[music] This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is. Bullish your bearish, no holds barred. Now here are your hosts, Eric Townsend and Patrick Serezna. Macro Voices Episode 527 was produced on April 9th, 2026. I'm Eric Townsend. We've got another Macro Voices double header lined up for you this week. Garing and Rosenswag co-founder Adam Rosenswag returns as this week's headliner for a discussion on what comes next for crude oil, food and fertilizer, uranium, and gold after the Iran conflict. Then for our bonus coverage of the Iran conflict, Bianco Research Founder Jim Bianco returns to weigh in on whether there really ever was a ceasefire. What happens next if there is and what happens if there isn't a meaningful ceasefire? As well as the Fed's reaction to all of this and the longer-term outlook for inflation. Then be sure to stay tuned for our post-game segment when Patrick's trade of the week will take a look at whether the ceasefire has really reduced right-tail risk in crude oil and how to hedge it. And then of course we'll have our usual coverage on all the markets with Patrick's post-game chart deck. And I'm Patrick Serezna with the Macro Scoreboard Week over week as of the close of Wednesday, April 8th, 2026. The S&P 500 index up 315 basis points trading at 6782. A substantial squeeze higher in the markets on short-term geopolitical de-escalation. We'll take a closer look at that chart and the key technical levels to watch in the post-game segment. The US dollar index down 50 basis points trading at 99.05. The May WTI crude oil contract down 570 basis points to 94.41 crude oil dropping over 20% peak to trough in the last 24 hours. The May R-Bab gasoline down 259 basis points to 301. The June Gold contract down 75 basis points to 4777. The May copper contract up 212 basis points trading at 577. The April uranium up 130 basis points trading at 8540. And the US 10-year charge yield down 8 basis points trading at 429. Yields getting some relief from higher inflation expectations. The key news to watch this week is Friday's CPI inflation numbers. And next week we have the PPI that produce surprise index numbers. This week's feature interview guest is Garing and Rosenswag co-founder Adam Rosenswag. Eric and Adam discuss the unprecedented physical dislocation in global energy markets. Why the oil market may be far tighter than widely believed the implications for food prices and inflation and how shifts in energy security could drive investment across oil, uranium and broader commodity markets. And then stay tuned for our special follow up with Jim Bianco where we break down the geopolitical developments in the Middle East and its implications on the global energy markets. Eric's interview with Adam Rosenswag is coming up as macro voices continues right here at macravoises.com. And now with this week's special guest, here's your host, Eric Townsend. Joining me now is Garing and Rosenswag co-founder Adam Rosenswag. Adam, great to get you back on. Needless to say we live in interesting times and for our listeners, Adam and I recorded this interview on Tuesday afternoon, about five hours before President Trump's 8 p.m. deadline. So needless to say there will be some news flow that has occurred after this interview was recorded before this goes to air. Adam, we don't know what will happen the next few days, but why don't we start with the situation at hand? Almost every physical market expert that I've spoken to agrees that this is the biggest physical market logistics dislocation in the history of the modern oil market, but it's definitely not the biggest price dislocation. Why is that? So first of all, wonderful to speak with you again, it's nice to be back and lots to talk about. As you very well mentioned, it's entirely likely that by tomorrow all the facts will be completely different and this might have a short shelf life, but what I'm going to try to do is talk about some of the fundamentals and details that we see in the oil market today and the commodity markets in general that are a little bit law of your term in nature that are a little bit stickier. And obviously, you might have to adjust everyone's sentiment or everyone's outlook depending on what happens in the next 24 hours or 72 or who knows how long, but I think a lot of what I'm going to say will be true today. It'll be true tomorrow. It'll be true months from now. So first of all, you're absolutely right that from a physical dislocation perspective, what we're seeing right now is pretty clearly the largest disruption in the global energy markets that we've ever seen, but we're not necessarily feeling or experiencing all of that dislocation just yet. So what is it that we're experiencing today? What are we seeing in real time? And why maybe have we not felt some of the larger impacts of that? As everyone now knows about 20% of the world's crude market passes through this trade of hormones and about 20% of the LNG trade as well. I think some people are beginning to learn that quite a bit of aluminum passes through that very sensitive choke point, quite a bit of fertilizer as well. So it's not just limited to oil and gas, but certainly oil and gas are incredibly impacted. And since the offensive from the United States and Israel about five weeks ago now, the Iranians and the IRGC have taken effective control of the straight-of-hormos and they've been certainly impacting vessels ability to transit. Some vessels are getting through. Many are not. And some oil is getting through on what they're calling these bypass pipelines, let's say the East West pipeline in Saudi Arabia, being the most notable, which was built over the last 15 or 20 years or so. Basically for exactly just this contingency to provide another form of Echress for Saudi crude. And basically what that does is it cuts across Saudi Arabia on an East West basis as the name would imply and allows for port loadings in the Red Sea. Now that port is not immune from attacks either and it's also not able to handle enough oil to totally offset what the Saudis relied on the straight-of-hormos. So it's a partial offset, but certainly not a total fix. By most estimates, you're talking about somewhere between at the absolute low end 10 million and the absolute high end 15 split the difference called 12 million barrels a day of impacted oil that's essentially not making it to market, which is huge. We haven't really seen anything quite like that before. Now one thing that I'd like to point out, particularly for those that have followed us, we really like to focus on long-term supply and demand fundamentals. We like to focus on depletion and geology. We like to focus on capital cycles. And if you read our stuff, we don't too often talk about what I would call these logistical issues with these kind of headline grabbing events. Sometimes you get them, for instance, back in 2019 when the Houthis bomb, the App Cake and Curious Oil processing facilities in Saudi Arabia. There was a little bit of a panic there that did last very long, only a few days before people realized that the impacts could be repaired in a matter of a week or two. Similarly, you know, in 2022 in Russian-Videocrane, it really dislocated energy markets and you got a spike there and it came off again. We're not the type of analyst firm that focuses too much on those near-term dislocations. It's not that they're not important. They don't last. They're resolved. In this case, I think it's a little bit different, though. And I think it's different for two reasons. First of all, it's different because the magnitude of this dislocation is just much bigger than anything we've seen before. So you will have, I think, in the near term, call it weeks. And potentially, in the medium term, call it months, I do think you'll see some fairly pronounced disruptions to the global supply chain for energy. And you're starting to see them already in places like Asia that were more dependent on Middle Eastern imports. You're starting to see it now in parts of Europe as well. You're not seeing it so much in North America, mostly because we've been able to produce a lot through the shale over the last 20 years. We've been able to reduce our reliance on Middle Eastern imports. You all remember when the US went to war in Iraq. And after 9/11, there's a huge amount of consternation over how reliant we were on Middle Eastern oil. That's just not the case anymore because entirely of the shales, which have grown to 13 million barrels of crude and even more when you include the NGOs. We're not seeing the physical crunch here, but that doesn't mean we're not going to see the economic impact because as we all know, oil is largely a global commodity. And prices, you know, arbitrage fairly quickly. So we are seeing.
crisis move here, we're not seeing, let's say, the gas shortages or the gas lines in this country that we saw, let's say, back in the 1970s with the dual oil crisis in 73, 74 and again in 79. That's not to say that that might not happen down in the future, but this is a really, really, really big volume of oil that's being disrupted. So that in and of itself makes it a bit of a unique event as far as dislocations go. But the second thing that I think is going to be really, really much more lasting and apparent is the fact that everyone has gotten the oil market wrong. We went into 2026 with oil being, I don't think this is an exaggeration, the most hated asset class in the whole world. The weighting in the S&P of oil stocks was pushing back down to the COVID lows a little bit above that, but not by much and falling. Investors positioning was extremely bearish and pessimistic. And in fact, even with all of that U.S. naval asset sailing east towards Iran and the Gulf, people went into the Friday before the attacks were launched with near record gross short positions on the speculative contracts at the NIMEX and on a net long basis, because there's some logs there too, a net long basis, basically the lowest net length we've seen in almost decades. So people were super, super bearish prices started this year at 50 bucks. And that's too low. The oil market doesn't work at $50. And why was that? Well, the reason everyone was so pessimistic on the oil markets right up until this conflict started was that people like the IEA and others, but most notably the international energy agency or the IEA, were saying that the global crude market was in the biggest surplus in oil market history. It had never been in a bigger surplus. And in fact, they were saying that supply was running about two and a half to three million barrels ahead of demand. Now, if that were the case, that would be really bearish situation indeed. And that would justify a $50 price or maybe even a bit lower than that. There's only one problem. We weren't seeing any evidence of that surplus. Notably, if in fact supply was running so much ahead of demand, inventories around the world should be surging. They think that last year called two million barrels conservatively in surplus 365 days in the year, that should be about 720, 730 million barrels of accumulated oil that was produced but not needed over the year that should have wound up in storage tanks around the world. And instead, we saw storage barely butch. Now, I want to put that into perspective because here we are today on April 7th, some six weeks into this conflict with the Strait of Hormuz moving somewhere between 10 and 15 million barrels a day being impacted and lost. And if in fact we had built inventories, 700 odd million barrels more than they were a year prior in 2025, we should be absorbing this fairly easily. We should only be taken down that excess inventory that we built last year by some, I don't know, what 30% or 40% of that. We should still be in a better position, a looser position, a better supplied position today. Then we were in even April or May of last year if you believe those numbers. And yet we're finding out that the whole transmission system of the global energy market is massively desperately searching for crude oil. I am going to tell you, and this is what our research has said, and we've been saying this long before, the situation in Iran, that the market was not in the big surplus. Everyone thought it was. The market was balanced. That's why inventories didn't grow. And it was balanced despite the fact that OPEC surged production by 2 million barrels last year. They brought everything they had back online. And they did it, I think, in a gesture to help Trump keep the oil price low when he announced his tariffs. The day that Trump announced the tariffs last April was the day that OPEC said we're just going to flood the world with oil. They did. They brought everything they had to bear. They brought 2 2 and a half million barrels a day online. And it was absorbed. It was absorbed by really, really strong demand. And so today we find ourselves now in a situation where we should have been able to absorb this in theory. We don't seem able to. And I think what the longer lasting effects of this conflict is that it's going to cause everybody to take a very close look at the oil market. And in many cases, that's for the first time in a decade. There's many investment firms in the world that have just written off oil and gas for over 10 years. And I don't think that that cuts it anymore. I think you need to have a more nuanced view. And as people begin to come back to the sector, they're going to say, oh my god, we haven't invested in any of this stuff in over a decade. And we're starting to see how fragile the supply chain really is. Adam, I agree with you that what's going to happen next is everybody is going to take a closer look at energy. Something I've been thinking about though is probably depending on each investor's own political orientation. Some of them are going to look at this as you were just diluting and say, boy, time to reinvest in oil and gas. Others are going to say, we got to do something about the oil and gas problem. We got to invest more heavily in renewables while others, myself included, we'll say, no, no, we got to invest more heavily in building out the nuclear renaissance. Do you think that those other themes are going to be big? And how do you think the market decides which ones get the most money? And what happens next? Well, you know, Eric, that's a really interesting question. Obviously, we've spoken quite a bit in the past on our view of renewables and whether we think that renewables are particularly suitable form of energy and to save your listeners going back. I mean, the answer is no, we don't. They're not a very efficient form of energy conversion. You take energy from sunlight and you can create energy from electricity from it. However, it requires an unbelievable amount of material of raw material in the form of steel cement, polysilicon in the case of solar. Obviously, huge amounts of steel and copper and in the case of windmills and then the fact that the sun doesn't shine in the middle of the night and the wind doesn't blow all the time. And so you need battery backups to do all that. All of these things consume energy. And so what you're left with is a really poor converter of energy with renewables. And that's why quite frankly, countries like Germany and England and, you know, all the countries that have really decided to push hard for renewables are feeling this energy crisis the most acutely. Right? Whereas the countries that have doubled down on their oil and gas infrastructure, like particularly the United States helped along by the shales, they're riding out the storm in a much better position. So will people argue that the takeaway from the Iran conflict is to double down on renewable energy? I have absolutely no doubt that they will. Do people in their hearts really think that that's the solution? I think the cat's a little bit out of the bag there. And I think people are now beginning to realize some of the challenges. Could nuclear help? Absolutely. And I think that will help push along the adoption of small modular reactors. But realistically, that's not going to be here before the early 2030s. And even then, it's going to take quite a bit of time to roll out and scale. So I can only hope that the big takeaway from all this is a big push into nuclear, not just for our portfolio, but more importantly for the energy abundance of the whole world. But that's going to take some time. I think in the near term though, the one thing that maybe people don't have on their radar is potentially a return to coal. And particularly in what they're now calling the global south or the global third world or developing markets or what have you. Countries, India being one of them, let's say, that had made real commitments to pursuing LNG imports and have now had to face both Russia, Ukraine and now Iran disrupting natural gas flows over the last 10 years. So if you want to talk about something that's really kind of sensitive to disruption, I would say that that's gas, international gas. And perhaps we'll see this as a catalyst to say, you know, maybe we shouldn't retire all those coal-fired power plants. Maybe we should double down on some of them. Adam, let's talk more about what happens next in oil and gas. Let's assume that one way or another, this war eventually ends for better or for worse. And we have to go to the recovery. So now we're dealing with a great big backlog of logistics nightmare probably. What happens next in terms of the market? To oil prices come right back down or do we see oil prices continue to increase? Is the recovery from this situation maybe drags on? And where are the investments? You know, what would you be actually moving on next as an asset manager? I think the best investments right now remain in the oil equities, believe it or not, because many of them have moved, but they've moved like 30 or 40 percent. They haven't had the kind of two to three X move that the spot price of oil has had from 50 up to 120, or I guess dated Brent today had 148 or something like that. You know, the stocks are up 30 to 50 percent. So what gives and why haven't they moved more and why might they move in the future? The reason they haven't moved more is because outside of the spot price, the price for oil delivery, imminently, the forward curve hasn't moved all that much at all. It's moved from about 50 bucks to 70 bucks. And so the stocks have moved up kind of in concert with that. So it's up, you know, it's up this year doesn't think that it doesn't think that things have gotten
looser certainly, but nowhere near what you've seen in the spot price action. The reason for that, I think, is that oil traders right now acknowledge that it's awfully difficult and getting a lot harder, mind you, to find physical barrels today. But that, as you put it a second to go, this will resolve itself for better or for worse, and a relatively timely fashion. From then on, the market will kind of get back to where it was before. Maybe a little bit scarier of a world because of the geopolitical risk, but buy and large back to where it was before, that $50 to $70 range. And I think that's what is going to, people are going to wake up to, because that's not going to happen. And the reason I say that, imagine, we're losing, call it 10 million barrels a day on the most conservative estimates. So that's 70 million barrels a week, and 70 million barrels a week, times 6, 7, 8 weeks, pick your length. We're going to take the global inventory level down dramatically by somewhere between 3 to 4 hundred million barrels. Now, global OECD countries have announced that they're intending to release 400 million barrels from their strategic petroleum reserves. But that will take their strategic petroleum reserves down to quite low levels, because remember in the US, we've already halved ours. And so that would take it down by another material percent to what I would call dangerously low strategic levels. And I suspect most countries around the world, certainly China, and I think certainly the United States, if there's a lesson to be learned here, it's that you better well have a good strategic petroleum reserve in place. So I don't think any country is going to valk at trying to rebuild those. And so the total global inventory situation is going to be a lot lower than it was in January. And once the dust begins to settle, literally and proverbially, I think analysts are going to stop saying how much is being impacted in the straight today, how dislocated can this market get? And they're going to start to say, let's work on rebuilding these inventories. And that's when people will begin to realize the market's quite tight. Because again, remember, if you took everyone at headline value and you think we're 2 to 3 million barrels a day in surplus, which I don't think we are, you could rebuild that inventory in 100 days. And so it's no wonder, I guess, that people in the forward curve are saying, yeah, by the third and fourth quarter, everything will be just like it was in January. I think what will change people's attitude is once the proximal crisis is over, people will begin to realize that inventories just aren't rebuilding the way they thought they were. And that's when people will say, wait a second, this is a tight market and it's going to be awfully difficult to make things feel comfortable again. That's when the longer end of the curve begins to rise. And that's when the stocks, I think, will begin to respond. Because what they like to do, obviously, is they like to price in the cash flows. And what cash flows do you use? Well, you're pricing it off of the forward curve, which tells you, yeah, there might be a good bumper quarter here. But within three, six months, you're basically back to where you were in January. I don't think that's the case. And that's the next shoot to drop from an investing standpoint. The inflection point right now on the WTI forward curve is right around the December 26 contract. And it's amazing to me as we're speaking, it's upwards of $114 to buy the front month WTI future. But you can buy the December contract for 75 bucks. It seems to me like, I wouldn't even describe that as a long dated future. That's a medium dated future. What about just buying December 26 futures for 75 bucks on the logic that, you know, yeah, everybody's going to need to replenish their SPR and they're going to, it's going to take months to work through this surplus. It seems to me like that's a pretty good bit. What do you think? Listen, I'm not a futures trader. And so I won't offer any recommendations on how to put out a futures strategy. In principle, I don't disagree with you. However, I think you can make it even easier on yourself. I think you can buy oil stocks and you can get that same exposure, essentially the same, you know, type of exposure as trying to play for a move higher in the $75 December dated contract. You know, if December contract goes from 75 up to 100, a basket of oil stocks, certainly offshore drilling stocks will do very, very, very well. And I suspect, you know, depending obviously there's an element of leverage in the futures contract, but I think you could earn just as good a return in the equities. If not better, then you could just try to play that move in the future. Adam, I want to move on to the knock on effects of this that we've talked to some previous guess about because I know it, Gary and Rosenschwegg, you guys focus a lot, not just in the context of this crisis, but bigger picture on food. Let's talk about what's happening, not just to oil through the straight of her moves, but also fertilizer, which has a much longer lag effect. It's, you know, the crop cycle where it's, if there's not enough fertilizer, it's going to be next year's crop that ends up not being as big as this year's crop. What is this going to mean for food prices and how does that affect inflation more generally as we look out for the next few years? I think that everything that's been happening in the last six weeks can have an impact on inflation. And if you want to talk about things that are not priced, I think that's exactly one of them. If you look at the Fed futures, if you look at inflation tips and things like that, I think again, these are woefully behind. And investors should begin thinking now about protecting, if not a base case, at least protecting the tail risk that you're going to have some pretty nasty and difficult inflationary prints. Ironically, the only area of the market, and it's a commodity, that is sort of signaling that maybe things are not going to follow the playbook that we thought they would six or eight weeks ago, is gold. And people have said, you know, why isn't gold doing better through this crisis? And I think one of the reasons is that some gold investors are now beginning to price in what could happen if you actually get a rate hike this year, which was unheard of in January and February, right? The only thing was how Dovis will the new Fed chairman be. I think now there's at least on the margin some people saying, you know, maybe there is some big disruptions. Another big area, like you just said, is going to be an agriculture. And that is because a lot of fertilizer does pass through the straight-of-form moves. And it's very clear now that that's being disrupted. I don't have the number off the top of my head in terms of how much of the world's fertilizer production passes through. It's fairly dramatic. And what's, I think, really important when you talk about the grain market is like, let's take a step back. So for the last 10 years or so, maybe even 15, we've had this very, very unique, interesting dynamic in global agricultural markets. Demand has been off the charts. And the reason it's been off the charts has been rising incomes in developing markets. People like to talk about energy demands. Certainly we spend a lot of time talking about energy demand in emerging markets. But the first thing you do when you have a couple bucks in your pocket is eat protein. And if you think about eating protein and you think about it from an energetic perspective or from an energy systems perspective, what you're doing is you're taking the sun's energy, you're growing grain, you're feeding the grain to an animal, and then you're eating the animal. So you're eating a lot of energy, caloric energy that's come through the sun into the agriculture into the animal and then into you. That's obviously a lot less efficient than you just eating the grain yourself because it's not a perfect, the animal's not a perfect converter of caloric energy from the plant into its own meat, right? So if you were to subsist on just a grain-based diet and then you move to just a meat-based diet, just to survive, you would require seven times as much grain as if you just ate the grains in the first place. So I'm not a vegetarian, I'm not a vegan. But when people do talk about the environmental impacts of eating meat, one of the things, a lot of attention is focused on bovine flatchelons and things like that. But really what it is, is it's just a much bigger energy system, right? Because you now need to convert from sunlight to grain to animal, animal to food. And so grain demand because of rising incomes in the third world and because of increased protein consumption, grain demand has just gone off the charts, off the charts. And anybody looking at that would have said in the last 15 years, this is a huge bull market for egg. But it hasn't been. And the reason it hasn't been is that our yields have gone off the charts. We've had some of the best record yields year after year for the last 15 years. Part of that is better fertilizer. Part of that is better seeds and better GMOs and things like that. And part of it, which no one wants to talk about, is that for the time being, rising temperatures across the globe have resulted in a longer growing season and better yields. I'm not saying that one day we're not going to have crop failures. That's a discussion for another day. For today and for the last decade, the growing season has gotten longer and there has been more ability to get higher yields out of those plants because of that. And so our yields have just been off the charts. And so we approach every year, every growing season, almost like we're going down this razor's edge. On the one hand, demand is off the charts. On the other hand, yields are off the charts. And we've said to ourselves every year, if anything happens to disrupt that growing season, if anything happens to impact the yields,
This market will be very tight in a hurry. And I think that this fertilizer issue could be that, right? You've needed perfection in your crop, urine, and you're out to meet demand. And I'm worried that finally, with this impact on fertilizer supply, we're not going to be able to get another record yield. And if you don't do that, the market tightens way faster. So when you think about it from an investment perspective, it's a classic asymmetry, right? It's not a normal distribution here. If something happens, the market tightens really quickly, and you have this asymmetric move. And I think that's what a lot of people, that convexity, that asymmetry, is what a lot of investors look for. And I think grain could potentially give it to you this year. Adam, I definitely want to come back to gold later in this interview. But let's start with another metal you and I are both fond of, which is uranium. And even before that, why don't we talk about where nuclear energy is headed? It seems to me like the outcome of this crisis is going to be a lot more attention on energy security generally. We already have a formative nuclear renaissance globally. Seems to me like this has to be super bullish for nuclear energy generally. Unless we were to get one of two escalations that I'm crossing my fingers are off the table. But if we actually saw a nuclear weapon used in this conflict, I think that would probably resensitize people to nuclear is bad. And the public can't seem to sort out the difference between nuclear weapons and nuclear energy. So I'm afraid that the use of a nuclear weapon would resensitize the public to fear nuclear energy. And I'm also concerned about the possibility of military strikes on an operating reactor, which is a violation of international law, but so are several other things that are being discussed in this conflict. If that were to happen and you had a worse than Chernobyl radiological disaster because somebody hit an operating nuclear power reactor with a missile, that could derail everything. I don't know how to think about those risks. Do you worry about that stuff and how do you see the outlook for nuclear energy and then of course for uranium? Back in 2022, uranium bull market had started already and we had big sizeable positions. And Leon, I discussed just that. What happens if something happened to one of the Ukrainian nuclear reactors, which so far has remained intact and or what happened if a tactical nuke was released? And I think that that would not be good certainly for humanity. And I don't think that that would be good if I'm being really, you know, callous and pragmatic. I don't think that would probably be great for a uranium portfolio. But taking sort of the biggest blacks, one events off the table, I think that the future for nuclear energy remains very bright. I think we're starting to see some very real advancements in permitting in the United States, notably towards small modular reactors. And we've argued for some time now that the biggest hurdle to the SMR adoption will be the Nuclear Regulatory Commission. And I remember sitting with someone who was very senior in Washington and we talked a little bit about what the US could do to really improve its energy security long term. And I said quite clearly, got the NRC and put in place people that are actually willing to regulate the nuclear industry and not people who are just hell bent on closing down every nuclear reactor in the country, which is really what the NRC became following Fukushima. You know, I think after Fukushima, the regulatory agency was desperate to make sure nobody could argue that they were in bed with the industry that they were regulating. Right? I think that was their number one concern. And so they became incredibly hostile towards nuclear energy to the point of making it almost impossible to build a new third generation reactor in the US. And certainly the idea of a small modular reactor passing permitting to two-phase permitting process seemed almost impossible, that has largely been changed. The Trump administration has really changed a lot of things in the NRC and they've moved some of the responsibility to the Army Corp Engineers. And they've really tasked the NRC with making timely decisions. It doesn't have to be approvals, but timely decisions on your reactor design. So we've seen, for instance, TerraPower get a major permit and I think that's wonderful. I know the team at TerraPower over the years and I think that their technology is probably the best in the industry. And so I do think that we're going to see a big improvement in nuclear reactor design in the next five or six years. I don't think you need any of that incidentally to invest in uranium today because the story between now and 2030 is really a story of not producing enough out of minds to meet the current reactor fleet. And this is where I think a lot of investors get it wrong. People ask me all the time, you know, when does this really become a problem? How many years out until you really had a severe deficit in the world's uranium market? And I tell people, it's here already. It has been largely obfuscated by these massive Japanese stockpiles that were accumulated post Fukushima. Those are now gone. Those are all into the market. And so the market is trading pretty much heads up, supply and demand. That's why price is just keep creeping higher and higher and higher. This is like a really simple, boring story wrapped in a huge amount of emotion and a huge amount of speculative energy where the hedge funds come in and play it massively on the long side and drive the price up and then become super short and they get it on the short side and drive the price back down. But the longer term true signal here, the true friend is very easy to understand is that we're not producing enough from today's mind supply to meet today's reactor demand. And we don't have much in the way of new minds coming online for the next three, four years. So I think between now in 2030, it's a really boring story and a bullish one. After that, it's going to be a question of how many new minds come on versus how many SMRs come on? Do we get the nuclear renaissance that we hope we do? It's all very, very exciting and full of promise. But between now and 2030, it's just a simple, simple story of supply and demand. Do you have a price target for your anime in 2030? That's what's so interesting is that if you look at the total cost of fuel in a nuclear reactor, it's minuscule. Everything is all about the initial capex build. So once you have built, for instance, an operating nuclear power plant, what would a fuel buyer at an operating nuclear power plant pay? When would they stop buying uranium? When would they say, you know what? We're going to step out of this market, not buy or shut the plant down. It's almost never. Could you get $500 and make your budgets work absolutely made even more interesting by the fact that most of them are regulated and we'll just pass that on to the consumer and nuclear power is still quite cheap compared to other forms of power. So even at $500, uranium, you're not going to squeeze out demand. So I think for the next five years, again, until we kind of inflect and it becomes a story of new mind supply relative to SMR demand, which is a 2030 story. But for now, what's super interesting about the Uranium market is that it's difficult to find that price that squeezes out the next unit of demand. So what is a good long term price? I think $150 is a good long term price. I'm talking per pound, U308, because that's really the price that you would need to make several good uranium deposits begin to make sense. The best ones in the world are next gen and denison. Those need about a hundred bucks and then there's not much to get to about 150. And so I think to truly balance the market, you probably need 150. Could you spike it up and above that? Absolutely, because again, there's no demand destruction. Let's move on to gold, which you mentioned earlier, as you said, the fear here and it's kind of fascinating when you really think through the macro dynamics. The reason there's a bearish case for gold is because as yields move higher, gold competes with treasuries and if gold's not producing any return and treasuries are producing a return, the competitors producing a greater return. Well, wait a minute, Adam. What that means is if people were completely abandoning US treasuries because of some geopolitical loss of faith in the United States and the treasury market was outright crashing, crashing treasury market means much higher yields. So that means you don't buy gold in that circumstance. What point does this argument break down? Oh, I think you're exactly right. Listen, I think that there's a very, very big difference between a real rate hike cycle, which historically has not been good for gold and actually was not good for gold in 2022, either, despite the fact that inflation inflation was high, money was abundant. We just printed all these stimulus checks during COVID and you had a big market dislocation. You would think that gold did really, really well, but it wasn't until 23 and 24 that it started to do well. And the reason was that in 22, you had a rate height cycle that was beginning. So, you know, I think you need to make a little bit of a delineation between a Fed chairman that surprises everyone with raising rates a couple times, which is more what I'm saying could happen versus a collapse of the treasury markets in which yields go up. The net result could be the same yields rise.
but very, very different beneath the surface of the water. So I think one is a loss of confidence in the United States, which would probably be quite good for gold. And one is just to have more typical rate hike cycle to try to get inflation under control, which historically might cause gold to sell off, particularly at the levels that we're at today. So one of the things that concerns me a little bit about gold today is that this was not true the last time we spoke. Not so much in the stocks, but in the actual holdings of the GLD, for instance, there's quite a bit of speculative money that's come into that. That has also chased a bunch of central bank buying of gold. So of the two, I find that the central bank buying of gold is going to be, quote, unquote, "better buying of gold." Not that their timing is better. Obviously, their timing in the '90s was terrible and they sold all their gold. However, their price agnostic, all they know is they will move a certain amount of their treasury holdings into gold. So that's always nice. And second of all, they're not really like hot money. They're not going to change on a dime, their policies. Whereas the speculative money that goes into the GLD, that's a bit more trend following. And in fact, as a really good example of that, when did that volume start to accumulate in the GLD? When did Western speculators start to buy gold? It wasn't at the beginning of '25. It wasn't in '24 that didn't catch the bottom. They put really the majority of their investment into gold in the fourth quarter of '25 in the first quarter of '26. So they were a momentum buyer. And now there's a lot of gold that's being held by them. So if that reverses and they start to come out, I think the gold could sell off a little bit. I think ultimately gold goes higher this cycle. I don't think it's done at 5,000. But I think it's entirely possible in the midst of a commodity bull market, which I think we're in now. For precious metals to seed leadership to other areas, notably energy in the middle part of the cycle. We saw that in the '70s. We saw it, frankly, from '29 to '40. And we saw it in the early 2000s. And that would not be a typical. And nor do I think that means it's the end of the run for gold this cycle. I think gold could probably double from here. But I think from January of this year, and obviously, here we are in April, and oil's doubled since then. But go back, and we were saying this a January this year. From January of this year, oil will be the better performer for a couple of years. I think that's for sure. Does gold go down? I think it could. I think it could also just trade sideways and be less good than other areas of the commodity market. But gold is going to have another run here at some point. It's not done just yet. And what's going to cause that next run? I think it's exactly what you said. It's a bit of a crisis of confidence in whether it's the United States, in particular, Western economies, in general, remains to be seen. But we've had so far what has been called the debatement trade. I think the next shoot to drop, which to be clear, I don't think is going to happen for a year or two or three, will be the insolvency trade, the fact that a lot of these governments are in really, really tough shape. That hasn't happened yet. We've had a debatement trade. I think the next step is the insolvency trade. And that'll be good for gold. Adam, I can't thank you. And off, as always, for a terrific interview before I let you go, let's talk a little bit about what you do at Garingin-Rosensthrig. A lot of people perceive you guys to be a commodity research firm because you publish some of the best work in the industry. But that's actually not your real day job. What's the story there? Thank you for saying that, Eric. That's very kind of you. We're very proud of our research. But our research underpins of investment process. We're money managers, and we have a fund in the US, as well as a use that's fund internationally. And I should point out that this is what we've always done. My partner Elise started managing the strategy back in 1991. The research and the letters is really just a way to show people in our partners and clients what it is that's driving our investment decision. So we spend maybe a little bit more time polishing it than some other bi-side folks might. But we are investment people first and foremost. And it sort of makes me think a couple years ago. Somebody asked me how I enjoyed making the transition from newsletter writer to portfolio manager. And I said, no, I think you have that backwards. We made the transition from portfolio managers to being on podcasts and stuff like that. But we're money managers first and foremost. Patrick Suresa and I will be back as macro voices continues right here at macrovoices.com. It was great to have Adam back on the show. Now Jim Bianco is next on deck for a special second feature interview on the developing Iran conflict and what it means for the oil markets. Then Eric and I will be back for our usual post game chart deck and trade of the week since the extra coverage format seems to be a hit with our listeners. We're going to do our best to continue it for as long as the situation in the Middle East warrants. Now let's go right to Eric's interview with Jim Bianco. Joining me now is Bianco Research Founder Jim Bianco. Jim, let's start with the simplest of questions. Is there a deal or is there not a deal? The ceasefire was announced on Tuesday just before the deadline. Already on Wednesday, it seems like Iran is basically alleging that the US is out of compliance with its perception of what the deal was. So what was the deal? Does it exist? Where do we stand? You know, that's a good question. It appears that there is a deal between the United States and Iran because they both said that there is a deal. And it appears for the moment that they are not even close to understanding what that means. And you know, the United States thinks it means one thing. And the Iranians think it means something completely different. And they have not yet been able to reconcile it. Now they are going to talk at the end of this week, probably into the weekend in Pakistan to try and iron out the details if possible. But we are talking on Wednesday the first day after the deal was announced. There is no evidence that anything has really changed. Does the matter of fact, a number of drones and missiles that the Iranians have fired at their neighbors, their Gulf state neighbors, is the highest it has been in a month. Today, supposedly day one of the deal. No ships are moving. The Israelis have attacked Lebanon. And as you pointed out, Iranians have already said we are out of compliance in the deal before it even started. So I don't know where we stand in all of that. Let's just take this as we don't know if there is a deal in terms of what would it mean if there is and what would it mean if there isn't, starting with if there is a deal, if we can come to some kind of agreement, what is that going to mean for my people? What is going to mean for markets and outlook for where we go from here? Well, I would say at least to start with markets, there of the firm belief that there is a deal. You've seen a sharp rebound in the stock market. On Wednesday, you've seen a big gigantic fall in nearby crude oil prices. So there of the opinion that there is going to be a deal. Now, the whole thing, you know, we have to keep in mind when we talk about all of these issues, what matters for the market? Matters for the market is the flow of oil and other basic commodities like LNG, Helium, and the like to get those critical come up to these moving again, or at least a credible way that the market believes that they're going to start moving again. And I think that's with the reaction in financial markets has been on the day one after the deal was announced, is that they believe that there is a credible way to get these commodities moving again. Now, I want to contrast that to war itself. And I'll use as an example just real quick, Cuba. There might be some action coming in Cuba, but no one is paying attention to it in financial markets, because it doesn't really impact financial markets. It's important strategically, and it's got other important issues, but it's not going to move the S&P or crude oil prices or the dollar or interest rates to any great degree, like this blockage of commodities would. In fact, I go to the next stop is that if we somehow had the straight-of-arm loose open, and we were still dealing with what we've been dealing with in Iran, the markets would look past it and say that is a political issue, that is a war issue, that is not a market issue, makes it a market issue is what's happening in the strait. So I think really what we're talking about is whether or not we can get the straight moving. The market thinks we will, but even if it's right, and I say that because as of this day, I'm skeptical, I don't know where the deal is going to come, or where the specifics are going to be agreed to, that we're going to get everything moving. But even if we do, I don't think we're going to see anything resembling like a pre-February 28th market. There's going to have to be some kind of risk embedded in a lot of these markets, because these issues now that they've been uncoorked can be uncoorked again and flare up again at any point. So you're going to see higher risk premiums in markets, whether or not it's going to be interest rates, or it's going to be higher volatility levels in the S&P, or it's going to be higher levels of crude oil prices. They might come down more than where they've already done if we do see the oil start to flow, but if they're not going back to pre-February 28th levels, there's always going to be a risk embedded in them. Now in the fog of war, we never know exactly what information to believe and not believe. But some of the information that's coming out says that the English version and the Farsi version of the. term sheet for this deal are completely different. And particularly the Farsi version says that the US and Israel have to respect Iran's continuing right to enrich uranium. That's part of the deal that Iran is supposedly saying was agreed to. Seems to me like it's unlikely that the US and Israel are going to agree to that under any circumstances. So let's suppose that what we get to is, oh, there was a misunderstanding which both sides took advantage of because they needed a pause to regroup. And no, we don't have a deal. We don't have anything close to a deal. We're completely at odds. What do we go back to next week? Is it back to the same or is it something worse than we had before this supposed ceasefire or where does that leave us? I think it's something worse if we go back because not to be too much of a military analyst here, but I'm going to be a military analyst for a second and say the biggest problem that the US military has and all Western militaries have is we're very good at offense. We're very good at attacking things and blowing things up. In fact, that's what we've been threatening for weeks. We're not so good at defense. What we really need is some kind of defensive shield. And that would be go ahead, fire all your drones and missiles you want at whoever you want, either the ships in the in the Persian Gulf or the Strait of Armouso or your neighbors. We're going to just knock them all down and they're just going to fall in the water. By the way, the Ukrainians have one. If you've been tracking the war with Russia and I have been very closely the last couple of months, there's a reasonable chance they might the Ukrainians might win this war. They have turned the tide so much against Russia because of the way that they've been using drones. Now, of course, Russia could always recalibrate their tactics against them, but right now, Russia's on its back foot and it's going backwards and the Ukrainians are going forward because of your drones. And in large part, it's because they have created the defensive shield against drones. So it does exist. We just haven't put one together yet. So that's what we would need. The reason I brought up all that military strategy stuff is if we fail at this talk, whatever I'm going to say is we're going to go back. And then the question is, how do we get the straight open? We got to remove the threat for shipping. How do we do that? In a decentralized world where you've got hundreds, if not thousands of these drones spread out all over the place, it could be launched from the back of a pickup truck. It's going to be very hard to offensively attack them to get them to stop launching these drones. You'd need a defensive shield. The fear of bringing up is we don't have an answer. The ship stays stuck, oil stays constricted, and this just drags on and on and on until there is some other kind of mediated solution there. So that's what I'm really more worried about is that if we go back, how do we get the straight open? And the answer is I don't see a scenario where aggressively, offensively attack them, blow up bridges, blow up more stuff, even if it isn't a war crime that you actually target military installations. I don't know if that's going to be enough to get them to back off because it hasn't been for the first 39 days of the war. Well, it definitely seems odd that the threat that's been levied is the US could take out all of Iran's bridges and civilian power plant infrastructure. It seems to imply that the much more obvious target of taking out all of their missile launching capabilities. For some reason, we're not able to do that. Do you have any insight? I realize neither one of us are military guys, but why wouldn't all of the offensive effort be put on disabling their offensive capability to fire missiles and drones? Because it's too much and that it is hundreds, if not thousands of drones and missiles and launchers and amountness regions spread over hundreds of miles. There is no central depot that you could attack to knock these out. Just like there is no real targets, these things are hiding. They're also under what the Iranians call this mosaic doctrine. And the mosaic doctrine simply is if the command structure of the IRGC gets knocked out, which it has been, the individual sector commanders have their orders to keep firing. The day we're reporting Pete Hex have acknowledged that at his press conference and said, because he was asked about, well, if you have a piece deal, why are they keeping shooting off their drones? And he said, he quits that the courier pigeons haven't gotten to the sector commanders to tell them to stop. Okay, find out in the next 24 or 48 hours if that's the case. Because apparently they should be getting the messages to stop with the firing of the drones. You can't find all of these individual drones. There's too much, they're too decentralized, they're too hidden, they're not easy to spot, especially the drones. Like I said, you could fire them off the back of a pickup truck. You can't be shooting every civilian vehicle that you see. There's too many of them. And that could in and of itself be a war crime. So you're kind of stuck with defense to have a defensive shield, which we don't have. Now, the Ukrainians are there. They've signed deals with the Gulf States 10-year security agreements with the Gulf States. And they're bringing their drone, their, their interceptor drone technology to try and put a defensive shield up. But we're talking about 600 miles between the Persian Gulf all the way through the straight of Harmoose to include all of the Gulf States as well too. They could probably do it, but it's going to take a long time to scale to that size to put up a defensive shield that renders that type of warfare inoperative. So the problem is the markets don't have that kind of patience. If we go back to no, no mishaps moving, no deal on the horizon, price of crude oil, well, to have your blast from Bloomberg, I think he's he had it right. The price of crude oil goes up $3 a day, not every day $3, but averages rising about $3 a day until we get some kind of a movement of opening these ships. We'll go right back to that back to where we were on the prices on Tuesday and just keep rising and rising as we're stalemated. Let's come back to the knock on effects of this conflict going into the resolution of Ukraine versus Russia. I find it very interesting. You're saying Ukraine maybe is getting an edge here. It seems to me Russia just got a huge cash benefit from this. You know, price of oil coming up and also Russia's restrictions on a exporting oil haven't been enforced as aggressively because everybody knows the world needs Russian oil, whether we like it or not. So didn't Russia just get kind of a big boost out of this? They're getting a monetary boost out of it because they're able to sell oil and sell oil at a higher price. But what's happened is that Ukraine out of necessity and out of desperation is kind of turned to tables and they're fighting this worn in asymmetric way that has been unlike anything that we've ever seen right now. They're doing it with drones. They're doing it effectively with drones. They're killing about 30 to 35,000 Russians a month this year. So over 100,000 Russians have been killed already. That is an extraordinary amount just to put that number in the perspective. The Russians are largely perceived because they have to have failed the Afghanistan war. They lost 15,000 soldiers in 10 years. They're losing 30,000 a month right now because of drones. 90% of the casualties are being caused by drones right now. The war has changed. This is the first war since the 19th century that the primary method of killing an soldier is not a bullet or an artillery shell. It is now a drone. So Russia has not solved that riddle as to your techniques of 20th century techniques fighting with these drones. Is it working? And I'll give you one other one. Back late last year NATO had some exercises. They were called Operation Hedgehog. It was with the UK and Estonia. And they were simulations of two brigades. That's 2000 soldiers. They invited 10 Ukrainian drone operators to simulate battle against 2000 NATO soldiers using NATO techniques, which the same techniques the US uses. The 10 Ukrainian soldiers wiped them all out. And that General Petreas came out again this week and he said it again. They're redefining the way war is going on. We being the United States have six exhibition games a year. And we need to understand that the way that war has been fought has dramatically changed because of drone warfare. That's what's given the Ukrainians the upper hand. Now you're right. Russia's a bigger country has more money, but they have not adapted their techniques and are not showing any way to adapt their techniques. So that's why I said, Ukraine's getting the upper hand. You can make an argument that if it continues down this road, they're going to win. What we're waiting on to see is if Russia can adapt and neutralize this advantage so far they haven't been able to Jim. Let's move on to the US Federal Reserve's reaction to all of this. I think their minutes just came out. How do you interpret it? What do you see on the horizon? You know, it was interesting because they came out with a two-sided argument. There was literally a handful of, they didn't say how many members
for arguing that if the war continues that the Fed might have to cut rates. And there was also a number of members that said a protractive war could increase inflation and maybe they'd have to raise rates. Some saw the case for they used the word "two-sided" language in their statements and in their looking forward as to what they want to do. Now this, the reason I bring that up is this does bring up a bigger issue with the Fed that I've argued with you and other places is that in this era now that we've got the way we're going to resolve this is we're going to have the 12 voters of the Federal Reserve, the 19 overall Federal Reserve members are going to start thinking independently. And they're going to start saying, you know, based on my experience and based on my research staff, if I'm a president of a regional Fed, I do have a research staff. I think that this is the right path to go or that is the right path to go and you're going to get several different opinions all the time. Gone are the days where we look at the chairman's words, parse every comment, every syllable that the chairman says to divine what the policy is going to be. Chairman is not one of 12 voters. And right now what you're seeing out of this is confusion as to what this means in terms of whether or not the Fed should be cutting rates because it might be slowing down the real economy or they should be raising rates because it might be adding to inflation. And I suspect we're going to continue to see a lot of that. Now one last thing I'll mention about the Fed is Kevin Warsh, the nominee, the Trump nominee, is scheduled to have his hearings of his nomination hearings next week Monday, the 13th of April. And so we haven't heard from him in several months. Lot has changed in those months, not just the war, but the rise of AI, the fear that AI is going to display jobs, the idea that we might be operating under a zero labor, but even rate, meaning that the number of jobs that the U.S. economy needs to create is zero, less than Jay Powell at his press conference in March and Chris Waller has acknowledged that might be the case. We've heard none of these comments out of Kevin Warsh. What do you think about the labor breaking away? What do you think about AI? Where do you think the war is with jobs? So we're going to have to hear what he has to say. Hopefully we'll have to ask him about whether or not he is dealing with 12 independent voters and he is one of 12. And he might have an opinion about where they're going to go, but does he have the ability to persuade six other people to vote with him to get a majority? So the Fed is all over the place right now. I don't necessarily think that is a bad thing. I'll conclude by saying one last thing. I happen to think that the best way to view this is from a nominal GDP perspective. The nominal is real plus inflation. The fear argument is that the war will slow down real growth, but also increase inflation. What is the net of the two? If the net of the two is that real growth will fall more than inflation is created, then the proper way is to cut interest rates. I happen to be in the camp that nominal growth will probably increase and you'll probably see interest rates trend higher and more talk of the Fed, at least not cutting rates or maybe hiking rates in the future. Now, if this drags out for much longer, that could reverse and say the real growth drag could be more than whatever inflation you get, nominal would go down and then the proper move would be to cut rates. I think that's what you're seeing out of the Fed, why you're getting these two cited arguments. They're basically arguing real growth is going to cause nominal to go down. The other ones are saying no, we're going to get more inflation than real growth drag. That's going to cause nominal go up. That's where you're going to some say cut and others say hi. Jim, final question, not just the Iran crisis, but big picture. What's your outlook for inflation? Where do you think we're headed? I think we're going to stay elevated right now. Let's put this in the perspective. We are five years without the Fed hitting their 2% inflation target. This war right now, at least for March, as we understand, March is inflation numbers. The consensus on Wall Street for Friday's March CPI is that it's going to be 0.9%, which one of the highest numbers we've ever seen, not the highest, but it's up there. It's way up there and the largely driven by an over $1 rise in gasoline prices. That will push your over-year inflation statistics headline to over 3%. Fed's nowhere near their target were five years. Even if you argue that the wars about to end and gasoline prices are going to deflate most of their gains, maybe not all of them, but most of their gains. We'll get some kind of reversal in inflation. That's going to take months in order for it to come down. I've been of the case of the opinion that we're not a 2% inflation world. We're in a 3-ish percent inflation world. I like to joke with you and others. I didn't say 8-10 years in Bobway. Don't think I'm saying it's going to be a runaway inflation. But if we're in a 3-ish percent inflation world and a world of greater uncertainty and that risk premiums, like term premiums and interest rates, have to stay in, I would still argue that in that type of world that interest rates are probably going to go higher just to hit their fair value, maybe closer to 5%. That we're going to have to get used to those types of levels of inflation and maybe a 7% mortgage is now something more along the lines of being more of a normal mortgage. I am thinking that we are going to stick with this kind of inflation world for a long time to come. I understand the arguments about that it's all housing driven, but that's not the way we measure it. I understand the arguments about technology and maybe AI is deflationary and probably agree with that. But on the flip side, we are in a period of de-globalization and we are in a period of changing alliances right now that we, as we started off talking, we don't even know if free commerce on the open seas is going to be free commerce on the open seas or whether or not everybody is going to have to constantly be at a toll every time they get near some piece of land somewhere which will dramatically drive up the price of everything else. And that's why I think we're going to see elevated inflation plus these risk premiums being added into the markets. Jim, I can't thank you enough for joining us for this Iran update. Before I let you go, quick plug you run Bianco Research which is an institutional research firm. You also have the folks at Wisdom Tree following some of your work with NETF. Tell us a little bit more about it. Biancoresearch.com or @biancoresearch on LinkedIn or Twitter acts is where I'm very most active in my original business which is the research business the last three years or so. It's been managing an index called the Bianco Research Total Return Index. It's a fixed income index because that's my bread and butter being a bond guy first, macro guy second. You can find out more about that at Biancoadvisors.com. There's an index. There's an ETF that tracks our index at Wisdom Tree WTBN is its ticker symbol. Patrick Sarraza and I will be back as macro voices continues right here at macrovoices.com. Now back to your hosts, Eric Townsend and Patrick Sarraza. Listeners will keep bringing on second guests as conditions warrant until the Iran situation eventually settles down. You'll find a download link for this week's Trader 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. Go to our homepage and look for the red button over Adam Rosenswag's picture saying looking for the download. Patrick oil sold off hard on the ceasefire deadline but you're thinking the real story here might be a higher floor underneath crude oil because of the straight-of-hormouse risk that hasn't really gone away. So what's the trade of the week to express that view? Yeah and I think that's the key distinction here. The markets reacted to the ceasefire as though it removed the oil risk premium but it really only reduced the immediacy of the threat. The underlying damage is still there. Golf infrastructure has been hit, supply chains remain disrupted and the straight-of-hormouse remains a live geopolitical choke point. So even if we see short-term relief move crude oil lower, the downside from here appears relatively limited while any re-escalation could quickly push prices back toward the recent highs. To me this creates an asymmetric setup, particularly when you can take advantage of the fat right-tail skews in call options. Using a traditional call spread, you're risking a small defined premium to position for a sharp upside move while keeping losses contained if the situation stabilizes. Now the way I'd structure that is through a June 2026 Nimex crude oil bull call spread. With crude trading around $89.10 the idea would be to buy the $100 strike call for roughly $6.10 and sell the $120 strike call for about $3.05 creating a $20 wide call spread for a net debit near $3. This means you're risking $3.
to control structure that can be worth as much as $20 at expiration, creating a maximum payoff near $17 or a risk reward close to $6 to $1 payoff if crude oil rallies through $120. What makes this attractive here is that the recent pullback has taken some of the immediate panic premium out of the market, but it has not removed the structural asymmetry. If the cease fire holds and nothing deteriorates, the defined premium keeps the risk contained, but if the Hormuz risk re-escalates, shipping disruptions worsen, and the market begins repricing the higher floor in crude oil, this structure gives you convex upside participation without having to own the futures outright. In practical terms, the break even on the trade is $103.5, so you don't need a full return to the highs for the position to start working. The idea is simple. Risk a small defined premium for exposure to a market that still appears to have limited downside and a very meaningful upside if geopolitical situation turns again. 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 tick. Alright, Eric, let's get to these equity markets. Well, obviously the big macro risk is the straight-of-hormuz staying closed for months that would starve the global economy for energy, and I think that if the straight were to stay fully closed for, let's say, six months, then a global depression would not be an exaggeration of what's possible. I certainly don't expect that outcome, but that's what's at stake here. On the other hand, markets are coiled up for what could be a post-liberation day like upside reversal if this is truly ending and ending now, which unfortunately I don't think it is. So the first words out of my mouth when the ceasefire was announced were "I don't believe this is going to last for the two full weeks." That's what I'm going to say on macro voices. Well, little did I know it wouldn't even last overnight, and that the ceasefire would be almost forgotten about by the time this episode airs. But crude oil prices literally dropped $25 in 25 minutes after the ceasefire announcement, and so far, despite the fact that it's now clear that the straight-of-hormuz was not really reopened and that there is no real ceasefire, crude is still only showing a very muted bounce. We're not seeing a full retracement back to the upside. So the question is whether the market doesn't yet realize that there hasn't been a meaningful ceasefire, or if more likely what the market is discounting is a perception that President Trump is now looking for an off-ramp where he was previously threatening an escalation against civilian infrastructure just a few days ago. I think that's the key to this market. For now, it appears that the market is discounting Trump looking for an off-ramp, and I think that's why oil is still way down, despite the fact that no tankers have passed through the straight-of-hormuz as of Wednesday evening. Now there are a few ships that have gotten through, but those were dry bulk carriers. So far as I'm aware, as of late Wednesday evening, no crude oil tankers have actually passed through the straight since this ceasefire and supposed reopening of the straight was declared. Meanwhile, Iran has been very clear in saying that they would still intend to charge a toll on any vessels that are transiting the straight. As far as what to do about this in terms of hedging that risk in the market, Patrick, great minds, think alike because my response was very, very close to your trade of the week. The only difference was that I chose slightly different contracts to express an almost identical trade objective with a little bit more leverage in an extreme right-tail outcome. So I went along the September rather than the June, and I went on the 130 bull call spread as opposed to the June 120 that you described in the trade of the week. I was able to buy that spread at an average cost of $1.85 is trading around $250 as of recording time, so I think I'm already up a little more than 35% on that trade. The reason I chose the September contract rather than June is I think that the excessive backwardation that we've seen so far during this crisis has been rooted in the market's assumption that this would be a short-lived conflict. My view is that it's likely to drag on longer than most people think, and later dated contracts I think are likely to rally in earnest once it becomes clear to the market that, oh yeah, this thing really is going to last longer than we all hoped for. The June contract that you used in the trade of the week expires in the third week of May. That's only a month and a half or so from now, and I fear that this conflict could last longer than that. Now the steep backwardation means that the September futures are still trading considerably lower than June futures, so even though we would normally expect to pay more for longer-dated options, the lower underlying price put the cost of my hedge under $2 a barrel for three months more optionality than the June spread offered at over $3. My spread also has a maximum payout of $30 versus $20. So I have a 15 to 1 maximum payoff from my entry price below $2. That payoff won't be as strong if this record backwardation that we've seen persists, and I end up having to cover in late May when the June spread expires, and at that point let's say there's still excessive backwardation, that means the September price isn't less likely to be in the money, so it might not pay off if this doesn't get so bad, but on the other hand if it gets really bad it's going to pay off at $15 to 1 instead of 5 to 1, so I was looking for an extreme right-tail risk hedge. And while it sounds like a speculation on oil prices, it's actually to my thinking, and at least for my purposes, much more of a risk hedge for my equity and gold portfolio. Sustained higher oil prices, if we get them are going to be a headwind for gold, fears of a nuclear power plant being targeted would be a headwind for my uranium holding, so it'd be actually be more than a headwind, we're like in the face typhoon. So my hedge has less of a chance of paying off in a modest rise in prices, but more than a 15 to 1 max payout if we see $130 plus oil prices sustained into August, which I unfortunately think is entirely possible if this crisis worsens from here. Well Eric, I just want to start with sizing up the S&P 500 technicals, so we went through a 10% market correction on the S&P, it was close to a 700 S&P point drop off of its highs, but the entire bounce up until now has been extraordinarily impressive. I mean, we were able to retrace 500 S&P points off of the low, almost 8%. So we are just 200 S&P points away from the highs, and so we have a scenario where the market is attempting to neutralize the sell cycle from a further downside risk by getting it back into its prior trade ranges. Now, will they succeed? That's the puzzle to watch here. Now, could we see a scenario where the market at this point double top retest 7,000 level with the S&P 500 200 points away? It's very easy for the market to do this. It's just that previous high is so close now. Overall, does that make it bullish? And this is where I think we have to look a little bit deeper. All of the things that we've seen that created turbulence in the markets is still there. Higher oil prices, higher gas prices, inflationary pressure, higher rates, private equity credit stresses in the system, a lot of reversals and major AI stocks. And of course, the geopolitical situation only has a short term pause before we could see a resumption of the situation there. And so, for us to say that there's an all clear for the next bullet advance, I mean, while anything is possible at this moment, it's still a little bit tricky to say there's any asymmetry in being long this market. So the way I look at it is that, is there a tactical room for this market to follow through 100 or 200 S&P points? Yes. But is it likely to have substantial overhead resistance and a big downside risk if things roll over? Yes. And therefore, I'm not too excited about putting risk on here at this juncture of the market. But what is worth noting is volatility collapse. We had the VIX drop from 30 level all the way down to 20. And while you were looking at the crude oil markets as a hedging mechanism, it is important to note that we now are seeing some of the cheapest option premium hedges available since February. And so even with the fact that we're up at these higher levels and cheaper vol premiums, it is once again an interesting window to consider portfolio hedging. All right, Eric, let's touch on this dollar. Patrick, the Dixie gaped down on the ceasefire announcement leaving an unfilled gap on the chart despite
the fact that it's now clear that there really is no bonafide ceasefire. And per my earlier comments, I think that's because the market now perceives President Trump to be seeking de-escalation rather than threatening escalation to include targeting of civilian infrastructure as he was alluding to a few days ago. I think it also provided a very important confirmation. I've been saying for several weeks now that I'm convinced that the big rally that we've seen in the Dixie over the last two weeks has been all about the Iran conflict and that we're likely to see a resumption of the secular downtrend in the dollar as soon as that conflict finally ends. The gap down reaction to the ceasefire announcement confirms that the market is ready to trade the dollar much lower when this is truly over. But for now, I'm afraid it's anything but over. So anything's possible here on the Dixie chart and it's going to depend entirely on the news flow. But that unfilled gap above the market is just begging to be filled. And we've already seen that the ceasefire is not going to cause all parties to cease firing their weapons, at least not in Lebanon. So filling that gap seems likely to me. The US dollar was testing the 100 to 100 and a half level where all of its previous highs were over the last six months. And this short term ceasefire has given all the cross currencies a breather and has caused the US dollar index to pause here back toward its 50 day moving average. I don't think anything structurally changes. Overall, we are still in the middle of a trade range. And we haven't bullishly broken out nor is there any evidence that the US dollars begun a decline back to the bottom end of its range. I'm going to be seeing whether a short term supports hold in here in the 98 and a half to 99 level. And whether the dollar gets back above its 50 day moving average for another run at its previous high. All right, Eric, let's quickly touch on crude oil. Again, I think the reason the ceasefire gap down move has not yet been retraced to well over, let's say, $105 is because the market perceives Trump to be looking for an off ramp rather than an escalation here. Now, I hope that that's what it is. I hope that he's looking for an off ramp. And this is all about to end. And if we just walk away from this declaring victory, I don't really care whether any actual victory occurred. I just wanted to be over. What I'm concerned about though is if for anyone who's actually studied the 10 point term sheet proposed by Iran, their terms are just not going to be tenable to the American side. The Iranian proposal emphasizes that the US and Israel must acknowledge and respect Iran's right to continue enriching uranium as part of the deal. They also call for economic reparations that I don't think are going to happen. So it seems clear to me that there never really was a deal or even the basis for a negotiation as the president described. So the big question now is what is the White House's intention? Are they just buying time to regroup in order to mount a fresh assault? And I think this is a very realistic scenario, folks. What if what's going on here is the White House is just buying time to plan and get organized to send special forces in on a mission to capture Iran's fissile nuclear material. The stuff they could make bombs from high enriched uranium after the negotiations have revealed that there are still irreconcilable differences between the parties. Is that what's going on here? If so, we're going to see a major re-escalation maybe as early as this weekend. I certainly hope that that's just my paranoia speaking. The other scenario is they're just looking for an off ramp of chance to save face, declare victory and walk away from this thing despite the fact that they have not achieved their goals. They have not aces to the uranium. And if you listen to what president Trump has said, it sounded like he was hell bent on preventing Iran from being able to get a nuclear weapon and it doesn't sound like that military objective has really been achieved yet. That's why I'm concerned that this might not be over the way the market seems to be discounting it as ending. Either way, the straight remains closed as of this recording and the scenario that would cause Iran to suddenly open it back up without charging tolls or restricting traffic is not obvious to me. Even if the US did just walk away from this, I don't see why Iran at that point would open the straight. So as I described earlier, my risk catch for this is long on the September WTI-130 vertical spread. I hope it expires worthless and I end up losing my premium. But I fear that we're headed toward another re-escalation and another upside retracement of oil prices. Let's see what the weekend brings in terms of how these negotiations go and what comes next. Well to me, Eric, I think that this moment is still relatively asymmetric. I don't think that even if there was a complete settlement to this situation, that oil is going back to its previous regime where we're let's say going to see oil prices back down to under $70. Now realistically, even if the oil started to flow with all of the chaos that's been created, I think that it's reasonable to assume that we would stay in the $80 area for any sustained period. So as oil here pulled back toward $90, we have a scenario where increasingly there's likely a support line below and any re-escalation could have us back to $120. So this kind of a pullback, I still think warrants some attention from an asymmetric perspective. I don't see a huge downside risk versus the upside is still pretty substantial if the geopolitical situation re-escalates. Now Eric, how do you size up the gold market in this move recently? Patrick, I think we're at a make or break moment here in gold. We've started to see signs that gold is maybe breaking out of that oil up, gold down correlation, which has persisted since March 2nd, in which is opposite the normal function that gold usually performs as a geopolitical risk edge. The reason for that, as we've described before, is because an oil-driven inflation surge would tie the Fed's hands and pretty much rule out any chance of rate cuts. So that's the reason it's been a headwind. It seemed like that headwind effect was starting to come out where we saw oil and gold both going up at the same time. So if we see a re-escalation of prices, that's going to be the big test. If you step back and consider the big picture fundamentals, if this situation were to go completely out of control and everything just gets really, really worse and we get a mushrooming out of control war situation, would selling out of gold really make sense just because treasury yields are going up? I don't think it would. So is this market perception that oil-driven inflation signals mean it's time to sell gold? Is that going to continue? Or are we going to revert back to gold as a safety trade and it's a safer than treasury's safety trade because it has no counterparty? I feel like we were starting to go in that direction, but it was kind of unconfirmed. So I'm going to say the big tell here is how gold responds if we see a re-escalation of oil prices, which I fear we might have coming in the near future. At this point, I think that the mechanical effect, once gold started selling off a March 2nd, it kicked in the CTAs, the algorithmic traders that were selling gold because that was what the trend following algorithm told them to do and so forth. I think that mechanism has already played out. So at this point, I'm hoping there's room for gold to return to its geopolitical hedge function. And if that's the case, an escalation might allow gold to continue rallying. If it dumps back down toward the 200 day moving average, well, then I guess anything's possible, but I'm hoping that we go in the other direction. Let's see what the market brings us. Well, Eric, just making a simple observation that gold at this point has broken what was been a very distinct two-year bull market advance. Now, we've sustained a month below the 50 day moving average and so far this entire rally has been contained to the Fibonacci retracement zones and remains below its 50 day moving average when we look at all the other precious metals, silver, platinum and platinum. And oddly, the fact that even copper is correlating to these charts, all of these are like flags and wedges that are failing below their moving averages, which means that at this stage, we're in the midst of some sort of a correction or consolidation of the prior bull advance. Now, I overall remain bullish these in the bigger picture and longer term, but we really do have some sort of a correction and that correction may not be over. And so if all of these precious metals are retesting their lows, it wouldn't be a big shocker to me. Maybe the story will end up being that the next bull advance is really a third, fourth quarter story and we may continue to grind it out here for much of the second quarter. I'm on the short term neutral long term bullish. All right, Eric, let's talk uranium. Well, the fundamentals for nuclear energy generally and for uranium miners and The uranium and the metal are still uber uber bullish.
and getting better by the day, this crisis only strengthens commitment to the nuclear renaissance. More and more people around the world are realizing that nuclear energy is the way to achieve greater energy security and less dependence on fossil fuels. But as I explained last week, the unthinkable tail risks have become thinkable, hopefully still very unlikely. An intentional breach of containment of an operating nuclear power reactor like the ones at Bashaire, Ineron, or Baraka in the UAE could cause a contamination event an order of magnitude worse than Chernobyl. Now we don't know exactly how the public would respond if something like that happened, but I don't think it's likely to be bullish for uranium ETFs. And frankly, an escalation to the point that someone uses a tactical nuclear weapon in this conflict is not out of the question at this point. Now so long as neither of those two unthinkable things happens, any weakness in uranium stocks in this war debacle is a by the dip opportunity. And we've also got a really nice setup here on the charts. If you look at the weekly chart, the stochastics have moved all the way into deep oversold but have turned back up again signaling the beginning of what could be a multi-week sustained rally. The daily stochastics are a little bit high and wavering, so we might see a pullback here at least according to the daily chart, but there's a really nice setup on the longer term weekly chart. It really depends on what happens with the war conflict. If we do really see an honest to goodness ceasefire and a post liberation day like rally in risk assets, I think we could really really see uranium and uranium miners take off here. But not until we get past these fears of nuclear reactors being targeted in a war action. Well for me, uranium has been generally stable. It hasn't really sold off in a big way and is it even trying to roll back up technically and get going, including many of the uranium stocks? Now will we see a bull continuation or will continued equity stresses and risk off impulses in the market? Act as a cap to keep just the uranium market grinding. That's going to be something we're going to see overall. I'm like you quite bullish uranium in the big picture, but similar to the gold circumstance, I am just concerned on the short term that the next few months are not when the bullish trends will emerge. So I'm bullish, but likely something later in the second quarter, if not a third quarter move. Patrick, before we wrap up this week's podcast, let's hit that 10-year treasury note chart. What we have is a scenario where the yields are off of their highs a little bit of a breather from oil prices coming off. On the short term we're seeing yields being directly sensitive to the movement of oil. I think bonds will be a substantial buying opportunity, but on the short term, we got to let this resolve itself and see where the stresses finally settle down and we're going long bonds and short yield will really prevail. 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 in this week's research roundup. Well, in this week's research roundup, you're going to find a transcript for today's interview and 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 the feedback and support we get from our listeners and we're always looking for suggestions on how we can make the program even better. Now, for those of our listeners that write or blog about the markets and we like 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@macrovoices for all the most recent updates and releases. You can also follow Eric on
[email protected]. That's Eric's belt with a K. You can also follow me at Patrick's Resina on behalf of Eric Townsend 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 macroeconomics. 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 e-mail, 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 Macro Voices on iTunes to have Macro Voices automatically delivered to your mobile device each week free of charge. You can e-mail questions for the program to
[email protected] and we'll answer your questions on the air from time to time in our mailbag segment. Macro Voices is presented for informational and entertainment purposes only. The information presented on Macro Voices should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions. The views and opinions expressed on Macro Voices are those of the participants and do not necessarily reflect those of the show's hosts or sponsors. Macro Voices, 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 Macro Voices. Macro Voices 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