Geopolitics & Multipolar World: Extensive discussion on the Iran conflict accelerating a shift to a multipolar order, with knock-on effects for energy flows, currencies, and global alliances.
Oil & Energy Shock: Potential Strait of Hormuz disruptions could drive diesel/jet fuel shortages and $200+ oil scenarios, risking stagflation and global trade breakdown.
Precious Metals: Gold’s unusual selloff tied to dollar strength and higher yields; long-term bullish but short-term correction risk if the 200-day moving average fails.
Food Inflation: Fertilizer and natural gas bottlenecks imply a second inflation wave via food, with emerging markets most vulnerable (e.g., Egypt’s energy rationing).
Private Credit Stress: AI and software sector headwinds pressure private credit, but systemic contagion to diversified banks is likely limited given balance sheet buffers.
Currencies & Europe: Terms-of-trade shock favors US dollar strength; a clean macro expression discussed was short EuroUSD amid elevated energy costs.
Uranium & Nuclear: Bullish uranium backdrop supported by rapid advanced nuclear progress and regulatory streamlining, though sector remains high beta to market risk.
Digital Finance: Stablecoins likely to feature in post-conflict energy trade architecture, with US dollar-backed and RMB stablecoins competing for settlement rails.
No Single-Name Pitches: The episode focused on macro sectors and themes; no specific public-company tickers were substantively pitched.
Transcript
This is Macrovoices, the free weekly financial podcast targeting professional finance, high- netw worth individuals, family offices, and other sophisticated investors. Macrovoices is all about the brightest minds in the world of finance and macroeconomics, telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Serezna. Macrovoic's episode 525 was produced on March 26th, 2026. I'm Eric Townsent. We've got another MacroVoices double header lined up for you as we continue to add extra interviews to cover the developing situation in Iran. Macrovoic's all-time listener favorite, Lynn Alden, returns as this week's headliner. Lynn and I will discuss the Iran conflict, the return to a multipolar world order, the outlook for persistent inflation, the breakdown in private credit markets, and what we can expect from monetary policy after Kevin Wars takes over as Fed chair. That's assuming, of course, that he's confirmed, and much more. For this week's Iran update, we're bringing back Robbo Banks Michael Every, who will weigh in on the broader macro implications of this geopolitical upset. Then we'll aim to bring one of our oil experts back next week. Then be sure to stay tuned for our postgame segment after the feature interview when Patrick's trade of the week will take a look at food inflation and what it could mean for emerging markets. And then we'll have our usual postgame chart deck with coverage of all the markets as of Wednesday's close. And I'm Patrick Szno with the macro scoreboard week overweek. As of the close of Wednesday, March 26, 2026, the S&P 500 index down 51 basis points, trading at 6591. The price action remains weak and distributive. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The US dollar index down 57 basis points trading at 9964 but continues to hold above its 50-day moving average but still in this multi-month consolidation asking the question will we get another bull breakout the May WTI crude oil contract down 538 basis points trading at 9032 the war premium remains as the uncertainty continues the May Arbab gasoline down 358 basis points points to 296. The April gold contract down 703 basis points, trading at 4552. Another big drop in gold prices, driving a deep reversion of that bull phase. The May copper contract down 54 basis points, trading at 556. The March uranium contract down 41 basis points, trading at 8440. and the US 10-year Treasury yield up 10 basis points trading at 433. Yields continuing to press higher in this post FOMC period. The key news to watch next week is we have the ISM manufacturing and services PMIs, retail sales, and the much anticipated jobs numbers. This week's feature interview guest is Lynn Alden, founder of Lynn Alden Investment Strategy. Eric and Lynn discussed the shift toward a multipolar world, the economic impact of rising energy prices, the risk of secondwave food inflation, and how stresses in emerging markets and private credit could shape the global macro outlook. And stay tuned for a special followup with Michael Every where we break down the broader macro implications of the latest developments in the Middle East conflict. Eric's interview with Lynn Alden is coming up as macrovoices continues right here at macrovoices.com. And now with this week's special guest, here's your host, Eric Townsend. >> Joining me now is Lynn Alden, founder of Lynn Alden Investment Strategy. Lynn, it's great to get you back on the show. Obviously, we've got to start with Iran, which has been the all-consuming news. What's your high level take on what's going on and how does this play into some of the writings that you've done in the past about the transition into a multi-olar world that we're we're moving into. >> First of all, thanks for having me on. Uh, and it's certainly one of those occasions where we all to be experts on the current thing. Usually that tendency is overblown, but not really in this case. we all have to be on top of it because it's kind of the all-consuming news item that affects I mean let alone human lives but of course all the investment topics we would potentially talk about on a program like this and you know one of the the frameworks I've had for a while and I'm of course not the only one that's had it is that the world is exiting a peak period of like a uniolar power very like a hyper power in the world and for obviously after World War II and then especially after the fall of the Soviet the United States basically became the core center of of kind of global economy, global military projection power and all that. Uh and that that's a historically uh unusual situation for one country to have such a large relative proportion of the rest of the world. Even for example during the height of the Roman Empire uh you know the Han dynasty in China and other empires in the world were still pretty significant. And so you still you know it was a world where they didn't obviously in long distances they wouldn't connect that much but in this kind of post telecom world this postindustrial world we can get around the world very quickly both digitally and with with you know military projection capability uh we we've been in this kind of hyper power world and then also of course that's financial power that's the global reserve currency uh which unlike prior global reserve currencies is it's different because it's not you know it's not based on gold which was the actual reserve currency. back for those prior periods. It's it's all tied to the dollar and the treasury. And so we kind of reached unusual levels of global centralization of multiple types of power kind of really peaking in the in the late '9s by many metrics. And ever since then there's been a gradual very gradual shift toward a little bit more of a multi-polar world. We obviously saw the rise of China as a massive economic power. Uh and then around the margins obviously financial power a military power but especially that that economic and manufacturing power. Uh we saw you know to lesser extent the rise of India and you know other economies and so kind of the the share of US influence uh across multiple domains is uh on the decline still of course very high. Ray Dallio and others have kind of mapped this outcomes of the US and China. Uh but he's kind of published research that kind of maps out the different metrics that you might analyze an empire by and by and they they tend to roll over at different paces. So for example, education quality tends to be a leading indicator on the way up and it also tends to fall early. uh whereas something like the global reserve currency because it has network effects uh that tends to be a later rise but also kind of one of the last things to decline over time. But all this is to say is that we're kind of falling back toward a world that historically is more usual which is that you have multiple poles of power that are in competition with each other rather than kind of one central world power. So of course you know the two biggest polls would be the US and China. the Europe's uh decisions have kind of reduced their the size of their poll going forward. I think as far as many analysts can tell and then there's other large polls of power in in India and and to some extent Brazil and others and this kind of battle over the Middle East is I think both a symptom of that which is that empires rarely give up their kind of projection capabilities easily even when it would potentially be the right thing to do from a strategic standpoint would be to kind of rightsize from a position of strength rather than kind of fight to always maintain whatever capability you have. But that's where we are. And so I think this is I mean this is a milestone to watch for sure both in terms of current market impacts, current humanitarian impacts, but then also just the relative projection might of different entities around the world. Lynn, something that surprised a lot of people was that precious metals, which we're used to thinking of as a geopolitical risk hedge. You know, it's usually bombs drop, oil goes up, dollar goes up, and gold goes up. All of a sudden, it's bombs drop, oil goes up, dollar goes up, gold goes down. What happened? What's causing that? How long does it last? >> Based on what I can estimate, I think there are multiple factors. One is we can't ignore of course the price action that occurred in precious metals before all this happened. We had an unusually strong rise in gold, silver and platinum prices uh in the year leading up to this event. And some people have used the word bubble to describe it. And while I think that might be valid on the shorter term like it's a sentiment bubble around those I mean this year the sheer magnitude and speed of those moves uh is concerning I don't really view them as fundamentally overvalued. But certainly when something trades that volatile to the upside, there's a risk that it it just goes volatile to the downside. So as a as a long-term, you know, nearly decade long precious metals bull, they kind of hit the price targets that I had years ago. Uh and so my my position uh in my research for months now was I'm not turning into a bear on precious metals per se. I'm not calling them a bubble, but they no longer have that asymmetry that was available, you know, at 20 something uh silver and at, you know, 2,000 something gold or, you know, before that even lower for the both of those metals. And now they were in a more kind of balanced range, which is I wouldn't be surprised by a big sell-off, nor would I be surprised by a, you know, a continued march higher because they have been pretty resilient. And so, one is just that price action becomes unreliable when you have such a massive move. uh and to you know sentiment that's almost unbeatable compared to where it was. So that just that just opens the door toward more unusual situations because as you point out I mean blank sheet of paper if you ask people what would you think precious metals would do during a war of this magnitude uh you'd think they'd be flat to up at least and they haven't been. The other factor I think and I'm not the first to bring this up is that in times of crisis sometimes entities have to sell what they can not what they want to. And so you know gold is a source of liquidity for many market participants including potentially sovereign participants in this crisis. And the other side of the coin is that usually when we have a crisis occur we usually see Bitcoin not do great. We we usually see do gold do pretty well. The other side of the coin is that Bitcoin is kind of held up oddly well in this environment. There are some that are arguing that it's like showing signs of, you know, risk off finally. I wouldn't go nearly that far because Bitcoin had the opposite price action of gold going into this. So, Bitcoin had a particularly rough several months leading into this. So, it was already largely delevered. Uh, it already sentiment was already very washed out. A lot of the fast money was out and a lot of the coins were held by pretty strong hands. And so we I think we've seen kind of a sentiment shift. And then if you want to add a fundamental component, if people find themselves wanting to move portable scarce money, it has, you know, some certain advantages compared to more eternal scarce money that is maybe harder to move across borders or uh jurisdictions. So I think that there's a fundamental component there potentially. But I personally don't read too much into this kind of multi-week action of gold doing poorly, silver doing poorly, Bitcoin doing well, uh, just because the the price action for both of them was so significant in the months leading up to it. Lynn, let's move on to the effect of this war and higher oil prices on the economy. Obviously, the experts have told us that there's really no limit to how high oil prices could go if the straight of horm stayed closed indefinitely. Well over $200, I I would think the global economy. Question is, okay, how do you put a number on that? If it if let's say, you know, $1,000 oil would clearly cause a massive global crisis, is $150 oil something we can tolerate without the economy collapsing? You know, what what's the number? What's the threshold? Any thoughts? >> Well, yeah, it's a good question. I think uh there's a couple ways to look at it. One, you you know, it's you can inflation adjust it and say, okay, well, what prior oil price levels damaged the economy? And of course, we can't just take those nominal figures because depending on how far back you go, money supply has doubled or more. And just the, you know, the size of the stock market's bigger, the the average income's bigger, the average house price is bigger, just the amount of money going around's bigger. So, uh, just because you get back up to $150 oil, uh, which historically has been awful. That that kind of anything in anything well over 100 has historically been awful for the global economy, I do think that the economy, uh, is is resilient enough to handle those types of similar nominal numbers of the past. I I think where it runs into danger is when you get into these kind of unprecedented levels like something something approaching new inflation adjusted highs which as you mentioned is is you know potentially in that 200 plus barrel range which according to the oil experts that I follow if the straight stays closed uh long enough and or if these shutins and you know the worst case scenario is these severely damaged you know energy production infrastructure if a multiple of those things together gives us you know a another month or more of a nearly closed straight then those you know the analysts I'm following are saying that those 200 plus numbers are quite possible if not probable and that does start I think become crippling for the economy now there's kind of two thresholds to consider the first one is what is painful for the economy and painful for say lower income consumers or even middle- inome consumers I mean, we've already touched that. I mean, this, you know, let's let's focus on the American consumer for a second. We're already in uh what other analysts are calling a K-shaped economy or two-speed economy. And all the data I look at that uh at fully confirms that. So if you're on the right side of AI capex or you're on the right side of fiscal deficit spending, you know, the health care, the social security, the defense uh sector, those areas are receiving the, you know, the majority of the deficits and they're on average doing pretty well. So on average, older, wealthier Americans are generally doing fine and people that work in certain industries are doing fine. But, you know, if you're a new college graduate looking for a white collar job in a world of stalling total payrolls and AI optimization to cut costs in the back end for companies all across the country and of course in other economies as well, it's rough. Same thing is if someone is looking for a home, especially, you know, if they're on the low to medium income side, you know, they're going to finance it, they're not going to buy it in cash. The combination of somewhat high mortgage rates and still high average price levels puts that out of reach for a lot of people and you've we've had insurance prices going up a taden. Things were already rough for a lot of consumers. And so, you know, gasoline even before it gets to all-time highs. Just the fact that it's gone up considerably uh in a matter of weeks already puts pressure uh at a time when the shields are kind of down when you have flat, you know, non-farm payrolls for the better part of a year. you know, even though you don't have high uh initial claims yet, uh even though you don't have any sort of acute signs of issues, you just have kind of a stall speed type of economy outside of those really hot spending areas. Uh so it's already that's already a painful element to the US economy, let alone obviously in developing countries, it's it's it's often even worse. uh in Egypt for example where I actually plan to be in a number of months because I I go there every year. They've already announced that because their natural gas import bill effectively tripled from somewhere in the ballpark of 500 million a month to 1.5 billion a month that they've already, you know, effectively had to have like rolling power issues. Uh, you know, kind of curfews on certain types of businesses uh that, you know, kind of close cafes and other things like that at like 9:00 p.m. at night uh to try to conserve electricity because a lot of that is is derived from natural gas. And that's just one example. I mean, obviously in countries of the world where they can't quite bid as much as the wealthy nations for energy, these pain points are already there, especially when they happen so quickly. But I think that because of, you know, large fiscal deficits as well as kind of high income spending. We've generally seen that that the US economy in particular, but also to some extent the global economy is more resilient than many bears think. Uh, which is why I think that just because you have a $150 oil doesn't mean the economy can't function. It just generally means that changes have to occur when we're back in a high energy environment. Uh, so I think that after a period of friction, the global economy could function on $150 oil because that's not the same thing as inflation adjusted. It's not all-time high oil. Uh, I think that can be sustained. You just have to adjust to it. But yeah, once you get above once you get like well into 200 plus oil, a lot of things start breaking down. >> Oil is an input cost to the price of everything and therefore a very important inflation driver. At what point, let's say we get a really big inflationary pulse out of this war and then the war gets wrapped up in a couple of months. Does that inflation pulse come back out of the system or has it already started a a self-reinforcing process that can't be unwound at that point? >> From data we have available, the most persistent type of inflationary pressures when you have a growth in the money supply because you know they they create more money. There's various mechanisms that get that money broadly out into the public which is why for example 2020 was very different than 2008. We didn't just recapitalize banks. uh you know if you look at broad money supply during 2008 2009 it just kind of stayed on its normal trend whereas you look at the money supply in 2020 and 2021 it spiked because not only did the Fed print money but that you know that funded direct fiscal injections out to the broad public. Uh and so and then it took years for that increased money supply to trickle out into various types of prices which is why we have five plus years of inflation from what was effectively a hyper stimulus for like two years. And but when you have a something that's caused by a supply disruption, that part shouldn't be as persistent. Kind of like how the energy price spike we had in 2022, while very damaging for that, it it gave us less persistent effects on inflation. I would argue, all all those quote unquote transitory types of inflation that policy makers kept saying things would be the transitory things did go away or at least at least diminish in time. It was it was the the persistent increase in the money supply that really kind of solidified uh the higher prices that we see kind of across the board. You know, we we saw massive increases in, you know, home insurance and um health insurance and all sorts of things that have nothing to do with supply chain issues or very little to do with supply chain issues. And so, at the moment, you know, let's call it the next couple months, there's no particular sign that we're going to get a massive increase in money supply in the US or certain other major economies. And so because of that, you know, should this be resolved, uh, you know, starting with some sort of peace talks in the coming days and weeks and then it still takes time unfortunately for all that shut in energy to come back. We have to see what what's going to happen with the insurance markets for these ships. We have to see how quickly, you know, the straight will fully open just because it's partially open. Uh, so even in the best of scenarios, this seems to looks like it's going to be quite a while. But if there's no kind of massive increase in the money supply, we should over time expect this to mostly go back to baseline. Now, it doesn't change the fact that a consumer would have spent more on gasoline during a number of weeks or months that they're never going to get back. Uh it doesn't change the fact that farmers because of, you know, sharp changes in fertilizer prices and things like that, you know, they're not necessarily going to get a a season of profits back. Um, so it's not that those things don't have permanent issues on certain parts of the economy, but I wouldn't expect a broad and permanent increase in prices just because you have a multi-month spike in energy unless we we get some sort of like stimulus to help people pay for that energy. That that's where we start to get that broad money supply growth. Uh, and that of course is all all what I'm saying there is is compared to the fact that we already have inflation. We already have money supply growth occurring. uh we already have price aggregate price levels going up. You know, we're we're still getting permanent inflation, but then I'm taking your question to mean will this energy price spike give us a like a a permanent sharp increase inflation above that baseline? My answer would be that generally speaking only if we get that money supply growth kind of accompanying it that's above the current baseline. >> While we're on the subject of monetary policy, let's talk about Kevin Worsh and I guess he hasn't actually been confirmed yet. that's on hold pending criminal investigation of Jay Powell. What a crazy world that we live in. Do you think there is a question as to whether or not Wars will be confirmed? And is there a question? Uh I think Powell's term is set to expire on May 15th. Does Wars definitely take over at that point? We're only a little more than a month away. >> Yeah. So Powell's term as as chairman expires. He he still has the option to remain on the board, which ironically he might increases the odds that he might stay on it based on recent comments he's made uh because of some of these investigations. I I've been operating with the assumption that the new Fed chair is going to be in place by midMay, but I'm not a I'm not, you know, deep in the weeds in in Washington politics to that could, you know, give you a precise answer on that. But I I I you know, he's certainly a candidate that in isolation should be, you know, is is likely to be confirmed by the Senate. He's not an outlandish c candidate or anything like that. And then this criminal investigation adds a new element to it that I'm not really in a position to to judge. Yeah, I've been operating with the assumption that miday or you know maybe with some delay we would have the new chairman in place. But obviously we live in very unusual times. So I I wouldn't be high conviction on almost anything. But I think my main focus would be that I don't really perceive a giant difference uh as we get the new chairman because you know as listeners know you know that the FOMC at any given time has has 12 voting members in it and you know they rotate over time. Uh and so while the chairman is a significant force on setting Fed policy and kind of controlling the the the microphone the biggest microphone uh in the central bank uh it's by no means a a dictatorship. In addition, I mean, I, you know, I've kind of analyzed his comments around balance sheet reduction. Uh, and while there are certain levers that he and others can pull that potentially, you know, give commercial banks the ability to provide a little bit more liquidity, which would, you know, reduce the need for the Fed to provide a little bit of liquidity. A lot of these things are at the end of the day liquidity neutral and not that big, uh, overall. So I I generally fate his comments on balance sheet reduction other than maybe around the margins and then you know I I do expect all us being equal he would be more doubbish on interest rates than POW would be but you know to a moderate extent and what I don't think changes either way is that anytime you have a acute liquidity stress either in the treasury market or in inter you know interbank overnight lending market the Fed's going to step in when needed either, you know, starting with their standing facilities, but then also including purchases if needed. So I, you know, while leadership changes do affect the Fed, I think a majority of it is kind of locked in. While I do expect the Fed rotation to to happen at least roughly on schedule, it's not really like a a thing that any of my investment decisions are going to massively hinge on, per se. There's one aspect of that that I'm a little curious about which is my thinking on this was pretty much consistent with yours except that I thought that Jay Powell was really not wanting to give President Trump the rate cuts the the policy rate cuts that he wants and it seemed like Worsh was lined up very loyal to the president and likely to champion those cuts. It seems to me like it's impossible for any Fed chair to champion rate cuts with what's happened with the Iran conflict unless there's a complete reversal of the inflation signal that's coming from elevated oil prices. Would you agree with that or do you think that it's still war comes in and starts cutting rates? I would roughly agree with that. So if you asked me a month ago, I would say that all us being equal, war should be slightly less growth oriented on the balance sheet and slightly more dovish on interest rates uh would be my kind of base case. And but now that we have this war and we have higher energy prices and and you know inflationary pressures kind of in multiple dimensions here, while I wouldn't say it's impossible for him to cut, I mean it'd be historically very unusual and he would again he'd have to convince other voting members to to side with such unusual policy. So I wouldn't quite say impossible, especially because we're in kind of this age of like impossible headlines being true oftent times. I do think that the war actually does kind of narrow the choices they have and and kind of narrows the difference between Powell and Wars, which I already don't think was huge to begin with. And I think that to your point further narrows it because it kind of ties the Fed's hands a little bit, at least until they see more employment damage. you know, as long as unemployment levels are still on on the lower side, uh even when they have softening in total payroll numbers and and some of that's, you know, net migration, some of that's demographics, they're not they're really looking at the unemployment rate more so and those numbers are still fine. Jobless claims are still fine. And so if they do have this kind of inflationary pressure from energy, I I think it puts them in somewhat of a holding pattern uh almost regardless of who of who's in charge as long as someone who's semiredible uh is in charge. And I I certainly think he, you know, he's he's a credible uh candidate. Lynn, let's continue on that multi-polar theme and talk about some of the other polls. uh as this war continues, it seems like one of the effects that it's going to have is that it's probably worsening the conflict between the United States and Russia, which is an ally of Iran. What does that mean in terms of the resolution of the Ukraine conflict? And what does it mean with respect to energy and energy policy for Russia's sale of oil both internationally and particularly with China? Well, all else being equal, this has been a positive development for Russia. Their energy prices are higher. Uh the sanction pressure is less on them. And you know, it's also they're also a major fertilizer producer. So, they're potentially going to get benefits in that department as well. And so, you know, as listeners know, I mean, the vast majority of the energy that comes out of the Persian Gulf uh heads east uh toward toward China and the rest of Asia. And but you know because these markets have varying degrees of fungibility to them uh you know the economies that were not getting that particular energy source are especially the the wealthier ones the bigger ones are going to be bidding pretty aggressively for any other sources they can get. Uh and while not all oil is the same there's many spots to get similar types of oil. Natural gas is you know one of the least funible of the energy markets because LG is so limited and you know the transportation costs are are higher compared to the pricing uh which is why we see bigger and more persistent pricing spreads between say like North American gas and say European gas back when that war broke out you know between Russia and Ukraine uh so all has been equal this has been positive for Russia it's I would generally consider it negative for China you know they generally benefit from stability uh they benefit from having uh you know fairly cheap energy uh as an energy importer. But you know I much like the US economy is often more resilient than bears think. Uh it's also true that China's economy is often more resilient than bears uh think. They're very flexible uh in terms of how they kind of um you know are able to keep functioning. uh on average Chinese citizenry, you know, they're kind of this their experience over the past decades has has kind of given them higher economic pain tolerance than Americans because they have a more of that uni party system. Political polarization is is less of an issue over there. That obviously comes with massive downsides of like freedom of speech and stuff, but it's it's just it's a reality to to take into account when we see how these things respond. And so I I do think that China is going to be quite resilient as these other, you know, inputs get scarce. I mean, they're they are one of the powers that is capable of bidding pretty aggressively to get much of what they need. And so what this is a conflict that is is good for very few entities and and bad for most entities around the world on average. Uh it does, you know, I think it's it's significantly bad for Europe. It is bad for China, but like I said, China is quite resilient. and I would argue more resilient than Europe on average economically and Russia has kind of been one of the outlier beneficiaries. Uh now from military experts that I'm I'm somewhat familiar with, I think one of the the negative showings was that some of the military equipment that Iran had from Russia and China has not necessarily operated uh as well as they would have hoped. So if there's a a downside to Russia, that might be that. But that's I mean that's outside of the scope that I'm able to comment on in any sort of like I like I certainly don't have an edge on that topic. >> You mentioned fertilizer in passing there. Let's come back to that because one of the things that several experts have predicted is maybe the oil price inflation shock that we're feeling right now is the first wave. But the bigger and potentially more crippling second wave comes from food inflation. And a lot of people don't understand that the straight of Hormuz is not just an oil passing uh lane. A lot of the fertilizer in the world goes through the straight of Hormuz. If that stays closed, we get to a situation where farmers can't grow their crops. Food becomes more expensive. And you know that doesn't go away the day that the bombs stop dropping. It continues for a full crop cycle. Would you agree with that outlook first of all? And if so, what are the implications of that food price inflation? How does it affect different economies? >> So I agree of course a lot of raw inputs to to make fertilizer come from the hydrocarbon industry uh and then even other things I mean even like like helium uh and other other components that are used for chipm and stuff. There's a whole assortment of things that are now at risk of price spikes uh and or outright shortages rather than just oil, gas and and you know other liquids. And so while price of the pump is kind of the first sign we see and you know potential shortages of of of LG shipments coming in as expected in in certain economies that that's kind of all hits first. But I do agree that that food inflation is a significant risk should this be prolonged. Uh my understanding at the current time is you know as we see already fertilizer prices go up. Farmers are kind of squeezed because they haven't really seen the sharp of a move up in in their cash crops yet. So they have higher uh expenses but not necessarily much higher revenue. But that obviously that situation only lasts so long and until you either until the situation resolves itself and those expenses come back down or they you know the prices for for you know their their crop starts to increase. Uh and food inflation is one of the obviously one of the the most damaging types of inflation you can get. You know, in a developing country, the two things policymakers have to try to not mess up are food inflation and energy inflation or shortages. Uh I mean, that's that's how you get revolutions. You know, it's, you know, when people just can't put food on the table or they, you know, they can't can't get to work or they just can't function or they can't keep their lights on, that's when they go out in the streets. And in a developed country, food inflation, there's less of an acute risk of of shortages and people literally unable to eat just because the the overall environment is wealthier. But it does squeeze people especially on the lower half of the income spectrum. So you do get more anger, more, you know, we're already in the US nearly record low consumer sentiment. Uh, you know, we're off like the absolute lows we were on, but it's still very low. and a prolonged, you know, gas gasoline spike uh combined with over time potentially just higher food prices uh is damaging. And so I I do think that's a significant risk and it's it's going to if it's prolonged, it's going to show up in in energy, food, as well as just things that people are not looking for like, you know, just supply chain for making things often requires gases or other feed stocks uh that come out of the Persian Gulf. What are the implications for emerging market countries that don't have access to a lot of alternatives? It seems to me that there there are some countries I know you you spend some time every year in Egypt. There are places around the world where the entire economy depends on certain kinds of imports and if they get cut off there's really no backup plan in a lot of cases. uh what are the potential risks? And I I hate to take a humanitarian crisis and turn it into a trading opportunity, but where are the trades there in the sense of uh emerging markets? Should we be worried about emerging market economies taking this harder than the rest of the world? Is are they a short? What's the outlook? >> I would argue that a decent chunk of it has been priced in, but that of course depends how bearish an investor is on this outlook. the longer and more severe they expect this to go on, the more that shorts become reasonable for the the more vulnerable spots of the world from a purely financial perspective. Uh, you know, I I got questions from family in Egypt asking why did the Egyptian pound suddenly jump from, you know, 47 to the dollar to 52 to the dollar, you know, in kind of the the week leading up to the war and then especially after the war. And it's in large part I think because FX traders uh are looking at this saying Egypt is is more vulnerable than you know the US and other safe haven currencies. Uh like I mentioned before uh you know they I mean they long time ago they were an energy exporter but now they are an importer. They're not a wealthy nation on a per capita basis and you know they're they're out there bidding uh with everyone else. Like when we saw for example the uh natural gas price spikes in Europe back in 2022 uh and it really they started in 2021 you know Europe suffered but we also saw you know developing countries like Pakistan would often suffer even more because they would get outbid by you know comparatively wealthier European buyers that can scramble to get the energy uh that they need more easily than a than a poorer country. And so I don't treat emerging markets as as just one big group. China is still classified as emerging market even though it has many characteristics that wouldn't put it in that category anymore. There are also emerging markets that of course are are energy sufficient or exporters uh or fertilizer exporters. But for those that are more tech- based or more tourism based where they you know they have to import their energy, people fly in on on very energy consuming jets uh and things like that. their economies are at risk the longer this goes on. And that can impact their currencies, that can impact, like I said in Egypt, they're already planning for that rationing stage, not just, you know, higher prices at the pump and and pain there. It's just outright just portions of the city shutting down hours earlier. So that that impacts everyone and you'll you'll see that in in multiple countries the longer this goes on. Uh, and you asked before about the topic of kind of permanent inflation, like if spikes for a number of months and then goes back down. The the countries that at risk of kind of permanent inflation are these weaker ones because when you have an already vulnerable country have that kind of uh energy price spike and it, you know, it's got its debt denominated in a currency it can't print and other issues like that, they're more likely to have a a big kind of money supply spike after this happens. So, they're more likely to actually lock in a lot of that inflation because they're more likely to get a a persistent and and and like a higher plateau of money supply resulting from this. Uh, not necessarily after these weeks, but after some months. Lynn, I want to change the topic now to something that uh we haven't really covered a lot on macro voices. I've been looking forward to asking you about, which is the private credit crisis that is also breaking out. It's not in the headlines as much because of the war, but it's kind of a big deal as I understand it. Basically, there's a whole lot of private credit was loaned to software companies. Then claude.code came along and kind of made it very easy to uh to write software almost uh automatically and it creates a threat. So this is the first time we've really seen AI pose a threat to jobs and to businesses but not quite in the way a lot of people expected it. Is that what's driving this private credit dislocation or is it something else? And what do you make of the situation? >> Uh so I think that's part of it. Uh that is a topic I've been focused heavily on since last year. Uh especially my research service. I've generally been in the camp that is not too alarmist on private credit at least in terms of its contagion effects. So I I think it's without question that there's obviously a lot of issues in private credit uh for all the reasons you said. I mean I I think even before the AI and software issue uh just if you if you just look at at the total credit creation that was happening in that sector it was very rapid uh and whenever you have a you know a very quickly moving uh a quickly growing part of the financial economy the odds are that's where that's where the next issue is going to be uh just because that's where that's where the most exposure is. That's where generally speaking you're going to get looser lending standards just because there's there's so much money slloshing around. Uh it's not it's not a tight area. Banks on average have been pretty tight, but non-deposit financial institutions aka private credit uh and and other types of equity or or credit based lenders, they've been, you know, they have looser regulations and are able to take more risks. And so I do think that uh for private credit investors, it's likely going to be a rough while. I think that's true for private equity as well. Basically, you have a lot of illquid uh investments on the private equity side. Uh then you have um just the risk of bad loans uh in the private credit side. But one thing I kind of noticed is we already see search activity like Google trends and stuff for private credit is like roughly as as high as subprime mortgage crisis was during the peak of 2008. So it's already getting a lot of attention. And of course what investors are really asking outside of investors that are directly invested in private credit funds. What broadly speaking investors are asking is what what are the contagion risks uh from this? You know, should we have multiundred billion dollar losses uh in private credit? What does that do to the banking system and what does that do to the broader economy? That's so after all that kind of bearish talk, the part that I'm I'm not quite as bearish on is the ability for losses in private credit to severely hurt the aggregate US banking system. You know, when we put some numbers into perspective, banks have collectively lent something like 1.9 trillion to non-deposit financial institutions of which a subset uh is private credit. And that sounds like a giant number and it is uh because we all macro stuff's in the trillions these days. Uh but that's in relation to about 25 trillion of total bank assets. uh which gives you 7 to 8% of total bank assets are held in the form of loans to non-deposit financial institutions. And then from there, a a typical private credit fund would have to have rather massive losses for its investors before it would it would come back and hit the bank that lent some money to it. So it's not as though as soon as private credit has losses, it's the bank having losses. This is kind of the mechanism where banks have exposure to the space but they have this risk reduced exposure to the space compared to the investors that are on the front line uh investing in those private funds. Uh and so let's say you know you you let's say you have multiundred billion losses you know you'd have a much smaller percentage of that hit the banking system and they they've got 25 trillion assets and then even their their capital buffer while you know a a small proportion of that is large enough to uh absorb just about any kind of reasonable default scenario for private credit. Uh now there's always a case that you have in individual banks that are like oddly exposed to a given sector. So you can see individual bank failures, but across the board of the bigger banks, they seem to have their exposure uh protected. Um so I I'm in the camp that while private credit is a is a problem, especially for investors in that space, uh I am less worried about contagion risks. Now, of course, when you have multiple crises together, the issue is that one can feed into another. Uh, so for example, I was on I was on Fox Business with with Charles Payne and he he kind of he put a list of crises on the board and said, "Okay, which ones are the worst ones?" And I said, "Well, the one I'm most concerned by far about is what's happening, you know, in the Straight of Hormuz." Because, you know, energy shortages, raw component shortages, if they persist, are like one of the worst risks in the world. And I I you know I say compared to that I'm not worried about private credit contagion into the banking system nearly as much. You know with a caveat that I mean one of the catalysts that can damage private credit is interest rates going up because of these these stagflationary issues. So these these pockets are not in isolation. Kind of like how high energy prices in a way led to the subprime mortgage crisis. Now, it wouldn't, you know, the the high energy prices wouldn't have been nearly as bad, like that recession wouldn't have been like so severe if the banking system was not so highly levered back then. But basically, that was kind of the that more inflationary uh environment, the higher interest rates that followed, that's what kind of popped that particular financial bubble. uh and so there are risks of course that high energy prices will pop any any number of other bubbles but I don't view the banking system as being in the US uh nearly as vulnerable uh at the current time as it was back in 2007208. Well, Lynn, I can't thank you enough for a terrific interview, but I've got one last question I cannot resist asking because I think the best advice I've ever heard on macrovoices came from you when you said, "Do not write a book unless you can't help yourself." Now, in fairness, that was advice on business books. Tell me about the Stogard incident. What happened? You couldn't have couldn't help yourself. >> Yeah, couldn't help myself. Uh, that's my new sci-fi book that's out. We all have to have hobbies and although I you know I analyze markets and and financial systems for a living. I mean my initial background was engineering and you know like many people I'm a big fan of fiction and so you know I I've had the story in my head for a while and I decided to write a kind of a sci-fi thriller the Stogard Incident. Uh you know in a in a world of bad news I figured you know uh it's a good time for it to come out so people can buy it on Amazon or elsewhere. And I mean it's a dark story but you know it kind of projects some of the technological trends you know explores some more far-fetched areas uh because that's what sci-fi is good for. But yeah people can check it out if they want to. And I think in general I would say that you know in like I mean certainly don't write a book for money. Um like I said is it's it's like you only do it if you can't help yourself. And that was certainly my case here. But from a perspective of reading books I think that especially in times like these we're of course glued to the news headlines. Many of us are, you know, our jobs make us have to be and then even other people just trying to figure out how to protect themselves. But over time, of course, on average, we are more kind of glued to the current thing and headlines and social media. And you know, reading is one of those things that's kind of uh slowly on the decline. And I I do think that there's still much to be gained from reading fiction of multiple genres in addition to the the non-fiction reading that people do. So, you know, while I've I've benefited a lot from reading, you know, non-fiction books, business books, and history books and technology books and all that, I've certainly also benefited over the years from from reading fiction. And I think it's uh it's important. >> Well, I'm hearing fantastic things about the book. So, congratulations on that. Let's get back to our usual format closing question, which is tell us about the services on offer at Lyn Alden Investment Strategy, what you do there, and how people can follow your work. >> Uh, sure. So, that's at lynalden.com. uh I provide public articles and newsletters so people can sign up to the free newsletter where I I provide uh you know research every every six to eight weeks uh on the broad macro picture. Uh and then I have a lowcost research service for um individual investors as well as institutions uh that comes out every two weeks uh and and provides a little bit more granular detail on what's happening both macro as well as kind of specific investment ideas. Uh, and of course people can also check out my non-fiction book, Broken Money, which is about the intersection of of money and technology. Thank you, >> Patrick Sznda. And I will be back as macrovoices continues right here at macrovoices.com. >> Eric, it was great to have Lynn back on the show. Michael Ever is next on deck for a special second feature interview on the developing Iran conflict and what it means for the oil markets. Then Eric and I will be back for our usual postgame chart deck and trade of the week. Since this extra coverage format seems to be a hit with our listeners, we'll do our best to continue it for as long as the situation in the Middle East warrants it. Now, let's go right to Eric's interview with Michael Every. Joining me now is Robbo Bank's global strategist for economics and markets, Michael Every. Michael, it's great to get you back on the show. uh you've of course as our listeners know had an exceptional track record terms of translating President Trump's uh what he says to what he really means. Boy, what a situation we have in Iran. Tell us your perspective high level on the conflict, how we got here, what it's going to mean for markets. >> Sure. And for once, all of us, regardless of how well we think we read the room, are in a room filled with the fog of war. So complete uh disclosure, there's no one you could talk to right now who can give you, you know, a complete answer on anything. We're all fumbling our way through it. First point very quickly, obviously this war is just as polarizing as everything else we see around us. The tail risks in terms of how badly it could go are obvious to the layman, so you don't need me to to underline them. How this plays out is also still very much clouded in fog. But there are optimistic scenarios which may surprise people. There are very pessimistic scenarios of which there are more of them and some of them are very very ugly. And importantly, not only do we have that fog of war, people are still pumping it into the room. You cannot take seriously a vast amount of what on your phone, your television set or your Bloomberg screen. Just because headline X comes through in the Middle East does not mean that is what's happening or that's what that particular individual or country thinks or is doing. And so that makes it even more complicated. >> Let's talk about Monday morning's news flow as it occurred. Uh I'll tell you at least how I received it. And I was very skeptical because it seemed just too impossible to believe. But first, President Trump announced great news. We've got a deal on the table and it looks like we're going to work things out with Iran. And so the 48 hour ultimatum that he issued, he said, was extended by 5 days. And that sounded like great news. The market, I think oil was down $20 in the matter of minutes. And then Iran, and it's not clear who in Iran exactly, refuted it and said, "No way. We're not having any negotiations with the United States. It didn't happen. It's all a lie. We haven't agreed to anything. It's not true." And everybody thought, "Well, maybe that's just some fake news out of Iran cuz surely that can't be it." Then Israel announced or at least someone in Israel claiming to represent the official position said, "Look, we are not aware of any reason to change our stance of continuing to fight the war. We're uh we're pressing ahead. We're not aware of any deals." It's kind of amazing that if the US and Israel are allied in this effort that they would say opposite things within minutes of each other and it doesn't instill a lot of confidence. Now, is that really what happened or am I getting fake news or or what's going on here? again um with the greatest respect you are underlining exactly why your traditional or one's traditional methodology for looking at news during a crisis like this in a place like the Middle East doesn't help you very much and the horistic on that besides actually knowing the region um and saying have you ever gone to a Middle Eastern bazaar and said how much is that item over there worth $2 and to be told $1,000 and then spend the next couple of hours haggling up and down screaming at each other before you eventually pay is that if you actually look at the recent run of events here going back to 2025, you know, when you had Operation Midnight Hammer, the US and Israel have repeatedly managed to fool the world by appearing to not be on the same page and that Trump's angry, BB's angry with Trump, etc., etc., and then boom, they coordinate and strike. So every single time the world seems to fall for this shtick that there's a difference between them and then something happens where you find out actually they were working in complete coordination because they knew that everyone would look at the headlines. The algos would trade the headlines. Therefore everyone else would have to go along with the algos and effectively the narrative becomes the reality until the reality is changed by a sharp application of physical force. Now that doesn't mean it isn't true this time. you know from a poparian sense you never know that anything's true until you just prove it right but don't necessarily believe as I said that what you are being told from all sides whether it's Israel whether it's the US or whether it's Iran is actually the case >> what is your understanding and analysis of the current state of transit through the the straight of Hormuz it sounds like Iran has basically announced well it's wide open now except it's It's a toll road and it cost 2 million bucks per ship in order to go through. Is that really the the situation or is that more propaganda? >> Again, you you rais an excellent point. Iran said that just the other day, but as far as I'm aware, they said the same thing at least a week ago. And yet, if you look at vessel transit numbers, I think the latest data I saw yesterday were that six ships had managed to get through, whereas normally it was like 138 of a given day. You know, my maths isn't the best, but six is a lot less than 138 given that any ship nominally is allowed to go through now for a fee, which is not cheap, but works out to a buck or two on oil effectively, you know, depending on the size of the vessel. So again, it's very easy to say these things. It's very easy to see them on a screen. It doesn't actually mean that's what the reality on the ground or at sea in that particular area still is. So until you start seeing vessel numbers start to get get up to at least high double digit which would still be you know a third or half of what they previously are then regardless of the rhetoric or the statement it simply isn't happening. Okay, if it isn't happening, let's talk about the consequences. How long can it be not happening before this turns into a really big global crisis where you've got entire nations that have to shut down because they don't have any fuel and you know thing things really grind to a halt? Is that something that's days away, weeks away, months away, years away? Uh what would it mean if there is no improvement and it's just six ships a day that can go through the straight of hormones? let's say for the next two months. What does that mean for the economy? >> So the first thing is it depends on the economy you're talking about. There's a big difference between them. The second thing is it depends on the kind of fuel that they're relying on because there's a big difference within the oil barrels themselves and what they're turned into. And the last point is it becomes exponential rather than linear. So to cut a long story short, if you were talking about say two months, this is purely hypothetical, not any kind of forecast, you are going to see crippling shortages of diesel, of bunker fuel, of jet fuel. And that's going to start obviously in Asia where it's already being reported. I'm seeing signs of that around me physically in Asia. Um even though that's panic buying more than natural shortages right now. Then it's going to flow back up to Europe and eventually it would hit most people. um you know even in the US but to a a much lesser degree and and more slowly and the impact of that would not just be in terms of higher prices for things because you don't have to be much of an economist to understand that if energy goes up everything goes up but it's going to be the shock of guess what there isn't any available regardless of the price so you don't record an increase in inflation there just isn't any diesel now what does that mean for the economy it's an interesting one for the statisticians because the CPI doesn't change but no one can move anything. No one can do anything. No one can be nothing can be delivered and so things absolutely grind to a hole which ironically in some instances can be deflationary because people are going to be desperate for cash and what might they have to try and sell off to whoever they can wherever they can at fire sale prices. And there's one very very nuts andbolts example of that. I've already seen a story last week uh in Thailand where a huge truck laden with strawberries coming from the north down towards uh Bangkok couldn't get any diesel from any of the uh service stations along the motorway. Had to therefore just give up, pull up on the side of the road and just sell the strawberries at whatever price it could to whoever still had fuel who was passing. That's a very small example of what you could expect to see going on. And the secondary and third order effects are incredible. Just imagine there's no bunker fuel. If there's no bunker fuel, ships don't go from A to B. If ships don't go to A to B, nothing goes from A to B, at which point global trade breaks down. >> We've already seen hundreds of filling stations in uh Australia running out of fuel and you it's already in some localized parts of the world already starting to uh to hit. One of the scenarios that I've thought about is given President Trump's America first policies, is there a scenario where President Trump says, "Okay, the way we're going to handle this is we're going to outlaw the export of finished products from the United States. We're going to outlaw the export of crude oil from the United States." Uh, he could presumably try to do that with just an executive order. If he did those things for the sake of trying to keep US prices down even as the rest of the world pays higher prices would create a lot of resentment around the world but it seems like it would be consistent with some of his policies. Do you think that's a a plausible scenario? >> I think it would be politically and even geopolitically. In fact, I think it's is bang in line with the overall Trumpian direction were it not for the fact that of course the US while it's a net energy exporter is still a net importer of certain kinds of fuel which it absolutely relies on for example the the fuel that it gets from Canada and increasingly from Venezuela now which has to be refined uh you know in a limited number of places and I don't think the refineries are inside the US to get it turned into the distillates and and the diesel and the jet fuel and the bunker fuel that's needed. for example to summarize the US isn't energy independent on a net basis even if it is a net exporter but were you to string together a scenario where you say the US plus a small cery of countries that could supply it potentially with the right amount of fuel that it needs for its domestic base and the US can somehow compensate them with a like forlike product swap andor other carrots and sticks were that to happen in theory Yes, I think in in reality there would be a lot of push back and it would certainly dislocate markets further and we have enormous dislocation now. I'm sure that people would already have mentioned to you uh in line with these conversations that you can look at your screen and say okay Brent is $100 give or take. WTI is what let's say 95 you know there's a spread over that and that can get wider on on these kind of rumors but in in Asia oil where it's available can go for 150 or 160 and if you're talking about jet fuel in Singapore that's been going for as high as 230 I think it's 200 today so we already have a broken down market where it's not just the standard plus a spread by different product type across geographies it's now completely segmented so yeah if Trump were to do that and to make it work that would completely break the one world market that we have for energy like that. And I don't think you should rule it out, but I wouldn't rule it in as a base case just because it would be so incredibly disruptive and I'm not quite sure exactly what constellation of countries he'd have to get with him and whether he could persuade them to come along with him in doing it. >> Let's talk about the unwind of this and how much lag effect there is. Suppose that this situation persists for a few more weeks. we get to that breakdown situation that you're talking about where things really start to grind to a halt and there's a tremendous amount of international pressure on the United States from other countries saying look you got to find a way to to find the offramp wind this thing down because this conflict that the US and Israel are having with Iran is causing huge amounts of dislocation in Australia and Asia and other places and let's suppose the US says Okay, we're going to have to do something to appease these people so that we don't make permanent enemies. Okay, I don't think you just throw a switch and everything's back to normal the next morning. How long does it take from a policy change until the system gets back to normal and recovers? >> Okay, let me unpack that into two parts and start with the second part. The second part is first of all, nothing can happen until the war is over. So regardless of what the US and Israel are saying, the war isn't necessarily over just because they go home. First of all, the US can go home. But as I've underlined repeatedly of late, if it were to just go home with its tail between its legs, that's a 1956 Suez style crisis for the US because it won't be fighting anywhere else again on the same scale as this if it can't manage to achieve victory here. So that's a huge setback for the US in every dimension of Trumpanomics and the reverse paristrika that I was discussing with you a few weeks ago. Basically everything starts to unravel were that to happen. So that's pretty existential for the US. Israel can't go home and it would be well aware that if it just gave up and said fine, we're done. You know, Iran would be even angrier and more determined to get a get a bomb either, you know, the slow way or to just get one smuggled in from North Korea, etc. At which point, there you go. That changes the equation in the region immediately. So there's no incentive for them to stop. And Iran, of course, has an incentive to keep escalating to make those two sides try and go home. And at the same time, even if it got that done, would then probably start to bully the GCC even more, the Gulf Cooperation Council to say, okay, you sided with the US. Now it's come time to come and, you know, kiss the ring here and understand that tan runs the Middle East. At which point it's a geopolitical catastrophe for the entire West. So, it's not necessarily something that any one person can just do because they want to. But even if we click our fingers and say it can be done, boom, there you go. It's all done. It would take months to get energy flows back to where they were. And that's depending on the supply side damage. We don't know how much damage has been done to LNG. So far, we're estimating 17% of Qatar's output, but for between 3 or 5 years, could be worse. We won't know till the war is over. Um, and equally oil wells that have been shut in. We don't know how much supply comes back online. We really don't know. And things could get worse. If the Houthis start firing in the Red Sea again, then we'll have an even bigger drop off in oil flows because Saudi Arabia can't send them via Yanbu. So everything can get much worse and it will take months to come back online. But just to very quickly address the first part, you said if the US needs to try and smooth things over with people. Yep. Okay. That's a very difficult question. I'm not sure what you do do, but if you're in the US position, do you even try and do that? Or do you say, "Okay, you desperately need me to sort this out. What are you going to do for me?" And I would be gobsmacked if the US in that position, whoever's president doesn't turn around and try and use that as leverage, were we in that position or were they in that position than to turn around and say, "How do I make nice?" Well, I was saving the other half of the question for next, which is one of the scenarios that President Trump has directly and not just alluded to, but laid out very specifically in one of his truth social posts is he said, "Maybe we should just go and make a final strike, obliterate the rest of the Iranian regime, and walk away and leave policing the uh straight of Hormuz to the countries that rely on it because we don't need it. I I disagree with the president that we don't need it, but that seems to be his perspective. If he were to do that, basically saying, "Okay, those countries that didn't send their navies to help, we're going to punish you by teaching you a lesson by by walking away and leaving you to worry about this. We're done. See you later." How much of a mess does that make? And what knock-on effects might not have been included in the truth social post that we should be concerned with? >> A very big mess. and more knock-on effects than we have time to discuss here. It would be absolutely, you know, it would overturn the tables, shall we say, were that to happen. But e equally and just joining that question there and the previous point I was making before it, Trump has also stated openly and again being mocked in in some media, but you have to differentiate signal from noise that maybe the US should run Hormuz or co-ontrol Hormuz with Iran. And again on one level you can say this is just delusional on the other level is there something in this that we don't know about and again we don't know what's going on we have a certain narrative we have certain stories which are being fed to us and we have certain statements which are outright lies from different parties at different times which suit their purpose what would that do to the world if the US were to effectively take control of hummus and there are different ways that could play out with different endgames but uh that's something really to consider too because whatever happens now I think the the critical Point is the global political architecture or the geopolitical architecture, the geoeconomic and the geoinancial architecture rotating around power alliances, energy which is at the root of everything uh finance and you know currencies that commodities are traded in on the back of energy. All of them are now in the mix and anybody thinking that they know 100% how it plays out is wrong. And anybody thinking that we just go back to normal after this has all happened. Even in a benign scenario that everyone says, "Okay, fine. Let's put that behind us and never talk about it again." They're also wrong. Everything will change on the other side of this. >> Now, President Trump has not exactly been super cordial with the European Union in recent months. It occurred to me is there a scenario where Iran rings up Ursula Vanderland and Xihinping and I don't know Australian leaders uh and so forth everyone else and says look our gripe is with the US and Israel. If you Western Europe and China and Australia, by the way, we've got you uh by the shorthairs here because you don't really have another choice given, you know, this would be a conversation that would be held after these countries are running out of fuel and really in crisis. if you will publicly denounce Israel and the United States and lobby the uh the UN to issue sanctions against Israel and the United States. If you do that, we're going to open everything up and we're going to give Europe and we're going to give China all the oil that they want. We're going to let that flow to you, but we're going to continue to impose these sanctions against the United States and Israel who are our actual enemies. Now before this conflict they would be laughed out of the room if they tried to approach Europe with a proposal like that. Is there a scenario where they don't get left out of the room because the other parties just don't have another choice? >> No. But a one part of that is hypothetical and b I don't think they'd have been laughed out of the room beforehand. So, I think you I think I whether we're seeing it or not in headlines, and again, I have to reiterate, I'm not trying to be a conspiracy theorist or say everyone's got to go and red pill themselves, but don't think just because you're reading Bloomberg or the Wall Street Journal or the New York Times or, you know, whatever your go-to media is, don't think you're getting the inside scoop on what's going on in a region as double dealing and as important as the Middle East at a time of war when you have 20% of global energy supply flowing through it and everything and everyone turns on that particular pivot point or that particular fulcrum um and think that therefore yeah you're being told exactly what's going on by the journalists right you're getting fragments of it but to be blunt that conversation and that thought process is absolutely playing out and if you think the US isn't cognizant of it and isn't thinking about how they can use it to its advantage rather than disadvantage then again I think you know one's one's not seeing the reality of the real politique >> well it seems to me that there's a very real risk here of Europe pivoting into a collaboration with China and Iran and uh and really becoming strongly at odds with the United States. >> Well, there's a couple of uh flies in that ointment. One of them is called Russia, which of course is very much in that camp and is currently helping Iran fight the US and Israel. So, you know, maybe that's an Orwellian double think that Europe can cope with at some point, but right now I think that would be very problematic. And the other one is that of course as we discussed in previous conversations like it or not and obviously they don't like it Europe is deeply imshed with so many American systems from the Euro dollar to you know the technology system to NATO for now because obviously that would mean the end of NATO to American LNG because you know right now Europe is still going to be needing American energy. So it's very easy in principle to say okay flip a switch and shift to that camp. But there's an enormous transition cost in doing so and I think the real picture is much much more complex. >> I'm going to hit you with a completely unfair and unanswerable final question in your best guess. Michael, this is over in a week, a month or a year. >> Couple of weeks. Let me be blunt. I was just saying to someone else this morning that my nature is, for those of you who think you understand me and think I'm very gloomy, I'm actually a deep-seated optimist, but I'm an optimist wrapped in a pessimist. And I always find that's the most healthy way to approach the world to, you know, take take the long-term view that actually life finds a way, but to recognize that in the meantime, in the meantime, things can get pretty ugly and you shouldn't just assume that everyone is your friend. I still think there is enough of an outline of things that could be happening through this fog of war that there is a potential way to emerge out of this which is painful now. Absolutely. Which is disruptive for months ahead in terms of you know the the the return to normality but which actually has a relatively good landing space uh on the other side of it. But I am fully cognizant that that changes on an hour to hour basis and that the tail risks here which everyone can see. You don't have to be any kind of expert. Everyone can see that the tail risks are extremely extremely ugly. >> And do you have a view in those two weeks as to what the outcome looks like after two weeks? >> I think it will surprise people. That's all I can say. But given the existential stakes here for okay, the Iranian regime and for Israel uh and also for the US in terms of what it's trying to do under Trump. Uh, I think there's a lot more escalation that can come and I expect more escalation. I've been arguing that since day one, but that escalation I think can end up with a scenario which as I said looks better than some people might expect. But it depends on which side of that geopolitical balance sheet that you're on. >> Michael, the next thing that comes to mind is our conversation in the last feature interview. And listeners, you can go to the homepage at macrovoices.com. Just put Michael's name, Michael Every, in the search box. You'll find that recent interview that was about stable coin statecraft. Is there an angle where stable coin statecraft plays into the resolution of this Iran situation? >> 100%. It's not something that you're going to see immediately because the physical fighting and the you know the the backstage and smokefield room negotiations are the clear focus for now. But on the other side of this, once one side or the other has basically started to take control of all the Middle Eastern energy de facto, which is what this is about, you will then start to see the emergence of stable coins US-based we spoke about before or US dollarbacked are certainly going to be rolled out as part of the new architecture on the back of that or alternatively and already happening in the background uh China's attempt to put out remi stable coins which are of course going to be much more centralized and run by the government versus the US freewheeling private sector version. They are going to be emerging. They are going to be center stage uh and they are going to be part of the physical architecture which comes up from these foundations of a new Middle East on the other side of this conflict. So if you think all the volatility and all the craziness and the wild headlines are only focused on this 2026 has got a lot more to offer you yet in terms of what you see dayto-day. The volatility that we've seen so far is pretty damn clear that making that call would be silly. What you're looking at over a quarterly basis or where you see is the end point on the other side of the crisis is a very very different matter. And on that front, I think we've got room for limited optimism. But in terms of yeah, where it will be in a couple of hours depending on what the next headline comes through, which may or may not be true. Good luck and and fasten your seat belt. >> Well, Michael, I can't thank you enough for a terrific update on this developing situation. and we look forward to getting you back for another feature interview. Before I let you go, please tell our listeners what you do at Rabo Bank and how they can find out more about the services on offer. >> I'm the global strategist within the economic and markets department within Rabo Research. I look at the big picture the way that I've just been trying to describe it to you. So, I'm not making calls on interest rates or FX, exchange rates, etc., etc., per se. I'm looking at the intersection of the global architecture between finance, economics, and geopolitics. and what the bigger picture will be going forward and what what that framework implies for where asset prices might generally trade and then other people fill in the the much more detailed gaps in terms of what they expect for the macro numbers and uh the specific asset targets. So that's what I do. You can look for our work if you're a Rabo Bank client at Rabo Bank knowledge. Please check that out there. If you're not a client uh some of our work and some of my thoughts are available on LinkedIn. You can also look for me on X and my handle is the Michael Every all one word. >> Patrick Sesna and I will be back as macrovoices continues right here at macrovoices.com. >> Now back to your hosts, Eric Townsend and Patrick Serzna. Listeners, we'll keep bringing on second guests as conditions warrant until the Iran situation eventually settles down. Now, you're going to find the download link for this week's trade of the week in your research roundup email. If you don't have a research roundup email, it means you have not yet registered at macrovoices.com. Just go to our homepage and look for the red button over Lyn Alden's picture saying looking for the downloads. Patrick Lyn Alden laid out a compelling case that rising energy and food costs could create real stress for emerging markets, particularly those dependent on imports. Is there a clean way to express that view in today's market? >> Eric, the interesting thing is that I believe you don't actually have to go into traditional emerging markets to express this trade. In this environment, Europe starts to behave like a large import dependent economy where rising energy and food costs create a direct terms of trade shock. So the cleanest way to position for that is the currency, specifically the EuroUSD. If Lynn's thesis is right and those secondord inflation pressures continue to build, you should see sustained demand for dollars to fund those imports, which puts downside pressure on the euro. Now, for that to play out, you need energy prices to remain elevated and those supply side pressures to persist. If instead oil rolls over, supply chains normalize, or global growth stabilizes, then that pressure fades and the trade loses its edge. But as it stands, the EuroUSD is one of the most direct and liquid ways to express this macro view. Now, for more sophisticated traders, the cleanest way to express this is directly in the CME Euro futures. The June Euro future is currently trading around 1162, allowing for a pure short macro view on Euro downside tied to the terms of trade deterioration. But given the environment we're in with elevated geopolitical risk, policy uncertainty, and the everpresent potential for a sudden deescalation headline, it makes sense to pair that directional short with a defined risk hedge. One way to structure that is by overlaying a call spread. For example, by buying the May 8th expiration 117 call, which is trading around 75 pips, and selling the 120 call, roughly 15 pips, creating a 300 basis point wide spread for a net cost of about 60 pips with approximately 43 days till expiration. That defines your upside risk over the near-term window where the headline risk is most elevated. on a $125,000 contract. The premium represents a relatively modest cost to cap exposure in the event that the euro rallies back towards the 120 highs. So, the idea here is to maintain a core short exposure on the euro while using options markets to define and contain the tail risk. essentially converting an open-ended short into a more institutional style riskmanaged position that can withstand adverse headline driven moves without forcing a premature exit. Patrick, every Monday at Big Picture Trading, your webinar explains how retail investors can put on our most recent trade of the week. For those listeners that want to explore how to put on these trades in greater detail, don't miss out on a 14-day free trial at bigpicturtrading.com. Now, let's dive into the postgame chart deck. All right, Eric, let's talk about these equities. Patrick, the market breathed a huge sigh of relief on Monday after the 48 hour ultimatum postponement announcement from President Trump, and I'm not clear on why the market is breathing that sigh of relief. I don't think it's warranted. Monday's news flow was utterly insane. And frankly, the 5-day postponement of that 48-hour energy strike threat sounded to me like basically buying time to turn a bluff into a real strike. If anything, the only message that I've heard out of Iran or supposedly from Iran, we don't know what's really going on, as Michael Every said in the second interview, but the only messaging that I've seen coming out of Iran is they're denying that there are any talks that are open with the United States. They're vowing to uh fight to the end, and they're saying that there's not going to be any ceasefire. So, we're having a a breath of relief on the coming ceasefire when the other side says they're not even in talks about any ceasefire. Maybe I'm just getting fake news. That is very, very possible. There's lots of false information floating around, but I haven't seen the side of this where somebody in Iran is saying, "Yeah, we're looking forward to working this out with the United States and getting to a ceasefire." I I don't know why everybody is not concerned. I am not at all persuaded that the final bottom is in for equity markets. I'm hedged for lower lows and I'm kind of bracing myself for what this weekend might bring. Now, Eric, I always like to put things in context from a probabilities perspective at a volatility index up in the 27 handle. We're talking about a situation where we have daily implied ranges of 114 S&P points, which essentially means that these 100 point swings higher and lower that we see on an intraday basis are not technically significant. This is just normal volatility ranges. Overall, there's a very clean line in the sand for the bulls to neutralize the existing downtrend, which is the 50-day moving average lies around the 6,800, which was the trigger point for systematic selling to begin. We are now in systematic sell mode, which is all of those strategies, whether CTAs, voling funds or or risk parity funds are all under pressure to delever. And now with the JP Morgan whale option strike open at the 6475 level, there's a a huge gamma exposure down below, which would have the dealers having to sell futures into weakness in order to stay neutral the hedge. And so you have a scenario where if this market uh remains um in the in these lower levels, the path of least resistance is actually still a market to go lower. And um and we have to respect that at this stage. I'm keeping it simple, which is either a some sort of a catalyst um needs to be introduced to create a meaningful turn or we're going to have to see some sort of a capitulation in the markets where uh a breakdown washes things out, gets things so oversold, forces all the margin calls that the only natural thing to follow would be uh a um a bull sequence on the upside. At this stage, there's no evidence of that catalyst. So we have to be very careful about the downside risks of the market on the short term from a technical perspective. All right, Eric, let's touch on that dollar. The last two weeks on the Dixie chart are looking more and more like a bull flag pattern. I think that kinetic escalation is likely in Iran, maybe as soon as this weekend. And that would likely bring a new higher high on the Dixie if it happens. I still see this eventually reversing lower and a downtrend resuming, but not until the conflict is resolved. And I don't think it's resolved yet. And I don't think it's about to be resolved in the the talks that are supposedly happening in the next couple of days. Well, Eric, when I look at this dollar index, I see the six-month trade range and this 100 level on the Dixie as being the key overhead level of this trade range with a bull flagging formation forming and us working our way back up to those highs. This is a moment where we could see a potential dollar breakout. And like we talked about in the trade of the week, it would almost certainly be led by a euro breakdown. So, will this break out is certainly the thing to watch. If the dollar index clears this 100 level with and these previous highs with any legitimate momentum, we could easily see a push to 102 103 purely on flows and short covering. It doesn't even need to have a fundamental reason to be happening. But we do certainly see the stresses that could be happening in the euro which happens to be the biggest weighted currency in this dollar index. All right, Eric, let's uh touch on oil here. Well, Patrick, anything is possible here. And frankly, this feels to me like the calm before the storm. There is plenty of room to see still a higher high in oil prices. We don't know how this situation is going to resolve yet. And I I'm hopeful that we'll see it all calm down soon, but unfortunately, I don't think that's the base case by any stretch of the imagination. Well, Eric, for me, the oil volatility does all the talking. We're at a 90% implied. I mean, we I guess we were as high as 120% implied on crude, but this uh this market is certainly still pricing in a pretty fat right tail on the SKS, which means that uh the dealers are still positioning for the risk that there could be an upside volatility move. Overall, this is one of the scenarios where maximum volatility has to be anticipated. I mean, we could be at uh $7580 or lower on one headline on WTI, but at the same time, uh we have a further escalation and real infrastructure damage in any way in the Middle East, and we could be north of 120. This is a very interesting time to be uh considering spread trades because at this stage uh with a right tail skew if you want to continue to play the upside of oil, you can have that on with these different types of spreads that actually have good payoff structures, but generally it is a a very challenging thing to just be long delta 1 on this because you have to be able to stomach some serious swings based on just the next headline. Nonetheless, oil's markets definitely still holding in that risk premium on the short term. All right, Eric, we got to talk gold. Like, what a crazy move we saw in the last week since we did the last episode. How do you size this up? Well, folks, you've heard me say several times in the last few weeks that I haven't heard a good explanation for why gold suddenly reversed its correlation and stopped acting as a geopolitical hedge at 11 p.m. on March 2nd, which is what happened. So, I spent last weekend digging uh with a little bit of help from AI and found some answers. The whole story is on my Substack at eric townsen.substack.com where I wrote a piece about what I think is going on with gold. Very briefly, the oil induced inflation signal pretty much ties the Fed's hands. It means that rate cuts are basically pulled completely off the table until this is resolved and oil is flowing normally through the straight of Hormuz. Higher yields compete with gold which of course yields zero. So the mechanism is pretty obvious here. The explanation for gold moving lower as the Dixie moves higher and the Fed's hands are tied taking the possibility of rate cuts off the table. It all spells an ugly technical picture for gold in the short run. But boy, what a setup. step back and ask yourself if the fundamentals have really changed here for gold in the bigger picture. Does this mean all of the sudden that central banks around the world that not in the United States are going to be more or less likely to want to trust the US dollar and US treasuries as their primary reserve asset? Is the whole world going to say, "Well, thanks to President Trump's ex excellent leadership in this uh Gulf conflict, we really are going to just put all of our eggs in that US Treasury basket from here on out." I don't think that's where this is headed, folks. Now, none of the big banks are reversing their uh targets for year-end prices on gold, which are around 6,000, depends on which bank you're talking to. So, despite this huge correction, they're not revising their targets lower. So, I think it's an absolutely incredible buy the dip opportunity. $6,000 gold is coming. But wait a minute. I think $3,000 gold is entirely possible if the Iran situation triggers a much higher Dixie and a much higher 10-year yield and a much higher oil price. And unfortunately, as much as all of those things happening at once is not the norm, these are not normal times. And I think all of those things happening at once is entirely possible. So the move here to make is buy the dip on gold. Buy it right at the bottom. Okay. The question then becomes when has it bottomed? Well, the 4,100 uh level which we hit the other day, the 200 day moving average was a huge line in the sand. The rejection off of that level was vigorous and we saw oil and gold trading in the same direction again for the first time since March 2nd, but it only lasted a couple of hours. So, there's a good argument to be made on a technical basis that the bottom might already be in at 4102, I think it was, was the low print. But if that 200 day moving average doesn't hold, anything is possible. And that would be the point because that line has not been crossed since 2023. trading below the 200 day average. If it does happen, you could see a whole lot of people abandoning their positions and we could see a wash out all the way down to 3,3500. Anything's possible. So again, the move here is if you can figure out how to buy the bottom of this correction on gold. That's the trade of the century. The question is when and what price the bottom in this gold market is actually going to occur. I don't know and neither do any of the people who pretend to. Well, I want to break it again down in a much more simple manner. There was a very distinct 2-year bull phase that blew off with a parabolic rise and a correction. We now decisively broke down after a failed rally attempt which is now putting gold in a distinct corrective pattern. Yes, those drivers you're talking about will be the ones that will contribute to the potential volatility. But what I would at this stage make very clear typically when you see these kind of tops and corrections begin they don't end in a week. And so uh what this pattern of of distribution can still be here going into the second quarter of the year. Overall maybe the downside is going to be much more contained as we've already seen some big drops. But in the bigger picture the primary trend now is down and we have to be anticipating uh that some short-term stresses to continue here. Uh and this is where being hedged up gold makes a whole lot of sense. All right, Eric, what are your thoughts here on uranium? >> Well, the fundamentals are still uber bullish and they're getting better by the day. And our friends at Aloto atomics unveiled their first test reactor which they built in record time at their new facility in Idaho Falls. That's of course on the INL campus up there where they do all of the reactor testing and have for really the the whole history of nuclear energy. They expect first criticality. That means actually splitting atoms in their new reactor in the next couple of months. So this is moving incredibly quickly. Even the NRC, the Nuclear Regulatory Commission, apparently shamed having been upstaged by the DOE under the leadership of Chris Wright, has announced the streamlining of licensing approval processes for advanced nuclear reactor technology. So even NRC is starting just barely to get its act together. Uh, I I still think that Chris Wright leading the DOE is setting the example. I I think he should take over or they should replace the NRC with something that's led by Chris Wright so that we could really get our act together. And we're starting to see signs of that happening. So, the fundamentals couldn't possibly be better, but this is a very high beta sector. So if we see a major uh Iran induced negative event in the broader stock market, which I think is very possible, we're going to see uranium stocks take a nose dive. That's going to be a buy the dip opportunity. And just looking at the uranium price itself, it's been incredibly quiet for all the volatility we're seeing on almost every other commodity and asset. uh uranium is just quietly waiting for its next catalyst at this moment. I don't see any reason not to be bullish uh the U308, but it really is inactive at the moment and is not getting any attention on the short term. So, we're going to have to see when we have some sort of technical flow start to show some sort of uh new bull move underway, which is just not here now. And just touching on a few more things here, Eric, what's your thoughts here on copper? Well, we're well below the 50-day moving average now and not a whole lot of headroom left above the 200 day moving average. And if that 200 doesn't hold, and the Iran is clearly the key to that, you know, it's a signal that a global recession or even depression is not out of the question. And I I really think a lot of people are not fully understanding the magnitude of this straight of Hormuz situation. Yeah, there's lots of reasons to think that this will get resolved in the next couple of weeks. As Michael Every said, he expects that it likely will. But if this persists for months and months, and yeah, that's an outlier case. I I admit it. But if it were to p persist for months and months, the damage that it will do to the global economy is impossible to overstate. It could be utterly crippling to entire nations and the recovery from the damage that would occur if this continues for months and months would take years if not decades to fully recover from. So this is a really really big deal. We need to see this Iran situation get worked out so that traffic is moving through the straight of Hormuz and we need to see it happen quickly. uh copper and the S&P and uh lots of other things are all approaching very critical levels and if those levels don't hold it's a sign that the markets think that the situation in Iran is not going to be timely resolved and that really spells very very grim outlooks for the global economy. I'm sorry to be so gloomy folks but this is a really big deal. Well certainly copper remained weak. I was talking about last week the correlation between copper and precious metals which uh I'm not sure even fully why it's happening but overall copper has uh started to deteriorate in a in a correction mode and so uh at this stage I don't see any reason why this has to bullishly reverse here on the short term basically anticipate a little bit deeper consolidation here in the weeks to come Patrick before we wrap up this week's show let's hit that 10-year Treasury note chart what a move it's been for the month of March. I mean, we had that bullish engulfing candle come off of a retest of the 395 level in the first days of March. And since then, we've seen a 50 basis point swing in the 10-year yield, causing all sorts of stresses in the credit markets. This trend is now in place. The bigger question is where does this stall out? uh all of the previous highs uh from 2025 were all in that kind of 4 and a half to 460 level on the upside. On the short term, there could continue to be a little bit of stress on yields. Overall, I think that this should be contained, but uh it certainly on the short term has another 10 or 20 basis points risk until it really has a support line to stabilize. Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of BigPictur Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's research roundup. Well, in this week's research roundup, you're going to find the transcript for today's interview as well as the trade of the week chart book we just discussed here in the postgame, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's research roundup. So, that does it for this week's episode. We appreciate all the feedback and support we get from our listeners, and we're always looking for suggestions on how we can make the program even better. Now, for those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email at researchroundup@macrovoices.com and we'll consider it for our weekly distributions. If you have not already, follow our main account on X at macrovoices for all the most recent updates and releases. You can also follow Eric on X, Eric S. Townsen. That's Eric spelled with a K. And you can also follow me at Patrick Serzna. On behalf of Eric Townson and myself, thank you for listening and we'll see you all next week. That concludes this edition of Macrovoices. Be sure to tune in each week to hear feature interviews with the brightest minds in finance and macroeconomics. 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MacroVoices #525 Lyn Alden: Iran Contagion, Inflation & Private Credit
Summary
Transcript
This is Macrovoices, the free weekly financial podcast targeting professional finance, high- netw worth individuals, family offices, and other sophisticated investors. Macrovoices is all about the brightest minds in the world of finance and macroeconomics, telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Serezna. Macrovoic's episode 525 was produced on March 26th, 2026. I'm Eric Townsent. We've got another MacroVoices double header lined up for you as we continue to add extra interviews to cover the developing situation in Iran. Macrovoic's all-time listener favorite, Lynn Alden, returns as this week's headliner. Lynn and I will discuss the Iran conflict, the return to a multipolar world order, the outlook for persistent inflation, the breakdown in private credit markets, and what we can expect from monetary policy after Kevin Wars takes over as Fed chair. That's assuming, of course, that he's confirmed, and much more. For this week's Iran update, we're bringing back Robbo Banks Michael Every, who will weigh in on the broader macro implications of this geopolitical upset. Then we'll aim to bring one of our oil experts back next week. Then be sure to stay tuned for our postgame segment after the feature interview when Patrick's trade of the week will take a look at food inflation and what it could mean for emerging markets. And then we'll have our usual postgame chart deck with coverage of all the markets as of Wednesday's close. And I'm Patrick Szno with the macro scoreboard week overweek. As of the close of Wednesday, March 26, 2026, the S&P 500 index down 51 basis points, trading at 6591. The price action remains weak and distributive. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The US dollar index down 57 basis points trading at 9964 but continues to hold above its 50-day moving average but still in this multi-month consolidation asking the question will we get another bull breakout the May WTI crude oil contract down 538 basis points trading at 9032 the war premium remains as the uncertainty continues the May Arbab gasoline down 358 basis points points to 296. The April gold contract down 703 basis points, trading at 4552. Another big drop in gold prices, driving a deep reversion of that bull phase. The May copper contract down 54 basis points, trading at 556. The March uranium contract down 41 basis points, trading at 8440. and the US 10-year Treasury yield up 10 basis points trading at 433. Yields continuing to press higher in this post FOMC period. The key news to watch next week is we have the ISM manufacturing and services PMIs, retail sales, and the much anticipated jobs numbers. This week's feature interview guest is Lynn Alden, founder of Lynn Alden Investment Strategy. Eric and Lynn discussed the shift toward a multipolar world, the economic impact of rising energy prices, the risk of secondwave food inflation, and how stresses in emerging markets and private credit could shape the global macro outlook. And stay tuned for a special followup with Michael Every where we break down the broader macro implications of the latest developments in the Middle East conflict. Eric's interview with Lynn Alden is coming up as macrovoices continues right here at macrovoices.com. And now with this week's special guest, here's your host, Eric Townsend. >> Joining me now is Lynn Alden, founder of Lynn Alden Investment Strategy. Lynn, it's great to get you back on the show. Obviously, we've got to start with Iran, which has been the all-consuming news. What's your high level take on what's going on and how does this play into some of the writings that you've done in the past about the transition into a multi-olar world that we're we're moving into. >> First of all, thanks for having me on. Uh, and it's certainly one of those occasions where we all to be experts on the current thing. Usually that tendency is overblown, but not really in this case. we all have to be on top of it because it's kind of the all-consuming news item that affects I mean let alone human lives but of course all the investment topics we would potentially talk about on a program like this and you know one of the the frameworks I've had for a while and I'm of course not the only one that's had it is that the world is exiting a peak period of like a uniolar power very like a hyper power in the world and for obviously after World War II and then especially after the fall of the Soviet the United States basically became the core center of of kind of global economy, global military projection power and all that. Uh and that that's a historically uh unusual situation for one country to have such a large relative proportion of the rest of the world. Even for example during the height of the Roman Empire uh you know the Han dynasty in China and other empires in the world were still pretty significant. And so you still you know it was a world where they didn't obviously in long distances they wouldn't connect that much but in this kind of post telecom world this postindustrial world we can get around the world very quickly both digitally and with with you know military projection capability uh we we've been in this kind of hyper power world and then also of course that's financial power that's the global reserve currency uh which unlike prior global reserve currencies is it's different because it's not you know it's not based on gold which was the actual reserve currency. back for those prior periods. It's it's all tied to the dollar and the treasury. And so we kind of reached unusual levels of global centralization of multiple types of power kind of really peaking in the in the late '9s by many metrics. And ever since then there's been a gradual very gradual shift toward a little bit more of a multi-polar world. We obviously saw the rise of China as a massive economic power. Uh and then around the margins obviously financial power a military power but especially that that economic and manufacturing power. Uh we saw you know to lesser extent the rise of India and you know other economies and so kind of the the share of US influence uh across multiple domains is uh on the decline still of course very high. Ray Dallio and others have kind of mapped this outcomes of the US and China. Uh but he's kind of published research that kind of maps out the different metrics that you might analyze an empire by and by and they they tend to roll over at different paces. So for example, education quality tends to be a leading indicator on the way up and it also tends to fall early. uh whereas something like the global reserve currency because it has network effects uh that tends to be a later rise but also kind of one of the last things to decline over time. But all this is to say is that we're kind of falling back toward a world that historically is more usual which is that you have multiple poles of power that are in competition with each other rather than kind of one central world power. So of course you know the two biggest polls would be the US and China. the Europe's uh decisions have kind of reduced their the size of their poll going forward. I think as far as many analysts can tell and then there's other large polls of power in in India and and to some extent Brazil and others and this kind of battle over the Middle East is I think both a symptom of that which is that empires rarely give up their kind of projection capabilities easily even when it would potentially be the right thing to do from a strategic standpoint would be to kind of rightsize from a position of strength rather than kind of fight to always maintain whatever capability you have. But that's where we are. And so I think this is I mean this is a milestone to watch for sure both in terms of current market impacts, current humanitarian impacts, but then also just the relative projection might of different entities around the world. Lynn, something that surprised a lot of people was that precious metals, which we're used to thinking of as a geopolitical risk hedge. You know, it's usually bombs drop, oil goes up, dollar goes up, and gold goes up. All of a sudden, it's bombs drop, oil goes up, dollar goes up, gold goes down. What happened? What's causing that? How long does it last? >> Based on what I can estimate, I think there are multiple factors. One is we can't ignore of course the price action that occurred in precious metals before all this happened. We had an unusually strong rise in gold, silver and platinum prices uh in the year leading up to this event. And some people have used the word bubble to describe it. And while I think that might be valid on the shorter term like it's a sentiment bubble around those I mean this year the sheer magnitude and speed of those moves uh is concerning I don't really view them as fundamentally overvalued. But certainly when something trades that volatile to the upside, there's a risk that it it just goes volatile to the downside. So as a as a long-term, you know, nearly decade long precious metals bull, they kind of hit the price targets that I had years ago. Uh and so my my position uh in my research for months now was I'm not turning into a bear on precious metals per se. I'm not calling them a bubble, but they no longer have that asymmetry that was available, you know, at 20 something uh silver and at, you know, 2,000 something gold or, you know, before that even lower for the both of those metals. And now they were in a more kind of balanced range, which is I wouldn't be surprised by a big sell-off, nor would I be surprised by a, you know, a continued march higher because they have been pretty resilient. And so, one is just that price action becomes unreliable when you have such a massive move. uh and to you know sentiment that's almost unbeatable compared to where it was. So that just that just opens the door toward more unusual situations because as you point out I mean blank sheet of paper if you ask people what would you think precious metals would do during a war of this magnitude uh you'd think they'd be flat to up at least and they haven't been. The other factor I think and I'm not the first to bring this up is that in times of crisis sometimes entities have to sell what they can not what they want to. And so you know gold is a source of liquidity for many market participants including potentially sovereign participants in this crisis. And the other side of the coin is that usually when we have a crisis occur we usually see Bitcoin not do great. We we usually see do gold do pretty well. The other side of the coin is that Bitcoin is kind of held up oddly well in this environment. There are some that are arguing that it's like showing signs of, you know, risk off finally. I wouldn't go nearly that far because Bitcoin had the opposite price action of gold going into this. So, Bitcoin had a particularly rough several months leading into this. So, it was already largely delevered. Uh, it already sentiment was already very washed out. A lot of the fast money was out and a lot of the coins were held by pretty strong hands. And so we I think we've seen kind of a sentiment shift. And then if you want to add a fundamental component, if people find themselves wanting to move portable scarce money, it has, you know, some certain advantages compared to more eternal scarce money that is maybe harder to move across borders or uh jurisdictions. So I think that there's a fundamental component there potentially. But I personally don't read too much into this kind of multi-week action of gold doing poorly, silver doing poorly, Bitcoin doing well, uh, just because the the price action for both of them was so significant in the months leading up to it. Lynn, let's move on to the effect of this war and higher oil prices on the economy. Obviously, the experts have told us that there's really no limit to how high oil prices could go if the straight of horm stayed closed indefinitely. Well over $200, I I would think the global economy. Question is, okay, how do you put a number on that? If it if let's say, you know, $1,000 oil would clearly cause a massive global crisis, is $150 oil something we can tolerate without the economy collapsing? You know, what what's the number? What's the threshold? Any thoughts? >> Well, yeah, it's a good question. I think uh there's a couple ways to look at it. One, you you know, it's you can inflation adjust it and say, okay, well, what prior oil price levels damaged the economy? And of course, we can't just take those nominal figures because depending on how far back you go, money supply has doubled or more. And just the, you know, the size of the stock market's bigger, the the average income's bigger, the average house price is bigger, just the amount of money going around's bigger. So, uh, just because you get back up to $150 oil, uh, which historically has been awful. That that kind of anything in anything well over 100 has historically been awful for the global economy, I do think that the economy, uh, is is resilient enough to handle those types of similar nominal numbers of the past. I I think where it runs into danger is when you get into these kind of unprecedented levels like something something approaching new inflation adjusted highs which as you mentioned is is you know potentially in that 200 plus barrel range which according to the oil experts that I follow if the straight stays closed uh long enough and or if these shutins and you know the worst case scenario is these severely damaged you know energy production infrastructure if a multiple of those things together gives us you know a another month or more of a nearly closed straight then those you know the analysts I'm following are saying that those 200 plus numbers are quite possible if not probable and that does start I think become crippling for the economy now there's kind of two thresholds to consider the first one is what is painful for the economy and painful for say lower income consumers or even middle- inome consumers I mean, we've already touched that. I mean, this, you know, let's let's focus on the American consumer for a second. We're already in uh what other analysts are calling a K-shaped economy or two-speed economy. And all the data I look at that uh at fully confirms that. So if you're on the right side of AI capex or you're on the right side of fiscal deficit spending, you know, the health care, the social security, the defense uh sector, those areas are receiving the, you know, the majority of the deficits and they're on average doing pretty well. So on average, older, wealthier Americans are generally doing fine and people that work in certain industries are doing fine. But, you know, if you're a new college graduate looking for a white collar job in a world of stalling total payrolls and AI optimization to cut costs in the back end for companies all across the country and of course in other economies as well, it's rough. Same thing is if someone is looking for a home, especially, you know, if they're on the low to medium income side, you know, they're going to finance it, they're not going to buy it in cash. The combination of somewhat high mortgage rates and still high average price levels puts that out of reach for a lot of people and you've we've had insurance prices going up a taden. Things were already rough for a lot of consumers. And so, you know, gasoline even before it gets to all-time highs. Just the fact that it's gone up considerably uh in a matter of weeks already puts pressure uh at a time when the shields are kind of down when you have flat, you know, non-farm payrolls for the better part of a year. you know, even though you don't have high uh initial claims yet, uh even though you don't have any sort of acute signs of issues, you just have kind of a stall speed type of economy outside of those really hot spending areas. Uh so it's already that's already a painful element to the US economy, let alone obviously in developing countries, it's it's it's often even worse. uh in Egypt for example where I actually plan to be in a number of months because I I go there every year. They've already announced that because their natural gas import bill effectively tripled from somewhere in the ballpark of 500 million a month to 1.5 billion a month that they've already, you know, effectively had to have like rolling power issues. Uh, you know, kind of curfews on certain types of businesses uh that, you know, kind of close cafes and other things like that at like 9:00 p.m. at night uh to try to conserve electricity because a lot of that is is derived from natural gas. And that's just one example. I mean, obviously in countries of the world where they can't quite bid as much as the wealthy nations for energy, these pain points are already there, especially when they happen so quickly. But I think that because of, you know, large fiscal deficits as well as kind of high income spending. We've generally seen that that the US economy in particular, but also to some extent the global economy is more resilient than many bears think. Uh, which is why I think that just because you have a $150 oil doesn't mean the economy can't function. It just generally means that changes have to occur when we're back in a high energy environment. Uh, so I think that after a period of friction, the global economy could function on $150 oil because that's not the same thing as inflation adjusted. It's not all-time high oil. Uh, I think that can be sustained. You just have to adjust to it. But yeah, once you get above once you get like well into 200 plus oil, a lot of things start breaking down. >> Oil is an input cost to the price of everything and therefore a very important inflation driver. At what point, let's say we get a really big inflationary pulse out of this war and then the war gets wrapped up in a couple of months. Does that inflation pulse come back out of the system or has it already started a a self-reinforcing process that can't be unwound at that point? >> From data we have available, the most persistent type of inflationary pressures when you have a growth in the money supply because you know they they create more money. There's various mechanisms that get that money broadly out into the public which is why for example 2020 was very different than 2008. We didn't just recapitalize banks. uh you know if you look at broad money supply during 2008 2009 it just kind of stayed on its normal trend whereas you look at the money supply in 2020 and 2021 it spiked because not only did the Fed print money but that you know that funded direct fiscal injections out to the broad public. Uh and so and then it took years for that increased money supply to trickle out into various types of prices which is why we have five plus years of inflation from what was effectively a hyper stimulus for like two years. And but when you have a something that's caused by a supply disruption, that part shouldn't be as persistent. Kind of like how the energy price spike we had in 2022, while very damaging for that, it it gave us less persistent effects on inflation. I would argue, all all those quote unquote transitory types of inflation that policy makers kept saying things would be the transitory things did go away or at least at least diminish in time. It was it was the the persistent increase in the money supply that really kind of solidified uh the higher prices that we see kind of across the board. You know, we we saw massive increases in, you know, home insurance and um health insurance and all sorts of things that have nothing to do with supply chain issues or very little to do with supply chain issues. And so, at the moment, you know, let's call it the next couple months, there's no particular sign that we're going to get a massive increase in money supply in the US or certain other major economies. And so because of that, you know, should this be resolved, uh, you know, starting with some sort of peace talks in the coming days and weeks and then it still takes time unfortunately for all that shut in energy to come back. We have to see what what's going to happen with the insurance markets for these ships. We have to see how quickly, you know, the straight will fully open just because it's partially open. Uh, so even in the best of scenarios, this seems to looks like it's going to be quite a while. But if there's no kind of massive increase in the money supply, we should over time expect this to mostly go back to baseline. Now, it doesn't change the fact that a consumer would have spent more on gasoline during a number of weeks or months that they're never going to get back. Uh it doesn't change the fact that farmers because of, you know, sharp changes in fertilizer prices and things like that, you know, they're not necessarily going to get a a season of profits back. Um, so it's not that those things don't have permanent issues on certain parts of the economy, but I wouldn't expect a broad and permanent increase in prices just because you have a multi-month spike in energy unless we we get some sort of like stimulus to help people pay for that energy. That that's where we start to get that broad money supply growth. Uh, and that of course is all all what I'm saying there is is compared to the fact that we already have inflation. We already have money supply growth occurring. uh we already have price aggregate price levels going up. You know, we're we're still getting permanent inflation, but then I'm taking your question to mean will this energy price spike give us a like a a permanent sharp increase inflation above that baseline? My answer would be that generally speaking only if we get that money supply growth kind of accompanying it that's above the current baseline. >> While we're on the subject of monetary policy, let's talk about Kevin Worsh and I guess he hasn't actually been confirmed yet. that's on hold pending criminal investigation of Jay Powell. What a crazy world that we live in. Do you think there is a question as to whether or not Wars will be confirmed? And is there a question? Uh I think Powell's term is set to expire on May 15th. Does Wars definitely take over at that point? We're only a little more than a month away. >> Yeah. So Powell's term as as chairman expires. He he still has the option to remain on the board, which ironically he might increases the odds that he might stay on it based on recent comments he's made uh because of some of these investigations. I I've been operating with the assumption that the new Fed chair is going to be in place by midMay, but I'm not a I'm not, you know, deep in the weeds in in Washington politics to that could, you know, give you a precise answer on that. But I I I you know, he's certainly a candidate that in isolation should be, you know, is is likely to be confirmed by the Senate. He's not an outlandish c candidate or anything like that. And then this criminal investigation adds a new element to it that I'm not really in a position to to judge. Yeah, I've been operating with the assumption that miday or you know maybe with some delay we would have the new chairman in place. But obviously we live in very unusual times. So I I wouldn't be high conviction on almost anything. But I think my main focus would be that I don't really perceive a giant difference uh as we get the new chairman because you know as listeners know you know that the FOMC at any given time has has 12 voting members in it and you know they rotate over time. Uh and so while the chairman is a significant force on setting Fed policy and kind of controlling the the the microphone the biggest microphone uh in the central bank uh it's by no means a a dictatorship. In addition, I mean, I, you know, I've kind of analyzed his comments around balance sheet reduction. Uh, and while there are certain levers that he and others can pull that potentially, you know, give commercial banks the ability to provide a little bit more liquidity, which would, you know, reduce the need for the Fed to provide a little bit of liquidity. A lot of these things are at the end of the day liquidity neutral and not that big, uh, overall. So I I generally fate his comments on balance sheet reduction other than maybe around the margins and then you know I I do expect all us being equal he would be more doubbish on interest rates than POW would be but you know to a moderate extent and what I don't think changes either way is that anytime you have a acute liquidity stress either in the treasury market or in inter you know interbank overnight lending market the Fed's going to step in when needed either, you know, starting with their standing facilities, but then also including purchases if needed. So I, you know, while leadership changes do affect the Fed, I think a majority of it is kind of locked in. While I do expect the Fed rotation to to happen at least roughly on schedule, it's not really like a a thing that any of my investment decisions are going to massively hinge on, per se. There's one aspect of that that I'm a little curious about which is my thinking on this was pretty much consistent with yours except that I thought that Jay Powell was really not wanting to give President Trump the rate cuts the the policy rate cuts that he wants and it seemed like Worsh was lined up very loyal to the president and likely to champion those cuts. It seems to me like it's impossible for any Fed chair to champion rate cuts with what's happened with the Iran conflict unless there's a complete reversal of the inflation signal that's coming from elevated oil prices. Would you agree with that or do you think that it's still war comes in and starts cutting rates? I would roughly agree with that. So if you asked me a month ago, I would say that all us being equal, war should be slightly less growth oriented on the balance sheet and slightly more dovish on interest rates uh would be my kind of base case. And but now that we have this war and we have higher energy prices and and you know inflationary pressures kind of in multiple dimensions here, while I wouldn't say it's impossible for him to cut, I mean it'd be historically very unusual and he would again he'd have to convince other voting members to to side with such unusual policy. So I wouldn't quite say impossible, especially because we're in kind of this age of like impossible headlines being true oftent times. I do think that the war actually does kind of narrow the choices they have and and kind of narrows the difference between Powell and Wars, which I already don't think was huge to begin with. And I think that to your point further narrows it because it kind of ties the Fed's hands a little bit, at least until they see more employment damage. you know, as long as unemployment levels are still on on the lower side, uh even when they have softening in total payroll numbers and and some of that's, you know, net migration, some of that's demographics, they're not they're really looking at the unemployment rate more so and those numbers are still fine. Jobless claims are still fine. And so if they do have this kind of inflationary pressure from energy, I I think it puts them in somewhat of a holding pattern uh almost regardless of who of who's in charge as long as someone who's semiredible uh is in charge. And I I certainly think he, you know, he's he's a credible uh candidate. Lynn, let's continue on that multi-polar theme and talk about some of the other polls. uh as this war continues, it seems like one of the effects that it's going to have is that it's probably worsening the conflict between the United States and Russia, which is an ally of Iran. What does that mean in terms of the resolution of the Ukraine conflict? And what does it mean with respect to energy and energy policy for Russia's sale of oil both internationally and particularly with China? Well, all else being equal, this has been a positive development for Russia. Their energy prices are higher. Uh the sanction pressure is less on them. And you know, it's also they're also a major fertilizer producer. So, they're potentially going to get benefits in that department as well. And so, you know, as listeners know, I mean, the vast majority of the energy that comes out of the Persian Gulf uh heads east uh toward toward China and the rest of Asia. And but you know because these markets have varying degrees of fungibility to them uh you know the economies that were not getting that particular energy source are especially the the wealthier ones the bigger ones are going to be bidding pretty aggressively for any other sources they can get. Uh and while not all oil is the same there's many spots to get similar types of oil. Natural gas is you know one of the least funible of the energy markets because LG is so limited and you know the transportation costs are are higher compared to the pricing uh which is why we see bigger and more persistent pricing spreads between say like North American gas and say European gas back when that war broke out you know between Russia and Ukraine uh so all has been equal this has been positive for Russia it's I would generally consider it negative for China you know they generally benefit from stability uh they benefit from having uh you know fairly cheap energy uh as an energy importer. But you know I much like the US economy is often more resilient than bears think. Uh it's also true that China's economy is often more resilient than bears uh think. They're very flexible uh in terms of how they kind of um you know are able to keep functioning. uh on average Chinese citizenry, you know, they're kind of this their experience over the past decades has has kind of given them higher economic pain tolerance than Americans because they have a more of that uni party system. Political polarization is is less of an issue over there. That obviously comes with massive downsides of like freedom of speech and stuff, but it's it's just it's a reality to to take into account when we see how these things respond. And so I I do think that China is going to be quite resilient as these other, you know, inputs get scarce. I mean, they're they are one of the powers that is capable of bidding pretty aggressively to get much of what they need. And so what this is a conflict that is is good for very few entities and and bad for most entities around the world on average. Uh it does, you know, I think it's it's significantly bad for Europe. It is bad for China, but like I said, China is quite resilient. and I would argue more resilient than Europe on average economically and Russia has kind of been one of the outlier beneficiaries. Uh now from military experts that I'm I'm somewhat familiar with, I think one of the the negative showings was that some of the military equipment that Iran had from Russia and China has not necessarily operated uh as well as they would have hoped. So if there's a a downside to Russia, that might be that. But that's I mean that's outside of the scope that I'm able to comment on in any sort of like I like I certainly don't have an edge on that topic. >> You mentioned fertilizer in passing there. Let's come back to that because one of the things that several experts have predicted is maybe the oil price inflation shock that we're feeling right now is the first wave. But the bigger and potentially more crippling second wave comes from food inflation. And a lot of people don't understand that the straight of Hormuz is not just an oil passing uh lane. A lot of the fertilizer in the world goes through the straight of Hormuz. If that stays closed, we get to a situation where farmers can't grow their crops. Food becomes more expensive. And you know that doesn't go away the day that the bombs stop dropping. It continues for a full crop cycle. Would you agree with that outlook first of all? And if so, what are the implications of that food price inflation? How does it affect different economies? >> So I agree of course a lot of raw inputs to to make fertilizer come from the hydrocarbon industry uh and then even other things I mean even like like helium uh and other other components that are used for chipm and stuff. There's a whole assortment of things that are now at risk of price spikes uh and or outright shortages rather than just oil, gas and and you know other liquids. And so while price of the pump is kind of the first sign we see and you know potential shortages of of of LG shipments coming in as expected in in certain economies that that's kind of all hits first. But I do agree that that food inflation is a significant risk should this be prolonged. Uh my understanding at the current time is you know as we see already fertilizer prices go up. Farmers are kind of squeezed because they haven't really seen the sharp of a move up in in their cash crops yet. So they have higher uh expenses but not necessarily much higher revenue. But that obviously that situation only lasts so long and until you either until the situation resolves itself and those expenses come back down or they you know the prices for for you know their their crop starts to increase. Uh and food inflation is one of the obviously one of the the most damaging types of inflation you can get. You know, in a developing country, the two things policymakers have to try to not mess up are food inflation and energy inflation or shortages. Uh I mean, that's that's how you get revolutions. You know, it's, you know, when people just can't put food on the table or they, you know, they can't can't get to work or they just can't function or they can't keep their lights on, that's when they go out in the streets. And in a developed country, food inflation, there's less of an acute risk of of shortages and people literally unable to eat just because the the overall environment is wealthier. But it does squeeze people especially on the lower half of the income spectrum. So you do get more anger, more, you know, we're already in the US nearly record low consumer sentiment. Uh, you know, we're off like the absolute lows we were on, but it's still very low. and a prolonged, you know, gas gasoline spike uh combined with over time potentially just higher food prices uh is damaging. And so I I do think that's a significant risk and it's it's going to if it's prolonged, it's going to show up in in energy, food, as well as just things that people are not looking for like, you know, just supply chain for making things often requires gases or other feed stocks uh that come out of the Persian Gulf. What are the implications for emerging market countries that don't have access to a lot of alternatives? It seems to me that there there are some countries I know you you spend some time every year in Egypt. There are places around the world where the entire economy depends on certain kinds of imports and if they get cut off there's really no backup plan in a lot of cases. uh what are the potential risks? And I I hate to take a humanitarian crisis and turn it into a trading opportunity, but where are the trades there in the sense of uh emerging markets? Should we be worried about emerging market economies taking this harder than the rest of the world? Is are they a short? What's the outlook? >> I would argue that a decent chunk of it has been priced in, but that of course depends how bearish an investor is on this outlook. the longer and more severe they expect this to go on, the more that shorts become reasonable for the the more vulnerable spots of the world from a purely financial perspective. Uh, you know, I I got questions from family in Egypt asking why did the Egyptian pound suddenly jump from, you know, 47 to the dollar to 52 to the dollar, you know, in kind of the the week leading up to the war and then especially after the war. And it's in large part I think because FX traders uh are looking at this saying Egypt is is more vulnerable than you know the US and other safe haven currencies. Uh like I mentioned before uh you know they I mean they long time ago they were an energy exporter but now they are an importer. They're not a wealthy nation on a per capita basis and you know they're they're out there bidding uh with everyone else. Like when we saw for example the uh natural gas price spikes in Europe back in 2022 uh and it really they started in 2021 you know Europe suffered but we also saw you know developing countries like Pakistan would often suffer even more because they would get outbid by you know comparatively wealthier European buyers that can scramble to get the energy uh that they need more easily than a than a poorer country. And so I don't treat emerging markets as as just one big group. China is still classified as emerging market even though it has many characteristics that wouldn't put it in that category anymore. There are also emerging markets that of course are are energy sufficient or exporters uh or fertilizer exporters. But for those that are more tech- based or more tourism based where they you know they have to import their energy, people fly in on on very energy consuming jets uh and things like that. their economies are at risk the longer this goes on. And that can impact their currencies, that can impact, like I said in Egypt, they're already planning for that rationing stage, not just, you know, higher prices at the pump and and pain there. It's just outright just portions of the city shutting down hours earlier. So that that impacts everyone and you'll you'll see that in in multiple countries the longer this goes on. Uh, and you asked before about the topic of kind of permanent inflation, like if spikes for a number of months and then goes back down. The the countries that at risk of kind of permanent inflation are these weaker ones because when you have an already vulnerable country have that kind of uh energy price spike and it, you know, it's got its debt denominated in a currency it can't print and other issues like that, they're more likely to have a a big kind of money supply spike after this happens. So, they're more likely to actually lock in a lot of that inflation because they're more likely to get a a persistent and and and like a higher plateau of money supply resulting from this. Uh, not necessarily after these weeks, but after some months. Lynn, I want to change the topic now to something that uh we haven't really covered a lot on macro voices. I've been looking forward to asking you about, which is the private credit crisis that is also breaking out. It's not in the headlines as much because of the war, but it's kind of a big deal as I understand it. Basically, there's a whole lot of private credit was loaned to software companies. Then claude.code came along and kind of made it very easy to uh to write software almost uh automatically and it creates a threat. So this is the first time we've really seen AI pose a threat to jobs and to businesses but not quite in the way a lot of people expected it. Is that what's driving this private credit dislocation or is it something else? And what do you make of the situation? >> Uh so I think that's part of it. Uh that is a topic I've been focused heavily on since last year. Uh especially my research service. I've generally been in the camp that is not too alarmist on private credit at least in terms of its contagion effects. So I I think it's without question that there's obviously a lot of issues in private credit uh for all the reasons you said. I mean I I think even before the AI and software issue uh just if you if you just look at at the total credit creation that was happening in that sector it was very rapid uh and whenever you have a you know a very quickly moving uh a quickly growing part of the financial economy the odds are that's where that's where the next issue is going to be uh just because that's where that's where the most exposure is. That's where generally speaking you're going to get looser lending standards just because there's there's so much money slloshing around. Uh it's not it's not a tight area. Banks on average have been pretty tight, but non-deposit financial institutions aka private credit uh and and other types of equity or or credit based lenders, they've been, you know, they have looser regulations and are able to take more risks. And so I do think that uh for private credit investors, it's likely going to be a rough while. I think that's true for private equity as well. Basically, you have a lot of illquid uh investments on the private equity side. Uh then you have um just the risk of bad loans uh in the private credit side. But one thing I kind of noticed is we already see search activity like Google trends and stuff for private credit is like roughly as as high as subprime mortgage crisis was during the peak of 2008. So it's already getting a lot of attention. And of course what investors are really asking outside of investors that are directly invested in private credit funds. What broadly speaking investors are asking is what what are the contagion risks uh from this? You know, should we have multiundred billion dollar losses uh in private credit? What does that do to the banking system and what does that do to the broader economy? That's so after all that kind of bearish talk, the part that I'm I'm not quite as bearish on is the ability for losses in private credit to severely hurt the aggregate US banking system. You know, when we put some numbers into perspective, banks have collectively lent something like 1.9 trillion to non-deposit financial institutions of which a subset uh is private credit. And that sounds like a giant number and it is uh because we all macro stuff's in the trillions these days. Uh but that's in relation to about 25 trillion of total bank assets. uh which gives you 7 to 8% of total bank assets are held in the form of loans to non-deposit financial institutions. And then from there, a a typical private credit fund would have to have rather massive losses for its investors before it would it would come back and hit the bank that lent some money to it. So it's not as though as soon as private credit has losses, it's the bank having losses. This is kind of the mechanism where banks have exposure to the space but they have this risk reduced exposure to the space compared to the investors that are on the front line uh investing in those private funds. Uh and so let's say you know you you let's say you have multiundred billion losses you know you'd have a much smaller percentage of that hit the banking system and they they've got 25 trillion assets and then even their their capital buffer while you know a a small proportion of that is large enough to uh absorb just about any kind of reasonable default scenario for private credit. Uh now there's always a case that you have in individual banks that are like oddly exposed to a given sector. So you can see individual bank failures, but across the board of the bigger banks, they seem to have their exposure uh protected. Um so I I'm in the camp that while private credit is a is a problem, especially for investors in that space, uh I am less worried about contagion risks. Now, of course, when you have multiple crises together, the issue is that one can feed into another. Uh, so for example, I was on I was on Fox Business with with Charles Payne and he he kind of he put a list of crises on the board and said, "Okay, which ones are the worst ones?" And I said, "Well, the one I'm most concerned by far about is what's happening, you know, in the Straight of Hormuz." Because, you know, energy shortages, raw component shortages, if they persist, are like one of the worst risks in the world. And I I you know I say compared to that I'm not worried about private credit contagion into the banking system nearly as much. You know with a caveat that I mean one of the catalysts that can damage private credit is interest rates going up because of these these stagflationary issues. So these these pockets are not in isolation. Kind of like how high energy prices in a way led to the subprime mortgage crisis. Now, it wouldn't, you know, the the high energy prices wouldn't have been nearly as bad, like that recession wouldn't have been like so severe if the banking system was not so highly levered back then. But basically, that was kind of the that more inflationary uh environment, the higher interest rates that followed, that's what kind of popped that particular financial bubble. uh and so there are risks of course that high energy prices will pop any any number of other bubbles but I don't view the banking system as being in the US uh nearly as vulnerable uh at the current time as it was back in 2007208. Well, Lynn, I can't thank you enough for a terrific interview, but I've got one last question I cannot resist asking because I think the best advice I've ever heard on macrovoices came from you when you said, "Do not write a book unless you can't help yourself." Now, in fairness, that was advice on business books. Tell me about the Stogard incident. What happened? You couldn't have couldn't help yourself. >> Yeah, couldn't help myself. Uh, that's my new sci-fi book that's out. We all have to have hobbies and although I you know I analyze markets and and financial systems for a living. I mean my initial background was engineering and you know like many people I'm a big fan of fiction and so you know I I've had the story in my head for a while and I decided to write a kind of a sci-fi thriller the Stogard Incident. Uh you know in a in a world of bad news I figured you know uh it's a good time for it to come out so people can buy it on Amazon or elsewhere. And I mean it's a dark story but you know it kind of projects some of the technological trends you know explores some more far-fetched areas uh because that's what sci-fi is good for. But yeah people can check it out if they want to. And I think in general I would say that you know in like I mean certainly don't write a book for money. Um like I said is it's it's like you only do it if you can't help yourself. And that was certainly my case here. But from a perspective of reading books I think that especially in times like these we're of course glued to the news headlines. Many of us are, you know, our jobs make us have to be and then even other people just trying to figure out how to protect themselves. But over time, of course, on average, we are more kind of glued to the current thing and headlines and social media. And you know, reading is one of those things that's kind of uh slowly on the decline. And I I do think that there's still much to be gained from reading fiction of multiple genres in addition to the the non-fiction reading that people do. So, you know, while I've I've benefited a lot from reading, you know, non-fiction books, business books, and history books and technology books and all that, I've certainly also benefited over the years from from reading fiction. And I think it's uh it's important. >> Well, I'm hearing fantastic things about the book. So, congratulations on that. Let's get back to our usual format closing question, which is tell us about the services on offer at Lyn Alden Investment Strategy, what you do there, and how people can follow your work. >> Uh, sure. So, that's at lynalden.com. uh I provide public articles and newsletters so people can sign up to the free newsletter where I I provide uh you know research every every six to eight weeks uh on the broad macro picture. Uh and then I have a lowcost research service for um individual investors as well as institutions uh that comes out every two weeks uh and and provides a little bit more granular detail on what's happening both macro as well as kind of specific investment ideas. Uh, and of course people can also check out my non-fiction book, Broken Money, which is about the intersection of of money and technology. Thank you, >> Patrick Sznda. And I will be back as macrovoices continues right here at macrovoices.com. >> Eric, it was great to have Lynn back on the show. Michael Ever is next on deck for a special second feature interview on the developing Iran conflict and what it means for the oil markets. Then Eric and I will be back for our usual postgame chart deck and trade of the week. Since this extra coverage format seems to be a hit with our listeners, we'll do our best to continue it for as long as the situation in the Middle East warrants it. Now, let's go right to Eric's interview with Michael Every. Joining me now is Robbo Bank's global strategist for economics and markets, Michael Every. Michael, it's great to get you back on the show. uh you've of course as our listeners know had an exceptional track record terms of translating President Trump's uh what he says to what he really means. Boy, what a situation we have in Iran. Tell us your perspective high level on the conflict, how we got here, what it's going to mean for markets. >> Sure. And for once, all of us, regardless of how well we think we read the room, are in a room filled with the fog of war. So complete uh disclosure, there's no one you could talk to right now who can give you, you know, a complete answer on anything. We're all fumbling our way through it. First point very quickly, obviously this war is just as polarizing as everything else we see around us. The tail risks in terms of how badly it could go are obvious to the layman, so you don't need me to to underline them. How this plays out is also still very much clouded in fog. But there are optimistic scenarios which may surprise people. There are very pessimistic scenarios of which there are more of them and some of them are very very ugly. And importantly, not only do we have that fog of war, people are still pumping it into the room. You cannot take seriously a vast amount of what on your phone, your television set or your Bloomberg screen. Just because headline X comes through in the Middle East does not mean that is what's happening or that's what that particular individual or country thinks or is doing. And so that makes it even more complicated. >> Let's talk about Monday morning's news flow as it occurred. Uh I'll tell you at least how I received it. And I was very skeptical because it seemed just too impossible to believe. But first, President Trump announced great news. We've got a deal on the table and it looks like we're going to work things out with Iran. And so the 48 hour ultimatum that he issued, he said, was extended by 5 days. And that sounded like great news. The market, I think oil was down $20 in the matter of minutes. And then Iran, and it's not clear who in Iran exactly, refuted it and said, "No way. We're not having any negotiations with the United States. It didn't happen. It's all a lie. We haven't agreed to anything. It's not true." And everybody thought, "Well, maybe that's just some fake news out of Iran cuz surely that can't be it." Then Israel announced or at least someone in Israel claiming to represent the official position said, "Look, we are not aware of any reason to change our stance of continuing to fight the war. We're uh we're pressing ahead. We're not aware of any deals." It's kind of amazing that if the US and Israel are allied in this effort that they would say opposite things within minutes of each other and it doesn't instill a lot of confidence. Now, is that really what happened or am I getting fake news or or what's going on here? again um with the greatest respect you are underlining exactly why your traditional or one's traditional methodology for looking at news during a crisis like this in a place like the Middle East doesn't help you very much and the horistic on that besides actually knowing the region um and saying have you ever gone to a Middle Eastern bazaar and said how much is that item over there worth $2 and to be told $1,000 and then spend the next couple of hours haggling up and down screaming at each other before you eventually pay is that if you actually look at the recent run of events here going back to 2025, you know, when you had Operation Midnight Hammer, the US and Israel have repeatedly managed to fool the world by appearing to not be on the same page and that Trump's angry, BB's angry with Trump, etc., etc., and then boom, they coordinate and strike. So every single time the world seems to fall for this shtick that there's a difference between them and then something happens where you find out actually they were working in complete coordination because they knew that everyone would look at the headlines. The algos would trade the headlines. Therefore everyone else would have to go along with the algos and effectively the narrative becomes the reality until the reality is changed by a sharp application of physical force. Now that doesn't mean it isn't true this time. you know from a poparian sense you never know that anything's true until you just prove it right but don't necessarily believe as I said that what you are being told from all sides whether it's Israel whether it's the US or whether it's Iran is actually the case >> what is your understanding and analysis of the current state of transit through the the straight of Hormuz it sounds like Iran has basically announced well it's wide open now except it's It's a toll road and it cost 2 million bucks per ship in order to go through. Is that really the the situation or is that more propaganda? >> Again, you you rais an excellent point. Iran said that just the other day, but as far as I'm aware, they said the same thing at least a week ago. And yet, if you look at vessel transit numbers, I think the latest data I saw yesterday were that six ships had managed to get through, whereas normally it was like 138 of a given day. You know, my maths isn't the best, but six is a lot less than 138 given that any ship nominally is allowed to go through now for a fee, which is not cheap, but works out to a buck or two on oil effectively, you know, depending on the size of the vessel. So again, it's very easy to say these things. It's very easy to see them on a screen. It doesn't actually mean that's what the reality on the ground or at sea in that particular area still is. So until you start seeing vessel numbers start to get get up to at least high double digit which would still be you know a third or half of what they previously are then regardless of the rhetoric or the statement it simply isn't happening. Okay, if it isn't happening, let's talk about the consequences. How long can it be not happening before this turns into a really big global crisis where you've got entire nations that have to shut down because they don't have any fuel and you know thing things really grind to a halt? Is that something that's days away, weeks away, months away, years away? Uh what would it mean if there is no improvement and it's just six ships a day that can go through the straight of hormones? let's say for the next two months. What does that mean for the economy? >> So the first thing is it depends on the economy you're talking about. There's a big difference between them. The second thing is it depends on the kind of fuel that they're relying on because there's a big difference within the oil barrels themselves and what they're turned into. And the last point is it becomes exponential rather than linear. So to cut a long story short, if you were talking about say two months, this is purely hypothetical, not any kind of forecast, you are going to see crippling shortages of diesel, of bunker fuel, of jet fuel. And that's going to start obviously in Asia where it's already being reported. I'm seeing signs of that around me physically in Asia. Um even though that's panic buying more than natural shortages right now. Then it's going to flow back up to Europe and eventually it would hit most people. um you know even in the US but to a a much lesser degree and and more slowly and the impact of that would not just be in terms of higher prices for things because you don't have to be much of an economist to understand that if energy goes up everything goes up but it's going to be the shock of guess what there isn't any available regardless of the price so you don't record an increase in inflation there just isn't any diesel now what does that mean for the economy it's an interesting one for the statisticians because the CPI doesn't change but no one can move anything. No one can do anything. No one can be nothing can be delivered and so things absolutely grind to a hole which ironically in some instances can be deflationary because people are going to be desperate for cash and what might they have to try and sell off to whoever they can wherever they can at fire sale prices. And there's one very very nuts andbolts example of that. I've already seen a story last week uh in Thailand where a huge truck laden with strawberries coming from the north down towards uh Bangkok couldn't get any diesel from any of the uh service stations along the motorway. Had to therefore just give up, pull up on the side of the road and just sell the strawberries at whatever price it could to whoever still had fuel who was passing. That's a very small example of what you could expect to see going on. And the secondary and third order effects are incredible. Just imagine there's no bunker fuel. If there's no bunker fuel, ships don't go from A to B. If ships don't go to A to B, nothing goes from A to B, at which point global trade breaks down. >> We've already seen hundreds of filling stations in uh Australia running out of fuel and you it's already in some localized parts of the world already starting to uh to hit. One of the scenarios that I've thought about is given President Trump's America first policies, is there a scenario where President Trump says, "Okay, the way we're going to handle this is we're going to outlaw the export of finished products from the United States. We're going to outlaw the export of crude oil from the United States." Uh, he could presumably try to do that with just an executive order. If he did those things for the sake of trying to keep US prices down even as the rest of the world pays higher prices would create a lot of resentment around the world but it seems like it would be consistent with some of his policies. Do you think that's a a plausible scenario? >> I think it would be politically and even geopolitically. In fact, I think it's is bang in line with the overall Trumpian direction were it not for the fact that of course the US while it's a net energy exporter is still a net importer of certain kinds of fuel which it absolutely relies on for example the the fuel that it gets from Canada and increasingly from Venezuela now which has to be refined uh you know in a limited number of places and I don't think the refineries are inside the US to get it turned into the distillates and and the diesel and the jet fuel and the bunker fuel that's needed. for example to summarize the US isn't energy independent on a net basis even if it is a net exporter but were you to string together a scenario where you say the US plus a small cery of countries that could supply it potentially with the right amount of fuel that it needs for its domestic base and the US can somehow compensate them with a like forlike product swap andor other carrots and sticks were that to happen in theory Yes, I think in in reality there would be a lot of push back and it would certainly dislocate markets further and we have enormous dislocation now. I'm sure that people would already have mentioned to you uh in line with these conversations that you can look at your screen and say okay Brent is $100 give or take. WTI is what let's say 95 you know there's a spread over that and that can get wider on on these kind of rumors but in in Asia oil where it's available can go for 150 or 160 and if you're talking about jet fuel in Singapore that's been going for as high as 230 I think it's 200 today so we already have a broken down market where it's not just the standard plus a spread by different product type across geographies it's now completely segmented so yeah if Trump were to do that and to make it work that would completely break the one world market that we have for energy like that. And I don't think you should rule it out, but I wouldn't rule it in as a base case just because it would be so incredibly disruptive and I'm not quite sure exactly what constellation of countries he'd have to get with him and whether he could persuade them to come along with him in doing it. >> Let's talk about the unwind of this and how much lag effect there is. Suppose that this situation persists for a few more weeks. we get to that breakdown situation that you're talking about where things really start to grind to a halt and there's a tremendous amount of international pressure on the United States from other countries saying look you got to find a way to to find the offramp wind this thing down because this conflict that the US and Israel are having with Iran is causing huge amounts of dislocation in Australia and Asia and other places and let's suppose the US says Okay, we're going to have to do something to appease these people so that we don't make permanent enemies. Okay, I don't think you just throw a switch and everything's back to normal the next morning. How long does it take from a policy change until the system gets back to normal and recovers? >> Okay, let me unpack that into two parts and start with the second part. The second part is first of all, nothing can happen until the war is over. So regardless of what the US and Israel are saying, the war isn't necessarily over just because they go home. First of all, the US can go home. But as I've underlined repeatedly of late, if it were to just go home with its tail between its legs, that's a 1956 Suez style crisis for the US because it won't be fighting anywhere else again on the same scale as this if it can't manage to achieve victory here. So that's a huge setback for the US in every dimension of Trumpanomics and the reverse paristrika that I was discussing with you a few weeks ago. Basically everything starts to unravel were that to happen. So that's pretty existential for the US. Israel can't go home and it would be well aware that if it just gave up and said fine, we're done. You know, Iran would be even angrier and more determined to get a get a bomb either, you know, the slow way or to just get one smuggled in from North Korea, etc. At which point, there you go. That changes the equation in the region immediately. So there's no incentive for them to stop. And Iran, of course, has an incentive to keep escalating to make those two sides try and go home. And at the same time, even if it got that done, would then probably start to bully the GCC even more, the Gulf Cooperation Council to say, okay, you sided with the US. Now it's come time to come and, you know, kiss the ring here and understand that tan runs the Middle East. At which point it's a geopolitical catastrophe for the entire West. So, it's not necessarily something that any one person can just do because they want to. But even if we click our fingers and say it can be done, boom, there you go. It's all done. It would take months to get energy flows back to where they were. And that's depending on the supply side damage. We don't know how much damage has been done to LNG. So far, we're estimating 17% of Qatar's output, but for between 3 or 5 years, could be worse. We won't know till the war is over. Um, and equally oil wells that have been shut in. We don't know how much supply comes back online. We really don't know. And things could get worse. If the Houthis start firing in the Red Sea again, then we'll have an even bigger drop off in oil flows because Saudi Arabia can't send them via Yanbu. So everything can get much worse and it will take months to come back online. But just to very quickly address the first part, you said if the US needs to try and smooth things over with people. Yep. Okay. That's a very difficult question. I'm not sure what you do do, but if you're in the US position, do you even try and do that? Or do you say, "Okay, you desperately need me to sort this out. What are you going to do for me?" And I would be gobsmacked if the US in that position, whoever's president doesn't turn around and try and use that as leverage, were we in that position or were they in that position than to turn around and say, "How do I make nice?" Well, I was saving the other half of the question for next, which is one of the scenarios that President Trump has directly and not just alluded to, but laid out very specifically in one of his truth social posts is he said, "Maybe we should just go and make a final strike, obliterate the rest of the Iranian regime, and walk away and leave policing the uh straight of Hormuz to the countries that rely on it because we don't need it. I I disagree with the president that we don't need it, but that seems to be his perspective. If he were to do that, basically saying, "Okay, those countries that didn't send their navies to help, we're going to punish you by teaching you a lesson by by walking away and leaving you to worry about this. We're done. See you later." How much of a mess does that make? And what knock-on effects might not have been included in the truth social post that we should be concerned with? >> A very big mess. and more knock-on effects than we have time to discuss here. It would be absolutely, you know, it would overturn the tables, shall we say, were that to happen. But e equally and just joining that question there and the previous point I was making before it, Trump has also stated openly and again being mocked in in some media, but you have to differentiate signal from noise that maybe the US should run Hormuz or co-ontrol Hormuz with Iran. And again on one level you can say this is just delusional on the other level is there something in this that we don't know about and again we don't know what's going on we have a certain narrative we have certain stories which are being fed to us and we have certain statements which are outright lies from different parties at different times which suit their purpose what would that do to the world if the US were to effectively take control of hummus and there are different ways that could play out with different endgames but uh that's something really to consider too because whatever happens now I think the the critical Point is the global political architecture or the geopolitical architecture, the geoeconomic and the geoinancial architecture rotating around power alliances, energy which is at the root of everything uh finance and you know currencies that commodities are traded in on the back of energy. All of them are now in the mix and anybody thinking that they know 100% how it plays out is wrong. And anybody thinking that we just go back to normal after this has all happened. Even in a benign scenario that everyone says, "Okay, fine. Let's put that behind us and never talk about it again." They're also wrong. Everything will change on the other side of this. >> Now, President Trump has not exactly been super cordial with the European Union in recent months. It occurred to me is there a scenario where Iran rings up Ursula Vanderland and Xihinping and I don't know Australian leaders uh and so forth everyone else and says look our gripe is with the US and Israel. If you Western Europe and China and Australia, by the way, we've got you uh by the shorthairs here because you don't really have another choice given, you know, this would be a conversation that would be held after these countries are running out of fuel and really in crisis. if you will publicly denounce Israel and the United States and lobby the uh the UN to issue sanctions against Israel and the United States. If you do that, we're going to open everything up and we're going to give Europe and we're going to give China all the oil that they want. We're going to let that flow to you, but we're going to continue to impose these sanctions against the United States and Israel who are our actual enemies. Now before this conflict they would be laughed out of the room if they tried to approach Europe with a proposal like that. Is there a scenario where they don't get left out of the room because the other parties just don't have another choice? >> No. But a one part of that is hypothetical and b I don't think they'd have been laughed out of the room beforehand. So, I think you I think I whether we're seeing it or not in headlines, and again, I have to reiterate, I'm not trying to be a conspiracy theorist or say everyone's got to go and red pill themselves, but don't think just because you're reading Bloomberg or the Wall Street Journal or the New York Times or, you know, whatever your go-to media is, don't think you're getting the inside scoop on what's going on in a region as double dealing and as important as the Middle East at a time of war when you have 20% of global energy supply flowing through it and everything and everyone turns on that particular pivot point or that particular fulcrum um and think that therefore yeah you're being told exactly what's going on by the journalists right you're getting fragments of it but to be blunt that conversation and that thought process is absolutely playing out and if you think the US isn't cognizant of it and isn't thinking about how they can use it to its advantage rather than disadvantage then again I think you know one's one's not seeing the reality of the real politique >> well it seems to me that there's a very real risk here of Europe pivoting into a collaboration with China and Iran and uh and really becoming strongly at odds with the United States. >> Well, there's a couple of uh flies in that ointment. One of them is called Russia, which of course is very much in that camp and is currently helping Iran fight the US and Israel. So, you know, maybe that's an Orwellian double think that Europe can cope with at some point, but right now I think that would be very problematic. And the other one is that of course as we discussed in previous conversations like it or not and obviously they don't like it Europe is deeply imshed with so many American systems from the Euro dollar to you know the technology system to NATO for now because obviously that would mean the end of NATO to American LNG because you know right now Europe is still going to be needing American energy. So it's very easy in principle to say okay flip a switch and shift to that camp. But there's an enormous transition cost in doing so and I think the real picture is much much more complex. >> I'm going to hit you with a completely unfair and unanswerable final question in your best guess. Michael, this is over in a week, a month or a year. >> Couple of weeks. Let me be blunt. I was just saying to someone else this morning that my nature is, for those of you who think you understand me and think I'm very gloomy, I'm actually a deep-seated optimist, but I'm an optimist wrapped in a pessimist. And I always find that's the most healthy way to approach the world to, you know, take take the long-term view that actually life finds a way, but to recognize that in the meantime, in the meantime, things can get pretty ugly and you shouldn't just assume that everyone is your friend. I still think there is enough of an outline of things that could be happening through this fog of war that there is a potential way to emerge out of this which is painful now. Absolutely. Which is disruptive for months ahead in terms of you know the the the return to normality but which actually has a relatively good landing space uh on the other side of it. But I am fully cognizant that that changes on an hour to hour basis and that the tail risks here which everyone can see. You don't have to be any kind of expert. Everyone can see that the tail risks are extremely extremely ugly. >> And do you have a view in those two weeks as to what the outcome looks like after two weeks? >> I think it will surprise people. That's all I can say. But given the existential stakes here for okay, the Iranian regime and for Israel uh and also for the US in terms of what it's trying to do under Trump. Uh, I think there's a lot more escalation that can come and I expect more escalation. I've been arguing that since day one, but that escalation I think can end up with a scenario which as I said looks better than some people might expect. But it depends on which side of that geopolitical balance sheet that you're on. >> Michael, the next thing that comes to mind is our conversation in the last feature interview. And listeners, you can go to the homepage at macrovoices.com. Just put Michael's name, Michael Every, in the search box. You'll find that recent interview that was about stable coin statecraft. Is there an angle where stable coin statecraft plays into the resolution of this Iran situation? >> 100%. It's not something that you're going to see immediately because the physical fighting and the you know the the backstage and smokefield room negotiations are the clear focus for now. But on the other side of this, once one side or the other has basically started to take control of all the Middle Eastern energy de facto, which is what this is about, you will then start to see the emergence of stable coins US-based we spoke about before or US dollarbacked are certainly going to be rolled out as part of the new architecture on the back of that or alternatively and already happening in the background uh China's attempt to put out remi stable coins which are of course going to be much more centralized and run by the government versus the US freewheeling private sector version. They are going to be emerging. They are going to be center stage uh and they are going to be part of the physical architecture which comes up from these foundations of a new Middle East on the other side of this conflict. So if you think all the volatility and all the craziness and the wild headlines are only focused on this 2026 has got a lot more to offer you yet in terms of what you see dayto-day. The volatility that we've seen so far is pretty damn clear that making that call would be silly. What you're looking at over a quarterly basis or where you see is the end point on the other side of the crisis is a very very different matter. And on that front, I think we've got room for limited optimism. But in terms of yeah, where it will be in a couple of hours depending on what the next headline comes through, which may or may not be true. Good luck and and fasten your seat belt. >> Well, Michael, I can't thank you enough for a terrific update on this developing situation. and we look forward to getting you back for another feature interview. Before I let you go, please tell our listeners what you do at Rabo Bank and how they can find out more about the services on offer. >> I'm the global strategist within the economic and markets department within Rabo Research. I look at the big picture the way that I've just been trying to describe it to you. So, I'm not making calls on interest rates or FX, exchange rates, etc., etc., per se. I'm looking at the intersection of the global architecture between finance, economics, and geopolitics. and what the bigger picture will be going forward and what what that framework implies for where asset prices might generally trade and then other people fill in the the much more detailed gaps in terms of what they expect for the macro numbers and uh the specific asset targets. So that's what I do. You can look for our work if you're a Rabo Bank client at Rabo Bank knowledge. Please check that out there. If you're not a client uh some of our work and some of my thoughts are available on LinkedIn. You can also look for me on X and my handle is the Michael Every all one word. >> Patrick Sesna and I will be back as macrovoices continues right here at macrovoices.com. >> Now back to your hosts, Eric Townsend and Patrick Serzna. Listeners, we'll keep bringing on second guests as conditions warrant until the Iran situation eventually settles down. Now, you're going to find the download link for this week's trade of the week in your research roundup email. If you don't have a research roundup email, it means you have not yet registered at macrovoices.com. Just go to our homepage and look for the red button over Lyn Alden's picture saying looking for the downloads. Patrick Lyn Alden laid out a compelling case that rising energy and food costs could create real stress for emerging markets, particularly those dependent on imports. Is there a clean way to express that view in today's market? >> Eric, the interesting thing is that I believe you don't actually have to go into traditional emerging markets to express this trade. In this environment, Europe starts to behave like a large import dependent economy where rising energy and food costs create a direct terms of trade shock. So the cleanest way to position for that is the currency, specifically the EuroUSD. If Lynn's thesis is right and those secondord inflation pressures continue to build, you should see sustained demand for dollars to fund those imports, which puts downside pressure on the euro. Now, for that to play out, you need energy prices to remain elevated and those supply side pressures to persist. If instead oil rolls over, supply chains normalize, or global growth stabilizes, then that pressure fades and the trade loses its edge. But as it stands, the EuroUSD is one of the most direct and liquid ways to express this macro view. Now, for more sophisticated traders, the cleanest way to express this is directly in the CME Euro futures. The June Euro future is currently trading around 1162, allowing for a pure short macro view on Euro downside tied to the terms of trade deterioration. But given the environment we're in with elevated geopolitical risk, policy uncertainty, and the everpresent potential for a sudden deescalation headline, it makes sense to pair that directional short with a defined risk hedge. One way to structure that is by overlaying a call spread. For example, by buying the May 8th expiration 117 call, which is trading around 75 pips, and selling the 120 call, roughly 15 pips, creating a 300 basis point wide spread for a net cost of about 60 pips with approximately 43 days till expiration. That defines your upside risk over the near-term window where the headline risk is most elevated. on a $125,000 contract. The premium represents a relatively modest cost to cap exposure in the event that the euro rallies back towards the 120 highs. So, the idea here is to maintain a core short exposure on the euro while using options markets to define and contain the tail risk. essentially converting an open-ended short into a more institutional style riskmanaged position that can withstand adverse headline driven moves without forcing a premature exit. Patrick, every Monday at Big Picture Trading, your webinar explains how retail investors can put on our most recent trade of the week. For those listeners that want to explore how to put on these trades in greater detail, don't miss out on a 14-day free trial at bigpicturtrading.com. Now, let's dive into the postgame chart deck. All right, Eric, let's talk about these equities. Patrick, the market breathed a huge sigh of relief on Monday after the 48 hour ultimatum postponement announcement from President Trump, and I'm not clear on why the market is breathing that sigh of relief. I don't think it's warranted. Monday's news flow was utterly insane. And frankly, the 5-day postponement of that 48-hour energy strike threat sounded to me like basically buying time to turn a bluff into a real strike. If anything, the only message that I've heard out of Iran or supposedly from Iran, we don't know what's really going on, as Michael Every said in the second interview, but the only messaging that I've seen coming out of Iran is they're denying that there are any talks that are open with the United States. They're vowing to uh fight to the end, and they're saying that there's not going to be any ceasefire. So, we're having a a breath of relief on the coming ceasefire when the other side says they're not even in talks about any ceasefire. Maybe I'm just getting fake news. That is very, very possible. There's lots of false information floating around, but I haven't seen the side of this where somebody in Iran is saying, "Yeah, we're looking forward to working this out with the United States and getting to a ceasefire." I I don't know why everybody is not concerned. I am not at all persuaded that the final bottom is in for equity markets. I'm hedged for lower lows and I'm kind of bracing myself for what this weekend might bring. Now, Eric, I always like to put things in context from a probabilities perspective at a volatility index up in the 27 handle. We're talking about a situation where we have daily implied ranges of 114 S&P points, which essentially means that these 100 point swings higher and lower that we see on an intraday basis are not technically significant. This is just normal volatility ranges. Overall, there's a very clean line in the sand for the bulls to neutralize the existing downtrend, which is the 50-day moving average lies around the 6,800, which was the trigger point for systematic selling to begin. We are now in systematic sell mode, which is all of those strategies, whether CTAs, voling funds or or risk parity funds are all under pressure to delever. And now with the JP Morgan whale option strike open at the 6475 level, there's a a huge gamma exposure down below, which would have the dealers having to sell futures into weakness in order to stay neutral the hedge. And so you have a scenario where if this market uh remains um in the in these lower levels, the path of least resistance is actually still a market to go lower. And um and we have to respect that at this stage. I'm keeping it simple, which is either a some sort of a catalyst um needs to be introduced to create a meaningful turn or we're going to have to see some sort of a capitulation in the markets where uh a breakdown washes things out, gets things so oversold, forces all the margin calls that the only natural thing to follow would be uh a um a bull sequence on the upside. At this stage, there's no evidence of that catalyst. So we have to be very careful about the downside risks of the market on the short term from a technical perspective. All right, Eric, let's touch on that dollar. The last two weeks on the Dixie chart are looking more and more like a bull flag pattern. I think that kinetic escalation is likely in Iran, maybe as soon as this weekend. And that would likely bring a new higher high on the Dixie if it happens. I still see this eventually reversing lower and a downtrend resuming, but not until the conflict is resolved. And I don't think it's resolved yet. And I don't think it's about to be resolved in the the talks that are supposedly happening in the next couple of days. Well, Eric, when I look at this dollar index, I see the six-month trade range and this 100 level on the Dixie as being the key overhead level of this trade range with a bull flagging formation forming and us working our way back up to those highs. This is a moment where we could see a potential dollar breakout. And like we talked about in the trade of the week, it would almost certainly be led by a euro breakdown. So, will this break out is certainly the thing to watch. If the dollar index clears this 100 level with and these previous highs with any legitimate momentum, we could easily see a push to 102 103 purely on flows and short covering. It doesn't even need to have a fundamental reason to be happening. But we do certainly see the stresses that could be happening in the euro which happens to be the biggest weighted currency in this dollar index. All right, Eric, let's uh touch on oil here. Well, Patrick, anything is possible here. And frankly, this feels to me like the calm before the storm. There is plenty of room to see still a higher high in oil prices. We don't know how this situation is going to resolve yet. And I I'm hopeful that we'll see it all calm down soon, but unfortunately, I don't think that's the base case by any stretch of the imagination. Well, Eric, for me, the oil volatility does all the talking. We're at a 90% implied. I mean, we I guess we were as high as 120% implied on crude, but this uh this market is certainly still pricing in a pretty fat right tail on the SKS, which means that uh the dealers are still positioning for the risk that there could be an upside volatility move. Overall, this is one of the scenarios where maximum volatility has to be anticipated. I mean, we could be at uh $7580 or lower on one headline on WTI, but at the same time, uh we have a further escalation and real infrastructure damage in any way in the Middle East, and we could be north of 120. This is a very interesting time to be uh considering spread trades because at this stage uh with a right tail skew if you want to continue to play the upside of oil, you can have that on with these different types of spreads that actually have good payoff structures, but generally it is a a very challenging thing to just be long delta 1 on this because you have to be able to stomach some serious swings based on just the next headline. Nonetheless, oil's markets definitely still holding in that risk premium on the short term. All right, Eric, we got to talk gold. Like, what a crazy move we saw in the last week since we did the last episode. How do you size this up? Well, folks, you've heard me say several times in the last few weeks that I haven't heard a good explanation for why gold suddenly reversed its correlation and stopped acting as a geopolitical hedge at 11 p.m. on March 2nd, which is what happened. So, I spent last weekend digging uh with a little bit of help from AI and found some answers. The whole story is on my Substack at eric townsen.substack.com where I wrote a piece about what I think is going on with gold. Very briefly, the oil induced inflation signal pretty much ties the Fed's hands. It means that rate cuts are basically pulled completely off the table until this is resolved and oil is flowing normally through the straight of Hormuz. Higher yields compete with gold which of course yields zero. So the mechanism is pretty obvious here. The explanation for gold moving lower as the Dixie moves higher and the Fed's hands are tied taking the possibility of rate cuts off the table. It all spells an ugly technical picture for gold in the short run. But boy, what a setup. step back and ask yourself if the fundamentals have really changed here for gold in the bigger picture. Does this mean all of the sudden that central banks around the world that not in the United States are going to be more or less likely to want to trust the US dollar and US treasuries as their primary reserve asset? Is the whole world going to say, "Well, thanks to President Trump's ex excellent leadership in this uh Gulf conflict, we really are going to just put all of our eggs in that US Treasury basket from here on out." I don't think that's where this is headed, folks. Now, none of the big banks are reversing their uh targets for year-end prices on gold, which are around 6,000, depends on which bank you're talking to. So, despite this huge correction, they're not revising their targets lower. So, I think it's an absolutely incredible buy the dip opportunity. $6,000 gold is coming. But wait a minute. I think $3,000 gold is entirely possible if the Iran situation triggers a much higher Dixie and a much higher 10-year yield and a much higher oil price. And unfortunately, as much as all of those things happening at once is not the norm, these are not normal times. And I think all of those things happening at once is entirely possible. So the move here to make is buy the dip on gold. Buy it right at the bottom. Okay. The question then becomes when has it bottomed? Well, the 4,100 uh level which we hit the other day, the 200 day moving average was a huge line in the sand. The rejection off of that level was vigorous and we saw oil and gold trading in the same direction again for the first time since March 2nd, but it only lasted a couple of hours. So, there's a good argument to be made on a technical basis that the bottom might already be in at 4102, I think it was, was the low print. But if that 200 day moving average doesn't hold, anything is possible. And that would be the point because that line has not been crossed since 2023. trading below the 200 day average. If it does happen, you could see a whole lot of people abandoning their positions and we could see a wash out all the way down to 3,3500. Anything's possible. So again, the move here is if you can figure out how to buy the bottom of this correction on gold. That's the trade of the century. The question is when and what price the bottom in this gold market is actually going to occur. I don't know and neither do any of the people who pretend to. Well, I want to break it again down in a much more simple manner. There was a very distinct 2-year bull phase that blew off with a parabolic rise and a correction. We now decisively broke down after a failed rally attempt which is now putting gold in a distinct corrective pattern. Yes, those drivers you're talking about will be the ones that will contribute to the potential volatility. But what I would at this stage make very clear typically when you see these kind of tops and corrections begin they don't end in a week. And so uh what this pattern of of distribution can still be here going into the second quarter of the year. Overall maybe the downside is going to be much more contained as we've already seen some big drops. But in the bigger picture the primary trend now is down and we have to be anticipating uh that some short-term stresses to continue here. Uh and this is where being hedged up gold makes a whole lot of sense. All right, Eric, what are your thoughts here on uranium? >> Well, the fundamentals are still uber bullish and they're getting better by the day. And our friends at Aloto atomics unveiled their first test reactor which they built in record time at their new facility in Idaho Falls. That's of course on the INL campus up there where they do all of the reactor testing and have for really the the whole history of nuclear energy. They expect first criticality. That means actually splitting atoms in their new reactor in the next couple of months. So this is moving incredibly quickly. Even the NRC, the Nuclear Regulatory Commission, apparently shamed having been upstaged by the DOE under the leadership of Chris Wright, has announced the streamlining of licensing approval processes for advanced nuclear reactor technology. So even NRC is starting just barely to get its act together. Uh, I I still think that Chris Wright leading the DOE is setting the example. I I think he should take over or they should replace the NRC with something that's led by Chris Wright so that we could really get our act together. And we're starting to see signs of that happening. So, the fundamentals couldn't possibly be better, but this is a very high beta sector. So if we see a major uh Iran induced negative event in the broader stock market, which I think is very possible, we're going to see uranium stocks take a nose dive. That's going to be a buy the dip opportunity. And just looking at the uranium price itself, it's been incredibly quiet for all the volatility we're seeing on almost every other commodity and asset. uh uranium is just quietly waiting for its next catalyst at this moment. I don't see any reason not to be bullish uh the U308, but it really is inactive at the moment and is not getting any attention on the short term. So, we're going to have to see when we have some sort of technical flow start to show some sort of uh new bull move underway, which is just not here now. And just touching on a few more things here, Eric, what's your thoughts here on copper? Well, we're well below the 50-day moving average now and not a whole lot of headroom left above the 200 day moving average. And if that 200 doesn't hold, and the Iran is clearly the key to that, you know, it's a signal that a global recession or even depression is not out of the question. And I I really think a lot of people are not fully understanding the magnitude of this straight of Hormuz situation. Yeah, there's lots of reasons to think that this will get resolved in the next couple of weeks. As Michael Every said, he expects that it likely will. But if this persists for months and months, and yeah, that's an outlier case. I I admit it. But if it were to p persist for months and months, the damage that it will do to the global economy is impossible to overstate. It could be utterly crippling to entire nations and the recovery from the damage that would occur if this continues for months and months would take years if not decades to fully recover from. So this is a really really big deal. We need to see this Iran situation get worked out so that traffic is moving through the straight of Hormuz and we need to see it happen quickly. uh copper and the S&P and uh lots of other things are all approaching very critical levels and if those levels don't hold it's a sign that the markets think that the situation in Iran is not going to be timely resolved and that really spells very very grim outlooks for the global economy. I'm sorry to be so gloomy folks but this is a really big deal. Well certainly copper remained weak. I was talking about last week the correlation between copper and precious metals which uh I'm not sure even fully why it's happening but overall copper has uh started to deteriorate in a in a correction mode and so uh at this stage I don't see any reason why this has to bullishly reverse here on the short term basically anticipate a little bit deeper consolidation here in the weeks to come Patrick before we wrap up this week's show let's hit that 10-year Treasury note chart what a move it's been for the month of March. I mean, we had that bullish engulfing candle come off of a retest of the 395 level in the first days of March. And since then, we've seen a 50 basis point swing in the 10-year yield, causing all sorts of stresses in the credit markets. This trend is now in place. The bigger question is where does this stall out? uh all of the previous highs uh from 2025 were all in that kind of 4 and a half to 460 level on the upside. On the short term, there could continue to be a little bit of stress on yields. Overall, I think that this should be contained, but uh it certainly on the short term has another 10 or 20 basis points risk until it really has a support line to stabilize. Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of BigPictur Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's research roundup. Well, in this week's research roundup, you're going to find the transcript for today's interview as well as the trade of the week chart book we just discussed here in the postgame, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's research roundup. So, that does it for this week's episode. We appreciate all the feedback and support we get from our listeners, and we're always looking for suggestions on how we can make the program even better. Now, for those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email at researchroundup@macrovoices.com and we'll consider it for our weekly distributions. If you have not already, follow our main account on X at macrovoices for all the most recent updates and releases. You can also follow Eric on X, Eric S. Townsen. That's Eric spelled with a K. And you can also follow me at Patrick Serzna. On behalf of Eric Townson and myself, thank you for listening and we'll see you all next week. That concludes this edition of Macrovoices. Be sure to tune in each week to hear feature interviews with the brightest minds in finance and macroeconomics. 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