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[Music] 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, Eric Townsend and Patrick Szna.
Macrovoices' episode 478 was produced on May 1st, 2025. I'm Eric Townsend. Forest for the Trees founder Luke Groman returns as this week's feature interview guest. We'll discuss the market's Trump tariff tantrum, and Luke will make the bold call that President Trump has a realistic chance of successfully raising enough tariff revenue to be able to excuse the bottom 90% from paying federal income tax. Needless to say, President Trump's popularity would be increased if he actually eliminated taxes for most taxpayers.
And I'm Patrick Sesna, with the macro scoreboard week over week as of the close of Wednesday, April 30th, 2025. The S&P 500 index, up 361 basis points, trading at 5569. The market continues to crawl higher as it attempts to break above the 50-day moving average for the first time since February. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The US dollar index, down 15 basis points, trading at 9963, bouncing from an oversold condition with retracement targets toward 101 to 102. The June WTI crude oil contract, down 652 basis points, trading at 5821. A material breakdown in oil towards April lows as recession risks rise. The June Arbob gasoline, down 242 basis points, trading at 202. The June gold contract, up 76 basis points, trading at 3319. Gold is now retracing the April advance, asking the question: is this a big buy on dip? The July copper contract, down 475 basis points, trading at 461. Uranium, up 305 basis points, trading at 6765. This is the first positive price action we've seen in months. The US 10-year Treasury yield, down 21 basis points, trading at 417. And the key news to watch this week is the US jobs numbers. And next week we have the ISM services PMIs, the FOMC statement and press conference, and the Bank of England monetary policy statement.
This week's feature interview guest is Forest for the Trees founder Luke Roman. Eric and Luke discuss tariffs, China's gold buying, and the perception versus reality in building US infrastructure. Eric's interview with Luke Groman is coming up as Macrovoices continues right here at macrovoices.com.
[Music] And now with this week's special guest, here's your host, Eric Townsend.
Joining me now is Forest for the Trees founder, Luke Groman. Luke, I've been particularly looking forward to getting you on the show. It seems to me this might be the year when all of those crazy nutcase things that only Luke Groman thinks could ever come true came true. Uh, at least that's the way it's starting to feel to me. Why don't we start with uh President Trump and the tariffs and uh talk about what's going on, where it's headed. Um, seems like President Trump's not uh unwilling to break things. Uh, is he going to break this market more than he has already?
Thanks for having me back on. Yeah, I I think I think the Trump tariffs are the snowflake that that triggered the avalanche on some level, right? The old metaphor of you never know which snowflake's going to trigger the avalanche. I think maybe we're starting to get some idea that that's that might be the avalanche. I I think the tariffs are super interesting on a number of fronts. When paired with when he came in late January, was inaugurated immediately both he and Bessant started talking about the tariffs and talking about fundamentally reversing the trade flows and capital flows that had defined the dollar-centric system as we know it for the past 50 years. So when you we wrote a report about it for clients at the end of January, we said look if with Trump saying we're going to fund more based on tariffs and cut income taxes and Bessant saying we're going to ramp up tariffs. That was very much a fundamental reversal of of flows. In other words, it used to be we send our factories and jobs to China. China sends stuff here. We send China dollars. China recycles those dollars into our capital markets and that's sort of the virtuous cycle of trade and and and that's sort of what's defined certainly the last 20 years and you know replace China with any number of you know Europe and Japan and and others and that's kind of been how the the broadstroke flows capital flows of of the dollar-centric system have have really happened over the last 40 years or so. And late January, Trump says, "Okay, we're going to do more with tariffs and we're going to try to cut income taxes." And that is starts to be a reversal of that. Uh, and then Bessant talks about tariffs and and both of those comments in late January, early February, noteworthy, but markets didn't really pay attention. And I think that the thing to me that really grabbed my attention in a big way was the America First investment policy memo that Trump the Trump administration put out late on Friday night, February 21st. Uh we wrote a report about it for clients on February 25th, highlighting that essentially what this report was doing was saying, "China, take your money and go home. we don't want you recycling your dollars into US capital markets anymore. And more broadly, the deal appeared to be ra the the the goal appeared to be raising the cost of carry for holding Treasury bonds and for reinvesting dollar surpluses back into US capital markets with the goal of trying to redirect those flows into uh real assets, Main Street, not Wall Street. As Bessant has said repeatedly, the next clue I to our eyes about what the Trump administration is trying to accomplish came when uh White House uh uh Council of Economic Advisors Chairman Steven Myin gave a speech at the Hudston Institute where he he reiterated essentially the goal of the America First Investment Policy Memo, which is look, if you do trade with us, hey, you're going to end up with dollars and you're you're welcome to reinvest those dollars into our physical infrastructure, property, plant, equipment. Uh you're welcome to cut us a check for tariffs, cut a check to treasury, buy some weapons from us. The other thing that Myin didn't say, and I I I don't know if he was thinking it. I certainly understand why he wouldn't have said anything about it, but the final clue I think in in everything that has really grabbed our attention most about this whole tariff episode over the last month has been that Trump put tariffs on on basically everybody and everything. Draconian, higher than expected, certainly higher than we thought. Uh, I mean, he tariffed an island full of penguins if if I remember reading properly. But the one thing he didn't put tariffs on that everybody was sure he was going to put tariffs on was gold. No tariffs on gold. Tariffs on everything and everyone else, but no tariffs on gold, which was very curious because when put together with higher cost of carry on treasuries and US financial assets and what Myron said, it starts to look when you paint with broad strokes like, "Hey, the old deal is off. We're no longer want you recycling your dollar surpluses into our financial asset markets. You're welcome to invest them in US factories. You're welcome to buy US weapons. You're welcome to cut the US Treasury a check. You're welcome to pay the tariffs. Or there's no tariffs on gold either. And so you can buy gold to your heart's delight. That works for us, too, because that's going to bid up gold relentlessly. And as gold rises, it's going to effectively drive more of a settlement and a neutral reserve asset dynamic that we've been discussing for years and years and years um together, Eric. And as gold gets higher, the dollar will weaken over time against creditor currencies that are quote unquote manipulating their currencies like the Chinese yuan, like the Japanese yen. And lo and behold, over the last month, look what's happened. Dollar is down against the yuan a little bit. It's down against the yen fairly notably, and it's down big against gold. So I think we are in I I can see in broad strokes what the Trump administration is trying to do here which is effect what we we we termed it closing the financial asset window uh in a nod to Nixon closing the gold window in 71. Well we wrote uh for clients about a month ago. We said Trump just closed the financial asset dollar window which is to say take your dollar surpluses. We don't want them in the NASDAQ. We don't want you bidding mag seven from 50 time sales to 75 time sales anymore. Buy our f, you know, build factories here, buy our weapons, pay our tariffs, or buy gold. And so that's the kind of price action we've seen in markets over the last month, last week and a half accepted. There's been a lot of confusion on Wall Street. We've never seen this before, most of us in our careers, even those of us that have been doing it for a long time, which is dollar down, stocks down, bonds down. That's capital outflow price action. And that is precisely what you'd expect to see especially when married with gold up big that based on what I just laid out. So that's what I think the Trump administration is trying to do in all of this. Basically Main Street not Wall Street, making America more competitive again, reassuring and weakening the dollar. But they are admittedly blunt instruments with high degrees of difficulty and very high degrees of executional risk and what it appears they are trying to accomplish in my opinion.
Let's go a little bit deeper on gold Luke, since you brought that up. Uh one of the things that se several analysts have said is this is mostly about China doing the buying for its own central bank purposes. They've analyzed the daily uh capital flows and so forth and they're saying look the the action is going on in the Shanghai market. We should be taking this as a signal that's all about that. Now what you just said is maybe Shanghai is buying it but they're buying it perhaps at the behest of Trump from a policy perspective. Um is it one of those two things? Is it both of those things? Is it something else? and particularly given the incredible price action that we saw with that near parabolic rise up to to 3500 uh on the price of gold. Um you know are we just getting started? Is it over? Uh what what inning are we in do you think in this gold market?
I think we're still in the early innings of the gold market because I am I am not hearing basically anybody other than a small cadre of people suggest that the catalyst the ultimate catalyst for what has happening to gold is that it is coming back into the system as a neutral reserve asset to replace treasuries. That's what's happening. And the US is not just fine with that. It's it's the goal and I I I think by virtue of that I absolutely I wouldn't be surprised at all if China's driving it. You know, there was a very interesting added up on my X feed the other day. Shanghai gold premiums were at 2% and rising last week on Thursday and postco anytime Shanghai gold premiums at 2% and rising. Uh it's usually a really bad time to try to short gold and yet sort of like every you know a lot of traders out there were saying oh it's you know now technically it was I think I don't know 60% above its 200 day moving average or something crazy like that. You know, I get it on sort of the pullbacks. With that said, those short-term traders were not focusing in my opinion on something really important that had happened, which is not only was Shanghai gold premiums around 2% and still rising, but historically postco when you've seen 2% plus premiums on in gold at Shang in Shanghai. Um, it has been it has happened with a decline in the gold price or at best a flat gold price, right? So you get, you know, some sort of some some sort of paper selling in in the west and then the Chinese feel like, wow, there's a great deal to be had here and structurally maybe there's some limits to how much is the the PBOC is letting people bring in and so you get a premium that builds up in China and so you see these premiums, but it's always been a premium in China of 2% plus when the price of gold is is flat to down and sometimes been down pretty notably except for this instance. We're seeing the price of gold, as you just noted, rising rapidly in dollars and yet the Shanghai gold premium is also ra rising rapidly. And so to me, you know, when you get these kind of correlation breaks, these these pattern breaks, there'sformational value there. Why is that happening? I think it ultimately speaks to uh I think it speaks to the shift that I described before. And look, I also think it's an important piece of data from the standpoint of the narrative we're getting in these markets, which is from from from some people, which is the Chinese are running out of dollars and all we need to do is just squeeze them a little harder and and they're going to just come crumbling down. And the problem with that narrative as it relates to gold and what we just discussed is that historically nations that are running out of dollars are selling their gold to get dollars. We saw that in the late 90s when you saw Korea and Indonesia and the Southeast Asian crisis. They were selling gold very rapidly to to get dollars. Uh Russia 98 99 2000 selling dollars or excuse me selling gold to get dollars. 2008 when oil prices collapse. Russia sold gold to get dollars. Uh you saw it elsewhere in you know currency crisis. Sell gold, get dollar. You've seen it in America over the last 20 years. You know you can go to the mall and see you know we cash for gold right? Americans have been selling gold for dollars. And so I think there's just when you take a step back when you see the flows into China, it's a pretty big fly in the ointment for the, you know, the Chinese are running out of dollars and they're about to collapse crowd. If the Chinese are buying so much gold that they have now basically taken control of the gold price from the West, which is what that that dynamic of rising Shanghai premiums with a rapidly rising price in the West, that's what that tells you. It tells you China's got control via the physical market. And the fact that they're doing that suggests that I'm sure they are hurting with the tariffs, but they're not about to tip over because if they're about to tip over, they'd be selling gold to get dollars or etc. So, um I I do think there's a number of very interesting uh threads to pull or tease out of uh the the gold flows into China.
If it is what you think it is, that is to say, if China is uh doing a lot of this buying for strategic reasons, uh just confirm my assumption here. I'm guessing that means they've got plenty of room to keep doing more of this and to drive the price quite a lot higher up.
I would think so. I think the, you know, when when you're hearing when somebody tells you they want to choke you out and use their currency to choke you out, I'd believe them. And what they're hearing from the US officials is that, hey, we want to use the dollar system to choke you out. And the Chinese have the Chinese government, this is another one of these paradoxes, the the the communist Chinese government has been encouraging its people to buy the currency of freedom for over 20 years, gold. Right? It's Warren Buffett's father, Howard Buffett, congressman from uh Nebraska, wrote a paper in in 1948 says, "Human freedom rests on gold convertible money." And so here you have the autocratic Chinese Communist Party encouraging its citizens to buy gold for the last 20 plus years and presumably continuing to do so because we're seeing the flows. If they didn't want those flows coming in, they wouldn't be coming in. presumably. So, uh, yeah, I would think those flows are likely going to continue, especially because I don't think it's against the US's interests. I think the US, one of the, you know, we we keep hearing over and over, and it's from from the Trump administration, the Biden administration, Trump administration, Obama administration, China needs to stop being a currency manipulator. China needs to strengthen its currency. Well, China is not going to strengthen their currency the way the Japanese did, which was just straight against the dollar, render themselves much less competitive against the dollar. Uh, China is is forget about is likely they are devaluing the yuan against gold. If you look at a a price of gold in Chinese yuan, uh it's down 50% in the last I want to say year, you know, which is to say the price of of gold in Chinese has doubled. Maybe it's in the last two years. But the point is is that I think gold is being used as the pivot. And I think the US government by their actions is is saying that's fine. That works for us. You know, we want a stronger yuan. We want a weaker dollar. Great. Let the price of gold go up in yuan and let it go up faster in gold in in dollars, excuse me. And look, right now the Chinese yuan I was looking at the other day, I think it's 24,000 yuan per ounce and it's whatever $3,400 in in dollars. Let's let's let's get crazy here. Let's say Trump really wants a stronger yuan and a weaker dollar to balance, you know, China being a currency manipulator. Well, if gold in China goes from $24,000 yuan to say 30,000 yuan and gold goes to $7,500 in dollars through the gold pivot. 30,000 yuan, $7,500. That's four uh yuan dollar cross rate. That's a much stronger yuan. But it is a much stronger yuan that isn't just straight devaluing against the dollar. It's a compensated devaluation from the standpoint that gold has gone up in yuan terms. It has gone up a ton in gold terms. And that allows a recapitalization via the gold holdings of the Chinese populace. All of a sudden, they're going to have a lot more uh money in their pockets. it will help compensate them or recapitalize the consumer balance sheet from what has happened with their property crisis or the property um selloff over the last several years. Uh it helps recapitalize their banks and obviously helps recapitalize or further capitalize their sovereign balance sheet. And so it's a I think there's a deal to be had between the two nations using gold as a pivot to rebalance currencies and and go from there. And to my eyes, both sides have been taking steps to facilitate that.
Luke, it seems to me that if what you describe is what's going on, then if you want to be a gold speculator, the the best way to analyze this is to put yourself in China's shoes and say either, you know, what are their policy objectives that they're trying to accomplish? If you want to look at it maybe from a more realistic perspective, what are their policy objectives that they're being forced by the Trump administration to take on and what is their target likely to be? Where are their targets likely to be and what they need to do with their currency? and start watching gold in Chinese yuan as your as your benchmark and say well I I'm waiting for this target because I think that's what China needs to do in order to accomplish its goals. Um is it possible to do that kind of analysis and figure out what uh you know what the number what the magic number is to watch and you know if so who's doing that?
I think in broad strokes that's I think if not the right approach I think a very valid approach. I mean I think it's or part of the approach. Um you know part of a mosaic you know for a long time you and I've talked about it I've I've talked about it ad nauseum. For me China's goal regarding gold has always been uh about a defensive nature. In other words, China China has has long understood the dollar uh sensitivity it has the oil and food sensitivity it has. Um, and what I mean by that is, you know, famously Kyle Bass went on, I think CNBC or something and he said, look, you know, this was probably 2019 and he said, you know, the Chinese import whatever they, you know, x million barrels of oil per day and oil goes up every year and, you know, they have a finite number of dollars and so as they keep growing their economy to support their debt, they're going to have to import more oil and other commodities and food and all of those are only priced in dollars. And so at some point, presumably oil prices will keep rising over time. And when they do, they're going to eventually run out of dollars. And when they run out of dollars, they're going to have a currency crisis like Southeast Asia. And the yuan's going to fall sharply, and they're going to have to devalue it. And and it's going to be a big mess like it was in Southeast Asia in the 1990s. And I think China's goal with gold has long been avoiding that outcome and using gold to gain the ability to buy oil and commodities on the margin in yuan rather than in dollars. And they've been successful in doing that. And I'm not speculating about that. That's the goal with gold. That is specifically what uh PBOC officials said at a Singapore LBMA uh meeting. I've got the I've got the receipts back in uh 2015 said the goal of the of of China is to internationalize the the yuan. What does that mean? That an internationalized currency has the ability to invoice oil and gas in its own currency. We are using gold to internationalize the remn. And so I think the goal has always been with gold with China has been the ability to buy oil and gas in their own currency to a lesser extent copper and other commodities on the margin. Not they people say well it's going to take them forever and you get the majority. That's not the goal here. The goal here is to give themselves another lever to be able to manage the yuan dollar cross rate to ensure that they cannot run out of dollars because and in extremists they can always buy in yuan and adjust the gold rate in yuan to do that and there are times on charts over the last 5 years in particular where you can see that China looks like they used gold effectively to defend the yuan. Uh, and so I think tying this all back to your question about what is the right number, I don't think the right the the the focal point necessarily is uh the the price of gold in yuan over time as much as it is the gold to oil ratio over time. Because ultimately with oil being priced in both yuan and in dollars uh and and at least China offering gold net settlement of any offshore yuan balances that build as a result of them buying some of their oil in yuan. What you end up with over time is a rise in the gold to oil ratio. And so it's fascinating that you know 2008 Putin starts buying more adding more gold reserves. The gold to oil ratio in 2008 was I think seven barrels an ounce something like that. So it's seven barrels of oil per ounce of gold. Well last week it was 55 barrels per ounce of gold or per ounce of gold. So the gold to oil ratio in the last 15 16 years has risen 8x which is an enormous move and I think ultimately as long as you continue to have this multicurrency energy pricing with net gold settlement being provided for by China as they've been talking about for 10 years uh you're going to continue to see a rise in the gold to oil ratio for a simple reason and that is that gold or oil excuse me even though the gold to oil ratio has gone from seven barrels to 55 barrels over the last 15 years. Uh oil is still like eight times bigger than gold with annual production of oil in physical dollar terms versus annual production of gold in physical dollar terms. Oil is still about eight times bigger than than gold. So my view has long been the gold to oil ratio would rise and rise and rise as as as multicurrency oil pricing with net gold settlement gain traction. And that's exactly what's happened. And so I think that price target or that that price movement, one of the gauges of this is that gold oil ratio. I think ultimately the gold oil ratio is going to continue to rise. It's 55 now. I think it I think it's going to 100 over time. It might go to 200 over time, maybe even higher. And because US shale can't produce much below 60 bucks. and US shale has been 80 90% of global oil production growth over the last 10 years. I don't think the gold
Oil ratio as it rises toward 100 or more in coming years. Again, this isn't like, you know, "by Christmas" kind of thing. I think it's just over time. Uh, I think the gold to oil ratio going to those numbers is mostly going to happen via a rise in gold prices relative to oil because oil dropping much below 60 bucks is going to start taking US shale offline, and that's counterproductive for global growth, global financial stability, etc. So, I kind of [gave a] long-winded answer through the past there, but I think that's what I think.
China has always been trying with gold—gold is not about gold or trying to tip over the dollar. It's about trying to defend the yuan from being tipped over by the dollar and by giving themselves national sovereignty over their energy bill, uh, which they've been able to do.
Look, it appears to me that one of the goals of the Trump administration with respect to tariffs is they want to eliminate uh income tax, not for everybody, but I'll say for everybody that matters from a voting electorate standpoint. In other words, you know, you're not going to completely eliminate taxes on the wealthiest Americans because that's who pays 90% of the taxes to start with. But if you can uh for the most part eliminate income taxes, you know, for all the people that are making less than $4 million a year, that pretty much is everybody when you're counting the votes in terms of, you know, who gets elected uh to office and so forth, although it certainly is not uh everybody from a capital-based standpoint. Um, do you think that's what they're trying to do? And if that is what they're trying to do, uh it seems like it would make the president incredibly popular. You know, if you're the guy who eliminated income tax by getting rid of it by in the public's perception, some genius tariff thing that most people don't understand, but it seems to have worked. Um, it's hard to ask for a bigger win than that.
What worries me about this is, boy, uh you've done a lot more work than I have, Luke, on analyzing uh balance of payments and and you know, tax receipts and so forth, but it seems to me that to achieve that goal through tariffs uh doesn't seem terribly realistic, although I haven't done any work to—it's just a hunch.
Yeah. You know, it was interesting because I saw him say that the other day and my initial—I guess yesterday he was he was tweeting it or or truth social posting it—my initial reaction was like, "Yeah, right. Everyone under 200,000, come on." And so then I started noodling around and and you know, we have data, IRS data, and it shows, you know, the top 1% of US taxpayers. So, let me back up. Individual income taxes payments cover about half of total federal receipts; come from individual income taxes. So, of that half that comes from individual income taxes, the top 1% pay about 42%, the top 5% pay about 62%. Top 10% pay 74%, and the top 25% of taxpayers pay uh 89% of individual income taxes, which is then half of overall receipts roughly. And so it was kind of interesting to me when I compare that to say uh let's say the top uh the top what did I say—10%—bear with me here—the top 10%, yeah, are 74%. So top 10% pay 74%. That means the bottom 90% are only 26% of total individual income taxes. And so the bottom 90%, if you assume 5.2 trillion of federal receipts last year, again roughly half are individual income taxes. That's a very blunt, but that's good enough for—good enough for government work. So that's roughly uh 2.6 trillion—right, half of 5.2 trillion is 2.6 trillion individual income tax receipts—26% of that are the bottom 90%. So bottom uh 26% of 2600—it's only like 676 billion. And so what that tells you is if he can raise $676 billion, assume from tariffs, assuming no other counter tariffs and no slowdown in the economy, and those are huge, huge, huge caveats, make no mistake, but just trying to keep it overly simple. If he can come up with $676 billion in tariffs, he can cut income taxes for the bottom 90% of people to zero and be revenue neutral. Again, assuming no um no no hit to the economy from the tariffs and and no counter uh tariffs, etc.
So when you start looking at those numbers, again, I wouldn't take those as absolute concrete numbers, but what they tell you is he's not crazy on this. Like those are in the neighborhood. It is not out of the realm of possibility for him to get, you know, 676 billion in tariffs. I think that's more than what I've seen, but it's not a ton more than some of the upside cases I've seen. I mean, that's uh what—556 billion dollars a month in tariffs. That's not crazy. And in the meantime, holy cow, can you imagine being able to go to the bottom 90% of the voters in this country and say, "Hey, you don't pay income tax anymore. It's all on tariffs." And so, it really actually is very much a Main Street, not Wall Street. Let's rebalance things. It's very uh it—to my eyes, it it could be—it's a very very populist move. Uh, it may have issues, you know, political issues go down the line in terms of, but it's it's it it could work. The math could work, looked at simplistically.
It's fascinating because it really does appear to me that uh at least with the rhetoric that he's using on this issue, President Trump seems to be, as you say, really vying for that electoral influence, you know, to get himself reelected. The thing is, this is his second term. So, either you, you know, you think he's going to somehow, um, you know, bring about a constitutional amendment to allow a third term. I don't think even President Trump is foolish enough to think that's possible. I know he's said that a couple of times. I I think when he says those things, he's just trying to uh, you know, cause some commotion just to upset the Democrats, but I don't think he really believes that. So why would he be doing things that seem to be very much uh focused on, you know, securing votes for the next election when he's not eligible for the next election? You know, to me, the Occam's razor explanation, and some of this is based on, you know, people I know that have spent a lot of time with him, is I I I think he really wants to do right by his electorate, the people. I think he really means what he says about rebalancing things and and and this would be a huge step in that direction. And I think for him it's legacy building. Like there's a way that all of this could go, and I think it's a it's a narrow needle to thread with a lot of executional risk. But if this goes well and is managed fairly well, he could end up being like, and I'm sure people are going to laugh at this, but he could end up being on the pantheon of sort of of of loved—loved presidents of US history. And I think that for him is a huge deal. Like that is I think that is what is motivating him in this case.
And you know, I was—there was a—it it reminds me of a a um of a joke that FDR used to tell. So FDR used to tell a joke uh and revel in it. He said there was a paper boy in New York City, and every day this wealthy Wall Street tycoon would stop on his way up to his skyscraper office and he would he would stop by the paper boy's papers. He'd pick up a paper. He'd look at the front page. He'd grump, you know, say, "Huh?" Put the paper back down. Walk on. Next day, repeats the same routine. This routine goes on for a few few weeks at a time or few for a few weeks more. And finally, the paper boy summons up the nerve to ask the Wall Street Titan, say, "Sir, every day you come to my stand, you pick up a paper, you look at the paper, you look at it for a second, you say 'hump,' you put it back down, and then you leave. What what are you looking for in the paper? I might be able to help you." And the Wall Street Titan says, "Son, I'm looking for an obituary." And the paper boy says, "Oh, well, sir, obituaries aren't going to be on the front page. They're in the back pages—is where all the obituaries are." And the Wall Street Titan says, "Son, the obituary for the son of a—I'm looking for—be on the front page." And FDR would tell the story and laugh and laugh and laugh and laugh. And so my point is that a big chunk of American society and and some of the wealthiest and most powerful people in America hated him. Hated him. But he was loved by the by the, you know, by the deplorables of today—by the bottom 50-60%. Obviously, we were in a depression at the time. And so I again, by way of background, I just think that you know, I think may very well be what the goal is here—is it's not about a third term. Uh, it's not about—I think it's about doing what he said he would do for the people that put him in that office twice and potentially establishing a legacy um that again, if it goes well, boy, it could go really really well, and he will go down very very favorably remembered uh paradoxically uh relative to you know what what what a lot of people think about him today.
Look, let's go back to China and the US relationship to China and where that's all headed. Something that I I just—sometimes I feel like I'm the only person paying attention in all of finance markets to what's going on with Chinese nuclear energy policy. They just announced another 10 reactors that they're uh building today. Now admittedly, Luke, these are, you know, nuclear reactors get built over a course of years to decades, and by the time that uh the policy changes that I see going on in China really start to take effect, we're talking 20 years out. But I see China moving to an energy dominance that could easily conquer the world. And it scares the hell out of me, and I feel like nobody else is noticing it. Um, to what extent do you think people are noticing it, and when does that start to matter? You know, is it really just well, you know, if it takes 20 years to build all the reactors, it doesn't matter until then? Or is it when the US figures out that China has a strategy that's going to make it completely energy-independent where it can no longer be blockaded for energy imports because it doesn't need any more energy imports? When they figure that all out, oh boy, that's when things start to to get wild. Um, how does this work? What should we expect? And do you have any thoughts on Chinese nuclear energy strategy? Cuz to me, they're just kicking ass both on conventional and advanced nuclear. And it seems like nobody's noticing.
Yeah. I mean, some of what I've read on China, one of the things culturally they have always done really well going back centuries under the emperors is building infrastructure and and sort of realizing, okay, we have a problem, and so we need to, you know, we have w too much water here and not enough water there. Let's build the infrastructure to move the water from where we don't want it to where we want it to improve the lives of our people. And this is a tradition going back a long time. Um, I think that moving water from where they don't want it to where they want it to improve the lives of people is is is a metaphor for what they are doing with energy policy. uh, and I think it's a it's a counter metaphor for what the US has done with energy policy, which is to say I think they are making allowance for, hey, look at what we're using in AI, look how much the growth of energy is in AI and electric vehicles, etc., and we're just going to plan forward; that means we need this many by this year, this many by that year, and so on and so forth. And that's I think they're basically sticking with the plan. And in contrast, the US is saying, look, we've, you know, we can see the growth in AI, electric consumption. We can see what we're trying to do with electric cars, and maybe the tooth fairy will show up and you know, build nukes for us on a compressed time scale because capitalism and #America. And as an American, it's it's very frustrating to watch domestically. U you know, Josh um he gave a testimony to Congress two years ago. I'll have to try to find it offline. But you know, he he laid out, look, Chinese are building nuclear power plants way faster. They cost one-sixth the cost of ours, and they're going to start exporting the technology, which will then also loop in economically and via energy and component dependence and expertise a lot of the world. And so, you know, I think there's two components of what the Chinese are doing. It's not just—it's many components, right? It's it's the energy-dependent side that you talk about, which is they are going to reduce their their liquid fuels dependence through it. Uh, I think it's AI—I mean, you can't be AI dominant if you don't have the grid and you don't have the generation, and the US from some of the stuff I've seen is in a position where you know, we—our grid, barring some miracle technology—is is not—I mean, forget if we want to forget if we have the scientists, forget if if how well we compete versus the Chinese on these AI type models—we don't have—we we may not have the generation capacity in 5 to 7 years, and the problem with that is is like if we you know, I'm an investor in a a private equity electrical distribution uh uh company. And so when I talk to these exacts, hey, how long does it take if if I wanted to build a nuke power plant in America now? When's it going to go live? Like 10 years minimum. Like in 5 to 7 years, we we may be bumping up against the constraints of our grid barring some sort of productivity miracle. So you can see a different sort of—there's actually an order of operations being put in place by the Chinese that so far we're not seeing with the US where it's hey, we've got you know, we've got the dollar, we've got the dollar rails, and so you know, we can we can just print money, and it's like great, but you can't print electricity, you can't print nuclear power plants, you've got to make them—I mean, you can print the money to do it—that creates a separate issue for your bond market, but at some point you actually have to do that. So it it is troubling to me from the competitive standpoint because when I see, hey, we're going to reshore and we're going to bring all this back, and then and then I see, you know, we wrote about it for clients several weeks ago and on March 25th of this year, the heads of the seven different regions of the of the US electrical grid had a hearing in Congress and they said, "We are getting critical. We are in a critical stage now. We are, you know, we're going to have shortages in a few years. We need to do something, you know, if we continue on this growth of AI, and yet like what are we talking about? You would think it reminds me so much of when I—it was February of '08 and I like—I knew the financial system was coming unhinged as we speak. I was seeing it at in the research in our firm. The economy was coming unhinged, and I'm watching Congress hold hearings about steroids in baseball with Roger Clemens, and it was—it's the same kind of thing where you can see the how fast the technology is moving. You can see we are in a competition regarding it, and you can see the installed base now and and forecast going forward and and the forecast usage of those installed bases and where we are is like the US is going to lose because we're not building the stuff we're going to need, and we're going to bump up against our ceiling. So there should be a lot more sense of urgency than there is. And look, maybe there's some miracle technology that that you know that I'm unaware of and and we're going to declassify it imminently, and when we do, hey, we're fine. Great. But like if we're going to flop that trump card—and you know, pun intended—we're starting to get late in the game to flop it. We need to flop it soon because you know, unless we don't need wires and infrastructure and etc. to move the electricity or the energy that's generated. Then like there's this there's this order book that has to happen, and it is a it's a it's a long lead time process with massive capital needs, and there's just—I'm not seeing the serious discussion around it in America like you're seeing what you're highlighting in in in China.
Well, it does seem that uh Chris Wright, our new energy secretary, gets it, but I'm not sure how much they can realistically do to compete with China. I mean, China is ahead on the technology, and we are uh a country that unfortunately is not as good at large bespoke public works projects as we used to be. And um I think people just don't want to to admit that reality.
No, I think that's right. And that's one of the things to me, it's one of the biggest variant perceptions I see and sort of, you know, tie it back to the trade war, which is look, if you ask anyone in New York or Washington who's going to win, who's going to lose? Like, oh, America's going to win. We always win. And it's it's almost like unpatriotic to say anything else. And yet when I sit down with people out here in Flyover Country, USA and the Rust Belt, you know, like we wrote about for clients a few weeks ago is a very big marquee industrial project here in Ohio. The sponsor of it or the the builder of it basically has an unlimited budget. The cost is not an issue. And so like recently a major portion of this industrial project showed up. We're talking hundreds of millions of dollars of equipment showed up, and it didn't have a right part. And so okay, there's a scramble. Get it figured out—like okay, well, where's you know, which you know, who's the supplier? Who's their supplier that supplied the supplier? And so, you know, they find a few suppliers down the supplier, and the suppliers like, "Oh, yeah, that was that was uh that was Joe. Joe died of a heart attack last week. Suddenly, he was 70. Uh, we don't know the password to get into his computer to figure out how to fix what you need fixed." And Joe is only here at age 70 because we brought him out of retirement because he does something in this in the sort of skilled trades/engineering world that we don't really train people anymore. And so we don't know what to do to help you. And this is where the rubber meets the road where you get away from the sort of rah-rah #America—we're going to win stuff. When you get down to the nitty-gritty and start going, great, who's going to weld it? Great. Who's going to build it? Great. Who are the engineers? And you know, um, Mike—Mike Rowe, the Dirty Jobs guy, right, who's been harping on this for years and years and decades. He he's like, "Listen, I know exactly where all the welders are. We need to do all this reshoring." And someone said, "Where are they?" He goes, "They're in eighth grade. They're in eighth grade. You're going to—if you teach them well, they'll be ready in six years." And so that's this variant perception. It's like a splinter in my brain around sort of this whole trade war reshoring thing. And remember, this is not like some little, you know, sort of marginal project with sort of a poorly financed or or capital, you know, capital-constrained builder. Like this is somebody who can afford to spend whatever they need to spend. And they're getting held up by sadly Joe dying of a heart attack. And now like the whole project gets held up, and there's no other Joe's because you know what—who needs Joe? For the past 40 years, we have the dollar; we can you know, we can you know, who needs to be in engineering? We can create mortgage derivatives and like this is when you do this for a long period of time, you end up with dollar Dutch disease, and this is this is dollar Dutch disease, and so not only is it—there are there are real physical constraints at the ground level that are simply not being discussed by people in Wall on Wall Street and in Washington because in their world the answer is always, well, just print the dollars, and like you can't print Joe, you can't print Joe's password, you can't print the welders, and so it's a very—when you look at this competition, there is a massive gap between perception and reality, and perception and reality are going to close probably in the next few months, and when that happens, it's going to be really interesting. Uh, but I agree with you that there is—is there's a really big fundamental problem that can only be fixed with hard work and time. You know, this is not 2009 where you're gonna have Ben Bernanke wave a wand and hit a few keystrokes and everything's okay, or 2020—kind of same thing. Like if we are going to do this, there are—there's no amount of money printing per se that can fix it. It's yes, some money printing because you're going to need to put the bond market under yield curve control, but then after that, it's going to need to be hard work and time. It's like—it's like Shawshank Redemption, right? Pressure and time. That's what is need to be done here. And the first step to doing that is having an adult conversation with the adults in the room about that. And I'm not hearing the quote-unquote adults in the room even broach the subject at this point.
Well, Luke, on that note, I can't thank you enough for another terrific interview. Before I let you go, though, please tell our listeners a little bit more about what you do at Forest for the Trees and what they can expect to find at fft-lc.com. [Music]
Yeah, sure. Thanks, Eric. We uh we we connect dots. We aggregate a large amount of publicly available information in an unconventional manner, trying to identify developing economic bottlenecks. And if uh we put out a number of different reports, if people would like to learn more about our mass market and institutional research products, they can check us out at fft-lc.com. And uh as you know, I also have a fairly active X feed at Luke Groman. Patrick Serna and I will be back as MacroVoices continues right here at [Music] macrovoices.com. Now back to your hosts, Eric Townsend and Patrick Serna.
Eric, it was great to have Luke back on the show. Now, let's get to that chart deck. Listeners, you're going to find the download link for the postgame chart deck in your research roundup email. If you don't have a research roundup email, that means you have not yet registered at macrovoices.com. Just go to our homepage, macrovoices.com, and click on the red button over Luke's picture saying, "Looking for the downloads." Okay, Eric, what are your thoughts here on equities?
Well, Patrick, the rally has been quite impressive, needless to say, and there are plenty of fundamental arguments that you could make to explain why we could be headed back toward all-time highs. But the fact remains that we're still below, although only a little bit below the 50-day moving average in a market that is learning to cope with White House policy uncertainty, including sudden and large important policy change announcements with no advanced warning or hint as to what's coming. Now, that could mean the uh risk of tail events on either side, uh both big moves up or big moves down. So, I see plenty of good arguments for why we could get all new all-time highs in the next few weeks. And I can also imagine plenty of scenarios that take us down to 3,000 on the S&P in a week. So, frankly, I don't have a lot of strong directional conviction other than vault trades are the place to be here. What I am delighted to say is that I was filled just about an hour or two before recording time on the final tranche of my hedge position. So, I'm now fully hedged in case we're about to take a turn south. I'm not predicting that's happening. Uh, it's been several weeks now though since the Trump administration hit the market with a thousand
Point, downside curveball. So, uh, I suppose maybe we're overdue for the next one. On the other hand, that next curveball could be an upside curveball. So let's wait and see what happens. As Lyn Alden said, it is a headline-driven market. So I think where the market goes next will depend in large part on what the next headline says.
Well, Eric, I do think that there are downside risks, and uh, Trump will continue to be a factor moving forward. Uh, but I do believe that if we do see that kind of downside that you're talking about on the markets, it is going to be far more about whether or not the indications are that we are moving toward a US economic recession and therefore something that impacts corporate earnings and can see corporate earnings contractions, which is usually something that is needed for there to be a bigger and deeper bare market.
So what are those recession risks? Well, I do like uh looking at the poly markets, betting markets for uh US recession risks because that's where people are voting with real money, and uh we have that now at a 66% chance of a US recession after that advanced GDP number was released, and so recession risks are growing, and that uh is why things like the jobs numbers coming out tomorrow are going to be really important. Are there going to be continued indications that we're moving towards uh that economic recession?
Now, on uh page three, I have that chart of the S&P 500, and we can see now that we've gotten to that 50-day moving average, and we've now entered the Fibonacci retracement zones of the prior decline. Now, uh on the short-term reactions to uh the MAG 7 earnings will drive flows for the next couple of trading sessions. But the bigger puzzle to solve is that is this a bare market rally? Because if this is a bare market rally, we shouldn't see much progress uh beyond the say 5700 or 5800 on the upside. And so the question here is that will we in the coming weeks see overhead resistance? The FOMC meeting coming up next week will also play a key role because we're right now the Fed has continued to focus more on inflation risks and has uh not made a dovish pivot, which I think uh if we see the tone of our concern come from the FOMC that somehow uh the market risks are growing and that they're going to have to uh tilt dovishly moving forward, uh that is going to be uh I feel a a big factor that could drive the next major market move.
Uh, to me the asymmetry is completely uh skewed against the bulls. There's uh arguably limited upside potential, though the trend can continue, but limited upside potential with a lot of things that can go wrong off these levels. And so to me uh lightening up into this strength is a a prudent thing.
All right, Eric, let's move on to the US dollar index. Well, I guess the most bullish thing we can say is the dollar index is holding up 99 this week. Um, I'm don't know what else to say uh other than we're overdue for a dead cat bounce. And maybe there's good reason to expect one sometime soon. 100 was an important psychological level on the Dixie. So whether or not we stay below it now that we are below it will be an important tell for whether or not a relief rally is in the works. I remain strongly of the view that the dollar will keep falling until it falls as far as Trump and Bessant want it to, and I suspect that that number is a lot lower than 100.
Well, on page four I have that dollar index chart, and we did definitely break last year's lows on the downside, which is really making the downtrend of the US dollar the predominant one. But we are very oversold on the dollar and looking for it to retrace maybe even back to 101 or 102 temporarily just to unwind. Oversold state is still the path of least resistance. We talked about it last week's show, and I still think this is the path of short-term least resistance. But if we see that uh the dollar uh bounce is very weak, it fails to follow through, making no real progress above there, staying below the 50-day moving average, uh then maybe later in the month of May or even early June, we could see the US dollar re-resar downtrend, and that will be the the kind of puzzle to solve. But on the short term, I think uh the the bounce can continue.
Now, Eric, let's move on to crude oil. What a move. Uh what what are your thoughts here?
Well, Patrick, OPEC is signaling that they can live with lower oil prices and they're not going to pursue any aggressive hiking campaigns uh in order to try to stave them off. Okay, that opens up a whole hornet's nest of follow-on questions. Uh, why are Saudi Arabia and OPEC suddenly taking this change of policy? Is this a concession that they're making to President Trump? And if so, what's the quid pro quo? That's the the biggest question on my mind. And if this is not something that they're doing for President Trump's benefit, okay, why would they suddenly be wanting or welcoming lower oil prices? You ready for my grand uh fundamental brilliance on this? I have no clue, but I do know who to ask, which is Dr. Anna Alhaji. I have his WhatsApp. I'm going to do my best to get a full briefing on what's going on. Uh, he's one of the very first people that the Saudis will tell whatever messaging they want the West to hear about this event. So I'll try to get an update from Dr. Anis and we'll get that before next week's show. Our producers have also reached out to try to get him back on for a macro voices interview as well.
For now, my early instinct is that this is a very important signal that we need to dig beneath the surface to figure out what the important reveal is likely to be. Is that a quid pro quo? If so, uh what's the quid pro quo? What is the Trump administration giving up in order to get lower oil prices? What deal did they make with MBS? Now, I'm just making guesses, but my friend Dr. Anna Alhaji has personal context both in OPEC and in Saudi royalty. So, he'll get to the bottom of this, and I'll get full details for you for next week's podcast.
Well, Eric, the crude oil price action is incredibly weak. It's one of the ugliest charts out there in the markets. Uh, all the rallies are failing below fib zone, staying below its moving average. What were previous highs act as overhead resistance, very quick to roll over. On a closing basis, we're already breaking to a lower low. Uh, a number of the different measured moves all uh leave the vulnerability for us to temporarily trade down even as low as $50. And I want to say temporarily because I'm not so sure that we would stay down there. You know, there's a lot of reasons why I think oil can be back in the 60s and uh trading within these ranges over any intermediate period of time. What is the short-term path and the trading risks on the short term? Definitely to the downside. Definitely vulnerabilities all the way down towards $50 on there. And you don't want to stand in this thing's way until we see where the bottoms really start to get banged out.
All right, Eric. Uh let's move on though to gold.
Patrick, I remain cautiously bullish for much higher gold prices before we eventually reach a final top for this cycle. But as I've said before, we're into the treacherous parabolic phase now where it's easy to lose your shirt if you get the timing of the cycles wrong. So, I'm frankly most hopeful for more consolidation and less upside price action. Let's shake off that last parabolic thrust up and get this bull market back into a healthy setup for a long and sustained rise without a blowoff top. Uh, reversing the major trend, which is the fear that I've had here. So, I'm really hoping that we're beginning a consolidation phase that's uh going to allow us to shake off these elevated RSI and stochastic levels and get this market set up for a sustained move to higher numbers.
Well, as we're recording this, we're getting a 70 plus point down day as we uh slowly heading down towards 3,200 on gold. This is actually a really important uh point here around 3,200 for me. Uh, it's a Fibonacci retracement zone. That 50-day moving average is slowly creeping up. This is the typical buy zone in bull trends. And this is why this is such an important moment. We still haven't seen whether the buy and dip trader is going to come in here. But that's uh certainly the thing to watch in the next two or three trading sessions. Will 3200 be defended? Will the buy and dip traders reverse this and get this back above 3,300 in a short window of time? This is uh important because if we see 3200 hold and we see we're back above 3,300 next week sometime then the window opens right upside uh to the upside again for a push up to 3500 3600 on the upside. Uh and that's that's the bull case. Now, if 3,200 doesn't hold, then in my mind that uh indicates to me that gold has entered some sort of a more intermediate consolidation that could take two or even 3 months. Maybe we could see numbers as low as 3,000 in a in a consolidation, but I'm not going to uh build the the kind of analog for that kind of a correction yet. My first uh approach here is that the 3200 will be bought on dip. But we're going to watch closely whether or not this support line holds in here.
All right, Eric, let's uh dive into uranium here.
Well, Patrick, we've seen plenty of false bottom calls in this treacherous market in terms of investors' sentiment, but several uranium issues moved and closed above their 50-day moving averages this past week, and that was for the first time in more than 5 months. So, at a minimum, we're be seeing at least beginning signs that the bottom might be in and that a new bull market might be beginning. But I want to defer to you, Patrick, as the technical analysis guru in the house. I know that you've cautioned many times that while the fundamentals might be impeccable, there just wasn't a valid technical case to buy uranium miners when the prevailing trend was clearly and obviously down. Patrick, what technical signals do you need to see from the uranium market to tell you not only that the bottom might finally be in, but also that there's enough upside momentum and technical accumulation patterns that are forming and starting to kick in in this market, which would make you feel like, okay, now it's finally time to load up and start buying for the next major bull run in uranium.
That's a great question, Eric. So, let's start off on page seven where I have the sprop physical uranium trust. And uh what we see here is that this is the first time it's attempting to close above its 50-day moving average uh since uh rolling over back in uh late uh fourth quarter of last year. Um now, uh what we're want to watch is whether or not we see signs of a basing or bottoming formation. All dips being bought, it beating key uh technical hurdles. Want to see that there's some new accumulation uh occurring and a good basing formation developing. Uh and on page eight uh I have uh the chart of the global uh x uranium ETF the URRA, and uh from a technical perspective I always find it uh the a very good positive initial sign when a rally occurs that wipes out the entire last wave of selling. And so when we look in the last few days of March into April when uh the URRA uh had its big drop uh from $25 down towards $20, we've now seen that entire uh selloff completely reversed. Now what typically then you want to see from a trading perspective is that when we pause here and correct that we don't see it make lower lows. We want to see that a new accumulation has begun and uh and that the trend uh the big downtrend that's been in place now for 6 months has in some way or another reversed, and that's uh something that I think will take a deep into the month of May for us to sort one way or another. Uh there was a very ugly sell sequence, and it now is taking a break and and starting to consolidate. So this is some initial positive signs that uh will make um the second quarter pretty interesting here in the uranium space.
All right, Eric, I want to wrap up by on page nine looking at the 3-mon sulfur futures. I particularly wanted to go out to December 2026, more than a year and a half out. And um uh this is a great place to look at what what the market is anticipating for short-term rates to be such as the Fed funds uh at that point in the future. A great way of kind of gauging how many rate cuts are coming in. And so what's interesting thing, what's interesting to me here is that uh going back even 2 3 years, we've seen uh this kind of 3% level around the 97 level act as a pretty significant overhead resistance. Uh but we're now in a situation where recession risks are rising and uh the idea that the Fed may be um engaged in policy error uh that could result in the market at some point having to price in more rate cuts when they are forced to give a dovish tilt. Uh this um is a really interesting resistance level to watch, especially considering we're going into the FOMC meeting. If we see that uh the tone from uh Powell has shifted and the market start to price in uh a more dovish Fed, we could see this potentially even break this three-year resistance uh line and uh and potentially make a move even toward 98. Now, will we see that? I mean, there's a lot of things that need to happen for that to play out, but that's one of the technical things I'm watching. Certainly going to uh uh continue to feed the recession risks if uh if that was to happen.
Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of BigPicture Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find in this week's research roundup.
Well, in this week's research roundup, you're going to find the transcript for today's interview, as well as the chart book we just discussed here in the postgame, including a number of links to articles that we found interesting. You will find this link and so much more in this week's research roundup.
So, that does it for this week's episode. We appreciate all the feedback and support we get from our listeners, and we're always looking for suggestions on how we can make the program even better. Now, for those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email at researchroundup@macrovoices.com and we will consider it for our weekly distributions. If you have not already, follow our main account on X at macrovoices for all the most recent updates and releases. You can also follow Eric on X, Eric K. Townson. That's Eric spelled with a K. You can also follow me at Patrick Suresna. On behalf of Eric Towns and myself, thank you for listening and we'll see you all next [Music] week.
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