, specific opportunities, kind of analyses that are somewhat similar to what we talked about today on certain topics and go into a little bit more detail with charts and quantifiable data. But always happy to catch up.
- [49:06]
B
Patrick Ceresda and I will be back as Macro Voices continues right here@macrovoices.com come.
- [49:17]
A
Now back to your hosts Eric Townsend and Patrick Seresna.
- [49:22]
C
Eric, it was great to have Lynn back on the show. Now listeners, you're going to find the download link for this week's trade of the week in your research roundup email. If you don't have a research roundup email. It means you have not yet registered@macro voices.com just go to our homepage and look for the red button over Lynn's picture saying Looking for the downloads.
- [49:42]
B
Patrick, with apologies, I've got a flight to catch so I won't be able to record the full post game segment with you. But please share your trade of the week with our listeners and give them your usual summary of what's going on in the markets.
- [49:54]
C
Well, coming out of Lyn's interview, one of the more interesting second order themes is the growing importance of power demand in the AI buildout. Lyn's point is that the next bottleneck is not just chips, it's electricity and what makes natural gas increasingly important as a bridge fuel that can actually meet the demand in the real world. So for this week's Trade of the Week, I want to focus on the idea of being long natural gas as the way to express that power bottleneck theme. Now the first place a lot of investors naturally look is the UNG Natural Gas ETF because it has the more liquid options chain and is easier to trade. But the problem with the UNG is structural. It owns and rolls the front month futures contract and when the curve is in contango, particularly as it rolls into the winter gas series, that creates a drag on performance through the negative roll yield. So while the UNG may be the better trading vehicle, it's not always the cleaner way to express the thesis. For investors simply looking for a Delta 1 exposure to the broader natural gas strip, the UNL is often the cleaner product because it holds a laddered exposure across the curve rather than concentrating all of the risk in the front month, even though its options market is far less liquid. Now, for those who want to express the view with options, the cleaner path is often to go directly into the natural gas futures themselves. In this case, I've been Looking at the December 2026 natural gas futures contract, which is basing along its yearly lows at a place where one could consider using option structures such as bull call spreads. That gives you a way to build convex upside exposure with defined risk while aligning the trade with a longer dated thesis rather than getting tied up in the distortions of the front month ETF role.
- [51:55]
B
Patrick Every Monday at Big Picture Trading, your webinar explains how retail investors can put on our most recent trade of the week. For those listeners that want to explore how to put on these trades in greater detail, don't miss out on a 14 day free trial@bigpicturetrading.com. now let's dive into the post game chart.
- [52:14]
C
Dick so now I want to just do a quick recap of what's going on here in the markets and what all of our listeners need to know. So the S P500 has been retracing a portion of its recent post peace deal gap higher rally and so far the index has given back roughly half of its prior advance. The initial pressure really came from the stress out in Asia, where the South Korean Cosby suffered a dramatic 10 limit down move, which in turn spilled over to the US semi semiconductors and put pressure on the broader index. But overnight sentiment shifted again after Micron delivered a spectacular earnings beat, triggering a relief rally and immediately raising the question as to whether this pullback is already over and whether the semiconductor complex has once again re energized the bulls for another leg higher. That said, the bigger issue remains market structure leadership continues to be extremely concentrated with semiconductors doing almost all of the heavy lifting while overall breath remains weak. So even if the index stabilizes here, the rally is still being carried by a very narrow group of momentum names, and that leaves a broader market on shakier footing than the headline index level alone might suggest. Now turning to crude oil, we have to address what continues to be the most dramatic move in the market after last week's sharp breakdown. The selling has remained relentless with oil collapsing from the 80 handle all the way down to 69 trading right now near 6918 at the time of recording. That kind of move has left the market extremely oversold on the short term. The real question now is not whether oil is stretched, because it clearly is, but rather where the fair value actually sits once the forced selling exhausts itself. There's a growing view that crude oil's more reasonable intermediate value may lie somewhere around the 80$85 range and that this latest leg lower has been Dr. Driven less by fundamentals and more by forced flows as a large number of traders who are positioned the wrong way are being pushed into liquidation. So the key issue from here is twofold. First, where does the intermediate selling pressure finally begin to subside? And second, once we do get a reversion rally, where does oil actually settle out on an interim basis? Many argue that that $80 area remains a reasonable magnitude it but for now it makes sense to take this one step at a time and first determine where the washout phase is likely to end. And while the move in crude oil has been the most eye catching, the more technically important development may have been the US dollar breakout. The dollar index has now decisively broken above the 100 level, clearing what has been a ceiling for roughly 15 months. The breakout is also showing up across the major crosses, with the dollar yen now holding above the 160 handle on a sustained basis and the Euro breaking down through a major support at 114. So there is clearly bullish momentum behind the dollar here. The bigger question now is whether this marks the start of a sustained dollar bull market or whether it is simply a shorter term move driven by funding stress and positioning unwinds that could carry the dollar a few handles higher before stalling. The next key test will come around the 102, 103 area where more meaningful overhead resistance may come into play. Finally, I just want to turn to gold with a quick update. We did see a brief reaction higher off the P Steel headlines, but broadly speaking the metal has remained under active distribution. In fact, the selling pressure has accelerated in the post FOMC period, pushing gold to a fresh lower low and back towards 4000 level, a price we have not seen since October of last year. What is technically clear is that gold remains in a corrective phase, defined by lower highs, lower lows and rallies that are consistently being met with supply. Now there are still plenty of arguments for why gold can be much higher over the long term, but on the short to intermediate time frame the dominant trend is this ongoing profit taking cycle. So the key level to watch Here is this 4000 handle. If that level can hold, we may see some stabilization, but if it gives way, then the next major magnet becomes the 50% retracement of the entire two year bull market which comes in closer to 3600. So this is where we're going to wrap up this post game update. Now this week in the Research Roundup email, you're going to find the transcript for today's interview as well as the Trader of the Week chart book we just discussed here in the Post game, including a number of link links to articles that we found interesting. You're going to find this link and so much more in this week's Research Roundup. We appreciate all the feedback and support we get from our listeners and we're always looking for suggestions on how we can make this program even better. And for those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email@research roundupacrovoices.com and we will consider it for our weekly distributions. If you have not already, follow our main account on X at Macro Voices for all the most recent updates and releases. You can also follow Eric on X at Eric S. Townsend. That's Eric spelled with a K. You could also follow me at Patrick Ceresna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week.
- [58:10]
A
That concludes this edition of Macro Voices. Be sure to tune in each week to hear future interviews with the brightest minds in finance and macroeconomics. Macro Voices is made possible by sponsorship from BigPictureTrading.com the Internet's premier source of online education for traders. Please visit bigpicturetrading.com for more information. Please register your free account@macrovoices.com Once registered, you'll receive our free weekly Research Roundup email containing links to supporting documents from our featured guests and the very best free financial content our volunteer research team could find on the Internet each week. You'll also gain access to our free listener discussion forums and research library. And the more registered users we have, the more we'll be able to recruit high profile feature interview guests for future programs. So please register your free account today@macrovoices.com if you haven't already. You can subscribe to Macro Voices on itunes to have Macro Voices automatically delivered to your mobile device each week free of charge. You can email questions for the program to mailbagrovoices and we'll answer your questions on the air from time to time in our Mailbag segment. Macro Voices is presented for informational and entertainment purposes only. The information presented on Macro Voices should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions. The views and opinions expressed on Macro Voices are those of the participants and do not necessarily reflect those of the show's hosts or sponsors. Macro Voices, its producers, sponsors and hosts Eric Townsend and Patrick Ceresna, shall not be liable for losses resulting from investment decisions based on information or viewpoints presented on Macro Voices. Macro Voices is made possible by sponsorship from BigPicture Trading.com and by funding from Fourth Turning Capital Management, LLC. For more information, visit macrovoices.com.