The Beyond

“I think they're partly considering that this is the new iPhone, right? That this is the new interface will be the glasses, that the glasses can be like the smart AI involved in your life. And it will, could even supersede the phone. And yeah, the other thing with Meta, I don't, it's not URI, but a lot of people use Meta for their businesses in the, you know, kind of smaller businesses. And I'm kind of interested that if you could get your AI, if you could get the AI kind of inserted into people's business, and it was kind of like their business consultant. And I don't know, I was just, I was kind of like trying to think how maybe that could be a, quite a valuable relationship.”

“And it started telling it, say, late June, early July, but then all of the big hyperscalers, they rebounded massively after their quarterly earnings. Even after some of them raised their capex guidance, some of them in more creative ways than others. Having said that, when the market buys them after another strong wave of capex, it's not exactly like you're sitting at sea level and say, okay, we won't do any more of this. We'll probably do more. So I think we have another quarter or two at least ahead of us, where they'll continue to raise the guidance.”

“They think with AI kind of commoditizing a lot of the software sectors, what can't you replicate? It's essentially large industrial companies and things like that. So the secular play here is large capex things that you can't reproduce and maybe AI commoditizes a lot of things and you get bigger margins from historical businesses you never thought.”

“It's like you get a narrative where you get a capital inflow and then you get the retail crowd tracing, chasing, and then you get the high frequency guys making it extreme because every inflow causes like an asymmetric price move. That's why like last price is a liar. Price is the equilibrium of liquidity. And the problem with crypto is it just doesn't have a narrative right now. Like it really, there's no reason, like if you were an allocator, why would you invest there specifically? Like there's a lot of dead projects just floating, doing nothing. I mean, I get Bitcoin, like Bitcoin is probably the best one. Maybe the stable coins of Ethereum and certain projects that generate yields make sense to me, but I don't know.”

“Yeah, I mean, the frontier models are doing this too. Anthropic has their entire strategy right now is trying to create a regulatory moat through hysteria of saying, Oh my God, like, you know, we can't be trusted with these these frontier models. You know, we need to have these safeguards and only us can be the ones that bestow that upon the so we need to we need to put out these regular regulations, pull up the ladder, you know, only only we can be trusted with that.”

“So, for example, today, LLMs using less than one third of the energy that we thought we need three years ago, just wait another four years, it's going to be like 10% of energy, but then we'll get to quantum computing, a lot of data centers will become playgrounds for children, because we just simply would not need it at that magnitude. So the first derivative are commodities needed, but this derivative has some choke points at a regular intervals, but it doesn't last terribly long. The second derivative are infrastructure that you need to build for that particular technology. Now, that has a longer lifespan. For us, it is data, it is chips, things like that.”

“I think the future clearly is open-end, which means that most of the open-weight, which means that for most LLM's, the value will be nowhere near the values that have been ascribed to it. So LLM is already starting to commoditize and starting to cannibalize.”

“Let's move on to AI, which has become not just a thematic trend in the market, but almost the entire market.”

“The most interesting implication of Viktor's rolling bubble thesis is that the next AI trade may not be in the chip and infrastructure names that have already captured most of the capital. Robotics and automation could be the next destination, and unlike the market leaders, that group has gone through a substantial reset. For this week's trade, I want to express that through the Global X Robotics and Artificial Intelligence ETF, ticker BOTS, B-O-T-Z. The ETF went through a three-month, 20 percent correction back towards its year lows. So much of the prior excess has already been cleared. That gives us an interesting asymmetry.”

“And maybe talk about where we are in the AI cycle based on that, Andreas, because it seems to me that the AI trade is beginning to be more and more debt driven, which pushes some of this leverage driven trading a bit when we are in a scenario where the path of the Fed is unsure. Was that what provoked this meltdown in situation awareness, or was it simply just bad risk management?”

“You said agentic AI is kind of over as a growth factor of semiconductor AI trade. Tell me about why you said that.”

“Yeah, I mean, I will say the backstop that NVIDIA is providing, it does seem like the companies are going to use that. And I think CapEx is going to go up by a lot over the next 18 months.”

“Look, I've been bullish on semiconductors, I still am, but I'm just saying, ultimately, that this will end in a bubble that will burst. Because literally, I heard Sam Altman on a podcast, and he's still talking about intelligence as a commodity and how it's going to be like a utility. And I'm like, dude, you cannot be talking about something that costs trillions of dollars, basically, to make as a commodity.”

“But, you know, despite that, the price action just exhausts similarly for gold at the beginning of the year. And I think you're a little bit at that stage with Semi's where there's enough, like, underlying things on bottlenecks and, you know, the future, that's all still intact. The fundamentals haven't changed, but the price action is kind of telling you, you know, it's become like a meme, too much money's got in. And typically when that tops and rolls over, it's quite hard for it to regain the highs.”

“You've had multiple, if you think all the way back to when Broadcom had earnings, and then subsequently multiple companies, obviously Micron has taken all of these and it stops reacting. That's just telling you it's kind of, yeah, I think markets is generally going to top before the fundamentals change, before the earnings move. So I think we're at that stage, and we're just sat around waiting for where the next leg of the narrative is. Until you have that, I think it's more, I'm not saying it's going to crash. I think AI is real. It's just more it's going to be dead money for a while. Think of what Bitcoin has done since 2025, right? Or what Gold's done this year after the crash. It just stops doing anything.”

“So AOL, Time Warner, these kind of major events people talk about. And obviously, we have a few candidates this time around. And probably we'll try to IPO October, but maybe OpenAI is going to be like the single most important company in the world right now. If they try and get the IPO off, maybe it's end of the year, maybe it's Q127, that could be the moment that marks potentially the top that might line up with when these macro factors are in place. So I think if it's like our models are telling us things are fine. When we've studied history of the world, we're like, okay, these are the signposts.”

“The enterprise part is what eats the profit pool of horizontal SaaS, whatever consulting or the middle layer. That eats the profit pool. The consumer tier is very hard to make money because it will be open, and then the top is where the money is made. But that's a much smaller, I think, addressable market. So that's in my mind how the end state looks. So if that's the end state and you work backwards, like why do companies like Microsoft desucceed? I think it's more, to your point, the trust is because they have the complementary assets, because you trust them with your data and their cloud.”

“But that doesn't mean the Chinese models won't have a compressing effect on pricing. That's a profit for me.”

“By modeling real world physics, right? These are all things that matter for robotics and real world interaction. That's a heck of a lot more data you've got to collect and process and use. So then you need a lot more training, a lot more inference. That's potentially one thing that can keep this going for a while. If we get genuine breakthrough on reinforcement learning, right? I think there's a lot of debate because fundamentally one of the bottlenecks, we run out of data. So we're supposed to generate, the models need to generate their own data to start the self-improvement cycle, right? So far, there's pretty limited evidence of that, but that's possible.”

“I spend my day in front of a screen, and I have all these different software products open. They don't talk to each other, and I'm the glue that makes everything work. I'm taking stuff out of here, out of an email, putting it into a spreadsheet, transposing it into a spreadsheet to put it into a PowerPoint presentation, and then making a PDF, and then sending it to somebody, and I'm doing all of this stuff. It's very time consuming and it's very expensive. Now, maybe if I don't do it, I'm paying a lot of assistants a lot of money to do it for me as well. The promise of AI, if you want me to put it bluntly, is you won't need your keyboard anymore. You'll have a contacts window and you'll just tell it to just do it for you.”

“Because every metric I read is compute is at a deficit. We don't have enough of it. We only have 2% of the public or the population using this stuff. And you're going to need a lot more compute. That's why we're building data centers like crazy. And that's why we've got this whole political fight about data centers. I'll say to my friends, if you're not sure about this, in two to five years, you won't be using a keyboard. You'll still have one, just like you had a fax machine, and you'll barely use it because you won't need to. You'll just talk to your computer and just tell it what you want and it'll give you the output that you need.”

“It will continue to be a wild ride, but you also have to remember it's going to end in a bubble, and that's going to be very dangerous. Maybe that bubble is three or four years down the road. Maybe it's three or four weeks down the road. That's going to be the trick in trying to play this game, that this is just the way all technologies work right now, but I don't think it's too early, and I think that if you're skeptical of what I'm saying, I would humbly suggest you're not fully realizing the power that a lot of these large language models and these harnesses that you can use with these large language models, and just what you're capable of doing by just asking a question and getting an answer.”

“But at the same time, I see the spending and the capex just looking unsustainable to me. Are we headed for some kind of, you know, well, it does have to continue, but it's going to crash along the way anyhow? If you think about it, that's kind of what happened with the Internet boom.”

“Nvidia is on the tape today guaranteeing $250 billion of, I think it's OpenAI, I think it's OpenAI, some sort of data center here in Ohio, actually. And interestingly, Nvidia is down on the day, last I saw, right? So it's Nvidia is starting to trade down on guaranteeing other people's bonds. That's another signpost, right? That shouldn't be happening. And ultimately, I think Treasury or Fed will take over for, Nvidia is guaranteeing these things. They'll take over for SoftBank, take over for and just backstop the whole thing. And it may not even be that expensive per se, but I think that's what's going to happen.”

“Now, you talked about the changing nature of the stimulus that we're going through right now compared to COVID, where it was sort of direct to consumers. I mean, do you view there being a potential that all of this AI spending has become such a big driver of the GDP growth of the US economy at this point that it is in many ways the stimulus and it will be backstopped.”

“Perhaps even as part and partial to what we've seen in the last week, which is, holy cow, Chinese AI is suddenly starting to threaten to disintermediate USAI models at the frontier, which is something that nobody thought possible, which again to me, the first time fool me once, shame on you, fool me twice, shame on me. How about fool me six or seven times? How many times have we heard, hey, the Chinese, they're cheaper, but they'll never be better?”

“So you Google Groundbreaker substack and he put up this mind blowing substack on AI where he says, look, these are not tech companies. These are real estate companies. And when real estate has a problem, it's not because demand falls. Demand almost never falls in real estate. It's when the second derivative of growth slows and you can't refinance your debt because the second derivative of the asset value falls. And that is happening right now in AI. And that was before the Chinese, this thing was published three weeks before the Chinese, the Kimi performance thing that's weighed on these names in the last week or two.”

“So what's going to happen is that orchestration layer is going to accrue a lot of the value. Companies are going to retain their sovereignty by basically making models more substitutable. And some tasks, low-value tasks, may be going to be routed smartly towards the open models, cheaper models, and then the high-value tasks maybe will be using frontier intelligence. To that extent, we expect there to be a general transition away from the current paradigm, even more so with inference becoming an ever bigger deal that most of the AI computing minds can come from inference, and the funding of a computer can come from many, many enterprises, companies that will be, I think, looking for compute.”

“So this is going to be a leading indicator. And I wrote a post at the beginning of June saying like, this thing seems to be plateauing a little bit, and the use-correcting situation is such. And this thing could be taking a break before a length like a lag up. Maybe we see like a super powerful model and it just runs away with it. Or there's a possibility this thing actually mean reverts a bit as, you know, people become more rational about the cost of these things and, you know, sort of substitute between quality and cost. And indeed, that seems to have been what happened.”

“You know, but the fundamental is such that if there is a perceived slowdown on rationalization, then, you know, and there's a perception that the frontier models could see their margins challenged with very powerful, much, much cheaper open-waist models, or even just sort of, you know, not open, but, you know, more capable, but cheaper models coming from Grok and MuSpark and whatever, that this could actually challenge the current paradigm of how the AI CapEx is financed. And I think this is part of the reason why, you know, we've seen markets selling off. If you open over latest chart with the AI, you know, sort of a beneficiary's index or the SMH or whatever, you can probably see like that turning point.”

“Where the funding of AI and the demand of AI becomes a lot more broad based. And, you know, you can have a lot more sort of smart routing of models, even as the inference market explodes in size, it becomes a much, much bigger of the overall pie of AI demand, AI compute. So this transition from one phase to another was always going to be a bit rocky, right? And even potentially runs in the risk of a bit of an air pocket where, you know, sort of on the one hand, the capex and ROI for the current paradigm doesn't show up quick enough. On the other hand, near the new phase, like maybe the biggest enterprises takes them a while to find that workflow and pick up.”

“Like I think, you know, this idea of token maxing was always the idea you want to actually let people experiment, right? Because in complex workflows, large enterprises, you don't really know what the use case is going to be. And also the models just were not, didn't really become smart enough or good enough until this year with agentic and everything. So you need token maxing. But token maxing is fundamentally at odds with expensive tokens, right? Tokens are so expensive and also throttled. So you need it eventually to get to a state where tokens are cheaper. And this idea of, you know, smartly routing models, you know, the work, like that's always going to be the case, right?”

“So there's going to be some dynamic of erosion there, right? You know, you're probably not going to earn like full and monopolist profits, you know, if you have competitors. At the same time, I also don't think it's been true, right? Whether you look at software or look at pharmaceutical or whatever, just because there is going to be competition and there's going to be some degree of copycats or what have you, it doesn't mean that the frontier is not going to grow, and it doesn't mean that the leaders of China and China will not be profitable. That being said, I do think this is going to challenge the question, where the ultimate bulk of the value is going to accrue to, right?”

“And Gavin Baker mentioned that there was even a month where Anthropic was profitable for the first time. So that's all great. But now we're seeing this substitution towards token efficiency. We're starting to see these open-way models that are looking a lot more powerful. We're starting to move to this world of perhaps front-tier model top-line orchestration, but a lot of the downstream execution is these more efficient, cheaper, open-way models. It feels like that is really good for the end consumer. The surplus goes towards them.”

“I feel like people look really closely at this because, of course, one of the largest companies in the world right now is NVIDIA. So obviously, demand for the GPUs is very correlated with the performance of NASDAQ and the total stock market. So obviously, if there's any sort of concern for demand for GPUs in the build out, that could have some pretty significant shockwaves throughout the system.”

“Like obviously the big runners have been the DRAM trade and the memory trade. And you're starting to see like Chinese supplies start to come on. You're starting to see substitution effects start to come on. More efficiency from the inference providers. And then now add on top of that is, I don't know if you guys saw, but today there was a new Chinese open model that just came out, Quinn 3 And its capabilities are right up there at the frontier models, like encoding this Chinese open weight model at a fraction of the cost is similar capabilities of Fable 5 So that is like, it's great for the consumer.”

“And if you use the cheaper models, they're still kind of useless and hallucinate like crazy. If you get to a world where it's actually margin positive, you could totally see it start to trickle through. And then, I don't know, you start to bring up the questions of obviously the analog here is during the telecom boom and everything, like the internet, all the companies that were laying the groundwork all went bankrupt, but then everything that was built on top of it was, that's where the value got captured. And obviously, that's been talked about ad nauseam, don't need to get too deep into it, but I think it's a decent enough a bet.”

“And this is moving up through its 50-day moving average, and stuff like Apple's hitting an all-time high, you know, you could see a squeeze here in a lot of the hyperscalers, particularly like you said, Felix, one of the interesting things is, you know, if you do have these models that are way cheaper, then maybe the build out isn't as, you know, expensive and CapEx goes down, and, you know, it changes the whole game. So you could see all the draconian scenarios for hyperscalers. Maybe their spending goes down, their stock squeeze here. So that's, that's kind of a potential thing. What's the last thing people would expect would be the hyperscaler squeeze?”

“I mean, it started with Mag-7, the hyperscalers. They've, again, we've been covering this for ages. They've been the laggards and they're shelling out cash flow. They're levering up. Their cost of capital, cost of financing is rising. Their spreads are widening. And all that money has been flowing to these memory chip, et cetera, who are now printing 80 percent margins. Those are going to get eaten. But it's spreading to the rest of the supply chain. And now you're running into the open source competition. You're reaching an upper bound of how much capex these guys can do. They're already negative free cash flow, already levering up. You can't just continue that infinitely.”

“But then that kills a bunch of their balance sheets because a number of them are receiving income and balance sheet bolstering from their stakes in these privately marked up labs. Open AI, Microsoft, Anthropix for Google. So it's very circular and that's where this comes into play because you have to chop off one arm to save the other. And that's why I think this correlation thing is interesting too, because once that does unpin whenever it happens, it's very rare that the market all rises together as correlations go from zero to one. It's very much more common to be a down move. And yeah, I mean, the Fed support isn't there. They're back to meddling in Iran. There's a lot to not like about this setup right here for risk.”

“I mean, you have to be like semis were up 30% and not down 30%. I mean, July 3rd, our last podcast, the title was the AI trade peaked and then everything shit the bed.”

“But then the second order impact is like, OK, well, look, if more and more people are going to say something hot happens in a random sector, like the memory sector right now for AI. It's just like, everybody goes to the LLM and they're like, what's the top DRAM plays? And it's like, if everybody's doing that, then actually like, maybe the right curve move is to actually go along those ones because you know everybody's doing that. And it's not, it's like sort of, I guess it's more so being like leaning into the momentum as opposed to saying this is consensus and fade it.”

“Maybe the US will actively start funding some of the companies in the US soon. But at the very least, I consider this a more or less statement that these models have become too big to fail. Because this is ultimately a race towards AGI, a race towards winning that competition on a sovereign scale. And therefore, it is highly unlikely that the financing concerns that we've had around Anthropic and OpenAI, mostly around OpenAI obviously, that those financing concerns are really something you should care about, given that the public sector will likely be involved or get involved should push come to shove here. So in my opinion, this export curb and the statement that followed, both decreased the right hand tail of the distribution of outcomes.”

“I've had a lot of discussions ahead of the IPOs of Anthropic and OpenAI around the token pricing. Most of you will know that I've referred to the Silicon Data Index on the token pricing over the course of the past weeks. Since we've seen a tendency towards using marginally cheaper tokens, let me put it like that, over the past weeks. And we've obviously seen a load of blue chips communicating that they've reigned in spending on Claude. Uber is an example of Microsoft, another example. And what we've seen is that the marginal activity has likely moved slightly towards other models. So I could be a little worried that we do see marginal activity moving towards cheaper models ahead of these IPOs.”

“And you have this push into AI, you have push into hardware, you've push into optics, things like that. And it's just unrelenting. The flip side of that is outside of some of those areas that are more momentum based, there's still opportunities for stock selection. So when you look at the average return of a stock in major markets compared to an index return, and the average stock has underperformed massively. So if you put together a long short portfolio between the performers and the underperformers, it's, you know, you have the opportunity to produce a stable return stream. So that's really what's happened. You've had a big bifurcation in some of the indices, and a few stocks driving the returns massively.”

“Like you said, Max, I agree, these companies have CapEx plans that they need to fund that are trying to optimize their own balance sheets and their own financing costs to go do so. It's much clearer what they are trying to achieve with the capital. Now, what the market's job is, is to figure out whether these projects will have a good return on that, on the capital and capital allocation for these companies becomes absolutely critical. But yeah, it definitely seems like it's an arms race to make sure you're a leader in these spaces. Right now, you need a massive amount of capital to do that.”

“The last time around, you had a lot of, we're the next Tesla, you know, there were five electric vehicle companies. These are the leaders in the space. I mean, does that change the feeling that you have about this equity issuance, that not only are they the leaders in the space, but also that the money is going towards something that we know what it's going towards. If you take, say, like a GameStop, which the stock goes up, they're able to issue shares on the market, we have cash, it puts the company in a better position, but we don't actually really know what that money is eventually going to go to. Google is saying, we're investing in more data centers.”

“But then there are these more thematic ones. And I've always been fascinated over the past few years because when a theme first comes, it's perceived as alpha, right? The idea that you're picking AI winners within the technology sector. OK, that's that's alpha within technology. But then very quickly, it becomes understood by the market. It gets sort of bucketed and basketed. And that thing that was alpha three months ago is now viewed as factor beta. And it feels like it's happening faster.”

“Tell us about, you said it's going to take longer than people expected. You are seeing headlines of data centers are being delayed.”

“And everyone was pushing back, a lot of people anyways, that, well, once they're so cheap, they're going to bottom, then they're going to take leadership and they're going to blast NASDAQ to new highs. Well, what is actually more likely we've been talking about is, well, they started the weakness. And then eventually people catch on and say, oh, wait a second, they're going to stop their share price decline by cutting their CapEx to improve their cash flow or their leverage. And then you get this announcement from Amazon. And then the cracks start to spread outside of the generals into the semis, the AI, you know, into Korea, into Taiwan.”

“And when you think about it, it's like, what was the, like, what's the, like, fair value of, you know, these semis and these AI related trades, right? It's nothing close to what we've seen. You can be the biggest bull on the industry and AI in the world. But when you look at the data of what's moving the market, and it's a hundred billion dollars of triple levered ETFs, that's obviously completely removed from fundamentals. But you sort of have no sense in when that's going to stop. So like anybody who is bearish just blown out to the upside. And then it starts to crack. And then, you know, at the same time, everyone's kind of getting bulled up because there's shortages for years to come and everything else.”

“And then you have the AI bulls. And I think the risk there is that they both kind of unwind at the same time over the next few months as liquidity wanes, the Fed's too hawkish, labor data comes down, inflation comes down with it. But that doesn't really like stabilize things. So there's a lot of risk factors, I think, out there, aside from just like the record yen short, dollar length, you know, sofa shorts, like all these things kind of are colliding in a weird way.”

“You know, sentiment got really crushed on them. Actually, next week SpaceX gets included the QQQ inclusion date, which is also just a wild thing. So, you know, probably some of that selling was making room in the in the mags. But yeah, I have a negative bias on NASDAQ and tech, and a long bias on gold and sulfur, and those kind of fading the hawkishness trades. And also just generally think, like the next two months are probably the most treacherous going into the back half of the year, where people are sort of too crowded in this risk on view. So yeah, I'm pretty cautious here, but more of a seller on balances than a buyer.”

“Say you say you're a data center host or it's, yeah, man, it's just signs of pretty frothy behaviors. The other thing is, is the profit and EPS expectations are just can have been mooning across the board, across all sectors that, that, that also is very peak, you know, peak, peak profit cycle type behaviors.”

“And so we've just had so much, like the momentum factor has just been ridiculous the past, like just outright absurd out performance. So obviously, when you have that sort of leverage and positioning in the system, it doesn't really matter what the news is, just as long as there's like a steady narrative to grab on to. So you have this is all, this is all the memory, DRM, AI trade stuff, and then you have that as the baseline, and then you just get a couple of news hits. So the first one we got over the last couple of days was Meta talking about trying to sell their access AI compute. I mean, they're only just considering, but still, that was enough.”

“Because if you're reacting now, you've already messed up. You should have had that plan. You should have been managing your risk and understanding what kind of game you're playing. So, yeah, the game I'm playing is this, I'm mostly on the side now and just watching. But I'm not writing the whole thing off either. But it's, yeah, we need to heal from this, this unwind. And at the same time, there's like a lot of these important questions that are being questioned around like the what the hyperscalers are doing. Why is meta renting out excess compute? Like why did OpenAI delay their IPO? These sort of questions need to be answered. And yeah, that'll take some times.”

“I mean, the bottleneck gross stuff was getting ridiculous. Like one of my favorite thinkers like Gavin Baker, who was like calling them out is like, man, like some of the stuff I'm seeing in these Mike, there's like these pump and dump Schiller's that are just like, this is the new bottleneck and then they push it onto their followers. It's like a $2 million market cap thing and they pump it. And it's just like total pink sheet pump and dump crap.”

“And yeah, I think you opened me up to an argument last time we talked where you said if AI is bigger than the.com and the internet, then the bubble should be bigger. And the PE for Microsoft was like 70 And so then therefore the PE for Nvidia should be 100 at the peak, of course. And if Nvidia is gonna make two or $300 billion, that would be a market cap of like 20 or 30 trillion on Nvidia. Now I'm not saying that's gonna happen, but I think that people should think of that right tail risk as well as the left tail risk of this evaporates to nothing and we have an 80% crash that's very violent.”

“Like if the companies that are employing and spending so much on Anthropic right now, in six months they say, hey, we're getting some return on investment, but it's nowhere near what we're spending, so we're going to scale back.”

“The revenue model, the business model for Microsoft and Google and Amazon is actually pretty simple. It's, we're gonna spend a bunch on data centers and then our revenue is gonna come from selling and leasing that compute out to the AI companies who are gonna buy it from us. Even for Oracle, that's true. But for a company like Meta, I really don't understand their AI strategy. And I think that if these glasses, if these Meta glasses are a flop, I have some severe concerns about Meta. Like how are they gonna make money?”

“Yeah, just to the parts companies like the Micron or Memory. You remember Cisco was 50 times, I think JDS Uniphase was 100 times. That earnings screen, most of those things are, a lot of those like Keoxy, a lot of this memory stuff is like six times or eight times. And I'm like, maybe I'm like, I don't know, maybe it's an earnings bubble, but it's definitely not a valuation bubble.”

“So we're getting trillion-dollar IPOs. And I'm like, so they don't really pop like the ones did back in 99 So I just go, maybe this isn't going to have the ferocity and the euphoria and the juice of 1999 But maybe the positive is it plays out longer because, you know, it just keeps going. And I look at my numbers on the S&P 10,000. That could be quite conservative, actually. You know, now I'm like lowering the PE to get there. I'm like, the earnings have come in way better than I expected when I made that call last year. I thought I was going to have to put a 30 times multiple on it to get there. Now it's like 25 Because then earnings are, you know, another 50 bucks higher than I expected.”

“That's not to some degree, that's like one-off spend in a data center, and it could actually decline quite meaningful if the spending stopped. One thing I'm seeing on the other side, though, is cloud revenues are ramping quite a lot. And I know we're kind of dinging the hyperscalers right now because they're spending almost all of their cash flow on data centers, which are yet to be completed. But when you just look at the earnings of these companies, like the cloud revenues are stepping up quite meaningfully. I mean, as you would expect, they're like, oh, there's this thing called AI, our customers are all using it, they're using a lot more every month, and we're building these data centers because we don't have enough capacity for it.”

“But broad strokes, I think it's... I'm increasingly amazed about it, using it more. I even have clients and people I work with. And just that I know quite a lot of people in the larger asset management industry, and it's barely being used. Other than them on their laptop, but it's not broadly infused into the entire organization. I think we're very... They're very careful. Most organizations are quite careful about cybersecurity. So it's been this kind of blocking about how much data can we give the AI and financial services. And I just think there's a long way to go for use of AI. I'm going to use another crazy thought, Jack. And I look at all the semiconductor supply chain stocks in Taiwan and South Korea going through the roof.”

“And if you had the second derivative of data center, CapEx go 400 billion, 600 billion, 800 billion, a trillion back to 750 And some question where, you know, whew, whole hardware space would, you know, you wouldn't be trading 40 times on connectors to a lot of that stuff. I find it concerning. You're putting very high multiples on certain subsectors, very high multiples on what is a highly cyclical CapEx good. That's kind of like a one-time.”

“And I think they're very, really don't want, they can see that over time, you do not want to get left behind on these things. And that is their own business experience of having lived through these things and been on the right side of them and said, wow, I never could have expected what Instagram would happen to Instagram or Facebook or Microsoft, any of these things, they're like, wow, this is as big as those things in my past and I never regret the $26 billion to spend on Instagram, right? And I think they're, so, but we look at it and we go, oh my God, these guys, you don't have the numbers to back this up. Where's the spreadsheet that tells, you know, how do you know? And I think that's what the market's critical of them.”

“And it's usually, oh, AI is going to disrupt it, or something's going to disrupt it, and it feels like the derating is higher than the actual risk is warranted, maybe.”

“You know, all hitting the market at once, 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, not, 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, you know, 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.”

“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? Like 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 the wrong side of AI.”

“Ironically, one of the few things that Bernie Sanders and JD. Vance both agree on is they both talked about partially nationalizing AI companies. You know, the US government taking shares in AI companies and their proposals, they are different. You know, 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 this kind of mixed messaging at the moment. There's certain things that can be done to support them. There's certain things that can be done to give them headwinds.”

“But, you know, 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 certain protections can we provide? But realizing that whenever they go to aggressively at the centralized models, it's basically marketing for open source versions where businesses and individuals, you know, one is they want to use the models and two, they often want some privacy for business secrets, just for personal data leak risks and stuff like that.”

“What they all seem to be doing, the very smartest of them, ones who truly invented this stuff, is they're selling their equity to bag holders as fast as they can. There's a race on right now between Anthropic and OpenAI and SpaceX. All of these big technology private unicorn companies are either going public or in the case of Google doing secondaries. It seems like everybody's trying to sell stock to retail at the same time. Am I interpreting that correctly as reinforcing what you just said about this transfer from momentum to value?”

“Look at what happened the last time the convertible bond market was on fire too, a lot of CFOs selling stock. So 2021-22, we were up near 19 trillion of value in late 21 And we went down to 12 trillion in literally four quarters. That's an example of what's about to happen, I think. So that kind of drawdown. And think about it. So we went from 19 trillion in the fourth quarter of 2021 to 12 trillion in the fourth quarter of 22, and then all the way up to 41 trillion. And that's why I think as money rotates out of financial assets, which are bonds and tech stocks, when you see this kind of value, the rotations can be amazing. If you look back to 2022, what were the big winners? Energy stocks were up a lot, I think well over 100 percent.”

“I mean, the earnings are solid, don't get me wrong, but there's talk about there's a bubble in earnings expectations and whether or not those expectations are realistic and whether or not they'll pan out. Not only will they question, will they pan out, but will they pan out in time to fund the next step of the AI build out, meaning there's obsolescence that's factored into these plans, right? And look, I'm not a tech person, but I'm hearing numbers like five years thrown around. So not only is this build out happening, but as time passes, things become obsolete, upgrades need to happen. And is the earnings capture going to take place at a fast enough clip to weather the replacement cycle?”

“And it feels like the second, you know, if you just think about the trajectory of that AI build out and the hyperscalers of the last couple of years, like the first phase has been mostly just funded from their free cash flow that they had that, okay, instead of like throwing it into buybacks, we're going to use that for capital expenditure.”

“But yeah, I think this is where the bulls and bears sort of, at least in some respects, disagree. It's like, I don't think anyone would argue with the fact that we're in a raging bull market across various asset classes and there's thematic secular themes that are producing monstrous booms and winners and earnings. I think the beef that people have is that it's maybe not how markets are supposed to work over a long-term time horizon. And it all is just so, like you said, Tyler, centralized and at the whim of policy makers. It's not in any sense of the words free markets.”

“Like 40 And I don't know, I think on the policy front, this is just a managed, we're just watching them slowly manage it from every angle. Geopolitics, monetary policy, treasury supply on issuance there. It's just, in fact, it's working. To give them credit, we're seeing a massive productivity boom.”

“Like I want to talk about that today, which is like in a world of, and maybe this is where I'm being open to this stuff is maybe an AI productivity boom is actually like a really great thing for America. But what is the role of crypto? If you have national GDP growth of 15 percent, do you need a store of value? Like what is the role of crypto there? You know, like you don't, and I'm increasingly, not like I'm a big Bitcoin believer long term, but like there is a world to be pictured where, like AI is that productive and it sucks up. We go into a whole new type of economy that we've never had before.”

“And it just went blow off top. They had all these giant gold miners were over levered, taking out debt and oversupplied the market with gold. At the exact same time, all these Silicon Valley tech companies in 2012, basically started growing. They were very productive. They were growing productivity. Their top lines were growing immensely. And that just sucked so much capital out of gold miners. And I'm almost wondering if we're watching the same thing happening in AI infrastructure to crypto, which is there's really, if you're not growing at the same rate, I don't, you know, it's really hard. Not only that, but like, what crypto funds do you know are growing assets? Who's allocating there right now?”

“Investors today are more informed than ever. If you were in a bank back in the 1870s, you may not have access to all the information like what's happening to banks in Northeast, the South. So this is a very different beast, both in a good way and maybe in a bad way. Maybe you could argue there's greater risk, but also there's greater knowledge and information, more discipline from the market too.”

“You're talking about common sense that needs to be used as well, not that machines can reconcile equity trading and do other things, but when you're looking at money movement, there has to be certain controls put in place. All of these things, I think, will speed up our processes and make us more productive and more efficient. But I am not a believer that all human beings go away. I think the human beings will be put into higher use cases, that maybe had someone who would look at 10 different accounts now, could look at 20 different accounts as efficiently as before. But there is still going to be a need for humans. But these tools are increasing productivity. They're also increasing creativity.”

“But they may not know all the nuances of the industry. They may not know if some regulatory changes that are coming. They may not know of particular supply chain issues. You know, with a certain company or a certain product. So I think that these tools will continue to help someone who is very specialized. They can help the specialist get a broad view very quickly. And then again, they can use their knowledge to dig in a lot deeper than a generalist would really know where to go, Max. So I think that specialists can use these tools and really hone in on what are the most important things that might drive a particular flat price.”

“The next one, I think, is a lot of nuclear is like autonomous. I think there's going to be an autonomous guy that emerges. Who becomes the expert.”

“Change the name to earlier, but now will be the time for Meta those. Sync of 3D printing. Started 10, 15 years ago, far too early, but now could be the time for 3D printing. We can go on and sync of further down the track within the next five, six, seven years, quantum computing. Now, that's going to completely unscramble almost everything we do. And that's what I call rolling bubbles. That there will be a bubble in commodities, there will be a bubble in infrastructure, and then there will be bubble in robotics, and then there will be bubble in other applications. In other words, every business, every industry will restructure themselves on the back of IE.”

“Let's tie that in with this AI race and everything that's going on. Because it seems to me like we have a setup here where a whole lot of people are going to feel, whether they're correct or not, they're going to feel like AI basically sabotaged their prosperity. They don't have any career future. It's, you know, there's no point in trying. Entire generations are giving up on life because they figure that AI is going to take over. How does that societal change or that public opinion change potentially have a reflexive effect that could even be bigger than AI itself?”

“Maybe there's also the hope that companies in Europe are going to use Anthropic and OpenAI and pay more because they don't trust China. And that is kind of what happened in software. People use Microsoft and I'm sure there's like a Singaporean version of Microsoft Word that's cheaper, but people still use Microsoft.”

“You're like SOE, state-backed private equity fund, venture funds. You're making out great. So I think it depends a little bit on who you are and if you have access, I think, in terms of how investible. I would say in general, for Western investors, it's probably not super obvious that you're first in line to get access. Clearly, I think the impact is more broader, but that is moving us away from the kind of frontier labs, closed model, that's clearly helping to accelerate price compression. Essentially, China is doing the work to accelerate Javan's paradox to ultimately get more people to use it. But in terms of how that profit pool is split, when China enters the industry, generally it destroys the profit pool.”

“You say that as if it's a future tense, but haven't we already kind of lost some edge to China? I mean, if I look at China's new models that they're introducing, it seems like they're making an awful lot of progress awfully quickly. And it also seems that progress is aimed and targeted toward saying, look, we can do things that these other bigger companies are not doing, and we can do it with an open source model that allows anybody to run it anywhere. Kind of hard to beat that.”

“I think we're coming to a social conversation about AI, which is probably going to lead us toward, I don't know if it's universal basic income or what, but I think that the people who are complaining about AI stealing their jobs are going to expect some kind of, you know, AI has to pay a tax in order to right this wrong. I disagree with all of that. I don't think there's a wrong to be righted there, but I think that's the sentiment that we're dealing with.”

“And we sort of take the input price, input volume and output volume, create a blended price for each model and aggregate them up to index level based on usage, so that this thing is going to track how much each model is being used and to the extent that the general price dynamics of this model is such that while the model is launched, the token price moves but not that much, right? So most of the movement comes from, you know, essentially usage pattern, usage behavior, consumer behavior, right? So the hour coverage of data is not a full market, right? If you imagine the full market, the AI inference market is being like a square, right?”

“And if I have a higher value to ask, some things that requires more powerful reasoning, they should all go to those, right? And the ability to route between them and correctly assess quality and cost is something that will have to happen, and it's not really been happening enough, and is a challenging thing, because just to figure out whether or not a certain ask is which type, right? It's not always obvious, right? Sometimes a question can seem benignly, innocuously simple, but in reality, it's actually a pretty complex question that someone has just asked it poorly, because they don't really know what they are looking for.”

“And then I think what some folks took away from, and I think to your point, you mentioned how partly it was just this index, maybe it was a bit of a misnomer, but people took it as, okay, this is just actual demand for tokens from corporations. And then you see the turn came forth right around the time where these news headlines started to come out of like, Uber went through their entire year budget of token spend in like a month, and everybody freaked out. And then, but what you're saying is, it's more so about substitution than outright token demand, right? Like what you're saying is that this is about going from token maxing to token efficiency. It's not saying that demand for tokens has gone lower since June.”

“So China is just way better commercializing, gaining share, and meeting customer needs at low cost. They've done that in manufacturing, all these things. And I think that's what they're doing with obviously the focus on open way, right? Make sure that people are locked in, or not locked in, but essentially that people are not locked into the US, right? In a way, if you view it for the sovereign lands, I think things make much more sense. China does not want the rest of the world to be locked into the US, especially closed way. So as long as China fully commits to open way and makes these breakthroughs, the rest of the world obviously will pick China. And in fact, in the end game is the US have to catch up and also commit to open way.”

“I mean, just like if you look at Alibaba's AI cloud revenue, it actually is growing at triple digits, but it is so low compared to Google, Amazon, or Microsoft, what they're charging OpenAI Anthropics. It's just like in China, just things are just so cheap and absolutely-”

“Eventually the market evolving in that direction now, of course, along the way, if you talk to your cloud providers today, there's going to be a lot of pushback. Nobody wants to be their product to be referred to as a commodity. And but I think the way I see it is that there's always going to be substitutability, right? If you tell me that your product is so unique, how do you win customers from someone else? That's how you win clients away from someone that's with someone that... So there is going to be a substitutability when it comes to compute, but it's not going to be perfect.”

“I mean, it started with Mag-7, the hyperscalers. They've, again, we've been covering this for ages. They've been the laggards and they're shelling out cash flow. They're levering up. Their cost of capital, cost of financing is rising. Their spreads are widening. And all that money has been flowing to these memory chip, et cetera, who are now printing 80 percent margins. Those are going to get eaten. But it's spreading to the rest of the supply chain. And now you're running into the open source competition. You're reaching an upper bound of how much capex these guys can do. They're already negative free cash flow, already levering up. You can't just continue that infinitely.”

“So I'm not saying it's some lion's number, but if you're saying, oh, earnings went from 12% to 25%, you know, some percentage of that is a little bit of a gain, but I am nitpicking a little bit. Like I don't deny that the operating earnings and the operating income growth from the cloud providers has been dominant.”

“I love how everyone's surprised when another scam comes about in crypto, and it's like, I got you again. It's like, wait, that's the norm. It's the opposite when you're surprised when a non-scam comes. And I think I don't really know anything about the guy, Voorhees, and he's obviously been around a long time, but I don't think it's new that he's also had a lot of projects that have left people maybe not the most happy with their token holdings, like ShapeShift and some of these other things.”

“And then I want to be loading up Bitcoin to the gunnels, and then I'll take my chances. I just think the price is going to be lower than where it is today.”

“I think just like I've been saying, the liquidity outlook is not great. I think there's still some risks over the next few weeks, but it definitely got very peak bearish sentiment, and especially around strategy. I still want to see how it trades over a number of weeks and months where strategy is not a buyer and active at all in the market, because I think that that would be a true test to see where the natural kind of participants step in. But that's been interesting biotech and home builders, a lot of these other trades that it's just this crowding gets so extreme in both side, in both directions.”

“You got to do like, obviously, I'm saying that I eventually want to be a buyer again of these dips of the memory stuff. But yeah, I also really quite like the debasement kind of trade stuff here.”

“And like, I'm done being cynical about crypto. Like we've had our pieces about it. Like whatever is going to be coming out of like whatever Phoenix is me reemerging. And I think there will be some sort of Phoenix reemerging. I'm going to be excited about I think I think there will be some interesting things that come out over the next year or two. Like there is that shift. Obviously, a lot of the tourists are all in the AI stuff now. But I think there will be something there. And I don't want to miss it. I mean, I don't want to be the idiot that like works for a crypto company and then just like fuzz the bottom.”

“I think that's confusing, but the industry is going to get better, but not necessarily all the tokens. Because most of these tokens are worthless.”

“I don't know, some of the blockers are trying to really push hard, but it's just like, they're double-dip. You have the equity in the token, and then all the equity owners own the token, but the token doesn't represent any claim on equity, and they can just sell the token. It's a whole mess. There's some really great protocols in crypto, where the token represents nothing, even though it has the name associated with it. Then there's the equity, and then there's the foundation that has this worthless governance token. So all that stuff needs to be washed out. But I think once it does, there's going to be some cool stuff. We just need to stop with this nonsense.”

“But just in this larger crypto market, I still hesitate to get too into any of these, to invest too heavily into any of these. But nevertheless, Aero does look good right now and it is outpacing quite a bit. And then another one that popped up on here that kind of surprised me was Useless. Yes, granted it's red, it's been running up and it did have a breakdown, but it quickly shot back up, broke back up above its track line. And even though the candles flipped red, it's still got green dots, meaning it's again, on the verge of potentially flipping back green again. So it's a neutral-ish signal, but it too, like Aero, is showing relative strength compared to a lot of the rest of the crypto market. So yeah, I mean, it looks good.”

“I don't know what that means in terms of over the next three to four months, but it was a technical change that caught my eye, and I wanted to call it out. Moving on to Ethereum. I mean, Ethereum doesn't look as good, even just as Bitcoin Cash did a second ago. Like Bitcoin Cash, nice solid rounding up pattern. We're seeing the red dots disappear, the green dots reappear. If we compare this to ETH now, you know, yeah, it had a bounce, but it's just kind of red, red, red across the board. No real bottoming signals or reversal signals. The only two that showed up were immediately invalidated.”

“We did have a reversal signal here that did not get confirmed. So we've had some noise here in terms of bottoming slash reversal signals, but they're just not really holding up. They're still proving to be just kind of noise thus far. We do have a nice bullish divergence on the RSI. So this tells us at least that the downward pressure is waning some, but that's about all we have to go on here with Sui at the moment. And that's unfortunately not a ton. So looking at Tron, Tron's kind of had a nasty correction too. We know Tron has been generally stronger than most, but it rolled up and then reversed and kind of ran right back down to its lows again. So I'm not sure what's going on there, but Tron's risk off at the moment across the board.”

“Like XRP, it's actually setting lower lows. It actually looks worse than Ethereum and Solana and SWE. It's continuing to set lower lows and it's almost gaining strength to the downside. So XRP, not a great look, honestly, at the moment. And then the same thing with BNB.”

“Like it's largely been holding its sideways range, but it is starting to break down out of it to the downside, which actually is a little bit better than maybe even ETH and SWE. But and we've got some exhaustion here. We've got a DMARC9 and a potential bullish divergence. So we'll see how this goes, but it's still early days as far as that. So yeah, the majors, like I said, my bigger point, the majors are all looking pretty weak right now. Outside of Solana showing perhaps the most relative strength across the top 10 Well, not counting hype. Yeah, I think it's really, in terms of the top 10, we're looking at hype obviously as the strongest and then Solana being a distant second still, I would say, to hyperliquid.”

“Yeah, I wanted to just get on record my theory that XRP is absolutely going to have a VC pump at some point. I don't know when it is, but I feel like they always do.”

“Like the only portions of the crypto industry right now that lean into that idea of productive assets for the most part, don't really have a token related to them. Like it's stable coin adoption and like improving payment rails. And it's like, you can see adoption of that and you see no value capture in any of the tokens. Like you see more and more people using Ethereum, for example, the network, but it really does not correlate to the price of the token. And you've been starting to see some like true OG ETH believers start to capitulate under Ethereum. Like David Hoffman from Bankless recently sold his Ethereum this week and he's like, I'm bullish on the network. I'm just, the asset itself is uninvestable.”

“The orange line here is at the end of March, March 31st, right? The entire curve has actually moved upward, right? In other words, every maturity, every length of the contract per GPU hour, a price has gone up. Not only that, the curve has also become like on the long end, almost seemingly a little bit in contango, right? Like, you know, sort of no longer downward sloping. What that means is that, you know, cloud providers, renters, the landlords of AI, you know, clouds are feeling comfortable and not, you know, giving these long-term contract discounts and just letting short-term contracts roll over, I saw that they have an opportunity to raise price again.”

“It seems to me that the big geopolitical or social political risk would really come into play if you had a large number of unemployed men that had nothing better to do with their time that have a riot basically. So it seems to me that we need to watch unemployment rates carefully. Am I on the right track there and how do the numbers look?”

“This was another smart way of doing it, because you cannot make computer chips and semiconductors without helium, and 75 percent of the helium going to South Korea and Taiwan is coming from Qatar. And it just happened that at the beginning of the war, the plant that make the LNG and helium in Qatar was destroyed. Among all the plants, all the factories, all the refineries in the Gulf, in all those countries, that particular plant that produced the helium was hit and destroyed. So now Asia is without helium. They have storage, but if this crisis is going to continue, of course, that storage is going to run out. They can do recycle, but that recycling cannot continue forever.”

“So they wanted more than just little things. They wanted something larger, way larger than what's being negotiated. And they want this to last longer. So they don't want to just to end next month and that's it. Those guys are in for the long term. And that's why they are using it right now. And again, that was not part of the plan, and that's why the Trump administration is struggling with them.”

“I think crypto is particularly interesting because it was a big question even coming into this year or coming into this current regime with President Trump, who was going to win, had the Democrats won, I mean, we would be in a completely different regulatory regime for crypto, almost certainly extremely hard to predict that. And it does go back to those ideas that we talked about earlier about liquidity and why it's so important and so valuable because you can't avoid these, you can't avoid risk, but you also need to be aware of the swiftness that change can happen.”

“And then I wanna also reiterate too, I've said this a few different times in the Discord, but even if it does pass, which we need it to pass, but even if it does pass, that doesn't automatically mean there's this instant influx of liquidity, there's this instant catalyst to rocket Bitcoin into a new bull market. The Clarity Act passing isn't suddenly gonna give retail a bunch of extra money to go buy Bitcoin. It's not gonna... If anything, it's just gonna give TradFi... It's gonna create a more investible environment for institutions to participate in crypto.”

“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 over on the margins by letting US banks kind of safely handle them, it lets the organic demand that's already there keep growing.”

“Samsung is expected to print more than a trillion in free cash flows over the next three years. Samsung is worth roughly a trillion. So they can buy back the entire company over the next three years, in case those assumptions hold true. That's bizarre. Micron is more or less the same story, and Hynix the same. The market is still very convinced that some of these memory names are cyclical. And I'll just add one thing in relation to that. Next year, 2027, to the best of my assumptions of the more than a trillion spent in capex, the projected spend in capex from the hyposcalers, around 75% of that will go to memory chips.”

“So memory chips are currently, and I stress currently, way more valuable than GPUs. NVIDIA is priced as a way more stable company than the memory companies. I think that assumption may be wrong. And the jury is definitely still out on that story. But everyone I talk to with solid understanding of data set of setups, etc., they tell me that memory is more important than GPUs by now. And the more we accelerate the agentic economy over the next handful of years, the more memory we need. Agents need memory. They need memory a lot more than they need logic.”

“So clearly, memory is the input into GPUs, and all these models are super memory hungry. And generally speaking, with longer context, longer conversations, the context grows with memory. That's clearly the reason why memory, as far as storage, you're generating tons and tons of data. That all just demand is not catching up with, supply is not catching up with demand. And it's not surprising that price is shooting up the way it is. But we also know that shortage and high prices are always the model of innovation. So unsurprisingly, we're seeing algorithmic innovation, no less from the recent Chinese models like Kimi and so on that are actually making sort of improvements to memory efficiency.”

“You know, there's started to be talk of availability of memory from China coming on to the market and that sort of thing. But it sounds like, yeah, regardless of that, you know, Jauvin's paradox and those ideas still hold true. And regardless of these, you know, marginal change, obviously, it can feel especially volatile and sensitive when you have these, you know, memory equities that have just ran like they have, like any sort of marginal shift. And just with the amount of like leverage positioning, it feels very intense in the short term. But what you're saying is that regardless of that, like if you zoom out a little bit, you know, these are pretty small changes on the margin.”

“Like obviously the big runners have been the DRAM trade and the memory trade. And you're starting to see like Chinese supplies start to come on. You're starting to see substitution effects start to come on. More efficiency from the inference providers. And then now add on top of that is, I don't know if you guys saw, but today there was a new Chinese open model that just came out, Quinn 3 And its capabilities are right up there at the frontier models, like encoding this Chinese open weight model at a fraction of the cost is similar capabilities of Fable 5 So that is like, it's great for the consumer.”

“Definitely not a valuation bubble. For memory, it's gotten so extreme that many people view it as unsustainable, where if Apple has to raise the prices by several hundred dollars because memory prices are so high, you know, memory prices should go down. I don't know if they will anytime soon. I think they're going to keep on going up for this year.”

“You do it with one purchase of a mobile phone, an iPhone or an Android phone, and therefore it's very cost effective. And that's where the money came from to make Apple again now the most valuable company in the world, if over $5 trillion. So we're going to divert a lot of our spending to it. That's where the optimistic part comes from. That's why Larry Page said in late 2024, I would rather Google go bankrupt and lose the AI race. Meaning all the Google products that we love, search, maps, cheats, documents, you know, and the like, we're not going to be using those in the future.”

“So you kind of becomes this backend thing. How does that work? And it may go to some kind of usage based model. And so, I think, I almost kind of in my head, I'm like, is this like the new real estate sector? Like, that there's, it's kind of okay, and, but there's kind of a structural change underway. And we don't know how long, the other problem is people go, how long are they going to stay derated? Like some people will say, look, time will prove me right, that the software company is fine, and the business model is going to be fine. But one uncertainty is no one knows how long that is going to take. And the feeling is every year, the AI is going to get smarter. And so the bear case might actually be improving with time.”

“There's going to be so much selling, it's not going to do well at all. And normally, like some of the times, the pundits are, that's too easy, it's too easy, but like literally, SpaceX just goes down every single day and it's still not cheap by any metrics. And I mean, literally, okay, if data centers in space are going to be a thing, like buy silver, because the data centers need way more silver in space and they have to disintegrate when they go back into the earth, so they can't be recycled, which is key for silver.”

“Like there's no valuation floor. I mean, I'm a fundamental guy in deep of my heart. There's no fundamentals. There's no valuation floor. I mean, the space business loses money. The Starlink business makes a lot of money, but then they're spending so much money on the data center business, which is a new thing. And look, Elon Musk is the best hardware person in the world. I'm not going to bet against him there, but it's just that there's nothing in the numbers to say, oh my God.”

“The other thing I would say for us is that one of the best elements of the data center investment opportunity is because of that, the nature of those credit tenants, the ability to put material amounts of leverage on it is attractive. But the core, you know, open-end universe of real estate funds generally operates at pretty low leverage. So most of the, one of the main drivers of benefits to drive returns, core real estate investors don't really do because they're not going to put 75% leverage on an asset. And so it just, when you add them all up, we just have found more compelling opportunities given our size and scale in other sectors, like industrial logistics, really driven by e-commerce, you mentioned senior housing.”

“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. 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 being cost effective to build data centers in space rather than on the ground, I'm having a really hard time buying it.”

“Longer term, like you mentioned, I think nuclear is a powerful solution. Ironically, part of why SpaceX has such a high evaluation 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 challenge is that that's eaten up by the launch costs and the lack of ability to do maintenance in space. So, a SpaceX bull would say that the launch costs will come down and make that a viable solution whereas the bears would say in any sort of investable time horizon, that's not going to happen.”

“But I think that's the layer, the cake of that like state capitalism component and how it lends itself that, the big bet being made here is if you just zoom out a little bit, obviously there's the race of AI and wanting to make sure we beat out China. Like that is one of the biggest priorities. And part of that is also funding the energy like that you mentioned and having a heavier hand in terms of capitalism. And then there's the other side too, which is just making sure we get to that other side in one piece without too much volatility, which brings forth what we're starting to see now in terms of this Yen Intervention.”

“And what makes it work for us is we are the dominant player with the computer, whether it's the hardware, the software, or anything else associated with it. If we lose an important part of that to China, then we are at their whims and their beck and call. And that context window that you depend on doing your job with, you might need permission from China to use it. And we don't want to be down that road.”

“And then they rolled it out, then they banned it for three weeks, and then they rolled it out with a bunch of guardrails on it as well, too. So I still think we're six months ahead. We're just not allowing ourselves that when we make a breakthrough to immediately capitalize on it. But even if you accept that, in six months or in a year, the Chinese will be where we are right now, and we have to be ahead of them. And the problem you're going to face with that is that in six months or a year, if they've got a free version of the full-blown Methos model, for 95% of corporate users, and that's good enough.”

“I'm just letting you know that my overarching thing is I really don't like India's geopolitical setup. I think it's extremely vulnerable there. And also, it has one of the biggest weights for food, in terms of this inflation basket. We obviously live in a world with El Nino, a lot of disruptions, so that's going to limit our RBI's ability to do some policy. So I don't think the policy outlook in India looks particularly good. Real rates and these things will be held up. Sure, of course, there's a lot of growth.”

“Now coffee spent roughly eight months in a brutal bear market, falling about 44% from its October peak. By the time it bottomed, the trade had been completely abandoned. Large and small speculators were both sitting at their one-year positioning lows, with real short positions on, not just reduced longs. And here's the tell on the other side. Commercial hedgers have gone unusually exposed, barely hedging at all. When the producers themselves stop paying for protection, they're telling you something. There's nothing to protect against. Everyone who could give up already has. Severe weather and harvest delays in Brazil, renewed El Nino concerns and extremely thin global inventories suddenly challenge expectations for a record crop.”

“It's up more than 2% today, and it's working back towards the top of its range. To me, that makes it an interesting long continuation pattern. Lamentum is turning up, and there still appears to be some room left in the positioning. What I'll be watching over the coming weeks is the retail side. The small specs start piling in on top of funds that are already this long. That's when the trade becomes genuinely crowded. The fuel starts to run low, and the long side gets more dangerous. But for now, price and positioning are still pointing in the same direction. So the through line this week is that the crowd is leaning hard in a few very specific places.”

“Brent's point was that the market focused on the immediate energy and shipping disruption, but the bigger opportunity may come later through the knock-on effects on fertilizers, chemicals and other crop support inputs that were disrupted during the planting season. In other words, this is not just an oil story. It may become a food story into the fourth quarter and the first quarter of next year. So for this week's Trade of the Week, I want to position for that delayed agricultural tightening theme.”

“Commodity prices over the last year have started to diverge based on where they're traded or where they're used. You can now have a different price for a commodity in the United States than you do in China, than you do in Africa. And I think that's a huge change because that you can no longer just go with the lowest cost. You have to consider supply chains, you have to national security issues, you have to consider tariffs, and you have to consider national security needs. And so this is a dramatic change from the world that I started in.”

“But the four kind of different opportunities that I see are in the food space based on the fact that many ships did not get out during the planting season. That wasn't just a factor for energy, although that contributed to it, but also fertilizers, chemicals, other additives that would typically help a planting season yield a higher crop. I think the fact that didn't happen to the same extent that it typically does, sets us up for a potential food cascade later this year or next year. Now, again, these are not certainties, but I think there's a higher probability than there would have been otherwise, and I think there's a number of other factors that contribute this. I see opportunities in the food industry.”

“And it started telling it, say, late June, early July, but then all of the big hyperscalers, they rebounded massively after their quarterly earnings. Even after some of them raised their capex guidance, some of them in more creative ways than others. Having said that, when the market buys them after another strong wave of capex, it's not exactly like you're sitting at sea level and say, okay, we won't do any more of this. We'll probably do more. So I think we have another quarter or two at least ahead of us, where they'll continue to raise the guidance.”

“So, for example, today, LLMs using less than one third of the energy that we thought we need three years ago, just wait another four years, it's going to be like 10% of energy, but then we'll get to quantum computing, a lot of data centers will become playgrounds for children, because we just simply would not need it at that magnitude. So the first derivative are commodities needed, but this derivative has some choke points at a regular intervals, but it doesn't last terribly long. The second derivative are infrastructure that you need to build for that particular technology. Now, that has a longer lifespan. For us, it is data, it is chips, things like that.”

“You said agentic AI is kind of over as a growth factor of semiconductor AI trade. Tell me about why you said that.”

“Yeah, I mean, I will say the backstop that NVIDIA is providing, it does seem like the companies are going to use that. And I think CapEx is going to go up by a lot over the next 18 months.”

“The enterprise part is what eats the profit pool of horizontal SaaS, whatever consulting or the middle layer. That eats the profit pool. The consumer tier is very hard to make money because it will be open, and then the top is where the money is made. But that's a much smaller, I think, addressable market. So that's in my mind how the end state looks. So if that's the end state and you work backwards, like why do companies like Microsoft desucceed? I think it's more, to your point, the trust is because they have the complementary assets, because you trust them with your data and their cloud.”

“So that's why they have to wind up giving it away in any great degree. But you're right. Energy is that measure. We don't have enough of it. And China does. And when we try and alleviate that problem, we run into all kinds of problems. Because when data centers are built, everybody comes in and says, well, my electricity bill is going to go up. And they say, no, we'll build a gas turbine power generator right next to the data center to power the data center. And everybody looks and goes, well, that's going to take five years of EPA and state reviews to even allow you to do something like that. So yeah, we are constraining ourselves with this. And the fear is, is that if we wind up losing this race, it could be very detrimental.”

“Who's got enough energy to, once you deal with the capex problem to build those data centers, you still got to actually power the data centers somehow. As you said, maybe there's some magic technological breakthrough that hasn't happened yet that somehow allows the data centers to run on less energy than they've required in the past.”

“Nvidia is on the tape today guaranteeing $250 billion of, I think it's OpenAI, I think it's OpenAI, some sort of data center here in Ohio, actually. And interestingly, Nvidia is down on the day, last I saw, right? So it's Nvidia is starting to trade down on guaranteeing other people's bonds. That's another signpost, right? That shouldn't be happening. And ultimately, I think Treasury or Fed will take over for, Nvidia is guaranteeing these things. They'll take over for SoftBank, take over for and just backstop the whole thing. And it may not even be that expensive per se, but I think that's what's going to happen.”

“Now, you talked about the changing nature of the stimulus that we're going through right now compared to COVID, where it was sort of direct to consumers. I mean, do you view there being a potential that all of this AI spending has become such a big driver of the GDP growth of the US economy at this point that it is in many ways the stimulus and it will be backstopped.”

“And there's a lot of risks that's being held in equity form and in a fixed income form. And in our view, sometimes probably not perfectly efficiently. And there's a lot of, I think, risks that's now involved with AI compute and GPU income. Data can be handled with traditional financial instruments that is well on the historical financial markets or capital markets. So to the extent that on the natural hedging side of the data providers, other providers, compute providers, all the companies that are looking to buy compute, compute futures contracts is a very natural way to hedge out that risk. And maybe actually, in fact, to help you be a bit bolder in terms of at the outset, how much compute you actually acquire.”

“So what's going to happen is that orchestration layer is going to accrue a lot of the value. Companies are going to retain their sovereignty by basically making models more substitutable. And some tasks, low-value tasks, may be going to be routed smartly towards the open models, cheaper models, and then the high-value tasks maybe will be using frontier intelligence. To that extent, we expect there to be a general transition away from the current paradigm, even more so with inference becoming an ever bigger deal that most of the AI computing minds can come from inference, and the funding of a computer can come from many, many enterprises, companies that will be, I think, looking for compute.”

“So the market, on the one hand, you have sellers of compute, these new clouds, cloud providers coming under the market. They want to have more certainty. And their lenders, their backers want to have more certainty over their revenue. And how do you actually have rest certainty? One natural way is to actually, just as you have with any commodity market, using futures contracts to lock in future revenue. On the other hand, you have the buyers of compute and the different ways in which you can work out some companies, maybe they don't directly buy compute, maybe they just buy tokens, but somebody will actually be buying that compute.”

“Eventually the market evolving in that direction now, of course, along the way, if you talk to your cloud providers today, there's going to be a lot of pushback. Nobody wants to be their product to be referred to as a commodity. And but I think the way I see it is that there's always going to be substitutability, right? If you tell me that your product is so unique, how do you win customers from someone else? That's how you win clients away from someone that's with someone that... So there is going to be a substitutability when it comes to compute, but it's not going to be perfect.”

“So this is going to be a leading indicator. And I wrote a post at the beginning of June saying like, this thing seems to be plateauing a little bit, and the use-correcting situation is such. And this thing could be taking a break before a length like a lag up. Maybe we see like a super powerful model and it just runs away with it. Or there's a possibility this thing actually mean reverts a bit as, you know, people become more rational about the cost of these things and, you know, sort of substitute between quality and cost. And indeed, that seems to have been what happened.”

“Where the funding of AI and the demand of AI becomes a lot more broad based. And, you know, you can have a lot more sort of smart routing of models, even as the inference market explodes in size, it becomes a much, much bigger of the overall pie of AI demand, AI compute. So this transition from one phase to another was always going to be a bit rocky, right? And even potentially runs in the risk of a bit of an air pocket where, you know, sort of on the one hand, the capex and ROI for the current paradigm doesn't show up quick enough. On the other hand, near the new phase, like maybe the biggest enterprises takes them a while to find that workflow and pick up.”

“Like I think, you know, this idea of token maxing was always the idea you want to actually let people experiment, right? Because in complex workflows, large enterprises, you don't really know what the use case is going to be. And also the models just were not, didn't really become smart enough or good enough until this year with agentic and everything. So you need token maxing. But token maxing is fundamentally at odds with expensive tokens, right? Tokens are so expensive and also throttled. So you need it eventually to get to a state where tokens are cheaper. And this idea of, you know, smartly routing models, you know, the work, like that's always going to be the case, right?”

“Meanwhile, you can have some of the workflow for training shifting away from H100 towards the newer chips, right? And as those chips come online and depend availability, so those things can fluctuate a little bit. So that's how I read at least that on demand indices for...”

“That just tells you just how robust, you know, inference demand is. And going back to what we were saying earlier about routing different workflows and whatever, there's just a lot of, I think, low-hanging fruit, easier asked tasks, inference demand. As this overall demand, you know, grows, people become familiar with AI. A lot of those things are being routed towards the workhorse chips, right? So I wouldn't be surprised if, you know, all the most widely deployed hopper chips, which will soon become no longer the most powerful chip for training and will actually become a new workhorse, right? You will see a similar pattern to follow here.”

“Every single time, we saw multiple providers of actually raising prices. In other words, it's not just like a one-off thing. You know, at least in terms of compute fundamentals, there is actually a pretty strong indication of firming demand and supply being a shortage that for the price has to adjust.”

“I think you see a similar picture on the right, there's the A100 and it's circularly going up, and maybe not quite as aggressively in more recent weeks, but generally holding up pretty strongly. And then the B200 is also generally moving up, but then there's a bit of a fluctuation. So the thing with B200, and also I think just think about the ship dynamics generally, is that B200 is still being deployed. Most of the data centers are still just bringing them online. Availability is not quite as high as the UJ100. So there's going to be some sort of fluctuations. But generally speaking, I think the picture that emerges qualitatively is very much in agreement.”

“You have this really powerful way of engaging with the AI, where you can ask AI to go and use agents to do things on your behalf. You can interact with what you're looking at on the screen and just use voice to do it. And that also means it's a ton more data, right? So every time you have, and we haven't even scratched the surface of video, right? Like, you know, so I just think like, you know, every memory is ultimately a commodity. Like, I don't care, it is a super cycle, but super cycle of a commodity can also go pretty crazy. So, yeah, so that's how I think about it. I'd be very, very shy about trying to make any sort of prediction about when it will end or how, you know, the direction seems pretty clear to me for demand.”

“That's a good segue into talking about NeoClouds and GPU rental index. So this is another index from you and your team. Walk us through how to think about this, and what does it say for the current landscape?”

“I feel like people look really closely at this because, of course, one of the largest companies in the world right now is NVIDIA. So obviously, demand for the GPUs is very correlated with the performance of NASDAQ and the total stock market. So obviously, if there's any sort of concern for demand for GPUs in the build out, that could have some pretty significant shockwaves throughout the system.”

“And this is moving up through its 50-day moving average, and stuff like Apple's hitting an all-time high, you know, you could see a squeeze here in a lot of the hyperscalers, particularly like you said, Felix, one of the interesting things is, you know, if you do have these models that are way cheaper, then maybe the build out isn't as, you know, expensive and CapEx goes down, and, you know, it changes the whole game. So you could see all the draconian scenarios for hyperscalers. Maybe their spending goes down, their stock squeeze here. So that's, that's kind of a potential thing. What's the last thing people would expect would be the hyperscaler squeeze?”

“I mean, it started with Mag-7, the hyperscalers. They've, again, we've been covering this for ages. They've been the laggards and they're shelling out cash flow. They're levering up. Their cost of capital, cost of financing is rising. Their spreads are widening. And all that money has been flowing to these memory chip, et cetera, who are now printing 80 percent margins. Those are going to get eaten. But it's spreading to the rest of the supply chain. And now you're running into the open source competition. You're reaching an upper bound of how much capex these guys can do. They're already negative free cash flow, already levering up. You can't just continue that infinitely.”

“One of Anas' strongest conclusions was that natural gas, and especially US LNG infrastructure, stands to benefit as countries prioritize secure energy supply, while AI and data centers drive another leg higher in electricity demand. For this week's Trade of the Week, I want to express the theme through Cheniere Energy, symbol LNG, one of the cleanest US listed ways to participate in that structural build out. From a technical perspective, the timing is starting to look interesting.”

“Not only because of the Hermes crisis, but also because of the demand for power, for electricity coming from data centers and AI. So you combine Hermes with data centers and AI, and you can see the massive demand as a result of this. Who are the winners? The first winner basically is Natural Gas and LNG. It's mostly LNG. I am very big on LNG names. The other one is coal. And the reason why coal becomes very attractive here, not only because it's cheap, it is a domestic source in most of the consuming countries that have been affected by Hermes. And we got to compare where coal was heading versus where it's going to be.”

“Like you said, Max, I agree, these companies have CapEx plans that they need to fund that are trying to optimize their own balance sheets and their own financing costs to go do so. It's much clearer what they are trying to achieve with the capital. Now, what the market's job is, is to figure out whether these projects will have a good return on that, on the capital and capital allocation for these companies becomes absolutely critical. But yeah, it definitely seems like it's an arms race to make sure you're a leader in these spaces. Right now, you need a massive amount of capital to do that.”

“Blackstone recently launched a successful externally managed listed vehicle to take advantage of this buying opportunity. I think they raised $2 billion. And that's the biggest one and the only one of its kind. So the biggest and the most successful global private equity firm raised a couple of billion dollars, which is very impressive. But that's 2% of what's under construction today. So the ability for vehicles to absorb and buy all this stuff will take longer than everyone's business plans because in order to generate a 20% plus return, most of these business plans assume you buy the land, you lease it to a hyperscaler, you build it and then you sell it to someone. I think that sale process will take longer than people thought.”

“It's creating demand for more data center space. But like building and delivering these things is essentially like, you know, that is that is not a futuristic expertise, like exercise that requires municipalities approving it. It requires utilities building power lines at water and sewer. And you're seeing increasingly some local communities object to the size and scale of these facilities in their communities and slow down the construction of that. But also you have basic supply chain needs. You have work challenges where there's simply like more demand for labor in certain places.”

“Several of your investments are indirect beneficiaries from the data center boom because they're logistical, but you currently don't have any direct investments in data centers. And Josh, I think what you're saying is that even though you're one of the largest real estate investors, that the check size is just too high and for you to remain diversified. So that that is really striking to me. It just shows just how large the capital demands are and kind of just how how kind of crazy it is.”

“Tell us about, you said it's going to take longer than people expected. You are seeing headlines of data centers are being delayed.”

“So, like, that's what I've been up to is, I, you know, on a multi-year basis, I think like these ideas of like Jauvin's paradox still hold true. Like, if we see more memory efficiency, like Fable, this model that just came back, like nobody can even use the damn thing because there's just like no compute available. And there's like these, like all these, like things that says, like if that's about to go to use this credit, like there is still this, these bottlenecks. And like new use cases, I think, will come up. Like that was the whole trade of going from January to today. It was just like, oh, wow, suddenly we're in this agentic world and we need 100X the amount of inference compute than we thought six months ago.”

“I think it's headed to a trillion in a few years or maybe, you know, one to two years. What are the risks that it stops?”

“That's not to some degree, that's like one-off spend in a data center, and it could actually decline quite meaningful if the spending stopped. One thing I'm seeing on the other side, though, is cloud revenues are ramping quite a lot. And I know we're kind of dinging the hyperscalers right now because they're spending almost all of their cash flow on data centers, which are yet to be completed. But when you just look at the earnings of these companies, like the cloud revenues are stepping up quite meaningfully. I mean, as you would expect, they're like, oh, there's this thing called AI, our customers are all using it, they're using a lot more every month, and we're building these data centers because we don't have enough capacity for it.”

“We're building AI, we're building data centers, we're building robots. And you're like, if you think of that, all those computer peripheral stocks, all the chips, laminate boards, you know, electric server motors, batteries, EV battery, all that stuff that's booming in Taiwan, South Korea, China. If you had this kind of bigger perspective of a society that was much more robotic, had been fused with AI everywhere, kind of like Cybertron, just to imagine it. I'm like, that, if you're, if someone from the future said, look, you are building out an AI economy, a robotic economy, all this hardware stuff that is booming is going to continue. It's the most important trend of the next 20 years, and it's going to continue to boom.”

“And if you had the second derivative of data center, CapEx go 400 billion, 600 billion, 800 billion, a trillion back to 750 And some question where, you know, whew, whole hardware space would, you know, you wouldn't be trading 40 times on connectors to a lot of that stuff. I find it concerning. You're putting very high multiples on certain subsectors, very high multiples on what is a highly cyclical CapEx good. That's kind of like a one-time.”

“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 a 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.”

“The short answer, I think it can continue longer than people think. 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, well, 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.”

“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, production, not just electricity, but also just heat for things like steelmaking, 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.”

“And there are some studies that have shown, obviously right now data center water usage gets a ton of attention. But if you compare it to say water for almonds, just how many people 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 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 necessarily clear data that says, 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 actual numbers.”

“And so you're taking trapped gas and you're making it available to data centers. And tourmaline is in discussion with hyperscalers right now. I think this is one of the best trades over the next five, ten years plus the political backdrop. Carney in Canada relative to is far less hostile to this investment philosophy. And the last thing is with the war. One of the points that the big hedge funds have been making to us in the chat, this war in Iraq and the Strait of Hormuz and LNG, what it's doing, it's making US natural gas and Canadian natural gas much more valuable. Because if you're a global buyer of LNG, and your gas has been trapped in the Middle East, you're burnt, you're not happy. And it's almost like America attacked Iran.”

“And it feels like the second, you know, if you just think about the trajectory of that AI build out and the hyperscalers of the last couple of years, like the first phase has been mostly just funded from their free cash flow that they had that, okay, instead of like throwing it into buybacks, we're going to use that for capital expenditure.”

“The other one was I recorded in September, October, November of 2024, I recorded a full hour on the AI data. The Bitcoin miners pivoting to AI data centers.”

“There's some sectors I'm getting very excited about for the reasons you mentioned, the fiscal policy directly supporting and investing behind some of these power and energy things, the geopolitical issues are not going away, all that.”

“If you're worried about your electric bill, they'll bring their own power. If you're worried about pollution, there's not really a whole lot of pollution with them. If you're worried about noise or unblightness, they'll put them in out of the way places. And oh, by the way, they're more than happy to pay really nice real estate taxes to your county or your city in order for you to fund your schools and your fire departments and your police departments as well too. So I think at the end of the day, a lot of this pushback is once we start to understand it, once we start to see the need for it, it'll become like the fracking argument. We tried to ban fracking in Pennsylvania, just like New York State is trying to ban data centers right now.”

“If you want to build something these days, you're going to have to have Japan build it for you or China build it for you. And China is not going to be the one to build it for us for obvious reasons. Korea can help on the margins. Germany maybe can help on the margins, maybe. But if it's not going to be that, in America, just we waited too long to do this. We don't have the ability to make stuff without just crazy inflation. And so the Japanese have a major role to play. And I think that is, you know, that I don't think that's a total shock to anybody listening, but I think that is still pretty early days. So I think Japanese industrial equities also do very well.”

“At the start of the year, Cheniere rallied roughly 60 percent into late March, and then spent the next three months in a 25 percent correction lower. Now, through July, the stock rallied, reclaimed its 50-day moving average, and broke above the descending trend line from the March peak, suggesting that a correction may have already run its course, and a new bullish phase may be starting. With LNG closing at $255.83, the cleanest expression is to simply buy the underlying shares. But because this is still early in the breakout, I want to add a short-term protective put to make sure the entry holds. The technical failure point sits at $240, so I'm looking at buying the $240 strike to put for $4.55, giving us 36 days of protection.”

“And you can see that coal companies basically are going to do extremely well, because linking those sources to energy security is going to benefit all the sources, not only solar and wind, they are going to benefit natural gas, even oil and coal. And by the way, when we talk about oil, we don't have that much generation coming out of oil, about only 4% of global oil demand basically is used in power generation. But this morning, we have very big news out of France, that oil use in power generation increased substantially, because wind stopped because of the heat. And this is the important point people have to realize, that the weather is hot simply because you don't have wind.”

“Let's drive straight to the trade of the week, Patrick. Anas laid out a pretty compelling case, energy security, geopolitics, an exploding power demand are all colliding, and US LNG sits right where they meet. How would you play that?”

“But we are seeing more and more signs of policy intervention, I think, that is going to not only increase, but become even more material. So we had a number of, obviously a lot of stuff from the Fed and the Japan intervention, and now the QRA news. So I think that probably explains the gold move. It explains why just inflation protection broadly, I think, has been doing quite well.”

“The pools with the greatest degree of liquidity as a protective device. But I think it's temporary because at the end of the day, to me, gold remains the ultimate safety assets. In a case of an absolute destruction, so to speak, where monetary systems melt down, where you have a situation where reset social and political systems, where you have multiple wars, I still think gold is the answer. Not Bitcoin or digital assets, they might just fade away from our psyche. But gold is an asset. I still think we'll have a premium. But it doesn't always behave, as I said earlier, the way you expect it. People shifted much more back into USD.”

“Well, gold delivered a decisive 4% breakout from its multi-month trade range, reclaiming both its 50-day moving average and its descending trend line. On its own, that would already be technically significant. But what gives it more greater weight is the breadth behind it. Silver, platinum, palladium, copper, mining stocks and even uranium equities all turned higher at roughly the same time. That kind of simultaneous strength across the metals and materials complex suggests this is not simply an isolated short-squeezing gold, but a broader intermarket rotation into hard assets. The first real obstacle now comes near the 45-50 area where gold meets a key Fibonacci resistance zone.”

“I just love this gold market on the positioning side, Patrick, because right now, large speculators are scoring 25 on the one-year view. So we think that's actually pretty low-tilted or bullishly tilted, but the raw book remains heavily net long, with 47.3% of open interest remaining bullish. So that means that any bullish price action will be supported by strong positioning in the gold market, and these bulls are just not getting shaken out of here.”

“I'm just looking at, like, I think the gold near, close to the gold's top was when Kevin Warsh was nominated by Trump. And I could say that's gold pricing in a more hawkish Fed. But if the hawkishness is basically fake, and he's not going to be that, that, that hawkish, maybe that, yeah, maybe gold stops going down.”

“I think gold is found on the floor, it's just going to be sideways from here. The gold mine evaluations are pretty reasonable, but we're going to need central banks to start cutting, right, for gold to really take off. So until we get there, it's probably fine. I do think gold plays a portfolio role as your stagflation in terms of multi-asset portfolio, right? Like I still prefer having some gold instead of nominal bonds. So you have some tips, some gold as your offset against your activity risk. I think that makes sense. The rest of the metals, yeah, I think we, I would say bullish, right, want exposure, especially, as I say, in this, there's going to be more geopolitical shocks. So having upside exposure will make a difference.”

“It's nothing to do with fundamentals at all. It's just the end of a meme like trading where every, again, everybody, every retail, every, you know, like my cousin, like people's cousin, sister, day trading at home, right? People got in and got out. I just think it's similar to like, I think the, the Semi move in May and June and July, right? People got in, got long, and got levered and got destroyed on the way down, right? So the signal is probably like where it was before, like the end of December, end of 25 was probably more like gold getting to a level that's reasonable.”

“Despite 10-year real yields reaching their highest level since late 2023, the metal continues to defend the 4,000 level. That suggests substantial macro pressure has already been absorbed. The Middle East creates a two-sided influence. Geopolitical instability supports safe haven demand, but the higher oil prices also threaten renewed inflation, initial Fed tightening and still higher real yields, which would work against gold. Technically, 4,000 is now the critical dividing line. If bulls continue to defend it and gold can clear 4,200, that would suggest that the market has absorbed the dollar and yield headwinds and is beginning a new advance.”

“Gold has gone down 26% from its Feb highs. That's almost $1,500 yet. Neither gross longs nor gross shorts have changed materially. We flatline on positioning all year. Now, the question is, what kind of move and goal we will need to see to see those large speculators to meaningfully reposition? And most importantly, which side breaks first here?”

“So the positive real yields, people have said, hey, sell gold on positive real yields. All my friends in emerging markets, they're like, when your debt to GDP is 125% and your deficit is 6% and it's growing faster than your receipts and your positive real yields are going to slow your receipts, the last thing you should be selling on positive real yields, on real yields rising is gold. You should be buying gold hand over fist because you know how it's going to end.”

“And they sold treasuries right alongside that as well. You can see that in the data. But the longer a war goes on, the less you want to own bonds and the more you want to own, the more you want to own gold. And also what this war has demonstrated, which is the Americans not only can't go to war on anything other than a weekend or, and as long as the 10-year treasury yield is below 4.7 percent, but even under those conditions, they can only go to war for a couple of months, and then they run out of defensive missiles and need China to restock them, and they can't make their own rare earths yet. And in those, with those set of circumstances, what do you want to own? The bonds of that country or do you want to own gold?”

“Look, equities are still down 30 percent from 2022 in gold terms, and they're down 40 percent from 2000 in gold terms. And I think that is, as long as China is China, I think that's the new regime, right? Where even if we want to beat down gold and sort of make a statement about the dollar, what are the Chinese doing? They're just showing up and waving it in every month more and more. And we can't afford to have a force majeure issue in London or in New York, in physical gold. And so ultimately, the Chinese are driving the boat on gold. Chinese are watching all this and going, there's a disaster.”

“And it is literally the way the system's designed for the yuan to fall against gold over time. So because that's how they're internationalizing the yuan.”

“And that's why, even though I would expect gold to sell off, as if any or all of these things go boom in the short run, I think gold actually would still go down because you're still a financialized instrument. I look at all these things and it's just so crystal clear, I want to have the gold position there because we know in two years, stocks higher in dollar terms, lower in gold terms. Gold is now the reference point to everything in my view, as a result of the untenability of all these issues, the untenability of Warsh.”

“Like you, if you want to own duration, own gold. Because gold is just a 0% yielding bond of infinite duration, finite issuance, and infinite face value. Why would you own a 10-year treasury, which is 4.6% yielding infinite supply, finite face value, finite yield? And I think it's more, central banks have gotten that.”

“You said it's going to just other bond markets just because there is so much issuance, but also central bank buying of gold has reaccelerated. There was a brief blip in March when I think people were selling gold to get dollars to buy oil as the price of oil went up, emerging markets in particular. But since then, buying of gold has resumed. We have stabilized a bit in the gold sell-off. Do you think that now with the crisis maybe behind us again, do you think we are going to start to see the gold buying pick back up and resume a resumption of the rally?”

“So you think gold purchases are going to continue to accelerate from China. Let's say this crisis does continue. I mean, obviously, they stabilized the price. They stopped importing oil. They sold a lot from their reserves. They don't really know how big those reserves are. Do you think that that's the lever that they can continue to pull?”

“Well, Luke's tactical observation was that gold had started rising along oil and interest rates during renewed geopolitical escalation. That matters because it may signal that the market is moving beyond short-term liquidation and beginning to price the longer-term consequences of war spending, fiscal expansion, and eventual financial repression.”

“At the same time, gold has already endured a major reset. From peak to trough, the correction has lasted roughly six months and erased almost 30% of the prior advance. A substantial amount of the excess has already been cleared, but the short-term trend has not yet decisively turned bullish. So, the objective is to establish long exposure without pretending we can identify the exact low.”

“Every time we've seen these two, three-day breakouts, they almost immediately fade and are under pressure of selling. Will we see that pattern repeat itself or will we start to see bottoming formations developing here? As of this moment, there is no new bull trend that can be identified. So we're going to see whether or not bottoming formations to start to develop here. The one thing that I do want to observe is that if this current rally that started over the last few days fails and we trade back to 4,000 level is a technical weakness sign that could open the window to a break to lower lows, which could usher in that retest of the 3,800 level.”

“That was from a starting point of the US was running surpluses. The thing that's been lost in all this with the war is like, we can't afford this. We were having fiscal problems before this, and there's nothing more inflationary and disruptive than war. There comes a point, yes, in the short run, there's reserve selling, and there is of gold, and that's knocked prices down, blah, blah, blah. But ultimately, the longer this goes on, the better it is for gold. In no small part, because we've seen the Chinese be able to be like, we have an alternative system. The CIP volumes, Yuan trade volumes, and the CIPs, China International Payment System, they hit an all-time record in May.”

“So it sounds like you think the turbulence is over in the gold market or you're just waiting it out?”

“When looking at gold, there's a lot of reasons to be long-term bullish gold, but over the last few months, the price action still remains decisively distributive. All rallies are failing. The selling pressure is still dominant. Now, we've established over the last three, four weeks a baseline around the 4,000 level, which is a key round number. And it will be very interesting going into next week, whether the bulls can hold the line there. Because a break of 4,000 could see short-term corrections head down to 3,800 or even as low as 3,600 for one last quick washout on the downside of gold.”

“And it shows up across all three trader groups. Both speculative groups in silver are scoring near the bottom of their one-year ranges. And commercials are only lightly hedged. And when the hedgers ease off, it tells you they see less froth left to protect against. Interestingly enough, gold shows a different picture. The gauge reads neutral, but large speculators are still heavily net long at 52% of open interest. So silver has been through the storm, gold is still holding its umbrella.”

“Yeah, I mean, if you look at like, I think people are over, like, overweight the 1980s for gold. So like, obviously, it was a great inflation hedge at that time. And if you look like empirically, it's really hard to find whether it is or not. Like, sometimes it is, sometimes it isn't. And then, yeah, with Bitcoin, it's interesting because it was kind of this chameleon that kept changing narratives over and over.”

“But I mean, they're kind of I know you can make the argument the gold run over the last year was just like a Chinese bank thing. And then if you isolate that out, like obviously Bitcoin has just been down in the dumps, but equities are all time highs all the time. And people would prefer to own a productive asset that's giving off like nominal earnings in a world where everything's going higher nominally because we're in higher inflation. It's just interesting that like those asset classes that weren't that were supposed to be designed for this moment aren't really doing that well.”

“But yeah, I have a negative bias on NASDAQ and tech, and a long bias on gold and sulfur, and those kind of fading the hawkishness trades.”

“So I don't know, it feels like a lot of things are coming together to me that it's just like, I want to be focused on trades that express the fading of this hawkishness, which to me is like gold is just a really good one. Also like the sofa complex.”

“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 4,000 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 timeframe, the dominant trend is this ongoing profit-taking cycle. So, the key level to watch here is this 4,000 handle.”

“Well, the FOMC dot plot reaction was swift and portends what could happen to gold if the Fed is forced to hike rather than cut at the September meeting. It does seem to now be clear that they thought that Kevin Warsh being appointed by President Trump would do nothing but cut, cut, cut as soon as he could. It seems like maybe that's not the way this is headed, or at least that's not the way the Fed governors are voting in the dot plot. I still think gold is set to rally spectacularly after the Iran dislo... Edit, please. After the Iran oil dislocation and associated knock-on inflation effects are really and truly over. I just don't think they are. I think we're a long way from this being over.”

“This bounce is certainly coming back to the 4,400 level. We have a declining 50-day moving average just above. Overall, we have not yet actually seen a bullish pivot in the trend. What I'm going to be observing is whether gold during selloffs doesn't make lower lows. Whether we start seeing structural accumulation developing that is showing signs that gold may be banging out of bottom. But I still think that this will be pretty much a summer story and a process that we have to still see play out. I won't rule out the fact that gold may still go and retest some of these previous lows. Overall, there will be another gold bull market, but I think it will line up far more with when we see a pivot in rates and inflation expectations.”

“Well, Erik, on the show for over a month, we've been talking about how distributive the price action has been on gold. And so this last one week was a definitive acceleration of that selling. What's clear to me is that we went through a two-year bull market that was an extraordinary impulse higher that ended with a beautiful parabolic rise at the tail end. We're now six months into a correction, and at this stage, there is a lot of headwinds. You have higher interest rates, a rising dollar, things that typically are headwinds for gold. And then probably no imminent turn in those trends. And so at this stage, expecting gold to continue to remain in this consolidation phase is the path of least resistance.”

“We're taught to think of gold as something you want in your portfolio as a hedge against big geopolitical events. If something like the Iran conflict happens, gold is going to go up, except for it went straight down. What gives, first of all, with that? Is that about inflation expectations? Is it going to continue?”

“I think it's because of those rate cut expectations, exactly as you said, but here's the thing. I agree with you completely that for a long-term trade in gold, it's going to be just an incredible buy and it's going to pay off in spades. But is there a chance that it's still too early? And the reason I say that is, it seems like it's pretty darn clear that it's the Iran conflict and the Hormuz closure and probably some of those central banks in the Middle East selling the gold is playing into this. I don't think this Hormuz thing is over yet.”

“We've already taken out 4100 to the downside with the low print so far as of recording time at 4047, 4047 That 4100 support line ought to be good for at least a little pause here, maybe a bounce. But if Hormuz remains unresolved, I think there's plenty of room for lower prices still. And frankly, if we were to see the Hormuz crisis extend all the way to the end of the calendar year, I don't think 3000 is out of the question for the gold market to test that 3000 round number support by the end of the year. Now, that would only happen if we were to see a prolonged extension of the Hormuz crisis, but I don't think that's out of the question.”

“And the gold miners now have really sold off for a bunch of different reasons. One important one is we've gone from three rate cuts to potentially one rate hike in terms of the SOFR futures or the expectations market of the Fed bonds. So when you to go from three rate cuts to one hike, that knocks a lot of steam out of the gold miners. But the best trades in the world, Erik, the best trades of our careers are what I call the hot money flush. So I love a sector that just had what we call a hot money flush. Think of a poker table, a lot of weak hands at the poker table, and that's the gold miners. So in the third, fourth quarter and the first quarter of last year, so many tourists, Erik, so many tourists came into the gold miners.”

“When front-end yields on T-bills go up a lot, it sucks money out of gold. Because if you can get 40 grand a year in a one-year T-bill, instead of 30 or 20, people just naturally will buy that. But so that's what creates the buying opportunity. So yes, probably a little early here, we're buying in thirds and quarters and we're looking to add on further weakness.”

“I think gold and Bitcoin are telling us something wicked this way comes.”

“Is this is this is, you know, the outcomes raiser is Japan and Korea are heading towards debt crises that are going to sort of, it's not good for anything. Except maybe the dollar in the short run and ultimately really, really good for gold.”

“I think gold and Bitcoin are telling us something wicked this way comes for risk assets. And so near term, I just, you know, especially, oh, by the way, you know, into valuations that are in complete and total lava land in America. I mean, just, they're silly, silly season. And what do I mean by valuations in silly season is, there's something called the Warren Buffett metric, right, which is total equity market cap over GDP. And that's been in silly season for eight years.”

“Having said that, as I've alluded to for probably a month or so, I don't think we see any major tightness in oil markets. If you look at the dated oil prices, it's between friends roughly flat versus the front month future. So, in that sense, if you have a physical market that is roughly on par with the future one month ahead, the physical market is not telling you to bring those barrels forward, if you know what I mean. They're not telling you to bring those barrels out of storage. And that's been my main message since we've approached the second memorandum of understanding that there's actually not a lot of risk premiums to price out of the energy market right now because there's no panic.”

“In 2024, you said that war style or Cold War style conflicts are economically manageable unless they displace global supply and demand curves. Well, I'm guessing that the Strait of Hormuz closure is going to satisfy your definition of dislocating those things. So, I want to revisit that now. Did the Iran War crisis, obviously, it crosses that threshold. So, talks are now resuming. Oil was down, what, I don't know, more than 10 percent in the last couple of days.”

“Well, crude oil spent the week giving back much of its geopolitical premium, as hopes for a sustainable peace deal agreement pushed prices back toward $75 at the time of this recording. But the bigger issue is that the physical damage has not disappeared with the headlines. Global inventories have been heavily depleted and Saudi Aramco has warned that rebuilding them could take as long as 18 months. That creates a structural floor beneath the market, even if a truce holds. The question now is not whether a peace, the question is where oil ultimately settles once that geopolitical premium is removed, but the inventory deficit remains. The market is now searching for that new fair value.”

“And we talked about this last week, and it's worth reinforcing this point because even after the recent 35% rally in crude oil this past month, large spec positioning remains at multi-year lows. So the market is still bearishly tilted this market as we move into fresh negotiation on the war front.”

“As we rightfully said, when the attack started again, the market will never discount the same event twice with the same kind of panic. Take this example, the spread between the Houston Argus oil price and the WTI. Basically, a spread that tells you whether the export price of US oil is higher than the domestic price amount. That spread will get very elevated if a lot of foreigners are willing to bid for the US oil exports. We didn't see that panic this time around. We saw the panic back in March and April. We didn't see the panic this time around. Probably as a lot of people have gotten accustomed to this sinus wave war, and people are just probably deciding to wait and see instead of panic bidding.”

“What I'm trying to say here, Mikkel, is that the market and especially the oil market has found ways to maneuver this by now. Yes, we're talking about a sinus wave war, but the relevance also dissipates over time. Sure, we'll get the waves, but it will be less and less and less important, in my opinion.”

“Yes, and I think that China has a huge stockpile of petroleum reserves, and they were willing to draw that down. But I think that we shouldn't let that excuse be for complacency. We were saved by stockpiles going down around the world, particularly in China. But number one, we can't rely on that forever. And number two, it has to be replaced. Theoretically, the oil straight away can be sold tomorrow, but over the next two years, we're going to structurally bull market in oil because China is buying back all the oil.”

“We would need to average, essentially average 120 for the rest of the year to get you to recession or else the same. Obviously, that's a big assumption. Whereas for example, in Europe, it's somewhere between 110 to 120 Brent. If you average that, it's like at the tipping point. So there's different sensitivities to your point because of these natural advantages and how much redundancy there is. But we've seen clearly a lot of reserves got released. I think we've all been surprised by China's role. I don't know why China would be willing to do that, but I think it's probably pragmatic.”

“So the impress by we, but I think the whole point of the reserves that they're like a one-off supply buffer. I don't think it's going to be such a strong bid to push your prices. The whole point of reserves is you just wait until prices are so bad, you step in, you just get filled. But I think the China definitely is real because I remember the last two or three years, people kept asking me, do you think China will try to make a move on Taiwan? Because people are looking at China's oil, they're like, the economy is doing so badly, why are they buying so much oil? Like literally non-stop.”

“And what I'm arguing, which I think is correct, is it's the price of oil that's driving the war. It's the other way around. So we're in, the question then becomes, does it ever become a dependent variable? In other words, we last week were pushing $100 on Brent. And what happened when we got to $100 on Brent, if you go back to last Friday, the president called off the airstrikes over the weekend. And they made up a lot of, oh, Iran called and they really, really want to make a deal. And he called off the airstrikes. And then Tuesday, Iran fired a bunch of missiles at American bases in Jordan.”

“The question then becomes, if we do trace back to $100 on oil, and he does follow this pattern that we've seen, where he starts to say, making noise, that Iran called, they want a deal, we'll stop bombing them, hopefully we'll get a deal. Does it become the dependent variable? And the question, meaning that no, at this point, it stops working now. The price just keeps going up and up even if you stop, because inventories are too low, the ships aren't moving fast enough, the demand for oil is not slowing down enough to meet the constricted supply, and so it then becomes dependent that the strait is not open even if you say that they want a deal, that's not going to work anymore. That's where I think the real risk comes in.”

“US crude inventories fell 7.2 million barrels last week to roughly 6% below their seasonal average while the SPR continues to be drawn down. With inventories tight and refineries running near capacity, any supply interruption now has an outsized impact on price. Technically, July delivered an extraordinary 40% advance from trough to peak before the hopes of diplomatic progress triggered a sharp correction back towards $80 a level. When those negotiations failed, buyers immediately returned and crude oil resumed its advance, suggesting the pullback was corrective rather than a breakdown in the trend. Oil is back above its key moving averages, dips continue to attract demand, and the broader bullish structure remains intact.”

“And just like you said, crude advanced 40% in just 3 to 4 weeks, and the net positioning graph shows large speculators shorts near a 5-year extreme of around 228,000 contracts, while gross longs have fallen from around 380,000 to just over 300,000 today. Isn't that crazy? I mean, look, price is rising without shorts meaningfully capitulating, or the longs even aggressively joining to move higher. And that's why I think oil still has fuel to run for another like higher as shorts will be forced to cover and longs begin rebuilding exposure.”

“I mean, it's not the rally you would expect for oil down five bucks on a pause of the war.”

“Not only did we have that June massacre that had forced flows washed out on the downside, but we have had an extraordinary reversal as the re-escalation of the war has gone full throttle. Obviously, both straits are in play as we heard from Anas last week. And right now, off of the lows, we've already seen a 35% advance in crude oil in just three weeks. We are back to this 90 handle where we were trading at back in the early part of June. And this recovery has now decisively broken back above the 50-day moving average, catching a lot of traders off guard on this one. As fast as this was a washout of long positioning, suddenly it's turned into a full-on short squeeze to the upside.”

“Too hard, I'll just own gold. I think gold is going to do well over time on less volatility and at least keep up with oil over time and all of this. We had a compression of the gold to oil ratio, but ultimately, I think gold is going way higher relative to oil. That's how I've thought about it for my own money and for clients as well. But overall, I think oil is going to stay at levels that are good prices for US oil producers and for global oil producers.”

“China just pulled off a miracle with basically containing oil prices. Whether they did that as a favor to Trump or not isn't clear, but they might be persuaded to do it as a favor to Trump. He needs that favor right now in a big way before the elections. So it seems to me like, why wouldn't they just continue draining SPRs and doing everything to manipulate the price of energy temporarily lower? That game won't last forever, but it'll last until the elections.”

“Actually, we went above that briefly for some local markets, but we haven't stayed sustained above that level. I'm not sure that we're not still headed there, and I can't decide. It's very clear that China can step in at any time they want to and kind of calm things down. I'm not sure that China would want to do Trump any favors coming into the election. And if that's the case, if they decide to throw this in the other direction between now and the election, I could easily see $200 oil prices. So I can go either direction.”

“WTI has actually been ripping higher and you'd expect speculators to be chasing it, right? But they actually did the opposite. As of the latest report, large speculators actually sold into the rally, cutting another 13,000 contracts. And their positioning score, it's down to just 12 points. Think about that. Price surging and the specs are leaving, which means this move is running on fundamentals. So the market keeps tightening and there's still a whole crowd on the sidelines that hasn't even bought in yet.”

“But I think it's worth mentioning that this time around that we're back here, this is where total global oil inventory is going into this round. And we're back to almost zero on the straight of former use in terms of traffic again, with inventories actually drawn down this time. So I don't really know the plan here. Obviously, oil is already 10 bucks above the lows. But if we're back to this regime again, with inventories where they're at, and it seems like the big thing all the smart oil analysts was that China had already stockpiled a ton of oil and had stopped importing during that phase. And that sort of kept them safe in terms of oil prices.”

“There's still ample reserves actually to draw down. Not saying as a government, you should do what they might do. But if you're a pumper in chief looking to manipulate markets and trying to sustain things into midterms, there is still functionally reserves to be drained that would support risk and keep a lid on oil.”

“That said, the other thing about this crisis is that it's becoming actually multi-pronged because of Ukraine's success against Russia. They are now hitting refining transportation and logistics for assets for oil and gas at an increasing rate that we have not seen yet in this whole multi-year, four-year conflict. And that's having real ramifications because obviously Russia is a massive top three supplier of refined products and oil and gas to the rest of the world. So you have things like Venezuela ramping and other parts that are sort of helping to buffer.”

“This is now unwinding the oversold state of oil. And this is where we're going to really start getting a technical tell on how the price action is going to develop. If we see the pattern that old dips are being bought, and generally accumulation is still coming in, that leaves the window open for oil to trade back to $85.90 a barrel, which would still be below the major consolidation throughout March and April and May. But certainly room for oil to at least come to a mid-fair value zone that is somewhere in between the highs of the second quarter versus those lows that were established here just two weeks ago.”

“So what happens next? Because on one hand, you've described reasons why you correctly predicted prices would come down. But now you're saying Strait of Bab el-Mandeb could come into the fray if the Houthis want to escalate again.”

“And that oil is mostly sent on sanctioned tankers that do not qualify for the Western insurance anyway. So they are insured by Russia, China, India, others. So if the Houthis act or do something for Bab al-Mandeb, then we will lose more than 4 million barrels a day of Saudi crude. As a result, it is the same crude that's been diverted from the Gulf because of Hormuz through the East-West pipelines. And losing that basically will force prices way above $100. It seems right now we do have two comments on this. The first one is, if this is going to happen and the Houthis attack ships, the expected reaction from the Arab coalition, which is led by Saudi Arabia, is going to be severe.”

“And prices of medium shower crude went up above 170, with some reports basically talking about some shipments being sold for $200 or close to 200 So for the AI industry in Asia, got hit really hard by higher energy costs on one hand, and no helium on the other. At the same time, we go back to that LNG war, that's we've been talking about. All of a sudden, Qatar couldn't export LNG, and all the plans by Qatar in the future, all the expansion they were planning, which will compete directly with the United States, is gone right now. It's been delayed and could be delayed for years. So the strategic objectives of the United States in this case about energy dominance and AI dominance already been achieved.”

“They have no choice because they have a population, they need to look like they are powerful enough, and they have those IRGC elements that they want to show that they are standing with them because the last thing they want is a civil war within Iran. So they have to make those statements. And for the Trump administration, including President Trump, they have to make outrageous statements for domestic consumption within the United States. So we should not be fooled by those statements and conclude, oh, we are going to go back to a full war, and therefore, oil prices go to 150 as a result, simply because most of those statements are intended for domestic consumption.”

“But the idea here is we have this decline, major decline in global demand because of those high oil prices. And that's what the permeables basically missed. And that's why when I was talking about the decline in prices, this was part of the story. You add it to the fact that Saudi Arabia and UAE were able to divert oil through the pipelines. You add the amount released from the strategic petroleum reserves. You add what we lost in term of demand decline from around the world. We end up with almost a balanced market. And therefore, this idea of 75 to 80, 85 basically dollars a barrel for Brent basically matches that balanced market. But of course, it is temporarily because we don't know what's going to happen next.”

“So the Japanese companies have no choice basically, but to go and use the strategic control room reserve that's been bought at the very low prices historically, until prices go down or they have a solution. But one thing is clear here, when we talk about the strategic control room reserves and refilling this strategic control room reserves, people are saying, well, now they have to refill and therefore prices will go up. Japan is not going to refill as long as the Yen is low. Because even by today's prices, the price is too high for Japan. So they are not going to refill until the Japanese Yen goes up and goes up enough, so oil looks cheap within Japan.”

“We did that, but we cannot refill that amount because technically speaking, at the current situation, we cannot inject more than 400,000 barrels a day. So we cannot return this amount at the same rate that we released it. That's why, when you talk about 400,000 barrels a day, it's not a big deal in term of prices. Yes, it supports prices, it creates a floor, but it's not going to raise prices substantially. We've seen this before. At the same time, people have to realize an important fact, that the releases, which is about, so far, is about 99 million barrels that we release. So we still have about 73 million barrels to release. Those releases are loans, they are not sales.”

“But their idea is if we go to tank bottom, then gasoline and diesel prices will go through the roof, and therefore crude prices will go up, and WTI will go up substantially. This is nonsense. The reason why, because if you look at today's numbers, refineries right now, some refineries are running above 100 percent of their capacity. On average for the US refining sector, we are running at 96, 97 percent. So, while refineries are running at almost full capacity, even if there is massive demand for gasoline and diesel, if you cannot process the crude, then you are not going to demand the crude.”

“So we might end up with higher gasoline prices, higher diesel prices. Of course, if you look at jet fuel, for example, in Europe, prices already hit record high. So we have the inflation, of course, we see it all over the place. We are still waiting for the second quarter data to come out from around the world to see what's been going on. But the fact is, you are absolutely right, that the problem is in products. Prices will go up and might go up even higher. But we will see demand destruction. We will see a demand decline. By the way, this is for the audience. Demand decline means this can be recovered over time.”

“It happened, but it happened in the different price, in a different area. But it happened, and it passed, and now the damage, we are dealing with the damage of it. So it's very hard to see this happening again, unless we see the Bab el-Mandeb or any other waterway, such as the ones in Asia or in Turkey or others basically are closed. Other than that, there is no reason to be extremely bullish on oil prices. There is no case, the damage already been done, the damage to demand already been done, countries are reacting, people are reacting, we see a change in behavior.”

“And the three major proposals I made, the first one is to change the bylaws of the group. And instead of focusing on production, they have to focus on exports, because you can measure that more precisely than production. And at the same time, the second point is to focus on all liquids, not only on crude, because the demand side is all liquids, not only crude. And the third point, the most important, is for them together as a group, OPEC plus, to work with the consuming countries, to build massive strategic petroleum reserves. And I went country by country, basically, in the research work, basically, to show how it works. And the objective is to avoid any choke points, not only Hormuz, and to avoid any waterway.”

“Well, Patrick, large speculator positioning in WTI has dropped to just 19 on the one-year score, and net long exposure is back down near where it sat before the Iranian War even started. Think about what that means. Nearly everything speculators added during the conflict has now been washed out, which means the market spent the last month on pricing a war that never actually ended.”

“But the more notable move week-over-week was once again in crude oil, with WTI falling another 690 basis points to 6726 As the market continued to unwind geopolitical premium and press the downside in energy.”

“All right, so yeah, we have that chart of crude oil on page 5 The relentless forced selling continues. Rory and many other oil experts out there are openly discussing that the fair value of oil at this stage is higher, maybe $5, $10, $15 higher depending on who's the one speaking. But the pain trade is the one that is prevailing. Technically, we are overdue for a bounce or retracement of some sort. But the part that troubles me is that that is the consensus. It's not easy to find traders or pundits that have a different view.”

“So we're seeing inbound on that 10-day average basis at around 10 million barrels a day, well ahead of where we would have expected us to be at this point in the recovery. But going back to those loadings, loadings are only running at about half that rate. So far, interestingly, we're actually seeing inbound tankers not being the binding constraint on the recovery so far.”

“Because you and I don't consume crude, we consume products. The only natural consumers of crude beyond, let's say, investors, are refineries. So with fewer and fewer refineries in the system, and the refineries in the Middle East still hobbled, we're just not seeing the demand for crude that is currently surging out of Hormuz. So again, if you would ask me, Hormuz has been closed for four months. It's June. Will Brent DFLs be in Contango?”

“Not as tight, clearly as we were, but tight versus loose in the current spot market. But I do think that, so I think that as that outflow peters out and you maybe get more Chinese buying, that should correct the front of the curve because I don't think that a prompt contango is sustainably justified. But then I think to your question, I think more broadly is I think applicable to flat price, which is the market is broadly assuming that this is the way it's going to remain. That I think is very tenuous. Again, we do not know, I don't think anyone, to my knowledge, knows really well what has happened in China and why they're out of the market and when they're coming back in size. So I think that's obviously this massive wild card.”

“You've also seen a recovery of refining margins, given that crude has finally fallen back to the level that allows for those suppressed domestic Chinese prices to kind of still make a profit for refineries. So I would say I would expect them to step back in, but so far they haven't. So all of this is conditional on China stepping back in because you're just such a big swing. In terms of how long the SPRs could draw down, I think they could keep drawing probably for months longer at this stage, but I don't think they're going to if market, if the crude market remains this week, but I also don't expect them to return to building them before, for instance, the end of the year. I think that we're probably, that's at least a next year problem.”

“I think at this stage, we could keep drawing at these levels for another couple months at commercial levels. And again, that's largely because China has taken so much of that slack or injected so much of that slack into the system. US SPR were sitting just above 330 million barrels as of last week, and I think that will continue drawing down probably for the next couple of weeks. At least we've seen that pace fall back a little bit. We've seen that fall to around five and a half million barrels over the course of the week, which is back below a million barrels a day for the first time since we hit that pace.”

“I think so far, as I was saying earlier, the inbound pace of tankers is actually really surprised to the upside so far. So what we're going to need to see over the next couple of weeks is whether or not that is a maintainable level of inflows or if these are just the most risk-tolerant tanker owners and operators that are taking these risks for the kind of big fat prize of these very, very high tanker rates in the region. So I think that if that's maintained, this will be a matter of weeks until we can at least get the inbound tanker capacity to facilitate restarts. And then we go to this question of how long it takes for them to restart, which is this broader question of upstream capacity.”

“In terms of short interest, in terms of the net position, I think we could probably have $10 plus a barrel on a short position alone upside here, just a renormalization. But I think at this stage, we still have a decent amount of gross length in the market, offsetting that really swelling short position. So I think what we're probably going to see, and actually even last week, we did see a trim back from that exceptionally high short position, just a narrow one. But I do think that momentum could bring us lower here. Again, we've still got a little bit of downside to last December's highs. The natural impulse here is that positioning and as momentum on prices has moderated with us in the 70s, in the low 70s on Brent.”

“It seems to me like the one of the biggest questions here is, has the war really reached an end point? Or is what's going on here more of, we can't keep the world cut off from oil, so let's have a ceasefire long enough to get a big surge of oil out, enough to keep us going for a while, and then we'll go back to, maybe we haven't quite resolved our disagreements yet. Where do you think this is? Is it winding down for real, or we get different messages from both sides of this?”

“Donald Trump's, I think, existential threat is he's got to get those prices down to the point that by election time in November, it's enough of a distant memory, those high gasoline prices. Everybody's mostly not necessarily forgotten them, but they're not in the immediate rear view mirror. It seems to me that that's a much harder fish to clean, so to speak, than getting the price of crude oil down because refining capacity is fixed. Is there, you know, we saw the technique was use the SPR as well as whether China did it of their own volition or in some kind of deal with Trump, we're not sure, but China cutting their imports also really helped on the crude side. What about the finished product side?”

“It's more than the refiners can refine, and you end up with excess oil. The flat price crashes down into the low 50s. Now, silly me, I would think if you just drew down all of your strategic reserves, you might have an interest in, I don't know, refilling it, and there would be demand for that oil. But it seems like there's a lot of concern in the marketplace that you could get into a situation where maybe they don't want to refill anything because of these political pressures, especially in an election year, to keep prices down at least through November. Maybe they don't refill anything, and we do end up in a scenario where there's a mini-glut that creates a short-term further drop even below where we are now.”

“That was actually going to be my next question is, on one hand, I agree with you that it feels like Iran wants to end this conflict and I sure hope it ends and ends soon. But it also seems to me that if we got to an escalation, the combination of closing the strait of Bob el-Mandeb and hitting the East-West Saudi pipeline at the same time, that really could put a pretty big dent in things if this crisis were to re-escalate. And it's not a prediction. I don't think that's going to happen. But it does seem to me that that tail risk is pretty darn big.”

“Let's suppose that we really can get to some kind of agreement with or without tolls, that really it's wide open, nobody's going to get droned, it really is safe to take your tanker through, and everybody wants to send their empty tankers back into the strait. How long does it take for them to get from wherever they are back into the strait? How long does it take to really get the world back to a fully supplied state if we had a resolution completely? Is it weeks, months?”

“You mentioned earlier that a lot of the downside in crude oil prices was a result of the short sellers piling in. Anytime short sellers pile in, it creates a risk of a short squeeze.”

“Now Patrick, Rory's big point was that this is really a split petroleum market. Crude itself may still look sloppy, but products remain very tight and that keeps the refining story alive.”

“As of last week's COT report positioning, the large and small speculators are clearly reducing long exposure. But from a one-year positioning, we're far from seeing traders washed out on the oil trade. I'm looking forward to see if there's a material change when the numbers are updated.”

“And I doubled down on my risk positive tilt in the portfolio last week, but if you want to check the exact single names in the portfolio, you need a pro subscription at Real Vision. It's been a great year for the stock portfolio, and well, the stocks are flying again today with this deal between the US and Iran. It was a very, very eventful weekend, to say the least, given this deal that at some point during Sunday looked like it was ready to be signed already yesterday. We now know that the signing ceremony is planned for later this week in Switzerland.”

“If you look at the chart on page four here on the decomposition of the oil flows out of the region since the crisis started, out of the 20 million barrels that typically left the region on a daily basis, roughly say 11.5 of those were replaced by alternative measures. Another couple of million barrels, as you can see from the right hand bar, were replaced by extraordinary exports from the US, both from the SPR but also from other commercial reserves. And then maybe most importantly in light green, China has been on a bias strike basically since the latter parts of March, importing, say between France, five and a half million barrels less a day, which is a lot. So China and the US in cooperation have managed to roughly balance the market.”

“But for the next 60 days, we don't have that. If we assume that the Iranian regime will be allowed to export oil without any sanctions globally, is that a potential addition to the global supply? Let's have a look at page 5 here, where we look at the Iranian production and the overall capacity of the Iranian oil sector. And we're talking about a meaningful addition in the case that Iran is allowed to export globally without any sanctions. Obviously, now we have a drawdown in the actual production, since some of it has been shot in due to the US blockade. But we're talking close to 4 million barrels a day at max.”

“But it comes on top of the tectonic shifts that we've seen in the oil market, essentially since the outset of this war. Amidst this war, remember that the United Arab Emirates left the OPEC plus group, meaning that even the Arabs cannot agree on the direction of travel on the supply management strategy within the OPEC now. And OPEC is basically a Saudi Arabia plus group now, meaning that Saudi Arabia is on its own in terms of trying to impact the supply and price dynamics of the global oil market. I'm of the view that we may get a raise to the bottom now in the oil price since many of these producers will have an incentive to increase supply as much as they can in a scenario where the oil price is on a slippery slope.”

“It seems to me like one of the biggest questions here is, has the war really reached an end point, or is what's going on here more of, we can't keep the world cut off from oil, so let's have a ceasefire long enough to get a big surge of oil out, enough to keep us going for a while, and then we'll go back to maybe we haven't quite resolved our disagreements yet. Where do you think this is? Is it winding down for real, or we get different messages from both sides of this?”

“I think at this stage, we could keep drawing at these levels for another couple months at commercial levels. And again, that's largely because China has taken so much of that slack or injected so much of that slack into the system. US SPR were sitting just above 330 million barrels as of last week. And I think that will continue drawing down probably for the next couple of weeks. At least we've seen that pace fall back a little bit. We've seen that fall to around five and a half million barrels over the course of the week, which is back below a million barrels a day for the first time since we hit that pace.”

“Yeah, like 2026 was great, but 2027 will be negative year over year because the oil price will be lower and they benefited from the first half of 2026 being high. So depending on where you think with oil price goes, I think it could go higher still. That's a little bit of a cushion or something in your back pocket that energy could surprise positively.”

“Like if 20% of the energy comes out of the Persian Gulf, but all of a sudden we have a very well fortified country with missiles, that's not, is an intractable problem. It is not really, or it's going to take years to fix, the same way the Donbass, the Ukrainians and the Russians are still fighting, I don't know, four or five years later. What if this is a four or five year problem or more? How does it affect shipping? How does it affect LNG? How does it affect energy supply? How does it affect refining? Because all these sectors, US refiners are booming because they have cheap access to energy and jet fuel prices are through the roof.”

“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 69.18 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 is a growing view that crude oil's more reasonable intermediate value may lie somewhere around the 80-85 dollar range, and that this latest leg lower has been 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.”

“If the straight stays open, I think this is 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 some of the markets that don't have a lot of pricing power, like I mentioned Egypt, with their energy curfew.”

“China has the ability to reduce its imports, and if it wanted to, it could resume exports of finished products. And China, if it chooses to, could do a lot to avert a major global financial crisis, and China is well-incentivized not to allow the global economy to fall into outright depression, because that would cripple China's exports. So, the doomsday prediction that we have to go to $150 oil, I take it back because the data has changed. But the everything solved, all clear, it's a perception as far as I'm concerned, and I do expect that physical shortages and the realization that this military conflict might not really be over after all could all lead to higher prices. Even Dr.”

“And since the peace deal, what we've basically seen is forced flows, whether it's margin calls, stop losses, CTA flips. Bottom line is that there is a huge structural repositioning in oil that has driven these flows to the downside. Obviously, once those forced flows are unwound, there is going to be a reaction higher. The question and the puzzle to solve is, what is the actual fair value of oil in the post peace deal regime? At this stage, I do think we will see prices settle back above 80 at some point here, and maybe even as high as 90, but on the short term, we have to see where this liquidation cycle really squeezes everyone out, and then we'll see how things rebalance from there.”

“But really, the question is, is going to be what will be the catalyst for a potential breakout out of this triangle formation? Where would it likely go? Now, obviously, some people speculate that if suddenly there was a peace deal that we could see $80 or less on crude, but there has structurally been a huge inventory depletion, and there is a higher level of oil that is likely to be with us. And so, it would be very interesting to see whether there will be this one moment where everyone realizes that a peace deal is much farther than everyone expects, and it causes oil to break back above the 100 handle, which I think is psychologically going to be a breaking point that could create a rush back into oil and drive a potential advance.”

“And so the puzzle to solve here is that if oil, for whatever reason, did have another bull impulse on the upside and broke out on there, would we see it impact the rates markets again and that correlation stay true? That is the thing to watch. Overall, some stage bonds are going to be a no-brainer buy, but at this moment with the current geopolitical and macro backdrop, I think it's a very premature to be looking for a peak in these yields and lows in bonds just yet. And so at this stage, I'm staying very neutral and observing and respecting that this prevailing uptrend in yields is still intact.”

“So the physical market is not forward looking. We don't need to see the physical market reprice anything until we actually exhaust those buffers and storage tanks and so forth. Once that's exhausted, the physical market does need to rebalance in order to close the Monthly Futures Contract. There has to be a rebalancing of supply and demand. Normally, what happens is that outcome would be anticipated by speculators who would front run it, resulting in a gradual ramp up to a final crescendo when the physical market finally rebalances supply and demand. My expectation is speculators are going to continue to stay scared out of the market by all these truth social posts, which, you know, they take a $10 bite out of the market in an instant.”

“Meanwhile, sentiment surveys say that over 75% of market participants now expect lower prices and soon. Now, if they're all wrong, and I think they probably will be proven wrong, the repositioning will be extremely violent once they're proven wrong. So when it suddenly becomes game on time, in other words, when the physical market really does have to resolve an imbalance that can only be resolved through the price mechanism, the specs, I think, will pile in all at once. They've been afraid to get in this market. That fear, I think, will shift from fear of getting trapped by the next Truth Social Post into fear of missing out on the biggest price spike of all time.”

“If you had told someone, hey, China's going to drop oil imports by four to five million barrels a day, what's their GDP do? If you had said that three months ago, they'd have been like, oh my god, China's going to have a severe recession. I just read something from Jeff Curry earlier today that I believe the amount of charging, I don't know if it was charging stops or wattage used or what it was, I'd have to go reread it. But the bottom line is up 55 percent year over year in China. So basically, they've got the grid, they've got the EVs, they've got the infrastructure. And so we'll just drive electric.”

“In other words, if you're selling oil for dollars, you can only sell them dollars, then you need a cartel to manage supplies in order to maximize the value you get. So you restrict supply, maximize value of oil, so that you can manage and make sure your dollar reserves maintain their value in oil terms. If you start to price oil outside the dollar in Yuan, and in particular, settle it in gold, which is really what we're talking about here. What we're really talking about is a petro-gold system through the Yuan is what the Chinese have been pushing. In other words, buy in Yuan, exchange your Yuan for gold at any... China has set up an offshore Yuan clearing bank at every major gold trading hub in the world.”

“So that kind of bridged things and surprised a lot of people. And I think a lot of people were expecting, myself included, you know, oil to be above 150 by June. It hasn't happened, but that was kind of the, you know, the invisible hand in the market was the SPR releases. Now, that said, those are finite. SPRs, you know, they're not, they are finite resources that at some point do get run down. And that run down period is looking like late July, maybe early August. So, you know, at some point, there still is going to be pressure in physical commodity markets that was expected around late May, early June. Hasn't happened. Good chance it happens in late July, early August. We just kicked, we were just able to kick the can.”

“I think it's just been circumstantial that we started this whole thing at the seasonal highs and we were able to just draw it out. And now we're below the five-year range in inventories. I think now it gets a bit more real. And I think some of the really smart geopolitical experts know a lot about Iran or we're talking a lot about early on about how they're incentivized to drag this out as long as possible. And it seems like that just is the case here, is that they have, they know that time is ticking here. Like you have all the inventories that are being drawn down.”

“Because the confidence in being able to get oil prices to plummet, which if you drain the SPR, of course you can, but what does that do long term? And then the ability or confidence to improve poll numbers within five months, the midterms, when you're just hanging the lower middle income classes out to dry.”

“As long as you own like the integrators, the refiners, they should be making hay and printing money. And just please, please just don't do dumb things and destroy it, just like returning to shareholders, buy back shares, free cash flow. And obviously, it's a very natural portfolio balance, right? Like it's the one thing that's going to break. It's going to be a prolonged inflation slash stock inflation scare that keeps long end yields high. And long end yields high is not good because everything else we discuss, ultimately, there's a lot of capex of finance. And so, I think, so to the extent you have equity risk, it's basically just AI risk. This becomes like a really obvious kind of ballast against that, right?”

“What did you mean and what should we be focused on in terms of refining capacity and which countries are most important in this equation? […] It seems to me, Anas, like we have a setup here for what could be that really big price escalation moment that everybody predicted in crude oil could still happen in finished products because we really do have a problem there. But the thing is, no matter how big of a problem it is, even if diesel fuel is $300 a barrel at some point, it doesn't change the fact that we've still got plenty of crude oil waiting to be refined.”

“You need to expand US refining capacity substantially if you want to use energy dominance in the coming years and coming decades in the world. So we need to see more refineries and we need to see an expansion of existing refineries. So that's number one. But one of the issues that be missed by analysts is the following. They been saying, look, global oil inventories declined substantially, which is true, and therefore oil prices should go up. Here they mixed apples and oranges and they misunderstood what's been going on. Most of the decrease was in strategic petroleum reserves, not in commercial inventories. And the impact here is different because when commercial inventories decline, oil prices go up.”

“But their idea is if we go to tank bottom, then gasoline and diesel prices will go through the roof, and therefore crude prices will go up, and WTI will go up substantially. This is nonsense. The reason why, because if you look at today's numbers, refineries right now, some refineries are running above 100 percent of their capacity. On average for the US refining sector, we are running at 96, 97 percent. So, while refineries are running at almost full capacity, even if there is massive demand for gasoline and diesel, if you cannot process the crude, then you are not going to demand the crude.”

“So we might end up with higher gasoline prices, higher diesel prices. Of course, if you look at jet fuel, for example, in Europe, prices already hit record high. So we have the inflation, of course, we see it all over the place. We are still waiting for the second quarter data to come out from around the world to see what's been going on. But the fact is, you are absolutely right, that the problem is in products. Prices will go up and might go up even higher. But we will see demand destruction. We will see a demand decline. By the way, this is for the audience. Demand decline means this can be recovered over time.”

“Coming at a Rory Johnson's interview, the headline story is Oil and Geopolitics, but the real market opportunity may be one step downstream, where crack spreads are still strong, and refiners continue to do the heavy lifting.”

“One of Rory's most important points was that the real strength in the petroleum complex is not necessarily in crude itself right now, but in the product side with gasoline and diesel markets staying tight and the crack spreads remaining elevated. So rather than trying to pick a bottom in crude, I'd rather continue to lean into the part of the value chain that is actually benefiting from that set up, and that is the refiners. For this week's Trade of the Week, I want to focus on Valero, symbol VLO, which is trading at $268. What stands out here is that Valero has just broken to a fresh 52 week high and is clearly one of the strongest names in the refining space.”

“Yesterday alone, I'm seeing more than eight confirmed VLCC …”

“Those are inbound empty tankers, which again is running way ahead of where I would have expected us to be at this stage.”

“And we're just in a situation where we do not have a lot of spare capacity on refining. We have very, very low inventories across all major tract regions, all the major trade hubs. What can be done about it from a market perspective? I think what we're going to need to see is we're going to need to see a recovery of product loadings out of the Middle East. Prior to the war, you saw the typical 20 million barrel a day figure that was quoted in terms of Hormuz flow. That was 15 million barrels a day of crude and five million barrels a day of product. We're going to need to get more work done on resupplying that five million barrels a day of product. I think that's what's going to allow the rest of the system to adjust.”

“There was a massive shift in yield of refined products away from gasoline and towards jet fuel from US refiners. That proved to be one of the big sources of swing in the system. But in the process, that also seems to have starved gasoline markets a little too much. So now there's going to be this process of swing back. So I would expect that we're going to see a swing back towards gasoline in the United States from US refineries, and that will help ameliorate some of that tightness. But I think net-net, you're going to remain tight here until Middle Eastern refineries recover.”

“From a positioning side, this theme isn't crowded yet. On the product side, gasoline speculators and commercials are actually light, low 30s on their one year range reading. So the crack spread strength isn't a maxed out speculative trade, there's still room to run. Crude itself is middle of the road, which is exactly why bottom picking is a coin flip right now. You're leaning on the strong part of the chain without finding a crowded trade and the spread gives you the complexity to keep playing momentum without taking on full Delta 1 risk.”

“Coming at a Rory Johnston's interview, the headline story is oil and geopolitics, but the real market opportunity may be one step downstream, where crack spreads are still strong, and refiners continue to do the heavy lifting.”

“From a positioning side, this theme isn't crowded yet. On the product side, gasoline speculators and commercials are actually light, low 30s on their one year range reading. So the crack spread strength isn't a maxed out speculative trade. There's still room to run. Crude itself is middle of the road, which is exactly why bottom picking is a coin flip right now. You're leaning on the strong part of the chain without finding a crowded trade, and the spread gives you the complexity to keep playing the momentum without taking on full Delta 1 risk.”

“Like you had a moment, you could do it, and then you did this dumb war, and now you can't, you can't, you can't, you can't devalue the dollar with oil at 85 Come on, you're right. Very, very clearly over the last three, four years, as long as oil is between 60 and 80, the treasury market's fine. Once it hits 85, it starts a dysfunction. Yields go up, you got to get it down. So if you're, for Besant, who came out in early 25, to judge us by the 10 year, well, how are you doing, buddy?”

“Therefore, a very high priority of society should be refilling the strategic petroleum reserve all the way up to 780 million barrels or whatever its capacity is supposed to be, as quickly as we possibly can. That's just me though. I suspect there's probably a larger number of people who are saying, well, why don't we just keep draining it all the way into the election so we can get the price of gasoline down even more?”

“So we have something from the Congress that's been specified long time ago, that we cannot go below 252 million barrels. So here is the issue. We already released about 99, and we still have about 73 So if we want to release the 73, we are going to go below the legal limit. But if you look at the language, the legal language, the Congress says that the president in case of emergency can go below the 250 So basically President Trump can literally say, we are in emergency and we have to go below 250 So that's number one. So we can go below 250 without any problems. Technical limits are way, way lower than that.”

“The question is, do we really need that SPR to be at 700 or even 400, etc? When we established the SPR, we were a net importer and we were expected to increase our imports to the extent that our US imports could be, in essence of being 6 million right now, could be around 20 million. But now it's exactly the opposite. We are a net exporter. The share revolution basically changed everything. So that's the first point. The second point is, the problem we have, you can look at shale literally as the SPR, because we can produce oil quickly from shale. Here's the problem, crude quality. What we need for diesel basically is medium sour crude. What we produce from shale is light sweet crude.”

“What do you do is you try to make that part of the world less of a threat. And you're starting to see all the fission company, the fusion companies and then you have the SMR companies that are doing really late stage rounds like Valor Atomics, Aloe Atomics. Like there's a whole bunch of like Series C, Series D, like nuclear companies that are about to come on. And if they really work, we're going to be in like an abundance of commodities and energy. And so maybe that's further along than I think. But over the next five years, it just feels like maybe the market takes that into account.”

“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.”

“I remain uber-duber bullish long term on uranium, but boy, there's been some upside retracement in the last few days, after quite a bit of weakness before that, but overall still lackluster performance compared to other commodities, compared to the S&P and so forth. It's kind of expected this time of year. Uranium is a seasonal market. The action usually picks up in late August in the lead-up to the World Nuclear Association Conference in London in early September. So look for late August, early September is maybe when this market starts to catch a bit again. Right now, it seems like it's going to be in the doldrums of summer for the next several weeks.”

“The demand for clean energy is going to be there because of these AI data centers and so on. But what we're looking for on the charts is when will we see investors start to once again flow back into these uranium names because there's very clear distribution cycle and continuously you're seeing that all rallies are met with ample supply of stock and we just simply hasn't seen a new wave of buyers coming in to drive momentum for a potential turn. So I'm still in the process of trying to discover where these uranium stocks are going to start showing bottoming formations that will certainly be a very interesting alignment when these long-term bullish fundamentals line up with potentially a bull breakout set up.”

“What's interesting to me is that uranium has been a little bit weak as a commodity, but certainly, we have seen the distribution cycle in uranium stocks really accelerate here, and it really does look like it happened the same time as the gold miners started to sell. We really at this stage are in the midst of some sort of distribution cycle. When we look back at uranium stocks back in 2024 and 25, the bull story was also super strong, but in that period, the URA managed to have two consolidations in the 35 to 40 percent variety. The idea here that we are in the midst of this style of a market correction is very likely.”

“I'm going to ask you to expand this topic a little bit more and also include the Uranium miners, if we could talk about that as well, because I've got to tell you, I need some help listening when markets speak. I'll tell you exactly why. I couldn't possibly be more long-term bullish on uranium and uranium miners, because I think the nuclear news flow couldn't possibly be better. Even before you consider all these SMRs and advanced reactors and all that stuff, we already had a uranium deficit on the horizon that just to run the reactors that are already in place that haven't been built yet.”

“So I just can't think of any reason not to be bullish long-term, except for one thing, which is this is a famously high retail participation, high volatility sector, not so much the Sprott Uranium Trust, but the miners are a really high volatility, high retail participation sector. And if what we just talked about a few minutes ago about the momentum stocks maybe being right on the precipice of a big sell-off, if we get a broad market risk event, if this Iran war gets worse and it leads to a bunch of negative events in the market, I can't imagine the Uranium miners not getting slammed by that. What do you do in a situation like that? I could be super bullish on one hand, but I'm really concerned about what could happen in the market next.”

“Well, as our regular listeners know, I remain and I will always remain super bullish long-term. But I've been warning for several weeks now that this market felt toppy and that a broad market risk event could easily drive uranium miners much lower. Well, that's exactly what played out this week. It's the exact scenario that I've been expressing concern about here on Macro Voices for the last few weeks. We saw the S&P 500 down hard on Friday and uranium down even harder on a percentage basis and again on Tuesday. Now, I still love the fundamentals, but hey, a popping of the AI bubble and a broad bear market in stocks could easily mean a washout for uranium on the scale of the 2024 into April of 2025 period.”

“So uranium, gold miners, they're a very high beta sector. But what's interesting with uranium now, the SRUUF, it's down 5 percent year to date, almost six, but Cameco's up 4 percent still. So the underperformance of the commodity gets me excited right now. And I think I want to buy the URNM or the NUKZ, which is the ETFs that own these companies. I want to buy them on a little bit more pain. Like we had last April, May of 2025 with the trade war. You look at the drawdowns, like it's just like you nailed it, Erik, these companies really are susceptible to market volatility. And so you want to be in the commodity if you expect volatility ahead. And then you want to rotate into the miners during that big kind of huge drawdown in the market.”

“But when you talk to people on the front lines, the big family offices that are close and really on the front lines, boots on the ground type people, they see the contract buyers really starting to get nervous behind the scenes. You're going to see the ramp up in purchases. In other words, uranium is not a spot market. Like in the commodity market, there's no futures. These contract buyers are really going to have to step up the next 12 to 18 months because they see the supply and demand problem. The risk rewarding uranium now is absolutely one of the most attractive entry points for the commodity that I've ever seen.”

“The sector was viciously for sale. Same thing in the summer of 2024 with the Japanese yen crisis, the carry trade blow up. In both instances, the commodity, I should say the producers on the uranium side were down like 30, 40 percent, 45 percent in a very short order. Because once again, like you said, retail tourists, some weak hands at the table, and all that means is, imagine you're playing a poker game, somebody does a big raise, and that's like the same thing as a big shock in the market. A shock in the market knocks a lot of the tourists back on the bus and they leave and go home.”

“Because they're telling you if we actually have a real war, they're going to print those bonds into oblivion to buy them all. Just buy gold.”

“And it wasn't, it created growth on a GDP basis, but then you created so much of residential investment, it increased the cost of capital for the next generation because they became the renters, not the rentiers. And I would actually make an argument that like, at least this hyperscaler investment, maybe it's the same thing where you're creating like this oligarch class that just taxes people for using AI, which is very possible. But you could also be in a 21st century economic boom, where like, this is actually real capital allocation, instead of like an extraction mechanism, where it actually like tenfold economic growth. And in that, maybe from a relative perspective, this is just beginning.”

“They happen in the context of rising asset losses and a deterioration of the ultimate business model also on the funding side. And the second insight is, and I'll give you more detail on what I mean by all of that, but the second insight is that bank runs as a cause of bank failures or the cause of banking crises, I believe tend to be overrated. That doesn't mean that bank runs don't happen. It doesn't mean that they're also not important, but I think we've historically in the narrative of US history and in the way we think about fragility in the banking system, we've just put a little bit too much emphasis of them as a sort of a cause of why bad things happen.”

“What we just found in the history, this just happens to be a fact that we discovered, is that historical national bank failures just involve very, very low recovery rates. So it's very hard for the majority of the failures to make an argument that the franchise value was so high and the receiver was so inefficient, even though we see a lot of evidence that actually experts in sort of unwinding these banks, it's very hard to construct the case that the majority of these failures would have come from a bank run. In fact, it looks more like most bank failures were failures of already deeply insolvent institutions, even though, as I said, sometimes bank runs happened.”

“Now, what we find then in this new paper, which I'm really excited about, so we merge the financial data, the call report data, with the data that tells us whether a bank run happened or not. We just try to understand what are the causes of bank runs, when do they happen, and whether do banks fail when they're subject to a bank run, because a bank run doesn't need to be the same thing as a bank failure. I think here the key takeaway is then we find that it is indeed the case that once in a while there is a run on a bank that looks in its call report in its financial statement perfectly healthy, although it's much more likely to have a bank run in a bank that looks fundamentally weak according to its financial statement.”

“What you observe is that a bank with good fundamentals is essentially going through the bank run in an unscarred way, whereas if the bank has weak fundamentals, well, then the bank will actually lose deposits and loans permanently. It's telling you something, really the state variable that you're interested in as a policymaker is the fundamental solvency of the system. Because the better capitalized banks are, the more profitable they are, the more healthy their business model is, a liquidity event on its own has just very little scope to do big damage. In fact, in this paper, we could trace it all to the real economic activity at the city level.”

“The way I think of it is not a question of whether liquidity interventions actually, I'm not claiming they don't matter. The question is whether they're the optimal policy. So if we think of classic lending of last resort doctrine, which says, oh, we should be lending to solvent institutions. So if you take some of my research in that context, the paper we've just talked about on bank runs with and without bank failure, there are banks that are solvent and subject to run. But what we find is that absent the lender of last resort, the solvent institutions are able to borrow from other institutions.”

“It's actually in the less informed space where I think the government has sort of more scope of providing insurance and making sure we don't have panic. So that would be the only thing that I would say is a general lesson what I've learned from the historical evidence I would apply here. But that being said, I really want to be clear that you cannot use sort of evidence from 19th century national banks to think about the current financial conglomerates.”

“Yeah, so much there, but at the end of the day, no matter how you slice or dice the data, what you're telling us is that it's ultimately about sufficient capital, fundamentals, solvency. […] So you've made a very convincing case that it's weak fundamentals, it's issues of solvency that nine times out of 10 or more, it's going to be the primary cause. Bank runs, the typical popular portrayals simply are misleading. I mean, everything from movies like It's a Wonderful Life, to just I guess maybe our attraction to fear and psychology. But more fundamentally in the profession, the very famous model Diamond Dibbvig.”

“But it also raises possibility that liquidity regulations really aren't as consequential as we often think they are. So let me provide just a little pushback to that conclusion. I mean, I'm very sympathetic to this paper, I know this is something you probably heard before. So there was this paper that looked at the Great Depression and looked at banks in Mississippi, those that were under the Atlanta Federal Reserve, the six districts, that they were supervised by the Atlanta Fed. Then I believe the St. Louis Fed supervised the northern part of the state. It's a nice national experiment. It's the same state, same culture.”

“Now we talked about the index level returns in Japan, in Korea, but as you said before, you take a much more neutral approach. So as investors that are focusing more on trying to find alpha in markets that have these tailwinds, they're going up, what do the alpha opportunities look like? I mean, you did allude to the dispersion in returns between the markets and the average stock. Clearly, that lends itself to the idea of long short alpha.”

“That's why I'm sitting personally of my liquid net worth nearly 60 percent in cash, T-bills, and gold bullion, because I don't know. I've got a bunch of flies flying around looking for a windshield. So what's the windshield? Is it the Japanese bond market? I don't know. Is it supply chains now that we're sort of reclosing Hormuz?”

“I think there's a renewed interest in having some more hedged approaches in portfolios and having them liquid in nature. I know one of the things we'll hit on next will also be just the advent of Asian investing and some of the interesting things that are going on in those markets. But probably a lot easier to access those through liquid strategies than through less liquid strategies and either private credit, private equity within both Japan, South Korea, China.”

“We can certainly talk about that, but certainly the asset prices themselves, as they've appreciated over time, there's just been more capital to deploy.”

“So the amount of capital you can deploy in these strategies, if you looked at Japan six years ago, the amount of capital you can deploy in these markets now is much, much higher. But there are constraints in each market. It really depends on the liquidity, the volatility of those markets. One of the reason that Asian markets are very interesting is, the individual stocks tend to have more volatility than in either the US or European markets. So you don't need as much leverage in those markets to generate similar types of returns. So that's very interesting. But we really invest across all the geographies, different time frames and different markets, Max.”

“To the point that people have so much that they're trying to put to work, a $10 million project just doesn't move the needle for the time it's going to take to underwrite that sort of risk.”

“But overwhelmingly, you want to own class A buildings. Our job, and one of the things we're really proud of, is you don't want to wait until the asset is functionally obsolete or no longer class A to sell it, because then you're selling a problem that somebody else has to fix. And so we're really a huge proponent of active portfolio management. So when we look back at our history, in most years, we're actually selling as much as we're buying. We're always pruning the portfolio and identifying the assets that they've not yet made the transition from maybe class A to class B, or there's something that we're, but we want to do it before it becomes obvious to the market.”

“So you think we're in a new cycle because the rate, maybe perhaps the rate hike cycle disencouraged supply. And that word now, you know, that's been fully digested. And that the demand is outstripping supply across the vast majority of asset classes.”

“Enough rebellion against it over time and people will. It's capital allocation, man. Like when you need efficient capital allocation to flow to the properly structured assets, because when it doesn't, then you just proliferate more and more incentivize more and more people. I guess it just is going to take longer, as you say, to rinse it out, but it'll come around.”

“It's also kind of exemplified with Bitcoin in particular with the ETFs. Like, TradFi is really selling off for the first time since this chart was created. We have ETFs dipping below, like the total volume of Bitcoin held in ETFs dipped below the total number of Bitcoin held in in treasuries and DATs, which is a bit ugly. And really, the ETF level is at the lowest it's been in about a year. Like, it gave up essentially a whole year's worth of gains from an ETF standpoint. In terms of total aggregate, you know, institutional held BTC, it's a little better off because, again, because DATs have continued to increase, strategy has continued to buy Bitcoin.”

“What about the key drivers for corporate profitability, mainly the big stocks, Alibaba, Tencent, Meituan, Pinduoduo. Basically, all these online retailers, the Amazons of China, have been killing each other because they've been competing on price so much. And the government keeps on saying, anti-involution, anti-involution, we're going to encourage our companies to actually stop fighting each other like Japanese fighting fish or Chinese fighting fish. But it never really does seem to happen. Do you see any policy changes there of like, oh, actually, we need to get Alibaba's profits up. We need to get Tencent's profits up because we need to stop having a financial crisis or no. Do you think this all talk?”

“The growth factor for LVMH and all these luxury European brands, was China was growing at like 30 percent year over year. Now, it's flat to down, contracting very bad. But within China, the domestic consumption has always been weak. So that's not new.”

“Their reserves are their deposits at the Fed. That's on the asset side of their balance sheet. And so they have to have capital against all their assets. And so an easy way to get rid of some of their assets is to ditch a bunch of reserves. And they do that systematically for one day at the end of each quarter. Now, you might ask, well, why do foreign regulators allow this? And that's another conversation. Because, I mean, obviously, the other 90 days in the quarter, they're not meeting their capital requirements, but they're only monitor on the quarter end.”

“Well, Governor Bowman, as you know, has been working a lot on adjusting the capital regulations. And she has touched on the issue of liquidity requirements. But to my knowledge, she hasn't stated exactly what should be done in the area of liquidity regulations. But it would be in keeping with her general approach that some of these regulations are doing, or at least the levels at which they're being applied, are doing more harm than good.”

“The reason it's hard to quantify is, as I said, it's about perceptions. It's about perceptions at the Fed. Do we really want the banks to use these facilities in a way that demonstrates that they're not self-sufficient?”

“If you do it in a sequence of steps without doing these netting cycles, you need more cash and that's been demonstrated both theoretically and empirically. The Bank of Canada has this, the Bank of England has this, the European Central Bank has this, the Bank of Japan has this, other central banks have it but the Fed, which runs the world's largest payment system, does not have it. And so, it would be good at a minimum for the Fed to investigate how much could they save on reserve balances by introducing a liquidity savings mechanism.”

“Then the other central banks introduced this real-time growth settlements coming after the Fed, and they realized this is kind of expensive for, in terms of the quantity of reserves that are necessary to run the system. They introduced liquidity savings mechanisms, and the Fed, which has had, since the crisis at least, tons and tons of reserves, never had to think about it. But now that it's trying to reduce its balance sheet, it should start to think about, maybe we should do what the other central banks have done and add this new software.”

“In multifamily, you've seen prices in some markets drop 20 or more percent from peak to trough. So the pricing has reset. At the same time, following the peak, those low interest rates, you had a surge of new supply, which is really being absorbed over the last couple years and this year. So when we look forward, we basically see the demographics of people that are aged, the population 35 to 49 is over the next 10 years is going to grow by something like six and a half to 10 million people. And that's peak household formation age 35 to 49 That's people get married, they partner up, they have more pets, they need more space.”

“But it's also it's a proxy for when people have jobs, they tend to get their own shelter. Right. When young people get a job, they move out of their parents' house. When you find more job growth, then people have fewer roommates. So it's the factor that we've identified in our data science, something called a recursive factor addition, where we run, basically use AI to run thousands of different models and then back test it against the actual data to identify what combination of outcomes and factors were most likely to drive what happened. And so for multifamily, that was essentially job growth.”

“But there's a lot of dispersion nationally. So you look in some markets like San Francisco, where in our portfolio we're seeing really significant rent growth. And that's really driven by there's no new supply, but also all the job growth around AI in the Bay Area. And then there's other markets where we're still seeing negative rent growth because there's incremental new supply that's still being delivered and absorbed. So it's not a blanket statement where housing is good everywhere. You have to sort of pick the right locations. But our long term conviction in housing is you still want to follow the U-hauls and follow the jobs.”

“So if you look at places like New York, San Francisco, even the Midwest, the story has been where places where there have been very few units delivered, you're seeing relatively positive and strong rent growth by historical standards. In the places where you've seen a ton of new supply, you've seen the other dynamic, but some of those high supply markets are starting to turn. One of the ones that's looking pretty, that is stabilized and is looking quite positive is Austin.”

“So if office using employment goes down, obviously not great for office as an asset class. But you're saying that it's that that's also key for apartment buildings because the reason people want to live in apartment is so they can live close to an office.”

“Tell us about a very key factor, which is the supply of multifamily, which was very high 2020, 2021 The market's been digesting that. Tell us about that phase and how much supply has come on, is going to come on long, and how much investment has there been in new projects recently?”

“Why hasn't the real estate investment community stepped up, the developers stepped up and built what is necessary? Why is there such an undersupply?”

“If you look at the market, I think in the last year, they've gone up over, when you count also the burn off of concessions. So in a lot of places, you had people giving two months free rent, not necessarily San Francisco, but where there's been a lot of new supply to induce people and incentivize them to move in. So you've seen some places where peak-to-trough net effective rents, that's adjusted for those concessions, have improved by like 20%, which is a huge number.”

“The second effect is that we haven't really talked about is, this is just sort of all partial equilibrium what we've talked about. So there is always sort of the flip side. You have in the debt inflation, you're going to have the creditor winning, you have the debtor losing. And that's going to of course matter in GE. So that's the part that I just have to be fully honest, I just don't have a fully understanding of. By the way, this also applies to my understanding of the German hyperinflation. We really focus on the benefits for the creditors, but we really have our time quantifying the losses for the debtors. So I think the sum of all of that is going to tell us whether this channel matters. I think just more work is needed.”

“One of the big takeaways from that paper, at least for me, and correct me if I'm wrong here, is that sticky nominal debt contracts really matter. It's an important rigidity in the economy.”

“The current environment, we've got implied correlations about as low as they've ever been. In many ways, a stock picker's dream or a relative trader's dream.”

“There's scarce resources for the use of public funds, so how do we best use them? Let's apply those insights to a more recent example. We had Silicon Valley Bank a few years back. How would you view that experience through the findings of your paper?”

“But you were really leaning at that point toward disinflation. I believe this year you've made a stagflation call, which seems a little bit out of character for you.”

“Look how bad the organic demand is. Why are they buying so much? They're stockpiling so much, so much, so much. Yeah, it turns out like it's more probably more. It's to be resilient in a world of just lots of shocks.”

“Those fat campers over there, the barrels will run down faster. It's just a pain contest. And they won the pain contest in April, of April of 25, Liberation Day. We're going to put it to them. By May, CEOs of several of the biggest retailers in the US., they went to the White House and said, there's going to be empty shelves in three to six months if you don't stop it. Round one of the pain contest goes to China.”

“And what makes it work for us is we are the dominant player with the computer, whether it's the hardware, the software, or anything else associated with it. If we lose an important part of that to China, then we are at their whims and their beck and call. And that context window that you depend on doing your job with, you might need permission from China to use it. And we don't want to be down that road.”

“That includes not just EVs and batteries, but solar panels, wind and everything else. So electrification stack is already lost to the United States and to Europe. Now, you're going to go beyond that because from electrification to stack, you start building robotics and automation. That's only one more step forward. Again, China is already gaining control over that as well, not just electrification. Now, the third area where US traditionally leads, which is science and technology. Again, US is relatively speaking falling behind. China is accelerating and you can see it in LLMs. You can see it in the ability to try to bypass technology restrictions, particularly in chips. So China is building the world and not deriving return on equity.”

“There's a guy very serious, very high degree of gravitas, saying that the West is sleepwalking into its downfall. And one of the things he said was just fascinating. He said, where is your reflection about how many people you have killed around the world over the last 30 years? And the whole point is, you guys are 4% of population, the rest of the world is a lot bigger than you, and we're moving on. And so yeah, I think that's exactly what China is doing, which is just when you've got a dog that won't stop chasing cars, let it catch the car and then see what it wants to do. I mean, the one thing I have heard from multiple different relationships in and around China is essentially like, what is it with you Americans in the Middle East?”

“When are you going to reflect on how many people you've killed? You just, nobody's got a higher body count than America in the last 30 years. I say that not because I hate America, but simply as I look at this as an objective analyst and go, I don't think the rest of the world is going to have hangups of using Chinese equipment that will better their lives the way a lot of American analysts and investors think they will, that the rest of the world will have those hangups. Because American analysts and investors tend to completely smooth over all the bad stuff America's been doing abroad over the last 25 years. Larry Summers said, look, when the Americans come, we get a lecture. When the Chinese come, we get an airport.”

“So China basically sits back, allows the US to stay at war while China quietly builds out even more AI capability, more dominance with respect to AI and so forth. And they continue to build out more power dominance, more energy dominance at the same time, which will support that AI agenda down the road. Are they basically just sitting back and smartly watching the US damage itself and quietly getting ahead?”

“We can cut our oil imports three to four million barrels a day, which is an astonishing number and still grow. And when you really look at some of the components of growth, yeah, they were shorting themselves oil to prevent a much bigger market and oil supply catastrophe throughout Southeast Asia and across the Global South. Let's not kid ourselves. The Global South would have suffered far more than the Treasury market and probably faster. So the Chinese, whether they intended to do it or not, created some real good political goodwill amongst potential trading partners.”

“But I think absolutely when you look at it sort of in through that lens, the Chinese demonstrated an ability to take pain much more than the West. And that doesn't even get into some of what we've seen in terms of the rundown of Western weapons stores, the ongoing rare earth drama where the US is still squawking that China isn't sending enough or in some cases any to the US that we need for weapons and other industrial goods, etc. So yeah, as we sit here on July 21st, I think objectively China demonstrated that it has a lot more geopolitical flexibility vis-a-vis oil and commodities than was appreciated five months ago.”

“It's used, the most important thing as it relates to our economy today is it's used in semiconductor chip production. So you have the Chinese come out and say, we're going to ban the export of helium. Why would they do that? Price is on the floor, US is the biggest producer, Qatar is the biggest producer, and we need it for semiconductors. China thinks Qatar is going back offline again, number one, and number two, China thinks the US might curtail how much helium we'll send them. Well, why would China think those things? There's only one thing that sort of checks all those boxes, which is the war is going to last longer than expected, and the Americans are going to be honked off about something and weaponize helium against the Chinese.”

“As it relates to the semis, my view is if USAI has a problem, semis are going to get dragged down alongside it. And that's probably an opportunity to add to them because I don't necessarily think that's the right thing, but I think that's what would happen. Longer term, we've seen this over and over. The US has weaponized semiconductors against China. They did it in 2022 with Biden. At the time, people were saying, oh, this is the death of Chinese tech, death of Chinese semiconductors, they're never going to be able to compete in AI, which again was totally frigging wrong.”

“To me, that just says that a day is coming where this sort of AI moment for China, which we saw on the Rust Belt 20 years ago of, hey, it's cheaper, but it's worse to, oh, God, it's cheaper and it's better. Something like that's coming for semis.”

“I can't drive the dollar. You know what I can drive? I can drive a Chinese BYD. Well, I can't because my country won't let it in. But most of the world, like when I was just over in London and Scotland, there are BYDs all over the place. There's other Chinese car brands all over the place. Because it turns out people like having cheap transportation.”

“All of this is absolutely correct only for a limited time, which means that if the homostrate issues continue, and the United States has the stomach to keep the homostrate closed like this for an extended period of time, and can handle the world criticism because the whole world economy is going to collapse, China will be the biggest loser if this is going to last for long, because the Chinese cannot continue these policies for a very, very long time. So, they can be affected. So, the Chinese policies are very effective in the short term, probably a little bit to the medium term, but that's it. After that, what are the choices?”

“But this is all a relative game. It's a pain contest. And those are essentially morphine shots that we run in a pain contest with the US. And so, you know, I look at that China meeting in the context of all of that. I think they talked about some things. But I don't think it necessarily achieved what the US was hoping that it would. And I think what we've seen since is I think the Chinese basically said, listen, you made your bed, now sit in it.”

“I think to that point about who's being hurt the most too, is that yes, everybody thought it would be China, but it actually seems to be more so countries like Japan, who are just being steamrolled. And, you know, they've been at odds pretty tersely with China in the lead up to this thing with their new prime minister. So it's quite interesting, you know, you bring that into the fold. And I am curious about how prominent you think these ideas of like financial warfare are, whether it's Iran looking at what they can press in terms of how long to keep this on and, you know, basically making the Fed have to hike rates a bunch.”

“China better be taking lessons because if China thinks that they can attack Taiwan, they could lose. How could China possibly lose? Because there are ports, Chinese ports, that are 10, 15 minute drone flights away from Taiwan to mainland China. They can't win. They can't push them off the island.”

“They could make the economic cost of them trying to attack Taiwan so prohibitively expensive, that even though they might have their soldiers in Taiwan, they might even be the installed government in Taiwan, the cost that they will pay won't be worth it at the end of the day. So this is what 21st century war is about. 20th century war was big exquisite systems like aircraft carriers and fighter jets and bombers and cruise missiles. Those have a purpose in the 21st century, but that purpose is narrowing. What do you do with them? Less and less.”

“And it's impossible for Russia to know how do you get rid of the supply chain when it's decentralized like that. So yeah, it is a bunch of housewives with 3D printers next to the refrigerator making these parts. And they're defeating the Russian army with this. And so we really need to understand that it is that way. And you hear a lot of people also talking about, well, we've got these great bombers, and we've got these aircraft carriers, and these cruise missiles, and they can blow stuff up. As Trump said today on Fox, we're going to beat the effing S out of them. Yeah, because we've got the kind of tool that can beat the effing S out of somebody. But that doesn't stop a decentralized, highly iterative warfare style.”

“Peppiger at Rheinmetall is in the business of making tanks and airplanes and big expensive multi-billion dollar systems on 10-year contracts. He doesn't want to hear that the world wants to move to cheap iterative parts, drones, most of which are made with commercial parts to keep the prices down low. So you're not even making military grade, you're actually using commercial parts because that's a threat to his business. And so that's going to be the thing is whether or not the bureaucracy is going to allow us to change before it's too late.”

“It seems like the big lesson that we learned here was not just what you said, but also we thought or we assumed that the United States beating Iran was going to be easy. Well, it turned out not to be easy. It seems like we're learning that, as you said a few minutes ago, the nature of warfare has changed. You have gigantic, super expensive, previously thought to be undefeatable military assets, like an aircraft carrier battle group. Then somebody figures out, well, if we have a large enough number of really cheap inexpensive drones, we can beat that thing. Have we just hit a moment in history where we're realizing that the balance of power isn't what we thought it was?”

“The first one is, when, if you look at the situation 50 years ago, and you look at pipelines or creating canals or others, etc., these were very smart ideas. But the technology in the last 15 years changed. And you can see it in Ukraine and Russia right now. With those drones, you can go to the heart of Russia basically and bomb anything accurately. So from a security point of view, having more pipelines to the west or through Syria or Israel or any other country does not make sense at all, because everything can be bombed right now. And by the way, the suggestion to take pipelines through Syria and Israel basically does not make sense simply because the market for the Gulf is in Asia, is not in Europe, is not in the United States.”

“But having said that, I actually think that it's always difficult with timelines, but I think it's an underestimated scenario that we will see some sort of formal alliances within the EU among, for example, this group of countries. I think it's reasonable to expect such a move over decades. Because especially since the UK left the European Union, this exact group of countries have in some cases searched for new alliances within the European Union. So I think that's why you see these, of course, satirical approaches to how to set up a new country. I don't think it will be a new country, but it could be some sort of informal alliance.”

“I don't know if you read the CNN report, Andreas, the US General Staff, the military leadership has essentially written a mail out, an email to its middle management asking, do you guys have any idea? Because they're simply running out of stuff to bomb. And that is as good as time as any to cut a deal. So let's hope we are indeed moving closer to that, Andreas.”

“Yeah, I think it's more like a political issue now, it seems. I mean, they're just stuck in this, I don't know, like, yeah, in this war.”

“You'd think a level-headed leader wouldn't do that. You also wouldn't think- I was shocked when they started their next incursion while he was in Turkey. I was like, that's crazy. Like he's one country over and he's blowing them up. I couldn't believe it. And then you saw these things about switching the planes. And it's a complicated time out there right now.”

“And so my argument was that there is no way out of this conflict that there will be decapitation of leadership is not going to work, regime change is not going to work, unless you put boots on the ground and actually do occupation of significant parts of Iran and try to change regime, otherwise regime will stay and probably will become much more extreme than what it was before those attacks. My next point was to say is that Strait of Hormuz is clearly the choke point, but Iran has many other choke points that they can actually use, and that's what you saw in the last week and a half with Houthis in Yemen, an entrance into Red Sea.”

“US had shifting objectives all the way through, but Viet Cong and North Vietnam had a very strong sense of what they're actually trying to do. And so my argument has been like Vietnam War, it has no solution, it will go on for a long period of time, and regularly there will be hiccups, regularly there will be closures, regularly there will be flare-ups. But my feeling was all the way through that it's going to take time. And both United States and Iran will regularly be overplaying their weekend in this particular game. Unlike, say, Russia-Ukraine War, which I viewed much more like a Korean War, and what I mean by Korean War, it was very brutal, but relatively short war.”

“In 2024, you said that war style or Cold War style conflicts are economically manageable unless they displace global supply and demand curves. Well, I'm guessing that the Strait of Hormuz closure is going to satisfy your definition of dislocating those things. So, I want to revisit that now. Did the Iran War crisis, obviously, it crosses that threshold. So, talks are now resuming. Oil was down, what, I don't know, more than 10 percent in the last couple of days.”

“What I'm trying to say here, Mikkel, is that the market and especially the oil market has found ways to maneuver this by now. Yes, we're talking about a sinus wave war, but the relevance also dissipates over time. Sure, we'll get the waves, but it will be less and less and less important, in my opinion.”

“Donald Trump called off what he mentioned as would have been the largest attacks on any country since World War II. That's a lot, but let's leave that. He called them off because negotiations were apparently progressing very, very well. The Iranians apparently are not really involved in these negotiations. They're not confirming this, but it seems to do the trick for markets once again. And it seems like, Andreas, you put up the sinus waves picture that we are essentially back to this weekly schedule, this weekly role of getting some Hopium over the weekend. We're getting closer to a deal, and then things slowly deteriorate during Monday, Tuesday, Friday, the trading week.”

“That is the only thing he needs before he can simply let this happen and obviously getting Iran to stop shooting and stuff as well. So we are getting down to the very, very, very basics of what the US can offer and probably they're going to have to give you even more concessions. Maybe we're looking at the war reparations that were part of the first Memorandum of Understanding, lifting sanctions, and the solution for the strait might very well be some joint venture setup between Iran and Oman, essentially the US out of the strait. So that's obviously a much, much worse situation than compared to pre-war. We're not going back to the pre-war status quo in any way. Iran has no incentive to do so.”

“If you look at US., Israel and Iran, there's nothing in the world that could satisfy all three parties, nothing at all. 40 years.”

“Given what the US has done in Iran, I would have thought that the US economy would have been impacted a lot more. But it does seem like we are separated by two oceans and we have this immense natural gas and oil reserve in Texas. Like, I don't know, it seems like the global oil markets are functioning better without the Strait of Hormuz than I would have thought.”

“And what I'm arguing, which I think is correct, is it's the price of oil that's driving the war. It's the other way around. So we're in, the question then becomes, does it ever become a dependent variable? In other words, we last week were pushing $100 on Brent. And what happened when we got to $100 on Brent, if you go back to last Friday, the president called off the airstrikes over the weekend. And they made up a lot of, oh, Iran called and they really, really want to make a deal. And he called off the airstrikes. And then Tuesday, Iran fired a bunch of missiles at American bases in Jordan.”

“The question then becomes, if we do trace back to $100 on oil, and he does follow this pattern that we've seen, where he starts to say, making noise, that Iran called, they want a deal, we'll stop bombing them, hopefully we'll get a deal. Does it become the dependent variable? And the question, meaning that no, at this point, it stops working now. The price just keeps going up and up even if you stop, because inventories are too low, the ships aren't moving fast enough, the demand for oil is not slowing down enough to meet the constricted supply, and so it then becomes dependent that the strait is not open even if you say that they want a deal, that's not going to work anymore. That's where I think the real risk comes in.”

“US crude inventories fell 7.2 million barrels last week to roughly 6% below their seasonal average while the SPR continues to be drawn down. With inventories tight and refineries running near capacity, any supply interruption now has an outsized impact on price. Technically, July delivered an extraordinary 40% advance from trough to peak before the hopes of diplomatic progress triggered a sharp correction back towards $80 a level. When those negotiations failed, buyers immediately returned and crude oil resumed its advance, suggesting the pullback was corrective rather than a breakdown in the trend. Oil is back above its key moving averages, dips continue to attract demand, and the broader bullish structure remains intact.”

“I mean, it's not the rally you would expect for oil down five bucks on a pause of the war.”

“Not only did we have that June massacre that had forced flows washed out on the downside, but we have had an extraordinary reversal as the re-escalation of the war has gone full throttle. Obviously, both straits are in play as we heard from Anas last week. And right now, off of the lows, we've already seen a 35% advance in crude oil in just three weeks. We are back to this 90 handle where we were trading at back in the early part of June. And this recovery has now decisively broken back above the 50-day moving average, catching a lot of traders off guard on this one. As fast as this was a washout of long positioning, suddenly it's turned into a full-on short squeeze to the upside.”

“But I think it's worth mentioning that this time around that we're back here, this is where total global oil inventory is going into this round. And we're back to almost zero on the straight of former use in terms of traffic again, with inventories actually drawn down this time. So I don't really know the plan here. Obviously, oil is already 10 bucks above the lows. But if we're back to this regime again, with inventories where they're at, and it seems like the big thing all the smart oil analysts was that China had already stockpiled a ton of oil and had stopped importing during that phase. And that sort of kept them safe in terms of oil prices.”

“And there's I don't know how you put the genie back in this bottle. And you just got to watch credit spreads because they'll they'll tell you what's really going on. And if you get you get the 10 year spiking along this, this could end really badly. Yeah, that was the time for conservation of capital and be in be in places that are less volatile is the way I see it. Until until you get a sign that implied vol is is kind of coming down. I don't think you can play if you want to trade this thing, you buy the dips, sell the rips. I'm sure we're going to have a vicious squeeze, which is so bear market in momentum here in like a day or two.”

“Unless you go, you have to have boots on the ground regime change. So we've seen that a million times. Even against stronger and weaker opponents in Iran, I mean, or weaker opponents in Iran, you know, doesn't end.”

“Anas is we have things heating up in the Middle East. The thing to watch right now is the Strait of Bab el-Mandeb. It would be a skirmish there or a closing of that strait, even just a temporary one, if it has the effect of spooking the insurance companies, that's enough to close the Strait of Bab el-Mandeb, which is the southern entrance to the Red Sea. In other words, the other side of Saudi Arabia from where the Persian Gulf exists. That could be closed off too. That would be the next friction point.”

“Okay, well, let's take this step at a time, because I want to start with your high level view here, is you hold the non-consensus view that the Strait of Hormuz was intentionally closed by the United States for the purpose of, I'll call it statecraft with China, basically showing China that the US is going to be dominant in energy and AI.”

“Okay, Anas, so to summarize the Big Picture, you think that what's happened here is that we were told a story when this Iran conflict originally broke out, it was about how it was supposedly entirely because of Iran having nuclear weapons or being about to get nuclear weapons and so forth. You're saying that you don't think that's the real reason that the US started the conflict with Iran. You think the real reason is US has an agenda to show China, look, we're big men on campus when it comes to AI and energy dominance, you better not mess with us because we're in control of the whole world here. If that was the agenda, I would say that maybe it's been a little bit suboptimal in terms of execution.”

“[…] Okay, so the Trump administration intentionally closed the Strait of Hormuz, expecting to be able to easily open it. Now we can't open it because certain factions of the IRGC are not cooperating. Where does that leave us now? And this didn't go the way they planned it, obviously. So does the end of the MOU and the return of the blockade that President Trump just put back in place, does that signal a return now to a full-scale conflict between the US and the IRGC until they get to the bottom of who really has the ability to reopen the Strait?”

“We're in charge of energy and AI. Seems to me that didn't go very well on us because what we actually showed them was actually that China could do an incredibly good job of rebalancing the market in response to all of these events, cutting off their own exports, which actually showed some teeth to the west in the sense that China was able to cover all of its own needs, maybe cutting off some other consumers of Chinese exports of finished products. It doesn't seem like the US goal of putting China in its place and showing China who the top dog was went very well for the US.”

“Okay, so the mess that we've made, China wants to help us get out of, the US wants out of the mess. The solution is to make a deal with the Iranians who want to negotiate. You're saying that you think the team of Iranians that have been put in the position of being the negotiators do want to bring about a peace deal and put this whole story behind us. But it is the rebel factions of the IRGC who benefit more from the bribes and the security tactics of keeping the Strait open and collecting tolls and so forth.”

“And why do you think that the risk of the shadow of Hormuz will persist indefinitely?”

“And those guys benefited greatly from the sanctions and benefited greatly from what's been going on for a long time. And we should point out that Iran's oil production increased substantially to the extent that the production in 2025 is the highest in like 20-something years. And in February, Iran's oil exports were the highest since 2017 So those guys have been making a lot of money despite the sanctions and despite everything else. They control the economy and they benefit from the prestige, the control and the money. And we are talking about billions and billions of dollars. And it seems that the Trump administration underestimated their power and their will.”

“And as a result, we might see attacks on ships in the Bab al-Mandeb. Bab al-Mandeb for those who do not know, it is the front door of the Red Sea. So about 6 million barrels of oil basically passes through Bab al-Mandeb, mostly Russian and Saudi oil. And we've already seen some Houthi leaders threatening to close Bab al-Mandeb. We've seen some IRGC leaders threatening to close Bab al-Mandeb. And can they close Bab al-Mandeb? No, the Iran cannot close the Hormuz Strait and cannot close the Bab al-Mandeb, but they can cause enough trouble to raise prices, oil prices significantly and raise insurance. And the fear is not the Houthis blocking Bab al-Mandeb. The fear that few guys basically launching an attack on a couple of oil tankers.”

“And that oil is mostly sent on sanctioned tankers that do not qualify for the Western insurance anyway. So they are insured by Russia, China, India, others. So if the Houthis act or do something for Bab al-Mandeb, then we will lose more than 4 million barrels a day of Saudi crude. As a result, it is the same crude that's been diverted from the Gulf because of Hormuz through the East-West pipelines. And losing that basically will force prices way above $100. It seems right now we do have two comments on this. The first one is, if this is going to happen and the Houthis attack ships, the expected reaction from the Arab coalition, which is led by Saudi Arabia, is going to be severe.”

“Why they are doing all of this? Later on, of course, it was being confirmed that the Hormone Strait was closed. And the way it was closed basically was, in a sense, there were two surprises the way it's closed. But here I would like to point out that on previous shows and in previous places, I mentioned several times over the years that Iran cannot close the Hormone Strait. And I still stand by that. And I do have enough evidence to prove it, that Iranians could not close the Hormone Strait. They can cause problems, but they cannot close the strait.”

“I said that Iran cannot close the Strait, but the United States will close the Strait, and I strongly believe that is exactly what happened. But there were two surprises here. The first surprise was the how quick it happened, because we were talking about the next two, three years, and it happened in months. So that was a big surprise. And the second surprise is the way it happened, because the Hermos Strait was closed without any military action. And this is a very important point to realize that the reason why shipping stopped, simply because insurance companies canceled the war coverage. And the story goes like this, that the EU instituted laws to prevent the solvency of the insurance companies.”

“And prices of medium shower crude went up above 170, with some reports basically talking about some shipments being sold for $200 or close to 200 So for the AI industry in Asia, got hit really hard by higher energy costs on one hand, and no helium on the other. At the same time, we go back to that LNG war, that's we've been talking about. All of a sudden, Qatar couldn't export LNG, and all the plans by Qatar in the future, all the expansion they were planning, which will compete directly with the United States, is gone right now. It's been delayed and could be delayed for years. So the strategic objectives of the United States in this case about energy dominance and AI dominance already been achieved.”

“That was the real war. And whatever we see or we've seen in recent weeks after the MOU basically are some sort kind of a skirmishes and battles, et cetera, but it's not the full-scale war that we've seen. So when we talk about war, we have really to define what we are talking about in this case. So the question here is, what is the default after the failure of the MOU? And if you look at that, we see many scenarios and the full-scale war basically is one of those scenarios, but the probability of going back to full-scale war is very small. What we might see is exactly what we've seen recently, that the IRGC will attack and then the United States will retaliate, etc.”

“So the negotiating team basically can have enough power in Iran to represent Iran and act on the promises they made.”

“They have no choice because they have a population, they need to look like they are powerful enough, and they have those IRGC elements that they want to show that they are standing with them because the last thing they want is a civil war within Iran. So they have to make those statements. And for the Trump administration, including President Trump, they have to make outrageous statements for domestic consumption within the United States. So we should not be fooled by those statements and conclude, oh, we are going to go back to a full war, and therefore, oil prices go to 150 as a result, simply because most of those statements are intended for domestic consumption.”

“And therefore, Western Europe does not want that. At the same time, Turkey does not want the Kurds to be independent. And Pakistan does not want the Baloch, which is an ethnic group there, to be independent. They've been fighting the government of Pakistan for years. So no one has an interest in a collapse of the regime. And therefore, the only choice for the United States is to support the negotiating team against the extreme elements.”

“And the three major proposals I made, the first one is to change the bylaws of the group. And instead of focusing on production, they have to focus on exports, because you can measure that more precisely than production. And at the same time, the second point is to focus on all liquids, not only on crude, because the demand side is all liquids, not only crude. And the third point, the most important, is for them together as a group, OPEC plus, to work with the consuming countries, to build massive strategic petroleum reserves. And I went country by country, basically, in the research work, basically, to show how it works. And the objective is to avoid any choke points, not only Hormuz, and to avoid any waterway.”

“And if you want to look at the main lesson out of Hormones, we need that cooperation. The idea is we look at the producers as the enemy or the consumers as the enemy, must end because that was one of the biggest lessons out of Hormones. As for OPEC basically or OPEC+, for a country to leave, it is not in the interest of the UAE, for example, for prices to collapse. So they are going to act in a very responsible way, no matter what, to avoid that. And they want to avoid a price war under any circumstances. So the impact is limited. So OPEC+, will be intact no matter what, but they have to meet the new challenges after Hormuz.”

“With social media and the impact of social media, they just made the impact of Hormuz way larger. We've seen what it is and the market becomes extremely responsive to these things. That's why the ghost of Hormuz basically will stay with us forever, even if we reach a final resolution to the crisis.”

“The first one is how countries are going to react to the Hormuz crisis, because the impact is tremendous. The impact is huge. And people realize that the short term behavior of China that we talked about earlier basically proved that China basically was the least affected. And therefore, countries and governments are going to adopt the Chinese model. What is the Chinese model? Is linking energy sources to national security.”

“On multiple days over the past week or two, we've seen flows out of Hormuz alone exceed 20 million barrels, which is the pre-war level, combined with the fact that we've seen all the other reroutes, you know, Nambu and Fujairah and everything else all maxed out. We've probably seen days where we've had kind of 130% or so of pre-war supply coming out of the Middle East. But I think what's important to note here is that you're seeing a lot of additional things kind of juice those numbers, most notably the drawdown of the long stranded barrels that have been floating in the Gulf for the past three, four months now.”

“No, but we remain in this increasingly Cold War standoff, with these intermittent flashes of heat, over who's going to control Hormuz, because in the implicit language of the MOU, it seems that Iran believes that they secured the right to control Hormuz.”

“It doesn't, like it seems like they're going to need to send a few more drones if they're going to want to enforce that line, because at least on today's data, it does not seem like everyone's going through the Iran toll booth route. It's this tug of war between the interests, because Iran, I also don't think, I don't think Iran wants to go back to full blown war either and risk losing some of the benefits it got out of the MOU.”

“It doesn't want to push too hard, but it also wants, it needs to push hard enough to lay claim. I think the longer people run around Iran, the more bold others will be and the harder, so it's one of these things that if they can't assert control in these early weeks, I think it's going to be exponentially harder to do so later. I think that will be fundamentally the battleground on which this next layer of uncertainty is determined, is this question of in one month or two months, let's say we're back to even 50 percent or 75 percent of pre-war flow through Hormuz, or is that flow going through the northern route, or is it going through the southern and center route?”

“So I think that to get back there, we would have to climb a couple more steps back to where we were there to that be, I think, a risk that was on deck. I think what we'd see first would be a re-closure of the strait. And so far, we've seen them hit a couple of ships, trying to instill respect for their new regime. But they've stopped well short of enforcing that, I think, even as hard as they could. So I think it's clear to me, at least based on their behavior thus far, that they don't have a strong interest in re-escalating things, and they may not even have the appetite to enforce their kind of core claim to Hormuz at this stage. So I think I would expect that to happen well before we saw a return to kinetic threats to physical golf.”

“It seems to me like the one of the biggest questions here is, has the war really reached an end point? Or is what's going on here more of, we can't keep the world cut off from oil, so let's have a ceasefire long enough to get a big surge of oil out, enough to keep us going for a while, and then we'll go back to, maybe we haven't quite resolved our disagreements yet. Where do you think this is? Is it winding down for real, or we get different messages from both sides of this?”

“That was actually going to be my next question is, on one hand, I agree with you that it feels like Iran wants to end this conflict and I sure hope it ends and ends soon. But it also seems to me that if we got to an escalation, the combination of closing the strait of Bob el-Mandeb and hitting the East-West Saudi pipeline at the same time, that really could put a pretty big dent in things if this crisis were to re-escalate. And it's not a prediction. I don't think that's going to happen. But it does seem to me that that tail risk is pretty darn big.”

“Let's suppose that we really can get to some kind of agreement with or without tolls, that really it's wide open, nobody's going to get droned, it really is safe to take your tanker through, and everybody wants to send their empty tankers back into the strait. How long does it take for them to get from wherever they are back into the strait? How long does it take to really get the world back to a fully supplied state if we had a resolution completely? Is it weeks, months?”

“And I doubled down on my risk positive tilt in the portfolio last week, but if you want to check the exact single names in the portfolio, you need a pro subscription at Real Vision. It's been a great year for the stock portfolio, and well, the stocks are flying again today with this deal between the US and Iran. It was a very, very eventful weekend, to say the least, given this deal that at some point during Sunday looked like it was ready to be signed already yesterday. We now know that the signing ceremony is planned for later this week in Switzerland.”

“Linsey Graham is one example of it. He explicitly refers to JD Vans and his negotiation team. And he wants them to ask Congress when they settle on the deal surrounding the enriched uranium. So therefore, I mean, we do have some clarity for the next 60 days, but we do not have clarity years ahead. If you ever get that in the Middle East, that is. But in my opinion, this is another example of what I've earlier labeled sequential progress in this question. I actually think that from a market standpoint, we've basically been past the peak of this crisis since the first week of April. I explicitly stated that the crisis was over from an investment perspective in the first week of April, which proved to be incredibly correct.”

“But for the next 60 days, we don't have that. If we assume that the Iranian regime will be allowed to export oil without any sanctions globally, is that a potential addition to the global supply? Let's have a look at page 5 here, where we look at the Iranian production and the overall capacity of the Iranian oil sector. And we're talking about a meaningful addition in the case that Iran is allowed to export globally without any sanctions. Obviously, now we have a drawdown in the actual production, since some of it has been shot in due to the US blockade. But we're talking close to 4 million barrels a day at max.”

“It seems to me like one of the biggest questions here is, has the war really reached an end point, or is what's going on here more of, we can't keep the world cut off from oil, so let's have a ceasefire long enough to get a big surge of oil out, enough to keep us going for a while, and then we'll go back to maybe we haven't quite resolved our disagreements yet. Where do you think this is? Is it winding down for real, or we get different messages from both sides of this?”

“Because again, Iran seems to have got a pretty good deal out of this. Do they get their money? Do they get their investment fund? Do they get whatever? Maybe they're willing to not push the envelope on control of Hormuz if they're getting everything else. But they have been pretty clear that they want to maintain control of Hormuz. But going back to this prior point of like, can they keep it? Can they manage it? It doesn't, like it seems like they're going to need to send a few more drones if they're going to want to enforce that line. Cause at least on today's data, it does not seem like everyone's going through the Iran toll booth route.”

“Like if 20% of the energy comes out of the Persian Gulf, but all of a sudden we have a very well fortified country with missiles, that's not, is an intractable problem. It is not really, or it's going to take years to fix, the same way the Donbass, the Ukrainians and the Russians are still fighting, I don't know, four or five years later. What if this is a four or five year problem or more? How does it affect shipping? How does it affect LNG? How does it affect energy supply? How does it affect refining? Because all these sectors, US refiners are booming because they have cheap access to energy and jet fuel prices are through the roof.”

“And I'm like, what if that was like the first chapter? What if, you know, how, what if we're on our road to 150 oil? And, you know, it's just this is gonna take time to realize this is like unsolvable. You know, it's a bit of this checkmate. The US doesn't want to put troops into Iran. But so just to say, on the data, the data is screaming all these energy related, all the sectors that are affected and benefiting from the lack of supply coming out of the Strait of Hormuz are screaming, screening very well for earnings revisions and very low valuations. So if you wanted to take a view that this problem will persist, those sectors are, you know, look quite attractive.”

“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.”

“I think this is unfortunately going to be a headline that continues with us probably for at least weeks, let alone months, because the memorandum of understanding still leaves a ton of details to work out. And even in the opening days, around the signing and around some of the talks that go into some of those details, there are still pretty big divides. 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? Enforcement mechanisms? What type of funding? They talked headline numbers, but 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?”

“Okay, wait a minute, so now parties that are not party to the agreement are going to come up with $300 billion, and that is part of the agreement, but the US isn't gonna fund it. How does that work? And then the whole question of the weapons-grade uranium, Israel has said very adamantly, the war's not over until it's physically removed from Iran. Both the mayor Iranian side and the US side of the MOU that's now been read out publicly say downblending on site, which Israel has... And it also says that they've got to have a complete ceasefire, including Lebanon, including Israel standing down from attacks on Lebanon.”

“The strait is still closed as of today. Both the Iranian and the US version of the MOU say it will be toll free for 60 days only and that Iran will maintain control and charge user fees. They're not calling them tolls anymore, but it's the same thing, a dollar a barrel. So $2 million per VLCC to go through the strait in a service fee payable to Iran. Both versions of the MOU say that's what it goes back to after 60 days. So it seems to me that both sides are now agreeing that Iran has basically been authorized to construct a permanent lifetime toll booth over the Strait of Hormuz and collect a dollar a barrel for every barrel that passes through it and both sides say that in their MOUs. I never thought that I would see that.”

“And the ones that I've seen are written in a way that each side is going to interpret them the way that they want to interpret them. I don't think either side will fully live up to what the other side believes they are responsible to do in it. And as a result, I think we'll probably end up back where we are now at some point down the road.”

“I would be surprised if it got back to normal, and again, I would be happy to be wrong on this. And I think, as I said a little bit ago, the consequences are still to be determined. Now, there's a lot of people who already thought we would see oil at 150 bucks or 200 bucks or whatever it is, or that we would see gold at 6,000 or 8,000 or 10,000 or whatever it is. Instead, they have both fallen precipitously over the last couple months. But I don't think that we have seen the full effects yet. And so I think that is probably, I think the big impact won't be realized for three to six months from now, maybe even nine months from now.”

“And we are getting close to a point where, you know, reserves around the world are being drawn down. And while they have been able to kind of keep the plate spinning so far, we're getting close to a point where maybe that is no longer the case. And I think it's important to remember that neither side wants the whole world to collapse as a result of this, right? Iran doesn't want that and the United States doesn't want that. And so perhaps the US was hopeful that they could get this wrapped up by early June, mid-June. And now that we're here and it's not wrapped up, they're saying, let's take a pause. Because if we don't take a pause, then many things are going to get out of our control.”

“I think it is very unlikely that either the United States, Iran or Israel lives up to their side of it. And whenever it kicks off again, each side will blame the other side. This is just reality.”

“We also found out that they have a missile that can reach Europe. That was suspected, wasn't sure, now we know for sure that they do. There is value in knowing that. We also found out that Russia and China will not come into the rescue of one of their biggest allies, despite the fact that they need Iran. And so there is great value in knowing that. We also know that the rest of the Gulf countries did not take out their frustrations on the United States and have in fact grown closer to the United States as a result of this adventure or whatever you want to call it. There's value in knowing that. OPEC in many ways is on its way out.”

“The reason that's important is the US is not only negotiating with Iran, they are negotiating with the rest of the world. And when the rest of the world is under pressure, the US can exact better terms on whatever deals that they're negotiating. There have been a number of extremely large long-term energy contracts that have been signed over the last four months, since February 26, I think, was the first one. And there was another one with Japan just signed, I think, four or five days ago. And there's many other things like that. And again, while not everybody has come rushing to aid the United States in this effort, nobody has run and sided with China and Russia as a result of this.”

“But further than that, Iran is now going to be able to sell that oil, at least for the time being, for full price and in dollars. Now, why is that important? Because for a long time, a lot of their export was going on the black market to China. China was paying anywhere from a 20-30 percent discount and using, guess what, not dollars, but yuan. If you don't want China to be able to continue importing oil in large quantities, at a large discount in their own currency, but instead have to compete to buy it on the open market, this would be one way that you would accomplish that.”

“Now, again, these are not certainties, but I think there's a higher probability than there would have been otherwise, and I think there's a number of other factors that contribute this. I see opportunities in the food industry. The other one that I haven't heard anybody else talk about is the MRO market, which basically stands for maintenance, repair, and overhaul. This impacts the aviation industry. The fact is that the Gulf region has become a very important part of this MRO global industry. The problem here is that if you end up getting a problem in that industry, it ends up potentially impacting all these other industries because it is another supply chain disruption.”

“So I'm trying to sort of sort out, okay, we got on Friday, the jobs report kind of led to a lot of people thinking that rate cuts are less likely than they were on Thursday for whatever reason. We've also got these big looming IPOs, and I'm not sure if the market's finally woken up to how big of a deal the Hormuz crisis is.”

“We're taught to think of gold as something you want in your portfolio as a hedge against big geopolitical events. If something like the Iran conflict happens, gold is going to go up, except for it went straight down. What gives, first of all, with that? Is that about inflation expectations? Is it going to continue?”

“Well, the dollar rally finally pushed through 99.5 on the Dixie, up to resistance again at 100 this week. I anticipated that that would be the case, and that's exactly what happened. I think the Iran conflict is likely to escalate from here. If it does, I think there's more upside, at least to 101.5 on the Dixie. The dollar is eventually going to top out and roll over, and probably roll over hard, but not yet. I think it's when the Iran conflict is really and truly winding down that we see the dollar top out, and then I think it probably has a long way to go to the downside.”

“So the physical market is not forward looking. We don't need to see the physical market reprice anything until we actually exhaust those buffers and storage tanks and so forth. Once that's exhausted, the physical market does need to rebalance in order to close the Monthly Futures Contract. There has to be a rebalancing of supply and demand. Normally, what happens is that outcome would be anticipated by speculators who would front run it, resulting in a gradual ramp up to a final crescendo when the physical market finally rebalances supply and demand. My expectation is speculators are going to continue to stay scared out of the market by all these truth social posts, which, you know, they take a $10 bite out of the market in an instant.”

“All of this is predicated on my personal analysis that we're nowhere close to a peace deal and that we can't realistically come to one because the disagreement on the nuclear file is frankly irreconcilable. Now, if I'm wrong about that and the other 70% of the market are right, then the big piece deal wins next week. It's all peace, everything's over. It's a completely different outlook. I see that as profoundly unlikely, but hey, I could be wrong.”

“When front-end yields on T-bills go up a lot, it sucks money out of gold. Because if you can get 40 grand a year in a one-year T-bill, instead of 30 or 20, people just naturally will buy that. But so that's what creates the buying opportunity. So yes, probably a little early here, we're buying in thirds and quarters and we're looking to add on further weakness.”

“I think the physical world is going to start kicking the financial world in the head sometime in the next one to two months. And look, I was early on, early and wrong on how quickly this would happen. But I was dead right that Hormuz would still be closed much longer than people thought. So that's still, I think, the overriding factor is the physical world will still get its say.”

“But I don't think people have thought hard enough about the potential implications of that. It's particularly in the context of China's screwed more than anybody, which was overwhelming consensus three months ago. Overwhelming consensus. Which is China wants this thing to last longer. China's fine. China's playing a strategic game here rather than some sort of tactical game, which is leave it closed. Leave it closed. We know what's about to happen to the US bond market, to the British bond market, to the EU bond market. It's all about to blow up. Leave it closed. Great. Now, would that explain why they sat down and nothing came out of it after from Donald Trump?”

“I mean, this is why I think Trump's going to cut a deal that will probably end up being worse than Obama's because he has to open. He were four months away from the midterms. He can't re-escalate and engage in another months long conflict with gas prices where they're at, the consumer health where it's at.”

“Now these bank notes, of course, circulated widely, and they were hugely successful because of the problems we had before the Civil War of not having this uniform currency. Now what are stable coins under the Genius Act? Under the Genius Act, it's not all of it's exactly clarified yet, but essentially what we're going to have is we're going to have issuers issuing stable coins that are going to then be backed by treasury bills and notes, but also uninsured deposits and potentially some other types of investment.”

“Now that's maybe also just because the stable coins domestically are not solving a problem that the national thinking notes were solving back then. It's a different question abroad. It could be that there are people abroad right now that are holding dollar notes because they are worried about the inflation risk or expropriation risk of their own currency, their own domestic currency, and that's why they prefer to hold dollars. So for them, it may be interesting to hold stable coins. So there's some potential for there to be demand abroad.”

“And I agree if you, I think domestically, maybe tokenized deposits will be the hot thing. If that, but clearly, I think stable coins future is in cross-border payments and places with less stable monetary regimes.”

“And now it's, what, $300 billion and climbing. I think eventually we'll see well over a trillion in stable coin market cap. Once we get to that number, I'll re-evaluate from there. But there are certain magnitude things that I think people somewhat overestimate, which is stable coins is as powerful as they are, that at least in their current form, they're mostly yieldless products. So anyone holding them is getting dollar exposure, but no yield. Which really means that they're good for payments, they're good for working capital. They're less ideal for savings. And so, but there's many businesses around the world that would happen to use them for working capital.”

“One place I kind of see it differently is, I think you're right that US dollar stable coins are likely to be the saving grace, if you will, for the US dollar as global reserve currency. But the way I interpret that is that puts a target on their back. That means that China and Russia primarily, probably are doing everything that they can possibly think of to engineer a different competing stable coin, a global south stable coin, a BRICS coin or something. I haven't heard anything about that actually happening. But then again, if I were them and I were doing it, I'd keep it secret. So do you think that the US really has a monopoly on this stable coin idea, or do you think it's going to come under challenge?”

“I think every country is going to have to rearm themselves, and I think money will be spent regardless of whether they can afford it or not on national defense, so I think that's an area. Then, as I mentioned the last time I was on your show, I think stable coins are going to be a revolution that many just don't yet understand. I think not only is it going to help to solidify the United States dollar as the global currency, but I think there are some pretty interesting investment opportunities associated with those as well.”

“You're supposed to fix 40 years of issues in how many weeks and months. I would say it's probably more the second order. I mean, something that's probably under-talked about was the Saudi Arabian nuclear deal, right? That got announced. Like those things are really norm-breaking. And I think it's just like, this is where I think the Trump administration's pragmatism could really have some long-term actual consequences, right? Like you're injecting a lot of these things that are breaking how the region operates normally.”

“Hey, if you try to make things multipolar or sell oil outside the dollar, we're going to come and send the most powerful military in the history of the world. I'm going to beat you over the head with it. And if the latter is even partially true, those things aren't true anymore. And I think that's what's happening here. And it's still, it's such early days in terms of the implications that I think markets are just waking up to the sort of the reality of it.”

“American strategy appears to be we're going to turn over the chessboard and try to squeeze you with the dollar until you comply. And the more they squeeze, look, you can see it showing up in Yuan payment volumes. You can see it showing up in Chinese export volumes. You can see it showing up in Asian EV or Asian solar panel electricity generation. It's not working. So at some point, American leadership needs to maybe think a little bit about changing the strategy or they can keep trying what they've been trying for 25 years.”

“I think one of the key things to watch is that US dollar yen, we had the Bank of Japan raise interest rates and yet almost no reaction on that market. The 160 level on the US yen has been a rock solid overhead resistance where we have seen numerous interventions happen in the past. And yet here we are quietly crawling above that level. Looking like the yen may have a whole new leg down. More importantly, the euro remains below the 50 day moving average, breaking to lower lows. There is clear US dollar strength here and flows coming into the US, maybe chasing some of these equity returns that are coming in the US markets. But certainly the US dollar remains very well bid at this moment.”

“The United States knows that if they want to, they can put the rest of the world under pressure by using the dollar as a weapon. They can take off this global white hat and being the bright shining city on a hill. They can put on the black hat and they can put another country into crisis. This has been done many times. It's been extremely effective. The most recent example, Secretary Besant just talked about this a few months ago, where he said very specifically, they used their tools to create a dollar shortage in Iran, which caused their currency to fall very dramatically, which caused inflation to pick up dramatically, and caused their local citizens to go out in the streets and protest.”

“It put the Iranian regime's revenue under extreme pressure. This is just one example that if they choose to do it, the United States can weaponize the dollar. Now, the other point I've made is when you paint it black and you put on the black hat and now you're the bad guy, the rest of the world doesn't like it. Of course, they're going to try to get out from underneath it. That's a big reason why central bank gold purchases have gone up dramatically. On slide 37, we show the net buyers era, and then how it jumped dramatically after Russian reserves were immobilized in 2022 I don't think that's an accident that central bank gold purchases jumped dramatically after that.”

“See, nobody wants those treasury bonds because they're falling in value. Well, fair enough. As I've said for a long time, I didn't think that treasuries would hold their value. Part of the milkshake initially was saying interest rates would rise and treasury bonds would fall. But there's two ways to look at that. That's another way the United States can weaponize the system against the rest of the world. If raising interest rates causes bond prices to fall, and then the rest of the world has to sell those bonds to get the dollars they need, that's essentially the same thing as an early withdrawal penalty being put on their US dollar reserves.”

“For 30 years, the US has been the only game in town, and now it's not anymore. If you're trying to sell your house and there's only one buyer, the buyer's got all the power. If there's two buyers, you have all the power. And my point here is, it's not well understood by American investors, I find, that China has, you want swap lines set up with everyone in the world, basically, except the United States. I think it's 185 countries. Plenty of volume, and oh, by the way, all those, if you take a dollar swap line, where are you buying your stuff from?”

“And you know, so when I think about these dollar swap lines, sure. Are they a weapon? Yeah. Are they the weapon they were 10 years ago? No, not even close. Because if Besson says, I'm not giving them to you, they're going to pick up the phone. Oh yeah. Hi, Beijing.”

“But they're a toolkit whose values, you know, has been drastically reduced by real politic of China having swap lines with everybody except the Americans.”

“That includes not just EVs and batteries, but solar panels, wind and everything else. So electrification stack is already lost to the United States and to Europe. Now, you're going to go beyond that because from electrification to stack, you start building robotics and automation. That's only one more step forward. Again, China is already gaining control over that as well, not just electrification. Now, the third area where US traditionally leads, which is science and technology. Again, US is relatively speaking falling behind. China is accelerating and you can see it in LLMs. You can see it in the ability to try to bypass technology restrictions, particularly in chips. So China is building the world and not deriving return on equity.”

“There's a guy very serious, very high degree of gravitas, saying that the West is sleepwalking into its downfall. And one of the things he said was just fascinating. He said, where is your reflection about how many people you have killed around the world over the last 30 years? And the whole point is, you guys are 4% of population, the rest of the world is a lot bigger than you, and we're moving on. And so yeah, I think that's exactly what China is doing, which is just when you've got a dog that won't stop chasing cars, let it catch the car and then see what it wants to do. I mean, the one thing I have heard from multiple different relationships in and around China is essentially like, what is it with you Americans in the Middle East?”

“So I wrote about this at the beginning of the year of this dual thing, and US and China both doubling down on CapEx and state intervention and involvement, probably just means that I think double the demand for overall compute and hardware. To the extent you would mention it, like a Chinese memory gets hit by Chinese demand by itself. So that's one thing. But then, on the other hand, I actually think the bigger thing to look forward to in terms of where things are headed is actually genuine enterprise adoption and the so to speak ROI, return on investment. I mean, the consumer use case is kind of stable stakes.”

“Okay, well, let's take this step at a time, because I want to start with your high level view here, is you hold the non-consensus view that the Strait of Hormuz was intentionally closed by the United States for the purpose of, I'll call it statecraft with China, basically showing China that the US is going to be dominant in energy and AI.”

“And one of the more nuanced trends that I think people are starting to understand is ex-US outperformance and particularly emerging markets. EM and really ex-US started to outperform post-tariff tantrum. There were narratives that, oh, this is the rest of the world, repatriating capital, dumping the dollar, if you look at the actual investment flows, that's not really the story. And then if you look even further under the hood, you have countries like Taiwan, Korea, with incredible exposure to the AI capex build out that are really leading the way. And it does seem like it's AI all the way down.”

“Well, we're back down to 99.5 on the Dixie. I guess we're testing what was previously resistance as support. The Iran conflict was a source of a lot of that US dollar strength. So a downside retracement makes perfect sense here. And there's plenty of room to say that if the Iran deal really is as strong as the president hopes it is, that maybe there's a lot more downside as we retrace a lot of the war premium out of the dollar. I don't rule out a re-escalation. As of recording time, everybody is celebrating like it's 1999 because, oh boy, it's over and we've got a completely done deal. Look, the deal is contingent on a complete stand down of aggression against Lebanon as well as Iran, and that includes Israel.”

“What did the elite get out of it versus what did Main Street get out of it? And so the United States has, and as a result of that inequality, that kind of led to the rise of Trump, right? Or the America First. And America First is a dramatically different way of dealing with the world than the rules-based order. The rules-based order was, for the most part, a greater goods strategy. We are going to do this, and we are going to do multilateral negotiations.”

“And I don't think it's going to change dramatically even if Trump was no longer president. Because I think in many ways, the world is fracturing. We are moving from a world that was globalizing to a world that is now deglobalizing. And I think as that happens, despite the numerous problems that the United States has, and I could spend hours and hours going over all the problems the United States has and the mistakes the United States has made, despite all of that, I think the United States is still relatively in a better position than virtually anybody else on the globe. And as a result, as we go through this Fourth Turning, I think a lot of people are assuming we're going to have this great calamity in the winter.”

“Many of the problems they have are bigger than the problems the United States has. And the United States just has so many advantages that most people quite honestly just don't even understand, that I think more likely than not, the United States will use every single asset they have, and I mean every asset that they have, to remain atop the global order. So I think it's more likely we see the fall of the republic and the rise of the empire than the fall of the empire and some new power takeover. And the last point I would make on this is I know there's a lot of people who think that the United States already is an empire and it has been for a long time and that its best days are behind it and the empire is dying.”

“But I have a hard time seeing the United States surrendering hegemony to some other power, regardless of whether Gavin Newsom's in the White House or Donald Trump Jr's in the White House. And I think the problems in the world are going to necessitate more nationalism as opposed to less nationalism. And that typically, once that process starts, it typically lasts a long time. And it could swing back and forth for a couple years this way or that way. But on the overarching pendulum swing, I think that has many years to go.”

“So we don't have the engineers. We don't have the welders. We don't. So we're going to do what we can, but the lion's share of American reshoring is actually going to be, you know, make Japan great again and make Korea great again. But, but Japan and Korea, if we switch manufacturing from China to Japan and China to Korea, our costs go like this. So we can't without blowing up our bond market. Unless we do a deal with you, Japan and Korea, which is you guys kill your currencies, kill them. And in return, we will give you sweetheart no-bid deals for factories here in the US, preferential market access, etc. And that is sort of financial warfare in the other direction, right?”

“So if you're an operations manager, what you're looking to do is not just make sure that you have access to materials for your inputs, you need to have buffer stocks. You need to have extra. And that raises working capital demands. That raises inventory requirements and on and on. So yeah, there's a lot of pulling forward, but I think it's kind of, for now, a permanent thing because this shift from optimization to resiliency, it doesn't happen overnight. And you can't put a lot of money into doing this and then shift on a dime. I think there is a transitional period that we're going through, and resiliency isn't gonna factor in more into how firms manage their supply chain.”

“And like, I don't know, I'm pretty agnostic on my perspective of Peter Thiel, but I do recognize him as a very powerful signal early to these secular shifts. And so if he's making that move, to me that's more of like a signal of the beginning and something that's like that you want to fade.”

“I know by the way, in the last 10 months, eight of those 10 months, gold has been the U.S.'s number one export. Bigger than pharmaceutical preparations, bigger than jet engines, bigger than oil. Two months that it wasn't, it was oil and it was pharmaceutical preparations. I think they have a strategic plan on that front. Tactically, I think they're just messing it up as they go. This Iran thing is just a disaster in terms of trying to achieve that. It is not working out for them the way they thought, and I think they don't know what to do, and I think Trump in particular doesn't want to hear that. There was even a Washington Post article this week where the military is trying to tell them, we don't have the weapons to keep this thing going.”

“But the fundamental thing both sides want is just not possible, right? It's irresolvable. So I think the MOU is kind of a phase one trade deal. That you both agree that you see where the ledge is and neither side wants to jump. But from there, you know, you can't really close the gap. So then you go for a period of both sides overplaying their cards a little bit, thinking you have leverage. But the reality is like it's not a closeable gap.”

“The enterprise part is what eats the profit pool of horizontal SaaS, whatever consulting or the middle layer. That eats the profit pool. The consumer tier is very hard to make money because it will be open, and then the top is where the money is made. But that's a much smaller, I think, addressable market. So that's in my mind how the end state looks. So if that's the end state and you work backwards, like why do companies like Microsoft desucceed? I think it's more, to your point, the trust is because they have the complementary assets, because you trust them with your data and their cloud.”

“Now, you talked about the changing nature of the stimulus that we're going through right now compared to COVID, where it was sort of direct to consumers. I mean, do you view there being a potential that all of this AI spending has become such a big driver of the GDP growth of the US economy at this point that it is in many ways the stimulus and it will be backstopped.”

“So what's going to happen is that orchestration layer is going to accrue a lot of the value. Companies are going to retain their sovereignty by basically making models more substitutable. And some tasks, low-value tasks, may be going to be routed smartly towards the open models, cheaper models, and then the high-value tasks maybe will be using frontier intelligence. To that extent, we expect there to be a general transition away from the current paradigm, even more so with inference becoming an ever bigger deal that most of the AI computing minds can come from inference, and the funding of a computer can come from many, many enterprises, companies that will be, I think, looking for compute.”

“So this is going to be a leading indicator. And I wrote a post at the beginning of June saying like, this thing seems to be plateauing a little bit, and the use-correcting situation is such. And this thing could be taking a break before a length like a lag up. Maybe we see like a super powerful model and it just runs away with it. Or there's a possibility this thing actually mean reverts a bit as, you know, people become more rational about the cost of these things and, you know, sort of substitute between quality and cost. And indeed, that seems to have been what happened.”

“Like I think, you know, this idea of token maxing was always the idea you want to actually let people experiment, right? Because in complex workflows, large enterprises, you don't really know what the use case is going to be. And also the models just were not, didn't really become smart enough or good enough until this year with agentic and everything. So you need token maxing. But token maxing is fundamentally at odds with expensive tokens, right? Tokens are so expensive and also throttled. So you need it eventually to get to a state where tokens are cheaper. And this idea of, you know, smartly routing models, you know, the work, like that's always going to be the case, right?”

“So you don't really have a way of monetizing the models if you just simply create consumer use cases like a a chat companion or whatever. You can't really charge that premium, but Chinese companies are increasingly willing to pay for cloud, right? And so that's changing. And also, I think in the US, you're going to see I think this gradually percolating up of adoption, right? So we already know, like anecdotally, when you and I talk to anybody who uses AI in a small company, a small context, personal context, every single person will tell you they fundamentally change their workflow, get a lot of productivity and whatever. But you don't hear it at the aggregate, and you don't see that in the aggregate economic statistics.”

“Like you said, Max, I agree, these companies have CapEx plans that they need to fund that are trying to optimize their own balance sheets and their own financing costs to go do so. It's much clearer what they are trying to achieve with the capital. Now, what the market's job is, is to figure out whether these projects will have a good return on that, on the capital and capital allocation for these companies becomes absolutely critical. But yeah, it definitely seems like it's an arms race to make sure you're a leader in these spaces. Right now, you need a massive amount of capital to do that.”

“Tell us about, you said it's going to take longer than people expected. You are seeing headlines of data centers are being delayed.”

“The one piece where I think it's failing is it's not, it's breaking the social contract. And that's my big quam of the dolls. I know the Marc Andreessen's of the world and all the big AI bulls are like, this is gonna unlock new economies of scale. This is incredible for society, et cetera. But there is a transitional period where people are really struggling and there's almost zero. And I think if you don't address it politically, you're probably more likely with the AOC and Mamdani's than you are with hands off laissez-faire conservative government.”

“And in that, maybe from a relative perspective, this is just beginning. And, you know, to play Contra on, this is what's really interesting, to play Contra on the issuance of the hyperscaler credit spreads, at some point, because boomers need yield, and all these life insurance companies, and the whole boomer yield thing, you get oracle bonds at like, say, 8-9%.”

“Well, at some point, why wouldn't you just sell, if you're a boomer, you just sell your equity and just buy those bonds? Because at that yield, you know it's not going out of business. At that yield, it's actually a great buy, relative to some other companies. You're probably not going to buy some high-yield companies that are over-levered, etc. Like CoreWeave bonds, I can actually talk about single stocks for one more day.”

“So the system works really great for them. But like, as a younger generation, you have to take that risk, you're being forced to take that risk when, you know, people don't necessarily want to. So that's therein lies the conundrum. And to finish it off is these scenarios, you end up with more leftist, you know, communist policies and redistributive policies. And I think that's the real risk here longer term is the more you, you know, you're creating this centralized, like, productivity boom. But like, we'll see it politically. Vol cannot be stifled for long enough. It gets transmuted to the social contract.”

“You know what else Mike talked about that I thought was kind of interesting was, he said something like, you know, your ability to like, if you had some capital, essentially you're passed down from some wealth, your ability to compound that wealth is like exponentially better because you can deal with drawdowns. But like, if you're in a lower income bucket, you know, you can't really take risk because it's, you know, obviously you have less to work with. It's like that slowly erodes over time, the social contract, and you can't catch up is really, you know, what he's been talking about. But all these things are, it's policy. Like, I have zero problem with the entrepreneurs.”

“It's a really well done movie that basically is this venture capitalist who's Seth Rogen and this gig economy worker, which is Aziz.”

“It's just your marginal utility and marginal rewards are decreasing, and that's what most of the younger generation feel right now. The other thing to remember is a technological and financial revolution. The first steps of those revolution usually involves transfer of value from labor to capital. It always has, it always done, and today, it's exactly the same thing. So if you think of share of wages in the United States relative to GDI, we are now at the lowest point since 1947 Now share of profit, we're at the highest level ever. It's about 16, 17 percent of national income, whereas traditionally Warren Buffett said anything more than six or seven is too high.”

“People are not ready for changing social and welfare system. So neither political systems, nor individuals and people, nor businesses are ready for any of this. And so the most obvious policies to apply in order to define the extreme, are not being implemented. The other set of policies you can introduce, and that's regulating AI and technology. And that's basically saying, let's just develop it, not just at a slower pace, but let's develop it in a way that it augments humans, not replaces humans. Again, there are very few takers, apart from academia and some places, that actually agree with that. So to me, do we have answers outside of violence?”

“So the killer to me is not unemployment, but drip by drip like a Chinese torture chamber of declining marginal utility and usefulness and marginal rewards that have been placed on individuals. It's like the carp from Palantir. He was quoted saying that average person might get a little bit more money as you go forward, but I will be, or anybody involved in AI, is going to be a hundred or thousand times richer. That's a problem because that opens up the gap that no matter what you do, you will never be able to succeed and that drives anger.”

“Because what's going to start to happen if we just let home prices run and run and run where people can't afford houses is you're going to start to have political instability. If you have, I mean, there's Peter Turchin did a book on it, T-U-R-C-H-I-N. I can't think of the name of it right now, but he looks, he created a scientific field called Clio Dynamics, which looks at basically its wealth inequality and elite overproduction leads to political instability. And so people say, hey, it's great. The US market's up and houses are up and so it's all fine, right? Like think about what Trump, what was her name?”

“And one of the Chinese are giving away education. The housing prices have crashed, equity prices are down, right? So it could be a sign of weakness of the Chinese. Maybe they're afraid of a revolution. I don't know. But I can tell you, the US, right, what do we have in New York? We have a vowed Marxist running this city of New York. And people are like, this is fine, that dows at 50,000.”

“Because you've got a lead over production and you've got record wealth inequality. Wealth inequality in America is higher now than it was in the Gilded Age. It's going to keep getting worse.”

“No, definitely, but this is a new extreme. I mean, I know Felix, you were talking about the inequality stuff today, but yeah, you're spot on, Tyler. It's getting so egregiously divergent that it's almost hard to believe is still ongoing.”

“They're in newer areas that are developing, so Anthropic and OpenAI and groups like that. These companies have been around, but they haven't been around all that long. But they are generating revenue. People are excited about the path for these companies. I'm sure not everyone is going to be a winner, and not everyone will justify probably these valuations or the capex that's happening. But right now, the capital markets are open for these types of ideas. Money is flowing not only here, but in other parts of the world as well. And it's a very good time. If you have a big idea that needs capital, it's probably never been a better time to go get that capital.”

“Well, the only thing I would just say as a reminder for people listening to keep in the back of your head is, that this administration has also shown a very willing appetite to play both sides of the manipulation game. And what I mean by that is, right now, you know, right now we're in the thick of peak political incentive period to keep things afloat. The midterms are coming up, they're probably gonna lose the House, the Senate's a toss up, they're about to go on recess, Congress, Senate and House, with a very pretty shitty last few weeks and months of activity and momentum.”

“They're already negative free cash flow, already levering up. You can't just continue that infinitely. And things are coming home to roost. And what I find really funny or interesting, I guess, about this most recent rotation, because for the last two months, it's really been a rotation game. The Nasdaq and the indices really are flat since early May. So, this most recent rotation has been, you can just see the hedges have been short the Mag 7, the CapEx spenders, and long the receivers, Korea, Taiwan, memory, et cetera. And that's just gotten squeezed.”

“And the reason I say that is you can't control it if it's out of your, if you didn't create it, you know, if the market's selling off because of this narrative and earnings and blow up of AI and all these things, you can't control that. If you create the volatility via Iran, you notice like he keeps saying tons of things and no one's listening, the market hasn't cared. It's sort of like a problem for him. I thought, I think this is, you know, in a way to kind of drum up that ball again, to then suppress it in a couple of weeks.”

“I mean, every time the VIX shows any upside movement, then there's another fake headline. And so as a market practitioner, you can't not... Like the VIX is not going to get sold down, and stocks are not going to rise if there's headlines that could be real, that the straight is opening and all these things. So it's working what they're doing, because there's extreme information asymmetry on the side of the administration.”

“Those choices, those capital allocation, allowing management to be a little bit more dynamic, I think has helped those situations. It's a little bit different. Max, when we were talking about winner take all, the companies need to get bigger to survive. But I don't think the holdco structure was working that well within Japan. And breaking it up, I think, is bringing up some of the companies to pursue their own paths, different objectives, growth rates, all of those things. So while the US share count was shrinking, the number of shares in China, Japan, Korea, the listings is increasing.”

“So every day, the Japanese to your yield seems to just, you know, grind higher. You had the Bank of Korea raised rates, which caused because there's everyone's making so much money there. There's inflation over there. When is there going to be one of those like carry trade unwinds? Because that's what I'm actually a little bit nervous of where these imbalances are so big and you have rate vol and FX vol so low, you'd expect an unwind of momentum like this to have some global destabilizing things. And there's not even a sniff of it. It's like yields are high.”

“Like there's no valuation floor. I mean, I'm a fundamental guy in deep of my heart. There's no fundamentals. There's no valuation floor. I mean, the space business loses money. The Starlink business makes a lot of money, but then they're spending so much money on the data center business, which is a new thing. And look, Elon Musk is the best hardware person in the world. I'm not going to bet against him there, but it's just that there's nothing in the numbers to say, oh my God.”

“And yeah, Tesla's fundamentals have gotten worse. Like literally, revenue declines in some sectors, literally cars, and the stock has been flat to moderately up. Robots.”

“I'm not throwing in the towel on the secular, like fundamental thesis, like a couple of weeks ago, but it's just like, dude, like, I mean, we went through the momentum charts the last episode too, like you gotta let this heal itself before you get excited again. I tried to catch the knife a couple of days ago, and I was stopped out within like a day. Like, it's just, I'm like, I'm waiting now.”

“Yeah, they had, they had five, five billion in revenue, I guess three, yeah, 3.7 in revenue when they IPO-ed. The point that you're making, which that there's been tons of bare cases and from the naysayers and they've all been wrong. I do accept that point.”

“That pushed both groups to the extreme of their one-year range. Commercials at their most net long, funds at their most net short, and it's not just the funds in the large specs. The smaller specs are down at the bottom of the range too, so both groups that tend to chase are short the pound at the same time. That's the mirror image of the dollar, which is still crowded long near the top of its one-year range. But I do want to emphasize that the pound is the most washed out of every currency on the board. Now, positioning this one-sided doesn't call the turn. It just means the fuel for squeeze is there if price starts to confirm. There's no technical confirmation yet, so keep it on your close watch list for now.”

“A couple of months ago, he's talking about trimmed mean, which would be a very dovish point of view, and then he comes out raging hawkish. I think in terms of FX, it's still the same thing. Rate differentials will be the main driver, barring there's weird idiosyncratic regimes where that doesn't happen. But overall, if you're right on rate differentials, you're usually right on FX. I think that'll still be the case. Where are you going to get your guidance on rate differentials? Maybe a little bit more from the data than you used to. But generally, I don't think it really changes that much.”

“Even though ironically, actually hiking could be good for JGBs, you would never know that till after the fact. So it's a risky gambit to say we're going to hike because we want lower yields in the back end. So the coordinated intervention would definitely be meaningful, but I don't think that's going to happen. I think what we're going to do is keep playing this cat and mouse game where there's some good trades to be short dollar yen into the interventions, but you got to be quick and get back out because the thing ultimately that will make dollar yen go back down for real, would be like US recession, lower two-year yields in the US or coordinated intervention, and none of those things are happening in 2026, I don't think.”

“We've had a bunch of scares, same with the UK where people are like, oh, this is it, the bond vigilantes are here, it's too scary, and then you get the feedback loop where the higher yields actually lead to a weaker currency, which is like the emerging markets set up where you're losing fiscal credibility, so people sell the currency and the bonds at the same time, which is like the nightmare for policymakers. I think we've seen it three times now in Japan, but the thing is they just have so many tools to slow things down and intervene.”

“Wow, that does sound like withering gaze is what he just said, that if we just kind of think about inflation and talk about inflation, it'll magically go away. And I think that the marketplace is of the opinion that, no, you have to do more than just talk about it or think about it for it to go away. More obviously is raising rates. And since they didn't raise rates, there's an old adage that I've been using a lot lately, that bond traders can stop panicking when the Fed starts panicking. Well, the Fed didn't panic today, so bond traders panicked. And that's why we got the 30-year yield to use one measure at 5.2%, a 19-year high.”

“We have a Fed meeting coming up. As you said, the first date with the market, Warsh came out and he said, you're not getting any. And everybody interpreted it as quite hawkish. But he's also said that he doesn't want to be giving a lot of guidance. I mean, what do you think the chances are that he kind of whipsaws the market around and goes back the other way just to sort of teach us all a lesson about taking his words too seriously? I mean, do you think that we're set up here with everybody expecting hikes into the end of the year for Warsh to kind of wiggle around a little bit and make the market unwind all of that pricing?”

“Yeah, the bond market moves like my issue with it was that he was saying, okay, if this happens tomorrow, I'm going for a hike in July. And okay, if the bond market stayed flat on that reaction and then waited to react, but the bond market's like, okay, this is a Fed governor talking, I'm going to react. So the two year sells off. I don't know how much it was, but it's a good chunk puts in the deal puts in a new high for the year. And then the CPI print comes out and it's like, oh, it's actually ice cold.”

“Curious as somebody who's predominantly an FX trader, there's a shift happening now of going from this era of Forward Guidance around rate expectations to this present day expectations and just the death of Forward Guidance in many capacities. I'm curious, how does that change your process as a trader in terms of how you look at the US dollar and rates?”

“And we found out after the fact that Warsh and Besson and Trump talk all the time. So they're literally watching the charts just like we are at the breaking point when SKU kind of like goes nuts. And I posted this chart about TLT SKU, where everyone was expecting yields. It was at the exact point where yields were about to break out and probably cause havoc in the bond market, causing credit spreads to rise, et cetera. And they come in and they smack it, defend the yen, sell the Euro. It's like, it's exactly what I said was Besson learned after breaking the Bank of England, was it 30 years ago, 20 years ago. Now he's on the opposite side of the trade. Instead of like betting on volatility increasing, he is volatility stifling.”

“And what these life insurance plans have done is they match assets with liabilities, right? And when you get volatility across currency, that causes that sale of those bonds that they bought as the asset against the liability, right? So they take in premiums from people paying their life insurance. They take that money, they go buy, say it's a US bond of a corporate. This is a Japanese life insurer. And they make sure across currency wise that if you adjust it, they're still getting a real yield. And now what Bessent really did was just stifle the fall of the fixed income market and the FX market, so that you can still have that same life insurance recycling policy. And yes, it might degrade.”

“It's like, okay, you can get, you can let the volatility event happen and you sort of clear the forest of the fire and regrow and you have the seedlings for a big trendy move. But, you know, maybe like, I guess if you apply 100 Band-Aids to like a leaky dam, okay, maybe like it actually does resurrect things for a little. But like fundamentally on like a medium to long term picture, it's still problematic to me. So I think it's a very, I don't think it's going to be any easier the next few months than it has been the last few, to be honest, from a trading perspective.”

“Well, the only thing I would just say as a reminder for people listening to keep in the back of your head is, that this administration has also shown a very willing appetite to play both sides of the manipulation game. And what I mean by that is, right now, you know, right now we're in the thick of peak political incentive period to keep things afloat. The midterms are coming up, they're probably gonna lose the House, the Senate's a toss up, they're about to go on recess, Congress, Senate and House, with a very pretty shitty last few weeks and months of activity and momentum.”

“They intentionally let Lehman fail. Congress intentionally waited until the last second to roll out TARP. This time, at the first second of bond market volatility, they're stifling it down. So they will throw everything at this before it even gets hairy. So to your point, yeah, I mean, Oracle bonds are a buy.”

“I mean, we talked about how reactive both the elected government and our central bankers have been to any sort of instability in prices. I mean, you look at comparing to 2008, how much faster during COVID they got the dollar swap lines out. They talked about backstopping the credit markets. Now, you know, we've got the president, if we get oil above a certain point, the war is off, you know, we're incredibly reactive. And any dip, whether it was Liberation Day or the Iran War or COVID, I mean, the greatest dip buying opportunity that many of us have ever seen, is the next dip going to be one that you want to buy?”

“It's like, they're, they're now, market makers are supposed to be kind of, they should be just non-participants in the market. And they are increasingly making more and more and more and more money. And in there, in life, like over a long, long period of time, you howl out the middle class. And that's, that's the name of the game, whether you're looking at prediction markets. And everything kind of centralizes more and more. Our only hope really is if you get that rotation out into like real businesses again, and you have productivity and growth and everything. So that's what I'm hoping for. Maybe this is just naturally decentralizing.”

“They're already negative free cash flow, already levering up. You can't just continue that infinitely. And things are coming home to roost. And what I find really funny or interesting, I guess, about this most recent rotation, because for the last two months, it's really been a rotation game. The Nasdaq and the indices really are flat since early May. So, this most recent rotation has been, you can just see the hedges have been short the Mag 7, the CapEx spenders, and long the receivers, Korea, Taiwan, memory, et cetera. And that's just gotten squeezed.”

“So not great, but if we look at everything else, the VIX has settled down, which I think is good. It was hovering up in the low 20s and that was causing the stock markets in particular to go batty over the last couple of weeks.”

“Yeah, I mean, the thing is just the catalyst. Like, it's often these macro things that no one foresees. I just, given how focused they are on stopping any volatility in its tracks, it's just hard to bet on it.”

“I know, we're at the lows of 2,000, 1999 Well, this is disinteresting because it almost looks like it, like a double, you know, there's the test. In 2020, there was a test, and then you get the retest now, and now it's coming out of here. It's kind of, if you zoom out here, you can send a longer term chart here.”

“A lot of people say, oh, he's still up 80 percent on the year. Yes, because of that anthropic position that they couldn't sell. So most investors in situational awareness, they are at around zero because they had that anthropic position from the get-go as far as I remember. So most that entered are basically wiped out.”

“So that's just a matter of positioning and …”

“This reminds me so much of, so much else I've seen as it relates to China, which is, you know, oh, don't worry, they're never going to catch us. They're closer, but they're still never going to catch us. Oh, yeah, they have a competitive offering, but it's just cheaper. It's not as good. Oh, God, it's cheaper and it's better. And by the time you get to that last one, it's over, you've lost. And I think that's what we're in the early days of seeing with this AI, which is, again, 2000.com bubble, it burst.”

“So China is building the world and not deriving return on equity. That's why Chinese equity is not necessarily the best investment.”

“So yeah, obviously, could you have sectors that do well? Of course, if the government is behind them, you can get cycles. Like I say, we had those LPG exhaustions in June, so there's always tactical trading opportunities. I think Chinese tech, China's AI, Chinese biotech, like certain things, China has a lot of potential.”

“And if there's truly going to be money rotating away from Korea, then I will pick China over India. And then you've seen that this month. Does the lag of money truly go to India or does it just go to China? So it's like either AI keeps going, the money stays and goes back into Korea, Taiwan. But so far, the evidence of this month, when the money comes out, it's going to China.”

“But more of the bigger problem has been the Hong Kong index is dominated by Alibaba, jd.com, Baidu, and the earning. They've all been kind of like online retail, takeout. It's a space that's gone smashed. There's been so much competition in online retail, in the food delivery business, paid search in China. Those stocks have been really, the earnings have been terrible. And so the tech space, that Hong Kong tech space has actually been a big disappointment. And the actual, like all the semi hardware stuff is mostly in Shenzhen and the A shares. So I almost kind of say like that's not what I'm, it's not a realization I'm happy to find out, but I feel like Hong Kong is software and mainland China is the hardware play.”

“It was building momentum to the downside and then finally just this very week for the first time in Circle's history in this indicator, we now have a red candle on the weekly. So, that's how Circle is going as far as this goes. Let's look at it on the daily. Yeah, I mean, it's broken down. So, it set a support level here that it has now broken down through. It tried to set a bottoming signal. It actually didn't close above it, so it did confirm this bottom signal, but then kind of immediately broke back down just a few days later and broke through it. So now we're firmly entrenched in down trend territory at this point. It's red track line, red dots, red candles. We do have a reversal flag poking up at the moment, but I don't know.”

“The weekly track line has trended back up. So Coinbase has been the better chart, the better stock to hold, the better investment, I guess. And yeah, I think, like you said, I think that maybe it is the better play in terms of stable coin exposure. I mean, there's a lot more going on, obviously. Coinbase has a ton of different revenue streams, so it's not a pure stable coin play like Circle is. And I don't know how much you can factor that into this chart because, I mean, they're making money, like I said, all over the map from all kinds of different things, from institutional holdings, from ETFs, from treasury yields, from Circle, from just trading fees, from retail, from custody, all kinds of staking.”

“It's largely been sideways with Bitcoin really since 2022 I mean, it started out a little bit higher, it lost some steam and it's been a higher beta to Bitcoin itself ever since then. It's just kind of oscillated up and down, but it's largely tracked sideways. So I don't know, are you then better off just holding Bitcoin? I'm not sure. I guess it depends on which sort of world you want to operate in, whether you want to be crypto-native or or TradFi-native, but I don't know.”

“Well, just where we're going now is like me personally after today, I'm adding coin to my watch list in general. Yeah. Of things that I might look to be adding once I feel a little more confident on the uptick. I really like it, especially with that stable coin exposure, aerodrome, base and all their other revenue streams. It seems pretty attractive to me. Obviously not right now, it's at 60% and crypto is not doing so well, but yeah.”

“And I think that's the thing where it's very easy to have an initial dismissal of circular financing. But fundamentally, circular financing is no different in my mind to any other forms of financing on the way up.”

“Well, the hedge in hedge fund is also a key word to examine a little bit. There are many hedge funds out there that have market exposure that can fluctuate from leveraged long to leveraged short.”

“So we're underweight office. I suspect we'll stay there. But will people make money in their opportunistic funds, buying office buildings and trading, and leasing them up and trading out of them in a momentum play right now? I think they will. That's not the core business of Clarion right now. We're really focused on long term cash flow growth, diversification, low volatility. Office has a lot of volatility as tenants come in and out because they're very capital intensive to replace the tenants.”

“Well, nobody ever builds, people only build Class A anything. I think the issue is there's not a lot of tenant demand for it. All the tenants want to go up and to the right into the higher quality, better amenities assets. And so, look, I think the story around one of the interesting stories around New York is it's probably been among the most successful in stimulating conversion of older office buildings into residential. So you're actually seeing a reduction in supply in those types of those buildings because they're not because someone's leasing them. Maybe some people are, but not because there's this overwhelming demand for office users, but because you're just taking them out of stock by converting them to apartments.”

“I, a counterpoint to your bearish case on Class B, Class C office, who's building Class B, Class C office right now? It doesn't everyone know that it's a bad idea and isn't that going to lead to a?”

“The real core volumes in a contract are the guys that actually use it. The guys who actually take delivery of the oil or the jet fuel or the agricultural commodity and they're hedging actual needs. And then you kind of get the high-frequency traders come on top. But those guys look around for like real, they don't want, they want some kind of real demand players and not everyone just gaming each other, you know, they. So that's what the CME has. It has the real, the real use case traders. And that's because it has the contracts convert to the actual underlying with deliverability.”

“Also, I'll say on CMEs defense, it's a very high quality business, very extremely high margins, and they also are entitled to something like 27% of S&P Global's index business. So they are an index business, basically. 27% of an index business. So I would not be buying long-dated puts on CME, although of course I could be wrong.”

“There are some offerings within hedge funds that have longer liquidity to them. But I think the most recent lockups and gates have actually referred to private credit, where investors couldn't get their capital out. Those are private loans being made to companies, individuals, whatever it is. The markets that we trade in are generally all listed. Markets from an equity perspective, bond perspective, or their currencies, commodities that are traded on exchanges. I think the one thing is that if people ask for liquidity and the markets were trading very poorly, the cost of that liquidity is quite high.”

“But what I would say is, I think real estate is a bit of a beneficiary because it's the ultimate halo trade, you know, heavy asset, low obsolescence. So it doesn't, you know, a lot of the private credit concerns seem to be around software and disintermediation from AI. But AI isn't going to change the need for someone to have shelter when they go home at night. It's likely not going to change the fact that people's Amazon packages get sent from some warehouse to their doorstep, you know, every day. And so we think real estate is a net beneficiary of concern around some of the corporate private credit, just because it is, by definition, a very low obsolescence business.”

“Obviously, they're so heavily tied to the crypto market, so they are going to experience the same pains as crypto will. But on the upside, when crypto starts taking up, the fact that they've added so many different revenue streams, and now that they have their hands all over the stablecoin ecosystem, between Circle, now OpenUSD, and then just capturing everything that goes on on their platform anyway.”

“I actually think that by now, it seems like this sinus wave is slightly longer than the weekly scheduling that you just laid out. Because we've seen this move before. Everything that happened in the run up to this weekend, kind of resembles what happened late March, early April, where he talked about, I think it was annihilating a whole culture, whatever he wrote, Trump, before calling things off. This time he stated that it would be the biggest attacks since the World War II, and then he ended up calling them off. So I think we're past peak.”

“Donald Trump called off what he mentioned as would have been the largest attacks on any country since World War II. That's a lot, but let's leave that. He called them off because negotiations were apparently progressing very, very well. The Iranians apparently are not really involved in these negotiations. They're not confirming this, but it seems to do the trick for markets once again. And it seems like, Andreas, you put up the sinus waves picture that we are essentially back to this weekly schedule, this weekly role of getting some Hopium over the weekend. We're getting closer to a deal, and then things slowly deteriorate during Monday, Tuesday, Friday, the trading week.”

“With 90 minutes of Open of Futures on Sunday night here in Toronto, you saw an announcement, announced, of course, by Axios, that there were going to be peace talks again and that there was a ceasefire, and this was all, again, weekends are for war at this stage, but it always ends before markets open again.”

“And like I say, I think broadly, not only our model is risk on, you have lots of confirming data points. If you look at credit spreads, especially adjusted for sovereign risk premiums, credit spreads in a normal range. It's not super low, super high. Savings rates remain very low. So from a collective levy point of view, money is just flowing around the economy. One person spending someone else's income, just going around. So there's been a lot of insider buying, despite all these things, there's a flood of insider buying globally across lots of different stocks. So these are not what you typically see at the imminent top.”

“The hedge fund industry has evolved over time as far as information from corporates, how that's disseminated. Like I talked about the change in Japan, you would have needed someone who spoke or read Japan to translate some of these things. This would have been years ago. There's been translation software for a long period of time. But some of this is going to come down to the creativity and the tools that you apply to discover Alpha. But I certainly don't think there's just one information source edge that's out there.”

“What will they, how will the technology change? We just struggle to see how it fits in a very long-term open-end evergreen vehicle. And but most of the capital that's been raised and is being deployed that you articulated is on the development side. It's people that are looking for, you know, a 20 plus internal rate of return that's all predicated on somebody like a Clarion in a core open-end fund buying that for more of a lower stable return. And we find there's some challenges in fitting it in our vehicles today.”

“And it's a little bit the philosophy that sort of populates our view on the data center we were talking about, which is it's probably fine for some period of time, but if you have a 10-year lease, five years from now, if you want to sell that data center, there's not enough transaction history for us that we've seen yet of people buying the data centers that only have five years left of term on that lease. And what does the market value that? How do they value that? So that's, like, there just needs to be, I would say, more pricing discovery on how that asset class trades, because our general model would look to transition out of assets well before it looks like they may be a problem.”

“You're talking about just the pure finances that the buyers of the data centers don't have as much money as the data centers are kind of now worth and being constructed and that someone's got to buy that and if someone's taking a risk maybe in like a closed ended fund or an institutional investor, they have to sell it to somebody and that somebody is you or someone like you or a public type of REIT. But like I think the data center REITs are pretty much legacy REITs and then Blackstone loaded this one thing that's exciting but you said it's $2 billion. So just the you're not seeing who's going to be the end buyer there.”

“If you're looking at the contemporary banking sector and you're concluding that bank runs never happened, then of course you'd immediately interject, well, that's just because the government is providing deposit insurance, is doing lending of last resort activities and all kinds of other interventions to prevent those things from happening. Now you have two options what to do. You can write a model or you could actually go back in history and study those laboratories in which the government was not doing these kind of interventions. And this kind of logic of how you can use historical micro data applies to a lot of more different questions. Just think of hyperinflations. It's just not that many hyperinflations in modern history.”

“And so that lower market exposure, it is funny because in years like 2022, the outperformance of market neutral strategies is very pronounced, but we've had some absolute rippers in the US equity markets more recently outside of the US. And that is increasing investor interest in looking beyond the US borders for exposure. But especially if you are somebody who hangs out around financial Twitter, every year the multi-strat market neutral hedge fund returns come out and you see chirping from the Peanut Gallery about who would want this and the S&P did this. And I think institutional investors do not really think that way.”

“Coming back to this idea about diversification, and so fitting a $5, $10, $25 billion asset in one of these funds, we don't think makes sense. The other thing I would say that we struggle with is, when we look at what types of assets do we want to be in our vehicles, well, we want diversification, so there's a size question, but fundamentally we're looking for things where we have conviction that in the future, it will be worth materially more than it is today. And when you look at data centers, there's undeniably, there's demand from the tenants, there's great tenants, but what's the value of that residual asset 10 or 15 years from now when Microsoft, Meta or Google chooses to leave it?”

“I think we'll have a soft dollar week upcoming, given our view on inflation.”

“Well, the dollar index reversed sharply following the FOMC meeting, and that weakness was then accelerated by the yen intervention. We are now in the middle of a genuine dollar correction, with prices testing a critical support zone that should determine whether this is simply a pullback within a broader breakout or the beginning of a larger trend reversal. The key level is the 99.5 level on the Dixie. A clean break below that area would damage the technical structure, pull the dollar back into its prior 15-month trade range, and open the door for a much deeper correction. The dollar is sitting at an inflection point, and the next move should tell us whether this breakout remains intact or has failed.”

“Instead, the Fed held rates steady and failed to validate the market's hawkish expectations, triggering a sharp reversal in the dollar and front and treasury yields. Technically, the dollar has backed away from resistance, but has not yet suffered enough damage to invalidate the broader bullish structure. The next few sessions are critical. A recovery back toward the highs would suggest that this was merely a post FOMC positioning flush. On the other end of that, continued weakness would indicate the meeting has interrupted the advance and opened the door for a deeper mean reversion, directing back to retracement zones under the $100 handle.”

“Technically speaking, we are seeing the dollar breaking above a key 15-month trading range, but the positioning still confirms that large speculators remain at one year high.”

“So they're going to keep buying gold because there is no mystery how this is going to go. And probably silver too, by the way. And so dips should absolutely be bought in dollar terms. And but in gold terms, I think the next five years, I'm going to look back in five years, and I think the S&P is going to be up big in dollar terms. I think it's going to be down in gold terms.”

“So that's how I think about equities. It's dollar terms, gold terms. I think ultimately good for Bitcoin too, but not yet.”

“Definitely the key level to watch is the 101.5 level. If we see a decisive kick higher in the dollar index, that could really get going a new bull advance. We've already broken out of that 15-month trade range. An entire month we've spent consolidating above that range, which is quite technically bullish and looking for bull continuation on dollars there. But what's interesting is that it's the euro that remains so decisively weak. Any breakdown here below 114 on a sustained basis could see us visiting the 112 or 111 level in just the next few weeks. Not only that, but the US dollar yen is just shockingly strong.”

“But definitely, the puzzle to solve going into next week is whether the selling pressure breaks down this market cap weighted index as some of these big behemoths may begin some bigger selling. On a final note, the technical level in my mind to watch is actually about 200 S&P points lower on the S&P 500, somewhere just below 7400 That's going to be an area where a lot of the CTA sell triggers have been slowly crawling up to. The thing to definitely watch is can the bulls keep the price action away from systematic sell triggers in order to maintain the prevailing bull trend, or will we see some prevailing weakness that adds systematic selling as a factor into the summer price action?”

“This is actually a very important technical crossroad. We saw a huge US dollar bull breakout, and this entire consolidation now is still staying above the previous trade range. This is a very typical place for buy-undip traders to defend, and if we see the dollar bullishly advance off this level, particularly reclaiming north of 101.5 on the upside on the dollar index, that could reopen an upside move that could see the dollar index heading to the 103 level on the upside bottom line, the bulls are still in control of this dollar trend, and we haven't seen any technical reversal points that suggest otherwise.”

“And what we can identify is the market remains in a primary bull trend. The semiconductor leadership is starting to, though, show some momentum lost in the post-micron earnings window. And in fact, overnight on the COSPI, we saw another legitimate breakdown, this time along a key support line, which is now questioning whether the COSPI has actually put in as high, which has been a huge international proxy for the big AI trade. So can the market continue to maintain its highs? If the semiconductors begin some sort of profit-taking cycle? And if so, will it lead to a bigger sector rotation? There's been some really big breakouts in the healthcare and biotechs. So the puzzle to solve is, if we are seeing the start of a bigger sector rotation.”

“So like even things like Dollar Brazil have been rallying. And yeah, I think it's mostly just, I mean, we had a couple, like you said, a couple of cuts priced in. Now we got a couple of hikes priced in. And so it makes it that much more attractive. And there's a lot of models and CTAs that just follow carry and momentum are the two strategies. So it creates, the yield differential creates not only a lot of flows from those guys, but also from like RV bond guys who are like, okay, well, it's just better to sit in the US because the carry is a lot better. And then obviously that's had a big impact on gold. So it's all kind of gone to the sort of more traditional FX regime where dollar up, gold down, following rate differentials.”

“And so it just stayed, dollar yen stayed heavy the whole time. And this is the opposite. It's like a beach ball under water. You can keep pushing it, but it just keeps on bouncing back. Now, on the other side, if in like historically coordinated intervention has worked almost every time, not perfectly on day one or whatever, but it has worked. Most coordinated interventions have worked. So like you said, if best and were to agree and they actually intervene and the Fed participates, and then they announce, we've done coordinated intervention at Japan's request, we agree that the yen is undervalued or whatever, I think then you have a much more durable top.”

“And what we can identify is the market remains in a primary bull trend. The semiconductor leadership is starting to, though, show some momentum lost in the post micron earnings window. And in fact, overnight on the COSPI, we saw another legitimate breakdown, this time along a key support line, which is now questioning whether the COSPI has actually put in as high, which has been a huge international proxy for the big AI trade. So can the market continue to maintain its highs if the semiconductors begin some sort of profit-taking cycle? And if so, will it lead to a bigger sector rotation? There's been some really big breakouts in the health care and biotechs.”

“I'll just say it's showing solid relative strength. It's still in the conversation.”

“I'm Patrick Ceresna with the Macro Scoreboard week over week as of the close of Wednesday, June 10th, 2026 The S&P 500 index down 379 basis points trading at 7267 We are seeing the first cracks in this bull advance as we're now testing the 50-day moving average. We'll take a closer look at that chart and the key technical levels to watch in the post-game segment. The US dollar index up 53 basis points trading at 100 spot 08, attempting a key bull breakout.”

“But I want to specifically speak to the charts here for a moment, because we had this correction from 7,600 down to testing 7,300 on the S&P along its 50-day moving average. To me, this is a very key pullback because the bulls had a pretty good cushion, and they could absorb this type of a sell-off without triggering systematic selling. We're still at that moment where if the bulls can get past the SpaceX IPO and keep the market pinned to the 7,300 area, then we could still see a rally in the markets back to its previous highs, and generally keep the market elevated.”

“But like Brazil has elections coming up in October, so maybe like, you know, there'll be some wobbles around that. Yeah, so we like Latin, we like the Americas basically. I'm skeptical on the Europe. I think Europe feels very contrarian, but it's exposed to energy crisis, right? It's got a lot of regulatory issues to deal with. Like a good long-time client, mine, always used to make this joke about, you want to go to Europe on holiday, but you need to get all your work done in the US. I think yes, until Europe overcomes a lot of these regulatory energy issue is going to be tough, right? Just like the Chinese exports is just everywhere in Europe, right? You don't have to travel very far to see Chinese actual vehicles.”

“So I think India sold off a lot, that I know people are starting looking. I personally pretty skeptical of India as an allocation, just because, one, valuations are obviously cheap, but fundamentally, again, with that sovereignty lens, I think India is caught between China and the US, and it's going to get hit with a stick by both, whereas Latam is going to be the carrot. Right? So I think India's, I don't think the US wants to allow India's rise because they don't want to make the same mistake they did with China. So I don't think the US can be very supportive of any India initiatives. India wants to do manufacturing. I don't think US is going to support any of that.”

“I think it's much more balanced today than what it was previously. Having minority shareholder rights are much more respected in both of those markets as well. So, I think they needed to be rebalanced. And I think what you've seen is a re-rating in those markets, more trading, all of those things that you kind of want in markets. You want liquidity, you want price discovery, you want good corporate governance, all of those things. So, those have been unleashed.”

“So, Erik, you've had a monster call on European banks and Japanese banks, and your point that they are under-levered and overly conservative, and as a result, there was tons of earnings per share to return to shareholders.”

“It's been a great trade. It's not as fresh as it was years ago, but still like stuff like Barclays. You can get most European banks at eight times earnings. And I'm like, okay, it was better. It was more fun when they were five or six, but eight to nine and the earnings grow. Maybe they grow to 12 times and the market gets bullish.”

“Again, I'm talking about the peak from a rate of change perspective. It doesn't necessarily mean that we go from peak to recession. A lot of people misunderstand that. But for markets, it's typically a relevant turning point. You turn the page when you go from momentum up to momentum down. And in some cases, some would argue that we already saw that through July. I think it's a little bit more technical in nature, what we saw in July. And my best guess is that we have another euphoric market coming up before New Year's.”

“This is a great free website, Factor Watch. You can just look at the different factor rotations. So you can just see over the past 20 days, Momentum has had a 2.3 standard deviation on-wind, and then even more aggressive. Last three days, 3.3 standard deviation. So just a total high beta momentum on-wind at the same time that you have seen some pretty steady rotations into more value plays. Like I was looking at the charts today, QQQ is down almost 2% while equal weight S&P is up almost 1%.”

“And like, obviously the first thing that's going to hit is like the people most levered. I don't think it's a coincidence that like most of the pain has been in the Korean retail traders that are just getting liquidated every night right now. I mean, you look again at the chart of implied correlation, this is the three month implied correlation. And you can see like the last time we were in this regime was in the summer of 2024, also around the time where there was like some again volatility and you saw the resolution as implied correlation went higher, we're still sub 10 So, you know, maybe the argument is just that we're in the early innings of it.”

“And then you get the reaction from the Fed later this month, and they got a break, but it's probably not helping that the amount of speeches which we talked about last the other week from from Fed governors has declined a ton. I mean they were yapping all the time every single week, like five to ten Fed speeches, and now you're barely hearing anything. And to be honest, it's probably better for everyone. It just there's this teething period where going from a very talkative Fed, any chance they got to like none, you just expect a little, you know, the market to need to get take some time to get comfortable with that.”

“So then the answer is war in spending. That's how politicians fix …”

“They intentionally let Lehman fail. Congress intentionally waited until the last second to roll out TARP. This time, at the first second of bond market volatility, they're stifling it down. So they will throw everything at this before it even gets hairy. So to your point, yeah, I mean, Oracle bonds are a buy.”

“And it'll be a really, look, I think stocks go up on that. I think bonds go down on that. I think dollar goes down on that. I think inflation goes up on that. I think gold goes up on that. I think Bitcoin goes up on that. I think industrials go up a ton on that.”

“I mean, we talked about how reactive both the elected government and our central bankers have been to any sort of instability in prices. I mean, you look at comparing to 2008, how much faster during COVID they got the dollar swap lines out. They talked about backstopping the credit markets. Now, you know, we've got the president, if we get oil above a certain point, the war is off, you know, we're incredibly reactive. And any dip, whether it was Liberation Day or the Iran War or COVID, I mean, the greatest dip buying opportunity that many of us have ever seen, is the next dip going to be one that you want to buy?”

“They're already negative free cash flow, already levering up. You can't just continue that infinitely. And things are coming home to roost. And what I find really funny or interesting, I guess, about this most recent rotation, because for the last two months, it's really been a rotation game. The Nasdaq and the indices really are flat since early May. So, this most recent rotation has been, you can just see the hedges have been short the Mag 7, the CapEx spenders, and long the receivers, Korea, Taiwan, memory, et cetera. And that's just gotten squeezed.”

“While if the government is is effectively providing a put, then obviously the left tail is not as scary as it was. So therefore, even though the outcome space has been contained here, I actually think that it's net positive. And I'm yet to hear others really saying the same. So let's see how the market prices this over the coming quarter or two. We obviously know that both companies are looking into IPOs in October. So it will be very interesting to follow. Speaking of IPOs, basically, the third most important news was the biggest IPO of all time on Friday, which again goes to show how crazy a weekend this has been. SpaceX did well on Friday. And if we look at the IPO pricing, it was obviously very oversubscribed.”

“And I didn't quite realize that the five year average seasonality momentum is like always really bad in July for momentum. Obviously, this one's like way worse than normal, but it's just always so interesting how the fundamentals start to happen at the same time as like the market structure. And it's like suddenly that seasonal momentum reversion happens at the same time that you're starting to see more memory supply come online, this questioning of the value proposition of frontier models.”

“And obviously, that's been talked about ad nauseam, don't need to get too deep into it, but I think it's a decent enough a bet. Obviously, it was a much better bet a couple of weeks ago, if you were long momentum to rotate in the value, but I don't know. I've also been burned too many times of thinking, here comes the value rotation, and then it's just like the local toss up on it.”

“Then if you go to the next one, this is JP Morgan currency index. Again, no, no volatility in cross currencies too, which is wild to me as well, that you'd have this momentum unwind. And, you know, there's no cross currency vol. And then if you go to the next one, and I'm sure all three of us have this chart, but this is the one month implied correlation. And when this is low, you know, it's a stock picker's market. There's a lot of different sectors doing different things. So this money is moving out of AI and AI infrastructure and going into different sectors. I mean, and then we can kind of talk about, just if you go to like 40, you can kind of see where it's going. This is the KRE. Financials have been on fire.”

“And what if this is the end of how it, how all that leverage ends is like these poor guys, these active managers that have been buying value stocks for years. Finally, like this is the where all that super high growth on lines and value businesses come back into play. And then you get all the passive ETFs chasing all these things that have been beaten up for, I don't know, 20 years. It's like, what are your thoughts there? Is value dead in this world? What if this AI in cheap models and what if the models get cheaper and cheaper and now value businesses actually can grow margins? And it switches the game.”

“You have hyperscalers, cash flow problems and return on capital questions. Then you have the semiconductors in memory who are printing 80 percent margins who you know are going to face severe competition. Like when we talk about that, it's not just tech anymore. It's why this bubble is different than 2000 is in 2000, it was a huge boom and you had this like maybe slightly more speculatively widespread mania. But in this instance, the bubble is more material and larger in magnitude because of the concentration that these companies have grown to become as part of the indices. And so it's more sort of contagious, if you will, in that way for the broader equity market because of how much they represent.”

“But the one thing I will say is like, just if you look at what companies have made a lot of money, it hasn't been value stocks. Even if you look at Buffett, a lot of his wins were like Apple and Geico and not value stocks. But honestly, I don't really have a strong view on why. The big argument for a long time was QE, just flatten everything, but there's no QE now. So yeah, I guess my view, if I had to guess, is that things are driven by earnings and those things don't have earnings growth the way that the hyperscalers have.”

“And you have this push into AI, you have push into hardware, you've push into optics, things like that. And it's just unrelenting. The flip side of that is outside of some of those areas that are more momentum based, there's still opportunities for stock selection. So when you look at the average return of a stock in major markets compared to an index return, and the average stock has underperformed massively. So if you put together a long short portfolio between the performers and the underperformers, it's, you know, you have the opportunity to produce a stable return stream. So that's really what's happened. You've had a big bifurcation in some of the indices, and a few stocks driving the returns massively.”

“And that's one of the arguments for why indexing actually works for investors is because it's so hard to pick what those winners are. Remember, we're not picking the winner in the index, we're picking relative. So we're saying this company is going to outperform this company, and that's the job of a portfolio managers. It's very different than saying what you're going to be the absolute winning stocks within the index this year. And that's why I think indexation has worked. I think it can be taken to dangerous extremes. As long as there is dispersion in the underlying stocks beneath that, and particularly at the sector level where specialists really focus, there's an opportunity for Alpha.”

“You know, we're at about a billion dollars in 2,000 units, but I think for relative to our size, we see the opportunity for quite a lot of growth. It's one of our, I would say, newest sectors. We've hired a dedicated health care team, including specialists in senior housing, but also outpatient medical, more like medical office buildings. But it's our fastest growing asset class, and so we would expect that to be pretty large, really, in the next 12 to 24 months. So, multiples bigger than what it is today at a billion dollars.”

“So if you are a believer in AI and the semiconductor trade that is attached to AI, why not just do that trade? You've got some great articles and bull theses on many different businesses, the exchanges like CME and ICE, or the European banks, a trade that has worked out phenomenally well for you, the Japanese banks, many other companies. But why not just be 100 percent in semiconductors?”

“Yeah, I guess I'm a bit more diversified. I'm kind of long everything. I do have a good chunk of my personal portfolio in the NASDAQ, and I've been over time doing less S&P and more NASDAQ because I just, I looked at it over decades and I'm like, the NASDAQ consistently outperforms the S&P by like two or three percent on average.”

“To me, this creates a colossal opportunity, an incredible opportunity looking forward for the next five years. You want to be selling down your exposure to technology and increase your health care. Look at slide number 20, Erik. Look at this momentum factor. It's way, way out of whack relative to the previous regimes. Once again, momentum, you see there everyone's long, aggressive momentum, which is the semiconductors, everyone's short health care. And as you can see here, we're at very rare territory. And I think with quarter and month end coming up at the end of the month into the second half of the year, the probability that we have a huge turn here, I think is a very high probability of a move out of high momentum into low momentum.”

“Doctors today, with robotics, can operate on patients in other countries. And the data in the future of artificial intelligence, the big beneficiaries are companies like intuitive that have that incredibly valuable data. I think, and I'm hearing this from, like I said, the top family offices in the AI medical field. These stocks are unloved, under owned, everyone's in the chips. And if you buy intuitive surgical now, on the 200-week moving average, to us, that's a really screaming buy, because over the next 10 years, five years, the data and the artificial intelligence that's going to take that data, it's going to turn intuitive surgical into an absolute profit beast.”

“Is US debt, US treasury yields, let's say the US 10 year yield, is that attractive to buy to a Japanese investor now relative to the Japanese 10 year if you take into account hedging costs?”

“So the core idea of the hierarchy of money is the quality of money matters only in the downside, only when things are turning down. When things are good, transactions can be settled by whatever people are willing to accept. It doesn't matter what power value is, it doesn't matter anything else. So if we're in the upcycle, people are willing to accept NVIDIA's backing or accept Compute or whatever, whatever things that are not cash-like, it's fine. The problem is when you start to see the first signs that people demand cash settlement. Well, at some point, we're going to turn around and go, right, we need cash settlement for these things. And that's when all the transactions that were built on these pledge things start to unwind, right?”

“And so that's actually been performing much better than Hong Kong. But I'm still sticking with it. So I still think it'll work.”

“Oracle is like 89 percent, everyone's calling about Oracle CDS, but it's at 200 some basis points, whereas I think CoreWeave was like 800 at the peak. So you're talking about two different capital structures here that are entirely different. Where, I don't know, I think at some point if they can keep the rate fall down on the treasury aspect, the hyperscaler bonds are a steal. But you need that geopolitical thing to just calm down, and maybe that's what they're trying to do into midterms.”

“I think, Jack, just to keep it simple, I think if I would look at Ice and CME, those are two of the amazing businesses. And in there, they rarely trade below 20 times earnings. I think Ice is like 15 times and CME is 18 times. I would 100% focus on those two things and go through the conference calls, see if there's something I'm missing, think about it, but like that rarely do those two businesses, they've done, been extremely consistent growers, extremely high generators of cashflow, very quality businesses. And if they come down to these levels, you should really check them out and make sure it's, you know, because it could be a gift.”

“So there's the regulation that's happening or that's happened that has changed markets or maybe isn't understood. But there's also regulatory risk. And certainly as we look at AI, there is looming regulatory risk there. How do you think about these known unknowns where there is going to be a regulatory change? It's going to happen. The frameworks are being worked out as we speak. We don't know where it's going to land.”

“And I think it goes back to this idea that it has a very strong structural long-term demand drivers. And our research, that same 16 person global team that does this analysis that identifies what the factors are that most impact rent growth, have done the same work for industrial and logistics. And our conclusion is that's all about e-commerce sales. So the thing that's the most impactful about driving the demand for a square foot of industrial space is a dollar sales of e-commerce. And so when we look at it, our research suggests that e-commerce growth, the annual e-commerce growth over the next 10 years is gonna go by trillion dollars per year.”

“So when we're talking to our tenants, which are large e-commerce users, third party logistics providers, retailers managing their distribution, they're increasingly looking at, what does their business look like in the future? How much power will they need in each warehouse when more and more things become mechanized or powered by robots? And how much machinery and data are they pushing through there? And so while they're not necessarily data centers, the sort of inexorable march towards the need for more power as more things are connected to the Internet of Things, and more and more, I guess, robot-like mechanized workforce, is something we're increasingly focused on because our clients, the tenants are focused on.”

“So the leasing is exceeding the new deliveries. Part of that is because interest rates went up. It's more difficult for people to get financing that works at the pencils for those projects. But I guess just maybe the most direct thing I would say is, you know, we're seeing tremendous demand and absorption in our existing portfolio. So I think we'll break ground on something like 10 million square feet of new projects this year is our expectation. And that's all driven by what we're seeing. So we signed in the first quarter of 2026 something like 8 million square feet of new leases across our global portfolio, which I believe is the best total new leasing quarter we've ever had in the history of Clarion in 44 years in industrial.”

“So that could be hundreds of dollars per square foot of what they call it landlord inducements, either cash or free rent for a period of time. So if you think about that, that impacts that if someone invests in your fund and you're trying to pay a consistent dividend, that impacts your ability to pay that dividend. You contrast that with industrial, which has super low capex requirements. So if somebody leaves, you're not giving them hundreds of dollars per square foot, you're giving them, I don't know, a couple bucks, five bucks. So the volatility of the cash flow is much lower in that business.”

“Yeah, so I think there's some interesting plays. So like, you know, companies like Nintendo and these, I've looked at a lot. Like, so I've been thinking about all the companies that have been hurt by the memory, AI components, but that irreplaceable, having irreplaceable assets and modes, right? So like some of those are kind of interesting. But ideally, I would like the Japanese government BLJ to resolve that currency issue.”

“It's going to be super interesting to see whether those heavy short sellers are going to be forced to reverse their positions, and it certainly can be a big driver. So, watching that yen is going to be the thing to watch.”

“Now, the first move was ignited by officials buying, but the long-term question is whether it creates a second self-reinforcing move driven by the market itself. If the Yen holds these gains going to next week, short sellers may be forced to cover, triggering stops, systematic trend reversals that produce even more Yen buying. Now, this is what makes Tomorrow's COT Report release especially interesting. It will capture the first positioning response following the intervention and show us whether large speculators have already materially reduced their shorts or whether much of that potential short covering fuel remains in the market going to next week.”

“What's going on in the Japanese Yen and why is Scott Besson getting involved here?”

“While here, we're seeing large specs positioning in both the euro and the Canadian dollar just keeps weakening. Both are now sitting at zero on the COD signal's one-year positioning score, but the five-year window tells you those two zeros just aren't the same. The euro has only slipped modestly net short as a percentage of open interest, while the Canadian dollar is already deeply net short, and both are still sinking towards the bottom of the five-year ranges. So the abandonment is real, but it may not be the end.”

“There is like a very marginal pricing in which I feel like needs to come out, especially in light of these recent comments. And I know that just feels like a good comparison of how at odds the rates market is towards like, I don't know if like that's why I'm just trying to go through this idea of like devil's advocate because I'm like, okay, why has it not been rectified yet? But I mean, this is also the classic trader thing where you see what should be happening over the next few months. And then you go all in on the idea and you expect it to happen overnight. And then it takes too long and you get like tested in the other direction and then you get stopped out.”

“If they increase exports 25 percent from this base, it's still a remarkable increase. Remember the nominals here. So I've said that for once, I actually think this wall of worry around the rate of change is one to discard, because when you have such extremes, look at the peak here in the dark blue. It is an extreme that is far more extreme than what we've ever seen in history. So if we grow from that base, it's still an incredible growth in nominal terms, and one that is by the way not accounted for in forward pricing, because if you look at forward pricing of everything related to this export trade out of Korea, it is priced to flat line. So it's basically pricing the dark blue line to go to zero.”

“You know, I'm fired up on the Korea trade. I've been very bullish at trade since early this year. I was dabbling in and out of it last year, and then this year it just got, it just went parabolic. Fortunately, we, you know, in subscription members were on it. But it's not just, it's not, it's not just loaded to Samsung and Hydex Semiconductor, all those combined are 50% of the index country weight. But there's, the whole economy is on fire. And it coincides with, you know, this huge pop in birth rates they just had. They've been kind of, they've had some really bad demographic issues. And this year we get the sudden pop in birth rates. And then you got Samsung giving out $400,000 bonuses to their employees.”

“Maybe people say, oh my god, the concentration risk is Korea is so huge as a negative. The positive framing is you want your index to be extremely concentrated in the industries that are doing well.”

“And what these life insurance plans have done is they match assets with liabilities, right? And when you get volatility across currency, that causes that sale of those bonds that they bought as the asset against the liability, right? So they take in premiums from people paying their life insurance. They take that money, they go buy, say it's a US bond of a corporate. This is a Japanese life insurer. And they make sure across currency wise that if you adjust it, they're still getting a real yield. And now what Bessent really did was just stifle the fall of the fixed income market and the FX market, so that you can still have that same life insurance recycling policy. And yes, it might degrade.”

“In theory, what that's the argument all the macro guys been making for ages, right? So, yeah, FX adjusted. JGB is give you like 200 basis points over. So why wouldn't you repatriate? But I'm just saying that the reality on the ground is, you can see the numbers, right? They report pension fund buying and selling. Nobody wants to do that because you can get extra spread out. That's why I was saying you can buy agency, you can buy credit, you can invest in US credit funds, you invest in US private credit, right? You don't have to go to treasuries when you do this.”

“And I think they're useful in an institutional setting to help match liabilities, to help smooth out return streams, to reduce correlation, all of those things. Because in a perfect portfolio, if you had 50 things that had a correlation of zero to each other, but all had positive expected returns, you would create just a money machine that's very consistent and stable across all different types of environments. And certainly that's an all weather stable vehicle that's going to have low correlation to traditional assets. And again, not everyone can just take pure equity risk because at times in the equity markets, there's going to be drawdowns between 20% and 40%, and you don't know how long they're going to last.”

“If, for example, you're wrong, you need liquidity to change your possession or else you're stuck with the position. And great, if your horizon is you're a long-term, long-only investor, again, that could be your source of alpha to take advantage of situations where people need liquidity and they price things incorrectly. For us, it's important to have liquidity to be able to risk manage the portfolio appropriately.”

“It's the liquidity of the underlying assets, but there's also the liquidity of the vehicles. We are seeing gating on hedge funds jump up. Is it not just the investments, but also asset lockups?”

“It's very good at pricing first order and seeing it, but we tend to miss the second order, which is when everybody sees it, it tends to be a policy reaction, right? That shifts things. And so I think that's my mental model for why when all the experts agree on something macro, it often doesn't work because there's a policy shift from the policy makers that suddenly change the dynamics. But on something like the IPO lockup is, it's very unlikely for there to be a policy shift. Like it's very unlikely like the Fed or whoever's going to look at space as going down and decide to change. So then maybe that's why, right? If you think back to my Facebook at the time, right? IPO after a while, it's just like down, down, down, down, down.”

“All right, listeners, this is where I want to introduce the new segment called Cot Signal Positioning Pulse, where Maciel highlights some of the key changes in the futures markets that we did not yet cover.”

“And the point being like that's a pejorative statement because most people underperform the index and most traders lose money. So you need to have some kind of divergent or independent thinking to have an edge and to make money. And a lot of that for me comes from outside domains and applying the concepts to trading. So that's what I want to do. So like there's a whole chapter in there on how I use poker to hopefully become a better trader. Like you get a lot more reps in poker than you do in trading. But many of the sort of core philosophies of poker, like tight, aggressive, for people that don't play poker, that concept essentially says, you fold your hands a lot and you fold all the bad hands.”

“And then when you kind of take a step back and look at your own trading, and you look at like hedge funds blowing up, and like some of the amazing traders that are like Niederhofer that's blown up so many times. And it's not to shit on those people. It's more like there's a lot of lessons in there because those are incredibly gifted traders who just are prone to blow up every five to six years because that's the nature of ergodicity. If you're trading a strategy that's extremely convex in the wrong direction, at some point, you're going to blow up.”

“And so really internalizing that and just never having strategies that are that way is another thing that I talk about in the book.”

“So like all the research basically shows that after a certain point, which is way closer than you would think, incremental information makes you more confident and less accurate. And so I talked a bit about that in the book as well. That's like an empirical observation in all research. And so it's like how much information do I need before it becomes too much?”

“But in terms of like I've put in like, you know, you're the best macro analyst in the world. Look at all factors in the world and tell me what the best currency trade would be right now. And it's like, it's exactly like a 22 year old analyst doing, you know, their best work when they don't know that much about markets. So I don't know if that covered it. One thing that I think I've found is really cool is you take a time series and put it in to Claude, I usually use Claude for time series, and then say, find any interesting patterns in this that might be tradable. And so I think most people would that know systematic trading or quantitative finance would say, you know, that's like the worst kind of snooping and data mining, which it is.”

“And they all kind of say like, well, that's probably a 50% hit to the stock because the FDA is even going to look at it for another two years or whatever. And the stock's trading down 9%. You know, I'll sell the stock and, you know, with a stop wherever the news came out and looking for it to be down 30%. And that's worked a whole bunch of times. Because I think you, you know, if the stock's not matching, not yet matching because it's only been three minutes since the headline came out, not yet matching what like the consensus is, you know, then there's a divergence and you can trade it.”

“Actually, from the pattern of flows I've seen, that actually kind of makes sense that like, whatever, a dollar a yen would rally at the end of April or something like that. Then it can give you ideas that you can then dig deeper into, as opposed to saying, OK, I'm going to create a systematic strategy that trades us, which would never work out of sample. I feel like it's good for idea generation like that as well.”

“And it's like the, Jim, I was trying to remember who, Jim Grant says the key to making money in markets is thinking what everyone else thinks, but just a bit before them. I didn't get the quote right, but essentially, you know, you're trying, and I think that's like one of the real things that I've come to realize in my trading, especially because I'm more short term, is I'm so much less trying to predict like what the central bank's going to do or what the data is going to do. And I'm more trying to predict like, what are the humans going to do?”

“What's so that would be your example would be a good example of that, of like, okay, I think people are going to get hot on this theme. And you know, what stocks are they going to buy? Well, I don't have to go digging into 10 Ks to find that I can look at LLMs. That's going to be the consensus. And I would buy those stocks. So again, I think like most of the time now, you know, in contrast to 15 years ago, I feel like my edge is much more in predicting where the humans are going to go in the next week or two and not like, is the ECB going to hike or sound hawkish or whatever? I mean, I still try to predict those things, but I think humans are easier to predict than macroeconomic policy or data.”

“Something that's expensive and going down is something you want to short. You have these other exogenous factors that come into the market. So if we go back to COVID, a lot of securities firm put together baskets, you know, stay at home versus return to work, or you have a Republican versus Democrat basket in the US. Now you absolutely have to look at an AI factor and basket of stocks. And it changes, Max, because so many companies have been caught up in AI. Who is the ultimate winner of AI? So is it going to be Anthropic? Is it SpaceX? Is it these different companies? Or is it the sleepy manufacturer who can adopt these models to speed up production, to speed up engineering, to do all these things?”

“This is one I wish I could just turn off the part of my brain that's like a tactical trader because you're just like, oh my God, this trend is going to be incredible for the next two years. But then after two weeks, it's like I have to fight myself. It's so hard to hold these things on even though you know, even like the memory, the AI memory stuff, I've done very well in it over the last couple of months, but I've over traded it as well. I could have probably made more if I just sat on my hands and then do anything and didn't look at anything and went to the beach.”

“But then there are times, it's hard to mentally compartmentalize the different types of trades and theses you're putting on, because that's very different from like, hey, I'm super bullish this trend for two years. And knowing, you know, you want like to see these moves, you have to hold it for the two years. And it's very, very difficult to trade around. But that's it, like solar or semis or whatever. You really have to like tune everything out. And so it's almost like having two different parts of your book that I find helpful is like, I just literally put things on different trackers and sometimes it counts to be like, okay, this is for this pocket. This is a two-year view I'm accumulating.”

“You hopefully get a quick move away from wherever you bought it from. And you're just playing with house money, and you don't have to care so much about the zigs and the zags. If you get in good, if you if you're chasing or having operating with fear that you're missing out and you're panicking to get in, you're going to get a poor entry on some wick higher that you think is the breakout. It's going to reverse in your face bottom there when you sell and then go again. And so for me, I think in these things, it's just the entry is so important because they're so volatile. Any given year, it might be the best theme consistently, but you're going to get some ridiculous entries into these high beta things.”

“If you link, hey, S&P down 40, S&P down 20 in two days, three days. I could get the long end bid for you for three, four, five days, maybe even a week. Then it's going to turn around, it's going to start selling off with the S&P. We saw that in COVID. We saw it in Liberation Day.”

“It's like, okay, you can get, you can let the volatility event happen and you sort of clear the forest of the fire and regrow and you have the seedlings for a big trendy move. But, you know, maybe like, I guess if you apply 100 Band-Aids to like a leaky dam, okay, maybe like it actually does resurrect things for a little. But like fundamentally on like a medium to long term picture, it's still problematic to me. So I think it's a very, I don't think it's going to be any easier the next few months than it has been the last few, to be honest, from a trading perspective.”

“And put it into energy, right? So that was basically, I would say, sector wise, the biggest shift. But if you look at the factor attribution, we started off with a very big growth, even sector neutral pretty big growth wise, but then flipped to a pretty big value bias from May as well. So that's definitely an element of like timing with the factors. But I think the reason you have factor timing is those things are not stable anymore, right? And we're in an environment that's constantly going to be more shocks. Like I think all you can do with your portfolio is when there's vol, try and rebalance to optimize for expected returns. So the attribution is almost slightly misleading in a way, because I don't think factors are stable.”

“So it is sort of like in the super big picture, it's kind of healthy, but it's obviously scary to watch it unfold on a day to day basis.”

“So not great, but if we look at everything else, the VIX has settled down, which I think is good. It was hovering up in the low 20s and that was causing the stock markets in particular to go batty over the last couple of weeks.”

“You say bond vigilantes, the US 30-year yield is now at the highest level since 2007, maybe 2006 What do you think happens to long end rates, the treasury bond market?”

“I mean, a 19-year high is pretty darn significant. Where are we headed in terms of long-term rates? And step back from this week's news and tell me about Jim's perspective on the longer term.”

“The cleanest way I'd express that view is through the iShares 20-year Treasury Bond ETF, symbol TLT, trading around $82.55. This trade can be used in two ways. For investors who believe yields are headed higher, it is a defined risk bearish position designed to profit from another decline in the long-duration bonds. At the same time, for investors who already own TLT or other long-duration Treasury exposure, it can serve as a short-term protective overlay to reduce portfolio losses if bonds sell off further. What makes this setup interesting is that the implied volatility on long-duration Treasuries remains relatively inexpensive.”

“Large speculators have pushed shorts roughly 187 contracts net short. That may not seem like a lot, but that's near the bottom of the last five years' range. So we're definitely on an extreme there. And the bearish bond thesis isn't just a consensus view anymore. It's fully expressed in actual positioning with real money. So here's the one thing to watch. The day bonds stop falling on bad news, whether it's a hot inflation print, or it's an ugly auction, or it's a hawkish Fed speech, and listeners will definitely want to follow that September Fed meeting closely for that. If you start to see the long bond refusing to make new lows, that's when I would expect a short covering reversal in the long end.”

“Maybe that's it, but all of it speaks to a conflict that is going to continue to go on, that is going to continue to add to global inflation because there will be tit for tat restrictions of supplies, et cetera, in both directions and around the world. And then go back to square one. Whose bond markets are getting hurt by this? Not the Chinese bond market.”

“You know, they typically are good for the next month. So they're not necessarily long-term models, but they give you a sense of when things are extreme to face, right? So the most recent has been obviously all the semi-AI related cells, and then the China, you know, Indonesia, a lot of these laggard, you know, biasing we've been writing about. And so obviously you've had that convergence. Yeah. So I will think of it very much as a tactical model to complement your kind of medium term views. In practice, the way we would use it is you have thematic investments or stocks or concepts you like, that's really about the next three to six months, and you use LPPL to help you with timing in and out and for managing exposure around it.”

“It's all a market structure, right? Exactly. Position gets rinsed. No one's there. A couple of headlines, liquidity comes in the market. It's fascinating because, I mean, really what's going to end that? Probably nothing. Like it's as long as the government's increasing their heavy handedness, there's going to be an increase in concentration of these insane moves because it's like, you get these narratives of like, oh, the government's supporting it. Why would you buy anything else? And then you get the 3X leverage ETFs, then you get the 4X leverage hedge funds, and then rinse it out and repeat.”

“Like, you know, buy a little bit slowly over time. Like, yeah, it's not the time to do like a high leverage swing right now, that's for sure.”

“And that is what's so discomforting for investors that you need to be agile. You should have no confidence in what you're doing. And you should always watch out for the new breakouts as they happen. And try to minimize your exposure to past winners that are being derated.”

“So as I wrote on Friday, this is the stupidest market I can recall having participated in, both on the way up and on the way down. You know, a lot of names that had no news were bought right, left and center in Q2 and a lot of solid, solid names with only good news through July have been sold off. So I think this is a time of great opportunity if you're not levered, because you obviously need to be able to withstand the volatility that this creates.”

“Just going back to Korea, many times they've banned short-tailing. So they've improved the rules, they've improved the disclosure. So hopefully it's more permanent that they'll allow short-tailing in a market like that, which is important for us to execute a strategy in a market like that. But they do change and there are the known unknowns, and that's why, Max, we really can't predict them. So we've got to be balanced within industries and countries. So we really don't want to take a big country bet that this is going to happen.”

“You're plugged in to 24-7 news in India, thinking about credit spreads and Trump derailing things and oil price shocks. It's really hard to just be agnostic and say, I'm riding this. I think you can also get duly hurt being dogmatic about that stuff and riding it long-term. So I'm happy with that. I'm happy with my return.”

“Why financials? Why energy? And why did you say a few minutes ago that the macro is fundamentally risk on for equities?”

“The money's not necessarily leaving the market, it's just rotating to laggards and other areas, which generally I think reflects the risk on. So, yeah, I think broadly, equity outlook is fine, but on the semi-specifically, I think we, in terms of out position, we're keeping some of the exposure, but we're really been rotating to more of the value laggards that's been popping up the portfolio in July.”

“I mean, it started with Mag-7, the hyperscalers. They've, again, we've been covering this for ages. They've been the laggards and they're shelling out cash flow. They're levering up. Their cost of capital, cost of financing is rising. Their spreads are widening. And all that money has been flowing to these memory chip, et cetera, who are now printing 80 percent margins. Those are going to get eaten. But it's spreading to the rest of the supply chain. And now you're running into the open source competition. You're reaching an upper bound of how much capex these guys can do. They're already negative free cash flow, already levering up. You can't just continue that infinitely.”

“And you have this push into AI, you have push into hardware, you've push into optics, things like that. And it's just unrelenting. The flip side of that is outside of some of those areas that are more momentum based, there's still opportunities for stock selection. So when you look at the average return of a stock in major markets compared to an index return, and the average stock has underperformed massively. So if you put together a long short portfolio between the performers and the underperformers, it's, you know, you have the opportunity to produce a stable return stream. So that's really what's happened. You've had a big bifurcation in some of the indices, and a few stocks driving the returns massively.”

“That you had 40% of the market that they thought was going to grow 30%. And that so it implied that the rest of it was seven to come up with I think a 15% estimated growth for next year. So the big piece is technology. If that, maybe that disappoints, but on the other hand, the other part of it seemed, real estate, financial services, energy, all seemed very, quite conservative, the outlook for those sectors. I got two more points. One on the data centers, just kind of interesting, like I'm not saying this is good, but just to get us to where we need to want to get to, which is 10,000 and keep it going, I like to track Blue Owl, right? The private credit firm.”

“The initial pressure really came from the stress out in Asia where the South Korean KOSPI suffered a dramatic 10% limit down move, which in turn spilled over to the US 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.”

“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 un-worried and the dollar is breaking out to the upside.”

“But the North Star that I keep erring toward is that fiscal is more powerful than people expect. Any trimming of fiscal tends to be a pretty big force to the downside, and any 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 big structural high-quality equities, scarce assets, and they all take their turn with little periods of out-performance and out-performance. They have a good year, a bad year. But when you own a collection of them in this run-it-hot fiscal environment, that's the North Star.”

“And so, I kind of like how some of these AI names get ahead of themselves from time to time. Even though the, you know, the use case is there, in many cases, like say Micron, the revenue is there. A lot of, 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. You know, where SpaceX trades 100 times revenue, you know, at what point is five or six times earnings for a technically still growing company overly bearish.”

“Larry McDonald's argument was that we may be entering a very different market regime where the leadership shifts away from crowded growth and momentum stocks and back toward value, hard assets and under owned sectors that have been left behind. One of the clearest examples he highlighted was healthcare. Despite the long-term demographic support from aging baby boomers, healthcare has been aggressively sold down as investors crowded into AI, semiconductors and mega cap technology. So rather than chasing the sectors that have already absorbed the majority of the speculative capital, this week's Trade of the Week is about positioning for a rotation back into healthcare, one of the most under owned and unloved parts of the market.”

“They're selling the Big Mag-7 equities, which are very liquid and they're raising capital for all these IPOs. That's like you said, the Time Warner Deal in 1999-2000, it's just too much coming into the market at the same time. Plus, we have a lot of private equity deals coming out in recent months. There's just too many sellers. And the last thing, remember, in the 90s, I founded convertbond.com. And for investors listening to us right now, always remember, the smartest sellers in the world are chief financial officers. And guess what, Erik, the amount of convertible bonds that are becoming to the market in the last couple of weeks, from say three, four weeks, is up a lot over last year.”

“I mean, the free cash flow yields in energy space are so cheap, natural gas equities, energy equities, materials. So you've got one part of the market that's really cheap. But the NASDAQ 100 valuations are really all-time high CAPE ratios, PE ratios. So there's like two different markets. One part of the market technology is really at the highest valuations almost ever. And then, but in the energy space and in the material space, you've got beautiful free cash flow yields, which are probably the cheapest part of the market.”

“You go from a 10-year disinflation regime, when in a unipolar world with less global conflicts, and you rotate into a multipolar world with more global conflicts, higher interest rates, higher inflation. That means your portfolio construction needs to have a totally different view. Companies that control hard assets and also value. So look at here, growth versus value has failed here a lot since 2019 Big move over the last week. Big move. And I think this is the beginning of a colossal move over toward value. Because I think of value companies, like look at Buffett. Buffett, Berkshire, big outperformance the last week or so from Berkshire.”

“And I think, you know, look, we tagged 5% back in October of 2023 And that, you know, the market was off to the races after that. I mean, before that, but also it just continued. So, you know, I wouldn't even get concerned with tenure rates at 5%. You know, that's just the bond market doing what the bond market is supposed to do. And equities will trade off of it, provide it. What's driving it is not something that's harmful to the cycle. So, yeah, so, you know, the two things can coexist. Higher nominal interest rates can coexist with rising markets and vice versa. It really depends on the causal factors, not just, you know, some magic numbers is kind of that the red pill of the black.”

“But yeah, I think this is where the bulls and bears sort of, at least in some respects, disagree. It's like, I don't think anyone would argue with the fact that we're in a raging bull market across various asset classes and there's thematic secular themes that are producing monstrous booms and winners and earnings. I think the beef that people have is that it's maybe not how markets are supposed to work over a long-term time horizon. And it all is just so, like you said, Tyler, centralized and at the whim of policy makers. It's not in any sense of the words free markets.”

“I think the next few months are going to be... I'm seeing some things set up that are interesting, and there will be a baton passing at some point over the next few weeks, I think, from semis. And that doesn't even need to be marked down, but I think other things are going to... We have a lot of catalysts next few weeks.”

“If there's 2,000 stocks in a particular market that are liquid, tradable, all those things, it's exponential the number of pairs you can put on. And you have to model each of those pairs. So that's why liquidity is important. If you're a fundamental small cap investor, it's a different process that you're going after. You may want a big information edge, and you may have to sit there long only in the stock. I wouldn't want to short a lot of small cap stocks, because if you have to cover that short position, you could get a short squeeze, there may not be any sellers. There are some attributes on the short side that can produce very non-asymmetric returns. So focusing where we do fits the style of investing.”

“I do believe despite maybe some of the flaws of CapitalismX, there's not a better system out there and sometimes it gets taken to excesses. And those excesses need to be corrected and the market's a good force to do that. So I think some of these are countries realizing that you need to attract capital and investment if you want to continue to be productive. So I think some of these changes were inevitable. Could have predicted the time frame? Probably not. But you did have more stagnation in Japan for a period of close to 30 years.”

“So on the daily, well, it's funny, it broke down. This was the, yesterday was the first day that it actually closed below this big support resistance line. Like we had had several wicks down below it, but it would always come back up and close above it. And then yesterday had finally closed below it. And today, well, up until a little bit ago, it had fully engulfed yesterday's downward candle and it was back up above it. And it still is back up above the line now. And we do have a decent bullish divergence flag here, a four flag. And we've still got a slight bullish divergence on the RSI, but it's lost a little bit of its speed. It actually got rejected off the 10 day moving average.”

“I remember, if you remember in October, we had the breakdown. You remember at the end of the 2022 bear market, we had FTX collapse. And his comment was just that as we get to these extremes in the markets, whether it's to the high or to the downside, it generally can sometimes serve as a mechanical catalyst for a black swan event that produces the final capitulation. And so he then was like, that said, we haven't had one yet. We may be due for a black swan event to happen in the next one to four months. That sort of cements the final low of this bear market. And so it would play out. It would be consistent with the previous cycles for that to be the case.”

“In human history, it tells you that we're very good at finding this stuff, but we even better by using technology to optimize it. So, for example, today, LLMs using less than one third of the energy that we thought we need three years ago, just wait another four years, it's going to be like 10% of energy, but then we'll get to quantum computing, a lot of data centers will become playgrounds for children, because we just simply would not need it at that magnitude. So the first derivative are commodities needed, but this derivative has some choke points at a regular intervals, but it doesn't last terribly long.”

“Well, gold delivered a decisive 4% breakout from its multi-month trade range, reclaiming both its 50-day moving average and its descending trend line. On its own, that would already be technically significant. But what gives it more greater weight is the breadth behind it. Silver, platinum, palladium, copper, mining stocks and even uranium equities all turned higher at roughly the same time. That kind of simultaneous strength across the metals and materials complex suggests this is not simply an isolated short-squeezing gold, but a broader intermarket rotation into hard assets. The first real obstacle now comes near the 45-50 area where gold meets a key Fibonacci resistance zone.”

“So it starts off using basically our capital cycle models to drive sector tilts and then once you have the sector tilts, you will then look at quality and crowding to essentially pick the stocks. And then after that, there's a macro and LPPO overlay to manage risks around it. Everything is combining to essentially a forecast return. So the difference between this and every other quant strategy I'm aware of is we take all our factors, but try and turn it into a forecast return so that when we rebalance, we're trying to maximize forecast return in the portfolio for the given amount of risk we expect. And I think it's subtly different from just ranking based on valuation, like a value factor or quality factor.”

“WTI has actually been ripping higher and you'd expect speculators to be chasing it, right? But they actually did the opposite. As of the latest report, large speculators actually sold into the rally, cutting another 13,000 contracts. And their positioning score, it's down to just 12 points. Think about that. Price surging and the specs are leaving, which means this move is running on fundamentals. So the market keeps tightening and there's still a whole crowd on the sidelines that hasn't even bought in yet.”

“Now, most people see a reading like that and think crowded means sell. But that's not how this works. An extreme is a condition, not a signal. Because there are two ways a crowded trade resolves. One, the price can crack and the crowd gets flushed out in a correction. Or two, the market simply digested through time. And copper this time chose time. Over six weeks of sideways action, specs quietly trimmed 14,000 contracts, and the score still cooled from 100 back down to 75, right back inside that normal range. But price never really broke down. And that's because the physical world kept buying it. Chinese inventories were falling, import premiums rising, metal leaving the warehouses.”

“You know, I look at these other ones that have done this, like it takes a long time to digest. There's a lot of positioning that needs rinse. Metal still haven't even digested their move, and that's seven months ago.”

“Now coffee spent roughly eight months in a brutal bear market, falling about 44% from its October peak. By the time it bottomed, the trade had been completely abandoned. Large and small speculators were both sitting at their one-year positioning lows, with real short positions on, not just reduced longs. And here's the tell on the other side. Commercial hedgers have gone unusually exposed, barely hedging at all. When the producers themselves stop paying for protection, they're telling you something. There's nothing to protect against. Everyone who could give up already has. Severe weather and harvest delays in Brazil, renewed El Nino concerns and extremely thin global inventories suddenly challenge expectations for a record crop.”

“Interestingly enough, commercial hedgers are doing little hedging at these price levels. Over the last quarter, they have been at multi or low forward hedging. Basically meaning that many miners are accepting the price volatility risk at these levels. That is even more prominent in silver, where commercials are the least hedge they've been in a very long time.”

“So you think we're in a new cycle because the rate, maybe perhaps the rate hike cycle disencouraged supply. And that word now, you know, that's been fully digested. And that the demand is outstripping supply across the vast majority of asset classes.”

“Interestingly enough, commercial hedgers are doing little hedging at these price levels. Over the last quarter, they have been at multi-year low of forward hedging, basically meaning that many miners are accepting the price volatility risk at these levels. That is even more prominent in silver where commercials are the least hedge they've been in a very long time.”

“Larry, your book has got to be the best title for a finance book ever, How to Listen When Markets Speak, because it's about the market. It's not about what you think the market should be thinking. It's figuring out what the market's thinking. Let's apply that now and talk about some rotations that are going on in the market, moving on to page 11 of the deck.”

“But your take on it is invest in the commodity now, rotate into the miners only after the pain that hasn't quite happened yet.”

“And that's why I love this platform, because I want to democratize the information. I want your phenomenal audience to really have a front row seat as to what the top institutions are talking about. The biggest thing in recent weeks is the consumer, oil inflation. And you could see here on slide 2, junk bonds. The high-yield market as a whole is OK, but the tertiary parts. And these are typically the leading indicators. The tertiary part of the high-yield bond market, which is CCCs, as you can see, they're really kind of blowing out. The last time stocks were at the all-time highs, CCCs were much lower in yield.”

“But your valuation is the cheapest of all time and the company is buying back $2 billion worth of stock. So to me, your risk reward of buying Agnico here is probably 10, 15 percent down and 200 percent up. Because this time next year with that wounded consumer, the Fed really can't hike that much. You go to a slow growth economy with high inflation, gold should be $6,500 an ounce this time next year, which would put Agnico Eagle up much higher, potentially 100 percent higher a year from now.”

“We had quite the whipsaw in expectations in rates this year from everybody saying we're going to get cuts to now people are starting to price in in hikes. There was a period in time when people were pricing in cuts and the long end was selling off. Now we're having inflation concerns and the long end is selling off. So I wonder, is there a world where without intervention in the bond market where you see the long end stabilizing?”

“Look, markets, they front run and they price in the entire change in the present value of all financial assets. And that you do get more bang from the buck from the expectations front running than you do. By the time the actual hike or cut or policy move comes, it's kind of baked in the cake. It's really an odd event, unless it's a surprise.”

“But then when we moved to this defined contribution plan, we basically mandated every employee to become their own stock picker, where they have to go out into the market and buy ETFs every week. And those folks are not thinking about duration mismatch or liability management. They just buy passive ETFs every paycheck and do that forever. And this dynamic of going from that one system to this new system has just like, it's just, I don't know, I've heard that this thesis talked about before, but it just really hit the nail on the head of just how powerful these flows are. When you just think about the fact that we had these multi-trillion dollar flows that had to be duration hedged to now, we just, we don't care.”

“I don't know if the software companies are really doing that what the payment companies are. And so the story there is just like really high free cash flow yields. And you know, also, I'm not I'm questionable about them. It was just something we explored because I was at an ideas dinner here in London and we're all talking about them because they're down so much. The other slight surprise kicker could be they're all they all earn percentage of the nominal transaction value, right? So I'm like, are these hidden inflation plays? I mean, they would have to inflation have to maybe get a lot higher.”

“I think the physical world is going to start kicking the financial world in the head sometime in the next one to two months. And look, I was early on, early and wrong on how quickly this would happen. But I was dead right that Hormuz would still be closed much longer than people thought. So that's still, I think, the overriding factor is the physical world will still get its say.”

“It's prediction markets and perpetual futures. So an investor rather than buying or selling contracts of WTI crude oil at $80 in April will say, just buy a contract of what are the odds that April, that the price of crude oil is above $80 and they'll buy or sell that contract and also perpetual futures that they, there's gonna be listed on like Robinhood and probably Coinbase. People can trade there the same things they did on CME.”

“Now, it's a laudable cause, but nevertheless what it means is a higher volatility and emergence of shadow chairs that are still going to drive conversation. The less you communicate, the more other people will communicate. The other thing he was highlighting is that it will be good idea to return risk to the market. Again, I think it's a very laudable task, but it cannot be done. There are other propositions such as reducing and altering the shape and the footprint of Federal Reserve. Again, a laudable task, but it cannot be done. So, to me, a lot of the sayings that Kevin Warsh is discussing, very few people will disagree and ultimately it might not be a better idea to do, but none of them, as I said, is relevant.”

“I'm just looking at, like, I think the gold near, close to the gold's top was when Kevin Warsh was nominated by Trump. And I could say that's gold pricing in a more hawkish Fed. But if the hawkishness is basically fake, and he's not going to be that, that, that hawkish, maybe that, yeah, maybe gold stops going down.”

“Wow, that does sound like withering gaze is what he just said, that if we just kind of think about inflation and talk about inflation, it'll magically go away. And I think that the marketplace is of the opinion that, no, you have to do more than just talk about it or think about it for it to go away. More obviously is raising rates. And since they didn't raise rates, there's an old adage that I've been using a lot lately, that bond traders can stop panicking when the Fed starts panicking. Well, the Fed didn't panic today, so bond traders panicked. And that's why we got the 30-year yield to use one measure at 5.2%, a 19-year high.”

“We have a Fed meeting coming up. As you said, the first date with the market, Warsh came out and he said, you're not getting any. And everybody interpreted it as quite hawkish. But he's also said that he doesn't want to be giving a lot of guidance. I mean, what do you think the chances are that he kind of whipsaws the market around and goes back the other way just to sort of teach us all a lesson about taking his words too seriously? I mean, do you think that we're set up here with everybody expecting hikes into the end of the year for Warsh to kind of wiggle around a little bit and make the market unwind all of that pricing?”

“So, this is a fun moment for Kevin Warsh's first ever meeting as Fed Chair in June, coming forth into, you know, when he got nominated, there was cuts priced into the curve, and now he's sitting in the chair, about to have his first meeting, and there's hikes priced into the curve.”

“I'm unbelievably bullish on real estate in the right places. I am, the migration, COVID was like, if you asked me, COVID was like training wheels of what the migration flows will look like into the future because of what all the things you're pointing out. I mean, as a business owner, you can't, that's basically eliminating property rights. Like, it's saying eviction is violence is saying like, oh, it's not, you don't actually own that apartment building, you know, like, you know, they can live there and they don't have to pay you. Like, property rights were one of the, if not the most fundamental thing to make in America and, you know, differentiate it and what it is, you know, that lays the groundwork for.”

“Yeah, the market will have to mature and grow and I just think that will take longer. And so you'll have the expected returns for some people, the actual returns for some but certainly not all, will sort of revert to more lower long term average returns as opposed to 20% in perpetuity because you just you can't sustain that if you don't sell it right away.”

“So what we see and what the market sees is fundamentals look really good, there's not a lot of new construction. What is being delivered is more than being absorbed. And you have the prices have dropped 20, 25 percent, sometimes more than some asset classes. So the pricing is attractive. And then when you look at it on a historical basis, compared to multiples in the equity market, high yield spreads, you know, investment grade spreads, real estate is quite fairly valued. And so we're seeing transaction volumes grow. They're not what they were in 2021 and 2020, which were kind of record all time highs with zero interest rates or very low interest rates. But they've come back a lot and they're at a very healthy level.”

“Yes, that plus prices adjusted in response to that rate hike to a level that the market has, there's enough price discovery and enough transactions that people are comfortable. And when you look at those yields or multiples or cap rates relative to historical standards and relative to other asset classes in the people could invest their money today, it's stimulating confidence in more real estate transactions because it feels fair.”

“Or someone made a mistake and built something that nobody wants. Right. They messed up the specs somehow. They built a building that they thought looked good on paper, but in practice, it's not dysfunctionally obsolete, or it's not really what people want, and so they have to charge a discount to find demand for it.”

“I keep going back to this is like people are reading it as bearish for the companies in the market, but I hear something completely different when I see, oh, AI data center, we got to regulate these things. My favorite is Bill Gurley saying regulation favors the incumbent. And it literally like makes these companies monopolies, where if you have access to the grid or power, you're literally like, you're like a toll taker, ching ching ching, you already got access. And not only that, but your balance sheet's big enough where you can finance the next regulatory, like all these hurdles. It's what happened to hedge fund industry, right? You start a hedge fund in the 1990s with 500 grand, and you didn't have to do all this crazy stuff.”

“Understanding is retail money flows, is that a big driver of performance? Then retail money flow can change as well. In Japan, it's more buy and hold now. Before, it was a contrary indicator. Now, it's much more stable. So these things change over time. Those are all sources of alpha. Data can be a source of alpha, but it gets arbitraged away, Max, fairly quickly. If you have a data provider that comes out with a new data set and then suddenly they start selling it to all your competitors, it's not an advantage. You kind of need it. So originally, when credit card data came out, that was a bit of an advantage for people.”

“I missed last week, but they artificially created a gamma squeeze. And this is the market structure stuff, is if you look at single stock of all, there's probably largely them. You're the supply of the stuff they're buying is not big. And then you get the piggybackers and then you get the retail crowd that buys the call options. I'm not saying this. They should have expected it. But for guys that smart, you know, when you see single stock fall that high, there's ways to hedge. And I'm really shocked given having read that piece that that's what happened to them. I'm really, and maybe they needed a trader to hedge that out a bit a bit better. But like that, it's I needed a risk.”

“It's like you get a narrative where you get a capital inflow and then you get the retail crowd tracing, chasing, and then you get the high frequency guys making it extreme because every inflow causes like an asymmetric price move. That's why like last price is a liar. Price is the equilibrium of liquidity. And the problem with crypto is it just doesn't have a narrative right now. Like it really, there's no reason, like if you were an allocator, why would you invest there specifically? Like there's a lot of dead projects just floating, doing nothing. I mean, I get Bitcoin, like Bitcoin is probably the best one. Maybe the stable coins of Ethereum and certain projects that generate yields make sense to me, but I don't know.”

“And so as that vol like seeps through, you have to de-lever your portfolio. So you end up selling your, if you're looking at market structure and a lot of these like long short funds, you have to sell the really, really high vol when it's going against you. And then you cover other sectors. And eventually, I think how this ends is you see single stock volatility has to drop here, and then fundamentals have to come back to play. But the effect of all these double and triple-levered ETFs and in the embedded leverage in the system, is the retail investor inevitably gets wiped out and Jane Street and Citadel centralized more.”

“But go to slide 29, you can see basically what happens is generationally all these bureaucratic pension funds, endowments, boomer Ponzi players have choked the float of a lot of the equity market. And now they're figuring out how to use Robinhood and basically buy call options to artificially create gamma squeezes. And so you can see the retail cash and then retail options. They're the ones that create like the end where, you know, vol goes into the 98th percentile and skew goes into the 98th percentile. And then if you go to the next chart, this is slide 30, you can see retail is actually, you know, picking up the investor volume. And that's, you know, that's a large portion of it.”

“So this is a long-goingly systematic strategy that's designed to be an alternative to your S&P allocation. So we created the product because for our super long-term money, we just want to be long US equities, right? But looking at S&P, we're a bit nervous about 10 names are like half the index. Obviously, everything is on AI. And we wanted something a bit more active that can rebalance. And using an ETF vehicle is very good because you can do a lot of frequent rebalancing in a tax-efficient manner. So we launched it in March. It utilizes our macro capital cycle quality crowding models. And touch wood, but so far, I think performance has been very, very good in terms of upside capture to downside capture.”

“How do you feel about the quality of the earnings in the S&P 500, given that some of it is these markups from VC gains, some of it is hyperscalers, you know, realizing the gains from their investments or the revenue is growing, but not seeing the depreciation yet. And you know, there's gonna be a depreciation bomb over the next five years. Like that's just a fact. And then also the fact that a large percentage of the earnings growth has been in one industry, semiconductors, an industry that I love to be clear, but it is increasingly somewhat of a one way bet on AI and Semi's in the S&P 500”

“The CFTC report isn't a crystal ball, it's really just a crowd map. It shows us where traders are committing their dollars and where positioning could become vulnerable if the market stops rewarding those same traders. Now, let's turn to the S&P 500 futures because large speculators are sitting at the 100th percentile on the one-year positioning score, but it's only sitting at the 60th percentile relative to the three-year score. So the market is definitely leaning on the bullish side, but it's not a market stuffed with speculative longs, which means that this breakout still has lots of room to attract additional pying.”

“But generally, you have monetary policy tightening for 69 months. While it's tightening, you see equity breath narrow. The definition is what I mentioned, value line arithmetic or these median stock. The median stock stops going up. It stops making high lows, but the concept stocks keep going up. Generally, when you see those and you see those for 69 months, that's generally been the absolute peak of the generational cycle.”

“So this is a long-goingly systematic strategy that's designed to be an alternative to your S&P allocation. So we created the product because for our super long-term money, we just want to be long US equities, right? But looking at S&P, we're a bit nervous about 10 names are like half the index. Obviously, everything is on AI. And we wanted something a bit more active that can rebalance. And using an ETF vehicle is very good because you can do a lot of frequent rebalancing in a tax-efficient manner. So we launched it in March. It utilizes our macro capital cycle quality crowding models. And touch wood, but so far, I think performance has been very, very good in terms of upside capture to downside capture.”

“I want to go back to that June piece deal gap higher that we saw in markets, because we saw here that gross shorts collapsed from roughly 460,000 contracts to 272,000, while gross long position remained broadly unchanged right around 250,000 contracts. In other words, the recent rally that we saw here since the June piece deal was driven primarily by short covering rather than aggressive new buying. But the important thing to know about what's happening today is that while equities are breaking key technical levels like we're seeing the S&P here breaking its 50 day moving average, a sustained decline lower would force systematic funds to start selling and speculators to potentially rebuild their short positioning.”

“I want to close with a question about sequencing and what you're watching and how you think this is all going to unfold. What is the area that's going to start this? Is it the AI trade unwinding? Is it losing the bond market? Is it more conflict, the forever war in the Middle East?”

“We just got a report from Google and Tesla, and each of them are at least at this point indicating a lower open. And so the question really becomes, what is going to drive the markets higher if we see that the MAG 7s and the semiconductors can't do the heavy lifting? While we have seen the breadth of the market widen, it may not be enough. And with the markets having traded sideways for a prolonged period, all of those CTAs and systematic traders, their flip points are slowly rising, like almost like a trailing stop loss. If we see at this stage even a 150 or 200 S&P point drop, it would put us into a sell trigger area where suddenly the flows will pivot. And a lot of forced systematic trading strategies will actually be active sellers.”

“Large specs, they've been crowded long on the S&P and the Dow for weeks now. But now, small specs are piling in too. And that was the biggest jump in positioning on the board. Almost 30 points on each of the index in just one week. That puts small speculators in their top-disciple positioning from the last 12 months. Both groups now are sitting at 90 on their one-year positioning score. And here's what that tells you. The bullish positioning isn't just holding, it's broadening. Large specs, small specs, everyone lean in the exact same way. And when there's crowding this clear, it can exacerbate downside volatility if a cell catalyst ever changes the narrative, just like you mentioned.”

“Then if you go to the next one, this is JP Morgan currency index. Again, no, no volatility in cross currencies too, which is wild to me as well, that you'd have this momentum unwind. And, you know, there's no cross currency vol. And then if you go to the next one, and I'm sure all three of us have this chart, but this is the one month implied correlation. And when this is low, you know, it's a stock picker's market. There's a lot of different sectors doing different things. So this money is moving out of AI and AI infrastructure and going into different sectors. I mean, and then we can kind of talk about, just if you go to like 40, you can kind of see where it's going. This is the KRE. Financials have been on fire.”

“And I mean, tech's kind of saying like there's some bigger problems here at play and that would hit the NASDAQ the hardest. So I totally agree with you. Like, I'm not buying vol here. I'm just playing everything via futures and spot. But I would rather be a buyer than a seller of vol for sure.”

“But two, all of these unwinds tend to follow each other. And there's, you know, some consistency between them. If you remember back in October of last year, you had the Renaissance. I think they lost like 10 or 15% in a week. There's a big momentum fall issue for the market neutral pods. And then they kind of rolled through different complexes. Crypto got nailed, a bunch of different things. And you're kind of seeing that now. It started with Mag-7, now it's, you know, semis, and now Korea. And those are all just signs of bad liquidity. And there's not enough capital to support everything. And so you get in these huge rotations. So I'd be very careful because there's a lot that could set it off.”

“But definitely, the puzzle to solve going into next week is whether the selling pressure breaks down this market cap weighted index as some of these big behemoths may begin some bigger selling. On a final note, the technical level in my mind to watch is actually about 200 S&P points lower on the S&P 500, somewhere just below 7400 That's going to be an area where a lot of the CTA sell triggers have been slowly crawling up to. The thing to definitely watch is can the bulls keep the price action away from systematic sell triggers in order to maintain the prevailing bull trend, or will we see some prevailing weakness that adds systematic selling as a factor into the summer price action?”

“Well, Patrick, large speculators positioning in S&P Futures has surged from 16 to 94, and that just happened in a single month. That's systematic money aggressively chasing this rally, not conviction that was built over time. Guess what? That distinction sets up the fork in the road. If the index breaks to new highs, that positioning gets reinforced and the chase can keep feeding itself. But sitting the top this out of positioning in the past year, the same trait cuts the other way. If the market rolls over and starts triggering CTA sell signals, positioning that was built in a month can unwind fast. Not in months, in days.”

“Well, Patrick, large speculator positioning in WTI has dropped to just 19 on the one-year score, and net long exposure is back down near where it sat before the Iranian War even started. Think about what that means. Nearly everything speculators added during the conflict has now been washed out, which means the market spent the last month on pricing a war that never actually ended.”

“The S&P 500 advanced roughly 164 basis points week-over-week, continuing to push higher as risk assets remained firm.”

“And what we can identify is the market remains in a primary bull trend. The semiconductor leadership is starting to, though, show some momentum lost in the post-micron earnings window. And in fact, overnight on the COSPI, we saw another legitimate breakdown, this time along a key support line, which is now questioning whether the COSPI has actually put in as high, which has been a huge international proxy for the big AI trade. So can the market continue to maintain its highs? If the semiconductors begin some sort of profit-taking cycle? And if so, will it lead to a bigger sector rotation? There's been some really big breakouts in the healthcare and biotechs. So the puzzle to solve is, if we are seeing the start of a bigger sector rotation.”

“So look, we got a bullish breakout out of a 15-month range and it's actually holding. Now inevitably, we're going to see a retracement and a test of some sort of support lines. And this is going to be the real key. Are we going to see a pattern develop of all dips being bought and a primary trend being well established? This is going to be certainly the story into the summer.”

“From a technical perspective, it remains in a primary downtrend, and the price action continues to exhibit all of the characteristics of distribution. At the same time, we're trading right at a psychological round number near the 4,000 level, which lies right at the Fibonacci retracement zones of the two-year bull advance, which suggests the asymmetry of being long has already been reset. This would be a logical place to see if the bulls can hold the line, but there is no evidence of that yet.”

“In a single week, large specs in the S&P covered close to 150,000 contracts a short. That's the biggest one-week swing anywhere on the board. And it takes them to the least short they've been all year. They're also outright long the Dow, now with retail sitting at the top of its range beside them. A month ago, an S&P wobble toward those trigger levels would have run into a wall of shorts ready to cover. That's a natural cushion. But those shorts are gone now. With funds and retail both stacked up on the S&P and the Dow, the crowd that would normally buy the dip is already in. So if the Semi's do start a profit-taking cycle, there's less positioning support underneath that there was even just two weeks ago.”

“We tend to be much more on the neutral side, particularly as it relates to equity, long, short investing.”

“There's a lot of cracks forming, where the things that were pumping this to the upside aren't really working anymore.”

“And everyone was pushing back, a lot of people anyways, that, well, once they're so cheap, they're going to bottom, then they're going to take leadership and they're going to blast NASDAQ to new highs. Well, what is actually more likely we've been talking about is, well, they started the weakness. And then eventually people catch on and say, oh, wait a second, they're going to stop their share price decline by cutting their CapEx to improve their cash flow or their leverage. And then you get this announcement from Amazon. And then the cracks start to spread outside of the generals into the semis, the AI, you know, into Korea, into Taiwan.”

“And then you have the AI bulls. And I think the risk there is that they both kind of unwind at the same time over the next few months as liquidity wanes, the Fed's too hawkish, labor data comes down, inflation comes down with it. But that doesn't really like stabilize things. So there's a lot of risk factors, I think, out there, aside from just like the record yen short, dollar length, you know, sofa shorts, like all these things kind of are colliding in a weird way.”

“So I think there's now, like I said earlier, I don't think that means it's still, I still think it's a very murky outlook for the equity indices even with no hikes. So I think adding hikes onto the case, it's the steepness of the yield curve that's the problem, which is what Warsh knows and talks about.”

“You know, sentiment got really crushed on them. Actually, next week SpaceX gets included the QQQ inclusion date, which is also just a wild thing. So, you know, probably some of that selling was making room in the in the mags. But yeah, I have a negative bias on NASDAQ and tech, and a long bias on gold and sulfur, and those kind of fading the hawkishness trades. And also just generally think, like the next two months are probably the most treacherous going into the back half of the year, where people are sort of too crowded in this risk on view. So yeah, I'm pretty cautious here, but more of a seller on balances than a buyer.”

“But it it also doesn't change any of the facts that are around the fiscal situation of governments, right? Our deficits are still 6% of GDP. The debt is still climbing. There's there's still manipulating issuance, like all the things that make, for example, gold. And, you know, when liquidity is booming, Bitcoin and this debasement trade generally like attractive. I think, I think that the fundamental case is as strong as ever. You just got a nasty, nasty rinse of positioning. And so I totally like those expressions better than NASDAQ here. I think, I think as is economic and growth and inflation slow. With sticky inflation still, you're going to want the debasement stuff back versus the Oh, my God, AI bottleneck stuff.”

“And so we've just had so much, like the momentum factor has just been ridiculous the past, like just outright absurd out performance. So obviously, when you have that sort of leverage and positioning in the system, it doesn't really matter what the news is, just as long as there's like a steady narrative to grab on to. So you have this is all, this is all the memory, DRM, AI trade stuff, and then you have that as the baseline, and then you just get a couple of news hits. So the first one we got over the last couple of days was Meta talking about trying to sell their access AI compute. I mean, they're only just considering, but still, that was enough.”

“But I think we're in that phase now of questioning the thesis. And all you needed was that one tweet saying some random company figured out how to increase efficiency of the whole thing on Wines. And you have to have a plan going into these moments so that you don't get freaked out in the moment.”

“And what we can identify is the market remains in a primary bull trend. The semiconductor leadership is starting to, though, show some momentum lost in the post micron earnings window. And in fact, overnight on the COSPI, we saw another legitimate breakdown, this time along a key support line, which is now questioning whether the COSPI has actually put in as high, which has been a huge international proxy for the big AI trade. So can the market continue to maintain its highs if the semiconductors begin some sort of profit-taking cycle? And if so, will it lead to a bigger sector rotation? There's been some really big breakouts in the health care and biotechs.”

“What are the 10 reasons you think we go higher in the …”

“What I saw was that it was a country that was struggling, everything was, there was no rise in employment, there were no, the government was disappointing, and the nominal inflation was carrying stocks up to unimaginable levels. And this has been something I call Project Zimbabwe, that I'm like, we're in a higher inflationary era, and you're going to be surprised how high the market goes, even when you might not think things are very good.”

“We have 4% inflation and the 10-year bonds at 4.5%. That's like almost no real yield. And I'm like, look, if you're gonna, if those are my two choices, the S&P growing at, you know, 15% a year and or a 4.5% tenure with inflation at four, that is a massively positive thing for the S&P. And, you know, just going back to your like Wharton MBA stuff, you know, you know, what's the fair multiple for in a DCF or a Gordon growth model and what you put on the top, I'll debate, people wanna use free cashflow or the EPS, whatever, I'm just gonna use the EPS. You know, the denominators always are minus G, which is your cost of capital minus your growth rate.”

“The consumer is going to lose his job to AI. The housing market isn't going to work. No one wants to own car, I mean, energy is not even going to work, even if, you know, the Strait of Hormuz is closed. And so it's, I want to say it's bearish because the SMP is still at 22 times, but I don't see a lot of carried away euphoria or bullishness or positive despite kind of amazing earnings growth and a very good set up here for the market. So I'm kind of like, I'm trying to give counterpoint to what I think I often feel as a quite bearish community out there and I'm like, I know I'm at the risk of be looking like an idiot. I'm like, let's use our imagination of like how this could go much higher than we expected.”

“It's probably not a bad thing to see institutional or TradFi investors kind of capitulating a little bit too. I mean, that sort of also just falls in line with the general bottoming pattern, bottoming phase of the bear market. And I think that that's not a good thing, but it's sort of, again, one of the yet another checkbox that needs to happen in order for the bottom to ultimately be in kind of thing.”

“I'll just say it's showing solid relative strength. It's still in the conversation.”

“I want to start with what is it exactly that started last Friday? Because it certainly seems to be the beginning of something significant in the markets. Is this the market finally waking up to the Iran conflict? Or is it a reaction to the jobs reports and maybe expectations of rate cuts being harder to come by? Or is it something else? By all means, refer to the slide deck as we dive in.”

“So if I look at what's happened in the last few days, it feels like, oh, we're down a lot. But really, if I just go back to the late March low, when the market initially started to freak out about the Iran conflict, we got down to what was it, around 60, just about 6,400, a little bit below 6,400 on the S&P. If I look at the, since Friday, the down move as of Wednesday afternoon, we're really only looking at, I don't know, it's nowhere close to a 38%. It's about 25% has been retraced at most. How far are we going? Is this just the beginning of something really big or are we just looking at a blip here?”

“So you do see the further weakness coming, but it's time to start scaling in is basically where you're at now.”

“So I think as we really consider what the outlook for 2027 is, there's a bare case that's pretty darn strong that I don't think a lot of people are thinking about.”

“You know the old theory, only monkeys pick bottoms, right? So what I try to do is we have a capitulation model that measures the tourist flush, and you want to start just buying in one-thirds or quarters into something like that.”

“One way to play that is the I-Vol ETF, which has been battered. The famous I-Vol ETF founded by Nancy Davis, IVOL.”

“And when that happens, the indexes can become more and more and more gameable. And you're seeing this on S&P 500 inclusion. Stocks like Lululemon come into the S&P 500 Everybody, the in-the-know crowd knows this and they buy it up ahead of time. And so the same thing with these IPOs, the billionaire investors on the West Coast, the venture capital people, they have, think of SpaceX, $30 billion valuation in 2019, 30 billion to now 1.8 trillion when it comes public. And so when they come public and they are accelerating these IPOs into the indexes, like you saw with the NASDAQ, the S&P, it's going to be over the next year.”

“Remember they couldn't get the votes for Tarp? Okay, fine. It failed. Now watch this show. And the market crashed and then everyone came back after they got some religion and then it passed. And so I think to your point, if it plays out that way, and I think you raise a valid point, to me, that just suggests near term, you're going to get some pain in markets and all markets. Stocks down, bonds down, probably dollar not up that much.”

“I think gold and Bitcoin are telling us something wicked this way comes for risk assets. And so near term, I just, you know, especially, oh, by the way, you know, into valuations that are in complete and total lava land in America. I mean, just, they're silly, silly season. And what do I mean by valuations in silly season is, there's something called the Warren Buffett metric, right, which is total equity market cap over GDP. And that's been in silly season for eight years.”

“And so, not only do you have valuations in the La La Land, but you've got yields rising rapidly due to a war that was very ill-advised, that has gone on way longer than people think, and in which Iran still has way more control over how it plays out than people think. And to me, it's just a terrible risk-reward setup. I'm happy to sit here and be patient. And I think that's when people say, why are gold down Bitcoin every day? Or why are gold and Bitcoin down every day? They're just telling you where equities are gonna be if they don't start injecting mass quantities of liquidity like really soon. And gun to my head, I don't think they're gonna start doing that yet.”

“Yeah, the 50 surprise. Things like that. That will get things moving. But for the most part, markets prices are centered. Slowly, slowly, then suddenly, and then by the time it's done, it's can't over.”

“So I want to take that framing and ask you about how you view that impacting both the long end of the bond market and equities in the US. We've seen a pretty meaningful sell-off in the long end of the bonds over the last month or so. It's given back some of, we've rallied a little bit since then. Equities have no issue in rally. We're setting all-time highs every week, so it doesn't seem like they're too concerned.”

“But it feels like, you know, circling back to some of the dynamics we talked about at the beginning of the show, corporate profit margins are just up on the earnings are accelerating, really incredible stuff going on there. We have, you know, public sector deficits, which are private sector surpluses as you mentioned, that's a tailwind, like, and then you have the AI data center thing, you know, if it's all being built out like that, like crazy, that's going to be added to the mix as well. It just feels like those factors are so much more powerful than the bond market and especially what the Fed is doing.”

“And I think like having the maturity as a trader investor to say, this isn't making sense. I'm not going to force it or I don't have enough conviction or edge in this scenario to be able to predict what comes next. Given these uncertainty, uncertain circumstances and heavy policy handed influence, I just, that's one thing I think is important, because people always want to know a trade and something to do, but it's so often that we make the most of our money in very short stretches.”

“So we're seeing that at the same time, if you go to slide 35, this is the vol of the VIX, that's fallen as well. So the dynamic is, if you look at single stock volatility relative to the index volatility, what you're seeing is these momentum systematic in retail investors are basically going like balls long single stocks and creating a high implied volatility by buying calls on single stocks. And then the systematic part of it is the quant funds are shorting index volatility. So that's why we see the VIX is so low is that's their hedge. Now, this can unwind and we saw it unwind in the carry trade like last year.”

“So I was going to say, I'm not bearish on the market in general. I just think there's going to be a massive sectoral rotation, just given how... Because credit spreads this low, it's hard to really have a Volmageddon type thing. But you can have a major... I think we saw a lot of the software stuff. Snowflake caused a big squeeze in software. And I could see there be a deleveraging of other frothy sectors and a short squeeze. And sometimes that's all it takes, is something to go well somewhere else.”

“But in terms of the leaders and the tech, that side of things, I'm still skeptical because like the dollar right here, it looks like it's going to bounce again. And I guess fundamentally, if everything was pushing up again, again is weakening again as well right now. Yeah, like that. I think the treasury market stuff, like the move has come off, but not crazy. They barely got yields to budge lower. So to me, the problems are just still there. They're just doing a more interventionist, manipulative, I guess you could say better in that regard, management of the volatility, which is keeping things supported.”

“Samsung is expected to print more than a trillion in free cash flows over the next three years. Samsung is worth roughly a trillion. So they can buy back the entire company over the next three years, in case those assumptions hold true. That's bizarre. Micron is more or less the same story, and Hynix the same. The market is still very convinced that some of these memory names are cyclical. And I'll just add one thing in relation to that. Next year, 2027, to the best of my assumptions of the more than a trillion spent in capex, the projected spend in capex from the hyposcalers, around 75% of that will go to memory chips.”

“So memory chips are currently, and I stress currently, way more valuable than GPUs. NVIDIA is priced as a way more stable company than the memory companies. I think that assumption may be wrong. And the jury is definitely still out on that story. But everyone I talk to with solid understanding of data set of setups, etc., they tell me that memory is more important than GPUs by now. And the more we accelerate the agentic economy over the next handful of years, the more memory we need. Agents need memory. They need memory a lot more than they need logic.”

“As it relates to the semis, my view is if USAI has a problem, semis are going to get dragged down alongside it. And that's probably an opportunity to add to them because I don't necessarily think that's the right thing, but I think that's what would happen.”

“For me, I look and go near-term, I think chips get dragged down with AI on that risk, but ultimately, I think they probably end up higher ultimately.”

“And what about the semiconductor rally and all the strength that we've seen there? Is it too much, too fast? Is it set to continue?”

“So clearly, memory is the input into GPUs, and all these models are super memory hungry. And generally speaking, with longer context, longer conversations, the context grows with memory. That's clearly the reason why memory, as far as storage, you're generating tons and tons of data. That all just demand is not catching up with, supply is not catching up with demand. And it's not surprising that price is shooting up the way it is. But we also know that shortage and high prices are always the model of innovation. So unsurprisingly, we're seeing algorithmic innovation, no less from the recent Chinese models like Kimi and so on that are actually making sort of improvements to memory efficiency.”

“I feel like people look really closely at this because, of course, one of the largest companies in the world right now is NVIDIA. So obviously, demand for the GPUs is very correlated with the performance of NASDAQ and the total stock market. So obviously, if there's any sort of concern for demand for GPUs in the build out, that could have some pretty significant shockwaves throughout the system.”

“You know, there's started to be talk of availability of memory from China coming on to the market and that sort of thing. But it sounds like, yeah, regardless of that, you know, Jauvin's paradox and those ideas still hold true. And regardless of these, you know, marginal change, obviously, it can feel especially volatile and sensitive when you have these, you know, memory equities that have just ran like they have, like any sort of marginal shift. And just with the amount of like leverage positioning, it feels very intense in the short term. But what you're saying is that regardless of that, like if you zoom out a little bit, you know, these are pretty small changes on the margin.”

“Like obviously the big runners have been the DRAM trade and the memory trade. And you're starting to see like Chinese supplies start to come on. You're starting to see substitution effects start to come on. More efficiency from the inference providers. And then now add on top of that is, I don't know if you guys saw, but today there was a new Chinese open model that just came out, Quinn 3 And its capabilities are right up there at the frontier models, like encoding this Chinese open weight model at a fraction of the cost is similar capabilities of Fable 5 So that is like, it's great for the consumer.”

“So it's a thing, I mean, it's the same thing kind of with US yields is that it's a velocity story or volatility story a lot of times more than a level story. So like equities don't really care if yields go up from 2% to 4% if it happens over 19 months or whatever. But if yields are, you know, and so you look at the volatility of bonds, if yields are moving 40 basis points in a week, then stocks start to get scared and start to sell off like in 2022 So I think it's more important to watch the velocity of it than the actual levels because like you said, ultimately, all this stuff that's going on in all these bond markets is like healing.”

“They have options on futures. I'm sure they could come up with perpetual futures if they wanted to. Maybe Cauchy has good retail distribution, but all the guys like Charles Schwab or Fidelity, I think would trade, if perpetual futures were a big thing and the CME offered them the same way the CME offers Bitcoin futures, I think people would trade on the CME or Ice just as, you know, I think they have a defense against that. But maybe that's not entirely what's going on, right? Like, I'm sensing there is a bit of a, is there a kind of like semiconductors are crowding out every other sector?”

“It's estimate revisions. It's where our earnings moving the most. And it is everything in computer hardware, semiconductors, memory, a lot of companies in Taiwan that do the Nvidia supply chain basically.”

“As it relates to the semis, my view is if USAI has a problem, semis are going to get dragged down alongside it. And that's probably an opportunity to add to them because I don't necessarily think that's the right thing, but I think that's what would happen.”

“And what about the semiconductor rally and all the strength that we've seen there? Is it too much, too fast? Is it set to continue?”

“So everything from memory to power semis, et cetera. And that's the chart I want to conclude this week's Macro Mondays with, because we did get the trade data from South Korea on Page 8 for the first 10 days of the month, late last week. And even though we do see some workday changes relative to the first 10 days of June in 2025, we're still talking about a growth of almost 90 percent year-over-year in the South Korean exports on Page 8 I do know that if you workday adjust this, you probably get something that is slightly less dramatic. But look at it versus the VanEx Semiconductor ETF here, which basically tracks the Semiconductor index. I think we have heydays ahead in Semiconductor still.”

“They think with AI kind of commoditizing a lot of the software sectors, what can't you replicate? It's essentially large industrial companies and things like that. So the secular play here is large capex things that you can't reproduce and maybe AI commoditizes a lot of things and you get bigger margins from historical businesses you never thought.”

“You do it with one purchase of a mobile phone, an iPhone or an Android phone, and therefore it's very cost effective. And that's where the money came from to make Apple again now the most valuable company in the world, if over $5 trillion. So we're going to divert a lot of our spending to it. That's where the optimistic part comes from. That's why Larry Page said in late 2024, I would rather Google go bankrupt and lose the AI race. Meaning all the Google products that we love, search, maps, cheats, documents, you know, and the like, we're not going to be using those in the future.”

“So I think Adobe is officially cheap at like eight times forward, free cash flow, maybe less. But so many of their valuations were so high on a free cash flow basis, but particularly on a net income basis because depreciation and stock base comp was so high. So like something like Tyler Technologies, which they sell software to the government, it's unlikely that in the next five years, the government is going to be vibe coding its own software in my view.”

“Like, there's a lot of dynamics that I think is so broken now in the region. So I guess as investors, we should just be prepared that there's just going to be more sovereign supply chain, sovereign link shocks, right, to your portfolio. So like that's going to be the, that's probably like the new risk of defensive assets. It's not going to be hiding out in consumer staples.”

“So I think if you're going to have some ridiculous thing about data centers in space, which is probably is going to happen in like 20 to 50 years, I don't know about five or 10, then like there's a lot of other ways to play it, and it just seems very, very speculative. I don't know. And just broadly, how concerned are you about these mega IPOs that are requiring tons of capital to be spent and basically be sucked out of the market? People have to sell it in NVIDIA to buy SpaceX. That's just a fact. And when Anthropic and OpenAI go public, if they do, which they probably will, people have to sell more in NVIDIA.”

“Like there's no valuation floor. I mean, I'm a fundamental guy in deep of my heart. There's no fundamentals. There's no valuation floor. I mean, the space business loses money. The Starlink business makes a lot of money, but then they're spending so much money on the data center business, which is a new thing. And look, Elon Musk is the best hardware person in the world. I'm not going to bet against him there, but it's just that there's nothing in the numbers to say, oh my God.”

“We've seen most of the hyperscalers go free cashflow negative. They've aggressively issued bonds. They've even turned to non-US markets to issue bonds because they have to kind of scrape all the bottom of the barrel to get liquidity where they can for the build up that they're going for. In terms of like it being a national security issue, I mean, there's already so much capital going toward it. So 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.”

“But a lot of that cost is, can you build a reusable rocket that you can just use 10 times or 100 times with minimal maintenance to make that work? Because the greater the number, 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 the physics behind that in order to see that happening at any sort of scale in the next 10 years. So I'm not investing in SpaceX.”

“If during five of those 10 days, the price is above the IPO price, that unlocks 10% of the lockup immediately. So we could as early as sometime in mid-July, see an unlocking of a lot of the restricted shares in SpaceX. It will be very interesting to see what happens. As I've said before, although there's a huge amount of capital flowing into these markets, these three big IPOs between SpaceX, OpenAI and Anthropic is just a huge amount of money. And then the unlocking of the overhang in those stocks, how is the market going to absorb potentially a whole lot of selling? So far, it's all to the upside. Let's see what happens, but I have my doubts.”

“Okay, add that $80 billion, Google's, and add to that, Anthropic is coming up. We're going to have OpenAI coming up. There's about $200 billion, $250 billion of immediate raise, but here's the thing that I'm actually focusing more on, Larry, is six to 12 months after that, all the insiders and the VCs and the early investors in those companies, it's not $200 billion. It's like $3 trillion of capital that gets unlocked as those restricted shares become unrestricted somewhere between six and 12 months after the IPO. It seems to me that's the point where, how do we absorb all of that equity into the market?”

“Obviously, a lot of people think SpaceX is going to be a huge, huge thing and it's the future. It feels to me like these IPOs are very reminiscent of 2000 or so, when frankly the smartest tech leaders had the wits to say, let me sell my equity to retail bag holders and let them ride out what happens in 2000 So it feels like 1999 to me.”

“Well, the stock market rally finally broke, but I don't think the Hormuz crisis had anything to do with it. Oil hasn't seen any meaningful upside response despite a complete failure of the peace deal negotiations and a major kinetic escalation. As a long-term investor, I think we need to step back and look at the big picture of what 2027 could bring. We've got the three biggest IPOs ever, I mean, by a lot, the biggest one ever was 25 billion Saudi Aramco. Now, we're talking about trillion dollar capitalizations, $80 billion raise on a single IPO, and there's three of them on that scale between SpaceX, OpenAI, and Anthropic all on deck in the next probably six months. So where is the 200 to 250 billion of immediate capital raises?”

“If you think of Facebook 2012, that was an enormous IPO at the time, $100 billion, and it was less than 1 percent of GDP. The SpaceX IPO would be 6 percent of GDP, and always remember, the biggest IPO ever was Saudi Aramco at $25 billion. So if you do the math, if you take the secondary offering from Google last week of shares, $80 billion plus the SpaceX, you get $150 billion, $150 billion. And so net-net, a lot of people have to sell stocks in the market to make room for these two absolute beasts that have come up.”

“If you look at the SpaceX program in terms of the lockup and unlock, it's much more aggressive than previous IPOs. For investors listening to us right now, it's extremely important. If you remember the Facebook IPO in 2012, once again, once the lockup started coming out and the shares, like you just nailed it in that first year, you had a 40-50 percent drawdown in Facebook. And I think what's happening is the VCs were, think about capitalism in America, these companies are coming public.”

“But I've learned my lesson on like looking at Tesla. If you look at the amount of people that got burned, both long and short, on Tesla, it's kind of like...”

“And then within equity space, in terms of how we're positioned, if you look at our VPX ETF, we're basically running a barbell of long energy, long financials, and we're actually starting to buy back into the kind of tech and semi names that's crashed. So I think we had a pretty big long all the way into May. We de-risked a little bit, but that definitely has hurt performance a bit. But it's been offset by the energy and financials piece. So we still kind of have this barbell of you have like value exposure with a little bit of the secular growth, but you're just kind of tweaking that, just so your portfolio overall has kind of a better kind of risk return profile.”

“So unlike the more sort of neutrality signal we were getting from hyper liquid, we're actually getting some momentum building to the downside. Like these, these red dots are often very much a precursor to a change from green candles to red candles. And the fact that it's below its track line, whereas hyper liquid was still above its track line, and it's been in a neutral state for a longer period of time than hyper liquid is a little bit concerning. Now, however, there was a good headline today that came out from Venice. They had a new funding round. I don't remember exactly. They were deemed to have a billion dollar valuation and they generated like 20 or 30 million in new funding investments.”

“I don't think Venice is going anywhere long term. I think what we're seeing really here is more just short term. This is, it ran for a while. It's been one of the better performers for several months now, and it probably just needed to cool off, and it's cooling off a little bit more than hyper liquid was. But still very strong and still in that very, very small category of crypto assets that are going to be solid revenue generating sort of assets that break out of the crypto sphere.”

“And this arrow here, this downward arrow, indicates that it's building steam. Again, it's below its track line. It's got all the fundamental characteristics of a trend reversal in a downtrend. So right now, Nier is risk off for me. Nier is like, I'm not gonna go there. I think it ran a bit on some narrative. And yes, it's got the fundamentals. It's still got the cool stuff that it's doing with the agent side of things and building out that framework. But it doesn't have the adoption to support the narrative. So yes, while it's doing cool stuff, it still needs more real world adoption to fully sustain a rally like this. And that's what we're not seeing yet. So in other words, Nier just remains a speculative asset.”

“I've spoken quite a bit how the XRP Bitcoin price would always get up to like this level here, this big red line that I had denoted. And I remember way back when it first did, you know, in kind of the end of November, I kept shouting out saying, this has proven to be really strong resistance for the XRP Bitcoin ratio for going back several years. And in the end, that held true. That held to be, that ended up being the same and proved out this time around. So yeah, when it gets up in this range, I know it's probably time to rotate out of XRP, and at least back into Bitcoin or back into whatever. But it has not significantly broken out of this range.”

“Let's talk about Canton. It had an interesting breakdown, which I wasn't kind of expecting because it had been generally trending upwards and doing this sort of very, very shallow cup and handle pattern. And I thought maybe it was going to come back up and get back up to this sort of 20 cent level where it peaked last time. But it actually broke down. It didn't get up there. And in fact, it broke down before it even got to this previous high here. And now we've got a full on trend reversal basically on the daily time frame. It went from full on green to full on red with all the boxes.”

“I had a laugh when I saw this because I think it was Reuters, a photograph from Reuters, and I can tell you two things. First of all, it's obviously interesting that this was an actual notepad from Scott Besson's meeting during the weekend before he entered the Japanese Yen market. But I can also guarantee you that Scott Besson didn't write this. The reason why is that Scott Besson has traded a lot of FX. If you're into FX and FX lingo, you would never write Japanese Yen and spell it out. You would never do that. You would only write the stuff in the parenthesis.”

“And I'm thinking as I leave the show here, I'm bottom tick. I feel like I'm on the spot of ticking Bitcoin because I think a lot of the transition, I think a lot of this supply from Bitcoin has basically been because AI has been winning the battle between centralization and decentralization. And now, you know, we've seen all the Treasury companies get taken to the woodshed, the leverage there, sale of changes is tuned. You had all the Bitcoin miners pivot to AI. They sold supply to finance it. They're still selling the supply. But at some point, hashrate drops low enough where you can actually mine again profitably. And you have some weird tax thing where, you know, the Bitcoin, the AI infrastructure guys have to pay more for electricity.”

“There's no positioning to short. Yeah, it's like, yeah, this. And the volumes are low, like, positioning is low. We're going into the worst seasonal month of the year. Like summer doldrums.”

“You had a bunch of the dats kind of, it would be nice to get some clearing event, a bigger clearing event. Maybe we had it with MicroStrategy, but maybe like one or two big dats, like kind of like call on it or something, you know? But can't always get what you want either.”

“I think there's some interesting tailwinds to the whole Bitcoin thing right now, because there's all that you mentioned. And then there's also just this cult of Bitcoin maximalism that, I don't know, became very toxic, in my opinion, that is starting to wash out now. And you also have, you know, sailor dominance, like, no, he's not going to get, he's not going to get carried out, but I think you'll also have less relevance moving forward. And I think that's, you know, I don't like owning an asset with such key man risk, where all I have to, like, where the price action is entirely determined on, like, what one guy is deciding on a given day of what he's prompting ChatGPT with in terms of, like, new structures.”

“I sold most of it, almost all of it last year, 96,000, 23, 24 ounces of gold. We're still sitting here 14, 15 ounces of gold, 65,000. I'm not buying it back with what I see the risks on tech. Because I just, you know, yes, Bitcoin's already sold off. But if we really get a risk off that we need for Warsh that I think we need for Warsh to have the political cover, to cut rates aggressively, weaken the dollar, all these things, and this newly emergent competitive setup from China. Look, if we have a two, three-month stretch where the NASDAQ really gets hammered, I don't want to own Bitcoin on that, and I'll be happy to be wrong if that's the case.”

“And then I want to be loading up Bitcoin to the gunnels, and then I'll take my chances. I just think the price is going to be lower than where it is today.”

“Obviously, you have the store of wealth, the people who want to get a hard asset outside of the dollar system, but at the same time, it's still a highly speculative asset, and you've got all of these other speculative assets right now that people are making money on. You're seeing streamers who used to cover meme coins are covering AI stocks. How much of the slowness in Bitcoin do you attribute to? There's another flashy, shiny thing in the room right now for speculators to go and tell their friends about.”

“But the book clarified it for me, is that there's also this dark zone where your monkey mind is in control and your every first thought that comes into your mind, you're reacting to it as opposed to that system to kind of doing the checks and balances and slowing you down. So a lot of things from that kind of, and then if you look at the DSM-5, which is like the Bible of psychiatric medicine, they kind of go through all this different symptoms of gambling disorder. And again, I can see myself in there when I'm not trading well, chasing losses and doing things that you don't want to do, and you know you shouldn't do it, but you do it anyways.”

“And then, yeah, with Bitcoin, it's interesting because it was kind of this chameleon that kept changing narratives over and over. And it was, you know, it was a store of value. It was a person-to-person cash replacement. It was digital gold. It was a risky asset for a long time. And unfortunately, like none of those things have exactly panned out.”

“I think it's also interesting a little to the side of the semis is crypto and Bitcoin, how it just actually has been inverse on this unwind where it's clear there was some level of fading it. And was it last week where we said, you know, people might want to temper their bearishness on the sailor and micro strategy complex.”

“I mean, it's just finding where the value accrues to. Because like with this new stable coin thing that just launched to write like. I mean, I don't want to be circle in that case. Yeah, the whole pie is going to keep growing. But where does the value flow to? Like, I mean, the case for Bitcoin is kind of easy. We know like they're going to every six or nine months, 12 months, we get a liquidity risk off. They need to add more liquidity.”

“All that matters is suddenly for the next six months, it probably is just going to fade out a little bit. And that's all you need for a pop. You don't even need to have the consideration of whether they're going to be buying anymore for the pop. Obviously, like that's already kind of playing out and is playing out. And like, I think we have like a bit more runway to go. But obviously, like the distinction between can we get back to 100K higher Bitcoin without Sailor? Like probably not anytime soon. But can we get this bounce just from moving their hand off the beach ball?”

“And then of course, it opened this week, right on the line, wicked way down below it again, and is back up above it at the moment. So on a weekly time frame, we're still holding the line, even though we've got multiple wicks below it. We still do have this, I mean, you can call it a bullish divergence a little bit, but it's lost a lot of its strength that it had. Like earlier, it was more like this, and now it's kind of like this. It's like technically, yeah, it's still a bullish divergence a little bit, but we're starting to see some pretty decent continued momentum to the downside that's pushing this RSI lower and lower even still. So my thesis still stands with Bitcoin. I still think we're going to see a lot of chop for a ways still.”

“I mean, it's red candles, red dots, which are showing that there's continued momentum to the downside, which I just spoke about with the RSI. Then of course, the red track line too, with a pretty heavy downward trajectory. So yeah, Bitcoin doesn't look awesome on the daily, on the weekly.”

“So we've been seeing a lot of headlines and news about the dollar strengthening, right? And then I think just recently it had, can't remember historically where it fell, but Japan basically hit a new low, or the Japan Yen hit a new low against the dollar. How is that impacting what you're seeing in terms of how it relates to crypto? Because I think stronger dollar means less risk on, right? But it seems like Bitcoin is not tanking maybe as much as I thought with what a stronger dollar headline might reflect.”

“So, and then in the majors, Bitcoin and ETH, you have Ponzi scheme dats that have just erupted and perverted the market structure. I mean, these guys have bought $15 billion of Bitcoin and ETH this year, and both assets are down massively year to day. It's just financial engineering scamming retail, propping up artificial demand. So, I mean, the liquidity picture under the surface isn't great either. Like, if we agree that the thing keeping equities propped is the vol mechanics, passive flows and manipulation and keeping that systemic and passive bid flowing, like it makes sense that crypto is lagging. So I think as far from Bitcoin perspective, it's just not the right market environment and macro conditions for it to do well.”

“I'm very optimistic about the future in the sense that we have all the evidence or more than ever, we have evidence that we need, in part by unlocking these historical settings that can guide us. So I believe we're doing a lot. We have everything we need at our hand to do it good and do it right.”

“You can't just run the whole thing with just a bunch of effective altruists. Like you needed a risk manager in there to say, hey, man, maybe we should dial back the leverage.”

“Anyway, credits for credit spreads is on the look area. Hyperscalar spreads are breaking it higher. Yeah, there's questions to be answered right now in the market.”

“Now, it's a laudable cause, but nevertheless what it means is a higher volatility and emergence of shadow chairs that are still going to drive conversation. The less you communicate, the more other people will communicate. The other thing he was highlighting is that it will be good idea to return risk to the market. Again, I think it's a very laudable task, but it cannot be done. There are other propositions such as reducing and altering the shape and the footprint of Federal Reserve. Again, a laudable task, but it cannot be done. So, to me, a lot of the sayings that Kevin Warsh is discussing, very few people will disagree and ultimately it might not be a better idea to do, but none of them, as I said, is relevant.”

“I'm just looking at, like, I think the gold near, close to the gold's top was when Kevin Warsh was nominated by Trump. And I could say that's gold pricing in a more hawkish Fed. But if the hawkishness is basically fake, and he's not going to be that, that, that hawkish, maybe that, yeah, maybe gold stops going down.”

“Wow, that does sound like withering gaze is what he just said, that if we just kind of think about inflation and talk about inflation, it'll magically go away. And I think that the marketplace is of the opinion that, no, you have to do more than just talk about it or think about it for it to go away. More obviously is raising rates. And since they didn't raise rates, there's an old adage that I've been using a lot lately, that bond traders can stop panicking when the Fed starts panicking. Well, the Fed didn't panic today, so bond traders panicked. And that's why we got the 30-year yield to use one measure at 5.2%, a 19-year high.”

“We have a Fed meeting coming up. As you said, the first date with the market, Warsh came out and he said, you're not getting any. And everybody interpreted it as quite hawkish. But he's also said that he doesn't want to be giving a lot of guidance. I mean, what do you think the chances are that he kind of whipsaws the market around and goes back the other way just to sort of teach us all a lesson about taking his words too seriously? I mean, do you think that we're set up here with everybody expecting hikes into the end of the year for Warsh to kind of wiggle around a little bit and make the market unwind all of that pricing?”

“But yeah, going back to Warsh, Kevin Warsh, it's gonna be an interesting one to watch.”

“They move out, they sell those homes and based on historical levels, somewhere around 10 percent of them choose to live in senior living. Now, if you just hold that constant, what that means is that demand for that population of 80-year-olds is going to double by 2040 So just to meet the demand for the larger cohort, that inevitable cohort of people, we will need to build something like 125,000 senior housing beds every year for the next 15 years. Now, the peak that's ever been built in this country in a single year at one time was 56,000 units. The current pipeline is about 25,000. So what we love about this business is you have to quintuple the supply chain capacity to deliver these units and sustain that for something like 15 years.”

“In the last 10 years, we've done something like $24 billion of ground up development. A lot of that was in industrial. And so what I mentioned before, when we were preparing ourselves for like an investment opportunity in the development of senior housing that looks like what we did, you know, 10, 15 years ago, you know, through today in industrial, because we see the same kind of long term tailwinds. Now, we've also bought something like a billion dollars and about 2000 units of senior housing in the last six, seven months. So we're both buying existing where we think the fundamentals are going to be really good, but also looking at developing in, you know, really good neighborhoods.”

“I would say if you can, developing things is generally more complicated than buying them. Now, if you can make an attractive spread or a margin for a higher return for taking that development risk relative to buying something existing, then we'll explore that. What we see right now is that you can do both. When we look at the sheer need for more senior housing facilities, it's going to create a really attractive development opportunity. We're mobilizing capital, both financial capital and human capital, because you need expertise to be able to do that, to oversee the construction, to make sure you're building the right design, the right product that people will actually want to live in.”

“The senior housing business is closer to, you know, multifamily here. So people are still signing, excuse me, like one-year leases. You just have more provision of service and you have more employees than you would have in a multifamily building. So in a multifamily building you might have a resident manager, you might have a couple maintenance people, you might have some on-site leasing people, and so maybe you had five people in the property. Here you're going to have more people because you're providing, you know, essentially more care and service, and you're providing three meals a day to the residents. So it doesn't, it's like somewhere between a hotel and a multifamily.”

“So availability of labor is one part of it. And then a big part of it is how much incremental supply is already in the planning stages, and how easy is it to sort of scale up supply. So we look at what is our expected demand based on the growth of the 80-year-old population in that region, which again, the demographics is sort of inevitable. We can predict that. And then we basically are subtracting how much, so we know how many, if we think the 80-year-old population is going to grow by 10,000 people in an area, and we think 10% of them are going to elect for senior housing because that's what they've historically done, we know there's demand for 1,000 units of this space over the next 10 years.”

“Yeah, so these trade, they have historically traded wider than multifamily or industrial. More capital is flowing into them, so that spread has compressed. But what we think is attractive is when we look at our internal forecast for what the long-term rent and cash flow growth is, it's really attractive. So it's not simply just a question of what you're going in cap rate or going in yield, what's your expected growth in cash flow over time. And across all of our sectors, Senior Housing is the one that has the most, the highest projected forward cash flow growth of any asset class. So we're getting both a better going in yield, generally speaking, and better cash flow growth.”

“You're saying you're big in industrial, but you're not big in senior housing right now, but you want to be big. You have plans to become big in that as a class.”

“I think all the criticism, we can get back to why this is a horrible idea, but as a business idea, this is quite a good idea.”

“So having said that, it is obviously worth a lot if you're running a high-frequency trading disk, right? So I guess it depends on your style, given that we're a little bit more forward-looking, a bit more cycle-based. I don't think we could use it for a lot, but if you're an oil trader, I guess it's a must-have.”

“Well, the only thing I would just say as a reminder for people listening to keep in the back of your head is, that this administration has also shown a very willing appetite to play both sides of the manipulation game. And what I mean by that is, right now, you know, right now we're in the thick of peak political incentive period to keep things afloat. The midterms are coming up, they're probably gonna lose the House, the Senate's a toss up, they're about to go on recess, Congress, Senate and House, with a very pretty shitty last few weeks and months of activity and momentum.”

“Yeah, I mean, like I guess one way to think about it is, okay, post midterms, say Democrats, we are going to have impeachment hearings every single day. You have like the AI data center, anti-AI moratorium stuff that is becoming very politically popular for Democrats to support. Like, yeah, if you do have this structure all built up on just like applying band-aids every five seconds, and then suddenly you have that person applying the band-aids, the band-aid machine is busy with impeachment hearings and AI data center moratoriums, like that does create an air pocket. That is, yeah, like it's a good point that can be quite concerning.”

“China just pulled off a miracle with basically containing oil prices. Whether they did that as a favor to Trump or not isn't clear, but they might be persuaded to do it as a favor to Trump. He needs that favor right now in a big way before the elections. So it seems to me like, why wouldn't they just continue draining SPRs and doing everything to manipulate the price of energy temporarily lower? That game won't last forever, but it'll last until the elections.”

“They're already negative free cash flow, already levering up. You can't just continue that infinitely. And things are coming home to roost. And what I find really funny or interesting, I guess, about this most recent rotation, because for the last two months, it's really been a rotation game. The Nasdaq and the indices really are flat since early May. So, this most recent rotation has been, you can just see the hedges have been short the Mag 7, the CapEx spenders, and long the receivers, Korea, Taiwan, memory, et cetera. And that's just gotten squeezed.”

“And the reason I say that is you can't control it if it's out of your, if you didn't create it, you know, if the market's selling off because of this narrative and earnings and blow up of AI and all these things, you can't control that. If you create the volatility via Iran, you notice like he keeps saying tons of things and no one's listening, the market hasn't cared. It's sort of like a problem for him. I thought, I think this is, you know, in a way to kind of drum up that ball again, to then suppress it in a couple of weeks.”

“So I think it's going to get spicy because as we approach this key midterm election date, you know, things are wobbling already and the importance and magnitude and all of these, you know, all the things riding on it increase and kind of reach fever pitch. So I'd expect more, a lot more sort of those socialist interventionist type, you know, AI stake type of policy announcements to come to try and sway people.”

“I just want to add, things are going to get weirder and weirder and weirder until, you know, there's some sort of revolution. I think that's basically where we're getting to. The ball is going to get transmuted somewhere.”

“I want to see it change to the opposite of what we have because I'm so fed up with what we have. That's what leads to something like Obama, Trump, Biden, back to Trump. It just swings one direction or the other. It seems to me, Brent, that obviously this Iran conflict could go either direction. It could turn into some grand success, but if it blows up in President Trump's face, it seems to me that probably Gavin Newsom would be the heir apparent if we were to swing the opposite direction in terms of the electorate wanting the opposite of Trump. What would that mean to your analysis in terms of what's coming if we were to see the next president have a completely opposite political leaning than President Trump has?”

“Like it's kind of like being in the Super Bowl for people who like macro and who like markets. And I actually considered a privilege to be managing capital through this time. But the flip side of that is that it's also tragic. Like real people are going to pay the price for this, right? I think more wars, more conflict, more non-cooperation, to put it politely, is probably in our future.”

“National defense is, I think, probably going to be the biggest investment opportunity any of us have ever seen or one of the biggest opportunities any of us have ever seen, both in the United States and abroad. I think every country is going to have to rearm themselves, and I think money will be spent regardless of whether they can afford it or not on national defense, so I think that's an area.”

“Both of them are in favor of eliminating student debt. Both of them in favor of terrorists. Both of them in favor of either taking stakes in companies or creating wealth funds to take the stake and share the rewards on a more broader basis within society. Both of them want to suppress pharmaceutical prices. Both want to direct capital. In other words, try to facilitate capital flows in a direction that the government believes is appropriate. All of this is so far away from Margaret Thatcher in Royal Reagan. It's not even funny. I mean, it's massively far away. But the left and right have a lot of similar views in economic area. Where they differ is in social area.”

“With this generation, it's the opposite. They're actually becoming even more liberal than what they were when they were younger. The reason it's happening, as I said, is that they don't see their way out. They're willing to take a gamble. Number one, they're more gambling individuals anyway, so younger generation gamble more because that's the only way to get ahead. Or they try to swing for extreme answers, sometimes transferring the loyalties to somebody like Donald Trump, and taking it away and putting an extreme left like, you know, Mom and Daddy or AOC or Bernie Sanders or Elizabeth Warren. So to answer your question, remember we discussed how you can solve it. Violence, redistribution policies, or fast productivity.”

“You find the level of violence is less in the countries of less polarized. So Australia started less polarized, today it's less polarized, you don't have quite the same level. Japan started less polarized, today it's less polarized, you have less. Other countries who already were polarized before and become even more polarized, like US or India, you do have a lot more of that occurred. And I said unless polarization have come down, we can't come back to something that we would regard as normal.”

“One is The Twilight Before the Storm that we published in 2024, and the other one is A Great Rupture we published in 2020 Both of them discuss the role of societies, economists, as well as technology, and how what I call Fujiwara Effect, the merger and reinforcement of two hurricanes, highly disruptive information age, and a deep financialization, how it impacts societies, politics, economics, and markets.”

“Do you think Trump and Besson have a master plan for how they're going to get out of this or how they're going to get through this conflict that's coherent and makes sense now?”

“Texas is going to, instead of a $30 billion surplus, we're going to have a $50 billion surplus. And then they're doing all these things in these states. And it's like, I just don't know how people survive there. It's almost the opposite of what you should do. And I just, what do you guys think of this? Like America, I just don't see how America stays together when the politics are so, like, polarized.”

“They moved from New York to Austin too, which is like another one of my, you know, and I think a lot more funds are doing that. You're not necessarily Austin particularly, but out of New York, you know, we're seeing the political reins in both New York and California kind of slowly squeeze.”

“This is someone who grew up outside New York, where Kathy Hochul put on a data center ban. Now all the data centers are going to come to Texas. Texas is going to, instead of a $30 billion surplus, we're going to have a $50 billion surplus. And then they're doing all these things in these states.”

“I just don't, you know, like, it's kind of sad to say, like, those states that we grew up in, the massive fiscal problems, and they're doing the exact opposite things, like you had, you had, and I thought the pain would get bad enough, where, you know, they would be forced to change, or it's like, all right, we got to cut regulation and just like build, because we need growth to pay for this stuff. And I don't think it's happening. In fact, it's like, it's actually the vice is getting tighter and tighter. And the only people that can survive it are kind of like boomers that have a low, low cost of capital and don't need, you know, to pay for child care. I don't understand how families survive there.”

“And it is interesting because China had this huge property bubble. Their market has gone nowhere for a number of years. They've been willing to suffer through this period of down prices from their biggest asset classes.”