recap/history/1775223130960-kjQZexuV_AE.json

{"id":"1775223130960-kjQZexuV_AE","videoId":"kjQZexuV_AE","url":"https://www.youtube.com/watch?v=kjQZexuV_AE","title":"MacroVoices #524 Simon White: War + Inflation = More Inflation","type":"youtube","topicCount":29,"segmentCount":298,"createdAt":"2026-04-03T13:32:10.960Z","uploadDate":"20260319","chunks":[{"title":"Podcast Introduction and Market Scoreboard","summary":"The hosts introduce the podcast and review the week's sharp market selloffs across equities, gold, and copper, alongside crude oil's geopolitical risk premium.","entries":[{"text":"Host: This is MacroVoices, the free weekly financial podcast targeting professional finance, high net 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, Erik Townsend and Patrick Ceresna.","offset":0,"duration":29},{"text":"Erik Townsend: MacroVoices episode 524 was produced on March 19, 2026. I'm Erik Townsend. It was a sea of red in markets on Wednesday as the Iran conflict has dragged on longer than most analysts expected, and the Fed's standing pat with no rate cut accelerated the selling.","offset":29,"duration":25},{"text":"Erik Townsend: The S&P, gold, copper, and just about everything else other than the dollar index and crude oil were down and down hard, closing on or near their lows of the day, and then selling off even more in futures trading after the 4:00 PM cash close. These are all ominous signs that more downside is likely in coming days, absent a major bullish news event.","offset":54,"duration":23},{"text":"Erik Townsend: So we've got plenty to talk about this week. Bloomberg macro strategist Simon White kicks it all off as this week's feature interview guest. Simon and I will discuss the prospects for secular inflation, and why the oil price surge might be the catalyst needed to bring it about. We'll also discuss the risk-off playbook, food price inflation, the breakdown in private credit, and much more.","offset":77,"duration":29},{"text":"Erik Townsend: We had a huge positive response to Dr. Anas Alhajji's cameo appearance updating us on the oil market disruption on last week's podcast. So this week, Commodity Context founder Rory Johnston will join us for another perspective on what the Iran conflict means to energy markets. That's coming up right after the feature interview with Simon White.","offset":106,"duration":25},{"text":"Erik Townsend: Then be sure to stay tuned for our postgame segment when Patrick's trade of the week will take a look at the inflation surge event that hasn't happened yet. Not the one in crude oil where the price already spiked, but the one in food prices, which as Simon White will explain in the feature interview, could come next. And oh by the way, Rory Johnston is going to reinforce that view in the upcoming oil market update.","offset":131,"duration":24},{"text":"Patrick Ceresna: And I'm Patrick Ceresna with the macro scoreboard week over week as of the close of Wednesday, March 18th, 2026. The S&P 500 index down 221 basis points, trading at 6625, markets now trading at multi-month lows. We'll take a closer look at that chart and the key technical levels to watch in the post-game segment.","offset":155,"duration":22},{"text":"Patrick Ceresna: The US dollar index up 97 basis points trading at 100 spot 21, attempting to bullishly breakout of a 10-month trade range. The April WTI crude oil contract up 941 basis points to 9546, the war premium remains as the uncertainty continues.","offset":177,"duration":22},{"text":"Patrick Ceresna: The May RBOB gasoline contract up 1204 basis points to 307, gasoline now trading at three-year highs. The April gold contract down 546 basis points trading at 4896, remains in consolidation after putting in the January highs.","offset":199,"duration":22},{"text":"Patrick Ceresna: The May copper contract down 509 basis points trading at 559, the March uranium contract down 111 basis points trading at 8475. The US 10-year Treasury yield up three basis points trading at 426, upticking at the end of the day in the post-FOMC window.","offset":221,"duration":21},{"text":"Patrick Ceresna: The key news to watch this week is the Friday OpEx, and next week we have the Euro and the US flash manufacturing and services PMIs. This week's feature interview guest is Bloomberg macro strategist Simon White. Erik and Simon discuss the risk of a renewed inflation cycle, why markets may be underpricing second-order effects of the Iran conflict, the parallels to the 1970s style stagflation, and how shifts in commodities, credit, and the yield curve could reshape the macro outlook.","offset":242,"duration":44},{"text":"Host: And now with this week's special guest, here's your host Erik Townsend.","offset":286,"duration":8}],"startTime":0},{"title":"Secular Inflation and the 1970s Analogy","summary":"Erik Townsend and Simon White discuss the return of secular inflation, comparing the current macro environment to the early stages of the 1970s inflation cycle.","entries":[{"text":"Erik Townsend: Joining me now is Bloomberg macro strategist Simon White. Simon prepared a slide deck to accompany this week's interview. Registered users will find the download link in your research roundup email. If you don't have a research roundup email, it means you haven't yet registered at macrovoices.com. Just go to our homepage macrovoices.com, look for the red button above Simon's picture that says \"Looking for the downloads\". Simon, it's great to get you back on the show. It's been too long. I want to dive right into your slide deck because there's so much to cover today. Let's start on page 2. You say inflation is a three-act play, that we really need to be thinking about a return to secular inflation, and a lot of people said there was no catalyst. Well, I think we got our catalyst, didn't we?","offset":294,"duration":49},{"text":"Simon White: Yeah, in spades. I think that's absolutely right, Erik. I think this is playing out in a way that's very analogous to the 70s, which is why I've referred to a three-act play there. And it certainly makes sense to start here. I think inflation is probably the most mispriced thing at the moment. I think it was mispriced before this war with Iran started and I think it's even more mispriced now.","offset":343,"duration":28},{"text":"Simon White: And it certainly seems that team transitory is back in force. If you look at the CPI fixing swaps, for instance, they show quite a sharp rise in inflation over the next few months expected, to maybe peaking out at 3 and a half percent, then very quickly it goes straight back down, and within 12 months, I think we're looking at roughly 2.8 percent in spot CPI, which is only about 40 basis points higher than it is now. So again, we're looking for quite a short-term shock, and it's even more egregious if you look at break evens.","offset":371,"duration":31},{"text":"Simon White: I mean, the shorter term break evens have moved a bit more, 2 to 5 year maybe moved 20 to 50 basis points since the war started, but the 10-year has barely budged, maybe 5 to 10 basis points. And I think the muscle memory is kicking back in that inflation will always go back to target. But I think that's you know, I think that's quite complacent. And that's why it's helpful to look at the 70s. You know, no analogy is perfect, but the 70s does have an uncanny amount of commonalities with today.","offset":402,"duration":29},{"text":"Simon White: And also the one thing that doesn't change is human nature. Human nature is immutable, and inflation is as much of a psychological thing as it is an actual you know, financial phenomenon or an economic phenomenon. So the chart on the left was something I first used in 2022, so almost 4 years ago, and it was uncanny because I updated it, and so the blue line shows the CPI level, not the growth, from the late 60s into the late 70s, early 80s, and the white line is today.","offset":431,"duration":30},{"text":"Simon White: And so I updated it, and we're kind of bang on today at the end of act 2. So the way I thought about it is act 1 was kind of when inflation first hits new highs. So this time around that was the pandemic. First time round in the 70s, it was on the back of we had a lot of fiscal easing because of the Vietnam War.","offset":461,"duration":20},{"text":"Simon White: You had LBJ's Great Society, Medicare, you already had quite loose fiscal policy. Inflation started creeping up much higher than expected. And then we went into act 2, which is kind of like the premature all-clear. And that's where it was kind of taken that inflation was a temporary phenomenon, it wasn't going to be much of a problem, it was going to go back in its box fairly quickly. And that feels like where we've been over the last couple of years. But you know, stubborn inflation as we know is proven very stubborn.","offset":481,"duration":29}],"startTime":294},{"title":"Comparing the Current Crisis to the Yom Kippur War","summary":"Simon White draws historical parallels between the current Middle East conflict and the 1973 Yom Kippur War, noting similarities in market complacency and equity leadership.","entries":[{"text":"Simon White: It's it's not gone back to target, it stayed above the target rate, it's remained elevated. And if you look actually where that act 2 ends and you match it up to the 70s, it's pretty much bang on October 1973, which is the beginning of the Yom Kippur War. And that in itself is a comparison worth looking at. There's a lot of differences obviously with that war, but there's actually a lot of commonalities that definitely makes it worth looking compared to what we're seeing today.","offset":510,"duration":32},{"text":"Simon White: So back then it was a surprise attack. It was the Arab states led by Syria and Egypt on Israel, and they attacked Israel on Yom Kippur. It was a very short war, it was only three weeks. So this war is not yet three weeks. Initially it was expected to be short, but that's looking less likely now. I think PredictIt has an end of April cease fire now down to 40 percent probability from something like 65 percent not too long ago.","offset":542,"duration":27},{"text":"Simon White: And um you had obviously a major oil shock in response to this war because what happened after the war, after the three-week war, was that the US stated aid to Israel and the Arab states decided to have an embargo on oil, and that created this huge oil shock. So oil prices managed to quadruple in a matter of months. That's quite a significant oil shock.","offset":569,"duration":27},{"text":"Simon White: And and then that led to the act 3, which is the comeback with a vengeance. You have this massive rise in inflation through the end of the decade, and it really didn't end until you got Paul Volcker in with his exceptionally high interest rate hikes, that Saturday Night Special, that really managed to break the back of inflation.","offset":596,"duration":20},{"text":"Simon White: And if you look at some of the further commonalities, it's not just obviously what happened with oil prices, not just that this was in the Middle East, not just that it involved Israel. You also if we go to the next slide in slide 3, and you look at the equity market back then. So the equity market back then, this was the time of the Nifty Fifty. So this was a set of stocks that everybody thought they had to own. You know, they had great earnings, they were great businesses, and pretty much everyone owned them.","offset":616,"duration":31},{"text":"Simon White: Excuse me, and you know, similar to today. So we had very narrow leadership. In fact, it wasn't until the time of the Bangs and the Magnificent 7 that we had such narrow leadership again as what we had back in the early 70s. You had extreme narrow leadership as well, and that Yom Kippur War just before or just after it started, stocks had already started to sell off maybe 10-15 percent in the months before the war, but in the following year they sold off another 45 percent, and that was the largest sell-off we'd seen since the Great Depression.","offset":647,"duration":34},{"text":"Simon White: Now that's not to say that we're going to get the same thing playing out here. There's a lot of differences obviously today. For instance, obviously the US is a major oil producer. This is not the same exactly the same states that are involved. The choke point here is not an embargo, it's the Strait of Hormuz. But there is still nonetheless a choke point in the supply states.","offset":681,"duration":20},{"text":"Simon White: But I think it's worth bearing in mind that you know as a non-negligible tail risk just given we are in a sort of not dissimilar situation. And the kind of nail on the coffin if you like in some ways for why you should be perking up now to be attentive to the risks is that valuations, even though we had this massive decline in stocks in this huge big bear market in 73-74, the CAPE, the cyclically adjusted price-earnings ratio, was 18. And today it's more like 40.","offset":701,"duration":31},{"text":"Simon White: And also like the you know allocation of households compared to financial assets was much lower back then, it's much much higher back today. So really there is a number of reasons why you could see things we're we're we're obviously to get more deterioration obviously to get anything like that, but given some of the commonalities I think it's worth bearing in mind. And especially when you look at the market today, it just does seem again there is some complacency in the air.","offset":732,"duration":23},{"text":"Simon White: The stock market inherently seems to believe I think that there is some sort of Fed put on the way, and therefore it's not really worth the market trading down too much. I mean even if you look at like the put-call spreads, so the VIX went up initially, a lot of that was driven by first of all it was driven by call spreads falling, then it was driven by put spreads rising, so people were putting on insurance, but then they quickly monetized I think they monetized those hedges and that put spread started to come off, and so the VIX has started to come off.","offset":755,"duration":27},{"text":"Simon White: So really I think the market's getting to the point where it feels like, you know what, this isn't going to be a major issue. You know, we don't have too much to worry about here, not ready to obviously rally and make new highs again, but this is not something to get overly your knickers in a twist about. But I'd argue again along with inflation, that's something that's beginning to look a little bit complacent.","offset":782,"duration":20}],"startTime":510},{"title":"Differences from the 1970s and the Food Price Shock","summary":"The conversation shifts to the differences from the 1970s, highlighting how the disruption in the Strait of Hormuz poses an even greater threat to fertilizer and food prices today.","entries":[{"text":"Erik Townsend: Simon, let's go a little bit deeper on some of the both differences and similarities between the Yom Kippur War and the present conflict. The Yom Kippur War was really a war of solidarity. As you said, the US had sided with Israel, basically all of the Arab states together went in on the Arab oil embargo. You have a very different situation today where the US has once again sided with Israel in a conflict with Iran, but now Iran does not have solidarity of the other Gulf states. In fact, it's attacking the other Gulf states that are allied with the United States. It seems to me there are still similarities, but there are some almost diametrical opposites in some aspects of this. How do we sort that out and make sense of to what extent the economic outcome might be the same or different?","offset":802,"duration":52},{"text":"Simon White: Yeah, I think I think that's 100 percent, you know, as I alluded to there are a number of differences, and so that puts you in a point where, you know, no analog is going to be perfect. But I think when you combine it as I say with the overall inflationary backdrop, where we are in terms of this three-act play in the 70s, you know, you could argue that what happened in the 70s were a series of kind of quote-unquote bad luck that led to inflation rising.","offset":854,"duration":27},{"text":"Simon White: So, you know, you had the kind of ex-ante conditions for inflation as I mentioned, we had already the Vietnam War, we had the fiscal expansion on the back of the Great Society stuff, and then you had the 1971 was Nixon closing the gold window, then you had the Arab oil embargo, the Yom Kippur War, you had at the end of the decade you had the Iranian Revolution. You could argue all these things are bad luck, but they were also hitting a situation where inflation was already in a different regime.","offset":881,"duration":28},{"text":"Simon White: And so I think I think that's the thing to to note the differences, that when you're in an inflationary regime, lots of things can happen, right? Things will always happen. But if they hit when you're already in an inflationary regime or more likely to have bigger inflationary impact. You know, that's where we are today. As I say, it's very uncanny we happen to look compare the two analogies that almost to the month when you get this sort of premature all-clear ending is almost to the month when the Yom Kippur War started as when the attacks on Iran started.","offset":909,"duration":31},{"text":"Simon White: Yeah, I wouldn't want to over-labor the point in terms of the analogies, but the there's there's so many precedents that makes it worthwhile looking a little bit deeper into. For instance, another one that's very interesting is an underappreciated fact that in the 70s, the food shock was actually much bigger than the energy shock in terms of on its effect on CPI. So if you look at the weighted contribution from food and from energy in the 1970s, it was much bigger than it was for energy.","offset":940,"duration":31},{"text":"Simon White: And in fact food food inflation was already rising before the the energy shock. This time around we have the disruption to the Strait of Hormuz. That obviously doesn't just affect energy prices, it affects energy products. And for instance, a lot of stuff that goes into fertilizer is either produced in that region or has to travel through that region. So Iran itself produces a lot of urea and ammonia. There's a huge amount of sulfur flows through the straits, all these things go into fertilizer.","offset":971,"duration":30},{"text":"Simon White: And in fact if we go a little bit further into the presentation, if we go to let me just find the slide, if we go to slide 8, we can see there actually you can see the two shocks. So the blue line shows the food shock after OPEC 1, the Yom Kippur shock, and you can see again after OPEC 2, the Iranian Revolution. Both times the food shock was worse.","offset":1001,"duration":24},{"text":"Simon White: And today already we have, if you look at the contribution to CPI, US CPI that is, from food, it's higher than than energy already. So if you have this effect feeding into, you know, fertilizer prices, and that's what I've tried to show on the chart on the right on slide 8, you can see this fertilizer proxy, which includes some of these inputs I mentioned along with things like potash. You know, when that starts to rise, it's a very reliable lead by about six months that food CPI will start to rise.","offset":1025,"duration":30},{"text":"Simon White: So I don't think that is also being fully priced in. And especially I think if you take account of the fact that if you have energy and food both rising, I think it's very unlikely you're not going to get some second round effect that's going to feed into core inflation and you get the sticky inflation that we saw in the 1970s. And that's a lot more troublesome for the Fed. In one sense it should make it slightly easier because the Fed can then go, \"Right, if we see sticky inflation, that's something we think we can do something about, we'll maybe hike rates.\"","offset":1055,"duration":24},{"text":"Simon White: But with the muted muted, sorry, next chair Kevin Warsh coming in, you know, whether he's going to lean towards the dovish or the hawkish spectrum, you know, I certainly think he's more likely to be more like an Arthur Burns who was in in the early 70s at a time of the Yom Kippur War than he's likely to be a Paul Volcker who was in charge after the OPEC 2 shock after the Iranian Revolution in 1979. So I think that further complicates the the matter in terms of what the Fed's reaction function is going to be.","offset":1079,"duration":41}],"startTime":802},{"title":"Duration of Oil Shocks and Yield Curve Mispricing","summary":"Simon explains how short-term conflicts can have long-lasting effects on oil prices, comparing the permanent shock of OPEC 1 to the transient shock of OPEC 2.","entries":[{"text":"Erik Townsend: Well, it seems like the analogy that's most relevant is the Yom Kippur War only lasted a few days, but the Arab oil embargo lasted quite a lot longer than that. So the question is once the direct kinetic conflict is over, how long can Iran continue to disrupt the flow of traffic through the Strait of Hormuz? Is that the right thing to focus on and if so, what's the answer?","offset":1120,"duration":25},{"text":"Simon White: Yeah, I think I think that's that's correct, Erik, in that the key message I think from that period was the war itself was very short. As you say, it was about three weeks, but the impact was felt way through all through the decade and it had a number of consequences. So again, no analogy is perfect, but the human side of things doesn't change how humans respond, human nature responds, doesn't really change.","offset":1145,"duration":30},{"text":"Simon White: In fact, I can see this this the two nature of the two different shocks. If we go to slide 6, so we've got two more charts there, and this this brings me to another point which I think needs to be made is that I don't think the yield curve is pricing in what's looking to be a much larger inflationary shock than for instance has been picked up in the break-even market.","offset":1175,"duration":20},{"text":"Simon White: And so the left chart we can see there is what break-evens did in the 1970s. So OPEC 1 and OPEC 2, both cases they ended up rising, and rising quite considerably, but long after if you like CPI had already started rising. So they were in late to the party. But both times they they did rise.","offset":1195,"duration":18},{"text":"Simon White: And if you look at the chart on the right there, you can see the two the nature of the two different shocks. So OPEC 1 was definitely more of a permanent shock to oil prices. So really oil prices never really revisited their pre-OPEC 1 or pre-war, pre-Yom Kippur War levels again. They just kept rallying through until OPEC 2 hit, the Iranian Revolution in 1979. They rose sharply again but nowhere near as much in percentage terms as they did in OPEC 1, and then they sort of gradually start decaying fairly soon after the Iranian Revolution.","offset":1213,"duration":34},{"text":"Simon White: So the OPEC 2 was more transient, was a more transient shock, but in both cases if you look at the bottom panel of that chart, you can see core and and in the interim period between OPEC 1 and OPEC 2, both made a higher low before rising again in the early 80s. And again it wasn't until Paul Volcker got his hands on monetary policy that he was really able to put an end to this huge inflation that we'd had through that decade.","offset":1247,"duration":25}],"startTime":1120},{"title":"The Vicious Cycle of Structural and Cyclical Inflation","summary":"Simon warns that structural and cyclical inflation are feeding off each other in a self-reinforcing cycle, further complicated by the impending arrival of a potentially dovish Fed Chair.","entries":[{"text":"Erik Townsend: One of the theories of secular inflation is that it's a self-reinforcing vicious cycle. So as you begin to see inflation, it changes consumer behavior. People start stocking up on things because they want to buy it while the price is still cheap before the price goes up more. That causes more consumption that is inflationary, and it all feeds on itself and it's kind of like a fire that once you've started it, you can't put it out. Are we already at that point in terms of this coming inflation cycle where the fire has been started and can't be put out, or are we still in the need to look at this and see what happens stage?","offset":1272,"duration":37},{"text":"Simon White: We're we're already in that. In my view it's quite clear that what began in 2020 with the pandemic, with the large spike in inflation, was the beginning of if you like that that cycle starting. And really what's happening underneath is that why 2 percent inflation, for whatever reason this is an arbitrary number, but 2 percent or around 2 percent inflation overall like over the whole economy tends to be fairly stable.","offset":1309,"duration":29},{"text":"Simon White: And I think that's because all the different actors that are taking price signals off one another when inflation is not moving around that much, they they tend not to get out of sync. But once it's out of the bag if you like, once you have this large rise in inflation which we saw in the early 2020s, they got all out of sync, and it takes a huge amount for them to get back in sync, and you end up with inflation remaining elevated.","offset":1338,"duration":24},{"text":"Simon White: And so you can split CPI up for instance into components. So you can look at the essentially sticky versus non-sticky components. And what you notice in 2020 is both cyclical and structural inflation rose, but cyclical started to fall and but the structural one remained more sticky.","offset":1362,"duration":19},{"text":"Simon White: And by the time the structural inflation had started to fall, cyclical inflation because of its name is cyclical, had started to rise again and started to reinforce structural inflation that was already elevated. And we're right in that period again now where structural had started to fall, a higher low, but the cyclical part of it is already rising again.","offset":1381,"duration":22},{"text":"Simon White: And this war is just going to make it worse because obviously the immediate effect is on headline inflation. So straight away you're going to see that feed into the cyclical side of things. And once again what was what 2.4 percent where we are now and CPI maybe 3 percent of PCE, you know they're going to look like again equivalent to what we saw in the mid-70s after the Yom Kippur War. This is the point where we start to see a rise again.","offset":1403,"duration":21},{"text":"Simon White: Now I don't know how far it goes. Again, the US is much more insulated than it was back then. But I think you do see a re-acceleration. And the real kind of, if you like, the real kind of tinder in this is that as I say, going back to Kevin Warsh, you've got someone that's coming in that nobody's really sure is going to be an inflation fighter. In fact quite the opposite quite possibly.","offset":1424,"duration":22},{"text":"Simon White: Which is kind of actually a bit odd just to slide deviation, but connected is it's kind of strange if you look at real yields have been rising. So real yields have been rising since the war, and that's been driven by higher rate expectations. And so that's part of the rise in nominal yields. So break evens have moved a bit, as I mentioned, but really the bulk of the move so far have been real yields, and that's on the back of as I say rate expectations are going higher.","offset":1446,"duration":26},{"text":"Simon White: But that kind of just seems a little bit incongruous, given Warsh and the conditions under his nomination and a president who still makes no bones about being absolutely determined to get lower rates immediately. I mean he was saying so only a couple of days ago on yesterday. So I feel that that is also adding to the structural kind of impediment for inflation to to keep rising.","offset":1472,"duration":26}],"startTime":1272},{"title":"Real Yields, Break-Evens, and Yield Curve Steepening","summary":"The discussion turns to the yield curve, with Simon predicting a steepener as the market begins to price in higher long-dated break-evens and inflation shocks.","entries":[{"text":"Simon White: And then go back to the yield point I was mentioning. So I think yields as I say are not priced for inflation shock, and I think one thing we'll see is the yield curve will steepen. So if we go to slide 7 on the deck and I looked at basically how break-evens and real yields behaved in the 70s. Now there was no real yield in the 70s because TIPS didn't start trading until 1997.","offset":1498,"duration":27},{"text":"Simon White: But you can synthesize a real yield so you basically look at how real yields have traded laterally versus a whole bunch of different economic and market indicators, and then you can back it out and look at how and build basically a synthetic series of real yield in the 70s. So chart on the left there we can see again the difference between OPEC 1 and OPEC 2 and how the yield behaved.","offset":1525,"duration":21},{"text":"Simon White: So in both cases, break-evens rose, but in the OPEC 1 what happened is that you had the shock to break-evens but then we had an equal and opposite shock to real yields. That's textbook stagflation. What happened in OPEC 2 is the break-evens rose, but real yields stayed largely static. And I think that was basically for two main reasons. One, the US response to OPEC 1, so the US became less energy intensive and more energy efficient, and a lot of non-OPEC production came on stream from places like Alaska and the North Sea.","offset":1546,"duration":36},{"text":"Simon White: And on top of that, you had very soon after the Iranian Revolution you had Paul Volcker at the Fed, and that really put a kind of cushion under how far real yields could fall. So in OPEC 1, the 10-year yield maybe didn't move a huge amount because the real yield and break-evens canceled one another where the nominal yield rose a little bit in OPEC 2.","offset":1582,"duration":20},{"text":"Simon White: But the difference being in OPEC 1 and OPEC 2, so the OPEC 1, the curve steepened because we had Arthur Burns, and he as I mentioned earlier, you know, was notorious for not believing that a central bank could do much for inflation, let alone a supply shock inflation. He was kind of of the view that by and large, most inflation shocks couldn't be solved by a central bank.","offset":1602,"duration":24},{"text":"Simon White: And in fact he was the guy when he was at the Fed, he got the staffers working on some of the first measures of core inflation, and through the decade he kept on taking out more and more of core inflation in a frantic hope that something would be going down, which he discovered wasn't the case. So you know, we have this very kind of dovish banker who doesn't really believe central banker doesn't really believe that inflation is something he can do much about.","offset":1626,"duration":23},{"text":"Simon White: So short yields kind of fell, so the curve steepened in OPEC 1. In OPEC 2, yes 10-year yields were rising a little bit, but you had Paul Volcker who was massively raising on the front end, so the curve the curve flattened. But this time I think in some ways it the curve response function could be more like OPEC 1 because I think that longer dated break-evens will rise. So I think that move thus far that we've seen this muted move, I don't think that'll last.","offset":1649,"duration":27},{"text":"Simon White: And that they should rise more from you know the relative static where they were before, and more likely to see as I say with Warsh, you're going to see lower rate. So I think lean towards a curve steepener this time as we saw in OPEC 1, but not just for reasons that OPEC 1 is a similar to what's happened today. There are as I covered some similarities but there's a lot of differences as well.","offset":1676,"duration":21}],"startTime":1498},{"title":"Equity Market Complacency and the Fed Put","summary":"Simon discusses why equity markets remain surprisingly complacent, heavily relying on the belief of a forthcoming \"Fed put\" despite immense geopolitical and inflationary risks.","entries":[{"text":"Erik Townsend: Well, if this was 1973 all over again, and clearly you've said that it's not exactly a perfect analogy, but to the extent that there's a lot of overlaps, 1973 was not a good time to have a long-term bullish outlook on buying and holding stocks for the long haul. What does this mean for equity markets for the rest of the decade?","offset":1697,"duration":21},{"text":"Simon White: Why, I I I think it's interesting now. I mean, depends who you speak to. I mean, so I've got like a lot of stuff you know some friends and people I know that speak to commodity people, and they're overall a lot more bearish than equity and rates people who seem to be overall less pessimistic. I think again, going back to what I said earlier, I think that's still the sort of belief that there is some sort of Fed put on the way.","offset":1718,"duration":23},{"text":"Simon White: But even more than that, I think the big difference is that ultimately there's a backstop, and that if things get really bad the Fed can step in. I'm not saying that's what's going to happen right now, but you're always going to have that kind of tail cover. So the commodity markets can really price in extreme kind of negative outcomes, but they don't have a lender of last resort, right?","offset":1741,"duration":20},{"text":"Simon White: So there's nowhere to go if you if your commodity markets seize up for whatever reason, there's no backstop in the same way that you have for financial assets. So I think that sort of explains why we have that today. And you know 1973, I don't think we we had that to the same extent. There wasn't this belief that the Fed was always going to protect equity returns.","offset":1761,"duration":22},{"text":"Simon White: So that's why you probably had that situation where you had this huge shock much bigger than the energy shock that got today, combined with a Fed that's then, yes it was overall more dovish, but this was the decade remember of go-stop monetary policy where, you know, they loosened policy, inflation came back then they tightened it, and then they're like, \"Oh right, better loosen policy again,\" back and forward, back and forward.","offset":1783,"duration":21},{"text":"Simon White: So you know, huge amount of volatility underlying there which obviously makes it more likely or or increases the chance you can have deeper steeper falls in the market. And so you don't really have some of that today, but it does seem as I say earlier, it feels like the market overall be more complacent, even with that in mind that there is a backstop, that there is still a potential for some sort of Fed put, it still seems to be some sort of complacency and as I say what drew me what draws me to that especially is just looking at what's happened to put-call skew.","offset":1804,"duration":27},{"text":"Simon White: You know, initially there was the response to like let's hedge some downside, but very quickly that reversed. It was almost as if like the market went, \"Oh maybe we don't need such deep out of the money puts here, maybe I maybe the market's not going to sell that sell off that much, in which case I don't need this insurance right now.\" So again that that smacks to me just of complacency just because the distribution of outcomes are are still very wide, right?","offset":1831,"duration":29},{"text":"Simon White: Still a lot of moving parts here, both unpredictable but the most of of course Trump himself. You know, back in the 70s we had a lot of volatility, political volatility, but again I don't think you had anyone quite as volatile and who was able to obviously voice his volatility in such a real-time manner than we've got today. So that really puts a lot of people in a sort of frozen moment. Like they want to move money, but they're also kind of fearful that they can't really put much risk on because so much could change.","offset":1860,"duration":27}],"startTime":1697},{"title":"Gold as a Tail-Risk Hedge and Ultimate Collateral","summary":"Simon explains why gold remains the ultimate form of collateral and a critical tail-risk hedge, defending its recent bull run despite short-term pullbacks and shifting correlations.","entries":[{"text":"Erik Townsend: Simon, on page 11 you say gold is a hedge against both tails. Elaborate on that please. But also I think it's it's relevant to point out if we're looking at the analog as being the 1970s, private ownership of gold wasn't relegalized until 1974. So there was a very big transition catalyst there where it became legal once again to own gold bullion, which probably disrupts the data. How should we think about this in the 2020s?","offset":1887,"duration":27},{"text":"Simon White: Yeah, that's a good point. I think I think there's also another disruption at the other side as well because the data on this chart goes back to the late 20s. And back in the 30s was when essentially the US confiscated private gold ownership, so they confiscated gold. I think they paid 20 dollars and then revalued it at 35 dollars an ounce.","offset":1914,"duration":23},{"text":"Simon White: So quite possibly gold could have went up a lot more in that deflationary period of the 30s. I think I think that's why gold's misunderstood, though, is that it is to some extent an inflation hedge. It's not a perfect inflation hedge, it's not path-dependent. But in extreme, when inflation goes very very high and you're in that sort of environment, it does a good job because you've got the debasement angle of things and just the general kind of insurance against the financial system.","offset":1937,"duration":29},{"text":"Simon White: But it's not appreciated that it's also a downside tail hedge as well. And I think what has been driving a lot of the rally recently in gold is just a lack of alternatives. If you start thinking about I don't know what's going to happen and I don't know whether we're going to be in a debasement world where there's a lot of inflation, or I don't know whether there's going to be a massive credit event and that's going to be deflationary.","offset":1966,"duration":21},{"text":"Simon White: These are potential threats to the financial system. What can I own that has you know proven record of protecting a portfolio in such an environment? And there's really not much else other than gold. I think people sort of ran through all the options and they're like, \"Right, that won't work, that won't work.\" Bitcoin? That hasn't been tested.","offset":1987,"duration":21},{"text":"Simon White: And they landed on gold. And you know, a lot of people that openly admitted they've never ever really favored gold, they've never been a fan of gold, they've never understood it, are nevertheless starting to add or have started to add some exposure to their portfolios. So I think as an unimpeachable form of collateral really is what's driving driving this move.","offset":2008,"duration":21},{"text":"Simon White: And although it struggled a little bit over the last few weeks, I think it's premature to say that's the end of the primary bull trend because kind of a lot of the main reasons that were driving it are still valid today. I mean there's still a need for diversification from the dollar system. I still think there's obviously a lot of geopolitical volatility. That hasn't changed.","offset":2029,"duration":23},{"text":"Simon White: You know, central banks, I don't think are suddenly like emerging market central banks, they were the ones that initially kicked off the rally a few years ago. I don't think they're going to turn tail and start selling in any great size. You know, they bought some and they may not buy any more, but I don't see why they would suddenly turn tail and start selling on mass. There was a story that Poland was mooting selling some of its holdings, but the reason why they were thinking of selling them was for defense. And that doesn't really strike me as a great sort of a gold bearish kind of reason for selling your gold overall.","offset":2052,"duration":37},{"text":"Simon White: So I think, yeah, the general environment's still very conducive to gold still still generally keeping to its primary bull trend. It's struggling right now perhaps because we've had some marking up of short-term rates, and the dollar's had a little bit of a rally, things like that. But overall I I don't see why. You know, it takes a big seller to come around to really force it into a massive bear market, and I just don't see where that's going to come from.","offset":2089,"duration":24},{"text":"Erik Townsend: As you said, unfortunately what has not gone away is geopolitical excitement, for lack of a better word. The thing that I've noticed just in the last few weeks is there was a very strong positive correlation, you know, the next time a bomb drops gold spikes upward. And what we've seen just in the last few weeks is a breakdown where when oil is up hard because of geopolitical, you know, bombs are dropping, gold's actually moving down. What's going on there?","offset":2113,"duration":29},{"text":"Simon White: Yeah, as I say, I think potentially it's because the real yields have risen, that could be part of it, the little bit of the rally in the dollar. It should also be in times of if there's any capital repatriation going on, maybe in the Middle East. I don't know for sure, but you know gold can often get hit in the short term. People need to liquidate.","offset":2142,"duration":20},{"text":"Simon White: That's unfortunately the problem with having an insurance asset that's also can sometimes be a very liquid asset, is it's often the one that's first to go, so it can give kind of counter-intuitive signals. But overall I just as I say, I don't know what the narrative or the argument would be to say that this is anything more than just, you know, obviously we've got to remember the market has rallied extraordinarily much in recent months and it's perfectly respectable for it to have, you know, the kind of pause it's having right now, like it can't continue in that sort of trend indefinitely.","offset":2162,"duration":38},{"text":"Simon White: But I don't think that means that the trend is over. So, yeah, I mean I think silver is a far more, obviously volatile, but a far more questionable kind of you know, response to that kind of overall idea and trade, but gold to me seems certainly more more secure just because as I say, the reasons underpinning its rally all seem to be mostly intact still now.","offset":2200,"duration":23}],"startTime":1887},{"title":"Rewriting the Risk-Off Playbook","summary":"Simon explains why traditional risk-off playbooks may fail in this environment, specifically arguing that the US dollar may not see a massive rally due to different capital flow structures.","entries":[{"text":"Erik Townsend: Simon, we've been jumping around in the slide deck. Let's go back to page 4 because you've basically said you're rewriting the risk-off playbook. It seems like an important book to read. Tell us more about it.","offset":2223,"duration":13},{"text":"Simon White: well, I'm certainly not going to rewrite it myself, but my point here is really that, you know, we talked about some historical analogs that are useful guides, but I think you have to keep an open mind as the rules can change. So I think standard you know risk-off playbook is that you see the dollar rally and Treasuries rally and risk assets sell off, and that might not be the case to the same extent this time.","offset":2236,"duration":25},{"text":"Simon White: So for instance, take the dollar. So the kind of quintessential risk-off moment really was the GFC, and in the GFC the dollar rallied. So I think that's for a lot of people's like, \"well, that that was the big one and the dollar rallied, the dollar's therefore a safe haven.\" But really if you look at what drove that, and then you compare to today, I don't think you can necessarily say the dollar's going to be in a condition to rally quite as hard as it did back then.","offset":2261,"duration":23},{"text":"Simon White: So the chart on the left there you can see that the blue line shows the bond flows, inflows from foreigners. So they they slowed. Equities were tiny back then, equities are much bigger now, as far as foreigners are concerned. But what actually drove the dollar, the rally, was repatriation of flows, so the US basically mutual funds and banks had lent to various European entities, and it was these guys repatriating that led to the dollar rally.","offset":2284,"duration":27},{"text":"Simon White: So it wasn't a case of foreigners channeling money in or needing dollars to cover structural shorts. It was really just US entities repatriating that led to the dollar rally. Now this time around, the cash flows are the structure of this is different. So bond flows are much smaller now because we've had because the US is now not see Treasuries are not seen as much of a safe haven. And equity flows are now massive.","offset":2311,"duration":32},{"text":"Simon White: And the US outflows are not as large as they were back in 2008. So the net impact means the US is much more exposed to equity outflows. So in a sort of risk-off environment that we're in right now, it's conceivable that more capital is repatriated, and some of that is equities in the US. Equity flows as I say tend to be unhedged. That is a dollar negative. And you don't have that cushion of the same cushion of dollar repatriation.","offset":2343,"duration":24},{"text":"Simon White: So, yeah, you wouldn't expect to see the dollar necessarily rallying as much. And that could be seen even more if you look at the chart on the right. So after the, you know, Mar-a-Lago Accord, you know, all the talk of the dollar disruption, the tariffs, you know, that didn't lead to a sell America trade, but I certainly think it made people think twice about their exposure to dollars.","offset":2367,"duration":20},{"text":"Simon White: And that could be seen as I say in this chart, just kind of like the dog that didn't bark. So the white line shows the dollar reversed. And what you tend to see is the blue line, which is reserves denominated in dollars. So when the dollar weakens, i.e. you see the white line rise, the reserve managers have tended to buy dollars. They tend to use the weakness in the dollar to to add to their dollar reserves.","offset":2387,"duration":26},{"text":"Simon White: And that significantly hasn't happened this time round. So we've seen this big weakening of the dollar and there's been no response yet from dollar reserve. So I think that shows like a general change in attitude to global demand for dollars. So I don't necessarily say as I think the dollar rally will be as big this time, and thus far the DXY I think is up about 1 and a half 2 percent since the war started.","offset":2413,"duration":17},{"text":"Simon White: And if we go to to slide 5 looking at say commodities, so commodities as a as a kind of risky asset is sort of seen as well should certainly sell off in a recession I think is the general interpretation. That isn't isn't always the case either. If you have a commodity induced recession, and if we are going to get recession, there's very low chance of it in the next few months, but that could change if the war continues and the negative effects spiral.","offset":2430,"duration":25},{"text":"Simon White: What often happens then is that commodities start to sell off before the slump in growth, but the that sort of sell-off in commodity prices kind of eases the growth shock and actually that allows commodities to rally through the rest of the recession. So that might well happen again. We get a commodity induced recession say later this year, next year. That's not a prediction, but if we were to get one, I wouldn't automatically assume that commodities are going to sell off through that.","offset":2455,"duration":26}],"startTime":2223},{"title":"US Economic Strength and Private Credit Vulnerability","summary":"Simon breaks down the underlying strength of the US economic cycles but warns that the massive growth in floating-rate private credit remains a deeply vulnerable underbelly.","entries":[{"text":"Erik Townsend: Simon, let's move on to page 9. The title of that slide is \"it takes a war to bring down an economy this strong\". Let's start with how strong the economy is, but then later you say it would take a protracted war. So I guess the question is how protracted does it need to be in order to take down the strength of economy that we already have, and where is this thing headed?","offset":2481,"duration":20},{"text":"Simon White: it's actually remarkably strong given I think the length of time of the cycle. And that really surprised me when I was looking at this. And it's also a little bit ironic, I guess, that coming into this war the US was firing on all cylinders. And you know as you mentioned as I mentioned the fact that war is perhaps just what it's going to take to to derail it.","offset":2501,"duration":23},{"text":"Simon White: And you have number of cycles for the US economy. Everyone knows about the business cycle. There's also the liquidity cycle, the housing cycle, the inventory cycle, and the credit cycle. And all of them are actually in in pretty good shape. So the business cycle, if you look at leading indicators, has been turning up. The liquidity cycle, so that's the chart on the left there.","offset":2524,"duration":21},{"text":"Simon White: And I look at excess liquidity, which is the difference between real money growth and economic growth. So that really gives you a measure of what impact this liquidity is going to have on markets. So the bigger the gap between liquidity and economic growth, it means the economy needs less, but that more to go into risk assets. That has been vacillating around, as you can see in the chart, but it's turned back up again.","offset":2545,"duration":22},{"text":"Simon White: And even even taking into account we've seen some tightening in financial conditions since the war, but overall they've not been massive. As I've alluded to earlier, the dollar's rally hasn't been huge either thus far. So liquidity's in in pretty good shape.","offset":2567,"duration":15},{"text":"Simon White: And the business you know the general business cycle is in pretty good shape, even taking into account the job market's slowed down. I think it's possible to have a jobless growth. And some of the things that I would look at to see if there was a slowdown in growth coming, such as temporary help, is actually rising, not falling.","offset":2582,"duration":16},{"text":"Simon White: Average hours worked is kind of static. You would normally expect to see that fall as people cut hours before they start sacking people. And I think you've got to remember that we have companies still have very strong margins, the you know their balance sheets are generally in pretty good shape.","offset":2598,"duration":20},{"text":"Simon White: And then you've got this massive amount of government money still filtering through the system. So there's maybe not the same acute needs, in the short term at least, for heavy layoffs. And that that global, the global economy is also in a good shape as well. So that's the chart on the right there. You can see that we're in the midst of this global cyclical upswing.","offset":2618,"duration":18},{"text":"Simon White: If you look at OECD leading indicators for different countries around the world, almost all of them are turning up on a six-month basis. And then if we look at the inventory cycle, that looks to be turning up as well. Leading indicators are pointing it to continue to rise. Sales to inventory ratios have started to rise.","offset":2636,"duration":18},{"text":"Simon White: The housing cycle is not as in good shape, but you know it's okay. House price growth, sales growth has slowed down and things like that. But one of the best leading indicators for housing is building permits. Building permits are are doing okay. And they're actually led by mortgage spreads. So we've seen quite a significant compression in mortgage spreads for various reasons such as falling bond volatility.","offset":2654,"duration":23},{"text":"Simon White: So you can't say that the housing cycle is in particularly bad shape either. And then we have the credit cycle. So if we go to slide 10, the listed credit market from a fundamental perspective, my my leading indicator there on the chart on the left shows that on net fundamentals are still pointing to tighter spreads. So things like bank lending conditions are particularly","offset":2677,"duration":23},{"text":"Simon White: supportive. You can see there on the chart that leading indicator typically gives about a six-month lead as to what we can expect from listed market credit spreads. So that is looking okay. But there is there is trouble brewing as well. It's not all good news. It's maybe more below the surface. So there's private credit.","offset":2700,"duration":19},{"text":"Simon White: Private credit is where we've had the most debt created recently as listed market debt creation was falling, debt overall debt creation was falling because private credit was rising so so much. And you can get a little bit of a measure on what's going on in private credit by looking at the business development company spread, the BDC spreads, so they are basically publicly listed companies that invest in unlisted entities.","offset":2719,"duration":24},{"text":"Simon White: And their spreads normally track the listed market quite quite tightly, but recently they've decoupled. So listed spreads continued to trade and to turn in lower, tighten, but the BDC spreads have decoupled and moved a little bit higher. So that suggests that there is some some problems in private credit.","offset":2743,"duration":16},{"text":"Simon White: And then the other factor is private credit as opposed to listed market credit tends to be floating rate. So high-yield listed high-yield maybe only about five percent or five to ten percent of floating rate now compared to nearly thirty percent after the GFC. Whereas private credit by its nature tends to be almost all private almost all floating rate.","offset":2759,"duration":20},{"text":"Simon White: So it's very exposed to the rise in interest rates that we've seen over the over the last year or so, and it will be obviously even more impacted if we get this re-acceleration in inflation and higher interest rates that I mentioned before. So you've got this situation where the economy is very strong overall, but it's got these sort of vulnerable underbellies such as private credit, which are already starting to hurt, as I say, if we look at the BDC spreads.","offset":2779,"duration":25},{"text":"Simon White: So that's the risk really is that a strong economy doesn't necessarily protect you from from accidents happening, and I think private credit's potentially where one of those could happen.","offset":2804,"duration":10}],"startTime":2481},{"title":"Reiterating Gold's Status vs Crypto","summary":"Erik and Simon circle back to gold, reiterating its historical outperformance during extreme inflationary or deflationary crises, contrasting it with crypto's unproven track record.","entries":[{"text":"Erik Townsend: Simon, I wanted to jump back into gold. You gave us page 11, \"the ultimate form of collateral\". We talked a little bit about the differences between now and the 70s. What are your views relative to gold and why specifically did you title this \"the ultimate form of collateral\"?","offset":2814,"duration":17},{"text":"Simon White: Well, that that's a good question. I mean the chart there on page 11 shows the performance of gold in inflationary environments and deflationary environments. And it's what I alluded to earlier, that gold performs remarkably well when inflation is very very high, above the target, so five, six, seven percent, it has historically done a really good job.","offset":2831,"duration":21},{"text":"Simon White: But it also manages a higher average return when the economy is contracting or during crises. And I think that speaks to it. In any situation where the system itself is being put under scrutiny, you know gold manages to outperform other major asset classes. It's because people don't find it particularly comfortable but they find it safe. You know, no one likes owning something that yields zero, but you know when everything else yields minus thirty, zero is an amazing amazing real yield to have in your portfolio.","offset":2852,"duration":30},{"text":"Simon White: So in that sort of scenario, people are attracted towards something that really is independent of of you know almost almost everything else. I mean, central banks have made efforts to control gold prices before. For instance, the London Gold Pool in the early 60s, but that ended in abject abject failure. So it really isn't an unimpeachable asset in that regard.","offset":2882,"duration":21},{"text":"Simon White: And I think that's why people keep coming back towards it. And especially today as I say in a position of debasement, but possibly contraction, tail risks on either side, I'll go gold's really where you you find yourself looking if you haven't yet been convinced that crypto will do the job.","offset":2903,"duration":15},{"text":"Simon White: Crypto as you look over the last last few weeks was also hit heavily. So that doesn't really smack yet for everyone as as being something that they can absolutely rely on in extreme events. I mean, look at what it did in in 2022. It didn't it certainly didn't work as a deflation hedge back then. So yeah, I still find people coming back to gold as the gold standard of unimpeachable collateral.","offset":2918,"duration":25}],"startTime":2814},{"title":"Private Credit Risks and Interview Outro","summary":"Erik formally concludes the interview with Simon before briefly returning to the topic of private credit, comparing its opaque risks to the 2007 subprime mortgage crisis.","entries":[{"text":"Erik Townsend: Simon, we're up against our time. Before I let you go, I can't think of anything more important than inflation right now. Tell us where our users can go to see more of your work and particularly work related to inflation.","offset":2943,"duration":12},{"text":"Simon White: So I publish daily on Bloomberg on the terminal and mobile and on on on the on bloomberg.com if you don't have access to the terminal. And so you know I cover all major macro areas. We look we obviously spent quite a bit of time on on the equity market over the over the coming months just as things got a little bit more heated.","offset":2955,"duration":18},{"text":"Simon White: But also focus obviously on the rates and fix income market and credit as well. So there really isn't any you know major asset class. I cover fixed commodities too as we've already done today in our talk. So yeah, we can you can catch me there.","offset":2973,"duration":13},{"text":"Erik Townsend: Simon, thanks so much for another excellent interview. Patrick Ceresna and I will be back as macro voices continues right here at macrovoices.com.","offset":2986,"duration":20},{"text":"Simon: Um, so I think, I think that does have to color your, your view and, uh, a protracted war would definitely do a lot of damage to, to the economy.","offset":3006,"duration":12},{"text":"Host (Eric): Simon, as you talked about private credit, it was kind of concerning to me because, frankly, it, it echoes in my mind to about 19 years ago, the summer of 2007, when we were also talking about an opaque, not well-understood in the broader finance community small little piece of the credit market that couldn't possibly disturb anything else. And the reassurance at the time was, don't worry, it's contained to subprime. There's nothing to worry about. Is this another setup like that?","offset":3018,"duration":32},{"text":"Simon: It looks very much like it. And I think it was Ben Bernanke himself who said, uh, subprime is contained, I think. Um, look, I, I go back to my kind of axiom that, um, the one thing that doesn't change is, is human nature. I think we're sort of seeing that even within the private credit space in terms of when people have opportunities to make money, the more kind of off-grid they are away from regulation, the standard kind of emotions of greed and fear will kick in.","offset":3050,"duration":34},{"text":"Simon: Greed initially, and people will start to take inflated risks to essentially earn money now and park what are risks later. Hopefully they can not be around when the, um, proverbial hits the fan. Um, so I don't see why, why it wouldn't be any different. I mean, there's even a story today about one of the credit funds. If you look in the private credit fund, it's, it's yet another black box, but within it there's even more black boxes.","offset":3084,"duration":29},{"text":"Simon: I mean, that straight away reminded me of CDO squared. So here we had CDOs, which were already kind of niche derivative products, but people started making up these CDOs of CDOs themselves. And, you know, I'm sure a lot of people at the time were thinking, this probably can't end well. And, you know, here we are again. There's nothing new in finance.","offset":3113,"duration":23},{"text":"Host (Eric): Simon, I can't thank you enough for a terrific interview. Before I let you go, I'm sure a lot of listeners are going to want to follow your work. You kind of have to be somebody special and have a Bloomberg terminal in order to access most of it. Tell them for those who are lucky enough to have that access, where they can find your writings.","offset":3136,"duration":20},{"text":"Simon: Sure, and thanks again for having me on the show, Eric. Uh, so on the terminal, I have a column called Macroscope. Comes out uh, twice week, Tuesday and Thursdays. And I also write for the Markets Live blog, which is a kind of 24-hour five-days-a-week markets scroll uh, that you can follow all the latest market development.","offset":3156,"duration":25},{"text":"Host (Eric): Patrick Ceresna and I will be back as MacroVoices continues right here at macrovoices.com.","offset":3181,"duration":10}],"startTime":2943},{"title":"Introducing Rory Johnston and the Strait of Hormuz Crisis","summary":"Erik introduces energy expert Rory Johnston to discuss the unprecedented and unexpected closure of the Strait of Hormuz.","entries":[{"text":"Host (Eric): It was great to have Simon White back on the show. Rory Johnston is next on deck for a special second interview on the developing Iran conflict and what it means for the oil markets. Then Eric and I will be back for our usual post-game chart deck and trade of the week.","offset":3191,"duration":21},{"text":"Host (Eric): Since the extra coverage format seems to be a hit with our listeners, we will do our best to continue it as long as the situation in the Middle East warrants. Now let's go right to Eric's interview with energy markets expert Rory Johnston.","offset":3212,"duration":22},{"text":"Host (Eric): Joining me now is Commodity Context founder Rory Johnston. Rory, uh, you, Dr. Anas Alhajji, really all of the most credible experts felt the same way, which was look, the Strait of Hormuz getting shut down is probably not that realistic of a scenario. And I'm going back to previous interviews, you know, months or years ago.","offset":3234,"duration":25},{"text":"Host (Eric): Boy, everybody got thrown a curveball. So what happened? How come all the experts, including yourself, who thought this really couldn't be shut down? Is it just about insurance? Is it about minefields? Is it about something else? How come the traffic is not flowing through the strait, first of all, and then we'll get into what does it mean?","offset":3259,"duration":22}],"startTime":3191},{"title":"The Trump Administration's Strategic Miscalculations","summary":"Rory admits his surprise at the strait's closure, arguing that the US administration blundered into a prolonged conflict expecting a quick capitulation that never arrived.","entries":[{"text":"Rory: Thanks for having me back on, Eric. As you note, I've been relatively kind of Pollyannaish about this for a long time, that...","offset":3281,"duration":10},{"text":"Rory: ...it, and the reason for it, the reason I didn't think this would happen, and to be clear, I never thought this would happen in my career. And the reason for that is because it is such a big shock. Like it's, you know, it make—it'll make the, if this continues, it'll make the 1970s look like child's play.","offset":3291,"duration":21},{"text":"Rory: And that is my concern here. And I think part of the reason that it is happening now, and the reason I didn't think it would happen is—it's not that I didn't think that Iran could close the strait, although I had my doubts because we had never seen it realized and again, the consequences are so intense.","offset":3312,"duration":19},{"text":"Rory: But I never thought a US president would engage in a war with Iran without a plan, without something in his pocket kind of ready for this moment. And what we've seen so far is that at least, here's my, my read of what's happening and how the Trump administration got into this. I do not think that the Trump administration expected to be in its third week of the Iran war.","offset":3331,"duration":27},{"text":"Rory: I do not think they did any of the things you would do if you had planned to be in this engagement for weeks and potentially months now. We saw, for instance, the IEA's coordinated strategic petroleum release last week. That was good. Uh, that's a, absolutely what we should be doing in this in this situation, but it was two weeks after the war started.","offset":3358,"duration":24},{"text":"Rory: Like, if you were, if you were planning this, you would have an IEA release lined up. You know, we saw that ahead of the Gulf War as an example. You would have had things like the marine insurance facility that Beston announced at Treasury. You would have had that lined up. You probably would have done more work to refill the Strategic Petroleum Reserve ahead of this.","offset":3382,"duration":23},{"text":"Rory: I mean, all of these things are such that it just seems insane that we entered this without—and by we, I mean the Trump administration entered into this without a plan. I think that what we've seen from the Trump administration—and very frankly, my expectation was that we were going to see something that clearly the largest military buildup in the Middle East since the invasion of Iraq in 2003 was going to lead to something.","offset":3405,"duration":27},{"text":"Rory: But right, we saw the same kind of buildup off the coast of Venezuela earlier this year or late last year. And in that moment, you know, there was blockade, there was everything else. But when it finally all went down that first weekend in January when the Trump administration, you know, uh, kidnapped Nicolas Maduro uh, and his wife...","offset":3432,"duration":21},{"text":"Rory: ...basically that happened on a Saturday, or Saturday morning, I guess. There was all this, you know, what's happening, what's happening, what's happening. And then by Monday, you know, we had Delcy Rodriguez in as the interim president. She was making a deal with President Trump and it was kind of, it was wrapped really quickly.","offset":3453,"duration":17},{"text":"Rory: The same thing happened last June when we last talked about the worry of the Strait of Hormuz, was that um, the Trump administration embarked on what at that stage was a fairly stark break from US military policy towards Iran, which is, you know, it had directly engaged in 14, dropping 14 bunker-buster bombs on uh, Natanz and Isfahan.","offset":3470,"duration":24},{"text":"Rory: And again, if you remember, and I'm sure you remember this Eric, the, like the Monday when that—or Asian markets opened at the end of the weekend, prices spiked higher as you would expect after this kind of event. And then by mid, mid, you know, by the middle of Monday, we saw this kind of symbolic retaliation from Iran. And then Trump saying we've got a peace, we've got a ceasefire.","offset":3494,"duration":22},{"text":"Rory: ...deal. And then I think crude ended the day down $10. That was kind of my framework for what was expecting out of this conflict. And by that token, I had expected that, you know, it was very clear that Cuba was next up on on the list of kind of regimes to roll over. And I think Trump planned to be basically be rolling over on Cuba by now.","offset":3516,"duration":26},{"text":"Rory: And the wrinkle here is that if they were expecting some kind of Delcy Rodriguez character to emerge in Iran, someone to say—someone to give them the opportunity to declare victory. I think he would have. And I think that what we've seen so far is that the Iranians have not done that.","offset":3542,"duration":15}],"startTime":3281},{"title":"Tanker Insurance and Expectations of a Ceasefire","summary":"Rory explains that exorbitant marine insurance premiums and the lingering hope of an imminent ceasefire are keeping tankers from braving the blockaded strait.","entries":[{"text":"Rory: And I think if Trump expected the political culture of Venezuela to be the same as the political culture of Iran, that I think is probably arguably the biggest miscalculation here from the White House. As for what's actually preventing the, the, you know, the passage through the strait. Because again, when we look historically, the strait has never been closed.","offset":3557,"duration":27},{"text":"Rory: Even when we've had acute violence, acute attacks in the strait back in the 1980s during the Iran-Iraq war, during the tanker wars, we saw hundreds of ships hit. We saw by, by the calculations I saw was 450 ships attacked. Uh, you had 250 tankers attacked and 55 of those tankers were basically either sunk or scuttled and otherwise abandoned by crews. Like we more than we've already seen now. And during that time, you never had flow halt through the strait.","offset":3584,"duration":32},{"text":"Rory: So that was our best historical parallel and quite frankly, I expected something similar to be happening here. And what we've seen so far is that no, uh, very, very few—I mean the estimates vary, but basically like between a 90 and 95% reduction structurally now through the Strait of Hormuz.","offset":3616,"duration":26},{"text":"Rory: And with things like insurance, I think there was this expectation that okay, maybe at the beginning it was the lack of insurance. Uh, we were waiting for these, you know, these tanker owners to and the insurance...","offset":3642,"duration":19},{"text":"Rory: ...providers to figure out a way to say, okay, you know, we're going to figure out a way to lift—obviously the risk is increased, so we're cancelling coverage and we're going to kind of reinstitute. But, but there was just, you know, that never happened. You ended up actually seeing, and we've seen reports more recently that, you know, the war insurance has skyrocketed.","offset":3661,"duration":19},{"text":"Rory: If it was basically 0.25% of a vessel's value kind of in the month before the war, uh, that is now by the latest estimates that I've seen published by Bloomberg jumped to 5%. So we're talking a massive, massive increase. That's like a $5 million insurance premium on a million on a $100 million vessel just to cross the strait.","offset":3680,"duration":26},{"text":"Rory: But the issue is that even at those insane levels, the arbitrage value across the strait still seems to clear. That, you know, we now have effectively negative prices on the bad side of the strait, and we have on a physical basis on Dubai, over $150 a barrel. You can very easily cover that with this insurance.","offset":3706,"duration":24},{"text":"Rory: And they're not. And I think that is where something else is happening. And I think my best explanation for this, and I think it's also an explanation you're going to hear me talk about through the financial—the relatively sanguine financial impacts that we've seen so far, is that the market continues to expect—the base case expectation is that Trump backs out here.","offset":3730,"duration":25},{"text":"Rory: That we see another taco. And if that's the case, if there's the chance that tomorrow this ends, or at least he declares it done, um, why spend the $5 million and risk your ship...","offset":3755,"duration":26},{"text":"Rory: ...and crew if this could be over tomorrow. And I think there's this continual hope that this is going to end because, as we will talk about, the consequences of it not ending are so extreme that it is unthinkable to me that a US president would bear the political cost of what's coming down the pipe.","offset":3781,"duration":23}],"startTime":3557},{"title":"Economic Calamity of a Prolonged Strait Closure","summary":"Rory details the devastating consequences of a prolonged closure, explaining that losing 15 million barrels a day would require COVID-level demand destruction and spark a global economic calamity.","entries":[{"text":"Host (Eric): Well let's talk about that specifically next then. I think you and I could easily agree that—and I'll just go to an extreme here—if this continued for a year, if there was no transit or no significant meaningful transit of the Strait of Hormuz for a year, that would result in probably a bigger than 2008 global financial crisis because it would shut down the entire global economy. There's no energy, there's no economy. That's the end of the story.","offset":3804,"duration":26},{"text":"Host (Eric): Okay, if it's—you know, we can't go a year, but we could go into next week. Okay, how long is that fuse? What—are there tipping points where after a certain point things are broken that can't be fixed because the backlog is too long? What does the timeline look like of how long this can continue before you get into a situation where it's not reversible?","offset":3830,"duration":24},{"text":"Rory: The first thing I want to say Eric is I completely agree with you. I think that if this goes on for a year, and again, I cannot imagine—like the level of economic calamity, of human catastrophe that would wrought is unimaginable to me. I mean, we'll walk through it briefly here, because I think it's important to try and imagine it. But again, I just can't imagine the political—any politicians kind of engage, you know, bearing that political consequence.","offset":3854,"duration":27},{"text":"Rory: Because what we're talking about, to your point, like I mean, I'm normally not a guy that comes, you know, comes up with like big price calls. I typically, I don't like them. But like I've been saying that yeah, $200 crude is easy in this scenario. If we're, if we're talking a year or more, like 200 is the bare minimum of what you'd expect. We need to—I've been trying to parameterize what we're actually talking about. And...","offset":3881,"duration":142},{"text":"Rory: ...if let's say, just for this heuristic here, we talk about 20 million barrels a day of oil flow through the strait. Let's even just knock it down to 15 because maybe we get, you know, the East-West pipeline and Yanbu and everything else—everything works well with the Saudi diversion plan.","offset":4023,"duration":16},{"text":"Rory: Let's say 15. That is ballpark the peak of the demand destruction we experienced in March and April of 2020 during COVID when everyone was locked in their homes, you had not an airplane in the sky, you know, major airports were effectively shuttered. That's the kind of demand destruction we would be needing to balance that market.","offset":4039,"duration":25},{"text":"Rory: But with no pandemic, and just, just purely through price mechanisms. That is an extraordinarily high price to clear that kind of demand destruction. I've been basically just kind of saying that like, you know, me, I have an extraordinarily low price sensitivity for gasoline to get my kids to school in the morning.","offset":4064,"duration":20},{"text":"Rory: But a lot of people both in wealthy countries, obviously this, you know, it's going to be effectively a massive regressive tax. Um, but I think in wealthy economies we will generally experience this as a debilitating recessionary, you know, nigh depressionary price shock that will sap consumer spending, that will have all of the normal repercussions we would think about.","offset":4084,"duration":23},{"text":"Rory: But the price spike isn't enough, because you still need to shed that much demand from the global system. And where is that going to happen? It's going to happen in poorer emerging market countries in the Global South. That when we see price shocks, they will see shortages.","offset":4107,"duration":16},{"text":"Rory: Uh, we saw this in kind of notorious fashion now in 2022 when the kind of the infamous example of the—of the committed tanker to Pakistan that they broke their commitment, uh, they paid the breakage fee and they shipped that gas to Europe because they could make a, you know, a king's ransom on the arb even factoring for the breakage fee.","offset":4123,"duration":14},{"text":"Rory: And that's how markets are going to clear. That's how they're supposed to clear in this system. So I'm not saying that's wrong per se, but there is going to be an enormous human cost here. And I think when you're talking about these fuels, you're talking about electricity, you're talking about heat, you're talking about cooking. You're talking about life. And I think that's what we're going to have to try and trim back by 15 to 20% if this persists. And that is just insane.","offset":4137,"duration":28}],"startTime":3804},{"title":"Timeline Scenarios for Supply Chain Recovery","summary":"Rory provides near-term scenarios, warning that even an immediate ceasefire would leave months of supply chain chaos, while another three weeks could easily push Brent crude past $150.","entries":[{"text":"Host (Eric): Let's try to put some specific time frames on this, which I know is difficult and I apologize for doing this to you. But as you said, what's going on here is most people are thinking, well surely this is about to be over. I mean, it's—it's crazy to continue it, it's about to be over, it must be about to be over. Just in case it's not, let's imagine both a three-weeks-more scenario and a three-months-more scenario. What do each of those—if you had to guess—the impact of three more weeks, just like the last three weeks or however long this has been? And then three more months. What—what do those scenarios look like in your mind?","offset":4165,"duration":37},{"text":"Rory: So let's actually start with the even more sanguine scenario. What happens if it ends today? Because I think there's already durable damage. And I think a lot of people just assume that we could end this tomorrow and everything goes back to normal. We're probably talking three months minimum to, to re-normalize this system, even if it stopped today and every tanker currently in the Gulf made a break for it and they all made it out and we just resume full flow and everything like nothing ever happened.","offset":4202,"duration":28},{"text":"Rory: Even in that case, we're talking about months of supply chain recovery because these ships are being piled on top of each other. You've had—you've already had roughly a 400 million barrel gap or 330-340 million barrel gap that's emerged in the, basically the normal flow of oil into the Middle East, largely to Asia.","offset":4230,"duration":22},{"text":"Rory: Right now, we're still—we still haven't felt the brunt of that because three weeks ago, we still had tankers laden with oil leaving the Gulf. Those tankers will continue to their destinations, takes three, four weeks to get where they're going. And when that air pocket finally hits land in Asia, that's when we're going to start drawing inventories at 10, 15 plus million barrels a day.","offset":4252,"duration":23},{"text":"Rory: Which again, has never happened before. We've already seen Asian refineries attempt to short—basically frontrun this, to extend their runways. They've reduced operating rates, they've cut product output. So we are talking we've seen a $150 crude in Dubai in physical crude, but we've seen over $200 a barrel jet fuel in Asia...","offset":4275,"duration":19},{"text":"Rory: ...I mean Singapore. And I think that is, that alone would take months to sort out. But let's go to that three-week scenario. Okay, so let's say we're already in this for three weeks, let's say it's double. Now you're looking at two-thirds of a billion barrels of air pocket in the system that, again, needs to get sorted out.","offset":4294,"duration":18},{"text":"Rory: By that stage, we've already seen upwards of 9 million barrels a day of crude oil production capacity shut in through the Gulf. The longer that's off, the—the longer the strait is closed, the more we're going to see that cut back. And again, as anyone familiar with this industry, it's not trivial to shut in these wells, it's not trivial to get them back on without any kind of negative repercussions.","offset":4312,"duration":19},{"text":"Rory: And all that stuff just gets worse with time and time and time. I think, you know, in terms of price call, I think in three more weeks of this, I think we could—I think we would already be over $150 Brent. We're already obviously there at the kind of physical Dubai cash market.","offset":4331,"duration":15},{"text":"Rory: And I think people are like, well, well why wouldn't, you know, why wouldn't anyone buy that that crude? Uh, why wouldn't you just...","offset":4346,"duration":6},{"text":"Rory: ...buy buy WTI? It's like $50 or $60 cheaper. And the answer is that it's in the wrong place at the wrong time. You know, if you're buying the prompt WTI—WTI futures, it's not for delivery until next month, and you need to get it from Cushing to the coast, then you need to get it from the coast to the Middle East, to Asia. That we're talking months.","offset":4352,"duration":16},{"text":"Rory: People need these barrels today. And that is why I think there was still this kind of hopium, if you will, from Asian refinery saying, like, okay, this is going on, but like surely this can't last. And what you've started to see over the last couple days—there's a Bloomberg report this morning—where Asian refineries were starting to bid into the Brent basket.","offset":4368,"duration":20},{"text":"Rory: And they're starting to kind of try and buy these fut—these other barrels, which means that they're now worrying that this is going to be going on for months. Uh, and it also means that kind of acute local scarcity in crude in the Middle East and products in Asia is also going to begin spreading out to all the rest of the world.","offset":4388,"duration":17},{"text":"Rory: And I think it's really easy for Americans and the American president to say, ah...","offset":4405,"duration":5},{"text":"Rory: ...who cares about tight oil markets in the Middle East? We're here and oil prices are still pretty low. It's because this shockwave kind of moving out through the system takes time to kind of incentivize and bid all those barrels over. And I also think back to this why aren't ships going through, because they, you know, maybe they think Trump's going to taco.","offset":4410,"duration":19},{"text":"Rory: I also think that the futures market are in the exact same situation. What we saw not, you know, two Mondays ago, the, you know, the second weekend that again, everyone thought he was going to end on the weekend. He didn't. Prices spiked higher, you hit almost $120 barrel Brent. But then you got the first kind of Trump said the—the war's almost over, and prices cratered. You had a $35 a barrel intraday spread in Brent, which I don't believe has ever happened before.","offset":4429,"duration":29},{"text":"Rory: And a lot of traders kind of lost their shirts in that because again, bidding crude higher was the obvious directional call in this environment. But the kind of constant jawboning, you know, those people got blown out of their positions, many of them lost their jobs. People are much more wary now to kind of frontrun, because normally you'd expect futures markets to frontrun the tightness in physical markets because markets are forward-looking. But I think now we have to wait for that physical market tightness to kind of fully and aggressively manifest in the West before those future prices are going to actually converge.","offset":4458,"duration":40}],"startTime":4165},{"title":"Trump's Shifting Narrative and Escalating Retaliations","summary":"Erik and Rory discuss the president's shifting rhetoric regarding oil prices and the danger of escalating retaliatory strikes involving critical Iranian and Israeli infrastructure.","entries":[{"text":"Host (Eric): Now you said earlier that you thought the Trump administration had no idea that this outcome, which has already occurred, was even possible. I want to push back slightly on that and ask you if it's possible that maybe they did see it as a possibility, but just were not as concerned by it as you and I are. I want to read you a Truth Social post from President Trump on Wednesday where he says, \"I wonder what would happen if we finished off what's left of the Iranian terror state and just let the countries that use the Strait of Hormuz—we don't—let them be responsible for the so-called strait. That would get some of our non-responsive 'allies' in quotes engaged and fast,\" signed President Donald J. Trump.","offset":4498,"duration":48},{"text":"Host (Eric): It sounds to me like he doesn't think it's a big deal for the United States since he perceives the United States to be energy independent, that if the Strait of Hormuz is closed down, it sounds like he thinks that's a problem that affects other countries but doesn't affect us. So, you know, the hell with it, let them worry about it. I don't—I'm not going to bother asking you whether we should be concerned about it, because I think you and I agree that we should be concerned about the strait needs to be open uh, for the sake of global commerce. Oil prices are set globally and so forth. But it does seem like there's room that the reason the president's not so concerned about this outcome is not that he didn't foresee it, but that he's just not as worried about it as you and I are.","offset":4546,"duration":49},{"text":"Rory: I think there's a chance of that, and I—I think again, I didn't expect him to go this far. So I'm—I can't pretend perfect knowledge of Trump's mind by any means. But I think what we've seen in those comments over the past two and a half weeks now is evidence of remarkable goal shifting.","offset":4595,"duration":16},{"text":"Rory: We had that—we had that tweet this week. End of last week, we also had the tweet about how actually high oil prices are good for the United States because the United States is the largest oil producer in the world. But that contrasts strongly with some of the earlier comments out of Trump about, you know, basically don't be a panicking, don't bid up the price of oil, you know, this is going to be fine, the war's almost over.","offset":4611,"duration":18},{"text":"Rory: Like it definitely felt like he was trying to keep the oil prices lower. And then as oil prices started to inevitably, based on this kind of physical reality we've been discussing, as those prices started to grind higher, he started to find new ways to say, oh, okay, this is actually good for us.","offset":4629,"duration":17},{"text":"Rory: And I actually think in some ways, that's actually the most worrying development in this because I think at least my mental framework here has always been that the oil market would be the single—the singular thing that would end up pushing Trump back from the edge, from really going through for a prolonged period of time, months or or longer.","offset":4646,"duration":21},{"text":"Rory: And if we're starting to see him attempt to, to change that narrative to almost convince himself—and again, like Donald Trump is an extremely public person. He's been for—he's been against high oil prices and...","offset":4667,"duration":13},{"text":"Rory: ...trying to drive them lower since the 1980s. Like low oil president is kind of like his brand. And I would say that—so I don't know how much I can really buy this. I don't even know how much he can really buy this depending how long this goes. I still think his core bias is towards low oil prices.","offset":4680,"duration":19},{"text":"Rory: Again, he was elected as kind of a pocketbook cost of living president. And I think this is just—he was also elected as a president that would get out of wars in the Middle East. But we're very—we're obviously in a very, very different timeline now from that election.","offset":4699,"duration":16},{"text":"Rory: So again, I think there's a possibility that you're right, you're right Eric. But I do think that a lot of this is him saying things after things don't go his way. For instance, the comment about the strait came mostly after he asked all of the kind of allied NATO nations and Asian nations that consume the oil to kind of come help them, and they were kind of like, no.","offset":4715,"duration":18},{"text":"Rory: Because again, I think the world, a lot of the consuming world, like I think if they knew 100% that this was going to go on for years, yeah, they're going to send their navies because again, this is untenable. But I think there's this worry, I think there I even heard this worry initially with the SPR releases, that like anything you do to ameliorate the oil price consequence to a degree short-circuits Trump's own feedback mechanism.","offset":4733,"duration":37},{"text":"Rory: That the only way he was going to back down—and this is a similar to the tariffs, that when you know the S&P was crashing, that's when he tacoed. There was an expectation that this was the same mechanism that would be seeing now but with oil. And I worry that is beginning to lose its sensitivity given that I think now it's a question of how can Trump figure out a way to declare victory? Because again, he's not going to stop this unless he can say he won. So I think he's trying to find ways, trying to find something that he can declare victory on.","offset":4770,"duration":27},{"text":"Rory: And again, I thought at the beginning, there was enough at the—at the gate...","offset":4797,"duration":4},{"text":"Rory: ...right? We wiped out the leadership, you killed the Ayatollah, all of this stuff. I think he could have declared victory on that first Monday. And I think he's like, oh, well, let's do this a little bit longer. And now we're in so deep that it feels like you need something much bigger.","offset":4801,"duration":15},{"text":"Rory: And if anything, the Iranian regime seems to be entrenching. At the beginning, you did hear—I mean, when there was a lack of centralized leadership, you had different elements that were being more negotiating or kind of conciliatory. And that it seems is beginning to fall by the wayside.","offset":4816,"duration":17},{"text":"Rory: And I think even for a while there was some hope that the number of missiles and drones that were being launched every day by Iran were dwindling over time. Like oh, is Iran running out of missiles? Are we entering the endgame?","offset":4833,"duration":11},{"text":"Rory: And over the last two days, they've shot back up. That—and again today in particular—we we were chatting about this before we started recording, but like Brent popped above 110 following Israel's attack on the South Pars gas field, which up until now we hadn't been hitting...","offset":4844,"duration":16},{"text":"Rory: ...upstream and kind of Iranian oil assets, oil and gas assets specifically. And that's why up until now, most of that production assets hadn't been hit. You've had—you had a couple refineries hit. You had Ras Tanura, you had—you've had attacks on Fujairah. But overall, there are a lot more targets across the Middle East that were very, very tempting targets. I mean, we all remember Abqaiq in 2019. Clearly the Iranians can hit it.","offset":4860,"duration":29},{"text":"Rory: They have chosen not to yet because it—again, for them, I think that they still have this conception of different degrees of escalation. And what we saw already was as soon as the South Pars gas field was hit, they were like, okay, now these bunch of petrochemical facilities and upstream facilities, they're all legitimate targets now.","offset":4889,"duration":24},{"text":"Rory: And they also warn that if Trump bombed Kharg Island, they're like, well, if you do that, then we view all other ports in the region as fair game. I think they are still trying to kind of parameterize their own escalation or retaliatory kind of spiraling here.","offset":4913,"duration":11},{"text":"Rory: But, and again, I think what we've seen so far is that in both cases where Israel and to my knowledge, these were both Israeli attacks specifically on the South Pars gas field and the fuel depot in Central Tehran, that those were kind of against the wishes of the White House.","offset":4924,"duration":16},{"text":"Rory: That, you know, there is still some kind of freelancing here on the Israeli side about like how far they're going to go and how much they want to escalate this. Clearly they want—they want more escalation, right? I think that's clear than what we've seen so far.","offset":4940,"duration":13},{"text":"Rory: But I do wor—I do wonder whether or not that's the kind of thing that's going to piss off Trump, quite frankly. We—we saw this, uh, he got really upset with the Netanyahu government last June when, you know, there was worry that they weren't going to play ball with the ceasefire or whatever else. There was like that famous comment uh, as he was trying to get on Marine One. But I do worry that that's the kind of situation we're ending up in now.","offset":4953,"duration":23}],"startTime":4498},{"title":"Dislocated Benchmarks and Physical Market Squeezes","summary":"Rory explains the severe price dislocation between global benchmarks like Brent and WTI compared to desperate physical market squeezes driving localized crude and jet fuel prices much higher.","entries":[{"text":"Host (Eric): Normally, Rory, people who are in macro markets and, you know, investors...","offset":4976,"duration":5},{"text":"Host (Eric): ...who are not specialists in oil only pay attention to two benchmarks. Brent crude, which is based on North Sea oil production, is the global benchmark and then West Texas Intermediate is the US benchmark. Uh, normally it's only professional oil traders who pay attention to any of the other prices in the oil market.","offset":4981,"duration":20},{"text":"Host (Eric): Let's talk though about some of the other prices, because really Brent and WTI only got—I guess WTI was 119. Neither one of them has gone above 120 in this. That's, uh, you know, they've gone up a lot, but they haven't gone up that much. I think it was Oman traded above 185 this week? Uh, as you said, there was jet fuel prices above 200 in Singapore.","offset":5001,"duration":25},{"text":"Host (Eric): Should we be thinking about these really high prices that are occurring in some localized markets as oh well, that's just a logistics thing, it doesn't really count? Or are those price signals that could portend what's coming for Brent and WTI?","offset":5026,"duration":15},{"text":"Rory: They're exactly what's coming for Brent and WTI. Because I think I've kind of talking around this point a little earlier, but what we're talking about right now is again, the—these markets, and you will know this well Eric, that futures and benchmarks, there is both a locational element to it and a time element.","offset":5041,"duration":19},{"text":"Rory: And where the current tightest market is right now is basically there's all these laden tanker or unladen tankers waiting to go back into the Gulf to fill up. And they're like, well, I could buy some crude off the coast of Oman and just basically turn around and head back.","offset":5060,"duration":16},{"text":"Rory: But those are the barrels that are at $150 or 100—I hadn't honestly seen Oman go up to 1—180. But yeah, that's basically, yeah, you can charge a king's ransom for any barrel that's physically available on the good side of the Gulf right now because that's where crude is in desperate, desperate supply because it's much faster to get to Asia from there than from the US Gulf or from the North Sea.","offset":5076,"duration":23},{"text":"Rory: And I think that is what we're going to see eventually for the other benchmarks. That now that Asian buyers in particular are coming to the realization that this isn't ending tomorrow and that they may need to cover not just today's crude slate but tomorrow's or next month's crude slate.","offset":5099,"duration":20},{"text":"Rory: Now they are beginning to bid on those other contracts, which again, is why we're starting to see Brent firm up so much more. That we're kind of back to above 110. WTI I think has some other potential weirdness going on. There's been a lot of talk about atte—you know, participants trying to hedge their SPR exchanges. Lots of stuff going on there as well.","offset":5119,"duration":22},{"text":"Rory: But I do think overall, the best thing that explains WTI's relative underperformance relative to Brent and certainly relative to the Middle Eastern grades is that the furthest grade away. That takes the longest to get to where you're going. And I think that's going to be something that will continue to kind of leave WTI at the back of that—of that bus, if you will.","offset":5141,"duration":19}],"startTime":4976},{"title":"The Looming Risk of US Export Controls","summary":"Rory warns of a looming political risk that the US administration might implement export controls on refined oil products to combat surging domestic pump prices.","entries":[{"text":"Rory: The other thing we haven't talked about yet, and I think where I'm especially concerned that we could be going. Because again, Trump says this is good, he doesn't care. But eventually pump prices are going to rise. We already have US average diesel prices over $5 a gallon. Gasoline's coming up there too. Diesel's going to go higher, jet fuel's going to go higher.","offset":5160,"duration":19},{"text":"Rory: I worry that we're going to see kind of a rediscussion or we've already seen musings about export controls out of the United States. That this was actually something that the Biden administration mused in 2022. They're like, well, well, could we restrict or ban the export of refined products?","offset":5179,"duration":17},{"text":"Rory: There are a lot of issues with that. It bottles up diesel in the Gulf Coast, it, it, it creates issues with potential res—reciprocal trade restrictions if then Europe decides to ban the export of gasoline to into the East Coast. There's a lot of problems there. But I do think that's where this could go.","offset":5196,"duration":17},{"text":"Rory: And I think particularly, you're seeing some of that like the framework and the kind of precursor to that argument being put out by Trump. And I think back to that question of he's saying we don't get any oil from this strait, so what do we care? And then your point, well, because markets are global. The way to solve that is to make markets not global.","offset":5213,"duration":21},{"text":"Rory: And I think that is my—is my most acute worry here going into this, is that I'd mentioned earlier that, you know, wealthy nations largely will be able to afford the oil and the products. It'll just be debilitatingly expensive.","offset":5234,"duration":13},{"text":"Rory: Once you start mucking with trade, even the United States, which is a net petroleum exporter, we you well know that that's not the same in crude or quality. That's not same in product slate by region. You've even seen the—the repeal or at least temporary waiver of the Jones Act, which is a very substantial political move for the White House.","offset":5247,"duration":20},{"text":"Rory: That really makes the most sense in the context of well, what if we ended up, you know, banning exports? Well then we could use non-Jones Act tankers to move US Gulf Coast crude to different area or US Gulf Coast oil, but also diesel to other areas of the country rather than it being bottled up.","offset":5267,"duration":12},{"text":"Rory: Because if you have no ability to shift out from those regions...","offset":5279,"duration":1},{"text":"Rory: ...you would basically end up forcing US crude production shut-ins and US particularly Gulf Coast refining shut-ins, which is the opposite of what you want. So temporarily it would lower prices, and I think that's why it would be very attractive for the White House. But in the long term, it would short-circuit wealthy markets' capacity to just pass this on through price. And then we would likely end up facing physical shortages in these advanced markets.","offset":5280,"duration":28}],"startTime":5160},{"title":"Fertilizer, Food Prices, and Severe Inflation","summary":"The conversation highlights how the disruption will ripple into fertilizer and global agriculture, causing food shortages and severe consumer inflation that could dwarf the 1970s.","entries":[{"text":"Host (Eric): Rory, when we hear about the Strait of Hormuz, what comes to investors' minds is of course crude oil. But tell me about how fertilizer plays into this story as well.","offset":5308,"duration":11},{"text":"Rory: Yeah, so I am not a fertilizer expert, but in addition—I mean, we've all been focused on oil and maybe gas, but there's a lot of other things that come from the Gulf, whether it's fertil—I think it's a third of global fertilizer supplies, the vast majority of global helium supplies. All these things are going to have their own knock-on consequences to all these other markets as well.","offset":5319,"duration":13},{"text":"Rory: I think when you think about fertilizer and even I think this ties back into to oil products as well, if this continues...","offset":5332,"duration":8},{"text":"Rory: ...we will see crop yields decline. We will see food production decline. We will see the food that does get to your plate more expensive on the commodity basis of the food itself, and being shipped there by either by truck or by plane at far more expensive rates.","offset":5340,"duration":15},{"text":"Rory: So this is absolute—I mean, again, this is, you know, our most recent experience here with—and again a where all this goes with monetary policy as well. Our most recent kind of parallel is 2022 that central banks got acutely—and I think reasonably—freaked out at the time by the explosion of inflation coming out of the COVID bullwhip effect.","offset":5355,"duration":23},{"text":"Rory: And for the first time in my life, central banks took a—took a keen interest in following the price of oil, and particularly the price of gasoline. And that's when I think the way this all feeds back into the macro side is this—you know, if there's anything that is going to unmoor long-term consumer inflation expectations, it's this kind of shock.","offset":5378,"duration":22},{"text":"Rory: It's, you know, this last time we experienced this would have been in the '70s. This shock, if continued, will make the '70s look like child's play. I think a lot of people still go back and think wow, we must have lost a massive amount of supply back in '73 or '79.","offset":5400,"duration":17},{"text":"Rory: And there were some losses, but the losses were relatively small. And the big thing was it was more of a logistical like we're not shipping to you, so that's causing gaps here and everything else. But a lot of it was, you know, the supply wasn't acutely lost to the degree that we are currently seeing it lost today.","offset":5417,"duration":17},{"text":"Rory: And it just sets us up for a much worse kind of price shock. And again, I think going back to this like even if this ended today, we're co—we're sewing the seeds of these like deep ripple effects, these deep kind of multi-industry bullwhips that are going to be working through the system. That even if you ended today, we're still going to have consequences trailing out for months.","offset":5434,"duration":20},{"text":"Rory: And if we and if this goes three weeks longer or heck, as you mentioned, three months longer, oh man, like these industries are going to break...","offset":5454,"duration":6},{"text":"Rory: ...and people will need to cut back. There will be physical losses that people will have to experience. And that's where I go back to. I don't see this as tenable long-term politically for anyone involved. But I also thought that so far and I've been wrong.","offset":5460,"duration":18}],"startTime":5308},{"title":"Desalination Vulnerabilities and Interview Outro","summary":"Erik clarifies a prior point about the vulnerability of Middle Eastern desalination plants to Iranian retaliatory strikes before Rory provides his contact information to wrap up the interview.","entries":[{"text":"Host (Eric): Rory, I can't thank you enough for a terrific interview. Before we close, I want to add a quick point just of clarification about last week's interview with Dr. Anas Alhajji. Several of you on Twitter and in email said, \"Hey, Anas was wrong when he said that Iran had a huge vulnerability if their desalination plants were attacked. Iran only gets 3% of their water from desalination.\"","offset":5478,"duration":25},{"text":"Host (Eric): I agree it was a little bit ambiguous how it was worded, but that was not Dr. Alhajji's intended point. The point that he was making is everybody presumes that Israel has a nuclear weapon and Iran doesn't. His point was Iran effectively does have a nuclear option which is the other Gulf states. Not Iran, which only needs to rely on desalination for 3% of its own water, but the other Gulf states, including Israel, are heavily dependent on desalination. So it is the risk of Iran striking the desalination plants of Israel and other countries that would be the equivalent of a nuclear escalation and would probably result in Israel responding with a nuclear response. So that was the point that Dr. Alhajji was making.","offset":5503,"duration":46},{"text":"Host (Eric): Rory, I want to come back to what you do at Commodity Context for anybody who's not familiar with it. Terrific website. Please give us your Twitter handle and tell people what they can expect to find at commoditycontext.com.","offset":5549,"duration":12},{"text":"Rory: Thanks so much for having me again Eric. I always love coming on the show. You can follow me on Twitter at uh, @Rory_Johnston. And all of my public research is published at commoditycontext.com. We've got an—the Oil Context Weekly report every Friday that covers—I currently call it the Oil of the—the Oil and Iran War Context Weekly because that's all we're talking about.","offset":5561,"duration":18},{"text":"Rory: But every Friday at 4:00 to 5:00 p.m. Eastern, uh, I publish three monthly uh, data reports on OPEC, global balances, and North American detailed balances. And then I also am doing particularly these days, a lot of thematic work on Iran, on Venezuela, and the overall insanity in this current oil market. And I encourage you to join me.","offset":5579,"duration":23},{"text":"Host (Eric): Patrick Ceresna and I will be back as MacroVoices continues. And stay tuned, folks. Case you didn't connect those dots, Simon White told me earlier in this podcast that we needed to worry about food price inflation next. That was even without considering the fertilizer angle that I just discussed with Rory. So Patrick's trade of the week is going to be about food inflation and how to hedge against it. That's coming up next right here at macrovoices.com.","offset":5602,"duration":31},{"text":"Host (Eric): Now back to your hosts, Eric Townsend and Patrick Ceresna.","offset":5633,"duration":7}],"startTime":5478},{"title":"Post-Game Analysis: Equities Outlook and Technicals","summary":"In the post-game segment, Erik and Patrick discuss the binary nature of the equity market's outlook based on the duration of the Iran conflict, noting clear technical signs of market distribution.","entries":[{"text":"Host 1: So if you think that the Trump administration has this whole situation completely under control, it's going to be over in another week or so, just like the President and Secretary Hegseth say it's going to be, then in that case, if that's what you think, then this is a terrific buy-the-dip setup. It probably sets the stage for a rally to new all-time highs.","offset":5640,"duration":26},{"text":"Host 1: If President Trump can really get this all under control and wrap it up and there's no lasting impact from it—and to be sure, in order for there to be no lasting impact, it really needs to get wrapped up pretty quickly here—if you think that's what happens, then it's time to buy this dip and buy it in size because we're going much higher.","offset":5666,"duration":18},{"text":"Host 1: On the other hand, if you don't think that, if you think that the Trump administration has started a fire that they won't be able to put out and that this is not under control and that this Iran conflict might turn into a repeat of the Iraq debacle that began in 2003, well, if that's what you think—because we're leaving my politics out of this one—that would portend a very, very different equity market outcome.","offset":5684,"duration":28},{"text":"Host 1: We could easily be looking at a cyclical bear market, and the worst case would be if oil transit through the Straits of Hormuz stays impaired for many months. In that scenario, without exaggeration, it could lead to an oil price surge well over $250 a barrel. That would cripple the global economy and lead to a global financial crisis on the scale of, if not bigger than, 2008.","offset":5712,"duration":30},{"text":"Host 1: Now, I strongly doubt that that would be the outcome because this is a problem that can be solved sooner than that. We're not going to see the Straits of Hormuz closed for years or anything like that.","offset":5742,"duration":12},{"text":"Host 1: The question is how long this goes on, how much damage it causes, and how long it takes to unwind that. In other words, how big is the backlog of global logistics that have been disrupted by the Straits of Hormuz closure? How long does it take to get things back to flowing as normal again?","offset":5754,"duration":19},{"text":"Host 1: That's really, I think, what's going to drive equity prices, and frankly, I don't think anybody knows for sure what's coming next in this market. So it really comes down to your geopolitical outlook. I think all of us are vulnerable to allowing our personal politics to bias our judgment as investors. So remember, this market reaction is not going to depend on what you think or what I think should happen. It's going to depend on what actually happens, and I don't think any of us know with any real certainty exactly how this is going to play out.","offset":5773,"duration":34},{"text":"Host 2: Eric, I'm going to keep my analysis very simple from a technical perspective. We're remaining below the 50-day moving average, we're breaking lower highs and lower lows, there is clear distribution. The bears are in control and in the driver's seat on the short term on the distribution side. We continue to see all rallies failing at Fibonacci zones, which is all indicating that generally the distribution cycle is still in play.","offset":5807,"duration":28},{"text":"Host 2: Now, while we have seen substantial increases in bearishness as the sentiment is pivoting, we've seen huge spikes in volatility index and other things that are signs that you typically would see from oversold conditions. But right now with enough of this global uncertainty here, this could be an overhang that keeps this market distributing.","offset":5835,"duration":25},{"text":"Host 2: Now, Eric, we certainly can't rule out that at some point the bulls will reverse this and counter-trend it. This is again the environment where hedges are critical, and we've talked about them the last couple weeks with our listeners, and I continue to advocate that portfolio insurance here makes a whole lot of sense. All right, Eric, let's talk about that US dollar.","offset":5860,"duration":28}],"startTime":5640},{"title":"Evaluating the US Dollar Flight-to-Safety Rally","summary":"The hosts analyze the US Dollar Index testing the 100 level, observing that the current strength is largely driven by a flight to safety and structural weakness in the Euro.","entries":[{"text":"Host 1: Now, Patrick, by recording time we were back down to a high 99 handle after surging above 100 and then below 100 intraday on Friday. I think by the cash close we were back over 100 again. So we're right on that hairy line between 99 and 100.","offset":5888,"duration":18},{"text":"Host 1: The question to ask is whether we're topping out here at overbought resistance on this technically overbought market or if the strength that we've seen in the dollar so far is just the beginning of a new bullish trend. Once again, I think the answer depends on your geopolitical outlook. Sorry folks, that's going to be the answer for most things this week, and there are plenty of strong arguments to be made in either direction.","offset":5906,"duration":25},{"text":"Host 1: I don't see any fundamental bullish drivers for the dollar here other than the flight to safety trades into the dollar, which are only going to intensify if the situation in Iran worsens from here and if equity markets take a nosedive.","offset":5931,"duration":19},{"text":"Host 1: So there's plenty of room for much, much more upside in the Dollar Index. But ultimately, I think that upside would be driven by flight to safety trades in the Iran conflict. Someday when the Iran conflict wears off or winds down, then I think it becomes a bearish... it's time to sell the dollar there because I think it will be overbought and ripe for a major correction, maybe resuming the primary downtrend that was in play before this conflict arose. The question is timing: how much longer before this Iran conflict is over? Whenever it's over, that's the time I think you want to sell the Dollar Index.","offset":5950,"duration":40},{"text":"Host 2: Well, Eric, when looking under the hood of the dollar, the key thing is to observe that the predominant weakness is coming from the Euro and the Yen, which happen to be very large weightings in the Dollar Index. But the story isn't the US dollar strength and all cross-currencies weakening against it.","offset":5990,"duration":22},{"text":"Host 2: We continue to see resilience in a lot of the commodity-based currencies like the Aussie dollar and the Canadian dollar, and that Euro is really where the drag is as there continue to be growth concerns at a time when obviously their energy prices are under a lot of pressure, which is stressing the Euro right now on the downside.","offset":6012,"duration":22},{"text":"Host 2: If we see Euro breaking some of these key levels, that then is going to be a huge bullish tailwind for this Dollar Index. Now we're at the top of an almost a 10-month trade range, and if the Dollar Index makes any progress above this 100 level with momentum, we've got ourselves some sort of a strong US dollar counter-trend move. And so we have to watch whether or not this gains momentum from here. All right, Eric, let's touch on crude oil.","offset":6034,"duration":30}],"startTime":5888},{"title":"Crude Oil's Continued Upward Pressure","summary":"Erik reiterates the logistical nightmares driving crude oil prices higher, warning that a continued surge could trigger a vicious cycle of global economic consequences.","entries":[{"text":"Host 1: Well, as I already discussed with Rory Johnston, the Oman benchmark traded over $180 this week. Obviously, logistic complications are part of that, but it's still an important price signal.","offset":6064,"duration":12},{"text":"Host 1: I'm sorry to sound like a broken record folks, but it's the geopolitical outcome with Iran that's going to drive everything. As Rory Johnston said, I think it would be foolish to assume that, hey, it's going to be just a couple more days and the Trump administration is going to completely end this thing.","offset":6076,"duration":19},{"text":"Host 1: Even if it ends this week, we still have probably a couple of months at minimum just to clear the system out and get things back to flowing as usual. And the longer that the conflict wears on, the more that effect is compounded and the more of a mess we're going to have to unwind.","offset":6095,"duration":17},{"text":"Host 1: So the longer this continues, the more it's going to affect oil prices and cause a continued increase in oil prices and the inflation signal that that drives. And eventually, it becomes a self-reinforcing vicious cycle of increasing inflation driving even more extraction cost price increases, higher oil prices, and so forth. Hopefully, we don't get to that point where that self-reinforcing cycle kicks in.","offset":6112,"duration":29}],"startTime":6064},{"title":"Gold Market Technicals and Consolidation Phase","summary":"Patrick details the technical breakdown of gold below its 50-day moving average, suggesting it may face a prolonged consolidation phase before marching to new highs.","entries":[{"text":"Host 2: All right, let's move on to gold here because we just got ourselves a little bit of a down day here on Wednesday. What's your take of what's going on?","offset":6141,"duration":8},{"text":"Host 1: The low print on the January 30th correction was 44.23, 4423. That was a near perfect test of the 50-day moving average at the time. But that happened in the middle of the night in very thin liquidity.","offset":6149,"duration":12},{"text":"Host 1: So something I said right here on MacroVoices just a few days later was we should watch for another test of the 50-day moving average during regular trading hours, not extended trading hours. Well, we got that on Wednesday, and it also coincided almost perfectly with the 38.2% Fibonacci retracement level of that January 30th correction. There was also a trendline there as well.","offset":6161,"duration":25},{"text":"Host 1: So three major support lines all broken at the same time. So there's a very good technical argument that could be made here, which is that that regular trading hours test of the 50-day moving average was the buy signal. The bottom could be in already.","offset":6186,"duration":15},{"text":"Host 1: Except we went right through it and we're trading considerably below it at recording time. I'm looking at 48.24 as we're recording right now, selling off more in futures trading after the close. These are all ominous signs and frankly, there's not a lot of obvious support until we get to the 100-day moving average at 45.91, 4591.","offset":6201,"duration":45},{"text":"Host 1: So I think we're probably headed in that direction unless there's a sudden change in the fundamentals. But it's also clear that there's been a breakdown of correlations between precious metals and the usual, you know, if it's increase in tension in Iran, more geopolitical upset, that would normally be up on precious metals.","offset":6246,"duration":21},{"text":"Host 1: That broke down on March 2nd. Gold is not trading up on geopolitical escalation the way it was before March 2nd, and frankly, I've yet to hear a really good explanation for why it isn't. So I don't pretend to know what comes next, but it sure looks to me like we might be headed towards a 45 handle, if not lower. That's the next obvious support level below the current market.","offset":6267,"duration":23},{"text":"Host 1: So either we get a bounce here and the 50-day really was the trading signal that it should have been, or if we continue to see this weakness below the 50-day continue through the day on Thursday, I think we're probably headed down to 45.91, maybe 4600 on the 100-day moving average by the time we get there.","offset":6290,"duration":19},{"text":"Host 2: Well, Eric, my view on gold has remained unchanged for the last month. After we saw that key blow-off top on gold and that huge reversion, typically if we look at the last four consolidations of gold, it took as much as two to four months of gold consolidating before it attempted to break to fresh new highs.","offset":6309,"duration":25},{"text":"Host 2: At this stage, that analog is the one that we continue to see here on gold as we saw some retesting of highs and this sideways consolidation continuing overall. After this consolidation finishes, there's lots of room for gold to go higher, but at this stage I think it'll be deeper into the second quarter before we see a meaningful turn up.","offset":6334,"duration":24},{"text":"Host 2: How low could this gold correction go? Well, the first level to watch on the support side is this 4800 level we're trading down to right now, which is a Fib zone of this retrace. If that doesn't hold, I mean there is always the possibility we head back down toward that 4500 level and $4400 level below, but if that was to happen, that would probably be a compelling buy on dip to take advantage of. All right, Eric, what are your thoughts here on the fact that Uranium continues to just consolidate sideways inactively?","offset":6358,"duration":35}],"startTime":6141},{"title":"Uranium's Resilience and Copper's Odd Correlation","summary":"The hosts observe the structural resilience of uranium miners amid the broader market selloff and puzzle over a strange, tick-by-tick correlation between copper and gold.","entries":[{"text":"Host 1: Well, Patrick, the fundamentals are uber bullish and they're only getting better by the day as we see more and more nuclear announcements. The nuclear renaissance is on and it's on strong.","offset":6393,"duration":13},{"text":"Host 1: And the market for Uranium and Uranium miners is holding up pretty darn well considering how bad everything else is going. We didn't see as big of a downside as I was fearing we might see on the Uranium stocks on Wednesday.","offset":6406,"duration":17},{"text":"Host 1: We're still looking at 49 spot 05 at the close on Wednesday on the URA ETF, which is the one that's most followed. That's still well above its 200-day moving average, whereas the indices have moved below their 200-day moving averages. But frankly, I think it's headed for its 200-day moving average, which is at 46 spot 03.","offset":6423,"duration":20},{"text":"Host 1: So we'll see what happens next. Broad market risk-off event is obviously going to take everything else down with it, including the Uranium miners. I think it just sets up better and better buy-the-dip opportunities. The question is how big is the dip before it's time to buy Uranium? I think the next obvious target is 46.03 on the URA ETF. But let's see what happens with the broader risk markets because if we get an outright market crash here, as could happen if oil prices continue to rise, particularly if they spike over $150 setting new all-time highs—at least on the major indices, we're already there with some of the other markets around the world, but if we get there on Brent and WTI above 150, that probably brings on an outright crash in equity markets and anything could happen.","offset":6443,"duration":50},{"text":"Host 2: Well, structurally the chart remains bullish. All consolidations are being held: higher highs and higher lows. But it's just been a quiet period, maybe the lack of liquidity in the broader asset markets could be just keeping this all contained. But overall the charts are still on the bull trend and at major support levels.","offset":6493,"duration":25},{"text":"Host 2: Now, Eric, I want to focus in on some bizarre price action that we've seen in Copper when it's overlaid on Gold. Now typically precious metals trade in correlation and a lot of times these industrial metals tend to march to their beat of their own drum independently.","offset":6518,"duration":34},{"text":"Host 2: But when I here show an overlay of the Gold and Copper charts, for some odd reason Copper, almost day by day, tick by tick, has actually been correlating with Gold. Now why? I really actually don't have an explanation. It's and I certainly don't know whether this will continue, but certainly as of this moment when we're looking at this chart, it's undeniable that right now Copper is just trading tick by tick with Gold. I'm very curious to see whether or not this trend continues in the weeks and months to come.","offset":6552,"duration":50}],"startTime":6393},{"title":"10-Year Treasury Yields and Podcast Outro","summary":"Patrick briefly notes the 10-year Treasury yield's upward push post-FOMC before wrapping up the episode with standard podcast disclaimers and promotional announcements.","entries":[{"text":"Host 1: Patrick, before we wrap up this week's podcast, let's hit that 10-year Treasury Note chart.","offset":6602,"duration":4},{"text":"Host 2: Well, we've seen here is that it's trading right up toward the 2.30 level. We had the FOMC meeting and the first reaction after the post-FOMC was yields rising up to their one-month ranges or multi-month ranges. It'll be very interesting to see whether this has started a new follow-through and we see yields push higher from here or whether this was going to just a fake-out retest of the highs.","offset":6606,"duration":28},{"text":"Host 1: Folks, if you enjoyed Patrick's chart decks, you can get them every single day of the week with a free trial of Big Picture 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.","offset":6634,"duration":15},{"text":"Host 2: Well, in this week's Research Roundup you're going to find the transcript for today's interview, you're going to find the slide deck that was put together by Simon White, and you'll find the Trade of the Week chartbook we just discussed here in the post-game, including a number of links to articles that we found interesting.","offset":6649,"duration":20},{"text":"Host 2: You're going to find this link and so much more in this week's Research Roundup. 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.","offset":6669,"duration":17},{"text":"Host 2: 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 will consider it for our weekly distributions.","offset":6686,"duration":15},{"text":"Host 2: 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 at @EricSTownsend, that's Eric spelled with a K, and you can also follow me at @PatrickCeresna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week.","offset":6701,"duration":19},{"text":"[Music playing]","offset":6720,"duration":6},{"text":"Host 3: 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. MacroVoices is made possible by sponsorship from bigpicturetrading.com, the internet's premier source of online education for traders.","offset":6726,"duration":23},{"text":"Host 3: Please visit bigpicturetrading.com for more information. Please register your free account at macrovoices.com. Once registered, you'll receive our free weekly Research Roundup email containing links to supporting documents from our featured guests and the very best free financial content our volunteer research team could find on the internet each week.","offset":6749,"duration":22},{"text":"Host 3: You'll also gain access to our free listener discussion forums and research library. And the more registered users we have, the more we'll be able to recruit high-profile feature interview guests for future programs. So please register your free account today at macrovoices.com if you haven't already.","offset":6771,"duration":17},{"text":"Host 3: You can subscribe to MacroVoices on iTunes to have MacroVoices automatically delivered to your mobile device each week free of charge. You can email questions for the program to mailbox@macrovoices.com and we'll answer your questions on the air from time to time in our mailbox segment.","offset":6788,"duration":20},{"text":"Host 3: MacroVoices is presented for informational and entertainment purposes only. The information presented on MacroVoices should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions. The views and opinions expressed on MacroVoices are those of the participants and do not necessarily reflect those of the show's hosts or sponsors.","offset":6808,"duration":22},{"text":"Host 3: MacroVoices, its producers, sponsors, and hosts Eric Townsend and Patrick Ceresna shall not be liable for losses resulting from investment decisions based on information or viewpoints presented on MacroVoices. MacroVoices is made possible by sponsorship from bigpicturetrading.com and by funding from Fourth Turning Capital Management, LLC. For more information, visit macrovoices.com.","offset":6830,"duration":29},{"text":"[Music continues]","offset":6859,"duration":15}],"startTime":6602}],"entries":[{"text":"Host: This is MacroVoices, the free weekly financial podcast targeting professional finance, high net 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, Erik Townsend and Patrick Ceresna.","offset":0,"duration":29},{"text":"Erik Townsend: MacroVoices episode 524 was produced on March 19, 2026. I'm Erik Townsend. It was a sea of red in markets on Wednesday as the Iran conflict has dragged on longer than most analysts expected, and the Fed's standing pat with no rate cut accelerated the selling.","offset":29,"duration":25},{"text":"Erik Townsend: The S&P, gold, copper, and just about everything else other than the dollar index and crude oil were down and down hard, closing on or near their lows of the day, and then selling off even more in futures trading after the 4:00 PM cash close. These are all ominous signs that more downside is likely in coming days, absent a major bullish news event.","offset":54,"duration":23},{"text":"Erik Townsend: So we've got plenty to talk about this week. Bloomberg macro strategist Simon White kicks it all off as this week's feature interview guest. Simon and I will discuss the prospects for secular inflation, and why the oil price surge might be the catalyst needed to bring it about. We'll also discuss the risk-off playbook, food price inflation, the breakdown in private credit, and much more.","offset":77,"duration":29},{"text":"Erik Townsend: We had a huge positive response to Dr. Anas Alhajji's cameo appearance updating us on the oil market disruption on last week's podcast. So this week, Commodity Context founder Rory Johnston will join us for another perspective on what the Iran conflict means to energy markets. That's coming up right after the feature interview with Simon White.","offset":106,"duration":25},{"text":"Erik Townsend: Then be sure to stay tuned for our postgame segment when Patrick's trade of the week will take a look at the inflation surge event that hasn't happened yet. Not the one in crude oil where the price already spiked, but the one in food prices, which as Simon White will explain in the feature interview, could come next. And oh by the way, Rory Johnston is going to reinforce that view in the upcoming oil market update.","offset":131,"duration":24},{"text":"Patrick Ceresna: And I'm Patrick Ceresna with the macro scoreboard week over week as of the close of Wednesday, March 18th, 2026. The S&P 500 index down 221 basis points, trading at 6625, markets now trading at multi-month lows. We'll take a closer look at that chart and the key technical levels to watch in the post-game segment.","offset":155,"duration":22},{"text":"Patrick Ceresna: The US dollar index up 97 basis points trading at 100 spot 21, attempting to bullishly breakout of a 10-month trade range. The April WTI crude oil contract up 941 basis points to 9546, the war premium remains as the uncertainty continues.","offset":177,"duration":22},{"text":"Patrick Ceresna: The May RBOB gasoline contract up 1204 basis points to 307, gasoline now trading at three-year highs. The April gold contract down 546 basis points trading at 4896, remains in consolidation after putting in the January highs.","offset":199,"duration":22},{"text":"Patrick Ceresna: The May copper contract down 509 basis points trading at 559, the March uranium contract down 111 basis points trading at 8475. The US 10-year Treasury yield up three basis points trading at 426, upticking at the end of the day in the post-FOMC window.","offset":221,"duration":21},{"text":"Patrick Ceresna: The key news to watch this week is the Friday OpEx, and next week we have the Euro and the US flash manufacturing and services PMIs. This week's feature interview guest is Bloomberg macro strategist Simon White. Erik and Simon discuss the risk of a renewed inflation cycle, why markets may be underpricing second-order effects of the Iran conflict, the parallels to the 1970s style stagflation, and how shifts in commodities, credit, and the yield curve could reshape the macro outlook.","offset":242,"duration":44},{"text":"Host: And now with this week's special guest, here's your host Erik Townsend.","offset":286,"duration":8},{"text":"Erik Townsend: Joining me now is Bloomberg macro strategist Simon White. Simon prepared a slide deck to accompany this week's interview. Registered users will find the download link in your research roundup email. If you don't have a research roundup email, it means you haven't yet registered at macrovoices.com. Just go to our homepage macrovoices.com, look for the red button above Simon's picture that says \"Looking for the downloads\". Simon, it's great to get you back on the show. It's been too long. I want to dive right into your slide deck because there's so much to cover today. Let's start on page 2. You say inflation is a three-act play, that we really need to be thinking about a return to secular inflation, and a lot of people said there was no catalyst. Well, I think we got our catalyst, didn't we?","offset":294,"duration":49},{"text":"Simon White: Yeah, in spades. I think that's absolutely right, Erik. I think this is playing out in a way that's very analogous to the 70s, which is why I've referred to a three-act play there. And it certainly makes sense to start here. I think inflation is probably the most mispriced thing at the moment. I think it was mispriced before this war with Iran started and I think it's even more mispriced now.","offset":343,"duration":28},{"text":"Simon White: And it certainly seems that team transitory is back in force. If you look at the CPI fixing swaps, for instance, they show quite a sharp rise in inflation over the next few months expected, to maybe peaking out at 3 and a half percent, then very quickly it goes straight back down, and within 12 months, I think we're looking at roughly 2.8 percent in spot CPI, which is only about 40 basis points higher than it is now. So again, we're looking for quite a short-term shock, and it's even more egregious if you look at break evens.","offset":371,"duration":31},{"text":"Simon White: I mean, the shorter term break evens have moved a bit more, 2 to 5 year maybe moved 20 to 50 basis points since the war started, but the 10-year has barely budged, maybe 5 to 10 basis points. And I think the muscle memory is kicking back in that inflation will always go back to target. But I think that's you know, I think that's quite complacent. And that's why it's helpful to look at the 70s. You know, no analogy is perfect, but the 70s does have an uncanny amount of commonalities with today.","offset":402,"duration":29},{"text":"Simon White: And also the one thing that doesn't change is human nature. Human nature is immutable, and inflation is as much of a psychological thing as it is an actual you know, financial phenomenon or an economic phenomenon. So the chart on the left was something I first used in 2022, so almost 4 years ago, and it was uncanny because I updated it, and so the blue line shows the CPI level, not the growth, from the late 60s into the late 70s, early 80s, and the white line is today.","offset":431,"duration":30},{"text":"Simon White: And so I updated it, and we're kind of bang on today at the end of act 2. So the way I thought about it is act 1 was kind of when inflation first hits new highs. So this time around that was the pandemic. First time round in the 70s, it was on the back of we had a lot of fiscal easing because of the Vietnam War.","offset":461,"duration":20},{"text":"Simon White: You had LBJ's Great Society, Medicare, you already had quite loose fiscal policy. Inflation started creeping up much higher than expected. And then we went into act 2, which is kind of like the premature all-clear. And that's where it was kind of taken that inflation was a temporary phenomenon, it wasn't going to be much of a problem, it was going to go back in its box fairly quickly. And that feels like where we've been over the last couple of years. But you know, stubborn inflation as we know is proven very stubborn.","offset":481,"duration":29},{"text":"Simon White: It's it's not gone back to target, it stayed above the target rate, it's remained elevated. And if you look actually where that act 2 ends and you match it up to the 70s, it's pretty much bang on October 1973, which is the beginning of the Yom Kippur War. And that in itself is a comparison worth looking at. There's a lot of differences obviously with that war, but there's actually a lot of commonalities that definitely makes it worth looking compared to what we're seeing today.","offset":510,"duration":32},{"text":"Simon White: So back then it was a surprise attack. It was the Arab states led by Syria and Egypt on Israel, and they attacked Israel on Yom Kippur. It was a very short war, it was only three weeks. So this war is not yet three weeks. Initially it was expected to be short, but that's looking less likely now. I think PredictIt has an end of April cease fire now down to 40 percent probability from something like 65 percent not too long ago.","offset":542,"duration":27},{"text":"Simon White: And um you had obviously a major oil shock in response to this war because what happened after the war, after the three-week war, was that the US stated aid to Israel and the Arab states decided to have an embargo on oil, and that created this huge oil shock. So oil prices managed to quadruple in a matter of months. That's quite a significant oil shock.","offset":569,"duration":27},{"text":"Simon White: And and then that led to the act 3, which is the comeback with a vengeance. You have this massive rise in inflation through the end of the decade, and it really didn't end until you got Paul Volcker in with his exceptionally high interest rate hikes, that Saturday Night Special, that really managed to break the back of inflation.","offset":596,"duration":20},{"text":"Simon White: And if you look at some of the further commonalities, it's not just obviously what happened with oil prices, not just that this was in the Middle East, not just that it involved Israel. You also if we go to the next slide in slide 3, and you look at the equity market back then. So the equity market back then, this was the time of the Nifty Fifty. So this was a set of stocks that everybody thought they had to own. You know, they had great earnings, they were great businesses, and pretty much everyone owned them.","offset":616,"duration":31},{"text":"Simon White: Excuse me, and you know, similar to today. So we had very narrow leadership. In fact, it wasn't until the time of the Bangs and the Magnificent 7 that we had such narrow leadership again as what we had back in the early 70s. You had extreme narrow leadership as well, and that Yom Kippur War just before or just after it started, stocks had already started to sell off maybe 10-15 percent in the months before the war, but in the following year they sold off another 45 percent, and that was the largest sell-off we'd seen since the Great Depression.","offset":647,"duration":34},{"text":"Simon White: Now that's not to say that we're going to get the same thing playing out here. There's a lot of differences obviously today. For instance, obviously the US is a major oil producer. This is not the same exactly the same states that are involved. The choke point here is not an embargo, it's the Strait of Hormuz. But there is still nonetheless a choke point in the supply states.","offset":681,"duration":20},{"text":"Simon White: But I think it's worth bearing in mind that you know as a non-negligible tail risk just given we are in a sort of not dissimilar situation. And the kind of nail on the coffin if you like in some ways for why you should be perking up now to be attentive to the risks is that valuations, even though we had this massive decline in stocks in this huge big bear market in 73-74, the CAPE, the cyclically adjusted price-earnings ratio, was 18. And today it's more like 40.","offset":701,"duration":31},{"text":"Simon White: And also like the you know allocation of households compared to financial assets was much lower back then, it's much much higher back today. So really there is a number of reasons why you could see things we're we're we're obviously to get more deterioration obviously to get anything like that, but given some of the commonalities I think it's worth bearing in mind. And especially when you look at the market today, it just does seem again there is some complacency in the air.","offset":732,"duration":23},{"text":"Simon White: The stock market inherently seems to believe I think that there is some sort of Fed put on the way, and therefore it's not really worth the market trading down too much. I mean even if you look at like the put-call spreads, so the VIX went up initially, a lot of that was driven by first of all it was driven by call spreads falling, then it was driven by put spreads rising, so people were putting on insurance, but then they quickly monetized I think they monetized those hedges and that put spread started to come off, and so the VIX has started to come off.","offset":755,"duration":27},{"text":"Simon White: So really I think the market's getting to the point where it feels like, you know what, this isn't going to be a major issue. You know, we don't have too much to worry about here, not ready to obviously rally and make new highs again, but this is not something to get overly your knickers in a twist about. But I'd argue again along with inflation, that's something that's beginning to look a little bit complacent.","offset":782,"duration":20},{"text":"Erik Townsend: Simon, let's go a little bit deeper on some of the both differences and similarities between the Yom Kippur War and the present conflict. The Yom Kippur War was really a war of solidarity. As you said, the US had sided with Israel, basically all of the Arab states together went in on the Arab oil embargo. You have a very different situation today where the US has once again sided with Israel in a conflict with Iran, but now Iran does not have solidarity of the other Gulf states. In fact, it's attacking the other Gulf states that are allied with the United States. It seems to me there are still similarities, but there are some almost diametrical opposites in some aspects of this. How do we sort that out and make sense of to what extent the economic outcome might be the same or different?","offset":802,"duration":52},{"text":"Simon White: Yeah, I think I think that's 100 percent, you know, as I alluded to there are a number of differences, and so that puts you in a point where, you know, no analog is going to be perfect. But I think when you combine it as I say with the overall inflationary backdrop, where we are in terms of this three-act play in the 70s, you know, you could argue that what happened in the 70s were a series of kind of quote-unquote bad luck that led to inflation rising.","offset":854,"duration":27},{"text":"Simon White: So, you know, you had the kind of ex-ante conditions for inflation as I mentioned, we had already the Vietnam War, we had the fiscal expansion on the back of the Great Society stuff, and then you had the 1971 was Nixon closing the gold window, then you had the Arab oil embargo, the Yom Kippur War, you had at the end of the decade you had the Iranian Revolution. You could argue all these things are bad luck, but they were also hitting a situation where inflation was already in a different regime.","offset":881,"duration":28},{"text":"Simon White: And so I think I think that's the thing to to note the differences, that when you're in an inflationary regime, lots of things can happen, right? Things will always happen. But if they hit when you're already in an inflationary regime or more likely to have bigger inflationary impact. You know, that's where we are today. As I say, it's very uncanny we happen to look compare the two analogies that almost to the month when you get this sort of premature all-clear ending is almost to the month when the Yom Kippur War started as when the attacks on Iran started.","offset":909,"duration":31},{"text":"Simon White: Yeah, I wouldn't want to over-labor the point in terms of the analogies, but the there's there's so many precedents that makes it worthwhile looking a little bit deeper into. For instance, another one that's very interesting is an underappreciated fact that in the 70s, the food shock was actually much bigger than the energy shock in terms of on its effect on CPI. So if you look at the weighted contribution from food and from energy in the 1970s, it was much bigger than it was for energy.","offset":940,"duration":31},{"text":"Simon White: And in fact food food inflation was already rising before the the energy shock. This time around we have the disruption to the Strait of Hormuz. That obviously doesn't just affect energy prices, it affects energy products. And for instance, a lot of stuff that goes into fertilizer is either produced in that region or has to travel through that region. So Iran itself produces a lot of urea and ammonia. There's a huge amount of sulfur flows through the straits, all these things go into fertilizer.","offset":971,"duration":30},{"text":"Simon White: And in fact if we go a little bit further into the presentation, if we go to let me just find the slide, if we go to slide 8, we can see there actually you can see the two shocks. So the blue line shows the food shock after OPEC 1, the Yom Kippur shock, and you can see again after OPEC 2, the Iranian Revolution. Both times the food shock was worse.","offset":1001,"duration":24},{"text":"Simon White: And today already we have, if you look at the contribution to CPI, US CPI that is, from food, it's higher than than energy already. So if you have this effect feeding into, you know, fertilizer prices, and that's what I've tried to show on the chart on the right on slide 8, you can see this fertilizer proxy, which includes some of these inputs I mentioned along with things like potash. You know, when that starts to rise, it's a very reliable lead by about six months that food CPI will start to rise.","offset":1025,"duration":30},{"text":"Simon White: So I don't think that is also being fully priced in. And especially I think if you take account of the fact that if you have energy and food both rising, I think it's very unlikely you're not going to get some second round effect that's going to feed into core inflation and you get the sticky inflation that we saw in the 1970s. And that's a lot more troublesome for the Fed. In one sense it should make it slightly easier because the Fed can then go, \"Right, if we see sticky inflation, that's something we think we can do something about, we'll maybe hike rates.\"","offset":1055,"duration":24},{"text":"Simon White: But with the muted muted, sorry, next chair Kevin Warsh coming in, you know, whether he's going to lean towards the dovish or the hawkish spectrum, you know, I certainly think he's more likely to be more like an Arthur Burns who was in in the early 70s at a time of the Yom Kippur War than he's likely to be a Paul Volcker who was in charge after the OPEC 2 shock after the Iranian Revolution in 1979. So I think that further complicates the the matter in terms of what the Fed's reaction function is going to be.","offset":1079,"duration":41},{"text":"Erik Townsend: Well, it seems like the analogy that's most relevant is the Yom Kippur War only lasted a few days, but the Arab oil embargo lasted quite a lot longer than that. So the question is once the direct kinetic conflict is over, how long can Iran continue to disrupt the flow of traffic through the Strait of Hormuz? Is that the right thing to focus on and if so, what's the answer?","offset":1120,"duration":25},{"text":"Simon White: Yeah, I think I think that's that's correct, Erik, in that the key message I think from that period was the war itself was very short. As you say, it was about three weeks, but the impact was felt way through all through the decade and it had a number of consequences. So again, no analogy is perfect, but the human side of things doesn't change how humans respond, human nature responds, doesn't really change.","offset":1145,"duration":30},{"text":"Simon White: In fact, I can see this this the two nature of the two different shocks. If we go to slide 6, so we've got two more charts there, and this this brings me to another point which I think needs to be made is that I don't think the yield curve is pricing in what's looking to be a much larger inflationary shock than for instance has been picked up in the break-even market.","offset":1175,"duration":20},{"text":"Simon White: And so the left chart we can see there is what break-evens did in the 1970s. So OPEC 1 and OPEC 2, both cases they ended up rising, and rising quite considerably, but long after if you like CPI had already started rising. So they were in late to the party. But both times they they did rise.","offset":1195,"duration":18},{"text":"Simon White: And if you look at the chart on the right there, you can see the two the nature of the two different shocks. So OPEC 1 was definitely more of a permanent shock to oil prices. So really oil prices never really revisited their pre-OPEC 1 or pre-war, pre-Yom Kippur War levels again. They just kept rallying through until OPEC 2 hit, the Iranian Revolution in 1979. They rose sharply again but nowhere near as much in percentage terms as they did in OPEC 1, and then they sort of gradually start decaying fairly soon after the Iranian Revolution.","offset":1213,"duration":34},{"text":"Simon White: So the OPEC 2 was more transient, was a more transient shock, but in both cases if you look at the bottom panel of that chart, you can see core and and in the interim period between OPEC 1 and OPEC 2, both made a higher low before rising again in the early 80s. And again it wasn't until Paul Volcker got his hands on monetary policy that he was really able to put an end to this huge inflation that we'd had through that decade.","offset":1247,"duration":25},{"text":"Erik Townsend: One of the theories of secular inflation is that it's a self-reinforcing vicious cycle. So as you begin to see inflation, it changes consumer behavior. People start stocking up on things because they want to buy it while the price is still cheap before the price goes up more. That causes more consumption that is inflationary, and it all feeds on itself and it's kind of like a fire that once you've started it, you can't put it out. Are we already at that point in terms of this coming inflation cycle where the fire has been started and can't be put out, or are we still in the need to look at this and see what happens stage?","offset":1272,"duration":37},{"text":"Simon White: We're we're already in that. In my view it's quite clear that what began in 2020 with the pandemic, with the large spike in inflation, was the beginning of if you like that that cycle starting. And really what's happening underneath is that why 2 percent inflation, for whatever reason this is an arbitrary number, but 2 percent or around 2 percent inflation overall like over the whole economy tends to be fairly stable.","offset":1309,"duration":29},{"text":"Simon White: And I think that's because all the different actors that are taking price signals off one another when inflation is not moving around that much, they they tend not to get out of sync. But once it's out of the bag if you like, once you have this large rise in inflation which we saw in the early 2020s, they got all out of sync, and it takes a huge amount for them to get back in sync, and you end up with inflation remaining elevated.","offset":1338,"duration":24},{"text":"Simon White: And so you can split CPI up for instance into components. So you can look at the essentially sticky versus non-sticky components. And what you notice in 2020 is both cyclical and structural inflation rose, but cyclical started to fall and but the structural one remained more sticky.","offset":1362,"duration":19},{"text":"Simon White: And by the time the structural inflation had started to fall, cyclical inflation because of its name is cyclical, had started to rise again and started to reinforce structural inflation that was already elevated. And we're right in that period again now where structural had started to fall, a higher low, but the cyclical part of it is already rising again.","offset":1381,"duration":22},{"text":"Simon White: And this war is just going to make it worse because obviously the immediate effect is on headline inflation. So straight away you're going to see that feed into the cyclical side of things. And once again what was what 2.4 percent where we are now and CPI maybe 3 percent of PCE, you know they're going to look like again equivalent to what we saw in the mid-70s after the Yom Kippur War. This is the point where we start to see a rise again.","offset":1403,"duration":21},{"text":"Simon White: Now I don't know how far it goes. Again, the US is much more insulated than it was back then. But I think you do see a re-acceleration. And the real kind of, if you like, the real kind of tinder in this is that as I say, going back to Kevin Warsh, you've got someone that's coming in that nobody's really sure is going to be an inflation fighter. In fact quite the opposite quite possibly.","offset":1424,"duration":22},{"text":"Simon White: Which is kind of actually a bit odd just to slide deviation, but connected is it's kind of strange if you look at real yields have been rising. So real yields have been rising since the war, and that's been driven by higher rate expectations. And so that's part of the rise in nominal yields. So break evens have moved a bit, as I mentioned, but really the bulk of the move so far have been real yields, and that's on the back of as I say rate expectations are going higher.","offset":1446,"duration":26},{"text":"Simon White: But that kind of just seems a little bit incongruous, given Warsh and the conditions under his nomination and a president who still makes no bones about being absolutely determined to get lower rates immediately. I mean he was saying so only a couple of days ago on yesterday. So I feel that that is also adding to the structural kind of impediment for inflation to to keep rising.","offset":1472,"duration":26},{"text":"Simon White: And then go back to the yield point I was mentioning. So I think yields as I say are not priced for inflation shock, and I think one thing we'll see is the yield curve will steepen. So if we go to slide 7 on the deck and I looked at basically how break-evens and real yields behaved in the 70s. Now there was no real yield in the 70s because TIPS didn't start trading until 1997.","offset":1498,"duration":27},{"text":"Simon White: But you can synthesize a real yield so you basically look at how real yields have traded laterally versus a whole bunch of different economic and market indicators, and then you can back it out and look at how and build basically a synthetic series of real yield in the 70s. So chart on the left there we can see again the difference between OPEC 1 and OPEC 2 and how the yield behaved.","offset":1525,"duration":21},{"text":"Simon White: So in both cases, break-evens rose, but in the OPEC 1 what happened is that you had the shock to break-evens but then we had an equal and opposite shock to real yields. That's textbook stagflation. What happened in OPEC 2 is the break-evens rose, but real yields stayed largely static. And I think that was basically for two main reasons. One, the US response to OPEC 1, so the US became less energy intensive and more energy efficient, and a lot of non-OPEC production came on stream from places like Alaska and the North Sea.","offset":1546,"duration":36},{"text":"Simon White: And on top of that, you had very soon after the Iranian Revolution you had Paul Volcker at the Fed, and that really put a kind of cushion under how far real yields could fall. So in OPEC 1, the 10-year yield maybe didn't move a huge amount because the real yield and break-evens canceled one another where the nominal yield rose a little bit in OPEC 2.","offset":1582,"duration":20},{"text":"Simon White: But the difference being in OPEC 1 and OPEC 2, so the OPEC 1, the curve steepened because we had Arthur Burns, and he as I mentioned earlier, you know, was notorious for not believing that a central bank could do much for inflation, let alone a supply shock inflation. He was kind of of the view that by and large, most inflation shocks couldn't be solved by a central bank.","offset":1602,"duration":24},{"text":"Simon White: And in fact he was the guy when he was at the Fed, he got the staffers working on some of the first measures of core inflation, and through the decade he kept on taking out more and more of core inflation in a frantic hope that something would be going down, which he discovered wasn't the case. So you know, we have this very kind of dovish banker who doesn't really believe central banker doesn't really believe that inflation is something he can do much about.","offset":1626,"duration":23},{"text":"Simon White: So short yields kind of fell, so the curve steepened in OPEC 1. In OPEC 2, yes 10-year yields were rising a little bit, but you had Paul Volcker who was massively raising on the front end, so the curve the curve flattened. But this time I think in some ways it the curve response function could be more like OPEC 1 because I think that longer dated break-evens will rise. So I think that move thus far that we've seen this muted move, I don't think that'll last.","offset":1649,"duration":27},{"text":"Simon White: And that they should rise more from you know the relative static where they were before, and more likely to see as I say with Warsh, you're going to see lower rate. So I think lean towards a curve steepener this time as we saw in OPEC 1, but not just for reasons that OPEC 1 is a similar to what's happened today. There are as I covered some similarities but there's a lot of differences as well.","offset":1676,"duration":21},{"text":"Erik Townsend: Well, if this was 1973 all over again, and clearly you've said that it's not exactly a perfect analogy, but to the extent that there's a lot of overlaps, 1973 was not a good time to have a long-term bullish outlook on buying and holding stocks for the long haul. What does this mean for equity markets for the rest of the decade?","offset":1697,"duration":21},{"text":"Simon White: Why, I I I think it's interesting now. I mean, depends who you speak to. I mean, so I've got like a lot of stuff you know some friends and people I know that speak to commodity people, and they're overall a lot more bearish than equity and rates people who seem to be overall less pessimistic. I think again, going back to what I said earlier, I think that's still the sort of belief that there is some sort of Fed put on the way.","offset":1718,"duration":23},{"text":"Simon White: But even more than that, I think the big difference is that ultimately there's a backstop, and that if things get really bad the Fed can step in. I'm not saying that's what's going to happen right now, but you're always going to have that kind of tail cover. So the commodity markets can really price in extreme kind of negative outcomes, but they don't have a lender of last resort, right?","offset":1741,"duration":20},{"text":"Simon White: So there's nowhere to go if you if your commodity markets seize up for whatever reason, there's no backstop in the same way that you have for financial assets. So I think that sort of explains why we have that today. And you know 1973, I don't think we we had that to the same extent. There wasn't this belief that the Fed was always going to protect equity returns.","offset":1761,"duration":22},{"text":"Simon White: So that's why you probably had that situation where you had this huge shock much bigger than the energy shock that got today, combined with a Fed that's then, yes it was overall more dovish, but this was the decade remember of go-stop monetary policy where, you know, they loosened policy, inflation came back then they tightened it, and then they're like, \"Oh right, better loosen policy again,\" back and forward, back and forward.","offset":1783,"duration":21},{"text":"Simon White: So you know, huge amount of volatility underlying there which obviously makes it more likely or or increases the chance you can have deeper steeper falls in the market. And so you don't really have some of that today, but it does seem as I say earlier, it feels like the market overall be more complacent, even with that in mind that there is a backstop, that there is still a potential for some sort of Fed put, it still seems to be some sort of complacency and as I say what drew me what draws me to that especially is just looking at what's happened to put-call skew.","offset":1804,"duration":27},{"text":"Simon White: You know, initially there was the response to like let's hedge some downside, but very quickly that reversed. It was almost as if like the market went, \"Oh maybe we don't need such deep out of the money puts here, maybe I maybe the market's not going to sell that sell off that much, in which case I don't need this insurance right now.\" So again that that smacks to me just of complacency just because the distribution of outcomes are are still very wide, right?","offset":1831,"duration":29},{"text":"Simon White: Still a lot of moving parts here, both unpredictable but the most of of course Trump himself. You know, back in the 70s we had a lot of volatility, political volatility, but again I don't think you had anyone quite as volatile and who was able to obviously voice his volatility in such a real-time manner than we've got today. So that really puts a lot of people in a sort of frozen moment. Like they want to move money, but they're also kind of fearful that they can't really put much risk on because so much could change.","offset":1860,"duration":27},{"text":"Erik Townsend: Simon, on page 11 you say gold is a hedge against both tails. Elaborate on that please. But also I think it's it's relevant to point out if we're looking at the analog as being the 1970s, private ownership of gold wasn't relegalized until 1974. So there was a very big transition catalyst there where it became legal once again to own gold bullion, which probably disrupts the data. How should we think about this in the 2020s?","offset":1887,"duration":27},{"text":"Simon White: Yeah, that's a good point. I think I think there's also another disruption at the other side as well because the data on this chart goes back to the late 20s. And back in the 30s was when essentially the US confiscated private gold ownership, so they confiscated gold. I think they paid 20 dollars and then revalued it at 35 dollars an ounce.","offset":1914,"duration":23},{"text":"Simon White: So quite possibly gold could have went up a lot more in that deflationary period of the 30s. I think I think that's why gold's misunderstood, though, is that it is to some extent an inflation hedge. It's not a perfect inflation hedge, it's not path-dependent. But in extreme, when inflation goes very very high and you're in that sort of environment, it does a good job because you've got the debasement angle of things and just the general kind of insurance against the financial system.","offset":1937,"duration":29},{"text":"Simon White: But it's not appreciated that it's also a downside tail hedge as well. And I think what has been driving a lot of the rally recently in gold is just a lack of alternatives. If you start thinking about I don't know what's going to happen and I don't know whether we're going to be in a debasement world where there's a lot of inflation, or I don't know whether there's going to be a massive credit event and that's going to be deflationary.","offset":1966,"duration":21},{"text":"Simon White: These are potential threats to the financial system. What can I own that has you know proven record of protecting a portfolio in such an environment? And there's really not much else other than gold. I think people sort of ran through all the options and they're like, \"Right, that won't work, that won't work.\" Bitcoin? That hasn't been tested.","offset":1987,"duration":21},{"text":"Simon White: And they landed on gold. And you know, a lot of people that openly admitted they've never ever really favored gold, they've never been a fan of gold, they've never understood it, are nevertheless starting to add or have started to add some exposure to their portfolios. So I think as an unimpeachable form of collateral really is what's driving driving this move.","offset":2008,"duration":21},{"text":"Simon White: And although it struggled a little bit over the last few weeks, I think it's premature to say that's the end of the primary bull trend because kind of a lot of the main reasons that were driving it are still valid today. I mean there's still a need for diversification from the dollar system. I still think there's obviously a lot of geopolitical volatility. That hasn't changed.","offset":2029,"duration":23},{"text":"Simon White: You know, central banks, I don't think are suddenly like emerging market central banks, they were the ones that initially kicked off the rally a few years ago. I don't think they're going to turn tail and start selling in any great size. You know, they bought some and they may not buy any more, but I don't see why they would suddenly turn tail and start selling on mass. There was a story that Poland was mooting selling some of its holdings, but the reason why they were thinking of selling them was for defense. And that doesn't really strike me as a great sort of a gold bearish kind of reason for selling your gold overall.","offset":2052,"duration":37},{"text":"Simon White: So I think, yeah, the general environment's still very conducive to gold still still generally keeping to its primary bull trend. It's struggling right now perhaps because we've had some marking up of short-term rates, and the dollar's had a little bit of a rally, things like that. But overall I I don't see why. You know, it takes a big seller to come around to really force it into a massive bear market, and I just don't see where that's going to come from.","offset":2089,"duration":24},{"text":"Erik Townsend: As you said, unfortunately what has not gone away is geopolitical excitement, for lack of a better word. The thing that I've noticed just in the last few weeks is there was a very strong positive correlation, you know, the next time a bomb drops gold spikes upward. And what we've seen just in the last few weeks is a breakdown where when oil is up hard because of geopolitical, you know, bombs are dropping, gold's actually moving down. What's going on there?","offset":2113,"duration":29},{"text":"Simon White: Yeah, as I say, I think potentially it's because the real yields have risen, that could be part of it, the little bit of the rally in the dollar. It should also be in times of if there's any capital repatriation going on, maybe in the Middle East. I don't know for sure, but you know gold can often get hit in the short term. People need to liquidate.","offset":2142,"duration":20},{"text":"Simon White: That's unfortunately the problem with having an insurance asset that's also can sometimes be a very liquid asset, is it's often the one that's first to go, so it can give kind of counter-intuitive signals. But overall I just as I say, I don't know what the narrative or the argument would be to say that this is anything more than just, you know, obviously we've got to remember the market has rallied extraordinarily much in recent months and it's perfectly respectable for it to have, you know, the kind of pause it's having right now, like it can't continue in that sort of trend indefinitely.","offset":2162,"duration":38},{"text":"Simon White: But I don't think that means that the trend is over. So, yeah, I mean I think silver is a far more, obviously volatile, but a far more questionable kind of you know, response to that kind of overall idea and trade, but gold to me seems certainly more more secure just because as I say, the reasons underpinning its rally all seem to be mostly intact still now.","offset":2200,"duration":23},{"text":"Erik Townsend: Simon, we've been jumping around in the slide deck. Let's go back to page 4 because you've basically said you're rewriting the risk-off playbook. It seems like an important book to read. Tell us more about it.","offset":2223,"duration":13},{"text":"Simon White: well, I'm certainly not going to rewrite it myself, but my point here is really that, you know, we talked about some historical analogs that are useful guides, but I think you have to keep an open mind as the rules can change. So I think standard you know risk-off playbook is that you see the dollar rally and Treasuries rally and risk assets sell off, and that might not be the case to the same extent this time.","offset":2236,"duration":25},{"text":"Simon White: So for instance, take the dollar. So the kind of quintessential risk-off moment really was the GFC, and in the GFC the dollar rallied. So I think that's for a lot of people's like, \"well, that that was the big one and the dollar rallied, the dollar's therefore a safe haven.\" But really if you look at what drove that, and then you compare to today, I don't think you can necessarily say the dollar's going to be in a condition to rally quite as hard as it did back then.","offset":2261,"duration":23},{"text":"Simon White: So the chart on the left there you can see that the blue line shows the bond flows, inflows from foreigners. So they they slowed. Equities were tiny back then, equities are much bigger now, as far as foreigners are concerned. But what actually drove the dollar, the rally, was repatriation of flows, so the US basically mutual funds and banks had lent to various European entities, and it was these guys repatriating that led to the dollar rally.","offset":2284,"duration":27},{"text":"Simon White: So it wasn't a case of foreigners channeling money in or needing dollars to cover structural shorts. It was really just US entities repatriating that led to the dollar rally. Now this time around, the cash flows are the structure of this is different. So bond flows are much smaller now because we've had because the US is now not see Treasuries are not seen as much of a safe haven. And equity flows are now massive.","offset":2311,"duration":32},{"text":"Simon White: And the US outflows are not as large as they were back in 2008. So the net impact means the US is much more exposed to equity outflows. So in a sort of risk-off environment that we're in right now, it's conceivable that more capital is repatriated, and some of that is equities in the US. Equity flows as I say tend to be unhedged. That is a dollar negative. And you don't have that cushion of the same cushion of dollar repatriation.","offset":2343,"duration":24},{"text":"Simon White: So, yeah, you wouldn't expect to see the dollar necessarily rallying as much. And that could be seen even more if you look at the chart on the right. So after the, you know, Mar-a-Lago Accord, you know, all the talk of the dollar disruption, the tariffs, you know, that didn't lead to a sell America trade, but I certainly think it made people think twice about their exposure to dollars.","offset":2367,"duration":20},{"text":"Simon White: And that could be seen as I say in this chart, just kind of like the dog that didn't bark. So the white line shows the dollar reversed. And what you tend to see is the blue line, which is reserves denominated in dollars. So when the dollar weakens, i.e. you see the white line rise, the reserve managers have tended to buy dollars. They tend to use the weakness in the dollar to to add to their dollar reserves.","offset":2387,"duration":26},{"text":"Simon White: And that significantly hasn't happened this time round. So we've seen this big weakening of the dollar and there's been no response yet from dollar reserve. So I think that shows like a general change in attitude to global demand for dollars. So I don't necessarily say as I think the dollar rally will be as big this time, and thus far the DXY I think is up about 1 and a half 2 percent since the war started.","offset":2413,"duration":17},{"text":"Simon White: And if we go to to slide 5 looking at say commodities, so commodities as a as a kind of risky asset is sort of seen as well should certainly sell off in a recession I think is the general interpretation. That isn't isn't always the case either. If you have a commodity induced recession, and if we are going to get recession, there's very low chance of it in the next few months, but that could change if the war continues and the negative effects spiral.","offset":2430,"duration":25},{"text":"Simon White: What often happens then is that commodities start to sell off before the slump in growth, but the that sort of sell-off in commodity prices kind of eases the growth shock and actually that allows commodities to rally through the rest of the recession. So that might well happen again. We get a commodity induced recession say later this year, next year. That's not a prediction, but if we were to get one, I wouldn't automatically assume that commodities are going to sell off through that.","offset":2455,"duration":26},{"text":"Erik Townsend: Simon, let's move on to page 9. The title of that slide is \"it takes a war to bring down an economy this strong\". Let's start with how strong the economy is, but then later you say it would take a protracted war. So I guess the question is how protracted does it need to be in order to take down the strength of economy that we already have, and where is this thing headed?","offset":2481,"duration":20},{"text":"Simon White: it's actually remarkably strong given I think the length of time of the cycle. And that really surprised me when I was looking at this. And it's also a little bit ironic, I guess, that coming into this war the US was firing on all cylinders. And you know as you mentioned as I mentioned the fact that war is perhaps just what it's going to take to to derail it.","offset":2501,"duration":23},{"text":"Simon White: And you have number of cycles for the US economy. Everyone knows about the business cycle. There's also the liquidity cycle, the housing cycle, the inventory cycle, and the credit cycle. And all of them are actually in in pretty good shape. So the business cycle, if you look at leading indicators, has been turning up. The liquidity cycle, so that's the chart on the left there.","offset":2524,"duration":21},{"text":"Simon White: And I look at excess liquidity, which is the difference between real money growth and economic growth. So that really gives you a measure of what impact this liquidity is going to have on markets. So the bigger the gap between liquidity and economic growth, it means the economy needs less, but that more to go into risk assets. That has been vacillating around, as you can see in the chart, but it's turned back up again.","offset":2545,"duration":22},{"text":"Simon White: And even even taking into account we've seen some tightening in financial conditions since the war, but overall they've not been massive. As I've alluded to earlier, the dollar's rally hasn't been huge either thus far. So liquidity's in in pretty good shape.","offset":2567,"duration":15},{"text":"Simon White: And the business you know the general business cycle is in pretty good shape, even taking into account the job market's slowed down. I think it's possible to have a jobless growth. And some of the things that I would look at to see if there was a slowdown in growth coming, such as temporary help, is actually rising, not falling.","offset":2582,"duration":16},{"text":"Simon White: Average hours worked is kind of static. You would normally expect to see that fall as people cut hours before they start sacking people. And I think you've got to remember that we have companies still have very strong margins, the you know their balance sheets are generally in pretty good shape.","offset":2598,"duration":20},{"text":"Simon White: And then you've got this massive amount of government money still filtering through the system. So there's maybe not the same acute needs, in the short term at least, for heavy layoffs. And that that global, the global economy is also in a good shape as well. So that's the chart on the right there. You can see that we're in the midst of this global cyclical upswing.","offset":2618,"duration":18},{"text":"Simon White: If you look at OECD leading indicators for different countries around the world, almost all of them are turning up on a six-month basis. And then if we look at the inventory cycle, that looks to be turning up as well. Leading indicators are pointing it to continue to rise. Sales to inventory ratios have started to rise.","offset":2636,"duration":18},{"text":"Simon White: The housing cycle is not as in good shape, but you know it's okay. House price growth, sales growth has slowed down and things like that. But one of the best leading indicators for housing is building permits. Building permits are are doing okay. And they're actually led by mortgage spreads. So we've seen quite a significant compression in mortgage spreads for various reasons such as falling bond volatility.","offset":2654,"duration":23},{"text":"Simon White: So you can't say that the housing cycle is in particularly bad shape either. And then we have the credit cycle. So if we go to slide 10, the listed credit market from a fundamental perspective, my my leading indicator there on the chart on the left shows that on net fundamentals are still pointing to tighter spreads. So things like bank lending conditions are particularly","offset":2677,"duration":23},{"text":"Simon White: supportive. You can see there on the chart that leading indicator typically gives about a six-month lead as to what we can expect from listed market credit spreads. So that is looking okay. But there is there is trouble brewing as well. It's not all good news. It's maybe more below the surface. So there's private credit.","offset":2700,"duration":19},{"text":"Simon White: Private credit is where we've had the most debt created recently as listed market debt creation was falling, debt overall debt creation was falling because private credit was rising so so much. And you can get a little bit of a measure on what's going on in private credit by looking at the business development company spread, the BDC spreads, so they are basically publicly listed companies that invest in unlisted entities.","offset":2719,"duration":24},{"text":"Simon White: And their spreads normally track the listed market quite quite tightly, but recently they've decoupled. So listed spreads continued to trade and to turn in lower, tighten, but the BDC spreads have decoupled and moved a little bit higher. So that suggests that there is some some problems in private credit.","offset":2743,"duration":16},{"text":"Simon White: And then the other factor is private credit as opposed to listed market credit tends to be floating rate. So high-yield listed high-yield maybe only about five percent or five to ten percent of floating rate now compared to nearly thirty percent after the GFC. Whereas private credit by its nature tends to be almost all private almost all floating rate.","offset":2759,"duration":20},{"text":"Simon White: So it's very exposed to the rise in interest rates that we've seen over the over the last year or so, and it will be obviously even more impacted if we get this re-acceleration in inflation and higher interest rates that I mentioned before. So you've got this situation where the economy is very strong overall, but it's got these sort of vulnerable underbellies such as private credit, which are already starting to hurt, as I say, if we look at the BDC spreads.","offset":2779,"duration":25},{"text":"Simon White: So that's the risk really is that a strong economy doesn't necessarily protect you from from accidents happening, and I think private credit's potentially where one of those could happen.","offset":2804,"duration":10},{"text":"Erik Townsend: Simon, I wanted to jump back into gold. You gave us page 11, \"the ultimate form of collateral\". We talked a little bit about the differences between now and the 70s. What are your views relative to gold and why specifically did you title this \"the ultimate form of collateral\"?","offset":2814,"duration":17},{"text":"Simon White: Well, that that's a good question. I mean the chart there on page 11 shows the performance of gold in inflationary environments and deflationary environments. And it's what I alluded to earlier, that gold performs remarkably well when inflation is very very high, above the target, so five, six, seven percent, it has historically done a really good job.","offset":2831,"duration":21},{"text":"Simon White: But it also manages a higher average return when the economy is contracting or during crises. And I think that speaks to it. In any situation where the system itself is being put under scrutiny, you know gold manages to outperform other major asset classes. It's because people don't find it particularly comfortable but they find it safe. You know, no one likes owning something that yields zero, but you know when everything else yields minus thirty, zero is an amazing amazing real yield to have in your portfolio.","offset":2852,"duration":30},{"text":"Simon White: So in that sort of scenario, people are attracted towards something that really is independent of of you know almost almost everything else. I mean, central banks have made efforts to control gold prices before. For instance, the London Gold Pool in the early 60s, but that ended in abject abject failure. So it really isn't an unimpeachable asset in that regard.","offset":2882,"duration":21},{"text":"Simon White: And I think that's why people keep coming back towards it. And especially today as I say in a position of debasement, but possibly contraction, tail risks on either side, I'll go gold's really where you you find yourself looking if you haven't yet been convinced that crypto will do the job.","offset":2903,"duration":15},{"text":"Simon White: Crypto as you look over the last last few weeks was also hit heavily. So that doesn't really smack yet for everyone as as being something that they can absolutely rely on in extreme events. I mean, look at what it did in in 2022. It didn't it certainly didn't work as a deflation hedge back then. So yeah, I still find people coming back to gold as the gold standard of unimpeachable collateral.","offset":2918,"duration":25},{"text":"Erik Townsend: Simon, we're up against our time. Before I let you go, I can't think of anything more important than inflation right now. Tell us where our users can go to see more of your work and particularly work related to inflation.","offset":2943,"duration":12},{"text":"Simon White: So I publish daily on Bloomberg on the terminal and mobile and on on on the on bloomberg.com if you don't have access to the terminal. And so you know I cover all major macro areas. We look we obviously spent quite a bit of time on on the equity market over the over the coming months just as things got a little bit more heated.","offset":2955,"duration":18},{"text":"Simon White: But also focus obviously on the rates and fix income market and credit as well. So there really isn't any you know major asset class. I cover fixed commodities too as we've already done today in our talk. So yeah, we can you can catch me there.","offset":2973,"duration":13},{"text":"Erik Townsend: Simon, thanks so much for another excellent interview. Patrick Ceresna and I will be back as macro voices continues right here at macrovoices.com.","offset":2986,"duration":20},{"text":"Simon: Um, so I think, I think that does have to color your, your view and, uh, a protracted war would definitely do a lot of damage to, to the economy.","offset":3006,"duration":12},{"text":"Host (Eric): Simon, as you talked about private credit, it was kind of concerning to me because, frankly, it, it echoes in my mind to about 19 years ago, the summer of 2007, when we were also talking about an opaque, not well-understood in the broader finance community small little piece of the credit market that couldn't possibly disturb anything else. And the reassurance at the time was, don't worry, it's contained to subprime. There's nothing to worry about. Is this another setup like that?","offset":3018,"duration":32},{"text":"Simon: It looks very much like it. And I think it was Ben Bernanke himself who said, uh, subprime is contained, I think. Um, look, I, I go back to my kind of axiom that, um, the one thing that doesn't change is, is human nature. I think we're sort of seeing that even within the private credit space in terms of when people have opportunities to make money, the more kind of off-grid they are away from regulation, the standard kind of emotions of greed and fear will kick in.","offset":3050,"duration":34},{"text":"Simon: Greed initially, and people will start to take inflated risks to essentially earn money now and park what are risks later. Hopefully they can not be around when the, um, proverbial hits the fan. Um, so I don't see why, why it wouldn't be any different. I mean, there's even a story today about one of the credit funds. If you look in the private credit fund, it's, it's yet another black box, but within it there's even more black boxes.","offset":3084,"duration":29},{"text":"Simon: I mean, that straight away reminded me of CDO squared. So here we had CDOs, which were already kind of niche derivative products, but people started making up these CDOs of CDOs themselves. And, you know, I'm sure a lot of people at the time were thinking, this probably can't end well. And, you know, here we are again. There's nothing new in finance.","offset":3113,"duration":23},{"text":"Host (Eric): Simon, I can't thank you enough for a terrific interview. Before I let you go, I'm sure a lot of listeners are going to want to follow your work. You kind of have to be somebody special and have a Bloomberg terminal in order to access most of it. Tell them for those who are lucky enough to have that access, where they can find your writings.","offset":3136,"duration":20},{"text":"Simon: Sure, and thanks again for having me on the show, Eric. Uh, so on the terminal, I have a column called Macroscope. Comes out uh, twice week, Tuesday and Thursdays. And I also write for the Markets Live blog, which is a kind of 24-hour five-days-a-week markets scroll uh, that you can follow all the latest market development.","offset":3156,"duration":25},{"text":"Host (Eric): Patrick Ceresna and I will be back as MacroVoices continues right here at macrovoices.com.","offset":3181,"duration":10},{"text":"Host (Eric): It was great to have Simon White back on the show. Rory Johnston is next on deck for a special second interview on the developing Iran conflict and what it means for the oil markets. Then Eric and I will be back for our usual post-game chart deck and trade of the week.","offset":3191,"duration":21},{"text":"Host (Eric): Since the extra coverage format seems to be a hit with our listeners, we will do our best to continue it as long as the situation in the Middle East warrants. Now let's go right to Eric's interview with energy markets expert Rory Johnston.","offset":3212,"duration":22},{"text":"Host (Eric): Joining me now is Commodity Context founder Rory Johnston. Rory, uh, you, Dr. Anas Alhajji, really all of the most credible experts felt the same way, which was look, the Strait of Hormuz getting shut down is probably not that realistic of a scenario. And I'm going back to previous interviews, you know, months or years ago.","offset":3234,"duration":25},{"text":"Host (Eric): Boy, everybody got thrown a curveball. So what happened? How come all the experts, including yourself, who thought this really couldn't be shut down? Is it just about insurance? Is it about minefields? Is it about something else? How come the traffic is not flowing through the strait, first of all, and then we'll get into what does it mean?","offset":3259,"duration":22},{"text":"Rory: Thanks for having me back on, Eric. As you note, I've been relatively kind of Pollyannaish about this for a long time, that...","offset":3281,"duration":10},{"text":"Rory: ...it, and the reason for it, the reason I didn't think this would happen, and to be clear, I never thought this would happen in my career. And the reason for that is because it is such a big shock. Like it's, you know, it make—it'll make the, if this continues, it'll make the 1970s look like child's play.","offset":3291,"duration":21},{"text":"Rory: And that is my concern here. And I think part of the reason that it is happening now, and the reason I didn't think it would happen is—it's not that I didn't think that Iran could close the strait, although I had my doubts because we had never seen it realized and again, the consequences are so intense.","offset":3312,"duration":19},{"text":"Rory: But I never thought a US president would engage in a war with Iran without a plan, without something in his pocket kind of ready for this moment. And what we've seen so far is that at least, here's my, my read of what's happening and how the Trump administration got into this. I do not think that the Trump administration expected to be in its third week of the Iran war.","offset":3331,"duration":27},{"text":"Rory: I do not think they did any of the things you would do if you had planned to be in this engagement for weeks and potentially months now. We saw, for instance, the IEA's coordinated strategic petroleum release last week. That was good. Uh, that's a, absolutely what we should be doing in this in this situation, but it was two weeks after the war started.","offset":3358,"duration":24},{"text":"Rory: Like, if you were, if you were planning this, you would have an IEA release lined up. You know, we saw that ahead of the Gulf War as an example. You would have had things like the marine insurance facility that Beston announced at Treasury. You would have had that lined up. You probably would have done more work to refill the Strategic Petroleum Reserve ahead of this.","offset":3382,"duration":23},{"text":"Rory: I mean, all of these things are such that it just seems insane that we entered this without—and by we, I mean the Trump administration entered into this without a plan. I think that what we've seen from the Trump administration—and very frankly, my expectation was that we were going to see something that clearly the largest military buildup in the Middle East since the invasion of Iraq in 2003 was going to lead to something.","offset":3405,"duration":27},{"text":"Rory: But right, we saw the same kind of buildup off the coast of Venezuela earlier this year or late last year. And in that moment, you know, there was blockade, there was everything else. But when it finally all went down that first weekend in January when the Trump administration, you know, uh, kidnapped Nicolas Maduro uh, and his wife...","offset":3432,"duration":21},{"text":"Rory: ...basically that happened on a Saturday, or Saturday morning, I guess. There was all this, you know, what's happening, what's happening, what's happening. And then by Monday, you know, we had Delcy Rodriguez in as the interim president. She was making a deal with President Trump and it was kind of, it was wrapped really quickly.","offset":3453,"duration":17},{"text":"Rory: The same thing happened last June when we last talked about the worry of the Strait of Hormuz, was that um, the Trump administration embarked on what at that stage was a fairly stark break from US military policy towards Iran, which is, you know, it had directly engaged in 14, dropping 14 bunker-buster bombs on uh, Natanz and Isfahan.","offset":3470,"duration":24},{"text":"Rory: And again, if you remember, and I'm sure you remember this Eric, the, like the Monday when that—or Asian markets opened at the end of the weekend, prices spiked higher as you would expect after this kind of event. And then by mid, mid, you know, by the middle of Monday, we saw this kind of symbolic retaliation from Iran. And then Trump saying we've got a peace, we've got a ceasefire.","offset":3494,"duration":22},{"text":"Rory: ...deal. And then I think crude ended the day down $10. That was kind of my framework for what was expecting out of this conflict. And by that token, I had expected that, you know, it was very clear that Cuba was next up on on the list of kind of regimes to roll over. And I think Trump planned to be basically be rolling over on Cuba by now.","offset":3516,"duration":26},{"text":"Rory: And the wrinkle here is that if they were expecting some kind of Delcy Rodriguez character to emerge in Iran, someone to say—someone to give them the opportunity to declare victory. I think he would have. And I think that what we've seen so far is that the Iranians have not done that.","offset":3542,"duration":15},{"text":"Rory: And I think if Trump expected the political culture of Venezuela to be the same as the political culture of Iran, that I think is probably arguably the biggest miscalculation here from the White House. As for what's actually preventing the, the, you know, the passage through the strait. Because again, when we look historically, the strait has never been closed.","offset":3557,"duration":27},{"text":"Rory: Even when we've had acute violence, acute attacks in the strait back in the 1980s during the Iran-Iraq war, during the tanker wars, we saw hundreds of ships hit. We saw by, by the calculations I saw was 450 ships attacked. Uh, you had 250 tankers attacked and 55 of those tankers were basically either sunk or scuttled and otherwise abandoned by crews. Like we more than we've already seen now. And during that time, you never had flow halt through the strait.","offset":3584,"duration":32},{"text":"Rory: So that was our best historical parallel and quite frankly, I expected something similar to be happening here. And what we've seen so far is that no, uh, very, very few—I mean the estimates vary, but basically like between a 90 and 95% reduction structurally now through the Strait of Hormuz.","offset":3616,"duration":26},{"text":"Rory: And with things like insurance, I think there was this expectation that okay, maybe at the beginning it was the lack of insurance. Uh, we were waiting for these, you know, these tanker owners to and the insurance...","offset":3642,"duration":19},{"text":"Rory: ...providers to figure out a way to say, okay, you know, we're going to figure out a way to lift—obviously the risk is increased, so we're cancelling coverage and we're going to kind of reinstitute. But, but there was just, you know, that never happened. You ended up actually seeing, and we've seen reports more recently that, you know, the war insurance has skyrocketed.","offset":3661,"duration":19},{"text":"Rory: If it was basically 0.25% of a vessel's value kind of in the month before the war, uh, that is now by the latest estimates that I've seen published by Bloomberg jumped to 5%. So we're talking a massive, massive increase. That's like a $5 million insurance premium on a million on a $100 million vessel just to cross the strait.","offset":3680,"duration":26},{"text":"Rory: But the issue is that even at those insane levels, the arbitrage value across the strait still seems to clear. That, you know, we now have effectively negative prices on the bad side of the strait, and we have on a physical basis on Dubai, over $150 a barrel. You can very easily cover that with this insurance.","offset":3706,"duration":24},{"text":"Rory: And they're not. And I think that is where something else is happening. And I think my best explanation for this, and I think it's also an explanation you're going to hear me talk about through the financial—the relatively sanguine financial impacts that we've seen so far, is that the market continues to expect—the base case expectation is that Trump backs out here.","offset":3730,"duration":25},{"text":"Rory: That we see another taco. And if that's the case, if there's the chance that tomorrow this ends, or at least he declares it done, um, why spend the $5 million and risk your ship...","offset":3755,"duration":26},{"text":"Rory: ...and crew if this could be over tomorrow. And I think there's this continual hope that this is going to end because, as we will talk about, the consequences of it not ending are so extreme that it is unthinkable to me that a US president would bear the political cost of what's coming down the pipe.","offset":3781,"duration":23},{"text":"Host (Eric): Well let's talk about that specifically next then. I think you and I could easily agree that—and I'll just go to an extreme here—if this continued for a year, if there was no transit or no significant meaningful transit of the Strait of Hormuz for a year, that would result in probably a bigger than 2008 global financial crisis because it would shut down the entire global economy. There's no energy, there's no economy. That's the end of the story.","offset":3804,"duration":26},{"text":"Host (Eric): Okay, if it's—you know, we can't go a year, but we could go into next week. Okay, how long is that fuse? What—are there tipping points where after a certain point things are broken that can't be fixed because the backlog is too long? What does the timeline look like of how long this can continue before you get into a situation where it's not reversible?","offset":3830,"duration":24},{"text":"Rory: The first thing I want to say Eric is I completely agree with you. I think that if this goes on for a year, and again, I cannot imagine—like the level of economic calamity, of human catastrophe that would wrought is unimaginable to me. I mean, we'll walk through it briefly here, because I think it's important to try and imagine it. But again, I just can't imagine the political—any politicians kind of engage, you know, bearing that political consequence.","offset":3854,"duration":27},{"text":"Rory: Because what we're talking about, to your point, like I mean, I'm normally not a guy that comes, you know, comes up with like big price calls. I typically, I don't like them. But like I've been saying that yeah, $200 crude is easy in this scenario. If we're, if we're talking a year or more, like 200 is the bare minimum of what you'd expect. We need to—I've been trying to parameterize what we're actually talking about. And...","offset":3881,"duration":142},{"text":"Rory: ...if let's say, just for this heuristic here, we talk about 20 million barrels a day of oil flow through the strait. Let's even just knock it down to 15 because maybe we get, you know, the East-West pipeline and Yanbu and everything else—everything works well with the Saudi diversion plan.","offset":4023,"duration":16},{"text":"Rory: Let's say 15. That is ballpark the peak of the demand destruction we experienced in March and April of 2020 during COVID when everyone was locked in their homes, you had not an airplane in the sky, you know, major airports were effectively shuttered. That's the kind of demand destruction we would be needing to balance that market.","offset":4039,"duration":25},{"text":"Rory: But with no pandemic, and just, just purely through price mechanisms. That is an extraordinarily high price to clear that kind of demand destruction. I've been basically just kind of saying that like, you know, me, I have an extraordinarily low price sensitivity for gasoline to get my kids to school in the morning.","offset":4064,"duration":20},{"text":"Rory: But a lot of people both in wealthy countries, obviously this, you know, it's going to be effectively a massive regressive tax. Um, but I think in wealthy economies we will generally experience this as a debilitating recessionary, you know, nigh depressionary price shock that will sap consumer spending, that will have all of the normal repercussions we would think about.","offset":4084,"duration":23},{"text":"Rory: But the price spike isn't enough, because you still need to shed that much demand from the global system. And where is that going to happen? It's going to happen in poorer emerging market countries in the Global South. That when we see price shocks, they will see shortages.","offset":4107,"duration":16},{"text":"Rory: Uh, we saw this in kind of notorious fashion now in 2022 when the kind of the infamous example of the—of the committed tanker to Pakistan that they broke their commitment, uh, they paid the breakage fee and they shipped that gas to Europe because they could make a, you know, a king's ransom on the arb even factoring for the breakage fee.","offset":4123,"duration":14},{"text":"Rory: And that's how markets are going to clear. That's how they're supposed to clear in this system. So I'm not saying that's wrong per se, but there is going to be an enormous human cost here. And I think when you're talking about these fuels, you're talking about electricity, you're talking about heat, you're talking about cooking. You're talking about life. And I think that's what we're going to have to try and trim back by 15 to 20% if this persists. And that is just insane.","offset":4137,"duration":28},{"text":"Host (Eric): Let's try to put some specific time frames on this, which I know is difficult and I apologize for doing this to you. But as you said, what's going on here is most people are thinking, well surely this is about to be over. I mean, it's—it's crazy to continue it, it's about to be over, it must be about to be over. Just in case it's not, let's imagine both a three-weeks-more scenario and a three-months-more scenario. What do each of those—if you had to guess—the impact of three more weeks, just like the last three weeks or however long this has been? And then three more months. What—what do those scenarios look like in your mind?","offset":4165,"duration":37},{"text":"Rory: So let's actually start with the even more sanguine scenario. What happens if it ends today? Because I think there's already durable damage. And I think a lot of people just assume that we could end this tomorrow and everything goes back to normal. We're probably talking three months minimum to, to re-normalize this system, even if it stopped today and every tanker currently in the Gulf made a break for it and they all made it out and we just resume full flow and everything like nothing ever happened.","offset":4202,"duration":28},{"text":"Rory: Even in that case, we're talking about months of supply chain recovery because these ships are being piled on top of each other. You've had—you've already had roughly a 400 million barrel gap or 330-340 million barrel gap that's emerged in the, basically the normal flow of oil into the Middle East, largely to Asia.","offset":4230,"duration":22},{"text":"Rory: Right now, we're still—we still haven't felt the brunt of that because three weeks ago, we still had tankers laden with oil leaving the Gulf. Those tankers will continue to their destinations, takes three, four weeks to get where they're going. And when that air pocket finally hits land in Asia, that's when we're going to start drawing inventories at 10, 15 plus million barrels a day.","offset":4252,"duration":23},{"text":"Rory: Which again, has never happened before. We've already seen Asian refineries attempt to short—basically frontrun this, to extend their runways. They've reduced operating rates, they've cut product output. So we are talking we've seen a $150 crude in Dubai in physical crude, but we've seen over $200 a barrel jet fuel in Asia...","offset":4275,"duration":19},{"text":"Rory: ...I mean Singapore. And I think that is, that alone would take months to sort out. But let's go to that three-week scenario. Okay, so let's say we're already in this for three weeks, let's say it's double. Now you're looking at two-thirds of a billion barrels of air pocket in the system that, again, needs to get sorted out.","offset":4294,"duration":18},{"text":"Rory: By that stage, we've already seen upwards of 9 million barrels a day of crude oil production capacity shut in through the Gulf. The longer that's off, the—the longer the strait is closed, the more we're going to see that cut back. And again, as anyone familiar with this industry, it's not trivial to shut in these wells, it's not trivial to get them back on without any kind of negative repercussions.","offset":4312,"duration":19},{"text":"Rory: And all that stuff just gets worse with time and time and time. I think, you know, in terms of price call, I think in three more weeks of this, I think we could—I think we would already be over $150 Brent. We're already obviously there at the kind of physical Dubai cash market.","offset":4331,"duration":15},{"text":"Rory: And I think people are like, well, well why wouldn't, you know, why wouldn't anyone buy that that crude? Uh, why wouldn't you just...","offset":4346,"duration":6},{"text":"Rory: ...buy buy WTI? It's like $50 or $60 cheaper. And the answer is that it's in the wrong place at the wrong time. You know, if you're buying the prompt WTI—WTI futures, it's not for delivery until next month, and you need to get it from Cushing to the coast, then you need to get it from the coast to the Middle East, to Asia. That we're talking months.","offset":4352,"duration":16},{"text":"Rory: People need these barrels today. And that is why I think there was still this kind of hopium, if you will, from Asian refinery saying, like, okay, this is going on, but like surely this can't last. And what you've started to see over the last couple days—there's a Bloomberg report this morning—where Asian refineries were starting to bid into the Brent basket.","offset":4368,"duration":20},{"text":"Rory: And they're starting to kind of try and buy these fut—these other barrels, which means that they're now worrying that this is going to be going on for months. Uh, and it also means that kind of acute local scarcity in crude in the Middle East and products in Asia is also going to begin spreading out to all the rest of the world.","offset":4388,"duration":17},{"text":"Rory: And I think it's really easy for Americans and the American president to say, ah...","offset":4405,"duration":5},{"text":"Rory: ...who cares about tight oil markets in the Middle East? We're here and oil prices are still pretty low. It's because this shockwave kind of moving out through the system takes time to kind of incentivize and bid all those barrels over. And I also think back to this why aren't ships going through, because they, you know, maybe they think Trump's going to taco.","offset":4410,"duration":19},{"text":"Rory: I also think that the futures market are in the exact same situation. What we saw not, you know, two Mondays ago, the, you know, the second weekend that again, everyone thought he was going to end on the weekend. He didn't. Prices spiked higher, you hit almost $120 barrel Brent. But then you got the first kind of Trump said the—the war's almost over, and prices cratered. You had a $35 a barrel intraday spread in Brent, which I don't believe has ever happened before.","offset":4429,"duration":29},{"text":"Rory: And a lot of traders kind of lost their shirts in that because again, bidding crude higher was the obvious directional call in this environment. But the kind of constant jawboning, you know, those people got blown out of their positions, many of them lost their jobs. People are much more wary now to kind of frontrun, because normally you'd expect futures markets to frontrun the tightness in physical markets because markets are forward-looking. But I think now we have to wait for that physical market tightness to kind of fully and aggressively manifest in the West before those future prices are going to actually converge.","offset":4458,"duration":40},{"text":"Host (Eric): Now you said earlier that you thought the Trump administration had no idea that this outcome, which has already occurred, was even possible. I want to push back slightly on that and ask you if it's possible that maybe they did see it as a possibility, but just were not as concerned by it as you and I are. I want to read you a Truth Social post from President Trump on Wednesday where he says, \"I wonder what would happen if we finished off what's left of the Iranian terror state and just let the countries that use the Strait of Hormuz—we don't—let them be responsible for the so-called strait. That would get some of our non-responsive 'allies' in quotes engaged and fast,\" signed President Donald J. Trump.","offset":4498,"duration":48},{"text":"Host (Eric): It sounds to me like he doesn't think it's a big deal for the United States since he perceives the United States to be energy independent, that if the Strait of Hormuz is closed down, it sounds like he thinks that's a problem that affects other countries but doesn't affect us. So, you know, the hell with it, let them worry about it. I don't—I'm not going to bother asking you whether we should be concerned about it, because I think you and I agree that we should be concerned about the strait needs to be open uh, for the sake of global commerce. Oil prices are set globally and so forth. But it does seem like there's room that the reason the president's not so concerned about this outcome is not that he didn't foresee it, but that he's just not as worried about it as you and I are.","offset":4546,"duration":49},{"text":"Rory: I think there's a chance of that, and I—I think again, I didn't expect him to go this far. So I'm—I can't pretend perfect knowledge of Trump's mind by any means. But I think what we've seen in those comments over the past two and a half weeks now is evidence of remarkable goal shifting.","offset":4595,"duration":16},{"text":"Rory: We had that—we had that tweet this week. End of last week, we also had the tweet about how actually high oil prices are good for the United States because the United States is the largest oil producer in the world. But that contrasts strongly with some of the earlier comments out of Trump about, you know, basically don't be a panicking, don't bid up the price of oil, you know, this is going to be fine, the war's almost over.","offset":4611,"duration":18},{"text":"Rory: Like it definitely felt like he was trying to keep the oil prices lower. And then as oil prices started to inevitably, based on this kind of physical reality we've been discussing, as those prices started to grind higher, he started to find new ways to say, oh, okay, this is actually good for us.","offset":4629,"duration":17},{"text":"Rory: And I actually think in some ways, that's actually the most worrying development in this because I think at least my mental framework here has always been that the oil market would be the single—the singular thing that would end up pushing Trump back from the edge, from really going through for a prolonged period of time, months or or longer.","offset":4646,"duration":21},{"text":"Rory: And if we're starting to see him attempt to, to change that narrative to almost convince himself—and again, like Donald Trump is an extremely public person. He's been for—he's been against high oil prices and...","offset":4667,"duration":13},{"text":"Rory: ...trying to drive them lower since the 1980s. Like low oil president is kind of like his brand. And I would say that—so I don't know how much I can really buy this. I don't even know how much he can really buy this depending how long this goes. I still think his core bias is towards low oil prices.","offset":4680,"duration":19},{"text":"Rory: Again, he was elected as kind of a pocketbook cost of living president. And I think this is just—he was also elected as a president that would get out of wars in the Middle East. But we're very—we're obviously in a very, very different timeline now from that election.","offset":4699,"duration":16},{"text":"Rory: So again, I think there's a possibility that you're right, you're right Eric. But I do think that a lot of this is him saying things after things don't go his way. For instance, the comment about the strait came mostly after he asked all of the kind of allied NATO nations and Asian nations that consume the oil to kind of come help them, and they were kind of like, no.","offset":4715,"duration":18},{"text":"Rory: Because again, I think the world, a lot of the consuming world, like I think if they knew 100% that this was going to go on for years, yeah, they're going to send their navies because again, this is untenable. But I think there's this worry, I think there I even heard this worry initially with the SPR releases, that like anything you do to ameliorate the oil price consequence to a degree short-circuits Trump's own feedback mechanism.","offset":4733,"duration":37},{"text":"Rory: That the only way he was going to back down—and this is a similar to the tariffs, that when you know the S&P was crashing, that's when he tacoed. There was an expectation that this was the same mechanism that would be seeing now but with oil. And I worry that is beginning to lose its sensitivity given that I think now it's a question of how can Trump figure out a way to declare victory? Because again, he's not going to stop this unless he can say he won. So I think he's trying to find ways, trying to find something that he can declare victory on.","offset":4770,"duration":27},{"text":"Rory: And again, I thought at the beginning, there was enough at the—at the gate...","offset":4797,"duration":4},{"text":"Rory: ...right? We wiped out the leadership, you killed the Ayatollah, all of this stuff. I think he could have declared victory on that first Monday. And I think he's like, oh, well, let's do this a little bit longer. And now we're in so deep that it feels like you need something much bigger.","offset":4801,"duration":15},{"text":"Rory: And if anything, the Iranian regime seems to be entrenching. At the beginning, you did hear—I mean, when there was a lack of centralized leadership, you had different elements that were being more negotiating or kind of conciliatory. And that it seems is beginning to fall by the wayside.","offset":4816,"duration":17},{"text":"Rory: And I think even for a while there was some hope that the number of missiles and drones that were being launched every day by Iran were dwindling over time. Like oh, is Iran running out of missiles? Are we entering the endgame?","offset":4833,"duration":11},{"text":"Rory: And over the last two days, they've shot back up. That—and again today in particular—we we were chatting about this before we started recording, but like Brent popped above 110 following Israel's attack on the South Pars gas field, which up until now we hadn't been hitting...","offset":4844,"duration":16},{"text":"Rory: ...upstream and kind of Iranian oil assets, oil and gas assets specifically. And that's why up until now, most of that production assets hadn't been hit. You've had—you had a couple refineries hit. You had Ras Tanura, you had—you've had attacks on Fujairah. But overall, there are a lot more targets across the Middle East that were very, very tempting targets. I mean, we all remember Abqaiq in 2019. Clearly the Iranians can hit it.","offset":4860,"duration":29},{"text":"Rory: They have chosen not to yet because it—again, for them, I think that they still have this conception of different degrees of escalation. And what we saw already was as soon as the South Pars gas field was hit, they were like, okay, now these bunch of petrochemical facilities and upstream facilities, they're all legitimate targets now.","offset":4889,"duration":24},{"text":"Rory: And they also warn that if Trump bombed Kharg Island, they're like, well, if you do that, then we view all other ports in the region as fair game. I think they are still trying to kind of parameterize their own escalation or retaliatory kind of spiraling here.","offset":4913,"duration":11},{"text":"Rory: But, and again, I think what we've seen so far is that in both cases where Israel and to my knowledge, these were both Israeli attacks specifically on the South Pars gas field and the fuel depot in Central Tehran, that those were kind of against the wishes of the White House.","offset":4924,"duration":16},{"text":"Rory: That, you know, there is still some kind of freelancing here on the Israeli side about like how far they're going to go and how much they want to escalate this. Clearly they want—they want more escalation, right? I think that's clear than what we've seen so far.","offset":4940,"duration":13},{"text":"Rory: But I do wor—I do wonder whether or not that's the kind of thing that's going to piss off Trump, quite frankly. We—we saw this, uh, he got really upset with the Netanyahu government last June when, you know, there was worry that they weren't going to play ball with the ceasefire or whatever else. There was like that famous comment uh, as he was trying to get on Marine One. But I do worry that that's the kind of situation we're ending up in now.","offset":4953,"duration":23},{"text":"Host (Eric): Normally, Rory, people who are in macro markets and, you know, investors...","offset":4976,"duration":5},{"text":"Host (Eric): ...who are not specialists in oil only pay attention to two benchmarks. Brent crude, which is based on North Sea oil production, is the global benchmark and then West Texas Intermediate is the US benchmark. Uh, normally it's only professional oil traders who pay attention to any of the other prices in the oil market.","offset":4981,"duration":20},{"text":"Host (Eric): Let's talk though about some of the other prices, because really Brent and WTI only got—I guess WTI was 119. Neither one of them has gone above 120 in this. That's, uh, you know, they've gone up a lot, but they haven't gone up that much. I think it was Oman traded above 185 this week? Uh, as you said, there was jet fuel prices above 200 in Singapore.","offset":5001,"duration":25},{"text":"Host (Eric): Should we be thinking about these really high prices that are occurring in some localized markets as oh well, that's just a logistics thing, it doesn't really count? Or are those price signals that could portend what's coming for Brent and WTI?","offset":5026,"duration":15},{"text":"Rory: They're exactly what's coming for Brent and WTI. Because I think I've kind of talking around this point a little earlier, but what we're talking about right now is again, the—these markets, and you will know this well Eric, that futures and benchmarks, there is both a locational element to it and a time element.","offset":5041,"duration":19},{"text":"Rory: And where the current tightest market is right now is basically there's all these laden tanker or unladen tankers waiting to go back into the Gulf to fill up. And they're like, well, I could buy some crude off the coast of Oman and just basically turn around and head back.","offset":5060,"duration":16},{"text":"Rory: But those are the barrels that are at $150 or 100—I hadn't honestly seen Oman go up to 1—180. But yeah, that's basically, yeah, you can charge a king's ransom for any barrel that's physically available on the good side of the Gulf right now because that's where crude is in desperate, desperate supply because it's much faster to get to Asia from there than from the US Gulf or from the North Sea.","offset":5076,"duration":23},{"text":"Rory: And I think that is what we're going to see eventually for the other benchmarks. That now that Asian buyers in particular are coming to the realization that this isn't ending tomorrow and that they may need to cover not just today's crude slate but tomorrow's or next month's crude slate.","offset":5099,"duration":20},{"text":"Rory: Now they are beginning to bid on those other contracts, which again, is why we're starting to see Brent firm up so much more. That we're kind of back to above 110. WTI I think has some other potential weirdness going on. There's been a lot of talk about atte—you know, participants trying to hedge their SPR exchanges. Lots of stuff going on there as well.","offset":5119,"duration":22},{"text":"Rory: But I do think overall, the best thing that explains WTI's relative underperformance relative to Brent and certainly relative to the Middle Eastern grades is that the furthest grade away. That takes the longest to get to where you're going. And I think that's going to be something that will continue to kind of leave WTI at the back of that—of that bus, if you will.","offset":5141,"duration":19},{"text":"Rory: The other thing we haven't talked about yet, and I think where I'm especially concerned that we could be going. Because again, Trump says this is good, he doesn't care. But eventually pump prices are going to rise. We already have US average diesel prices over $5 a gallon. Gasoline's coming up there too. Diesel's going to go higher, jet fuel's going to go higher.","offset":5160,"duration":19},{"text":"Rory: I worry that we're going to see kind of a rediscussion or we've already seen musings about export controls out of the United States. That this was actually something that the Biden administration mused in 2022. They're like, well, well, could we restrict or ban the export of refined products?","offset":5179,"duration":17},{"text":"Rory: There are a lot of issues with that. It bottles up diesel in the Gulf Coast, it, it, it creates issues with potential res—reciprocal trade restrictions if then Europe decides to ban the export of gasoline to into the East Coast. There's a lot of problems there. But I do think that's where this could go.","offset":5196,"duration":17},{"text":"Rory: And I think particularly, you're seeing some of that like the framework and the kind of precursor to that argument being put out by Trump. And I think back to that question of he's saying we don't get any oil from this strait, so what do we care? And then your point, well, because markets are global. The way to solve that is to make markets not global.","offset":5213,"duration":21},{"text":"Rory: And I think that is my—is my most acute worry here going into this, is that I'd mentioned earlier that, you know, wealthy nations largely will be able to afford the oil and the products. It'll just be debilitatingly expensive.","offset":5234,"duration":13},{"text":"Rory: Once you start mucking with trade, even the United States, which is a net petroleum exporter, we you well know that that's not the same in crude or quality. That's not same in product slate by region. You've even seen the—the repeal or at least temporary waiver of the Jones Act, which is a very substantial political move for the White House.","offset":5247,"duration":20},{"text":"Rory: That really makes the most sense in the context of well, what if we ended up, you know, banning exports? Well then we could use non-Jones Act tankers to move US Gulf Coast crude to different area or US Gulf Coast oil, but also diesel to other areas of the country rather than it being bottled up.","offset":5267,"duration":12},{"text":"Rory: Because if you have no ability to shift out from those regions...","offset":5279,"duration":1},{"text":"Rory: ...you would basically end up forcing US crude production shut-ins and US particularly Gulf Coast refining shut-ins, which is the opposite of what you want. So temporarily it would lower prices, and I think that's why it would be very attractive for the White House. But in the long term, it would short-circuit wealthy markets' capacity to just pass this on through price. And then we would likely end up facing physical shortages in these advanced markets.","offset":5280,"duration":28},{"text":"Host (Eric): Rory, when we hear about the Strait of Hormuz, what comes to investors' minds is of course crude oil. But tell me about how fertilizer plays into this story as well.","offset":5308,"duration":11},{"text":"Rory: Yeah, so I am not a fertilizer expert, but in addition—I mean, we've all been focused on oil and maybe gas, but there's a lot of other things that come from the Gulf, whether it's fertil—I think it's a third of global fertilizer supplies, the vast majority of global helium supplies. All these things are going to have their own knock-on consequences to all these other markets as well.","offset":5319,"duration":13},{"text":"Rory: I think when you think about fertilizer and even I think this ties back into to oil products as well, if this continues...","offset":5332,"duration":8},{"text":"Rory: ...we will see crop yields decline. We will see food production decline. We will see the food that does get to your plate more expensive on the commodity basis of the food itself, and being shipped there by either by truck or by plane at far more expensive rates.","offset":5340,"duration":15},{"text":"Rory: So this is absolute—I mean, again, this is, you know, our most recent experience here with—and again a where all this goes with monetary policy as well. Our most recent kind of parallel is 2022 that central banks got acutely—and I think reasonably—freaked out at the time by the explosion of inflation coming out of the COVID bullwhip effect.","offset":5355,"duration":23},{"text":"Rory: And for the first time in my life, central banks took a—took a keen interest in following the price of oil, and particularly the price of gasoline. And that's when I think the way this all feeds back into the macro side is this—you know, if there's anything that is going to unmoor long-term consumer inflation expectations, it's this kind of shock.","offset":5378,"duration":22},{"text":"Rory: It's, you know, this last time we experienced this would have been in the '70s. This shock, if continued, will make the '70s look like child's play. I think a lot of people still go back and think wow, we must have lost a massive amount of supply back in '73 or '79.","offset":5400,"duration":17},{"text":"Rory: And there were some losses, but the losses were relatively small. And the big thing was it was more of a logistical like we're not shipping to you, so that's causing gaps here and everything else. But a lot of it was, you know, the supply wasn't acutely lost to the degree that we are currently seeing it lost today.","offset":5417,"duration":17},{"text":"Rory: And it just sets us up for a much worse kind of price shock. And again, I think going back to this like even if this ended today, we're co—we're sewing the seeds of these like deep ripple effects, these deep kind of multi-industry bullwhips that are going to be working through the system. That even if you ended today, we're still going to have consequences trailing out for months.","offset":5434,"duration":20},{"text":"Rory: And if we and if this goes three weeks longer or heck, as you mentioned, three months longer, oh man, like these industries are going to break...","offset":5454,"duration":6},{"text":"Rory: ...and people will need to cut back. There will be physical losses that people will have to experience. And that's where I go back to. I don't see this as tenable long-term politically for anyone involved. But I also thought that so far and I've been wrong.","offset":5460,"duration":18},{"text":"Host (Eric): Rory, I can't thank you enough for a terrific interview. Before we close, I want to add a quick point just of clarification about last week's interview with Dr. Anas Alhajji. Several of you on Twitter and in email said, \"Hey, Anas was wrong when he said that Iran had a huge vulnerability if their desalination plants were attacked. Iran only gets 3% of their water from desalination.\"","offset":5478,"duration":25},{"text":"Host (Eric): I agree it was a little bit ambiguous how it was worded, but that was not Dr. Alhajji's intended point. The point that he was making is everybody presumes that Israel has a nuclear weapon and Iran doesn't. His point was Iran effectively does have a nuclear option which is the other Gulf states. Not Iran, which only needs to rely on desalination for 3% of its own water, but the other Gulf states, including Israel, are heavily dependent on desalination. So it is the risk of Iran striking the desalination plants of Israel and other countries that would be the equivalent of a nuclear escalation and would probably result in Israel responding with a nuclear response. So that was the point that Dr. Alhajji was making.","offset":5503,"duration":46},{"text":"Host (Eric): Rory, I want to come back to what you do at Commodity Context for anybody who's not familiar with it. Terrific website. Please give us your Twitter handle and tell people what they can expect to find at commoditycontext.com.","offset":5549,"duration":12},{"text":"Rory: Thanks so much for having me again Eric. I always love coming on the show. You can follow me on Twitter at uh, @Rory_Johnston. And all of my public research is published at commoditycontext.com. We've got an—the Oil Context Weekly report every Friday that covers—I currently call it the Oil of the—the Oil and Iran War Context Weekly because that's all we're talking about.","offset":5561,"duration":18},{"text":"Rory: But every Friday at 4:00 to 5:00 p.m. Eastern, uh, I publish three monthly uh, data reports on OPEC, global balances, and North American detailed balances. And then I also am doing particularly these days, a lot of thematic work on Iran, on Venezuela, and the overall insanity in this current oil market. And I encourage you to join me.","offset":5579,"duration":23},{"text":"Host (Eric): Patrick Ceresna and I will be back as MacroVoices continues. And stay tuned, folks. Case you didn't connect those dots, Simon White told me earlier in this podcast that we needed to worry about food price inflation next. That was even without considering the fertilizer angle that I just discussed with Rory. So Patrick's trade of the week is going to be about food inflation and how to hedge against it. That's coming up next right here at macrovoices.com.","offset":5602,"duration":31},{"text":"Host (Eric): Now back to your hosts, Eric Townsend and Patrick Ceresna.","offset":5633,"duration":7},{"text":"Host 1: So if you think that the Trump administration has this whole situation completely under control, it's going to be over in another week or so, just like the President and Secretary Hegseth say it's going to be, then in that case, if that's what you think, then this is a terrific buy-the-dip setup. It probably sets the stage for a rally to new all-time highs.","offset":5640,"duration":26},{"text":"Host 1: If President Trump can really get this all under control and wrap it up and there's no lasting impact from it—and to be sure, in order for there to be no lasting impact, it really needs to get wrapped up pretty quickly here—if you think that's what happens, then it's time to buy this dip and buy it in size because we're going much higher.","offset":5666,"duration":18},{"text":"Host 1: On the other hand, if you don't think that, if you think that the Trump administration has started a fire that they won't be able to put out and that this is not under control and that this Iran conflict might turn into a repeat of the Iraq debacle that began in 2003, well, if that's what you think—because we're leaving my politics out of this one—that would portend a very, very different equity market outcome.","offset":5684,"duration":28},{"text":"Host 1: We could easily be looking at a cyclical bear market, and the worst case would be if oil transit through the Straits of Hormuz stays impaired for many months. In that scenario, without exaggeration, it could lead to an oil price surge well over $250 a barrel. That would cripple the global economy and lead to a global financial crisis on the scale of, if not bigger than, 2008.","offset":5712,"duration":30},{"text":"Host 1: Now, I strongly doubt that that would be the outcome because this is a problem that can be solved sooner than that. We're not going to see the Straits of Hormuz closed for years or anything like that.","offset":5742,"duration":12},{"text":"Host 1: The question is how long this goes on, how much damage it causes, and how long it takes to unwind that. In other words, how big is the backlog of global logistics that have been disrupted by the Straits of Hormuz closure? How long does it take to get things back to flowing as normal again?","offset":5754,"duration":19},{"text":"Host 1: That's really, I think, what's going to drive equity prices, and frankly, I don't think anybody knows for sure what's coming next in this market. So it really comes down to your geopolitical outlook. I think all of us are vulnerable to allowing our personal politics to bias our judgment as investors. So remember, this market reaction is not going to depend on what you think or what I think should happen. It's going to depend on what actually happens, and I don't think any of us know with any real certainty exactly how this is going to play out.","offset":5773,"duration":34},{"text":"Host 2: Eric, I'm going to keep my analysis very simple from a technical perspective. We're remaining below the 50-day moving average, we're breaking lower highs and lower lows, there is clear distribution. The bears are in control and in the driver's seat on the short term on the distribution side. We continue to see all rallies failing at Fibonacci zones, which is all indicating that generally the distribution cycle is still in play.","offset":5807,"duration":28},{"text":"Host 2: Now, while we have seen substantial increases in bearishness as the sentiment is pivoting, we've seen huge spikes in volatility index and other things that are signs that you typically would see from oversold conditions. But right now with enough of this global uncertainty here, this could be an overhang that keeps this market distributing.","offset":5835,"duration":25},{"text":"Host 2: Now, Eric, we certainly can't rule out that at some point the bulls will reverse this and counter-trend it. This is again the environment where hedges are critical, and we've talked about them the last couple weeks with our listeners, and I continue to advocate that portfolio insurance here makes a whole lot of sense. All right, Eric, let's talk about that US dollar.","offset":5860,"duration":28},{"text":"Host 1: Now, Patrick, by recording time we were back down to a high 99 handle after surging above 100 and then below 100 intraday on Friday. I think by the cash close we were back over 100 again. So we're right on that hairy line between 99 and 100.","offset":5888,"duration":18},{"text":"Host 1: The question to ask is whether we're topping out here at overbought resistance on this technically overbought market or if the strength that we've seen in the dollar so far is just the beginning of a new bullish trend. Once again, I think the answer depends on your geopolitical outlook. Sorry folks, that's going to be the answer for most things this week, and there are plenty of strong arguments to be made in either direction.","offset":5906,"duration":25},{"text":"Host 1: I don't see any fundamental bullish drivers for the dollar here other than the flight to safety trades into the dollar, which are only going to intensify if the situation in Iran worsens from here and if equity markets take a nosedive.","offset":5931,"duration":19},{"text":"Host 1: So there's plenty of room for much, much more upside in the Dollar Index. But ultimately, I think that upside would be driven by flight to safety trades in the Iran conflict. Someday when the Iran conflict wears off or winds down, then I think it becomes a bearish... it's time to sell the dollar there because I think it will be overbought and ripe for a major correction, maybe resuming the primary downtrend that was in play before this conflict arose. The question is timing: how much longer before this Iran conflict is over? Whenever it's over, that's the time I think you want to sell the Dollar Index.","offset":5950,"duration":40},{"text":"Host 2: Well, Eric, when looking under the hood of the dollar, the key thing is to observe that the predominant weakness is coming from the Euro and the Yen, which happen to be very large weightings in the Dollar Index. But the story isn't the US dollar strength and all cross-currencies weakening against it.","offset":5990,"duration":22},{"text":"Host 2: We continue to see resilience in a lot of the commodity-based currencies like the Aussie dollar and the Canadian dollar, and that Euro is really where the drag is as there continue to be growth concerns at a time when obviously their energy prices are under a lot of pressure, which is stressing the Euro right now on the downside.","offset":6012,"duration":22},{"text":"Host 2: If we see Euro breaking some of these key levels, that then is going to be a huge bullish tailwind for this Dollar Index. Now we're at the top of an almost a 10-month trade range, and if the Dollar Index makes any progress above this 100 level with momentum, we've got ourselves some sort of a strong US dollar counter-trend move. And so we have to watch whether or not this gains momentum from here. All right, Eric, let's touch on crude oil.","offset":6034,"duration":30},{"text":"Host 1: Well, as I already discussed with Rory Johnston, the Oman benchmark traded over $180 this week. Obviously, logistic complications are part of that, but it's still an important price signal.","offset":6064,"duration":12},{"text":"Host 1: I'm sorry to sound like a broken record folks, but it's the geopolitical outcome with Iran that's going to drive everything. As Rory Johnston said, I think it would be foolish to assume that, hey, it's going to be just a couple more days and the Trump administration is going to completely end this thing.","offset":6076,"duration":19},{"text":"Host 1: Even if it ends this week, we still have probably a couple of months at minimum just to clear the system out and get things back to flowing as usual. And the longer that the conflict wears on, the more that effect is compounded and the more of a mess we're going to have to unwind.","offset":6095,"duration":17},{"text":"Host 1: So the longer this continues, the more it's going to affect oil prices and cause a continued increase in oil prices and the inflation signal that that drives. And eventually, it becomes a self-reinforcing vicious cycle of increasing inflation driving even more extraction cost price increases, higher oil prices, and so forth. Hopefully, we don't get to that point where that self-reinforcing cycle kicks in.","offset":6112,"duration":29},{"text":"Host 2: All right, let's move on to gold here because we just got ourselves a little bit of a down day here on Wednesday. What's your take of what's going on?","offset":6141,"duration":8},{"text":"Host 1: The low print on the January 30th correction was 44.23, 4423. That was a near perfect test of the 50-day moving average at the time. But that happened in the middle of the night in very thin liquidity.","offset":6149,"duration":12},{"text":"Host 1: So something I said right here on MacroVoices just a few days later was we should watch for another test of the 50-day moving average during regular trading hours, not extended trading hours. Well, we got that on Wednesday, and it also coincided almost perfectly with the 38.2% Fibonacci retracement level of that January 30th correction. There was also a trendline there as well.","offset":6161,"duration":25},{"text":"Host 1: So three major support lines all broken at the same time. So there's a very good technical argument that could be made here, which is that that regular trading hours test of the 50-day moving average was the buy signal. The bottom could be in already.","offset":6186,"duration":15},{"text":"Host 1: Except we went right through it and we're trading considerably below it at recording time. I'm looking at 48.24 as we're recording right now, selling off more in futures trading after the close. These are all ominous signs and frankly, there's not a lot of obvious support until we get to the 100-day moving average at 45.91, 4591.","offset":6201,"duration":45},{"text":"Host 1: So I think we're probably headed in that direction unless there's a sudden change in the fundamentals. But it's also clear that there's been a breakdown of correlations between precious metals and the usual, you know, if it's increase in tension in Iran, more geopolitical upset, that would normally be up on precious metals.","offset":6246,"duration":21},{"text":"Host 1: That broke down on March 2nd. Gold is not trading up on geopolitical escalation the way it was before March 2nd, and frankly, I've yet to hear a really good explanation for why it isn't. So I don't pretend to know what comes next, but it sure looks to me like we might be headed towards a 45 handle, if not lower. That's the next obvious support level below the current market.","offset":6267,"duration":23},{"text":"Host 1: So either we get a bounce here and the 50-day really was the trading signal that it should have been, or if we continue to see this weakness below the 50-day continue through the day on Thursday, I think we're probably headed down to 45.91, maybe 4600 on the 100-day moving average by the time we get there.","offset":6290,"duration":19},{"text":"Host 2: Well, Eric, my view on gold has remained unchanged for the last month. After we saw that key blow-off top on gold and that huge reversion, typically if we look at the last four consolidations of gold, it took as much as two to four months of gold consolidating before it attempted to break to fresh new highs.","offset":6309,"duration":25},{"text":"Host 2: At this stage, that analog is the one that we continue to see here on gold as we saw some retesting of highs and this sideways consolidation continuing overall. After this consolidation finishes, there's lots of room for gold to go higher, but at this stage I think it'll be deeper into the second quarter before we see a meaningful turn up.","offset":6334,"duration":24},{"text":"Host 2: How low could this gold correction go? Well, the first level to watch on the support side is this 4800 level we're trading down to right now, which is a Fib zone of this retrace. If that doesn't hold, I mean there is always the possibility we head back down toward that 4500 level and $4400 level below, but if that was to happen, that would probably be a compelling buy on dip to take advantage of. All right, Eric, what are your thoughts here on the fact that Uranium continues to just consolidate sideways inactively?","offset":6358,"duration":35},{"text":"Host 1: Well, Patrick, the fundamentals are uber bullish and they're only getting better by the day as we see more and more nuclear announcements. The nuclear renaissance is on and it's on strong.","offset":6393,"duration":13},{"text":"Host 1: And the market for Uranium and Uranium miners is holding up pretty darn well considering how bad everything else is going. We didn't see as big of a downside as I was fearing we might see on the Uranium stocks on Wednesday.","offset":6406,"duration":17},{"text":"Host 1: We're still looking at 49 spot 05 at the close on Wednesday on the URA ETF, which is the one that's most followed. That's still well above its 200-day moving average, whereas the indices have moved below their 200-day moving averages. But frankly, I think it's headed for its 200-day moving average, which is at 46 spot 03.","offset":6423,"duration":20},{"text":"Host 1: So we'll see what happens next. Broad market risk-off event is obviously going to take everything else down with it, including the Uranium miners. I think it just sets up better and better buy-the-dip opportunities. The question is how big is the dip before it's time to buy Uranium? I think the next obvious target is 46.03 on the URA ETF. But let's see what happens with the broader risk markets because if we get an outright market crash here, as could happen if oil prices continue to rise, particularly if they spike over $150 setting new all-time highs—at least on the major indices, we're already there with some of the other markets around the world, but if we get there on Brent and WTI above 150, that probably brings on an outright crash in equity markets and anything could happen.","offset":6443,"duration":50},{"text":"Host 2: Well, structurally the chart remains bullish. All consolidations are being held: higher highs and higher lows. But it's just been a quiet period, maybe the lack of liquidity in the broader asset markets could be just keeping this all contained. But overall the charts are still on the bull trend and at major support levels.","offset":6493,"duration":25},{"text":"Host 2: Now, Eric, I want to focus in on some bizarre price action that we've seen in Copper when it's overlaid on Gold. Now typically precious metals trade in correlation and a lot of times these industrial metals tend to march to their beat of their own drum independently.","offset":6518,"duration":34},{"text":"Host 2: But when I here show an overlay of the Gold and Copper charts, for some odd reason Copper, almost day by day, tick by tick, has actually been correlating with Gold. Now why? I really actually don't have an explanation. It's and I certainly don't know whether this will continue, but certainly as of this moment when we're looking at this chart, it's undeniable that right now Copper is just trading tick by tick with Gold. I'm very curious to see whether or not this trend continues in the weeks and months to come.","offset":6552,"duration":50},{"text":"Host 1: Patrick, before we wrap up this week's podcast, let's hit that 10-year Treasury Note chart.","offset":6602,"duration":4},{"text":"Host 2: Well, we've seen here is that it's trading right up toward the 2.30 level. We had the FOMC meeting and the first reaction after the post-FOMC was yields rising up to their one-month ranges or multi-month ranges. It'll be very interesting to see whether this has started a new follow-through and we see yields push higher from here or whether this was going to just a fake-out retest of the highs.","offset":6606,"duration":28},{"text":"Host 1: Folks, if you enjoyed Patrick's chart decks, you can get them every single day of the week with a free trial of Big Picture 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.","offset":6634,"duration":15},{"text":"Host 2: Well, in this week's Research Roundup you're going to find the transcript for today's interview, you're going to find the slide deck that was put together by Simon White, and you'll find the Trade of the Week chartbook we just discussed here in the post-game, including a number of links to articles that we found interesting.","offset":6649,"duration":20},{"text":"Host 2: You're going to find this link and so much more in this week's Research Roundup. 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.","offset":6669,"duration":17},{"text":"Host 2: 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 will consider it for our weekly distributions.","offset":6686,"duration":15},{"text":"Host 2: 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 at @EricSTownsend, that's Eric spelled with a K, and you can also follow me at @PatrickCeresna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week.","offset":6701,"duration":19},{"text":"[Music playing]","offset":6720,"duration":6},{"text":"Host 3: 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. MacroVoices is made possible by sponsorship from bigpicturetrading.com, the internet's premier source of online education for traders.","offset":6726,"duration":23},{"text":"Host 3: Please visit bigpicturetrading.com for more information. Please register your free account at macrovoices.com. Once registered, you'll receive our free weekly Research Roundup email containing links to supporting documents from our featured guests and the very best free financial content our volunteer research team could find on the internet each week.","offset":6749,"duration":22},{"text":"Host 3: You'll also gain access to our free listener discussion forums and research library. And the more registered users we have, the more we'll be able to recruit high-profile feature interview guests for future programs. So please register your free account today at macrovoices.com if you haven't already.","offset":6771,"duration":17},{"text":"Host 3: You can subscribe to MacroVoices on iTunes to have MacroVoices automatically delivered to your mobile device each week free of charge. You can email questions for the program to mailbox@macrovoices.com and we'll answer your questions on the air from time to time in our mailbox segment.","offset":6788,"duration":20},{"text":"Host 3: MacroVoices is presented for informational and entertainment purposes only. The information presented on MacroVoices should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions. The views and opinions expressed on MacroVoices are those of the participants and do not necessarily reflect those of the show's hosts or sponsors.","offset":6808,"duration":22},{"text":"Host 3: MacroVoices, its producers, sponsors, and hosts Eric Townsend and Patrick Ceresna shall not be liable for losses resulting from investment decisions based on information or viewpoints presented on MacroVoices. MacroVoices is made possible by sponsorship from bigpicturetrading.com and by funding from Fourth Turning Capital Management, LLC. For more information, visit macrovoices.com.","offset":6830,"duration":29},{"text":"[Music continues]","offset":6859,"duration":15}],"logs":[{"elapsed":"0.0","message":"Downloading audio from YouTube...","detail":null},{"elapsed":"0.0","message":"Trying download with browser cookies (ad-free)...","detail":null},{"elapsed":"58.0","message":"Audio downloaded (61.2 MB) in 58.0s","detail":"File size: 61.2 MB"},{"elapsed":"58.0","message":"Video title: MacroVoices #524 Simon White: War + Inflation = More Inflation","detail":null},{"elapsed":"58.0","message":"Audio duration: 1:54:31 (114.5 min)","detail":null},{"elapsed":"58.0","message":"Very long audio (114.5 min) — will use chunked transcription with gemini-3-flash-preview","detail":null},{"elapsed":"58.0","message":"Skipping full-file attempt — using chunked transcription for 114.5 min audio","detail":null},{"elapsed":"58.8","message":"Split audio into 3 chunks for transcription","detail":null},{"elapsed":"58.8","message":"Transcribing chunk 1/3 (starts at 0:00)...","detail":null},{"elapsed":"58.8","message":"Uploading audio to Gemini File API...","detail":null},{"elapsed":"62.1","message":"Audio uploaded in 3.3s","detail":"File ref: files/zs2ncd0vkmjh"},{"elapsed":"62.1","message":"Audio processed in 0.0s. 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