MacroVoices #499 Has The Luke Gromen Moment Arrived?

[music] This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices 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 Sarrezna. Macro Voices episode 499 was produced on September 25th, 2025. I'm Eric Townsend. Our countdown to episode 500 continues with forest for the trees founder Luke Groman claiming the silver medal as our number two most popular macro guest ever. And trust me folks, Luke won't disappoint in this interview. I think it's his best yet, and there will be no shortage of frank talk about how extraordinary and unprecedented some recent news events that most people didn't even notice truly were. And of course we'll discuss what it will mean for markets from gold to Bitcoin to stocks. And of course, no Luke Groman interview would be complete without an update on Luke's outlook for the US dollar. Then stay tuned for our new post game trade of the week when Patrick will translate Luke's financial repression thesis into an actionable trade. If we're really moving from the gradually to the suddenly phase as Luke alluded, this setup could have a lot more room to run. And I'm Patrick Sarrezna with the macro scoreboard week over week as of the close of Wednesday, September 24th, 2025. The S&P 500 index up 56 basis points trading at 6637. The market press to an old time high, but now fading over the last couple of days. We'll take a closer look at that chart and the key technical levels to watch in the post game segment. The US dollar index up 81 basis points to 9780 off of a retest of the July lows. But the key technical levels to watch is if the Dixie can break and hold above that 98 level. The November WTI crude oil up 143 basis points to 6443. Last week retested the summer support lines and now this week turned higher, begging the question as to whether we'll see a new bull breakout. The November R. Bob Gasling down 102 basis points to 195. The December gold contract up 214 basis points to 3768. Every dip being bought, continuing to punch to all time new highs is 4000 now inevitable. The December copper contract up 389 basis points to 481 copper ripping higher on supply concerns after free ports mine accident. Uranium up 864 basis points up to 83 even first legitimate technical breakout of spot prices. But will we see momentum just start to build from here? The US 10 year treasury yield up 9 basis points training at 414. The key news to watch this week is the core PCE price index and next week we have the ISM manufacturing and service PMIs and the much anticipated jobs numbers. This week's feature interview guest is for us for the trees founder Luke Gromann. Eric and Luke discuss financial repression, the Shanghai cooperation organization, gold, bitcoin, US dollar and more. Eric's interview with Luke Gromann is coming up as macro voices continues right here at macrovoices.com. And now with this week's special guest, here's your host Eric Townsend. Joining me now is forist for the trees founder Luke Gromann. Luke to my thinking there could not be a better time for you to be acknowledged is our second most popular macro voices guest ever. The reason I say that is nearly a decade ago. I coined the phrase the Luke Gromann moment inspired by the minskie moment. And what I mean by that is when we first started talking nine years ago or ever since then I have been absolutely convinced that you would be proven right in the end. On your bold calls at the US dollar was eventually going to fall into decline. Fall out of prominence not be the US or not be the world's reserve currency anymore just as the pound sterling fell out of popularity 100 years earlier. But I also said at the time I thought you were early. I thought it was several years away and I knew you'd be proven right. And of course you got ridiculed along the way and so forth. Let's start just by making sure I'm not over reacting here because I don't take you early anymore Luke. I think the Luke Gromann moment is happening right now kind of scares the shit out of me. And then I read your last three writings frankly over the weekend and that scared the shit out of me even more. So is the Luke Gromann moment that I describe actually happening the way that I think it is. Am I being true dramatic or is the shit really hitting the fan in a bigger way than most people seem to be talking about? Well first thanks for being back on and congratulations to you and Patrick. I'm honored to have been a part of your guys is amazing success and wish you all the best and continued success from here. So to answer the question, you know, I've always thought of I guess the quote unquote Luke Gromann moment was sort of a gradually then suddenly phenomenon right like how did you go bankrupt a little by little than all at once. And you having me on for this actually caused me to search for my first appearance. I wanted to see when it was on America voice isn't it. September 8th 2017 and the title that episode was the Luke Gromann the biggest mean reversion 50 plus years is underway and so at that point we had been bearish on the dollar beginning late 2016 at a time when most were pretty bullish on the dollar. So you let off by saying that you know we had so many secular dollar bowls we wanted to bring listeners a credible secular dollar bear so here's Luke and so at that point the dollar early fall in that year in 2017 from 101 to 94 by the time we did that first interview and you know we said look the de-dollarization transit kicked off the dollar goal market and earnest in the third quarter of 14 had gone too far and you'd start it and to see the deficit in the US as a percent of GDP back then in 2017 rewind for all first time since 09 and only the seventh time since 1969 basically every other time we had a recession or one time we didn't we got the dollar devalued at the pause according to what we said was like look if you look at the Paul at the debt levels a recession isn't a policy option and so we think that the government's going to we're going to weaken the dollar and so we did see that and the key thing within that was that was the first time in our career in any dollar at that point up to the point we'd been a bull in in 16 up until early 17 we had never seen the US fiscal situation the deficit widen or the fiscal deficit sort of break out before you had an EM crisis but that's exactly what happened and so we said in in at the bottom line was look because for central bank stopped by in treasuries back in 3Q 14 on that either the feds going to have to raise rates they tried to it didn't work because the fiscal situation broke before emerging markets they're going to have the force US domestic investors by treasuries they did or the feds going to have to go their balance sheet and so we kind of saw that and so when you when you look back to that it's pretty amazing is you know from the date of our first show with you you know fed balance sheet was 4.4 trillion dollars it's 6.6 trillion now after nearly four years of QT you know on that show yes is hey what's the trade and we said look in a nutshell the trade long gold short oil you know that day gold oil ratio was 22 barrels announced today at 61 barrels announced all time high G.D.X. Gold miners which is a proxy for gold oil ratio was 22 bucks at 73 today so you got a couple triples in eight years 15 16% Kagers for both you know we also warned on that show about long term treasuries we said look something that jumps out at me as I try to look at the trees is US retirees commercial banks and pension funds are all the biggest bid for long term treasuries and if those groups are on the right the right side of a major macro trade well ahead of time it would probably be the first time I can remember in my 22 plus year career on Wall Street and so we said that that day the TLT long term treasury ETF was 125 today it's 88 so down 35% and risk free long bonds when you know long term treasury is at basically been a one way trade for the prior 35 years up at that point and obviously some pretty well known long term treasury bowls were sure that deflation was going to drive ETF you know the TLT ETF higher and higher and higher and then finally on that first show you know we said look I think the overriding message of the political populism that is broken out in the US and in Western social democracies over the last six to 12 months is that all US entitlements are going to get paid and I think that's what maybe Mr. market is starting to discount I said on the show you've seen a breakout in the S&P 500 over the TLT the the long bound ETF a very pronounced breakout in a 25 year chart so you know went back looked at it today and and you know that day the S&P over TLT ETF was 20 and today you know it had recently broken out or 15 for the first time in at least 15 20 years you know today up from 20 the S&P over TLT is 75 X so nearly quadruple in eight years and so all of which I bring up by way of a background to the question regarding the loop growing moment is it I never was a moment I saw it is more you know gradually than suddenly you know and gradually was gold the oil ratio up three X in eight years it says 15 16% K or TLT down 33% in eight years GLD over TLT up 4 X in eight years S&P over TLT up 4 X in eight years you know the dollars been 94 it was 94 then it's 96 97 today you know we've been tactically bullish in bearish a few times in the show but you know I think overall pretty good calls pretty good positioning early I think probably maybe, but we should all get 15 to 20% K-Gren, levered returns on our early calls, right, in terms of what we're saying. So that was the gradually part. It worked out pretty well for FFTT clients, worked out pretty well for my own portfolio. And so by way of background, is that context, is the loop-growing moment? I think it's really about, are we going from gradually to suddenly? And to your point, I think we are. I think the suddenly portion is beginning. We wrote two weeks ago, we thought the week of the SCO, the Shanghai Cooperation Organization meeting, was, it might have been the most important geopolitical week since the fall of the Bill and Wall in 1989. And if that's right, I think it is, then I think we're likely to see things accelerate further. Well, look, I want to congratulate you. I think you've made some brilliant calls over the years. I don't want to be clear. When I've said you were early, I meant the part about the US dollar falling out of prominence and not being the reserve currency. I thought that was early. You've certainly been very timely in a lot of your past calls. Luke, I think what we need to get to is what causes the state transition from slowly to suddenly? What is it that causes that to happen? And I think it's the recognition by all the people that were in denial that, oh, he was right. You know, think about the pandemic. All of us who called the pandemic early were being ridiculed. We were being called alarmists. We were all kinds of stuff. And then one day it's like, well, duh, everybody knows there's a pandemic. What do you think you're smart? And I think all of the sudden, the Luke Groman thinks the US dollar is falling out of reserve currency status. That means Luke has to be a conspiracy theory nutcase. No, I don't think anybody thinks that anymore. I think it's pretty darn clear. Is that what's going on? Is everybody else is waking up to it? Or is it something else that's causing that sudden acceleration? I think it's a gradual awakening, I guess, on multiple fronts. So when you highlight that, you can look at things objectively. So all of a sudden, gold is now bigger than the euro in global FX reserves. And after another two or three years, if we assume another two or three years we'd call it 800 to 1,000 tons of central bank gold buying, we assume modest gold price appreciation for the next two, three years. Gold is going to be the biggest global reserve asset. And then that just gets into a question of semantics. If gold is the biggest reserve asset, it's bigger than the dollar. What's the primary reserve asset, the dollar or gold? And that, I think, is part of it. I think the other thing, and maybe the biggest thing that is really starting to drive a recognition is the reaction to the trade war. And in particular post-liberation day. Remember we came into Trump's administration and it was, hey, we're going to doze. We're going to cut and we're going to strengthen the dollar. And OK, and we tried to doze and we couldn't. We saw very quickly, oh, we're going to take pain. Well, we took pain for like 10 days. And then the treasury market started dysfunctioning. We weren't able to scare money out of stocks and the bonds. Yields went up, not down as Bessons and a lot of others thought. And I think that was sort of strike one, right, to the recognition. Then more specifically, April 7, I think, it was Bessons who, on Wall Street, I think was seen by sort of the adult in the room, if you will, within the Trump administration. He's our guy. He's the adult in the room. And the adult in the room, Bessons, set on April 7, Tucker Carlson, as the debtor, as the trade debtor, we have all the leverage with China. They're going to do what we tell them to do. And on April 9, the US treasury market dysfunction severely. Very badly, the move of volatility index hit 175 or something in today, which it had only done like when Lehman 9/11, the 87 crash, like all it was, the treasury market was breaking. And Trump, that led to the phrase taco, right? Trump always chickens out, that led to the first taco instance. We've also, I think people said, well, we don't need the Chinese to supply us, we can get it from somewhere else. And then major US retailers went to the White House, I hear in either late April or early May, and said, well, not really, actually, we can't do this without China. And we tacoed again. And so I think there has been a recognition, even most recently, how many times have you and I are occurred from China hawks that look, if we cut off food to China, China will starve. We've heard, I mean, I've heard it so many times in my career, too many times account. And yet the Chinese have not bought a single new crop soybean or a single new crop corn from the United States this year. The Chinese aren't starving. Why? They're getting it all from Brazil. They're getting it from elsewhere. So they don't need to sound food either. So we have no leverage on trade. Our treasury market broke in five seven trading days after liberation day, which, yes, China would have been hurt. But they weren't going to be hurting seven days. They probably weren't going to be hurting seven months. So I think that was, we didn't have leverage on food. We didn't have leverage on trade. We didn't have leverage on the treasury market. And then the rare earth situation got layered on as well, which was, as it turns out, again, something else we've been highlighting for a long time was ultimately key parts of the US military or made in China, and in particular around rare earth. And the information was all out there. But again, I don't know if it was confusion or busyness or hubris or what. But US policymakers seem to think we have all the leverage. We literally can't go to war without China on the conventional side. And so then you layer that on. And so I think as you kind of layer these things out, that leads to two things. It leads to the recognition on the trade side that we don't have all the leverage. And you start looking at some of the stuff that actually the biggest export market for Chinese exporters relative to the US is actually consumer electronics. And that for a lot of other stuff, the Chinese consume a lot of their own stuff. And then I think the final sort of reason why we're seeing this acceleration now is because rightfully, something we've heard, and like I said, I think it's rightfully, that anytime someone says, well, ultimately, the US military backs the US dollar. True. But we just had it demonstrated that the Chinese rare earth and Chinese factories backed the US military. So what actually backs the US dollar? And I think there is this growing recognition. We saw it even again this week, critical shortages in Germanium. We've seen it a number of other different key raw materials, mostly around reverse, but elsewhere as well. The Chinese have just stopped sending the stuff as it relates to the US military. And so when you layer all those things on, you realize US doesn't really have the leverage we thought we had. So when you look at the reaction to post liberation day along the five stages of grief, right? Denial, anger, bargaining, depression, and acceptance, there's still a lot of investors that are just now getting out of denial, that out of this, hey, we have all the leverage. And that was pretty obvious from like before it started. You're getting into some of the anger, right? When you hear things like Secretary Besant telling Pulti that he's going to punch him in his effing face at Shamath's birthday party at the White House a couple weeks ago, I think that's anger. I think he's under a lot of stress. I would be too. And now we're kind of starting to get, I think, mainstream into this bargaining. Well, like maybe if we sort of cobble together the Europeans and the Argentinians, and we can create this buying group and we can cut out China. And like it's bargaining. It's it's it's it's it's it's it's not going to work. Um, so we still have to get through bargaining and then into depression and then into acceptance of all of this. So I guess I would say the last thing as sort of wise is accelerating is in the first half of this year, it has become very apparent and obvious that another thing that was said by the establishment was wrong, which is that Russia was, you know, the rubble was rubble. Russia was a gas station with nooks, blah, blah, blah, blah. You know, they're putting the they're fighting the US military with tanks that they had to put chips in from washing machines. That was US official government saying that three years ago. Well, either our military couldn't beat a bunch of guys who had washing machines ships in their weapons systems, which would be very disturbing or more likely and the truth. Russia's industrial base is in better shape than ours because we've been off-shoreing it to support the dollar system for 45 years and they've out produced us. And so I think there's this reason why I think we're watching this quick beginning is this sequence of demonstrable, empirically demonstrated facts that we don't have the leverage that we thought we did to support the dollar system. And ultimately, if we can't go to war to support the dollar system from China and Russia trying to change the dollar system because China makes key parts of said military, then we're going to get a change to the system. And that's where we are. And that's why I think we're seeing the quickening. I want to go back to something that you said earlier, Luke, the Shanghai Cooperative Organization meetings that were held recently. You follow much more closely than I do. All I know about it is I was taken aback by a photo I saw of Vladimir Putin, Narendra Modi and Xi Jinping, obviously made for the press for public consumption photo, intending to show at least the way I interpreted it, that Modi or that India has pivoted to China and Russia or is in the process of doing so. It was like two or three days later, you know, Wash Rinse repeat, I see another photo this time, it's Putin standing shoulder to shoulder with Xi Jinping and Kim Jong-un, North Korean head of state. And that was at a military parade. I mean, that's a pretty unmistakable message. The guys that are in charge of most of the nuclear warheads on this planet are working together and they don't want to be messed with. So I look at this and I think, oh my gosh, that's like really big. I got to get on this. Like Google, iconic photo news coverage and sure enough, it's the biggest thing. Well, the biggest thing in the United States was the photo where Sidney Swini apparently put on some blue jeans and that's created an ideological. I don't really get what the battle's about. Anyway, look, I don't think we're paying attention to the most important stuff. So obviously I brought that up to point out the irony of the corporate media's priorities. But I really think there's an important and serious issue here. We're saying, okay, we're just at maybe the denial stage. Why are some people are? Why would you expect anyone to ever come out of the denial stage if the news coverage about the things that are like really, really important signals are being replaced with Sidney Swini's blue jeans. Help me with this. I mean, it's, I'm not just ridiculing them. I'm saying seriously, until this gets fixed, why would you expect, you know, the mainstream to ever come around and see what you see if what they're paying attention to in the news is very different than what you're paying attention to. Look, I think part of the media strategy is the distract. And without getting myself totally in trouble, I will tell you my son certainly noticed it. They're all, uh, and the young adult men. And yes, they have. We're moving. Luke, you had the opportunity. All you had to do was to just run with the Swini story, figure out how to pull Taylor Swift into it and you could have totally leapfrogged next week's mystery guest and locked in more downloads than anybody else. But you want to talk about little stuff like, you know, the future of humanity and how it's going to play out in financial markets. Fine. Well, do it your way. Go ahead. What did you write about it on the 9th of September? And the 9th of September, I said, I thought what had just happened the week before at this Shanghai cooperation organization, meaning your SEO meeting might have been the biggest geopolitical week since the fall of the Berlin Wall. And what we pointed out was you had this meeting, which you saw the pictures with Putin, um, Modi and she, which to me, I think discredited an army of think tankers in Washington, right? Because we were supposed to be sort of, you know, splitting those three any number of different ways against each other. We used to be the media or excuse me, the picture you referenced to the parade. We had Russia and China signing a major gas deal that could reshape global energy markets according to the FT and which had a gas problem said it was likely going to be priced. The same way the other gas deals were between them, which was to say in rubles and in foreign currency, which is to say not the dollar. It highlighted, of course, you know, the military parade unveiling new weapons. It was filed by President Trump, accusing she, Putin and Kim of quote unquote, conspiring against the United States of America, which one of the charms about President Trump is that he will several times a year actually tell you what's going on by virtue of sort of some sort of impulsive expost or true social post. And I think these were one of these. I think he got a briefing about like, uh, sir, this is happening and he immediately took to his phone. And then he followed that up even more tellingly, uh, by conceding it seemed like to me to the bricks saying it looks like we've lost India and Russia to deepest, darkest China. May they have a long and prosperous future together, uh, which to me, like I said, red is a, is a concession post on truth social after him getting a briefing about what was decided there. And then finally, all in the same week over that weekend, the US Pentagon, uh, released the new national defense strategy report or at least a drafts of it to the Washington media. And I said it was going to be pivoting away from China in a much more realist view and focusing on a more sort of Monroe doctrine like policy in our own hemisphere. And so like to me, I thought that was an enormous set of events and what I think it meant was that, you know, this sort of this, this daisy chain of things we highlighted started highlighting back in 17 and we've talked through the years, um, that to your point, they were still early. We were still describing things. They stopped by treasuries on net. They start shifting commodities outside the dollar with net gold settlement. They do China 2025, etc. They've now reached this point where they are comfortable sort of coming out on the town on the grand promenade and China, Russian India are using their real economic cloud in manufacturing, in energy, commodities and in population, they're essentially restructuring the rules based global order. And then we forced gold back into the system as a neutral primary reserve asset to replace treasuries to replace Western sovereign debt. And ultimately, over time, that means Western central banks are probably going to have to engage in some form of yield curve control or its proxy through, you know, the genius act stablecoins, however they want to do it. And I think that was, I think that week was we're going to look back in five years, ten years. And at the same way we look back at when the Berlin wall came down, like everything changed. Luke, when I read that September 9th piece, I was extremely impressed. Listeners, we do have it for you. It's linked in your research roundup email. If you don't have a research roundup email, just go to our homepage macrovoices.com, click the red button above. Luke's picture that says looking for the downloads. Luke, wow, it was a doozy. I thought it's going to be a long time before Luke comes up with another tree rings report that matches this one. He actually outdid it three days later on September 12th. And I'll tell you, I just had a really strong reaction to that. I've been reading your stuff for years. And the way I read it, Luke, is, looks a smart guy forecasting some long term trends that haven't happened yet. It feels to me like you're like reading color commentary on really big stuff as it's going down to me. Seems like a really big change from the way you used to write and report on things. And it sounds to me like it's a very direct reflection of what you described earlier, which is we're going from the slowly at first to the all at once. So am I right? I mean, is that how you perceive what's going on? And obviously we've teased the listeners now. You got to tell them all about what's in the September 12th report. Right. I always say it and so people laugh when I say it here is, is what's normal for the spiders chaos for the fly, right? Like you're long gold with all this happening today. You're not unhappy. If you own Bitcoin and I think if you own stocks, you're not going to be unhappy. You own long term bonds. I think you're going to be fine. But I think you're going to go from eating steak to eating hamburger to eating dog food to eat and kibble and bits. So that's okay. What really has gotten, why I was so really focused on the pace of events and highlighted in that piece was, you know, look, three weeks ago we had this SEO in the China parade, right? And that effectively threatened, you know, mutually assured destruction, you know, with a demonstration. Essentially what they said in plain English, a conventional war with China and Russia is going to lead to mass casualty events in major Western European cities, major US coastal cities. That was the message that parade in my opinion. And I think you've got to take a step back within that and why it got me so, you know, why what happened that week was so big is if you go to three months before that, the US reported that the US ran down 15% of its of its TAD, THAAD, air defense missiles in just 11 days of medium intensity combat defending Israel. Israel ran out of their air defense missiles even faster. And it was a supply chain issue. We simply can't make them fast enough because we've offshored too much of our industrial base to China. So basically we need to ask China nicely to send us the stuff in China as keep saying no because we keep telling them we're going to use them to point it at them understandably. So, and then if you even take a step back from there over the past three years, NATO supplied intel surveillance, reconnaissance, weapons, tactics, strategies to Ukraine versus Russia and Ukrainians were very good and Russia won with China's support. So, when we saw, you know, partly of that was due to the nature of war changing to drones and missiles, partly because NATO got out produced by Russia because we again, we had to get out of the industrial production business to support the dollar system of last 40 years. But I don't think investors recognize what has just transpired here, which is that, you know, the last three years, especially last month, the last three months, excuse me, proved to a lot of the world, what a lot of people at high levels in finance and in military intelligence had already known, which is the US Defense Industrial Base has been too hollowed out by the structure of post-71 dollar hegemony to be able to sustain a conventional war versus the BRICS for more than just a few weeks. And certainly not without severe casualties and certainly by the way, not without the Fed essentially buying the entire $130 trillion bond market with printed money to prevent it from crashing, which it would not open war with any of these guys. So we highlighted, you know, in running through those military things and then in this report, what we really on of the 12th, what we really highlighted was that a combination of softening US consumer sentiment, we then highlighted that ultimately there's a fundamental misunderstanding between how much China can out produce that actually that the United Nations has understated Chinese production and consumption and economic, the China's real purchasing power parity economic growth. We highlighted that if they're starting to be in awakening around, hey, these raw materials that that we've been, we have for 40 years, it'll all we need are dollars. And so let them produce everything. They're starting to be a recognition around that by the International Energy Agency, the US administration, West, more broadly. What we point out is that's great. And the bond market is the elephant in the room. We can't just run industrial policy to start producing a bunch of this stuff. For multiple reasons, we don't have the skilled trades. And from the bond market perspective, we could get the skilled trades if we're willing to let inflation really, really rip. But if inflation really, really rips because our debt is already so high from the things we've done, you end up in a position where the debt will create more of a problem than it solves. So basically, what the report lays out is that there is no way this works unless we get into some form of yield curve control, whether that's via the Fed, whether that's via Treasury, there's a lot of different ways to try to do that. But that's what has to happen. And I think we're watching in markets, a growing recognition of exactly that. When you talk about gold, you talk about Bitcoin, you talk about stocks, et cetera. Luke, that was the September 12th, Missive End listeners. That one, too, is linked in your research, round up email. Luke, I do want to respect our standing policy that we never ask you to share your latest current writings with our listeners out of respect for your paying subscribers. I'm going to break the rules on this one, at least a little bit. And I certainly understand we cannot share the full September 16th PDF with our listeners. But how about at least giving us a sense of who is a manual Todd and what's he writing about and the way is that kind of important in your mind? A manual Todd is a French anthropologist who is famous for having written three different geopolitical essays over the past 50 years. So he spends most of his time studying anthropology, the human of the study of human family systems and organizations. The first geopolitical essay he wrote was called The Final Fall. He published it in 1976 and he predicted the collapse of communism based on the anthropological concepts of declining Russian female fertility rates and rising Russian infant mortality because infants are the most sensitive indicator of a society that is starting to fail. He wrote his second geopolitical essay and of course it goes out saying he had to wait 14 years or 13 years, but he was right. He published The Final Fall in 1976, so he collapses 1989. He writes his second geopolitical essay. It was called After the Empire. It was published in 2002. It was published at a time in which he said or excuse me in it, he said that the United States would not enjoy an indefinite unipolar era because the world was too big, the relative size of America is shrinking economically and America will not be able to control this world. And this happened at a time if you recall where there was great consensus that the United States was in the very early days of a generational unipolar power moment. And once again, he was right based again on strictly on anthropological inputs. And then that brings us to the third geopolitical essay that he has written in his life. Todd is now an old man of course and he published in January of 2024 what he thinks will be his last geopolitical essay, which is written in French, still not translated to English interestingly. He's titled The Defeat of the West. And in the defeat of the West, he states that as a result of many of the same dynamics that let him to predict the collapse of the USSR in 1976, he says quote, the West has been defeated industrially and economically citing US infant mortality, which is above Russian infant mortality. US for female fertility rates falling. US industrial base having been hollowed out by offshoring in a man of reminiscence of what happened to the Soviet Union when he wrote his first essay. Early graduating engineer numbers in the US and educational attainment were broadly in the US falling for decades. So he wrote that early 2024 before it was obvious that the US or that the proxy war in Ukraine was not going for NATO. In April of 2025, he gave a public speech discussing the defeat of the West in which he said, we're past a turning point. We're moving from defeat to dislocation. And what makes me cautious is my past experience of the moment of the collapse of the Soviet system. I predicted this collapse, but I must admit that when the Soviet system actually collapsed, I was not able to foresee the extent of the dislocation and the level of suffering that this dislocation would bring to Russia. We read it in, it was, he published it publicly at the end of May. We read it then. We kind of set it aside in our cutting room because it didn't feel like, it didn't feel like it made sense yet. And we pulled it out as part of the report of September 16th after the events of a few weeks ago, because it started to feel like it makes sense. Now our friend Belagie Srinivasan came at this exact same issue from a completely different angle in conversation with our friend Peter McCormick a couple of months ago in July. Belagie came at it from a technologist, but he came to the same conclusion, which is essentially where past the point of no return. China has disintermediated red America. The internet and Bitcoin have disintermediated blue America, right? They control media and they control the money and they're being disintermediated in the same way that China disintermediated red America with manufacturing the military. And so we're getting this dynamic that we're watching every day in our lives now, just everywhere, blue fights with red, red fights with blue, red fights with China, blue fights with Bitcoin in the internet. And the US, as a nation, pulls back because it's getting beaten in its own open global capitalist competition game that it created and it's getting beaten by the global south, right? How often do we hear Chinese Chinese out producing us? We've got to get them to like slow down. They're producing so much that they're beating us at our own game. That's highly inflationary over time, best case. In this report, in addition to what Emmanuel Todd said in May of this year, or he wrote the book in January, everybody said this in April and May of this year, in addition to what Bellagy and Peter McCormick said in July of this year, we highlighted a Chinese people's liberation army general who gave us speech in 2015 to the CCP senior leadership. He warned of some of the very same things. Most Western investors either never even saw it or those that did kind of laughed at it. You know, they're not laughing anymore. And you know, I don't want to take things away from our own folks here. Like the US military was ahead of this more than any of the above as we're some major US industrial titans from GE, Google Intel. The most Western investors ignored it or left. I'm going to read a brief passage from top US military leadership in 2011 and Edward Lucio's 2012 book Time to Start Thinking. Quote, "Senior US military leadership, 2011 said this." Quote, "The window on America's hegemony is closing. We are at a point right now where we still have choices. By 2021, we will no longer have choices. The US is way too dependent on its military should sharply reduce its global footprint by winding up all wars, notably in Afghanistan, by closing peacetime military bases in Germany, South Korea, the UK, and elsewhere. All this is a means to an end, which is to restore America's economic vitality. Our number one goal should be to restore American prosperity as such. We recommend the Pentagon shrink its budget by at least 20%. Most of the savings should be spent on civilian priorities such as infrastructure, education, foreign aid. Nobody here thinks the politics in this town are going to change overnight. All we're saying is that we're in trouble if they don't. This is not about ideology. This is about understanding where we are as a country. The US military has been warned about this for 14 years. Of course, they said we're going to be out of time in 2021 and the problem, of course, is that 2021 is almost five years in the rear view mirror now. When you then layer that with what the Chinese general highlighted some of the same dynamics, what an anthropologist, in his speech actually apologizes. This is not what I wanted to come up with this data. The data are the data. You can't lie about the fertility rates and the infant mortality rates. They are what they are. And here's what they're saying, and I'm sorry, America. And so that's what we highlighted. And it didn't make me happy to highlight it, but it is what it is, right? It was hard to write. It was harder for me to write than it was for you to read, if you can believe that. So look, if I had to write the executive summary of Todd's writings, I could do it in six words. The Luke Grumman moment is upon us. Or I guess I should probably translate that to your frame of reference, which is the phase of the Luke Grumman, I don't know, evolution. We're hitting the acceleration point. We're going from the happen slowly at first to the then all at once. We know that Emmanuel Todd, who has a pretty darn impressive track record, basically thinks that this is a very pivotal moment in history. I want to know what Luke Grumman thinks this moment is going to mean. How turbulent could things get in financial markets? And most importantly for this audience, who are going to be the winners and losers. Obviously, gold has been a big winner here. I think we're headed into the famous line about inflation as investors always forget. That inflation is really, really good for the stock market in the beginning at the beginning of the inflation. Is that what's driving this stock market and how long until we get to the bad part of the inflation as far as the stock market and for that matter, any other markets that come to mind? Yeah. I think there's probably some investors that'll listen. to this and say, well, oh, never short America, right? And look, I agree with that. And that's also just a comforting platitude. It's a cop out. It doesn't fit, do anything to fix the problem. And I would also say, which America? From 1940 to 1980, what was good for GM was good for America. And from 1980 to 2020, what was good for Goldman Sachs? And what's good for the Treasury market is good for America. And now what's good for the defense industrial base, the working class, the middle class is, I think we're like two years into that, is 40 years stretch of that, what's being good for America. So, I think we're going through this phase change. I think it's an early, I think we're early in it. And I think it's important to say, look, we're not saying short America. What we're saying is short the real value of long-term treachery, and short the dollar against gold, Bitcoin and stocks, because the US is on military, saying the US is four years past the, we're out of options day. And so, I think what's going to happen is we're going to run this economy so hot. And I think we're going to repress the real value of long-term treasuries so much versus gold and Bitcoin and stocks. And that will ultimately fix the problem. It might create some others we can touch on in a second, but I think it's really important that, recall in COVID, the US got debt to GDP, after the stimulus and everything initially in the economy was shut down, debt to GDP blew out to 130% if I recall correctly. And the US got that right back down to 118 or 117% in just a couple of years. And recall that at the peak in COVID, I think the 12, trailing 12-month deficit was running at $3.3 trillion. They got it down to $1.4 trillion or so. And I want to say like 18 months. And how did they do it? Simple. 8% CPI, FedQE with rates at zero and rapidly rising home prices. 50% to 70% you over your gains in the S&P, which consumers spending at Goose's tax returns. So all they're going to have to do is run inflation hotter for longer. And the deficit will quickly fall to something sustainable. US nominal GDP is going to soar. We'll be able to reshore. Wages will be able to rise. The release valve will be the dollar, the real value of long-term treasuries. I would think that stocks will soar in dollar terms. They've already started to fall in gold and Bitcoin terms. And I think that's going to continue. Same thing with home prices. Since COVID, home prices, I think are up 65% in dollars. They're down 40% in gold terms down 95% in Bitcoin terms since COVID. So now what I'll say about all that is what I just laid out that they are going to run this thing so much hotter than anybody realizes. That's the optimistic case. And that's what I say, what's normal for the spiders cast for the fly. Look, if you're a boomer and you've got 80% of your money in long-term treasury bonds, you're going to go for a meeting stake to hamburger to kibbles and bits. And that's sorry. And to be honest, that makes some sense. Boomers are getting 70% of all-time record tax receipts. The elderly, boomers in silent generation are getting 70% of all-time tax receipts for entitlements. We can't raise taxes, so we're going to inflate them. We're going to inflate them. So that's the optimistic case. I hope we can get through this without a real domestic political convulsion. I am admittedly less confident about that after the assassination of Charlie Kirk, after the assassination of the United Healthcare CEO, Brian Thompson. And maybe more importantly, the polarized political reaction to those assassinations. That really, as shocking as those were, those were like a double dose of shock was the reaction and the polarized reaction. So look, if I'm wrong and we can't hold it together as a nation, and I don't know exactly what that means, but if we can't, then I'm going to be dead wrong about stocks going up in this year. I'll be really right on Golden Bitcoin, but I'm going to be dead wrong on stocks. Because I think right now we have a moment to try to gather ourselves and come together. But the longer we don't do that, I would again really reiterate that foreigners have $62 trillion gross and $27 trillion net and dollar assets. They are so long dollar assets. We saw Post Liberation Day. What happens when just a little bit of money leaves the United States, stocks down big, 10 year treasury yields up big, bonds down big, dollar down big. Right. So that was just a little bit of money that moved out of the US Post Liberation Day. If we get an honest to goodness political convulsion here, wow, that is going to be, that's the Fed's worst nightmare. You're going to get stocks down big, bonds down big, dollar down big, and then what do you do? You raise, you raise rates, you cut rates. And so that is to me something I'm watching very closely for signs, hopefully that we call things down or if we don't. But I'm hopeful we can get this, you know, sort of the easy way, right? Which is, I put easy way in quotes on my notes here because it's, look, it's not going to be easy, but it's the easier way. When you make really bad long term decisions for 40 straight years, sooner or later you run out of room to kick the can and we're there, right? For a number of different reasons, we're there. I think ultimately what it means for markets is I think inflation is going to run so much hotter than consensus. I think it's entirely possible that it's reported as sort of slightly elevated and frighteningly the release valve. If they do that, we'll be more domestic political tensions. And so I think, you know, I think we're in for a bit of a bumpy stretch here within sort of this, this fourth turning dynamic. Luke, as you've been describing all of this, it's basically forming an analog in my mind that I'd like to run past you and this pertains specifically to this question of the state transition from, you know, slowly at first until suddenly all at once. And I guess I'll draw an analogy to the pandemic back into the end of 2019. There were plenty of people on the internet that, you know, know about these things that were starting to talk about something's going on in China. The rest of us didn't understand that significance and couldn't possibly be expected to. Then there's a state transition that happens next where, okay, Jim Bianco was probably the first guy in finance to really understand the scope of this or other people in other fields. But right around the end of January 2020, it was January 30th of 2020 that we dropped everything and replanned macro voices in order to get Dr. Chris Martinson on to talk. He was one of the people who had been talking about it since 2019. But it wasn't really any kind of wake up to what I'll call the second tier of people. You know, at first it was just the Luke Grumman writing about this stuff 10 years ago. Just like Martinson writing about the pandemic in 2019, nobody paid attention, nobody cared, nobody got it because it just wasn't registering yet. Then somewhere around the beginning of February, there was this middle period where it wasn't just one or two guys. It's like 20 guys now. It's the smartest guys in finance like Bianco that are all over it. But they're being ridiculed left, right and center as alarmists. You know, I was, I had all kinds of hate mail for doing that, that show in January 30th, saying that we were irresponsible fear mongers and you know, yada, yada, yada. And then that went on for a few months and one day snap. Everybody knew that it's a global pandemic. Nobody questioned it and it's like, oh my gosh, everybody's panicking. I feel like this US dollar secular decline thing. I think we went from the only people like Luke are writing about it to the 20 guys like the smartest, Jim Bianco have figured it all out now. And I don't think we've yet gotten to that sudden. Everybody gets it moment. Does that resonate for you? Am I on the right track? And what could happen when we get to that moment? No, I think that, I think it's exactly right. And the reason I think people aren't there yet is it's a little bit cross discipline, right? When you're in our business, you're focused on markets and that and doing what I do, owning my own business. I have the luxury to write about what I think is interesting. So I have a bit of a cross-disciplinal approach that I think is somewhat unique. And the reason I bring that up for this is I think they're still a lot of like, I think we're no longer in the denial stage of China 2025, you know, when they roll that out, right? People like, oh, ha, ha, ha. No one's laughing about that anymore. They're not in denial. They're a little bit angry still, right? Oh, they're cheating and they're, they're all were producing and manipulating their currency and like, boohoo, you know, compete. I think we're really in this bargaining stage and that's to your point, like, there's a recognition, but it's not the bargaining stage is still around. Well, we can get a, we can get to Europeans and we can sort of block out China and the bricks and and and it we're only looking at it from one side and nobody is really doing sort of the deep look of supply chains to go, okay, break your supply chains down, break your trade balances down and see how much of it ever touched China. And if they, at some point they're going to do that and they're going to go, oh my god, oh my god, like, there is that and that will be sort of that moment. And I, the sense I get is the old, the old famous saw, right? And it, amateur study tactics, professional study logistics. You know, the bargaining stage was talking tactics, right? You know, me, you know, Besson's talking tactics around well, we just going to get this group and we're going to isolate China. The logistics are the guys within the US military and intelligence communities and I, I just get the sense that they've done the digging. on the supply chains. And like they know we don't have the leverage. They know, and whenever that common knowledge goes from the special knowledge like you were talking about, sort of the isolated, you know, 20 guys to, oh my gosh. Yeah, then I think it's gonna, things are gonna happen really fast. Because, you know, to me, the conclusion is just so crystal clear. Look, we cannot win this trade war. The treasury market will blow up first every time. You can game it out however many times you want it. In the end, the only way it works is if the Fed or the Treasury basically buy much of the bond market and yield control. And historically when we've gotten into these tense situations, as the military warned about in 2012, right? We rely too much on our military. Historically geopolitics since the year 2000 has been like, don't do anything to mess with the rules based global order 'cause the American military will show up and kick your head in. That's geopolitics since the year 2000 in 10 seconds. Well, US military critical components are now made in China. So that too, there's still denial or, you know, some anger, not even really bargaining yet. When you put those two cross discipline things together, which is our debts too high, our supply chains are all touching China, even if we want to pretend that they don't. And our military critical components can't, we don't have the industrial base anymore. Those three things together lead you to a conclusion. Either we're gonna go to nuclear war and there's no winners there. I think it's uninvestable. I hope that's not how it's gonna go. But let's set that aside. Or we're gonna run this super hot and the marketing wake, I'm gonna go, oh my God, I can't own bonds. I can't own long term bonds. I need to own gold. I need to own stocks. I need to own Bitcoin. I need to own anything but bonds, anything but dollars. And that's not even, and any but dollars not even really fair, right? Anything but bonds. Because I think dollar stocks, I think you're gonna be fine. I don't know when that moment's common, but I don't think it's years away anymore. I think we're, I think that's, you know, I think it's six to nine months away. Because then I can overlay that with the fiscal situation and look. Like I can overlay that, you know, the fiscal situation, we're right now with receipts at all time highs. We have true interest expense, which is interest plus entitlements, plus veterans of fairs. It's 100% receipts. And receipts are highly sensitive to stock market. So that like we're to the wall there. We're seeing the US economy on the consumer side actually slow, which is really weird because it's really bifurcating, right? The bottom 50% are really suffering. And the top 10% are, you know, it's, you know, party on Wayne, party on Garth. And that then reverberates into the geopolitical side, right? You're starting to see people writing articles like, what is going on in America after the last two, three weeks? And so it could be a geopolitical trigger. I don't know, or not a geopolitical, but a domestic political trigger. I don't know, or simply just a spooking of foreign investors, right? We have so much foreign money. Or 62 trillion gross, 27 trillion net. If they start to get spooked about the domestic political situation, they take 5, 10% of their money home, then what happens? So yeah, I think we are like right on the cusp of exactly what you describe. And there can be domestic political, there could be market, there could be trade, there could be geopolitical, there could be any number of things that could spark it. Luke, I was fascinated by your mention of military and digging into supply chains and so forth. I want to share a quick story with you. I was recently surprised to be invited to speak at a supply chain conference. So I do a Zoom call with the organizers. I say, guys, I'm really flattered. You know, thank you, but you've misunderstood. I'm not a supply chain expert. I really don't know very much about it at all. I'm not qualified to speak at that kind of conference. But boy, I would love an invitation because I'm very curious to learn more about the people who do the things that you describe. The people who are analyzing things like, hey, we're about to start a war with China, but we get, we're completely dependent on them for rare earth elements and for almost all of our medications and for all these other things. I would really be fascinated to attend that and learn from the experts who is analyzing these things 'cause I don't know that much about it. And they just looked at me like, Eric, you don't get it. We do know exactly what your qualifications are. The answer is nobody that goes to our supply chain conferences looking at any of those things. And we want you to come and point out that they should be. And I'm like, wait a minute. Or what? Supply chain people are not focused on that. Well, I gotta believe they are in the military, but that would be classified and so forth. It sounds to me like most of the people in the commercial supply chain industry are not really focused on the things that you're talking about. And boy, I agree with you that they should be. I mean, it's one of these things. Like I have a good friend who worked for a major global international freight for it. And so someone in that seat is gonna know. And when you talk to folks like that, it's what they highlight or some of just, what I would highlight are some of the seven or eight of the 10 biggest container ports in the world are in China. And it took them 30 years working at the fastest pace in human history to build them. And then there's a whole scale and network around engineers and factories and roads and infrastructure. And it's simply world class across the board. And they've, again, 30 years working the hardest, fastest pace in human history. And that's kind of where I say sort of like the bargaining side, right? When I hear those things, I say, well, we're gonna move it all to Vietnam. Well, sure, you're gonna move some to Vietnam. You move some India. You can't move it all. Why not? Because literally you can't fit it. And even if you could fit it, which you can't, it's gonna take you, do you think the Indians are gonna work faster than the Chinese did? Like I remember being an investor in a Chinese factory, the Indian management team come in, they go, look, you have to understand. In India, the British invented administrative stuff and the Indians perfected it. Like it is just, you know, it takes longer to get stuff down there. So you're like best case you're talking, if you did it as fast as the Chinese, you're talking about 30 years. Isn't he not gonna do it that fast? And even if you could fit it, which you can't, and even if you could do it on, in half the time of the Chinese, which is still put us 15 years, which you can't, you still have the elephant in the room, which is the global bond market, which is to say, like all this stuff is in China and optimized the way it is for to keep inflation down to support the bond market. That's why we did this. That's why we did this at the end of the day. So if you want to do it, it's going to be inflationary and probably wildly so, which wouldn't be a problem except the debt levels in the West in particular are so high that 10, 20, 30 basis points from where we are today, maybe in some case, I don't think the US, maybe 60 basis points on the tenure, starts to trigger a debt-despire, ricks up, stocks down. And that we've seen happen multiple times in the last five years, Japan, same story, Europe, same story, UK. So that's where I kind of look at this, and I think it's a great summer you highlight of just like there's still this bargaining phase of, well, we just need to work really hard and we can move stuff out of China, we can cut China off. You know, like, you know, now without a friggin' 83 DeLorean and a flux capacitor that goes 88, and you go back in time 40 years and you undo the stupid stuff, the short-term focused corporate profit maximizing stuff that you did to break unions and support the bond market for 40 years under the guise of neoliberal economics. You do that, like great, hey, if you got a time machine, let me know, we can have this thing fixed, you know, six months, but failing that, it can't happen. And so I think once we go from bargaining to the depression of like, oh God, then you're gonna realize like, okay, well, they're either gonna let everything collapse, they're not gonna do that, they're gonna print money. You know, and they can't go to war, right? That's another way out, they can't do that conventional. Hopefully they're not gonna go nuclear. They're gonna run this thing so hot. They have to, that's the only choice. And I think it, I guess I would just finish by saying, like, I think the whole discussion around fed independence and Stephen Myron, I think is totally off base with like most US investors are planned by the old rules. You know, I've been doing this 32 years. Most people that have been doing as long as I have with their plan by the wrong rules, they're planned by the old rules. They don't understand, like, is inflation too high? Should it, it doesn't matter. The choices bring this stuff back and blow up the bond market on a real basis or don't and lose. Like those are your choice. This whole debate around should the fed cut, should they raise or they independent or they, no, it's noise. It's noise. The variant perception is they are doing to the fed, what they are doing because they have to because of what we just laid on the supply chain front. The bond market has to be anesthetized to, for the US to get back on its, you know, on the right track again. - Luke, I can't thank you enough for another brilliant interview. It comes as no surprise that you're right at the top of our listener rankings for top guest of all time in terms of total downloads. Frankly, I think you're writing in your tree rings report pretty much speaks for itself. We've got two examples of that. Linked in the research roundup email from September 9th and September 12th for people who want to find out more about what you do or interested in subscribing and so forth. Tell us what you do it for us for the trees, how do people sign up? - Sure, absolutely. You can find out more about what we do at fftt-lc.com or for both for institutional and mass market products and on x@lukegromanall1were. And don't miss the two samples that are linked in the research round up email. Patrick Suresna and I will be back as McRovoyce's continues right here at McRovoyce.com. [music] Now, back to your hosts, Eric Townsend and Patrick Suresna. Eric was great to have Luke back on the show, always great to get an update on his insights. Patrick, let's hit the trade of the week. Luke's financial repression thesis centers on being long, golden bitcoin, while shorting long duration treasuries. The macro thesis is clear, but we're talking about instruments with different contract sizes and other complications. Please give us your best thinking on how to put that trade on, and I mean exactly, including the tickers. The sinners you're going to find the download link for the post-game trade of the week in your research round up email. So, Eric, I wanted to go a little deeper into that financial repression trade that Luke shared, the basic idea is to be long-goal-than-bitcoin against a short position in long duration treasuries. Now, for asset managers, simply owning physical gold and bitcoin, you can easily pair the position with an ETF like Harley Basmonds interest rate hedge ETF, which is the symbol PFIX. Now, I wanted, though, to focus on the leverage trader who can put on all three legs directly in the futures market. That's a very capital-efficient way, but it requires discipline and contract mechanics, including understanding expiration cycles, planning and roles, factoring and role costs, and dealing with liquidity. Now, I'm going to focus today on using the December 2025 Gold Futures contract, which is the symbol GC, the December 2025 Bitcoin Futures symbol BRR, and the December 2025 Ultra Treasury Bond Futures symbol UB. Now, you can see the breakdown of the trade on page two of this week's chart deck. Now, with close to 90 days left on these contracts, a trader has to build into their trade plan a quarterly role in potential rebalancing. Now, the real art is in the sizing. Do you size based on notion exposure or do you volatility adjust in a more of a "risperity framework?" The math is pretty striking. Bitcoin's volatility runs dramatically higher, about three times that of gold and roughly four times that of long bonds. That means if you really try to equalize risk across the trade in the risk-perity framework, you'd need a much larger treasury short against a relatively small Bitcoin position. In this example, we will size gold roughly three times the notion exposure of Bitcoin. So, for a combined $1 million long exposure, that works out to about a quarter of a million dollars in Bitcoin, roughly two BRR contracts, and about $750,000 in gold, around two GC gold contracts. Now, against that $1 million long basket, the volajusted hedge would be about $1.75 million short in treasuries, which translates to roughly being short three UB contracts. Now, my own take on this is that it's a very volatile and messy pairing, and it comes with considerable volatility risk. Personally, if I was running this with a lot of leverage, I'd be thinking about tail risk hedges on top, whether that's through options or other overlays, just to keep the drawdowns contained. That explanation worked for the pros, but we don't have time to delve into all the details of a retail version of this trade. So, how about giving our retail listeners the quick 10,000 foot overview? Now, for retail investors, particularly for traders without access to futures, one of the biggest obstacles is not having access to a prime broker. Short selling can come with all sorts of extra margin requirements and costs, especially if you're trying to express the trade through something like the TLT. This is where I think options can become a powerful tool by using deep-in-the-money options as a synthetic. You can replicate the position in a risk-controlled way with smaller capital requirements and without traditional short selling margin headaches. Patrick, every Monday at Big Picture Trading, your webinar explains how retail investors can put on our most recent trade of the week. For those listeners that want to explore how to put on these trades in greater detail, don't miss out on a 14-day free trial at BigPictureTrading.com. Now, let's dive into the Post Game Chart deck. All right, let's dive into that chart deck. Now, listeners, you can find the download link for the Post Game Chart deck in your research roundup email. If you don't have that research roundup email, it means you have not yet registered at macroboyces.com. Now, just go to our homepage macroboyces.com and click on the button over Luke's pictures saying looking for the downloads. Okay, Eric, what are your thoughts here in equity markets? Well, a few notables, including a Goldman Sachs trader that was kind of pimped up on zero hedge or calling the top here. This is it. Okay, they could be right. As we've discussed over several recent shows, this market is way, way, way overextended and overbought on a technical basis. A very significant correction could happen at any time. There's lots of reasons to think news events could bring it about. But I think that the run at hot thesis still makes perfect sense. As Luke described, policy makers are boxed in a corner and the only obvious way out is financial repression and secular inflation. Bottom line, I have very little directional conviction right here, but frankly, I'm pretty darn confident that whatever comes next won't be boring. I'm not trying to trade this one. If I were, it would be a long straddle on e-mini S&P futures. Well, Eric, would I do agree with you is that volatility is coming back in. One of the reasons we're going to see that is there was a very large September option expiration that just happened last week. So now the market has unpinned from all of that gamma. At the same time, it's quite overbought and there's no denying that this bull trend has been so strong. But from a perspective of the length and magnitude of this rally that we've come off of the liberation lows for this decade, this has now been the longest and the largest in magnitude rally without a 5% market correction. And while at any one moment, the stock market can continue in a bull trend, there's simply no technical breakdown. One has to recognize that we are in the ninth inning of this run. And inevitably, some form of a correction is going to get underway. Does it have to be like a boogie man market crash? No. But corrections happen often as many times as four times a year. And so us getting some sort of a reversion from this really amazing bull advance would be incredibly normal. So what are we looking for for signs that this market correction may be underway? Well, I think we have to look a little bit deeper under the hood. The one thing I have here on page four is a chart of market breath. And what we've seen in the S&P 500 is that while it held at 52 week highs, the deterioration of the market breath approached to 50% where literally one out of every two stocks in the S&P 500 was already down trending. So we're seeing a deterioration of that breath. At the same time, we're now seeing a less and less of the mag 7's rallying. And while we do have a few of them that actually had great impulses, many of them are stretched and some like Amazon are outright rolling over. If we see the mag 7's start to roll over and also if the financials make a break, you can literally go to the XLF and just draw a trend line along its previous lows and see if we're going to get some sort of breakdown. If we have financials and the mag 7's rolling over, it's going to be very hard for the S&P 500 to stay up just because of the sheer market cap waiting of these giants in there. Now, ideally, I'm going to be watching to see whether it is more of a sector rotation rather than a risk off of everything down, particularly if we see things like some of the defensive sectors start to rebound. That would be signs that some sort of a corrective move is underway from a technical perspective. It's a simple as a watching where that 50 day moving average is because it lines up with the Fibonacci retracement of the post jobs number rally that we've had as well as where all the highs from July and August form. And if we started to see price action fail at those points, it would become a clear indication that some sort of a distribution cycle has kicked in. That's very important to see more technical damage before calling a turn. Why is that? Because there's so much systematic trading out there, whether it's ball targeting funds, whether it's CTAs or whether it's just short gamma on dealer's books. You need a deterioration in the price in order to create that snowball effect of lower prices, begin more selling and it creates that negative feedback that basically causes the stock market to have one of those deeper drawdowns. And so it is insufficient for there to be just a hundred point pullback. It needs to be a little bit deeper in order to create that negative effect. Are we in the midst of that? Well, a number of measured moves are done on the upside. So and this has been such an extraordinary ordinary rally that at some point here, we're just going to end up seeing just from exhaustion some profit taking kick in. Let's see if this is the week where it all begins. All right, Eric, let's move on to the dollar. Well, given this week's feature interview topic, I'll zoom out to the longer term picture on the US dollar this week. My predictions of several years ago now were that Brent Johnson would first be proven right on his long dollar calls, but that eventually Luke's secular bearish dollar view would play out and would enter a secular dollar decline. Now, it's too early to say decisively that I got that call, right? But my strong sense is that I did Brent's dollar milkshake scenario did play out just like he said it would. We saw a massive rally in the Dixie all the way up to 116 that nobody thought was possible. I think now it's Luke's turn. I think it's time for Luke to be proven right. And that means a much lower Dixie. My next major target lower is 89, but if Luke's really right that we're going from the the slow part to the fast part where things accelerate, then 89 is just the first step on the way down. Well, Eric, going back to July, we had an attempt on the dollar index to break back above its 50 day moving average. If spectacularly failed and we saw throughout the summer a breakdown for a complete double bottom retest of its July low. And so now a complete retest of its June low. But now that that held in the post FOMC period, we now have seen the dollar try to work its way back above the 50 day moving average and above what I consider a critical level around the 98 level. Now, what is interesting about this? Well, the dollar bear has now been eight plus months in play and it is very consensus. And now while I'm not necessarily bullish on the dollar, what I do recognize is that it's incredibly oversold and everyone is relatively short the dollar in terms of positioning. So any sort of a squeeze here could create that counter reaction. Now, I don't want to already call it because we haven't yet seen key technical levels broken. But any sustained price action north of 98 for multiple days will certainly at minimum have neutralized the sell cycle and would put the trade range that's been established over the summer back in play. All right, Eric, let's move on to crude oil. Patrick WTI moved back above its 200 day moving average for the first time in a month late Wednesday. More importantly, the XZ spread that's the November December WTI spread widened back out to about almost 60 cents almost double what it was a couple weeks ago. That may suggest that front of curve backwardation may have bottomed. And to be sure, I'll be watching structure closer than flat price is I try to gauge what comes next. Well, Eric, to me, what's actually important is that overall over the last month, there's been generally negative news news that would typically have caused bears to have a window to take oil prices lower. But yet throughout August and going into September, every time oil is sold, it held the line around that $61.62, $63 level establishing a base, which is very close to the Fibonacci retracement zones of that May to July rally. So now we see oil strengthening back above that 50 day moving average. What I particularly like about oil is that nobody really is interested right now with gold and uranium and and AI stocks, oil ripping oil has been left for dead. But really to me, this is what the kind of a backdrop where I get super bullish because when nobody's paying attention, but the price starts behaving in a more bullish way is what sometimes when the most asymmetry exists, let's see whether or not oil can build on this and actually break above the $66 level, which I think would be quite technically significant. All right, let's talk on gold. Patrick, I agree with Luke Grumman that investors would be crazy not to be satisfied with the amazing returns we've already seen on gold. And despite that we are now seriously overbought and ripe for a correction on a technical basis, the long-term fundamentals couldn't be more bullish. So I'm in total agreement with Luke Grumman on those points. But what came to mind for me when I heard Luke say gold and Bitcoin investors aren't complaining about this market was actually that I remembered Rick Rool's wisdom that this raging gold bull market is nothing to celebrate, even for us gold bulls who are profiting handsomely from it. The reason gold is ripping higher is that the world is going to shit. And the same slowly at first, but then all at once phenomenon applies there too. Now I'm staying long here because I'm a trader and I don't think this trade is done, but I can honestly say that I would much prefer an outcome where I lose a considerable percentage of my net worth on the gold trade because it turned out that in the end actually all my geopolitical concerns were overblown and it turned out to be a false alarm. Crapi returns and even a huge loss still beats the heck out of World War III in my book. And I'm going to take this opportunity, Patrick, to say that I now believe that this period we're living through right now will ultimately be recorded in the history books as the time when the Second American Civil War broke out. Civil War is never an isolated event. It's an escalation of an out of control political division. And that's exactly what we're living through right now. To be clear, I am not saying that Charlie Kirk's murder or the shootings that occurred in Dallas at the Ice Detention Center or any of the other violent actions taken by any individual, evidence is the outbreak of a civil war. That's crazy. Those things do not evidence that. Crazy people do crazy things and that applies to both sides of the political divide and there certainly have been violent events perpetrated by both sides of this political division. The reason that I'm going to call September 2025 as the month the Second American Civil War began is not the actions but rather the reactions. Any of these events could happen at any time, but for both some parts of the corporate media and some elected officials to publicly take the position that some of the people killed in America in crimes had it coming or that maybe it's the government that's to blame for having policies that are so unjust that these crimes were actually legitimate acts of justifiable violence. That's the signal that we're getting right here. What we're seeing is not the actions of individuals. That's not an important signal. It's the reaction of the news media and the elected public officials that are not saying violence is always bad and crime is always bad. They're saying some of them at least are saying, "Maybe this is justified and I want to be super clear on this. I'm not taking sides." At least not on the podcast. What I'm saying is that this is not unprecedented. In civil wars, what happens? Is elected officials and media who in normal times unconditionally endorse peace and only peace are now saying openly that the circumstances have escalated to the point that they feel that they really are at war and many of them are saying openly that violence is justified in the interest of correcting the injustices that they perceive to exist in today's society. What usually happens next is that political parties are transformed into warring factions who eventually go to literal armed conflict against their own countrymen because the political or ideological divide became so extreme that they felt violent conflict was the only remaining option. Strauss and Housework on the fourth turning or Condrautiaif Winter if you prefer that terminology is very much in play here. This is what happens in fourth turnings. The tail end of it is the worst and the last fourth turning before this one culminated in World War II. Charting dates on a cycle with 80 to 100 year periodicity is tricky business but my best guess is that this fourth turning will end sometime between 2029 and 2034. American Civil War II is something that the vast majority of Americans and the rest of the world can survive. Nuclear World War III is not and frankly the biggest question in my mind is which of those two events will be the culminating event that ends this fourth turning. All of this is massively utterly bullish gold long term but I've honestly never hoped ever in my life more to be proven wrong. Humiliated publicly and lose money in the process than I do right now on my overweight gold long because it simply does not make sense to stay long gold here and not take profits unless you have an extreme view as to what could happen next and the degree of geopolitical as well as financial and inflation risk that exists in the system. I think Luke did a brilliant job in his interview. This is something that I've been thinking about for quite a while as to when I would say on the podcast that I think the second American Civil War has begun and I feel that Luke's interview that he gave set the stage perfectly. I think he explained it probably better than I could. That's what I think is happening and I sure hope I'm wrong. Well Eric I just want to look at gold purely from a technical perspective and what we have is in the extraordinary bull market where every dip is almost immediately bought. Now there are all the measured moves technically that measure all the way up to 3900 to 4000. So there is nothing stopping gold from attacking on a couple hundred bucks to the upside. But this is a balancing act of the long-term outlook going at one or two years where gold being north of 4000 is probably a very high probability outcome versus the short-term technicals as to where is their short-term draw-down risk and buying opportunities on pullbacks. Overall, the price action has been relatively positive but the bigger question is that what will happen if the broader intermarkets get all wonky. Imagine a scenario that the market is not expecting, the dollar rallying, the stock markets going risk off and going through some sort of correction. The bigger question is can gold stay isolated and march the beat of its own drum or will it succumb to intermarket forces and then be dragged down with it into some sort of a correction that in the bigger picture is quite insignificant to gold but on the short-term anyone who is highly leveraged will feel a little bit of stress on their gold positioning. Overall, I remain quite bullish gold but really this is a period where you should be focused on buying dips and not chasing rips and at this moment even if gold got up to 3900 4000 I would almost certainly be actively using option overlays to secure those prices on any advances up there. Alright Eric, let's touch on Uranium. We got a really really important signal this week. On Wednesday, spot Uranium was up but the Uranium miners were down and there's usually a strong positive correlation there across the board. Now to give credit where it's due both Patrick and our good friends over at UraniumInsider.com have been pounding the table for the last few weeks saying the only thing left in the nuclear space that's still cheap was Sput. That's the one that invests directly in the Uranium Spot Market. And what Patrick has suggested and what our friends at Uranium Insider have suggested is, okay guys, the Uranium stocks, the miners, they already had their run on speculation. It's time for a rotation out of those more speculative Uranium miners into Sput because that's what's still cheap here and that's what doesn't need a retracement before it moves considerably higher. I think Patrick and our buddies over at UraniumInsider.com totally nailed that call. This is where Sput Uranium finally catches up to and surpasses both term and price as well as its prior high. I also described the self reinforcing aspect of that virtuous cycle of Sput being at the money. That's in my Twitter feed if you're interested. And yes, ironically that could spell a sell the news event on the more speculative miners that have already seen their big move to the upside. Now I should confess that despite the fact that I just endorsed that recommendation to rotate out of the miners into Sput. I didn't do that. I just kept all of my mining shares and added to my Sput position. That clearly increased my risk at a time when the market has already had an incredible run and I am not worried. I'm in this trade for the long haul. If my Uranium mining shares dump in reaction to calls for a broad market top and reversal or who knows whatever else happens, I guess I'll just have to learn to play the drums like Dr. Michael Berry did in the big short. I am that confident that the Uranium and nuclear trade has only just gotten started in big picture terms but it's already come too far too fast so a correction would make perfect sense especially if broad market weakness is the catalyst. So first off let's talk about Uranium itself. The Sput prices just broke out and things like the Sput physical like you suggested are just beginning to break out. I think there's lots of room in those closed-end funds that hold Uranium itself to have upside. But the bigger question about Uranium stocks in my mind is how correlator or how influenced would they be in a correction in the AI space because a lot of times the AI investors are also pairing the Uranium long stock positioning in the same theme of energy consumption and my curiosity is whether or not a correction that kicks in in the AI space would lead to profit taking on many of these Uranium stocks. It had just an absolutely extraordinary multi-month run here on the upside that is certainly the thing to watch. Now Eric, we do have to talk about copper here. Patrick is ironic that even I occasionally learn something from listening to macro voices. I told you guys a couple of times in the last few weeks that I would be sorely tempted to add to my long copper position but you know it's already pretty seriously over-weight and they'll be crazy to add more. Well guess what? Listening to the last couple of episodes and our expert guest's opinions really confirming that long copper view persuaded me to add considerable size this week to my long HGZ6 that's a hotel golf Zulu 6. That's the futures contract that's a December 26 not 25 and I did that after realizing that rebalancing just my gains in golden Uranium justified more size just for the sake of rebalancing or at least that was my rationalization. So it was only pure dumb luck not skill that I happened to increase my futures position on copper by 50% just hours before free port macmarons declared forced measure in the wake of a serious accident at a copper mine in Indonesia a couple of weeks ago. That shock panic whatever you want to call it move took us back above the 200 day moving average and just eyeballing the chart if this rally can continue. That's a big if because we need to see this signal translate into a real recovery not just a quick panic reaction to news that retraces but if we stay above the 200 day moving average it will and if we can keep the rally going a little more than that it looks like we're going to avert what otherwise looked like an impending death cross on the daily chart. The market tested the 50 day moving average on Wednesday but still close below it now if we can get above four spot 90 or so and stay there and that number that I'm quoting is on the December 25 chart hotel golf Zulu five on that chart above four spot 90 if we can get there and stay there then I think the long overdue recovery and copper may finally be upon us and it definitely comports with Luke's view that they're going to have no choice but to run this economy hot. Well Eric it's awesome to hear that you got some good positioning there on your copper things we did talk about that copper trade very timely last week as a trader the week and so tonight to see that any listeners that were acting upon that had a great start to that trade now overall copper here has lots of room to go back up to that kind of five to five and a quarter range and so at this moment with this kind of a great tailwind there's lots of room for copper to strengthen here in the next couple weeks or month ahead. Patrick before we wrap up we usually at the 10 year old treasury no chart I don't think you can skip that one this week and wake of Luke Grubman's interview what do you think and how does it comport with what Luke told us while we saw yields break down towards 4% before the FOMC really Powell did cool things off in the rates markets and bonds have weakened and subsequently yields have risen and we're now actually testing some pretty key levels I think this kind of even 424 25 yield areas going to be very important if the primary trend is now lower yields this should be the resistance level on yields and we should see them start to weaken from here and if for whatever reason yields strengthen above these levels it would have to be acknowledgement that something has changed in the rates markets and we'd have to then see whether or not a retesting of highs would be on the table right now I'm actually anticipating this to fail at this level in weaken and let's let's see if this overhead resistance does in fact stall things out here folks if you enjoy 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 big picture trading.com Patrick tell them what they can expect to find and this week's research roundup when this week's research roundup you can find the transcript for today's interview as well as a link to the trade of the week and chart book we discussed here in the post game including a link to a number of articles that we found interesting so 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 now for those of our listeners that write or blog about the markets and we'd like to share that content with our listeners send us an email at research [email protected] and we'll consider it for our weekly distributions. 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