Transcription
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AND SOMETIMES MAY BE GOOD, SOMETIMES MAY BE [ __ ] >> It's macro moni stocks, bonds, FX, crypto on the way. Get contro. Level up your week. Oh yeah.
Hello out there. Hello out there. Welcome to Real Vision. Welcome to Macro Monday. My name is Venol. I'm your usual host these Mondays. Finally back after a few weeks in sunny Italy. and I'm joined as usual by my co-host Andreas. Welcome to the show, Andreas.
>> Thanks, Michael. Uh, finally the temperatures have dropped a bit here in Copenhagen after I think a new record high in um in temperatures on Saturday. So, it was a nasty weekend for us without AC's to be honest. But, uh, >> old alltime highs also in temperature recordings in uh in Denmark, Andreas. not the all-time highs we were looking for maybe, but uh it's the ones we we we had. We have a great show for you today. We're going to answering some of the the most red-hot questions out there in markets. Uh are we back to a war in hormuse? Uh has the dollar topped? Will the dollar top? And uh what is the situation in markets? as we look into a week of very very interesting both number prints but also a speech from from Kevin Wars that we're going to preview a little bit here and give you a uh a sense of where we are on markets.
Before we get started though uh remember this show is part of uh Real Vision. We uh uh have dropped our prices to the lowest levels ever on Real Vision as part of our summer campaign. We are uh building a new Real Vision. It's very much communitydriven. You get so much value from Real Vision, whether it's on the connect alpha approach here. So, if you've been lurking around watching our free show, the Macro Monday, maybe wanting to to test out uh the waters at Realvision, now is the time to go. Check out realvision.com/pricing to secure your future today. In my opinion, that's a very some very very good offers. I was beginning to wonder, Andre, if these price cuts had in had impacted our casting and brought the inflation measure down so much. Maybe that was the cause. But I'm not sure that Real Vision is big enough to to to to draw that down single-handedly even though they are very very great discounts.
Okay, enough salesmanships here. Andreas. Uh remember guys, this is our free show where we give you a sneak peek into the macro and geopolitical research that we publish on Real Vision. We try to be as actionable and concrete as possible. uh and we as we dive around the the the world of global macro, but please do remember that our opinions and ANALYSIS MIGHT BE >> SOMETIMES MAY BE GOOD, SOMETIMES MAY BE [ __ ] >> ABSOLUTELY.
ANDREAS, I have to say you nailed it last week with the uh with the micron uh quarterly reports. Uh uh was that your was was that your best call this month as we are heading towards the end of June or what what's the one you've been most proud of?
>> Well, it was a good call. Uh but we've had a pretty volatile week and month in in memory stocks overall. It seems like there's kind of an angst that we're approaching a top again uh which is in my opinion unsubstantiated. We can get back to that. But beneath the hood uh of our pro portfolio, we also had a huge multibagger development in one of our biotech healthcare old health stocks. um probably the first breakthrough in depression drugs in 50 years and I'll leave that there as a cliffhanger but uh yeah, it has it has moved my wealth in a positive direction let me put it like that and hopefully also some of our members that's what we're here for and address at the end of the day so that was the uh sometimes maybe good what was sometimes maybe bad in the month of June and address
>> you know our data has been you know fairly vocal that dollar inflation is coming down um that you know everything related to the straight of moves and that energy spike and and all that uh has come to an end but it's not like the market is listening really if you know what I mean. So I I I guess that's kind of been the flip side. Uh we do have some positions in our portfolio very sensitive to the dollar and uh you know the dollar just before we went on air here the dollar made a new top versus the Japanese yen. It's actually the printing at the highest level since 1986 before I was born um today. So the dollar has been stronger than I had anticipated. That's probably been the flip side.
>> Interesting interesting. We'll we'll we'll get right back to that in uh in a moment and uh and a bit of outlook on that. But overall a very very interesting month and obviously we're we're heading into an equally interesting June July address. Let's uh pause a bit on one of the uh the ongoing developments that you mentioned the situation in Hormuzuk because you know I thought things were mostly done with a memorandum of of understanding but apparently we still have a weekend war going on where there is some fighting every weekend and then we get our Sunday hop and everything is good again. Um, so we had obviously Iran is the way I see it trying to maximize their leverage, maximize their outcome of this war. They're trying to establish some sort of control over the Syri enabling them to to levy sound tolls uh essentially to to some degree and the US is not having that. They they've had it with with the humiliations essentially of Donald Trump here as they see it and uh hit back at the at the Iranians. Um, and then on Sunday as usual um Axios got the news. I don't know why it's always a but it is that that attacks have been halted and that talks have are back on and address perhaps the most important thing to zoom in on here um to to cut through all the noise is that some ships are still going through. We're not back to prewar levels uh in the street of Hermoose. We might never be or might might never come there. Um, but are you worried about this from a market investor perspective or uh are you confident as long as as ships are are floating through?
>> So you know everyone's short oil now if you look at the speculators data. Uh so we obviously cannot cope with the major hiccup. Um having said that you know the price action is still very benign in oil uh also in physical markets and the oil has been flowing pretty decently since the signing of the memorandum of understanding. I mean sure it's not like we're back to pre-war levels in terms of the transit but we will never get back to pre-war levels. Just remember that. I mean the bypassing is very true and the bypassing is continuing. uh we just got another reason to continue to bypass the trade of a moves this weekend, right? I mean um on top of it uh obviously some flows are going through that we do not account for in this official data here and um I think the bigger discussion here is whether you know is the Omani transit route used or the Iranian transit route because you know pre-war it wasn't really separated between the two countries but now you basically have two shipping lanes uh And the Americans, they've they've done a lot to protect that Omani shipping lane. Also during this weekend, right? uh we've seen uh outright, you know, escorts, whatever you call it, of of some of the ships out of of of the straight of moose. And the Iranians obviously cannot live with that. Um, but I think you said it a month ago or so, Michael, that you know, they've played this card now, the Iranians. It's not like we can we cannot return to normal and pretend that this war has never happened, right? Um, so of course a lot of the stakeholders in the region they've they're also trying to position themselves for this you know post straight of a moves world. Um, and yeah, if we unless the strike clo is completely closed again, I don't think we have a major issue here because we we've actually managed to cope without the strike for a long while and we'll also manage to cope with a partial straight for a while in my opinion as long as it doesn't close again.
>> Interesting address. So, so uh let's just leave it at that. We have another couple of very very interesting geopolitical developments especially in the EU China trade relations. I'll be covering that in my the drill article later this week on real visions. So, so let's leave it at that and and and return and address to discussing the US dollar. Um, you uh published your your your weekly flagship article this morning on is everyone wrong on the the US dollar uh arguing first of all of the uh the technical outbreak of the dollar obviously also the relation to the Kev Kevin Kevin W's remarks. So, so may maybe let's just uh roll back a bit and address what caused this rally in the dollar uh for that we've seen over the past weeks.
>> So, you know, if we turn back time to Kevin War's first press conference a few weeks back, he you know he he had to take uh stage with a new set of projections, a new set of dot plots from from the members of the committee. And uh if you look at it statistically, they've basically opted every single forecast in the direction of like a more hawkish outcome, right? Right up um while they uh they seem more scared of inflation, right? And um all of this happened amidst first of all the draw down that we've seen in inflation in our data for yeah almost two months now. but also as the market pricing of inflation fell apart. Uh and I I'd like to show a chart on on that exact divergence on page 13 because you know typically central banks and especially since co they've they've been very correlated to the inflation market, right? Because inflation has been the main worry. it's it's kind of been the thing that they've used as their as their guiding star for um for the policy rights and and so on and so forth. And yeah, I I cannot recall a disconnect this huge between, you know, the rhetoric and what markets are telling you on inflation. Uh so the rhetoric is getting more and more hulkish and inflation is coming down. Uh so that disconnect obviously leads to leads to real rates coming higher. I mean interest rates adjusted for expectations for future inflation which is an environment that typically leads to a strong dollar. Uh I think this is a you know a classic example of what I call the generals always fight the last war syndrome that you know most of the members of the committee the last crisis that they had to deal with was an inflation crisis right in 2122 where they got things wrong uh they underestimated inflation so I think most members would I now rather overestimated than underestimated the inflation picture, right? Because they got it wrong the other way around a few years back. Uh and I think this chart tells you exactly that. Um, it's pretty obvious that we had an inflation spike in uh in April and May. Uh the big question is whether it is something that we should worry about now that the oil price is basically back to square one. uh and you know I sincerely doubt that there is a more lasting inflation picture here. Uh our data is basically screaming that uh it is transitory. Having said that, it's not only the Fed that did this pivot uh alongside falling inflation. We we did see the same to some extent in the Euro zone. We did see the same to some extent in Australia etc. Right? Uh the big difference here is and that's probably why the dollar is so strong is that you know coming into the Iran war coming into the new championship we had expectations of rate cuts priced in in the US. Uh so it's obviously being a been a big change of of the scenery from cuts to hikes um over the past month or so. Uh is this a policy mistake? Not yet because they haven't hiked interest rates but it's at least a forecasting mistake. Uh and I guess your next question is when will they undo this damage? And um, you know, I've I've spent all this week.
>> Yeah, they already have a chance this week. So, a few things, Migle. Um, remember the Kevin Worsh, one of the fif first things he did, uh, he he decided to cut down the number of words in the press release from the FOMC. Uh, he he was very vocal about the FOMC having to take guidance for markets and not vice versa. Now um which is basically one of you know Trump has been very vocal on that for a couple of years as well. So what where does that leave us when when inflation markets are you know coming down rapidly? Does that tell Kevin Wars that he needs to respond to that? At least that would be my reading of things. Um, but the market is not it's not like the market has made the conclusion okay now inflation is falling that will lead Kevin Morris to do X Y and Z. Um, so I think that's the big test here. Will he admit to inflation markets already, you know, sending him a signal? Yeah. Over the two weeks here because it it it is admittedly probably the fastest pivot from a pivot ever if he manages to U-turn again this week.
>> And interest to me there's an even bigger pivot here. Speaking of pivots, because I thought, remember back 9 12 months, uh, Donald Trump and J. Paul walking around in hard hats. It was it was a matter of is he going to jail in him or jail him or shoot him. We all expected Donald Trump to put in a puppet. >> We all expected Donald Trump to put in someone who would just hammer down interest rates no matter the data. That
>> I'm I'm paraphrasing a bit here. That's not what we have. It seems like there's no political pressure right now. No, at least they they'll allow him some time uh before they they ramp up the pressure. Uh so Walsh will appear on a panel. I think it's on Wednesday in um in Portugal. If I'm not mistaken, this ECB forum that they typically host before the summer vacation. I've remember that, you know, it's only US stains that are weird enough to go on vacation now and most of Europe will wait another month, right? So um having said that Miguel um it it is typically a very very important conference this one also for the European Central Bank. Um, so you know our data is as clear as it can get. I mean on inflation um in the inflation signal is incredibly strong. The question is just when will those in power admit to it? Uh, and you could of course argue that it would make more sense for them to wait until you have the actual confirmation, right? The actual numbers. Um, from Europe, we got the Spanish inflation report. Not I'm going into details on that one uh for June. Remember that the inflation numbers in the Euro zone, they're published at month end, right? And in the US they're published roughly two weeks later. Uh, and the core inflation in Spain was actually pretty soft. Uh, also when you look at the headline inflation, I think we overall have a pretty soft uh surprise coming in the Euro zone. So again, confirmation that our data is probably right. Um, but you just need to be a little bit patient here because um, you know, especially given this fighting the last war syndrome, I'd argue that it makes sense for them to wait until they actually have some confirmation that inflation is coming down. Um, it it's again, it's not it's not like Kevin Wars has told us, okay, well, we're going to hike this the hell out of this market, right? They just made a forecasting pivot and then, yeah, let's see. At least he's not fighting a war with the president like unlike his pres predecessor. That was my point here which is quite remarkable that it seems like he's been giving sort of a honeymoon period of or you know the honeymoon period Trump has created for him with the Iran war that has created this impass of uh uh of murky data. So very very interesting address.
>> We have a aside from war speed we have a couple of very interesting numbers coming up both on the manufacturing PMI we have job numbers. What do you expect this uh maybe let's start with the job numbers. What do you expect this week?
>> Uh weaker than the last couple of months.
>> So remember exactly a month ago uh we were one of the very few uh to get this right. We had a pretty material job creation in leisure and hospitality. uh obviously related to hiring for you know everything from merch shops to um yeah drop beer servants and whatever you have for for the World Cup right so >> um of course there's been a little bit of hiring within that space still in June for for the World Cup but um most of it should be in the price for for uh for the job creation and then overall um if you look at our tax indicators uh which I typically like to consult ahead of job reports. We've actually seen a de acceleration in June also during the sample week. So my best guess is that it will be softer than last month. That is pretty well telegraphed. Um, but I um I wouldn't be surprised to see it below 100K which is below consensus. So um again here most most people and probably also most um of the members of the Federal Reserve Committee concluded that the job market was really accelerating uh when they met a few weeks back and I uh I think that was that is a decently fair um conclusion but again it looked arbitrarily strong let me put it like that because of the World Cup uh and it is something that's very difficult to, you know, adjust away because, you know, you don't really have any data to compare it with, right? Uh, how would you ceasly adjust inflation or job creation for a World Cup? Um,
>> I don't think it's possible.
>> No. >> So, so it's it's just something to consider. So, I I you know, my my best guess right now is that both jobs and inflation will look softer than what they have uh in their forecast for the next few months here. Yeah, again underscoring the uh the scenario we've been talking about. Okay, interest you you're telling me that we need some patience. We need some better numbers to get a uh to to to get worse numbers you could argue better or worse numbers you could argue to for to to get a softer line out of the Fed. Um, you're heading on vacation next week. Um, I know you're still uh you still like to be connected. You're still online. You still like to post. You'll probably even join the show if I if I know you're right. We will see about that. But but Andreas, how do you uh for the listeners out there who who are maybe heading into the vacation in the coming weeks, maybe in a month from now, it doesn't matter. How do you prepare for your your portfolio? Do you do you take the gas off the your foot off the gas a little bit or what do you do?
>> So this is one of I I get this question every single summer. Uh especially from >> I might have asked you asked you this last year as well. >> Yeah. Yeah. Yeah. You probably did. But uh but I also get it from you know various institutional counterparts and uh so on and so forth because the interesting thing is that positioning today will likely be somewhat reversed into the vacation season. Um, so whether that's positive or negative for the market depends on the positioning coming into the vacation season >> because what you typically see is that you lower your leverage, you lower your notionals a little bit on average into uh the vacation season. And when I say the vacation season, I think we're uh we're maybe talking the third week of July onwards, right? Um, so this year um it could be that we see a move lower in the dollar into the vacation season. It's it's a very uh popular trait to be long dollar right now.
>> Um, it could be that we see a reversal of some of the shorts in software and metals and some of those sectors in the equity space. It could be that uh it takes a bit of steam out of the semiconductor trade because that's a very popular trade. Um, obviously um, and yeah, it could be that we see some buying of the Japanese yen probably the most unpopular trade at all. Right. So I uh I think you need to look at sort of the scoreboard of positioning and account for the possibility that you see some positioning squaring ahead of that vacation season. there. You still have a couple weeks left before it really starts, right? But that's that's typically my go-to to look at the positioning ahead of the vacation uh season. I've always um designed my vacation so that I go on vacation before everyone else. And I actually like that edge because um it gives me the opportunity to be at the desk when all of the stuff happens. Um, of course I'll, you know, I'll be on top of everything related to the portfolio when I'm away. I'm that kind of guy. Um, and you know, I have real money invested in this. So, um, you know, [laughter] I I don't sleep well if I do not track it. So, I'll continue to do that, of course.
>> Absolutely. Okay. Okay, we we've had a few questions on uh some of the fundamentals uh fundamental uh indicators in the AI trade and we just have time to cover a few of those. You cover them in your stem signals uh article as well. Andreas, both the token expenditure uh index uh which we used a lot and also the the the the DRAM spot price. H still no signs of an AI slowdown as far as I can tell. No, and and I mean we had a lot of discussions on whether to see this draw down in the token expenditure index as a a red flag overall for this trade. Um, and as we showcased in last week's editorial uh it it was more of a um a story of the marginal user u moving to Chinese open source models. Uh so remember that this is the average price paid for a million tokens. Uh so if the volume goes up and that volume to a larger extent than the month prior goes to the Chinese open source model this average will drop even though the volume is going up. Uh and that's basically been the case um in June the volume is still going up. I guess you can you can argue that it's been crystal clear if you look at a lot of other live indicators such as uh you know the rental price of black wells for example you you haven't really seen the same draw down there um you haven't seen the draw down in memory pricing um so if we move to the memory pricing let me just
>> let me just highlight that you know I I had a a few things um that I I think I said that last week on the show here as Well, that you know if the Micron quarterly report um by the way covering the purple area here, right? So between March and May, >> it wasn't the strongest quarter for the underlying spot price development. Um, but see what happened since the end of that quarter, right? We've seen another acceleration. Um, that's point number one. Point number two uh and I think I got some uh confirmation of that is that we we probably have some sort of a frontloading of the whole demand cycle for memory here due to the Iran war. Um, because you know everyone suddenly got scared that the world would run out of helium gas capacity and stuff like that uh maybe during the second half of the year. Basel, I'm I'm I'm watching this spot price development more or less on a daily basis because we all know that everyone's involved in Micron and Sandisk. I mean, uh I've I've gotten some data from some of the pl the trading platforms here. Um, and they are the two most popular retail trades, right? So, you know, everyone and their mother and probably also their dog is involved in this trade both on the long and the short side. I mean you can see from the volatility over the past couple of weeks that people are in and out in and out in and out. I mean uh
>> uh but you know the fundamental fundamental underlying story is still accelerating. Um, so I you know I'm I'm still all in memory despite this volatility. But I get that if you're if you're running institutional money um it's getting a little bit more difficult to to to size this because of the volatility. Right. That's that's that's kind of the side effect of volatility that you need to run smaller positions again, get the same outcome, right? So, um, yeah, we'll we'll have to see how much juice there is left, but uh well, the underlying picture still looks incredible.
>> Yeah. Yeah. And Elon Musk and and Tim Cook also talked about it over the week. This is the the most massive price jump in everything we've ever seen. Maybe maybe one comment there amigo because I've had a lot of questions on the Chinese competition uh in the memory space.
>> Yeah.
>> Um, and I think it was Reuters that um laid out a story two three days ago about Apple asking Trump and his administration for you know access to these Chinese memory um manufacturers. Currently it's not allowed for Apple to put a Chinese memory chip in their phone. But yeah, they're currently asking due to the scarcity. Remember it's it's because of a scarcity those memory prices enormously in their >> corporate and and um what I wanted to say is that you know Apple for example um they have a pretty decent supply chain secured in China. So I mean they can obviously use these Chinese suppliers in in case they they're allowed to but this is geopolitical question as well right um
>> become for for now it it's not like um CMTX and um and the local Chinese competitors are close to having the same yield on their memory chips as Micron and Heinex. But they're getting there. Uh, and you obviously want to stay ahead, right? So, uh, I'm I'm I'm actually not sure what to expect from the Trump administration on this question. Uh, if I were to guess right now, I think they'll say no.
>> I think so too. I think so too. But but but it's a very very delicate balance because uh you can't have a shortage either, which we are essentially looking into. You have to to take action on that because that that will begin to affect consumer products. We already saw the price hikes on iPhones and iPads etc. So it it is a very very delicate situation to address
>> and and it is by the way a situation that we perfectly forecasted like two or three months ago. Um, we have a little less than a handful of of names in our consumer scarity basket. So yeah, we're very thematically driven and we try to look one step ahead every time uh we get these developments. We were one of the very few to get this whole technology trade right during the Iran war uh due to this frontloading of demand. And in my opinion, the second half of the year is very much about the byproducts of that front loing of the demand for AI semis because it will impact a lot of things down the supply chain, consumer electronics, cars, what have you. Because the chip scarity is very it's it's very real. It's very live.
>> It's alive. Absolutely. Andreas, that's all we had for you this week from Macro Mondays at Real Vision. Remember that we are running a big summer campaign at Real Vision. We've dropped our prices to the lowest level ever. So, we're if you've been lurking around wanting to join Real Vision, now is the time to to do so. Go to realvision.com/pricing to join up and get even more of our uh content that includes both Andreas's weekly STEM signals macro piece, my geopolitical piece, the drill, and obviously our uh portfolio update which which is released every Friday. We also have a bunch of live shows uh among the contributors of Realvision. So, don't miss out on that. Check out realvision.com/pricing. Thanks to you Andreas for joining. Thanks to everyone for for listening in. That's uh macro Mondays for this week. We'll be back.