[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 your bearish, no holds barred. Now here are your hosts, Eric Townsend and Patrick Suresna. MacroVoices episode 524 was produced on March 19, 2026. I'm Eric Townsend. It was a sea of red in markets on Wednesday as the Iran conflict has dragged on longer than most analysts expected, and the Fed standing pat with no rate cut accelerated the selling. The S&P gold, copper, and just about everything else other than the dollar index and crude oil were down and down hard, closing on or near their lows of the day, and then selling off even more in future trading after the 4PM cash close. These are all ominous signs that more downside is likely in coming days, absent a major bullish news event. So we've got plenty to talk about this week. Bloomberg macrostratogist Simon White kicks it all off as this week's feature interview guest. Simon and I will discuss the prospects for secular inflation, and why the oil price surge might be the catalyst needed to bring it about. We'll also discuss the risk off playbook, food price inflation, the breakdown in private credit, and much more. We had a huge positive response to Dr. Anasal Haji's cameo appearance updating us on the oil market disruption on last week's podcast. So this week, commodity context founder Rory Johnston will join us for another perspective on what the Iran conflict means to energy markets. This coming up right after the feature interview with Simon White. Then be sure to stay tuned for our post game segment. When Patrick's trade of the week will take a look at the inflation surge event that hasn't happened yet. Not the one in crude oil where the price is already spiked, but the one in food prices, which is Simon White will explain in the feature interview, could come next. And oh, by the way, Rory Johnson is going to reinforce that view in the upcoming oil market update. And then we'll have our usual coverage on all the markets and Patrick's chart deck as of Wednesday's close and on Patrick's to resident with the macro scoreboard week over week as of the close of Wednesday March 18th, 2026. The S&P 500 index down to 121 basis points trading at 6625 markets now trading at multi-month lows. We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. US dollar index up 97 basis points trading at 100 spot 21 attempting to bullishly break out of a 10 month trade range. April WTI Crude oil contract up 941 basis points to 9546. The war premium remains as the uncertainty continues. The May R-bob gasoline contract up 12, 104 basis points to 307 gasoline now trading at three year highs. The April gold contract down 546 basis points trading at 4896 remains in consolidation after putting in the January highs. The May copper contract down 509 basis points trading at 559. The March uranium contract down 111 basis points trading at 8475. The US 10 year treasure yield up 3 basis points trading at 426 up taking at the end of the day in the post FOMC window. The key news to watch this week is the Friday op-ex and next week we have the Euro and the US Flash Manufacturing and Services PMIs. This week's feature interview guest is Bloomberg macro strategist Simon White. Eric and Simon discuss the risk of a renewed inflation cycle. Why markets may be underpricing second order effects of the Iran conflict, the parallels to the 1970s style stagflation and how shifts in commodities, credit and the yield curve could reshape the macro outlook. Eric's interview with Simon White 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 Bloomberg macro strategist Simon White. Simon prepared a slide deck to accompany this week's interview. Registered users will find the download link in your research roundup email. If you don't have a research roundup email, it means you haven't yet registered at macrovoices.com. Just go to our homepage macrovoices.com, look for the red button above Simon's picture that says looking for the downloads. Simon it's great to get you back on the show. It's been too long. I want to dive right into your slide deck because there's so much to cover today. Let's start on page 2. You say inflation is a three act play that we really need to be thinking about a return to secular inflation. A lot of people said there was no catalyst. Well, I think we got our catalyst, didn't we? Yeah, it speeds. I think that's absolutely right. Eric, I think this is playing out in a way that's very analogous to the seven things, which is why I've referred to a three act play there. And I certainly could make sense. You know, I think it's the least probably the most misprice thing. At the moment, I think it was misprice before this war with Iran started. I think it's even more misprice now. And it certainly seems that team transitory is back in force that you looked at the CPI fixing swap's presence. They show a quite sharp rise in inflation over the next few months expected. So maybe think about three and a half percent. They're very quickly go straight back down and look into our ones. I think we're looking at properly 2.8 percent and spot CPI, which is only about 40 basis points higher than it is. So again, we're looking for quite short term shot. And it's even more egregious if you look at break evens. I mean, the short term break evens have moved a bit more to to five year, maybe move 20 to 50 basis points since the war started at 10 years as fairly fast. We've been 5 to 10 basis points. And I think the muscle memory is kicking back in. The inflation will always go back to target. I think that's, I think that's quite complacent. And that's why it's helpful to look at the 70s. No analogy is perfect. But the 70s does have an uncanny amount of commonalities with them today. And also the one thing that doesn't change is human nature. Human nature is immutable. And inflation is much of a psychological thing as it is an actual phenomenon or an economic phenomenon. So the chart on the left was something I first used, 2022, so almost four years ago. And it was uncanny because I updated it. And so the blue line shows the CPI in like level, not the growth from the late 60s into the late 70s, early 80s and the white line is today. And so I updated it and will kind of bang on today at the end of act two. So the way I thought about it is act one was kind of when inflation first hits you highs. And so this time round that was the pandemic. And first time round in the 70s is on the back. Oh, we had a lot of this gleeving because of the Vietnam War. We had LBJ's grey society, Medicare. You already had quite a little physical policy. Blasting starts creep up much higher than expected. And then you went into act two, which is kind of like the premature or clear. And that's where it was kind of taken that inflation was. It's a temporary phenomenon. It was going to go back in his thoughts fairly quickly. And that feels like where would be over the last couple of years. But you know, stubborn inflation is the old proven very stubborn. It's said you not going back to target state above the target rate. So it's remains elevated. And if you look actually where that act two ends, you match it up to the 70s. Pretty much buying on October 1973, which is the beginning of the young corporate war. And that in itself is a comparison that's worth looking at. There's a lot of differences, but that war. But there's actually a lot of commonalities that definitely makes the work looking compared to what we're seeing today. So back then it was a supply of attack. It was the Arab states and you were led by Syria and Egypt on Israel and the attack Israel on Yon Kupur. It was a very short war. It was only three weeks. So this war is not yet three weeks. Initially, it's expected to be short, but that's looking less likely now. I mean, I think volume market as an end of April ceasefire now down to 40% probability from something like 65% not that long ago. And you had obviously a major oil show in response to this war because what happened after the war, after the three weeks war was that the US state ate Israel and the Arab states decided to have an embargo on oil. And that created this huge oil shop. So oil prices managed to quadruple in a matter of a month. That's quite a significant oil shop. And then that led to the act being to become back for the very end.
had this massive rise in inflation through the end of the decade and it really didn't end until you got all bulker in with this excessively high interest rate heights, the Saturday night special, it really matters to break the back out of inflation. And if you look at some of the further commonalities, it's not just obviously what happened with the oil price, not just that this was in the middle east, not just could it involved in Israel. And you also will be going to the next slide and slide three, if you look at the X-T market back then through the X-T market, and back then this is the time of the Nifty 50. So this was like set of stocks that everybody thought they had to renew, they had great earnings, they were great businesses, and pretty much everyone owned them. And you know, similar to today, so we had very narrow leadership, in fact it wasn't until I knew the banks in the big cities in seven that we had such narrow leadership again as what we had back in the early 70s. You know, extremely narrow leadership as well. And now the young group of war just before, just after it started, stocks had already stopped to sell off maybe 10, 50% in the bonds before the war, been the following year, they sold off another 45% and that was the largest that's fell off with seeing since the sense of great depression. So we saw as significant as stock sell off. Now that's not to say that we're going to get the same thing playing out here. There's a lot of differences obviously today. For instance, to the US is the major oil producer. This is not the same exact of the same states that are involved. The choke point here is not an embargo. It's the straight of our moves and that there is still nonetheless, you know, choke point in the supply states. But I think it's worth bearing in mind that you know, the non-negative will tail rest is given we are in a sort of not the similar situation. And the kind of nail the coffin of you like in some ways for why you should be. Perfect not to be attended to the rest is that valuations even though we have the massive supply in stocks, this huge big bear market in 70 degrees, 70 or the case, the second case of the price, the RNG issue was 18. And today it's more like 40 and also like the you know, the allocation of households compared to natural assets which more lower back then, much much higher back today. So really it is the number of reasons why you could see things, we'd up to see a more deterioration obviously for to get anything like that. But given the sub of the commonalities, I think is worth bearing in mind that especially when you look at the market, it just does seem again, there is some complacency in the air, stock market. The narrowness is the lead I think that there is some sort of tackle on the way and therefore it's not really worth market trading down too much. I mean even if you look at like the food spreads, so the best went up initially a lot of that was well, first of all was driven by the cold spreads falling and then it's driven by food spread, the items with people who are putting on their insurance. And then quickly monetize that I think those monetize those edges, that food spread start to come off and so the next start to come off. So really I think the market gets the point where it feels like you know what, this isn't going to be a major issue. You know, we don't have too much to worry about here, not really to obviously rally and making the eyes again, but this is not something to get overly unique because in the twist of both. I don't you again along with inflation that something that is beginning to look a little bit complacent Simon, let's go a little bit deeper on some of the both differences and similarities between the young Kapoor war and the present conflict. The young Kapoor war was really a war of solidarity. As you said, the US had sided with Israel. Basically all of the Arab states together went in on the Arab oil embargo. You have a very different situation today where the US has once again sided with Israel in a conflict with Iran, but now Iran does not have solidarity of the other Gulf states. In fact, it's attacking the other Gulf states that are allied with the United States. It seems to me there are still similarities, but there are some almost diametric opposites in some aspects of this. How do we sort that out and make sense of what extent the economic outcome might be the same or different. Yeah, I think that's 100% you know, the alluded to that there are a number of differences. And so that puts you in a point where you know, no analog is going to be perfect. But I think when you combine it with the overall inflationary backdrop where we are in terms of this key athlete in the 70s, you know, you could argue that what happened in the 70s were a series of kind of quote unquote bad luck that led to inflation rising. So, you know, you had the kind of ex ante conditions perflation as I mentioned. We had already the war we had the physical expansion on the back of the society stuff. And then you had the 1971 was next and closing equal window. Then you had the oil embargo, the war and you had the end of the decade, you know, you had the Iranian revolution. You could argue all these things were bad luck, but they're also hitting a situation where inflation was already in a different regime. So I think I think that's the thing to note the differences that when you're an inflationary regime, lots of things can happen like things will always happen. But if they hit when you're already in inflationary regime, much more likely to have bigger inflationary impact, you know, that's probably after this day. It's very uncanny and we absolutely compare the two analogies that almost to the month when you get this sort of premature or all clear ending and is almost the month when the war started as when the attacks on Iran started. Yeah, I wouldn't want to overlaid or the point in terms of the analysis. The so many precedents that makes it worthwhile looking a little bit deeper into for instance, that other one that's very interesting is it's an unlearned appreciate fact that in the 70s, the food show was actually much bigger than the energy show in terms of on its effect on CPI. So if you look at the weighted contribution from spurt and from energy in the 1970s, it's much bigger than it was for energy. And in fact, including inflation was already rising before the air of the show this time around we have the disruption to the straight of our moves that obviously doesn't just affect energy crisis, it affects energy products. And for instance, a lot of stuff goes in better lighter is that I have produced in that region that has to travel through that region. So around itself, producing a lot of urea, ammonia. There is a huge amount of sulfur flows through the space. All these things go into better lighter and effect to be the door a little bit further into the presentation. And we go to the slide if we go to slide eight we can see there actually you can see the two shots of the blue line tools the good shot and after OK one the young commercial and you can see again after OK to the radiant revolution. And both times the good shot was worse and today already we have a view look at the contribution to CPI the US CP either is from food. It's higher than the energy already. So if you have this effect eating into you know, fertilizer prices and that's what I try to show in the chart on the right on slide eight. You can see the fertilizer proxy includes some of the inputs I mentioned along with things like for task you want to start to rise is a very reliable lead by the six bonds that foods CPI will start to rise. So I always think that is also be really Christ and especially I think if you take a character that if you have energy and food for Friday. I just very unlikely you're not going to get some second route of that that is going to be then to core inflation and you get the sticky inflation that we saw in the 1970s and that's a lot more troublesome or the fed in one sense it should make a small easier because the fair can angle right with these and the second inflation that's something we think we can do something about will maybe high breaks with the muted muted sorry next to the war coming in you know whether he's going to lean towards the the hawk spectrum you know I certainly think he's more likely to be more like an after burns who was in the in the 70s and at times the young couple war. That is likely to be a poll ball car who was in charge after the OPEC to shop in after the Iranian revolution in 1979. So I think that further complicates the matter in terms of what the best reaction function is going to be. But seems like the analogy that's most relevant is the umpura war only lasted a few days but the Arab oil embargo lasted quite a lot longer than that so the question is once the direct kinetic conflict is over how long can Iran continue to disrupt the flow of traffic through the straight for moves is that the right thing to focus on and if so what's the answer yeah I think that that's the correct in that the key message I think from that period was the war itself was very short I think it was about a few weeks but the impact was felt way through all through the deck and I had a number of consequences so again no analogy was perfect but the human side of things it doesn't change how humans respond to the nature response it doesn't really change in fact I can see that this attitude nature of the two different shocks will be going to slide them six so we've got two more charts there and this this brings me to another point which I think needs to be made is that I don't think the yield curve is pricing in what's looking to be a much larger inflationary shop than for instance has been picked up in the keeping market so the latter is there is what pretty even said in the 1970s
So all pack one and all pack two both cases they ended up to drive then the drives quite Cetrically, but the along after a delight CTI'd already start driving This little kind of late are a but both times they they're drives and if you look at the chart on the right there You can see the two the nature the different nature of the two shocks So all pack one was definitely more of a permanent shock to oil prices so really Oil crisis never really revisited And they're we go pick one or pre war pre on could go to war levels again They just kept rallying through until go pick two here the Iranian Revolution in 1979 They were sharply again, but nowhere near rise much and and percentage terms as it did no pick one and then he's Gradually start to care and fairly soon after the Iranian revolution so the OPEC 2 was born transient because the more transient shock But in both cases, if you look at the bottom panel of that chart You can see core and in the insurance you know pack one and all pack two and both made a higher low Before rising again and early keys and again, it wasn't until All of all of these hands of the monetary policy They was really able to put an end to this this huge inflation of attack Do that that he one of the theories of secular inflation is that it's a self-reinforcing vicious cycle So as you begin to see inflation it changes consumer behavior people start stocking up on things Because they want to buy it while the price is still cheap before the price goes up more that causes more Consumption that is inflationary and it all feeds on itself and You know you it's kind of like a fire that once you've started it you can't put it out Are we already at that point in terms of this coming inflation cycle where the fire has been started and can't be put out or we still in the Need to look at this and see what happens stage We we're in we're already in that is in my view is quite clear That what began in 2020 with the pandemic the large spike in inflation was the beginning of If you like that that cycle starting and really what's happening underneath is that why 2% inflation for whatever reason the set of an arbitrary number but 2% and are around 2% inflation overall like over the whole economy tends to be fairly stable and I think that's because all the different Actors that are taking price signal dot one another when inflation is not moving around that much They tend not to go out sync But once the cash out of the bag If you like once you have this large right in inflation as we saw in the early 2020s They got all it will sink and it takes a huge amount for them to get back and sing and you ended up with inflation remaining Elevated so you can split CPI out for instance into Importance so you can look at the sensor in sticky virus with the non sticky components and what you notice in 2020 is both cyclical and structural inflation rules that cyclical start to fall and But these trucks were wondering being more sticky and by the time the structural collision had start to fall Surgical inflation because Helpless name is cyclical has started to rise again and start to reinforce Strafton inflation that's already elevated and we're right in that period again though. We're as structural had stopped all A higher low but the cyclical part of it is already riding again and this award is gonna make it worse because obviously the immediate effect is on headline inflation And so straight away you can see that we do into the cyclical side of things and Once again, what was more 2.4% where we are on and CTI maybe 3% a PC You know, they're gonna look like again equivalent to what we saw in the mid 70s after the young per war This is the point where we start to see a rise again I don't know how far it goes again The US and much more insulated and then it was back then But I think you do see a way acceleration and the real kind of if you like the real kind of tender on this is That's I'll say going back to Kevin war you got someone that's coming in that nobody is really sure is gonna be an inflation fighter In fact quite the opposite quite possibly which is kind of actually a bit odd Just the slight deviation bit connected is it's kind of strange if you look at and real yields have been rising So real yields have been rising since the war and that's we driven by higher rate expectations And so that's part of the rise in nominal yields so preference that moved a bit other mentioned But really the bulk of the moves so far have been real yields and national in the back all as to say rate expectations We've gone higher that kind of this seems a little bit in congress and you know given and the conditions that are not conditions But the circumstances under in nomination and a president is still makes no bonds about being Absolutely determined to get lower rates immediately. I mean he was saying so only a couple days ago yesterday So I feel that that is also adding to these trucks rule kind of impediment or inflation to to keep rising And then you got go back to the yield point I mentioned that I think yields are not priced for an inflation shock And I think one one thing will see the yield curve will see them so if we go to slide seven on the tech I looked at basically how great seasons and real yields Behead in the 70s and then there was no real yields in the 70s because text didn't start trading until 1997 And you can see synthesize a real yields. You basically look how real yields are traded later lead versus a whole bunch of different economic and market indicators And then you can back it out and look at how and build basic and I see a series of real yields in 70 so John left there we can see again the difference to go pick one and all pick two and how the yields behave So in both cases break even the rules But in the all pack one more happened is that they're used for the shop to break the limbs that then we had that equal opposite shock to real yields That's a good Stagflation What happened in all pack to use and say they've pretty even throws the real yields and state-wide rate static and I think that was Basically for two million one the US response to all pick one so the US became less energy and answer and more energy especially And a lot of non-opak production in on street completed like a last time and the North Sea and until for that you had or very soon after the rating revolution You had Paul Walker at the fair did not really put a kind of cushion under how far a real yields could fall so in all pack one The tell you maybe the move a huge amount because the real yield and breake that's a cat or one or Whereas the normal yield rose a little bit in all pack two But the difference being in all pack one and all back two so the opette one the curve steepen because we had our good births and And he as the benched earlier, you know the notorious for not deleting the central back and do much but please let alone a supply shock Inflation it was kind of overview that by and large most inflation shocks couldn't be solved by a central bite And if I see this the guy when he's at the fed he got staffers working on some of the first measure to core inflation And and to the tech is he kept on taking out more or more of core inflation in a frantic hope that something would be going down Which she discovered wasn't the case So you know we have this and very kind of and dollars banker who doesn't really believe central bank who doesn't really believe that Is there something he can do much about so short yields kind of fails We've had a steepened in all pack one and all back two yes ten yields variety a little bit But you had Paul Boecker who is massively reading the front into the curve and the curve slas and But this time I think in some ways it the curve response function could be more like Opette one because I think that longer days break even the will rise So I think that moves thus far that we see this muted move I don't think that'll last and that this should rise more from you know The relative status and more like to see at the stage of war you can see lower weight So I think linked to war the car stealing this time and as we saw it'll pick one bit not Just for reasons the opette one is As simple to what's happening today there are some covers of some similarities, but there's a lot of differences as well Well, if this was 1973 all over again and clearly you've said that it's not exactly a perfect analogy But to the extent that there's a lot of overlaps and 1973 was not a good time to have a long-term bullish outlook on Buying and holding stocks for the long haul. What does this mean for equity markets for the rest of the decade? Why I Interesting now. I mean it can see you speak to and so I've got like a lot of stuff You know some friends and people I know that speak to commodity people and they're overall a lot more bearish than F10 race people you seem to be overall less pessimistic I think again, one by two I said earlier I think that there's still the sort of belief that there's some sort of an attack on the way But even more than that I think the big difference is that they're ultimately in the backstop and if things get really bad The Fed can stutter and I must say that's what's gonna happen right now But you're all gonna have that in a tail covered so the commodity markets to really price in and extremely kind of negative outcomes and They don't have a lesser lender of last resort, right? So there's no way to go Your commodity market sees us for whatever reason there's nothing really can be done There's no backstop and the same way that you have for financial assets And so I think that's what I'm explaining why we have that today and you know 1973 I don't think we we have that to the same stand. It wasn't this belief that the Fed was always gonna protect Effes we return so that's why you probably have that situation where you have this huge shock must bigger than the energy shock But got a day combined with Affair is there yes, it is over all more dubbush, but this is the actually remember of gold stock monetary policy, but you know, the Western policy, please, she can.
came back and then he tightened it and then he wrote, oh right, about loosened policy again, back and forward, back and forward. So there's huge amount of volatility underlie on the Arab. So obviously makes it more likely or increases the chance you can have deeper, deeper falls in the market. And so you don't really have some of that today, but it does seem as if the earlier that feels that the market is overall be more complacent, even with that in mind that there is a backstall, that there is still a potential for some sort of, still seems to be some sort of complacency in it and say, what brought me to that, especially, it's just looking at what's happened to Putsky. And you know, initially there was the response to like let's hedge some downside. Very quickly that reverse, it was almost as if like the market went, oh maybe I don't need such decoy the money. Who's here maybe I'd feel like the market's not going to sell that sell off that heart. In which case I don't need this insurance right now. And so again, that sort of smacks to me just, all complacency just because the distribution of outcome are still very white, right? There's still a lot of moving parts here and most unpredictable to the waters, of course, Trump themselves. And you know, back in the 70s we had a lot of volatility, political volatility. Again, I don't think anyone quite as volatile and he was able to obviously voice his volatility. It's such a real-time matter that we've got today. So that really puts a lot of people in a sort of frozen moment like they want them everybody. And but they're also kind of fearful that they can't really put much risk on because so what could he? Simon on page 11, you say gold is a hedge against both tails. Elaborate on that please, but also I think it's relevant to point out if we're looking at the analog as being the 1970s, private ownership of gold wasn't re-legalized until 1974. So there was a very big transition catalyst there where it became legal once again to own gold bullion, which probably disrupts the data. How should we think about this in the 2020s? Yeah, that's a good point. I think there's also another disruption at the yellow side as well because the data in this chart was back to the data late '20s. Back in the territories was where the extension of the US confiscated private golds, autochets, the cost of the gold, I think they paid $20 and then re-bounded at $5.9. So quite possibly gold could have went up a lot more in that equation period of the earnings. I think that's why gold's missed understood it is to some extent an inflation hedge. It's not a perfect inflation, but it's not a dependent. And in extremes, when inflation goes very, very high, you're in that sort of environment, it does a good job because you've got the deviation and I've got things and just the general kind of insurance against an agile system. But it's not appreciated, it's also a downside tail hedge as well. And I think what has been driving a lot of the rally recently in gold is this is the lack of alternatives. If you start thinking about, I don't know what's going to happen, I don't know whether we're going to be in a engagement world where there's a lot of inflation or I don't know whether there's going to be a massive credit event and that's going to be deflation great. These are potential threats to the financial system. What can I own that has a proven record of protecting a portfolio in such an environment? And there's really not much else other than gold. I think people sort of ran through all the options. No, right? That would work. That would work. Bitcoin, that hasn't been tested. And they landed on gold. And there are a lot of people that generally, like, ultimately admitted, they've never, ever really saved their gold. They've never been a fan of gold. They've never understood it. Our knowledge, never less, starting to add or have started to add some exposure to the portfolio. So I think as an unpeachable form of collateral, really is what's driving is moved. And although it's struggled a little bit more than the last few weeks, and I think it's premature to say that that's the end of the primary bull's rent, because kind of a lot of the main reasons that we're driving are still valid today. I mean, there's still a need for diversification from the dollar system. I still think, obviously, a lot of geopolitical volatility that hasn't changed. Central banks-- I don't think are suddenly like a Meridian market central bank. They were the ones that initially picked off the rally a few years ago. I don't think they were going to turn tail and start selling in any great size. They've all stopped and the emotional buy in it. But I don't see why they suddenly turn tail to selling it on mass. It was a story that Poland was mooting, selling, some of its gold things. The reason why they were thinking to sell them was for defense. And that doesn't really strike me as a great gold bearish reason for selling your gold overall. So I think, yeah, the general environment is still very conducive to gold still, still, generally, keeping to its primary build right. And it's struggling right now from now, because we see some market up of short term rates. And the dollar has had a little bit of a rally thing like that. Overall, I don't see why-- I take a big seller to come around to really force into massive bear market. And I just don't see where that's going to come from. As you said, unfortunately, what has not gone away is geopolitical excitement for lack of a better word. The thing that's-- I've noticed just in the last few weeks is there was a very strong positive correlation. The next time a bomb drops, gold spikes upward. And what we've seen just in the last few weeks is a breakdown where when oil is up hard because of geopolitical bombs are dropping, gold's actually moving down. What's going on there? Yeah, as I say, I think it actually is because of the real yields of the present. That could be part of it. It's a little bit of a rally in the dollar. It should also be in times of-- does any capsule replaturation go on, maybe in the least? I don't know for sure. But gold can often get hit in the short term. People need to liquidate. That's, unfortunately, the problem with having a deterrent asset, it's also can sometimes be a very liquid asset, is it's often the ones that first go. And so it can give kind of a kind of a tune of the signals. But overall, I just have to say, I don't know what the narrative or the argument would be to stay-- this is dead at the moment. And just obviously we've got to remember the market is rally stormly much in recent months. There's apparently a respectable part to have. The kind of positive it's having right now. And like it acts to continue, and that's what trend indefinitely. But I don't think that means that the trend is over. So yeah, I think silver is a far more obviously volatile, but a far more questionable kind of then responds to that kind of overall idea and trade. And the goal to need seems certainly more secure, just because in the state, the reason's underpinning it's rally, all seem to be mostly intact still now. Simon, we've been jumping around in the slide, Dick. Let's go back to page four, because you've basically said you're rewriting the risk off playbook. It seems like an important book to read. Tell us more about it. I'm certainly not going to rewrite it myself. But my point here is really that we talked about some discoverable analogs, they're useful guides. I think you have to keep in mind as the rules can change. So I think standard risk off playbook, because you can see the dollar rally and generally rally and risk assets sell off. And that might not be the case to the same extent as time. So for instance, take the dollar. So the kind of quintessential risk off moment really was the GSC and then the GSC, the dollar rally. So I think that's a lot of people's that, well, you know, well, that was the big one and the dollar rally, the dollar is there for a safe haven. But really, if you look at what drove that, and then you compare it to the day, I don't think you can necessarily say that dollar is going to be in a position to rally quite as hard as it did back then. So the chart on left there, you can see that the glue line shows the bond flows in flows from foreigners. So they slowed equities or a tiny back then, actually the much quicker stays far as foreigners are concerned. They all actually drove the dollar. The rally was repatriation to close. So the US, they studied mutual funds and banks have led to various European entities. And it was these guys repatriating that led to the dollar rally. So it wasn't the case of foreigners channeling money in or making dollars to cover like structural shocks. It was really just US entities repatriating and led to the dollar rally. Now, that's time around. The cash flows are this pressure of this in different. And so bond flows are much more known because the US is not seeing treasures, they're not seeing as much of a safe haven. And epithets, they're not massive. And the US outflows are not as large as we were back in 2008. So the net impact means the US is much more exposed to epithets. So in a sort of risk of environment that we're in right now, it's can see more capital is repatriated. And some of that is equities in the US, active loads of the state tends to be on the edge. That is a dollar negative. And you don't have that cushion of the same cushion of dollar repatriation. So yeah, you wouldn't expect to see the dollar necessarily rallying as much. And that could be seen even more if you look at the chart and the right. So after the bar like all court, all the talk of the dollar disruption, the tariffs, that didn't lead to a sell America trade. But I certainly think it made people think twice about their exposure to dollars. And that can be seen that the state of this chart is kind of like the dollar that didn't bar. So the white line shows the dollar reverse. And what you tend to see is the blue line, which is reserved and denominated dollars. So when the dollar weakens, I see the white lines
rise, the reserve managers are 10 to 5 dollars, they're 10 to you the weakest in the dollar to add to the dollar reserves. And that certainly hasn't happened this time, so it's seen the big weakening of the dollar, and there's been no response yet from dollar reserves. So I think that shows like a general change in the attitude to global demand for dollars. So I don't necessarily see other things that the dollar rally will be as big as the same as far as the DXY, I think is up about 1 to half, 2% since the war started. We go to slide five, look at that, say, commodities, so commodities as a kind of prestige asset is sort of seen as well. It should certainly sell off in a recession, I think, in general interpretation. That isn't all the case either. If you have a commodity in juice recession, and if we are going to get recession, there's very little chance of it in the next few months, but that could change if the war continues, and the negative effects spiral, what often happens then is that commodities start to sell off before the slum, but the that's sort of sell off in the body price is kind of eases the growth shop, and actually that allows commodities to rally through the rest of the recession. So that might maybe all happen again. We got commodity in juice recession, say, this is your next year, that's not a prediction, that if we were to get one, I wouldn't automatically assume that commodities are going to sell off through that. Simon, let's move on to page nine, the title of that slide is it takes a war to bring down an economy this strong. Let's start with how strong the economy is, but then later you say it would take a protracted war. So I guess the question is how protracted does it need to be in order to take down the strength of economy that we already have, and where is this thing headed? Is that actually remarkably strong given that thing could be led to time of the cycle? They're not really surprised me when I was looking at this, and it's also a little bit ironic, I guess, that coming into this war, the US was firing in all cylinders, and you know, as he mentioned, as I mentioned, the fat and war is perhaps just what it would take to to derail it, and you have numbers cycles for the economy that everyone knows about the business cycle, there's also the liquidity cycle, there's the housing cycle, there's the inventory cycle, there's a cycle cycle, and all of them are actually in pretty good shape. So the business cycle, if you look at leading endocarras, that's being turning up, the liquidity cycle, so that's the chart and the left there, and I look at excess liquidity, which is the difference between real money growth and economic growth, so that really gives the a measure of what impact this liquidity is going to have on markets, so the bigger the gap is between liquidity and economic growth, that means the economy needs less, more to go into risk assets, that has been vacillating around, as you can see the chart, but it's turned back up again, and even taking a secluded process, we've seen some tightening in natural conditions, the war, but overall, it's not been massive, as I feel you're good to earlier, the dollar's rally hasn't been huge either, thus far, so the liquidity is in pretty good shape, and it's, you know, the general business cycle is in pretty good shape, even taking a secluded with the job market still done, I think it's possible to have a job as cool, and some of the things that I have in Luca to see if there was a school done in group coming, such as temporary help, is actually rising, not falling, average hours worked, it's kind of static, you're dormant expect to see that fall, as people cut ours before these start attacking people, I think it's, you've got to remember that we have companies still have very strong margins, the, you know, their balance sheets are generally pretty good shape, and you've got this massive amount of government money still filtering through the system, and so there's maybe not the same acute needs in the short term at least, or heavy layers, and that global economy is also in the good shape as well, so that's the chart on the right there, you can see that we're in the midst of this global sickle-up swing, if you look at OECD leading entities from different companies around the world, almost all of them are turning up on six month base, and then we looked at the emergency cycle, and that looks like to be turning up as well, leading indicators are pointing in it to continue to rise, sales, the inventory ratios are starting to rise, the housing cycle is not as in good shape, but you know it's okay to have the sales growth slowed down, and things like that, but one of the best unique indicators for housing that is building products, building products that are doing okay, and they're actually led by bonus spreads, so you've got a significant compression in bonus spreads, providers of even such a small and bond volatility, and so you can see that the housing cycle is in a particularly bad shape either, and then we have the credits like, so we go to slide 10, the listed credit market from a fundamental perspective, my leading indicator there on the chart, the left, shows that on the fundamental they're still pointing to tighter spreads, so things like backs, landing conditions are particularly, tightening in a particularly ractive way right now, perfect savings is still quite low, which means there's more money to be spent, which goes into back to corporates, to little profits, so you've got this general kind of listed credit market still okay, the weakest link though is private credit, and private credit I think is the one you do probably have to be most aware of, obviously it's very paid, unlike the listed markets, I'm just seeing a number of cockroaches seem to be popping up with a little bit more frequency, that probably most people would like, we had well redemptions, redemptions, redemptions in one of Quick Waters funds, J.P. Morgan loans, and they've just lineeting the events of landing it's doing to private funds, and really what kind of trigger this latest little bio-weekness of was the concentration of software companies that private credit companies probably have a sport or two, and that does on the back of this massive kind of like, contently in the performance of AI coding agents, which leads a lot of software companies business models, maybe in the little amount, there's not access to a lot of them, but it certainly means that they may not be able to charge as high or get as high margins on their businesses, then they have a small or simple seedless markdown, if valuations and their stocks, and obviously that's going to be reflected in the loans as well, and we're getting as visible we can see the loans themselves, obviously, because they're okay, that's kind of a selling point, the USB of the market, but we can see the shares of BDCs that business develop companies, and they've obviously been falling because the market is obviously wide to the fact, and perhaps what they have underneath or the loans that they have are particularly a good shape, and the events are a deal of your life, because these to be, I remember these been arguments that was private credit, something bad happens that can be contained because these guys can insulate the rest of the management system, but that's not the case that you look at the banks have been lending to private funds, and if you look at lending to a non-bank financial institutions, that has been in over the last couple of years, you're really seeing huge number of loans as being extended from the banking system to a lot of private credit funds, so there is your kind of vector of risk like there, and if there is something we'll see raise that as a private credit, if you quickly transmit into the listed credit markets, and then it's feasible of course, that's bad for the rest of the economy, we've obviously been here before, credit markets are big enough that they can do a lot of damage and 50 to earn down very rapidly, so that's where we are in terms of the overall economy is strong, the credit market, again, fundamental local cake, but the weakest link is private credit, and that's obviously the one to watch, or watch as much as you can, because of this capacity, it's kind of typical, other than just watching Red Bad or Headlands come at up, tell me which fund is doing what with the redemption, otherwise it's very difficult to really get a proper handle unless you're in that particular space yourself, or really what's going on, but certainly that's one of the biggest risks, but take that away, and the US economy is in a pretty good spot, the one thing I think that can really derail it would be a protracted war, I mean, you ask how long it's protracted, I don't know, but the longer that we have, and straight apart lose the lot, the longer it takes to switch things back on, but the longer things are off-stream, the longer it takes to switch back on, so whether that's if you power down to five years or if I knew it's a damage, or I think that smelters that switched them all six months to bring them back on, and so there's many of these histories that backs that will start to kick in, and I think that's also one of the reasons why a lot of people in the quality space are more bearish, because they're kind of seeing this, and they can't see any else, I think they're looking at disruptions good way, probably well into next year, and that's in the basis that even if the war stopped in quite short term, and so I think that does have to color your view, and protracted war would definitely do a lot of damage to the economy. Simon, as you talked about private credit, it was kind of concerning to me, because frankly, it echoes in my mind to about 19 years ago, the summer of 2007, when we were also talking about NOPEC not well understood in the broader finance community, small little piece of the credit market that couldn't possibly disturb anything else, and the reassurance at the time was don't worry, it's contained to subprime, there's nothing to worry about. Is this another setup like that? It looks very much like it, I think it's not with Ben Bernanke himself, he said the housing is stained, I think. Look, I go back to my kind of axiom that the one thing that doesn't change is human nature. I think we're seeing that even within the private credit space, in terms of when people have opportunities to make money,
and the war kind of off-curricular away from regulation, the standard kind of emotions of greed and fear will kick in greed initially. People will start to take anticipated risks to assess their own money, now are risks layer, hopefully they can not be around when the proverbial hits the fan. And so I don't see why wouldn't be any of that. I mean, there's even a story today, one of the credit funds, if you look in the private credit button, there's a black box, but within it there's even more black boxes. I mean, I strictly reminded me of CDOs squared. So here we had CDOs that are already could have niche terrific products. But people start making up these CDOs of CDOs themselves. And you know, I've seen a lot of people that sign or think that this probably can end well. And you know, here we are again, there's nothing new and finer. - Simon, I can't thank you enough for a terrific interview before I let you go. I'm sure a lot of listeners are gonna want to follow your work. You kind of have to be somebody special and have a Bloomberg terminal in order to access most of it. Tell them for those who are lucky enough to have that access where they can find your writings. - Sure, and that thanks again for having me on the show, Eric. So on the terminal, it's a column called Macroschool. It comes out twice a week, Tuesday and Thursdays. And I also write for the MarketSlide blog, which is the kind of 20s, where there are five days that we markets through and you can call all the latest market development. Patrick Suresna and I will be back as MacroVoices continues right here at MacroVoices.com. (upbeat music) - It was great to have Simon White back on the show. Rory Johnson is next on deck for a special second interview on a developing Iran conflict and what it means for the oil markets. Then Eric and I will be back for our usual post game chart deck and trade of the week. Since the extra coverage format seems to be a hit with our listeners, we will do our best to continue it as long as the situation in the Middle East warns. Now let's go right to Eric's interview with Energy Markets Expert, Rory Johnson. (upbeat music) Joining me now is commodity context founder, Rory Johnson. Rory, you, Dr. Anasalhaji, really all of the most credible experts felt the same way, which was, look, the strength of our moves getting shut down is probably not that realistic of a scenario. And I'm going back to previous interviews months or years ago. Boy, everybody got thrown a curveball. So what happened? How come all the experts, including yourself, who thought this really couldn't be shut down? Is it just about insurance? Is it about minefields? Is it about something else? How come the traffic is not flowing through the straight? First of all, and then we'll get into what does it mean? - Thanks for having me back on Eric. As you note, I've been relatively kind of polyannish about this for a long time, that, and the reason for it, the reason I didn't think this would happen, and to be clear, I never thought this would happen in my career. And the reason for that is because it is such a big shock. Like it's, you know, it'll make, if this continues, it'll make the 1970s look like child's play. And that is my concern here, and I think part of the reason that it is happening now, and the reason I didn't think what happened is, is not that I didn't think that Iran could close the straight, although I had my doubts, because we had never seen it realize, and again, the consequences are so intense. But I never thought a US president would, and engage in a war with Iran without a plan, without something in his pocket, kind of ready for this moment. And what we've seen so far is that, at least here's my, my read of what's happening, and how the Trump administration got into this. I do not think that the Trump administration expected to be in its third week of the Iran War. I do not think they did not do any of the things you would do if you had planned to be in this engagement for weeks. And potentially months now, you we saw, for instance, the IEA's coordinated Estetrician Petroleum release last week. That was good. That's absolutely what we should be doing in this, in the situation, but it was two weeks after the war started. Like if you were, if you were planning this, you would have an IEA release lined up. We saw that ahead of the Gulf War as an example. You would have had things like the Marine Insurance facility that, that, that sent to NASA Treasury. You would have had that lined up. You probably would have done more work to refill the Strategic Petroleum Reserve ahead of this. I mean, all of these things are such that it just seems insane that we entered this without kind of, or I mean, the Trump administration entered into this without a plan. I think that what we've seen from the Trump administration, and very frankly, my expectation was that we're going to see something that clearly the largest military buildup in the Middle East since the invasion of Iraq in 2003 was going to lead to something. But we saw the same kind of buildup off the coast of Venezuela earlier this year, late last year. And in that moment, there was OK, there was everything else. But when it finally all went down that first weekend in January when the Trump administration kidnapped Nicholas Maduro and his wife, basically that happened on a Saturday, or Saturday morning, I guess. There was all this, what's happening, what's happening, what's happening, and then by Monday, we had Delci Rodriguez in as the interim president. She was making a deal with President Trump. And it was kind of, it was wrapped really quickly. The same thing happened last June when we last talked about the worry with the straightforwardness was that the Trump administration embarked on that. What at that stage was a fairly stark break from US military policy towards Iran, which is, you know, it directly engaged in 14, dropping 14 bunker buster bombs on three, the three main Iranian nuclear sites at Fort Al-Natans and Isfahan. And again, if you remember, I'm sure you remember this, Eric, like the Monday when that our Asian markets opened at the end of the weekend, prices spiked tire, as you would expect after this kind of event. And then by mid, you know, by the middle of Monday, we saw this kind of symbolic retaliation from Iran. And then Trump saying, we've got a ceasefire deal. And then I think fruit ended the day down $10. That was kind of my framework for what is expecting out of this conflict. And by that token, I expected that, you know, it was very clear that Cuba was next up on the list of kind of regimes to roll over. And I think Trump planned to basically be rolling over on Cuba by now. And the wrinkle here is that if they were expecting some kind of deluski Rodriguez character to emerge in Iran, someone to say, someone to give them the opportunities to declare victory, I think he would have. And I think what we've seen so far is that the Iranians have not done that. And I think if Trump expected the political culture of Venezuela to be the same as the political culture of Iran, that I think is probably arguably the biggest miscalculation here from the White House. As for what's actually preventing the, you know, passions to the straight, because again, when we look historically, the straight has never been closed. Even when we've had acute violence, acute attacks in the straight back in the 1980s during the Iran-arach war, during the tanker wars, we saw hundreds of ships hit. We saw by the calculations I saw was 450 ships attacked. You had 250 tankers attacked, and 55 of those tankers were basically either sunk or scuttled, and otherwise abandoned by crews. Like we, more than we've already seen now. And during that time, you never had flow halt through the straight. So that was our best historical parallel. And quite frankly, I expected something similar to happening here. And what we've seen so far is that no, very, very few, I mean, the estimates vary, but basically, like between 90 and 95% reduction structurally now through the straight of hormones. And with things like insurance, I think there was this expectation that maybe at the beginning it was a lack of insurance. We were waiting for these, you know, these tanker owners to, and the insurance providers to figure out a way to say, okay, you know, we're going to figure out a way to lift. Obviously, the risk is increased. So we're canceling coverage, and we're going to kind of re-institute. But there was just, you know, that never happened. You ended up actually seeing, and we've seen reports more recently, that, you know, the war insurance has skyrocketed. If it was basically 0.25% of a vessel's value kind of in the month before the war, that is now by the latest estimates that I've seen published by Bloomberg, jumped to 5%. So we're talking a massive, massive increase. That's like $5 million insurance premium on a $100 million vessel just across the straight. But the issue is that even at those insane levels, the arbitrage value across the straight still seems to clear that, you know, we now have effectively negative prices on the bad side of the straight, and we have on a physical basis on Dubai over $150 a barrel. You can very easily cover that with this insurance, and they're not. And I think that is where something else is happening. And I think my best explanation for this, and I think it's also an explanation you're going to hear me talk about through the financial, the relatively sanguine financial impacts that we've seen so far, is that the market continues to expect. The base case excitation is that Trump backs out here, that we see another taco. And if that's the case, if there's the chance that tomorrow this ends, or at least he declares it done, why spend the $5 million in risk your ship
and crew, if this could be over tomorrow. And I think there's this continual hope that this is going to end because as we will talk about, the consequences of it not ending are so extreme that it is unthinkable to me that a US president would bear the political cost of what's coming down the pipe. Well, let's talk about that specifically next then. I think you and I could easily agree that, and I'll just go to an extreme here, if this continued for a year, if there was no transit, no significant meaningful transit of the straight-up hormones for a year, that would result in probably a bigger than 2008 global financial crisis because it would shut down the entire global economy. There's no energy, there's no economy, that's the end of the story. Okay, if it's, we can't go a year, but we could go into next week. Okay, how long is that fuse? Are there tipping points where after a certain point, things are broken that can't be fixed because the backlog is too long? What does the timeline look like of how long this can continue before you get into a situation where it's not reversible? The first thing I want to say, Eric, is I completely agree with you. I think that if this goes on for a year, and again, I cannot imagine, like the level of economic calamity, of human catastrophe, that would rot is unimaginable to me. I mean, we'll walk through it briefly here because I think it's important to try and imagine it, but again, I just can't imagine the political, any politicians kind of in getting, you know, bearing that political consequence because what we're talking about to your point, I mean, I'm normally not a guy that comes, you know, comes with like big price calls. I typically, I don't like them, but like, my advantage is I get $200 crude is easy in this scenario. If we're talking a year or more, like 200 is the bare minimum of what you'd expect. We need to, I've been trying to parameterize what we're actually talking about. And if let's say just for this churistic here, we talk about 20 million barrels a day of oil flow through the straight. Let's even just knock it down to 15 because maybe we get, you know, the East West pipeline and Yanbu and everything else, everything works well with the Saudi version plan. Let's say 15. That is ballpark, the peak of the demand destruction we experienced in March, April of 2020 during COVID when everyone was locked in their homes. You had not an air plan in the sky, you know, major airports were effectively shuttered. That's the kind of demand destruction we would be needing to balance that market, but with no pandemic and just purely through price mechanisms. That is an extraordinarily high price to clear that kind of demand destruction. I've been basically just kind of saying that like, you know, me, I have an extraordinarily low price sensitivity for gasoline to get my kids to school in the morning. But a lot of people, both in wealthy countries, obviously, this, you know, it's going to be effectively a massive, regressive tax. But I think in wealthy economies, we will generally experience this as a debilitating recessionary, nigh, depressionary price shock that will sap consumer spending that will have all of the normal repercussions we would think about. But the price spike isn't enough because you still need to shed that much demand from the global system. And where is that going to happen? It's going to happen in poorer emerging market countries in the global south that when we see price shocks, they will see shortages. We saw this in kind of notorious fashion now in 2022 when the kind of the infamous example of the truck of the committed tanker to Pakistan that they broke their commitment. They paid the breakage fee and they shipped that gas to Europe because they could make a, you know, king's ransom on the arb even factoring for the breakage fee. And that's how markets are going to clear. That's how they're supposed to clear in the system. So I'm not saying that's wrong per se. But there is going to be an enormous human cost here. And I think when you're talking about these fuels, you're talking about electricity, you're talking about heat, you're talking about cooking, you're talking life. And I think that's what we're going to have to try and trim back by 15 to 20 percent if this persists. And that is just insane. Let's try to put some specific time frames on this, which I know is difficult. And I apologize for doing this to you. But as you said, what's going on here is most people are thinking, well, surely this is about to be over. I mean, it's crazy to continue. But it's about to be over. It must be about to be over. Just in case it's not, let's imagine say both a three weeks more scenario and a three months more scenario. What are each of those? If you had to guess the impact of three more weeks, just like the last three weeks or however long this has been. And then three more months. What do those scenarios look like in your mind? So let's actually start with the even more sandwich scenario. What happens if it ends today? Because I think there's already durable damage. And I think a lot of people just assume that we could end this tomorrow and everything goes back to normal. We're probably talking three months minimum to normalize the system, even if it stopped today. And every tanker currently in the golf made a break for it. And they all made it out. And we just resume full flow. And like, nothing ever happened. Even in that case, we're talking about months of supply chain recovery because these ships are going to pile and top of each other. You've had, you've already had roughly a 400 million barrel gap or 340 million barrel gap that's emerged in these, basically the normal flow of oil into the out of the Middle East largely to Asia. Right now we're still, we still haven't felt the brunt of that because three weeks ago we still had tankers laden with oil leaving the golf. Those tankers will continue to the destination. It takes three, four weeks to get where they're going. And when that air pocket finally hits land in Asia, that's when we're going to start drawing inventories at 10, 15 plus million barrels a day, which again has never happened before. We've already seen Asian refineries attempt a short way to basically front run this to extend their runways. They've reduced operating rates. They've cut product output. So we're talking, we've seen a $150 crude into buy and physical crude. But we've seen over $200 barrel jet fuel in Asia in Singapore. And I think that is that alone would take months to sort out. But let's go to that three weeks scenario. Okay, so let's say we're already in this for the three weeks. Let's say it's double. Now you're looking at two thirds of a billion barrels of air pocket in the system that again needs to get sorted out by that stage. We've already seen upwards of nine million barrels a day of crude oil production capacity shut in through the golf. The longer that's off, the longer the the straighters close, the more we're going to see that cut back. And again, as anyone familiar with this industry, it's not trivial to shut in these wells. It's not trivially to get them back on without any kind of negative repercussions. And all that stuff just gets worse with time and time and time. I think, in terms of price call, I think in three more weeks of this, I think we could, I think we would already be over $150 brand. We're already obviously there at the kind of physical Dubai cash market. And I think people like, well, why wouldn't, why would anyone buy that crude? Why wouldn't you just buy WTI? It's like $50 or $60 cheaper. And the answer is that it's in the wrong place at the wrong time. If you're buying the Promp WTI futures, it's not for delivery until next month. And you need to get it from cushion to the coast. And you need to get to the coast to the Middle East Asia. We're talking months. People need these barrels today. And that is why I think there was still this kind of hope, if you will, from Asian refineries saying, okay, this is going on, but surely this can't last. And what you've started to see over the last couple of days, there's a Bloomberg report this morning where Asian refineries were starting to bid into the brand basket. And they're starting to try and buy these other barrels, which means that they're now worrying that this is going to be going on for months. And it also means that that kind of acute local scarcity in crude in the Middle East and products in Asia is also going to begin spreading out to all the rest of the world. And I think it's really easy for Americans and the American president to say, "Mah, who cares about tight oil markets in the Middle East? We're here in oil prices are still pretty low." It's because this shock wave kind of moving out through the system takes time to incentivize and bid all those barrels over. And I also think back to this, why aren't ships going through? Because they may think Trump's going to talk. I also think that the future market are in the exact same situation. What we saw not two Mondays ago, the second weekend that, again, everyone thought he was going to end on the weekend. He didn't. Prices spiked higher. You hit almost 120 dollar barrel Brent. But then you got the first kind of Trump said, you know, the war's almost over. And prices cratered. You had a $35 barrel in Tradeys spread and Brent, which I don't believe has ever happened before. And a lot of traders kind of lost their shirts in that because, again, bidding crude higher was the obvious directional call in this environment. But the kind of constant jaw boning, those people got blown to their positions. Many of them lost their jobs. People are much more wary now to kind of front run because normally we expect future markets to front run the tightness in physical markets because markets are forward looking. But I think now we have to wait for that physical market tightness to fully and aggressively manifest in the West before those future prices are going actually converge. Now you said earlier that you thought the Trump administration had no idea
that this outcome which has already occurred was even possible. I want to push back slightly on that and ask you if it's possible that maybe they did see it as a possibility, but just were not as concerned by it as you and I are. I want to read you a truth social post from President Trump on Wednesday where he says, "I wonder what would happen if we finished off what's left of the Iranian terror state and just let the countries that use the straight of Hormuz, we don't. Let them be responsible for the so-called straight. That would get some of our non-responsive allies in quotes in gear and fast." Signed President Donald J. Trump, it sounds to me like he doesn't think it's a big deal for the United States since he perceives the United States to be energy independent that if the straight of Hormuz is closed down, it sounds like he thinks that's a problem that affects other countries but doesn't affect us. So, you know, the hell with it, let them worry about it. I'm not going to bother asking you whether we should be concerned about it because I think you and I agree that we should be concerned about the straight needs to be open for the sake of global commerce, oil prices are set globally and so forth. But it does seem like there's room that the reason the president's not so concerned about this outcome is not that he didn't foresee it but he's just not as worried about it as you and I are. I think there's a chance of that and I think again, I didn't expect him to go this far so I can't pretend perfect knowledge of Trump's mind by any means. But I think what we've seen in those comments over the past two and a half weeks now is evidence of remarkable goal shifting. We had that tweet this week. And of last week, we also tweet about how actually high oil prices are good for the United States because the United States is the largest oil producer in the world. But that contrasts strongly with some of the earlier comments out of Trump about, no, basically don't be a panicking, don't bit up the price of oil, you know, this is going to be fine. The war is almost over. It definitely felt like he was trying to keep the oil prices lower and then as oil prices started to inevitably based on this kind of physical reality we've been discussing as those prices started to grind higher, he started to find new ways to say, oh, okay, this is actually good for us. And I actually think in some ways that's actually the most worrying development in this because I think at least my mental framework here has always been that the oil market would be the single, the singular thing they would end up pushing Trump back from the edge, from really going through for a prolonged period of time, months or longer. And if we're starting to see him attempt to change that narrative to almost convince himself, and again, like Donald Trump is an extremely public person. He's been, he's been against high oil prices and trying to drive them lower since the 1980s. Like low oil president is kind of like his brand. And I would say that so I don't know how much I can really buy this. I don't even know how much he can really buy this depending how long this goes. I still think his core bias is towards low oil prices. Again, he was elected as kind of a pocketbook cost of living president. And I think this is just, it was also elected as a president of good and worse in the Middle East. But we're very, we're obviously going to vary very different timeline now from that election. So again, I think there's a possibility that you're right, you're right, Eric. But I do think that a lot of this is him saying things after things don't go his way. For instance, the comment of the straight came mostly after he asked all of the kind of allied NATO nations and Asian nations that consume the oil to kind of help them. And they were kind of like, no. Because again, I think the world, a lot of the consuming world, like I think if they knew 100% of this was going into law for years, yeah, they're going to send their navies because again, this is untenable. But I think there's this worry. I think they're, I even heard this worry initially with the SPR releases that like anything you do to ameliorate the oil price consequences to a degree short circuits Trump's own feedback mechanism that the only way he was going to back down. And this is a similar to the tariffs that when, you know, the S&P was crashing. That's when he talked out. There was an expectation that this was the same mechanism that we'd be seeing now that with oil. And I worry that is beginning to lose its sensitivity given that I think now it's a question of how can Trump figure out a way to declare victory? Because again, he's not going to stop this unless he can say he won. So I think he's trying to find ways, trying to find something that he can declare victory on. And again, I thought at the beginning, there was enough at this, at the gate, right? We wiped out the leadership. You killed the Ayatollah. All of this, I think he could have declared victory on that first Monday. And I think he's like, oh, well, let's do this a little bit longer. And now we're in so deep that it feels like you need something much bigger. And if anything, the Iranian regime seems to be in trenching. At the beginning, you did hear, I mean, when there was a lack of centralized leadership, you had different elements that were being more negotiating or kind of conciliatory. And that seems is beginning to fall by the wayside. And I think even for a while, there was some hope that the number of missiles and drones that were being launched every day by Iran were dwindling over time. Like always a Iran-writing out of missiles. Are we entering the end game? And over the last two days, they've shot back up that and again, today in particular, we were chatting about this before we started recording, but like Brent popped up 110 following Israel's attack on the South, Pars gas field, which up until now we hadn't been hitting upstream and kind of Iranian oil assets, oil and gas assets specifically. And that's why up until now, most of that reduction assets hadn't been hit. You've had a couple of refineries there. You had Restonora, you had you've had attacks on Fuzhera, but overall, there are a lot more targets across the Middle East that were very, very tempted. Because I mean, we all remember ab cake in 2019. Clearly the Iranians can hit it. They have chosen not to yet because it again, for them, I think that they still have this conception of different degrees of escalation. And what we saw already was, you know, as soon as the South Pars gas field was hit, they were like, okay, now these bunch of peppercamical facilities and upstream facilities, they're all legitimate targets now. And they also warned that if Trump bombed Carg Island, they're like, well, if you do that, then we view all other ports in the region as fair game. I think they are still trying to kind of parameterize their own escalation or retaliatory kind of spiral here. But again, I think what we've seen so far is that in both cases where Israel and to my knowledge, these were both Israeli attacks specifically on the South Pars gas field and the fuel depot in central Tehran, that those were kind of against the wishes of the White House. That, you know, there is still some kind of freelancing here on the Israeli side about like how far they're going to go and how much they want to escalate this. Clearly they want more escalation. Right? I think that's clear that what we've seen so far. But I do wonder whether or not that's the kind of thing that's going to hiss off Trump very frankly. We saw this, he got really upset with the Netanyahu government last June when, you know, there was worry that they weren't going to play ball with the ceasefire wherever else. There was like that famous comment. I was just trying to get on Marine one. But I do worry that that's the kind of situation we're ending up in now. Normally, Rory, people who are in macro markets and, you know, investors who are not specialists in oil, only pay attention to two benchmarks. Brent crude, which is based on North Sea oil production, is the global benchmark. And then West Texas intermediate is the US benchmark. Normally, it's only professional oil traders who pay attention to any of the other prices in the oil market. Let's talk though about some of the other prices because really Brent and WTI only got, I guess WTI was 119. Neither one of them has gone above 120 in this. That's, you know, they've gone up a lot, but they haven't gone up that much. I think it was Oman traded above 185 this week. As you said, there was jet fuel prices above 200 in Singapore. Should we be thinking about these really high prices that are occurring in some localized markets is, oh, well, that's just a logistics thing. It doesn't really count or are those price signals that could pretend what's coming for Brent and WTI? They're exactly what's coming for Brent and WTI because I think that, as kind of talking around this point a little earlier, but what we're talking about right now is again, these markets, and you will know this well, Eric, that futures and benchmarks, there is both a locational element to it and a time element and where the current tightest market is right now is, there's all these laden tanker or unladen tankers waiting to go back into the Gulf to fill up. They're like, well, I could buy some crude off the coast of Oman and just basically turn around and head back, but those of the barrels that are at $150 or $100. I hadn't honestly seen Oman go up to 180. But yeah, that's basically, yeah, you can charge a king's ransom for any barrel that's physically available on the good side of the Gulf right now because that's where crude is in desperate, desperate supply because it's much faster to Asia from there than from the US Gulf or from the North Sea. And I think that is
is what we're going to see eventually for the other benchmarks that now that Asian buyers, in particular, are coming to the realization that this isn't ending tomorrow, and that they may need to cover not just today's crude slate, but tomorrow's or next month's crude slate. Now they are beginning to bid on those other contracts, which is again, is why we're starting to see Brent firm up so much more that we're kind of back to above 110. WTI think has some other potential weirdness going on. There's been a lot of talk about participants are in a hedge, their SPR exchanges, lots of stuff going on there as well, but I do think overall, the best thing that explains WTI's relative under performance relative to Brent and certainly relative to the Middle Eastern grades, is it's the furthest, great way. That takes the longest to get to where you're going, and I think that's going to be something that will continue to kind of leave WTI at the back of that bus, if you will. The other thing we haven't talked about yet, and I think we're, I'm especially concerned that we could be going, because again, Trump says this is good, he doesn't care, but eventually pump prices are going to rise. We already have US average diesel prices over $5 a gallon. Gasoline's coming up there too, diesel's going to go higher, jet fuel's going to go higher. I worry that we're going to see kind of a re-discussion or we've already seen musings about export controls out of the United States, that this was actually something that the Biden administration used in 2022, like, well, could we restrict or ban the export of refined products? There are a lot of issues with that. It bottles up diesel in the Gulf Coast, it creates issues with potential reciprocal trade restrictions, if then Europe decides to ban the export of gasoline to the East Coast. There's a lot of problems there. I do think that's where this could go, and I think particularly you're seeing some of that, like the framework and the kind of precursor to that argument being put up by Trump, and I think back to that question of, he's saying we don't get any oil from the straight. So what do we care? And then your point, well, because our markets are global, the way to solve that is to make markets not global. And I think that is my most acute worry here going into this, is that I had mentioned earlier that, you know, wealthy nations largely will be able to afford the oil and the products, it'll just be debilitatingly expensive. Once you start mucking with trade, even the United States, which is a net petroleum exporter, you well know that that's not the same in crude or quality, that's not the same in products slate by region. You've even seen the repeal or at least temporary waiver of the Jones Act, which is a very substantial political move for the White House, that really makes the most sense in the context of, well, what if we ended up, you know, banning exports, well, then we could use non-Jones Act tankers from the US Gulf Coast crude to different US Gulf Coast oil, but also diesel to other areas of the country rather than it being bottled up. 'Cause if you have no ability to shift out from those regions, you would basically end up forcing US crude production shut-ins and US pretty league Gulf Coast refining shut-ins, which is the opposite we want. So temporarily with lower prices, and I think that's what would be very attractive for the White House, but in the long term, it would short circuit wealthy markets capacity to just pass this on through price. And then we would likely end up facing physical shortages in these advanced markets. - Rory, when we hear about the Straight-up Hormuz, what comes to investors' minds is of course crude oil, but tell me about how fertilizer plays into this story as well. - Yeah, so I am not a fertilizer expert, but in addition, I mean, we've all been focused on oil and maybe gas, but there's a lot of other things that come from the Gulf, whether it's fertile, I think it's a third of global fertilizer supplies, the vast majority of global helium supplies. All these things are going to have their own knock-on consequences to all these other markets as well. I think when you think about fertilizer, and even they think this ties back into oil products as well, if this continues, we will see crop yields decline. We will see food production decline. We will see the food that does get to your plate more expensive on the commodity base of the food itself, and being shipped there by either by truck or by plane at far more expensive rates. So this is absolute, I mean, again, this is our most recent experience here with, and again, where all this goes with monetary policy as well, our most recent kind of parallel is 2022, that central banks got acutely, I think reasonably fricked at the time, by the explosion of inflation coming out of the COVID blowup effect. And for the first time in my life, central banks took a keen interest in following the price of oil, I'm particularly the price of gasoline. And that's when, I think the way this all feeds back into the macro side is this, you know, if there's anything that is going to unmore long-term consumer inflation expectations, it's this kind of shock. It's, you know, this last summer experience, this would have been in the 70s. This shock, if continued, will make the 70s look like child's play. I think a lot of people will still go back and think, "Wow, we must have lost a massive amount of supply back in '73 or '79." And there were some losses, but the losses were relatively small. And the big thing was it was more of a logistical, like we're not shipping to you, so that's causing gaps here and everything else. But a lot of it was, you know, the supply wasn't acutely lost to the degree that we are currently seeing it lost today. And it's just set this up for a much worse kind of price shock. And again, I think going back to this, like, even if it's the end of the day, we're sowing the seeds of these like deep ripple effects, these deep kind of multi-industry boebs that are going to be working through the system. That even if you ended today, we're still going to have consequences trailing out for months. And if this goes three weeks longer or heck, as you mentioned, three months longer. Oh, man, like these industries are going to break. And people will need to cut back. There will be physical losses that people will have to experience. And that's where I go back to. I don't see this as tenable long term politically for anyone involved. But I also thought that so far, and I've been wrong. Ruria, I can't thank you enough for a terrific interview. Before we close, I want to add a quick point just of clarification about last week's interview with Dr. Anasal Haji. Several of you on Twitter and in email said, hey, Anas was wrong when he said that Iran had a huge vulnerability if their desalination plants were attacked. Iran only gets 3% of their water from desalination. I agree it was a little bit ambiguous how it was worded. But that was not Dr. Ahaji's intended point. The point that he was making is everybody presumes that Israel has a nuclear weapon and Iran doesn't. His point was Iran effectively does have a nuclear option, which is the other Gulf states, not Iran, which only needs to rely on desalination for 3% of its own water. But the other Gulf states, including Israel, are heavily dependent on desalination. So it is the risk of Iran striking the desalination plants of Israel and other countries that would be the equivalent of a nuclear escalation and would probably result in Israel responding with a nuclear response. So that was the point that Dr. Ahaji was making. Rory, I want to come back to what you do at commodity context for anybody who's not familiar with it, terrific website. Please give us your Twitter handle and tell people what they can expect to find at commoditycontext.com. Thanks for having me again, Eric. I always love coming on the show. You can follow me on Twitter at Rory_Johnston. And all of my public research is published at commoditycontext.com. We've got the oil context weekly report every Friday that covers-- I currently call it the oil of the oil and a Ron War context weekly, because that's all we're talking about. But every Friday at 4 to 5 PM Eastern, I published three monthly data reports on OPEC global balances and North American detailed balances. And then I also-- I'm doing particularly these days-- a lot of thematic work on a Ron on Venezuela and the overall insanity in this current oil market. And I encourage you to join me. Patrick, Sarresna, and I will be back as macro voices continues. And stay tuned, folks, in case you didn't connect those dots. Simon White told me earlier in this podcast that we needed to worry about food price inflation next. That was even without considering the fertilizer angle that I just discussed with Rory. So Patrick's trade of the week is going to be about food inflation and how to hedge against it. That's coming up next right here at macrovoices.com. Now back to your hosts, Eric Townsend and Patrick Sarresna. The sinners were going to keep bringing on the second guess as conditions warrant until the Iran situation eventually settles down. Now you're going to find the download link for this week's trade of the week in your research roundup email. If you don't have a research roundup email, it means you have not yet registered at macrovoices.com. Just go to our homepage and look for the red button over Simon's picture saying looking for the downloads. Patrick, everyone's focused on oil as the inflation driver right now. But Simon made an interesting point that food might actually be the bigger story. Then Rory Johnston echoed that from a completely different perspective, having to do with fertilizer. How are you thinking about that? And what is the trade of the week to express it? Eric, the key insights from Simon is that the real inflation risk isn't the first order energy shock. It's what comes next. In the 1970s, food inflation ultimately had the more persistent impact on CPL.
And we're starting to see the early pieces of that same transmission through today's rising fertilizer costs, supply chain disruptions, and emerging weather risks. So if this is the beginning of that second wave, I think the cleanest way to express it is in wheat. The trader of the week is to go long Chicago SRW wheat, where tightening export flows and a still net short positioning backdrop create the potential for a sharp repricing if that food inflation narrative starts to get recognized. Now for more advanced traders, this can absolutely be expressed directly in the wheat futures markets, where the liquidity is deeper and the execution is more precise. But for simplicity and accessibility, I want to frame this through the Toot Creme Wheat Fund ETF ticker WET, which is trading around $23.15. Given that implied volatility is already elevated and the option surface is showing a clear right-tailed skew, this lends itself well to a call spreads structure rather than outright calls. Specifically looking at the October 16th, 2026 expiration, you can buy the $25 call for roughly $2 and sell the $30 call for about $1, creating a $5 widespread for a net debit of $1. This means you're risking about 4% of the underlying ETF value to gain exposure for the potential of a $5 payoff, giving you roughly a 4-to-1 payoff ratio over a 212-day window. The idea here straightforward, use the skew to your advantage and define the risk while still maintaining meaningful upside if the food inflation narrative begins to reprice. So the idea here is simple. By using the defined risk call spread, we're able to position for that upside while keeping the premium outlay relatively small in a market that is already pricing in elevated volatility. It is a straightforward way to gain exposure to a potentially underappreciated macro theme, with a payoff structure that becomes increasingly attractive if the narrative starts to gain traction in the months ahead. 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, Eric, let's dive into these equity markets. Patrick Wednesday was a major risk off day across most markets, except of course the dollar index and crude oil, with equities, gold, copper, and several others down and down hard, closing near the lows of the day. That of course, as I said in the introduction, is an ominous sign that more downside is likely still to come. The S&P 500 was sitting below its 200-day moving average as of Wednesday's 4 p.m. cash close. It continued to trade lower than that after the cash close. It did trade lower than today's cash close on an intraday basis back on March 9th, but today was the lowest closing price of 2026 for the S&P 500 futures contract. So my take on this equity market is that it really depends on your geopolitical outlook and your expectations for what comes next in this Iran conflict. I'll strive to leave my own personal politics out of this and focus on yours instead. So if you think that the Trump administration has this whole situation completely under control, it's going to be over in another week or so, just like the president and secretary Hague Seth say it's going to be, then in that case, if that's what you think, then this is a terrific buy the dip set up. It probably sets the stage for a rally to new all-time highs. If president Trump can really get this all under control and wrap it up, and there's no lasting impact from it, and to be sure in order for there to be no lasting impact, it really needs to get wrapped up pretty quickly here. If you think that's what happens, then it's time to buy this dip and buy it in size because we're going much higher. On the other hand, if you don't think that, if you think that the Trump administration has started a fire that they won't be able to put out and that this is not under control, and that this Iran conflict might turn into a repeat of the Iraq debacle that began in 2003. Well, if that's what you think, because we're leaving my politics out of this one, that would pretend a very, very different equity market outcome. We could easily be looking at a cyclical bear market. The worst case would be if oil transit through the state of Hormuz stays impaired for many months in that scenario without exaggeration, it could lead to an oil price surge well over $250 a barrel. That would cripple the global economy and lead to a global financial crisis on the scale of, if not bigger, than 2008. Now I strongly doubt that that would be the outcome because this is a problem that can be solved sooner than that. We're not going to see those straights of Hormuz closed for years or anything like that. The question is how long this goes on, how much damage it causes, and how long it takes to unwind that. In other words, how big is the backlog of global logistics that have been disrupted by the straight of Hormuz closure? How long does it take to get things back to flowing as normal again? That's really, I think, what's going to drive equity prices. And frankly, I don't think anybody knows for sure what's coming next in this market. So it really comes down to your geopolitical outlook. I think all of us are vulnerable to allowing our personal politics to bias our judgment as investors. So remember, this market reaction is not going to depend on what you think or what I think should happen. It's going to depend on what actually happens. And I don't think any of us know with any real certainty exactly how this is going to play out. America, I'm going to keep my analysis very simple from a technical perspective. We're remaining below the 50 day moving average. We're breaking lower highs and lower lows. There is clear distribution. The bears are in control and in the driver's seat on the short term on the distribution side. We continue to see all rallies failing at Fibonacci zones, which is all indicating that generally the distribution cycle is still in play. Now while we have seen substantial increases in bearishness as the sentiment is pivoting, we've seen huge spikes in volatility index and other things that are signs that you typically would see from oversold conditions. But right now with enough of this global uncertainty here, this could be an overhang that keeps this market distributing. Now Eric, we certainly can't rule out that at some point the bulls will reverse this encounter trend. This is again the environment where hedges are critical. And we've talked about them our last couple of weeks with our listeners and I continue to advocate that portfolio insurance here makes a whole lot of sense. All right, Eric, let's talk about that US dollar. Now Patrick, by recording time, we were back down to a high 99 handle after surging above 100 and then below 100 in today on Friday. I think by the cash close, we were back over 100 again. So we're right on that hairy line between 99 and 100. The question to ask is whether we're topping out here at overbought resistance on this technically overbought market or if the strength that we've seen in the dollar so far is just the beginning of a new bullish trend. Once again, I think the answer depends on your geopolitical outlook. Sorry folks, that's going to be the answer for most things this week. And there are plenty of strong arguments to be made in either direction. I don't see any fundamental bullish drivers for the dollar here other than the flight to safety trades into the dollar, which are only going to intensify of the situation in Iran worsens from here. And if equity markets take a nose dive. So there's plenty of room for much, much more upside in the dollar index. And ultimately, I think that upside would be driven by flight to safety trades in the Iran conflict. Someday when the Iran conflict wears off or winds down, then I think it becomes a bearish it's time to sell the dollar there because I think it will be overbought and ripe for a major correction, maybe resuming the primary downtrend that was in play before this conflict arose. The question is timing, how much longer before this Iran conflict is over, whenever it's over, that's the time I think you want to sell the dollar index. Well, Eric, when looking under the hood of the dollar, the key thing is to observe said that predominant weakness is coming from the euro and the yen, which happened to be very large weightings in the dollar index. But the story isn't the US dollar strength and all cross currencies weakening against it. The continuous resilience and a lot of the commodity-based currencies like Aussie dollar and the Canadian dollar and that euro is really where the drag is as there continues to be growth concerns at a time when obviously their energy prices are under a lot of pressure, which is stressing the euro right now on the downside. If we see euro breaking some of these key levels, that's going to be a big deal.
then it's going to be a huge bullish tailwind for this dollar index. And we're at the top of almost a 10 month trade range. And if the dollar index makes any progress above this hundred level with momentum, we've got ourselves some sort of a strong US dollar counter trend move. And so we have to watch whether or not this gains momentum from here. All right, Eric, let's touch on crude oil. Well as I already discussed with Rory Johnson, the Oman benchmark traded over $180 this week. Obviously, logistic complications are part of that, but it's still an important price signal. I'm sorry to sound like a broken record folks, but it's the geopolitical outcome with Iran that's going to drive everything. As Rory Johnson said, I think it would be foolish to assume that, hey, it's going to be just a couple more days and the Trump administration is going to completely end this thing. Even if it ends this week, we still have probably a couple of months at minimum, just to clear the system out and get things back to flowing as usual. And the longer that the conflict wears on, the more that effect is compounded and the more of a mess we're going to have to unwind. So the longer this continues, the more it's going to affect oil prices and cause a continued increase in oil prices and the inflation signal that that drives. And eventually it becomes a self reinforcing vicious cycle of increasing inflation, driving even more extraction cost, price increases, higher oil prices and so forth. Hopefully, we don't get to that point where that self reinforcing cycle kicks in. All right. Let's move on to gold here because we just got ourselves a little bit of a down day here on Wednesday. What's your take? What's going on? Low print on the January 30 correction was 4423, 4423. That was a near perfect test of the 50 day moving average at the time. But that happened in the middle of the night and very thin liquidity. So something I said right here on macro voices just a few days later was we should watch for another test of the 50 day moving average during regular trading hours, not extended trading hours. That on Wednesday and it also coincided almost perfectly with the 38.2% Fibonacci retracement level of that January 30 correction. There was also a trend line there as well. So three major support lines all broken at the same time. So there's a very good technical argument that could be made here, which is that that regular trading hours test of the 50 day moving average was the buy signal. The bottom could be in already. Except we went right through it and we're trading considerably below it at recording time. I'm looking at 4824 as we're recording right now selling off more and futures trading after the close. These are all ominous signs. And frankly, there's not a lot of obvious support until we get to the 100 day moving average at 4591 4591. So I think we're probably headed in that direction unless there's a sudden change in the fundamentals. But it's also clear that there's been a breakdown of correlations between precious metals and the usual, you know, if it's increase in tension in Iran, more geopolitical upset that would normally be up on precious metals. That broke down on March 2nd. Gold is not trading up on geopolitical escalation the way it was before March 2nd. And frankly, I've yet to hear a really good explanation for why it isn't. So I don't pretend to know what comes next, but it sure looks to me like we might be headed towards a 45 handle. If not lower, that's the next obvious support level below the current market. So either we get a bounce here and the 50 day really was the trading signal that it should have been. Or if we continue to see this weakness below the 50 day, continue through the day on Thursday, I think we're probably headed down to 4591, maybe 4600 on the 100 day moving average by the time we get there. Well Eric, my view on gold has remained unchanged for the last month. After we saw that key blow off top on gold and that huge reversion, typically if we look at the last four consolidations of gold, it took as much as two to four months of gold consolidating before it attempted to break to fresh new highs. At this stage, that analog is the one that we continue to see here on gold as we saw some retesting of highs and this sideways consolidation continuing. Overall, after this consolidation finishes, there's lots of room for gold to go higher, but at this stage, I think it will be deeper into the second quarter before we see a meaningful turn up. How low could this gold correction go? Well, the first level to watch on the support side is this 4,800 level. We're trading down to right now, which is a fib zone of this retrace. If that doesn't hold, I mean, there's always the possibility we head back down toward that 4500 level and $4,400 level below. But if that was to happen, that would probably be a compelling buy on dip to take advantage of. What are your thoughts here on the fact that uranium continues to just consolidate sideways inactively? Well, Patrick, the fundamentals are uber bullish and they're only getting better by the day as we see more and more nuclear announcements. The nuclear renaissance is on and it's on strong. And the market for uranium and uranium miners is holding up pretty darn well considering how bad everything else is going. We didn't see as big of a downside as I was fearing we might see on the uranium stocks on Wednesday. We're still looking at 49 spot 05 at the close on Wednesday on the URA ETF, which is the one that's most followed. That's still well above its 200 day moving average, whereas the indexes have moved below their 200 day moving averages. And frankly, I think it's headed for its 200 day moving average, which is at 46 spot 03. So we'll see what happens next. Broad market risk off event is obviously going to take everything else down with it, including the uranium miners. I think it just sets up better and better by the dip opportunities. The question is how big is the dip before it's time to buy uranium? I think the next obvious target is 4603 on the URA ETF. But let's see what happens with the broader risk markets because if we get an outright market crash here as could happen if the oil prices continue to rise, particularly if they spike over $150, setting new all time highs, at least on the major indices. We're already there with some of the other markets around the world. But if we get there on Brenton WTI above 150, that probably brings on an outright crash and equity markets and anything could happen. Well structurally the chart remains bullish. All consolidations are being held higher highs and higher lows. But it's just been quite appeared. Maybe the lack of liquidity in the broader asset markets could be just keeping this all contained. But overall, the charts are still on the bull trend and at major support lines. Now Eric, I want to just quickly touch on copper here. Copper futures very decisively took out their 100 day moving average to the downside on Wednesday, closing near the print of the day. And they continued to trade substantially lower even after the cash close as I'm recording. So we're looking actually already we're halfway down from the 100 day, which was the hopeful support line today. The next support is all the way down at the 200 day moving average at 5.38. We're halfway there as of recording time. So it looks like that maybe where we're headed next on copper, unless we get a sudden resolution to the Iran conflict and a real resolution here, lots and lots of signs across the board from equities to precious metals to Dr. Copper, all closing down hard on Wednesday, near or at their low prints of the day, and continuing to trade even lower on after hours future trading. Those are all ominous signals that these markets are still headed lower. Now of course they can all turn on a dime on news flow. If there is a sudden resolution to the Iran conflict and the straight of our moses flowing freely and oil prices are rapidly correcting back down into the 60s, then obviously this is all going to reverse. But until they do, all of the markets, including Dr. Copper, are telling us we've got a serious problem on our hands. Now Eric, I want to focus in on some bizarre price action that we've seen in copper when it's overlaid on gold. Now typically precious metals trading correlation and a lot of times these industrial metals tend to march to their beta, their own drum independently. But when I hear a show in overlay of the gold and copper charts, for some odd reason, copper almost day by day, tick by tick, has actually been correlating with gold. Now why I really actually don't have an explanation. And I certainly don't know whether this will continue. But certainly as of this moment when we're looking at this chart, it's undeniable that right now copper is just trading tick by tick with gold. I'm very curious to see whether or not this trend continues in the week.
in month to come. Patrick, before we wrap up this week's podcast, let's hit that 10-year Treasury note chart. Well, we've seen here is that it's trading right up toward the 230 level. We had the FOMC meeting and the first reaction after the post-FOMC was yields rising up to their one-month ranges or multi-month ranges. It'll be very interesting to see whether this has started and you follow through and we see yields push higher from here or whether this was going to just a fake out retest of the highs. 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 bigpicturetrading.com. Patrick, tell them what they can expect to find and this week's research roundup. Well, in this week's research roundup, you're going to find the transcript for today's interview. You're going to find the slide deck that was put together by Simon White and you'll find the trade of the week chart book we just discussed here in the post game, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's research roundup. 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, we want to share that content with our listeners, send us an email at research
[email protected] and we will consider it for our weekly distributions. If you have not already, follow our main account on X at macro voices for all the most recent updates and releases. You can also follow Eric on X at Eric S. Townsend. That's Eric Spelt with a K and you can also follow me at Patrick Sarasna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week. That concludes this edition of macro voices. Be sure to tune in each week to hear feature interviews with the brightest minds in finance and macro economics. Macro Voices is made possible by sponsorship from BigPictureTrading.com. The internet's premier source of online education for traders. Please visit BigPictureTrading.com for more information. Please register your free account at macrovoices.com. Once registered, you'll receive our free weekly research roundup email containing links to supporting documents from our featured guests and the very best free financial content our volunteer research team could find on the internet each week. You'll also gain access to our free listener discussion forums and research library. And the more registered users we have, the more we'll be able to recruit high profile feature interview guests for future programs. So please register your free account today at macrovoices.com if you haven't already. You can subscribe to Macrovoices on iTunes to have Macrovoices automatically delivered to your mobile device each week free of charge. You can email questions for the program to mail bag at macrovoices.com and we'll answer your questions on the air from time to time in our mail bag segment. Macrovoices is presented for informational and entertainment purposes only. The information presented on Macrovoices should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions. The views and opinions expressed on Macrovoices are those of the participants and do not necessarily reflect those of the show's hosts or sponsors. Macrovoices, its producers, sponsors and hosts Eric Townsend and Patrick Sarresna shall not be liable for losses resulting from investment decisions based on information or viewpoints presented on Macrovoices. Macrovoices is made possible by sponsorship from bigpicturetrading.com and by funding from fourth turning capital management LLC. For more information visit macrovoices.com.
PodcastTranscript AI