[music] This is MacroVoices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. MacroVoices is all about the brightest minds in the world of finance and macroeconomics telling it like it is. Bullish your bearish, no holds barred. Now here are your hosts, Eric Townsend and Patrick Suresna. MacroVoices episode 530 was produced on April 30th, 2026. I'm Eric Townsend. These negotiations collapsed over the weekend after President Trump canceled Vance and Whitcoff's negotiating trip, saying it wasn't worth the 18-hour flight, and igniting an explosive spike up in crude oil prices from the Sunday evening futures open. With front-month WTI now over $110 and spot-branded over $120 at recording time, bringing rise to serious concerns that the global economy could soon be starved of energy, risking a global recession. And the S&P 500 stock index rallied to fresh, new, all-time highs on the news. Tresses Chief Economist Daniel Lecaier returns as this week's feature interview guest to help diagnose why the stock market rallied to fresh highs following news that, frankly, legitimately threatens the entire global economy. We'll also discuss secular inflation precious metals, the greater risk to Europe from the energy crisis, and much more. Then be sure to stay tuned for our post-game segment when Patrick's trade of the week will explore a relative value setup designed to take advantage of potential divergence within global financials. And then of course we'll have our usual coverage of all the markets with Patrick's post-game chart deck. The feature interview was taped early Monday morning before news broke that the United Arab Emirates was pulling out of OPEC, so I'll cover that news in the post-game crude oil segment. And I'm Patrick Sarasna with the macro-scorboard week over week, as of the close of Wednesday April 29th, 2026, the S&P 500 indexed down four basis points trading at 71.35. No initial reaction to the mag 7 earnings or the oil pop, but we'll take a closer look at that chart and the key technical levels to watch in the post-game segment. The US Dollar Index up 38 basis points trading at 98.97. The June WTI crude oil contract up 1497 basis points trading at 10688. A material breakout back towards its highs. The June Arbob Gasling up 1046 basis points to 359, breaking out of an old time new high. The June Gold contract down 404 basis points to 4561 remains in corrective mode. The July Copper contract down 405 basis points trading at 593. The May Uranium contract down 23 basis points to 8655. And the US 10-year Treasury yield up 12 basis points trading at 443 back to testing March highs. The key news to watch next week is we have the ISM Services PMIs and Friday's much anticipated jobs numbers. This week's feature interview guest is Daniel Lecchaie. Eric and Daniel discuss why liquidity is masking underlying economic stresses, how persistent inflation is being driven by policy and supply constraints, and why Europe may be particularly vulnerable to margin pressure, credit deterioration, and second order effects from current geopolitical environment. Eric's interview with Daniel Lecchaie 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 Tresses Chief Economist and Fund Manager Daniel Lecchaie. Daniel, it's great to get you back on the show. It's been way too long. Maybe you can set me straight or maybe I'm just missing something, but we're speaking on Monday morning before the open in Europe. So right at the very beginning of the week, the news over the weekend, the Iran negotiations basically completely collapsed to the point there was no meeting and no negotiation. S&P 500 futures, rally to new all-time highs on the news. I don't get it. What's going on here? Am I missing something because I think this is a pretty darn big deal and I think that we're about to see delayed impact, you know, effective of six weeks of supply disruption to energy markets. Seems like markets are just not worried about it. I think it's staggering to be fairly honest, but I think that there is a fundamental reason is that money supply growth is soaring. We have the fastest money supply growth since 2021 globally, led by China, it's true, but also in the United States, Europe a little bit more so, dude, but in the UK it's also soaring. And that obviously, considering that the war is generating a significant impact in investment decisions, consumption decisions, credit demand, etc. All those things are reducing money velocity, but if money supply is growing, but money velocity is stable or declining as in some economies, what ends up happening is that asset prices in financial markets so or at least discount that destruction of the purchasing power of the current. Let me just probe a little bit on why that's having the effect that it's having because I completely understand if we go back to say a 2021 analogy, you had a COVID crisis, it was a really big deal. So we print money like it's going out of style and that kind of recovers the global markets and economy. Okay, you can't print energy and as much as it was a really difficult time in 2021, even though there weren't a lot of people flying on the flights because of COVID and the restrictions and so forth. We had the jet fuel, we had the diesel fuel, we had everything we needed to run the economy, we were just choosing to shut it down. Yeah, I think we're headed into a situation where in some parts of the world, it won't be everywhere, but especially in places like Australia, they're just really going to be hurting for diesel fuel and a lot of other finished products and it will all get worked out. There's no doubt in my mind. It's going to be worked out in a few months. Few months is a long time. It's a long time. Completely agree. I think that there's going to be very severe disruptions and that there are big winners and big losers. I don't think that anybody wins in a wall. Let's start with it. There is nothing, no one that gets a benefit. No consumers all over the world are feeling the damage created by the elevated oil and gas prices. But obviously what's interesting about this crisis is that it's showing the resilience and the ability of the United States and China to endure this kind of situation and actually in the case of the United States is exporting record levels of jet fuel. All these things are certainly elements that are important to take into account relative to other crisis. China is also maintaining the security of supply, banned exports of refined products and it continues to have a very, very, very strong level of competitive advantage coming from its supplier agreement with Russia. But the problem is in Europe. The big problem is in Europe. It's also a problem in Australia. You just mentioned it quite right. Is that many, many economies have not prepared themselves for this type of disruption. In 2022, we had a very, let's say, benign outcome of the beginning of the Ukraine war. You had an immediate spike of natural gas prices, oil prices, coal, grain, you name it, everything. There were huge concerns about security of supply in cereals, in energy of course, etc. But because of the flexibility of supply chains and all the things that you just mentioned, ended up happening, was that added to a very mild winter, oil, natural gas prices, etc. All of them ended the year well below the levels at which they started throughout the Ukraine war. And a lot of countries, instead of taking that as a warning signal, particularly in the European Union, warning signal. We have to make an extra effort to guarantee our security of supply, the flexibility of our sources, etc. Instead of that, what they did was to think it was a policy success. And obviously, now we read that Europe has basically a few weeks left of jet fuel. It's not going to run out of jet fuel. It's going to pay five times what it usually pays. And that is obviously eroding consumer sentiment, consumer sentiment in the European Union is at the lowest level since the pandemic. It's also having a very substantial impact on companies investment in the
positions on the ability to manage working capital. All these elements are going to come later on in the process. Right now we have the effect of oil prices, which is very evident on gasoline prices, things like this. But what we are going to see later is the challenges coming from big erosion of margins, reduction in the ability of to manage working capital and the challenges of supply chain disruptions that are going to be solved with very, very high prices. Because if there's one thing that we see everyday on our screens is that China, Asia is certainly bidding up any flexible cargo of anything. And in the European Union, we don't seem to see that urgency, it looks like it's there continuing to bet on obviously what is going to be a hot summer to mitigate all these impacts. Let's talk about staying power and who really has how much of it. Because it feels to me like this has turned into a contest of who can tough it out for the longest. It seems like the United States is saying to Iran, "Look, we can blockage you, we can stop you, "you're eventually you're going to be to the point "where you can't export your oil, "you're going to run out of places to store it, "you're going to be forced to shut in your production, "that's going to cripple your economy. "We can wait you out." And Iran is saying, no, no, no, we can keep the straight closed and we can wait you out. And I think there's a dimension of this where China comes into it and the US is kind of, you know, almost as a proxy economic war. Signalling to China like, look, we can control all of this stuff and China's saying, "Oh yeah, we can wait you out "because we've got bigger stockpiles of everything "than anyone else." So first of all, Daniel, who really can wait who out the longest? How long could this go on if people are in a contest of staying power or wait you out power? First of all, I guess do you agree that that's what's happening? So how long can they wait it out? But then the next question is, what about not those principle actors, but what about the rest of the world? How long can they afford, including Europe, to wait out this pissing contest between Iran and the United States and China? I think that both the United States and China can wait for quite a bit of time. China, as you have rightly mentioned, has the largest stockpiles of any essential commodity that they need, and on top of that, they have banned the export of petroleum products and other critical elements in this supply chain right now. Also, we have to mention the very substantial competitive advantage that China has by continuing to be the main partner of Russia in this aspect. So China and that aspect can hold on and can wait it out for quite a bit of time. And I think that it's certainly going to be at least until the summit with President Trump, there is certainly going to be no move from China trying to force Iran to take action on allowing a full flow in the state of Hormuz. In the case of the United States, the United States is now the largest oil and gas producer in the world. It is exporting record levels of petroleum products. It's at net exporting of 2.8 million barrels a day. So net exports, very significant, same with jet fuel, same with other elements. The problem is in the European Union and is certainly also in emerging economies. Emerging economies, some of them are going to see some benefits from the rise in commodity prices, Brazil, Argentina, etc. Are going to see that benefit because obviously they're big. So yeah, and oil producers and exporters, all those things may be positive, but an overall negative impact on countries like India, countries like Colombia, countries like Mexico, because Mexico, for example, has demolished its domestic production. Pay mixes in an absolute shambles. So if you look at what we saw discussed prior, Europe does not have the possibility of waiting it out until the end of May or whenever the summit between President Trump and President Xi Jinping happens. That's a problem. So I think that that is. This is the situation that certainly leads many of the expectations and estimates that I see out there to be, in my opinion, way to biased to try to make everything equally damaging for everybody. I think that is incredibly evident for anybody that the United States and China have a huge competitive advantage, be it on their own or be it because of the strong relationship with the second largest oil producer in the world. But many emerging economies are going to suffer quite significantly. Some of them already started the year at much higher levels of inflation than their central banks and certainly markets would feel comfortable. So that is already a big situation. There is something that is debatable, which is the Iran regime going to change its position in an environment in which the Iranian economy is completely demolished because it was already obliterated in 2025 and 2024. Remember that we close 2025 with protests all over Iran, 60% inflation, capital flight, everything. So yes, the Iranian economy is doing really badly and the most impacted by the shutdown of the straight of Hormuz is Iran itself, because 25% of its GDP and 60% of its government revenues flow through the straight of Hormuz. But the regime can stay in the way that they are for longer than what Europe, many emerging economies can actually sustain. No, so I think that all of that creates a quite a significant level of tension because coming back to the example of 2022, when the three sides in this equation that you just mentioned, China, the United States and Iran feel relatively comfortable about keeping the stalemate, then it may stay that way for longer than what other economies can endure. Daniel, the messaging from the Trump administration about this has been look, I asked for the European countries to help in this conflict. They didn't send their navies. They've brought this upon themselves. They're on their own to bail themselves out. We tried to work with them. They didn't want to work with us. That's the way President Trump has presented the participation of Europe and the conflict to the American people. What we don't hear in the United States is the European side of that. So what's the perspective in terms of how it's reported in Europe where you live of both the European Union government, but also just the sentiment of the people of Europe. Is it a boy? We screwed up and forgot to send our navy or is it more of, okay, maybe we need to revisit our relationship with the United States? Yeah, it's very polarized. On the one hand, you have quite a significant part of the population, certainly the media and the political landscape in the following argument, which is we did not feel any threat from Iran. We don't think that the nuclear program of the Iran regime was a threat to Europe. We were not informed of the decisions made by the United States and Israel and therefore we do not need to participate in any of this because this has not been, let's say, discussed with us. On the other side, you have a part of the political spectrum that feel that the European Union and NATO should be supporting the United States but not participating actively in the conflict because in both sides of the political spectrum, there is a certain fear about taking sides with Israel and the United States because a lot of governments from different ideological positions lost a tremendous level of support by participating in the Iraq war. So if you put together the complacent view that Iran is not a threat while at the same time you add the concerns that it is something that Europe would be dragged into this war, not participating willingly, that creates what I would say a majority view that this is something that has been decided by the United States and Israel and that has absolutely nothing to do with European countries. And within that perspective, there are different shades of grey. The German and the French, they continue to support the United States in terms of military support and the United States.
etc. But they're not participating actively. And on the other side, you have Spain that has the government of Spain very intelligently, which is surrounded by corruption scandals decided, wow, I am going to take the anti-Trump card and I'm going to go Gonzo on the opposite message. So all those things are certainly creating very different perspectives. But if I put them all together, what I would say is a majority position in Europe is that at best what the European Union should do would be to support logistically or diplomatically any efforts to end the nuclear program in Iran and to end this war, but not to participate actively on the military side. Daniel, let's talk about the fallout and consequences of this in Europe. Sometimes politicians who don't understand economics are in the habit of imposing price controls right at the moment when they're most damaging and they undermine the price transmission mechanism that's needed to correct supply imbalances. That usually leads to outright you can't get something and you have shortages and all kinds of other problems. What's the mood? Is there a reassurance of don't worry we're going to put price controls on this or is there an understanding that would be detrimental? Overall, the majority of countries in the European Union don't think that price controls are a good decision. But there are some, we have to remember that there's a huge populist left and populist right in the political spectrum. In Europe, the populist left is obviously coming very, very hard. The extreme left is saying we have to start expropriations, we have to start price controls etc. Always they do this, they did this in the Ukraine war at the beginning of the Ukraine war, they did this in 2018 etc. and they've done it all the time. But in general, I would say that policy makers are very, I would say reluctant to impose price controls and certainly very, very reluctant to justify big subsidies, those two elements. Now, as always, in Europe, we always have politicians that will find any excuse to go out and say, hey, let's put Wienfell profit taxes on precisely the companies that could actually support the improvement of security of supply and invest in the flexibility of the system in order to avoid challenges like this. So that unfortunately is less, less I would say consensus. There's more of a consensus of putting more taxes rather than price controls and certainly there are some countries putting subsidies on energy but quite limited. Let's talk about the economic consequences and also the market impacts and where the trades are here. Feels to me like this is a strong enough inflation signal that we're thoroughly into self reinforcing vicious cycle if you will of secular inflation. I've held that view for a long time actually before this conflict happened that we were in secular inflation. A lot of people thought that I was crazy. Am I still crazy? Are we in a secular inflation and if so, what is it going to mean for markets, equities and so forth? I think that we are in an environment of persistent inflation. You and I talked about it. It makes absolutely no sense for people to think that there's going to be a radical change in the inflationary trend. When governments are spending like this, no tomorrow, they're getting more and more debt which means printing money and at the same time when all of the policies are aimed at avoiding any type of reduction in aggregate demand. Therefore, when all policies are based on increasing aggregate demand at any cost, you get persistent inflation because money supply growth is soaring, money velocity does not come down as it should in an environment of crisis because governments spend what the private sector stops increasing their expenditure on and at the same time we are entering this energy crisis with already elevated levels of inflationary pressures because a lot of people say, "Oh, come on, inflation was coming down. Inflation is annualized and inflation is accumulative and more importantly, year after year, we have seen all over the world and this has happened everywhere. The way in which CPI is calculated includes a smaller percentage of, for example, food and shelter. In the case of the European Union, in the case of the UK, those two elements have soared by twice the amount that CPI accumulatively has risen in the past seven years. So the loss of purchasing power of citizens is phenomenal, absolutely monstrous. And I think that is going to be exacerbated by what starts as an energy crisis, but then spreads out to other goods and services because of scarcity, because of lack of availability of a particular product, etc. How long do you think the elevated oil prices will last as the top in or are we still headed to higher prices still and where's the trade there? In my opinion, oil prices have already reached the top. From now on, I think that oil prices are now discounting, that there's the future's curve is in huge backordation, also seems to be discounting that even if the situation ends in no progress, that global supply of oil is going to be managed between the over supply that existed in 2025 plus the exports of the United States, plus the exports of Russia, plus the exports of Saudi Arabia. And basically, those added to higher Venezuelan output are likely to be cushioned elements on the marginal oil price. Can the price of oil go higher? Absolutely, it can, obviously we know. But I think that the risk is tilted to being stable or slightly down, considering that every day, every week that passes, the system is adapting to both on the refinery level and also in the supply of oil level. So I would say that if you look at the forward curve of futures of oil prices, they're basically discounting a huge level of disinflation into the end of the year, but still, and I think that this is where what we have just said is so important, is that the level of disinflation that the forward curve is discounting is still leaving oil prices, $15 a barrel above the level at which they were at the beginning of the year. So I think that that is the problem. The geopolitical risk premium that oil prices completely lost in the past three years, which was an abnormality to be fairly honest, is not only back on that, but it may probably last for a prolonged period of time. And that's where we have to focus in my view, and not necessarily where they can go because they can spike and they can go, you can have a opposed to true social from Trump and the oil prices plummet $10. I think that what is really concerning for me is that the forward curve is discounting that oil prices will still end up much higher than they were in January by December of 2026 and December of 2027. If I look one year out on the forward curve on WTI, it's right around $70. Is that the new floor that stays in place even after the Iran conflict really and truly is over in the Strait of Hormuz is open again, or do we go back down to $50 oil at that point? The other day I had this fascinating discussion with somebody that I knew from Aramco a few years ago, and he was saying we need to be very aware that after every crisis in 2008, oil prices went to 140 then they dropped like a stone to 50. We need to be aware of that negative effect when you have when you start to get accumulative and dominant type of demand destruction. I think this is not the case. Why? Because in 2008 you had a huge crisis, but now all policy makers are focused on maintaining aggregate demand. Therefore, I would say we need to be used to the fact that energy is not going to be the disinflation factor that it has been
between 2023 and 2025. Unless obviously we get the United States to go from 13.6 million barrels a day of production to 17. That would be obviously goodbye oil prices. Or if Venezuela went to three and a half million barrels a day and it completely offsets Iran's exports. Do I think that that is likely to happen in the short term? Very difficult, almost impossible. It is easy to bring the production of Venezuela from 500,000 barrels a day or a bit higher to a million to 100. That is relatively easy. But it's incredibly difficult just to bring it back to 3.5 million. So all those elements in my opinion give me the idea that it's going to be very difficult to bring oil prices down to 50. The same way that it is very difficult to bring oil prices up to 212, which would be in real terms, the equivalent of the old time high. So I think that basically just to summarize it, the geopolitical risk premium is likely to maintain prices at a higher level than we have been used to in the past two years. But the United States has gone from being a shock amplifier to a shock absorber historically in 1973. In 2008, the United States began the largest importer of oil in the world. When there was a geopolitical risk problem, it amplified the risk because it did what China is doing today, which is to increase prices at the margin. The United States now is a shock absorber. And the fact that China has its strategic partnership with Russia and Russia is producing 10 million barrels a day, exporting around 4.5 is also a shock absorber, even if China is setting prices at the margin for LNG and for other energy products much higher than what people would be comfortable with. Again, summarize is I think that the bottom is higher and that the top is much lower. Up until March 2, gold was operating as a geopolitical risk hitch. Bombs fall, gold goes up. Oil goes up, gold goes up together. Now we've got this inverse relationship where the bombs start dropping and gold goes down as oil goes up, the opposite of usual. What's causing that and how long does that last? One of the most fascinating elements about this change in the global landscape of energy that I just mentioned, the United States going from being the largest importer of oil to the largest producer of oil is that the US dollar in this crisis has behaved like a petro currency. It has basically risen when oil prices were rising. And if you look at the correlation between the dollar and oil prices, it's been almost phenomenal. But so I think that what happened was the following, particularly in the past 18 months. A lot of us saw that there were a lot of positions being built in the market with very little equity, very leverage positions on gold using as a source of funds the US dollar. So long gold short the US dollar because it's been a phenomenal trade. And because it's been a phenomenal trade, a lot of people were putting less equity and more debt. So what happened is that once the geopolitical risk scenario got worse and people starting to demand more dollars, the dollar stopped falling around, relative to most currencies around July 2025 and has been stable then started to rise. So margin calls started to appear. A lot of people had to sell their winning positions in gold. In order to reduce their losses or their possible losses in this trade. And I think that what has happened is basically that at the same time, a lot of the central banks that had hordered gold in the past three years aiming to rebalance their asset base, they have decided to sell some of that gold in order to reduce the impact on their local currency of the revaluation of the dollar but also the depreciation of their local currency relative to their trade in basket. So those two things now, very big leverage bets on gold using the dollar, the treasuries as a source of funds and the central banks that have decided to reduce a little bit, take some profits on some gold and mitigate the impact on their local currency. And that's why gold has not continued to rise but it has also behaved pretty well. It has not collapsed in any shape or form. Let's come back to the US dollar index. The dollar was in a downtrend pretty darn clearly before this conflict started. Now we're back up to not quite a cycle high but pretty close to it. Is that a change in direction? Is this a new secular move higher in the dollar or is this just a safety trade that only lasts for as long as the Iran conflict lasts? I think that the upward trend of the US dollar is clearly a sign of risk of environment and also is clearly a sign that there was an uncomfortably high level of shorts on the US dollar in 2025 in particular. I think that all of that has sort of cleaned up a little bit but I don't see the US dollar strengthening in an environment in which the conflict ends. I see it stable. The DXY index, as we speak, at 96.5. It moves up at 100, 101, it moves down. I think that's sort of the trend that the US administration, that the Federal Reserve, that the market sort of sees as the logical trend for the US dollar. And obviously if tomorrow we have a piece of news saying the conflict has ended, there's an agreement and the Strait of Ormuz is open and Iran has stopped its nuclear program. If we get that piece of news, I can guarantee you that the dollar index goes to 96. Another aspect of this conflict is the impact that it will have on fertilizer. I've seen a few reports that least American farmers are having difficulty sourcing all the fertilizer they need to fertilize their crops as much as they would like to. I would assume that that's probably the same situation in Europe. Maybe it's worse there. I'm not sure. How does that play into this? Are we looking at a big food inflation coming? There is certainly a big problem of availability and price of fertilizer. So far, those producers, those farmers and those agricultural firms that are able to accept higher, much higher price of fertilizer are not having a problem of supply. What is the problem? The problem is that, for example, in the European Union, the margins of the farming and agricultural sector have been obliterated in the past five years through taxation and completely misguided environmental policies, etc. All these regulations are over the place. So for the European Union is a much bigger problem. But obviously, at the same time, Ukraine is likely to be there to mitigate a little bit that problem. And Russia, for China, is also likely to mitigate that problem. In the United States, the fertilizer problem is a problem of price. It's not a problem of availability. They can get fertilizers from its main sources outside of China. And that's going to be more expensive. That's why, if you think about this, everything that we're discussing today, everything that we're discussing today leads to a point in which Trump and Xi Jinping get together and they reach an agreement that is beneficial for both, or things get really, really nasty for everybody. See what I mean? So that's why I think that all these little elements that are creating tensions are likely to come together into some form of agreement that sort of wraps the trade war and the geopolitical challenge or the Iran war right now in some form. And obviously that may take some time. For the traders in our audience, Daniel, what can you think of, beyond what we've already discussed, that might be a consequence of this conflict that will play out in markets? Is there a shortage of X, Y, or Z that people need to be thinking about? I think people need to be thinking about the challenges for the financial
sector of continuing to lend and not face significant provisions, particularly in the case of the European Union, there always a lag effect. I think that people need to be aware of the problems in the aviation sector. I think people are already aware of that path. I don't think that they're aware of how quickly the margins in the aviation sector go to negative. I think that that's where people are still not paying enough attention to. The automotive sector is going to have huge problems of spare parts, etc. This is the thing. Everybody's trying to find solutions right now in the world for essential raw materials and minerals. Right now we're seeing the price to availability element playing out well. But it seems that all of those ships that are currently stopped or unable to get to the place where they're heading to. Most of them are actually taking spare parts, elements that are essential for the production of cars, for the production of different parts of the economy. So I think we're going to have in the services sector, tourism is going to have a big big problem into summer, particularly in the European Union. It's already evident that you've seen the services sector in contraction for the first time in I think three years, four years. I think you're going to have big problems in the automotive sector and I think you are going to have big problems in everything that has to do with their travel. And apart from that, you're going to continue to see equity markets doing pretty well. Well Daniel, I can't thank you enough for another terrific interview before I let you go. You run the fund at Tresses. You're also published author. You've got lots of different things going on. Tell people how they can follow your work and for our accredited and institutional investors. How can they reach out to you with respect to your fund to invest in our fund? You just can contact Tresses, TRE, SSIS. And they'll be able to give you all the information. In terms of following me, you can go to my website, dlakaia.com. There's a part in Spanish and a part in English. So don't worry about it. I also have a next account in English, dlakaia_IA. And my official YouTube channel in English, I always say that it's easier to find me than to avoid me. So just put Daniel lakaia and you start to get everything. But remember that for everybody that is listening, that you can find for every account that you see, you'll probably see the first one in Spanish. I have one in English. So make sure that you look for the English or international account. Patrick Sarasda and I will be back as MacRevoices continues right here at macrevoices.com. Now back to your hosts, Eric Townsend and Patrick Sarasda. Eric is great to have Daniel back on the show. Listeners, you're going to find the download link for this week's trade of the week in your research roundup email. If you don't have a research roundup email, it means you have not yet registered at macrevoices.com. Just go to our homepage and look for the red button over Daniel's picture saying looking forward to download. Patrick, for this week's trade of the week, Daniel lakaia argued that while liquidity is supporting the markets, underlying stress is building in Europe and could hit financials with a lag. So how do you position for that potential divergence within global financials? Eric, Daniel lakaia's point was that the liquidity is keeping asset prices elevated, but the real economic stress is building underneath the surface, particularly in Europe. And while that hasn't fully shown up in the data, the transmission mechanism tends to hit with a lag through margins, credit conditions, and ultimately the financial sector. So rather than chasing what's already moved, this trade is well positioning for that delayed reaction where Europe's financials begin to reflect the underlying strain relative to their US counterparts. Now what makes this setup particularly interesting as I'm showing on page three of the chart deck is that the European financials as proxied by the iShares MSCI Europe financials ETF, which is the symbol EUFN has materially outperformed the US financials represented by the financial select sector spider ETF XLF since the start of 2025 with the EUFN up roughly 59% versus about 8% for the XLF. That relative strength has pushed the spread toward the upper end of its recent range, even as the underlying macro backdrop in Europe appears far more fragile. So rather than chasing absolute direction, the opportunity here is to fade that relative outperformance and position for a reversal, pairing a short position in the European financials against a long in the US financials to capture that potential divergence as macro stress begins to surface. From a trade construction standpoint, this is a classic long short ratio trade where you're pairing a long position in the US financials against a short position in the European financials to isolate the relative performance to implement it in a dollar neutral way with XLF trading around 51.71 and the EUFN near 36.99. That works out to roughly a.72 shares of XLF for every one share of the EUFN to balance that notion with exposure. The objective here isn't to call the outright direction of the market or rather to capture the spread between the two expressing the view that US financials should outperform the European counterparts. But for those who are concerned about the left tail risk in a broader market sell-off, you can introduce convexity by replacing the XLF equity with a deep-in-the-money call option. In this case, using the 85-cent delta, October 16th, $45 strike call option on the XLF trading around $8.26 with roughly 169 days to expiration, providing high-delta exposure that behaves similarly to the long stock on the upside. The key difference is that as markets move lower, the options delta will naturally decline, reducing effective long exposure and dampening downside losses. So you preserve most of the relative performance capture if the trade works while embedding a more defensive convex profile of both legs come under pressure in a risk-off environment. 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 equities. What are your thoughts here? Patrick, the market's willingness to shrug off the Iran crisis is striking to say the least. Clearly, the crude oil market got the memo. Meg 7 earnings were mixed, frankly, so it's hard to attribute all the strength and equities to that alone. I see parallels here to the COVID pandemic. Now admittedly, it's not quite as certain in this case. In the COVID situation, we knew with certainty by the first of February that there was going to be a global pandemic, or I should say anybody who was paying attention knew that with certainty by February 1st took the market a good month almost to figure it out after that. So it's different in this case because if a deal was suddenly reached tomorrow and the straight reopened completely and permanently tomorrow, then the pandemic level economic outcome on the global economy probably wouldn't occur. But frankly, all indications that I can see are that both parties are overconfident and happy to play chicken and wait the other out. The parallel to the pandemic is that if this goes on for two or three more weeks, then we really are facing a global energy price crisis that becomes inevitable and simply will not be possible to avert. It's not quite at that critical level just yet, although it is certain there will be a very significant disruption, the effects of which have not yet been felt. There's still room maybe to salvage this without completely crippling the global economy to the extent that COVID did. But if we go on a few more weeks, it really will be. And the assertions being made by President Trump that Iran is only two or three days away from being forced to shuddy and all of its production are just plain wrong. Sorry, Mr. President. JP Morgan is saying it's at least a couple more weeks before we get to that stage. And our good friend Jim Bianco pointed out on X that Iran does have a sort of nuclear equivalent environmental option, which is if they run out of
storage to put that oil in. They could just open a pipeline someplace and start pumping that oil into the ocean. That would be obviously an environmental disaster if they were to pump more than a VLCC, several million barrels of oil and just pump it overboard. It would pollute the environment and it would put all of the neighboring countries' desalination assets at risk. I think that this is really pretty darn serious and the president's perception that Iran is out of options and about to be forced to capitulate is probably not accurate. I doubled down on my S&P hedge position on the spike to 7200 that we got right after Wednesday's closed. That was a gift and I was quickly rewarded Wednesday night. As I'm recording this very early in the wee hours of Thursday morning, we're seeing a little bit of a bounce here just coming barely above 7150 again. I won't be surprised if it's lower by the time you hear this. But frankly, you know, anything's possible here. If we get another bounce to 7200 because the stock market just doesn't want to get the message, I'll add even more to my hedge. My theory though is that just like the pandemic, what's going on here is people aren't going to stay in denial because they've never seen anything like this before and they're just not going to believe that what is clearly inevitable is actually happening until it has already happened. And that's starting right about now. In other words, the lag effect of global transit times, the oil takes several weeks to travel to its destination from the Persian Gulf. Well, we're finally getting to the point where those effects are now being felt in the sense that refineries don't have enough crude oil. They're not able to refine and produce finished products and so forth. We haven't gotten to rationing in very many places yet. Iran has announced that they're rationing, but almost nobody else is doing that. That's about to happen and it's absolutely inevitable. We're going to have a shock as a result of this. Now, if the straight has already been reopened when that shock really starts to hit the market. And there's a light at the end of the tunnel, maybe markets will kind of grin and bear it and bear through this. But I think what's more likely is if the straight remains closed for at least another week, which as far as I can tell is what all signals are suggesting is going to happen. Then as we start to feel those real impacts and we are rationing fuel all around the world, I think reality is finally going to set in with a time lag just like it had a time lag during the COVID crisis. So we'll see what happens. No matter what those effects that we're just starting to feel now are going to be felt for at least six more weeks. And if the straight stays closed for three more weeks, those lasting effects will be extended for months as a result of the shutdowns, which take a lot of time and money to reverse once they've been shut in. Well, Eric, my take on all of this is that the macro fundamentals will prevail, but they always prevail over the longer term on the short term. What we experienced was a substantial flows pivot driven by all sorts of systematic trading that created a huge squeeze to the upside and certainly through fuel on the fire of reigniting the AI flows. And so we're now in a situation where these types of moves don't end or turn on a dime odds are that from this flows perspective, the market could stay at these elevated levels for weeks. If not a month or more before the flows have room to pivot once again to a sell cycle, I do think that the longer term, all of the damage that's being done on a macro scale will end up manifesting in the equity markets. But with us at these elevated levels, it's going to be hard for there to be a bearish downturn on the downside from an upside perspective. There are a number of the measured moves that we're doing that target 74 to 7500, but one of the things that I was looking for was a bullish tailwind from these mag sevens would be needed in order to really get that market up to that elevated level from a market breath perspective. While we're trading at these 52 week highs, the breath of the market is under 50%, which is essentially means that 50% of stocks are actually in a downtrend, really shows how concentrated this entire advance has been in this AI story. And how important these mag sevens rallying here is to keep this going one way or another, there is going to be a point where the markets will have to take this macro condition seriously, but I'm not necessarily thinking it's imminent. All right, Eric, let's touch on this US dollar Patrick, we still have a big unfilled gap on the Dixie chart up to 99 spot 38 from just after the first ceasefire announcement. And I still expect that to be filled maybe fairly quickly here just from the signal that we're getting from oil. President Trump has indicated that he's told his military commanders to prepare for a strike on Iran. If that actually happens and we've got bombs dropping again, that's probably what will give us that gap closing spike up on the Dixie chart. Crude oil is already signaling that that's coming, least as of recording time that hasn't happened yet, we're still looking at less than 99 on the Dixie chart. As of recording time, I won't be surprised if we get any kind of kinetic action out of this conflict. It suddenly takes it well up to 99 spot 38, which is where that gap on the chart ends. I am probably higher than that depending on how big of a military barrage we get. Again, President Trump has ordered the military to plan for that, but at least as of recording time, there haven't been any bombs dropping. This weekend could be hot again. Now, eventually, I think the dollar downtrend will resume and resume in earnest. The tape action that we've seen so far on the perception that we had an all clear as of last week seems to have already confirmed that view. So very little doubt in my mind that we eventually see a resumption of the secular downtrend in the dollar index, but not till we get up spike first, maybe a sharp one. Then we go back down after this conflict is really and truly over, we start to see the dollar sell off and sell off to new lows. I don't think that happens until the conflict is completely over and I think that is still a long way off, unfortunately. So Eric, for me, this is all about watching the Euro. We're pinned in a tight range. And for me, I consider the Euro to be in a neutral zone between 116 to the 118 level. In order for us to see a deterioration in the Euro, it would take a break below the 116 level, which would send dollar index potentially on another bull advance. But we haven't seen that yet. We're right now at 117 right in the dead center of that kind of trade range and really been trading sideways for weeks. We'll see what the next catalyst that emerges to potentially cause a break up right now. It's very quiet and very inactive and we're going to wait till that wakes up before putting on any big trades on our end. All right, Eric, let's talk about oil clearly a huge move on the upside. How do you size this up? Patrick, this is playing out exactly as I expected it to remember what I told you two weeks ago listeners. We said a big dip was coming and that was the dip to buy the very next day. You got a chance to buy 79 dollar West Texas intermediate crude oil futures by midnight on Wednesday evening just before recording time. We were up more than 40% in those two weeks to over 110 dollars. What is that annualized to? I only bought a small tranche of flat price futures and then a much larger tranche of time spreads. The time spreads are also performing extremely well. The news that hit the tape after I recorded the interview with Daniel Lecaye was the UAE United Arab Emirates pulling out of the OPEC alliance. That's really, really big news. My initial interpretation of what's going on here is the UAE has been complaining for years about what it considers to be unfair quota apportioning where all the other producers were basically peddling as fast as they could and still staying within their quotas. Their quotas UAE in order to comply with its quota had to produce well below its capacity and that meant that the UAE and Saudi Arabia were the only countries that really had any significant spare capacity. What this move signals is UAE is saying, "Baby, when this thing is over, we are going to produce produce produce. We're not going to worry about any quotas and we are going to take advantage of the opportunity to produce as much oil as we possibly can to sell into the massive deficit that is going to be created by this crisis." Now, in the long run, the bigger picture here I'm absolutely convinced is that spare capacity is history. We were already pretty close to that point and I think this crisis pushes us into a new regime in the oil market where we're not going to have spare capacity and OPEC a few days later.
effectively controlling the market. The UAE is basically telling Saudi Arabia we're not playing this game anymore. We're gonna produce as much as we want. At that point, Saudi is the only one that has any spare capacity. They're probably gonna produce as much as they can in order to keep up with UAE. That will drive prices down when this conflict is over. It might lead to a rapid recovery of prices down to, I don't know if we're gonna get quite to the levels we were at before the crisis, but we'll get close on all of that competitive overproduction. The thing is longer term, what that actually means in terms of pricing signals is we're not gonna have any spare capacity left. The market is going to be incredibly vulnerable in coming years to great big increases in price. Anytime there's any kind of disruption, because we don't have the spare capacity, if I'm right, if my prediction is correct that spare capacity is gonna become a thing of the past and everyone's gonna produce as much as they can, we'll bring prices down, but it means OPEC will no longer be able to manage markets and will no longer be able to contain any future upside price spikes. So I think that's the really big takeaway here and it's gonna look backwards in terms of the price signal that you see as the conflict ends. For now though, I don't think the conflict's ending and as these effects get felt by the global market, I think we're gonna see continued upward pressure on prices until there is an actual deal to reopen the straight. As long as the straight stays closed, I think prices keep going up from here. A question I want you to ask yourself is okay. Wednesday was a massive, massive move, $8 in a single day. What was the signal? What was the catalyst that brought that about? Well, President Trump threatened some more violence. Well, he's always threatening that. That's nothing new there. He was just reiterating threats he's made previously. Iran began rationing, okay, wait a minute. If Iran began rationing, yes, it means they're running out. But if anything, that would be a signal that the end is near. In other words, it would suggest that maybe President Trump was right that if Iran is rationing fuel, it means they don't really have the staying power that they claim to have. So it doesn't make sense that that would cause $8 up in prices. President Trump's no more Mr. Nice Guy comments. Again, he's made these threats before. So we still saw $9 on the day on WTI. I think Brent was up even more on Wednesday. I think the reason is because those easily foreseeable impacts that the market has known about for weeks are finally starting to be felt. So the rubber hits the road when there's actually no tanker arriving to supply various refineries around the world with the oil that they need in order to continue refining. So potentially we get a risk of refinery shut-ins coming next. I think it's going to get much worse from here. Let's see if the stock market gets the memo. So far it hasn't. Well, Eric, I'm going to look at it a little bit technically here, which is that we broke some of these key breakout zones on the upside, which is jammed the upside window open again. And while there's resistance at its previous highs, this is clearly showing a new trend of flows coming in on a swing trade basis. And we'll be interesting to see whether 52 week highs here follow on this breakout at this stage. There isn't any imminent deal. And so the tight oil markets inevitably are a tailwind for oil to potentially continue higher here. All right, Eric, let's talk about these precious metals markets. Patrick, I de-risked my gold position considerably on Sunday night's bouts above 4730. I sold more than half of my position. First time in years that I've done that. Because frankly, the gold market tends to punish people who try to get cute and trade in and out of it, thinking they're going to outsmart the market. Now, the reason that I went ahead and took that risk and traded out of my position, despite the fact that I'm still convinced that we're eventually going to new all-time highs. And I don't think that this secular bull market and gold is over is that it's now crystal clear to me that markets are just not yet discounting. What I'm convinced is inevitable for oil prices. And as this oil crunch gets worse and the market finally starts to panic, I think it's going to bring us new lows in gold, maybe even a lower low below the 200 day moving average and even below the 4100 low that we already saw. So again, I'm taking a pretty significant risk here. The reason I only sold a little more than half of my position is the gold market tends to punish people who get cute here. And if we suddenly have a resolution and the straight is open again, I think gold is going to rally and rally hard. But for now, I'm happy to step out of the way because I'm not sure how much downside is left in this market. And of course, what's driving gold to the downside is that as we see crude oil prices increasing, it sends a macro signal that basically makes it impossible for the Fed to do anything other than consider a rate hiking rather than cutting cycle in order to counter inflation. That's the risk to gold that's the reason gold has been selling off. And I think we're going to see more of that before this is over. I hope I'm lucky enough to try my trades well enough to get back in close to the bottom and that I don't end up getting left behind if we see a whipsaw from here. Well, Eric, when I really step back and look at what's happened here in gold over the last two years through 2000 and 24 and 25, we went through an epic bull market advance in gold and we had a parabolic blow off in January. And since then, gold has been in a corrective phase. Now, corrective phase may now be more sideways. If there was another leg down, we could temporarily test 4000. Overall, I'm long-term very bullish. But we have to first see where this corrective pattern finishes. And when we see basing in accumulation, start to appear again. As of this moment, it's still in this primary downtrend. At minimum, I think the next buy signal is going to take a breakout back above 5000 to really set in motion some sort of a positive feedback that gets a new trend going. Right now, things are very quiet in the gold market. All right, Eric, let's move on to uranium here. Well, the market is pulling back modestly in what's just a natural stochastic oscillators we're starting to get overbought. Now they're rolling over. What's going to happen, though, if the broader market tanks when the reality of this global oil crunch finally hits the tape? I'm not completely sure because without a doubt, this whole Iran event is ultimately long-term bullish, nuclear, and uranium names. The fundamentals here couldn't be clearer. The global economy is under serious threat. And we need to accelerate the nuclear renaissance in order to reduce our dependency, especially after that signal from UAE pulling out of OPEC means we're not going to have any more spare capacity in order to cushion future shocks. So when you really think this through, this is all super bullish nuclear and super bullish uranium. Thing is, the market doesn't work that way. A falling tide lowers all boats just as a rising tide lifts all boats. And this could be a tsunami or a tsunami and reverse. I'm not sure what the metaphor is, but if this Iran situation isn't resolved in the next couple of weeks, we could be looking at a massive global economic dislocation on par with the COVID pandemic. That could potentially result in everything selling off, including uranium stocks. So let's see what happens here. I'm a little bit surprised by how quiet things have been. I mean, there's every opportunity for uranium stocks to have gotten some bullish tailwinds from the fact that these AI and data center story usually pairs it with some sort of an energy build out. And typically, there'd be some flows. Overall, the uranium space seems rather quiet. I wouldn't interpret it bearishly, but certainly not active at this moment. It continues to consolidate very similar to the way gold has been consolidating. And we're going to have to see when flows start to pivot again. But for now, we're in some form of a distribution cycle. And we have to just let it finish playing out. Patrick, before we wrap up this week's podcast, let's hit that 10-year Treasury note chart. Well, Eric, what we continue to see is a direct correlation of rates to inflation expectations driven by the next move in oil. And so as oil broke out here on the upside, so did yields. And now while I'm showing the chart on the 10-year yield breaking out towards 4 1/2 on the upside, you can see this on sober futures. You can see this on the 30-year. It doesn't matter where on the curve you go, we're getting that direct sensitivity to this move in oil. So I think that the one thing to just respect here is that if oil was to break out, which is not a certainty, but if oil was to break out above 120 and get running on the upside, that almost certainly puts some short-term pressure on this causing yield.
to potentially break out back towards 2025 highs. And so will we get that? Let's watch the oil market right now. These introshray markets seem directly correlated to this story. Folks, if you enjoy Patrick's Charter Dax, you can get them every single day of the week with a free trial of big picture trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com. Patrick, tell them what they can expect to find and this week's research roundup. Well, in this week's research roundup, you're going to find the transcript for today's interview as well as the Trader the Week chart book. We just discussed here in the post game, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's research roundup. That does it for this week's episode. We appreciate all the feedback and support we get from our listeners and we're always looking for suggestions on how we can make the program even better. Now, for those of our listeners that write or blog about the markets and would 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. And also you can follow Eric on X @aerichesstounson. That's Eric's belt with a K. You can also follow me @PatrickSorezna on behalf of Eric Townsend and myself. Thank you for listening and we'll see you all next week. [music] That concludes this edition of Macrovoices. Be sure to tune in each week to hear feature interviews with the brightest minds in finance and macroeconomics. Macrovoices is made possible by sponsorship from bigpicturetrading.com the internet's premier source of online education for traders. Please visit bigpicturetrading.com for more information. Please register your free account at macrovoices.com. Once registered, you'll receive our free weekly research roundup email containing links to supporting documents from our featured guests and the very best free financial content our volunteer research team could find on the internet each week. You'll also gain access to our free listener discussion forums and research library. And the more registered users we have, the more we'll be able to recruit high profile feature interview guests for future programs. So please register your free account today at macrovoices.com if you haven't already. You can subscribe to Macrovoices on iTunes to have macrovoices automatically delivered to your mobile device each week free of charge. You can email questions for the program to
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