Complete Intelligence


It’s Malaysia’s Time Finally

This podcast is originally produced and published by BFM 89.9 and can be found at

The BFM hosts provides a comprehensive overview of global markets and corporate earnings, covering major stock indices’ performance and specific company reports like HP Inc. and Salesforce. Analyst Tony Nash discusses market valuations, highlighting potential overvaluation of US stocks and undervalued markets like Poland and Israel. Discussions on tech giants Nvidia and Apple illuminate trends in the technology and automotive sectors. It also explores Apple’s decision to abandon electric vehicle ambitions, insights on emerging markets like India, and shifts in global supply chains. The segment concludes with an analysis of Salesforce’s earnings report, focusing on revenue growth concerns and the company’s strategic emphasis on AI technology for future profitability amid market changes.



BFM 89.9. Good morning. It’s seven o’ six a.m. On Thursday the 29 February. You are listening to the morning run. I’m Shazana Mokhtar with Wong Shou Ning and Keith Kam. We are going to start the morning with the recap of how global markets closed overnight.


Wall street ended lower as investors were looking ahead to a key inflation report that’s due out later this week. The Dow Jones fell 0.1%, the S&P 500 was down 0.2% and the Nasdaq was down 0.6%. Earlier in the day, Asia was pretty much in the red as well. The Nikkei was down 0.1%, Hong Kong’s Hang Seng was down 1.5%. Shanghai’s composite index was down 1.9%, Singapore’s STI was down 0.6% and the FBMKLCI back home it ended lower, 0.9% lower at 1546 points.


All right, all in the red, surprisingly. But let’s take a look, maybe at some of the headlines coming out of corporate America. We have quite a number of companies reporting earnings with HP Inc. First on our docket, they reported first quarter results that missed estimates and this is really due to the ongoing slump in pc sales. Revenue declined 4% to 13.2 billion U.S. Dollars in the first quarter ended January 31, dismissed estimates of $13.6 billion. Profit, excluding some items, was share in line with Wall Street estimates.


If you look at different segments after two years of declining revenue in the consumer pc unit, analysts were hoping for a sales increase in the quarter. But instead consumer sales fell 1% to $2.76 billion, while pc revenue dropped by 5% to just above $6 billion. Its printer division revenue was pretty much in line with estimates at $4.38 billion. And that’s down by 5%.


Okay, so what’s the outlook? The company expects pc sales to increase in 2024. Basically, the new computers are now tied to Microsoft Windows eleven software, and there’s some modest impact from AI ready pcs. But if you look at the pc market right, it’s really going through a major downturn. Some people say it’s the unparalleled in the industry’s recorded history. Holiday shipments last year were the lowest since 2006. So it might be we’ve reached the bottom and then hence it’s going to be up from now. But very quickly, does a street like this name, what do they think? The answer is not really because there’s just eight buys, eight holes, three sells. Consensus price for the stock, $33.27. It was down eleven cents to twenty eight dollars and seventy two cents.


All right, we are going to take a look at more earnings, but let’s first take some discussion on what’s moving markets. We do have on the line with us Tony Nash, the CEO for Complete Intelligence. Tony, good morning. Thanks very much for joining us. The S&P 500 forward PE ratio has risen above 20 times for the first time in two years. Based on this, do you think us stocks are overvalued, as some analysts believe?

Tony Nash

Yeah, I think it’s possible, but we have to look at some of those stocks that are hitting those high levels. So if you look at Nvidia, which is a stock that everyone loves to talk about, Nvidia is contributing 23% of all of the S&P 500 earnings right now, all the earnings growth. So this is one that people love to point to and say, hey, it’s overvalued. But actually you have to pull back and look at the whole market and go, this one stock is actually propping up. We’ve all seen that meme where there’s this house falling over and there’s a log holding the house and fall on its own. Right? That’s Nvidia right now and maybe a handful of other stocks. So when we look at something like Warner Brothers, which is an old media stock, it’s got a massive PE right now. And that’s not technology, it’s just a firm specific valuation. So is it overvalued? Probably, possibly. But I think that’s a function of both earnings growth expectations and interest rate expectations. So there are a number of people here in the states who still believe the Fed is going to cut rates, and they’re factoring that into their equity valuations when those expectations keep getting pushed back and back and back.

Tony Nash

So at some point those rate expectations will catch up with the valuations and the pes. I think it’s also necessary to look at global forward pes. Okay, so the US is definitely in a weird place at, say, 21 times earnings, but if you look at, say, Denmark and India, they’re hitting 25. Those are two markets that are very highly valued. So when we look at the US, because of the strong dollar, we have a lot of capital being attracted to the US right now because of the strong dollar and because of the higher for longer narrative out of the Fed, those markets, they’re attracting some capital, but especially a market like Denmark. I’d be really concerned of the overall pes in a place like Denmark. And then finally, if we look at Malaysia, Malaysia has 15 times PE right now, so it’s not nearly as stretched as the US is right now.


Okay, so you highlighted us. Thank you very much, Tony, because we are usually nervous, but what other markets would you pay attention to which you think are, well, cheaply valued, undervalued.

Tony Nash

Cheaply valued, undervalued. Well, let me look at this list. Well, you’ve got things like, say, Poland. Israel is undervalued. Poland is undervalued. South Africa might be, Brazil might be. I mean, there are different types of risk in these markets, right? And we look at know people have really fled China as an investment market right now, really because of economic and policy risk in China. So if you look strictly at PE, China looks very undervalued, but you have to look at the other risks around that market to understand what’s loaded into that PE based valuation.


Tony, can I pick up on something you said about Nvidia just now? Its spectacular run is being compared to what we’re seeing with Cisco during bubble. Is this a valid comparison and where do you think they are similar and different?

Tony Nash

Yes, I love that comparison. Because when you mention that comparison to anybody, anybody who watches markets, nobody is just kind of met about it. Right?

Tony Nash

Everyone either hates it or they love it. So I’m old enough to remember the Cisco run up. And so personally, I have some selection bias and I see a lot of parallels, but in reality, it’s both yes and no. So they’re both selling infrastructure to kind of the current thing. Right? So for Cisco, it was the first generation of the Internet. For Nvidia, it’s AI. Nvidia is spinning off much more cash as a percentage of overall market earnings than Cisco did back in the day. So it seems to be on much more solid footing than Cisco was. We also have Nvidia selling into the likes of Google and Microsoft. These are Facebook and so on. These are very large companies with very solid cash streams, whereas Cisco was selling to a lot of people and a lot of startups that really had money pulled when that Internet bubble. So I think there is some merit to that comparison. I think it’s an interesting one, and it’s one that I gravitate to because I live through that first bubble. But I think you can see both sides of it and definitely justify both sides.


Tony, can we take a look at recent news coming out of Apple? They dropped their decade long aspiration to enter the EV space. Is this a sign that the EV market is already reaching a peak in terms of competitor space as well as returns on investment?

Tony Nash

Yeah, I think for EVs, we’ve had a pretty long hype cycle for probably the past ten years, and Apple’s been talking about developing EVs for that long. And when we have a lot of the Chinese EV makers who are really making headway and they do amazing products, and in the US, you have Tesla that has huge market share, and we’ve got European brands and legacy brands and us legacy brands and Japanese legacy brands, all with EVs. I think from Apple’s perspective, it’s looking at that market and going, are we really going to bring something to the market that’s not there? And they do wearables, they do mobiles, they do software, they do other stuff. And I think from the board perspective and from the operating management perspective, they’re looking at it. There’s a huge capital expenditure risk of building automotive plants. There’s a huge supply chain on the selling end that needs to be built up. And then there’s a massive amount of marketing to get into that crowded space. So for them, I think it just makes a lot of sense to pull the plug. And I’ve been waiting for this for a long time, actually.


Okay, Tony, we’ve talked about China. We talked about Malaysia, some markets which are very unknown to us, like Poland and Denmark. But what about India? What are your thoughts on this market?

Tony Nash

Yeah, so we saw some announcements over the past couple of weeks of people moving manufacturing to India.

Tony Nash

And so I think India can definitely draw investment away from China in terms of manufacturing and supply chain investment. But I think that, say, China plus x strategy, whether it’s one, two, three, or multiple countries, that’s not something that people, major companies can execute right away. It’s something that takes time. And the problem that India has is Malaysia, Thailand, Vietnam are very, very good at what they do in terms of manufacturing. And so those are the competitors for India. So India has, say, very low labor wages, but the infrastructure and the services surrounding manufacturing aren’t as well built out as they are in, say, Malaysia, Thailand, Vietnam. So I do believe that India will provide benefit for very labor intensive, very scale oriented manufacturing. But again, for those guys, it’s really hard to just turn the tap on in India. They have to make a major investment, run it in parallel, and then maybe turn the tap on full. So I know India has been building this for a long time. Made in India started, what, twelve years ago or something. Right? So they’ve been pushing it for a long, long time, but there’s a whole ecosystem that has to be built out and I know they’ve made headway there, but it’s just not as built out as say Malaysia, Thailand, Vietnam.


Tony, thanks as always for the chat. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead. We have a little bit of time. Perhaps we can take a look at another earnings report that came out overnight. And that is Salesforce. Salesforce shares fell by 4% after it provided an outlook for sales that fell short of estimates, although results for fourth quarter surpassed estimates suggesting that new AI features for its software have yet to boost growth.


For its 2025 fiscal year, Salesforce expects adjusted earnings to be between nine dollars. Sixty eight to nine dollars. Seventy six per share revenue is expected to increase by about 9%, up to $38 billion. And analysts had expected $38.6 billion in revenue previously.


Okay, so what they’ve done is they’ve cut costs just like any other tech company and that has helped profitability in the past year. But now investors are saying where’s the profit really going to come from? Where’s the growth coming from? Especially since a lot of companies are tightening their respective spending on software. So they are, of course just like anyone else, investing heavily into AI. But that monetization path isn’t so smooth, isn’t so fast, right? So in the meantime, I think people were disappointed with their numbers. They however, have launched a copilot feature that uses generative AI to answers questions and to create new content. Now, does the street like this name? Do you remember this? Was a real darling during the pandemic? Still a darling actually if you ask me. 42 buys, 13 holes, just one sell consensus tile price $304.13 last and price $299.77 up. Love the ticker on Bloomberg. CRM says it all right.


Indeed. 07:19 a.m. We’re going to head into some messages and when we come back we’ll continue looking at the top stories in the newspapers and portals this morning. Stay tuned. BFM 89.9.

Audio and Podcasts

AI: More Hype Than Substance?

This podcast is originally and first published by BFM 89.9 The Business Station for their program called Morning Run. Find the original source at

Investor excitement over AI has been driving up valuations of tech stocks, but to what extent is this optimism substantiated? Tony Nash of Complete Intelligence weighs in on the sustainability of the tech rally, as well as the outlook for Fed monetary policy, among others.

Key takeaways from this episode:

  • Fed likely to delay rate cut to July unless significant economic changes occur.
  • Market expectations of 3 to 5 rate cuts for the year but unlikely to be as aggressive as initial rises.
  • Tech companies like Microsoft and Nvidia driving market rally, but concerns over valuations exist.
  • Nvidia’s high valuation raises questions about benefit versus risk.
  • US oil production impacts OPEC and Russia’s influence on oil prices.
  • Japanese Yen weak against USD, potential for intervention due to undesirable levels.
  • Cisco reports revenue decline, plans to cut workforce by 5%.

In this podcast from BFM 89.9, Tony Nash shares insights, indicating that the Fed views the hot CPI number as a sign of strong policy and hints at a potential rate cut in July 2024.

The conversation shifts to the stock market rally and the performance of tech giants like Microsoft and Nvidia. Tony highlights the concentration of the rally in specific stocks, raising concerns about valuations and market dynamics. He questions the sustainability of Nvidia’s growth and the risk associated with its current valuation levels.

The discussion then changes to the oil and gas sector, focusing on the US’s significant oil production and its impact on global supply dynamics. Tony explains how the US’s supply has influenced geopolitical risk premiums and natural gas prices, reshaping the market landscape. The conversation also touches on the Japanese Yen’s depreciation against the US Dollar and potential interventions by Japan.



All right, for some thoughts on what’s moving international markets, we have on the line with us Tony Nash, CEO of Complete Intelligence. Tony, good morning. Thanks as always for joining us. So, hotter than expected, US CPI numbers have dampened market expectations of a rate cut. How do you think the Fed will view those figures? And where do you think they’ll place the timing for the first rate cut of 2024?


Yeah, I think the Fed sees the hot CPI number as their policy just not having enough time to work. So jobs are relatively strong, inflation is reinserting itself. So it’s definitely higher for longer. There had been an expectation of, say, a March rate cut, but that’s definitely gone now. Markets have wanted an earlier cut, which is why we saw so much activity in stocks. So we’re seeing some stuttering in valuations, a lot of the choppiness in valuations at the moment as investors try to figure out where is fair value. So the next rate cut is likely July. So it’s pushed back pretty dramatically from what we expected, unless we see something change. If we see recession come in or job cuts or deflation or something like that. But what we’ve seen over the past couple of years is the Fed has proven that it’s determined and that it’s patient. So they’re not in a rush to cut.


What does this then mean for the quantum of cuts? Tony, I think market is expecting a range between three, probably now three to five cuts for this year. What are your expectations?


Yeah, I definitely don’t see cuts coming at the rate at which they started. Meaning, remember, those first two rate rises were 75 basis points. We’re definitely not going to see 75 basis point rate cuts unless we see some dramatic problems in, say, housing or equities or something like that. If it’s really just dialing down because inflation has slowed, then there’ll be minimal rate cuts and they’ll be spaced out over time because we’re really just getting back to kind of a normal rate environment. So we’ve been in a zero interest rate environment for so long that people are not accustomed to actually having a real cost of money, which is what interest rates are. And so we’re probably in a zone between, say, 4% to 5% where they may actually want to keep interest rates in that zone to have a normal cost of money and cost of risk.


Tony, with this in mind, and the stock market rally that we’ve been seeing in the past couple of weeks or so, along with how well tech companies like Microsoft and Nvidia have been doing, what do you foresee going into the coming weeks as far as the market is concerned?


Yeah. Companies like Microsoft and Nvidia are really in their own realm. You know, the mag stocks, they’re pulling the entire market. So when we see a rally, it’s not a market-wide rally, it’s largely concentrated in those stocks. Last week, for example, we saw Facebook rise by 21% in one day. That’s unbelievable. And for a company that size to see a 21% rise in their value, it’s really strange. So investors will have to see a dramatic change in news, or they’ll have to see investment funds dump shares before they give up their current positions. One telling factor, maybe Jeff Bezos’s sale of a large tranche of Amazon stock this week. He could be signaling that he thinks the market is at a top, so he’s cashed in for now. So if that’s what he’s communicating to markets, we’ll have to see if investors really receive that and what they do with those tech shares.


Okay, can I talk about Nvidia? Because that’s another stock that’s just gone gangbusters, right? It’s up almost 50% on a year to date basis. I’m looking at Bloomberg forward P’s of 60 times. It overtook Alphabet and Amazon. In terms of market cap, are we putting too much money and too much faith into AI?


I don’t think we’re putting too much faith in AI. I think we need to examine the earnings of those AI companies harder to understand the quality of those earnings. If Nvidia is rallying and other semiconductor companies are not rallying, we have to ask why and look really deeply into their value chain and understand what their sales process looks like. I’m not sure that a lot of these investors have really looked that deeply into what Nvidia actually does, what risks they actually have, what their value chain is like, how they get revenues and so on. It’s just that it’s seen as the picks and shovels for AI, which is great, but we all saw what. Well, maybe we didn’t. I saw what happened with Cisco Systems in bubble in 2000, right. And some people were around for that. The underlying theory there was, well, Cisco has the picks and shovels for the Internet, and that’s great until it’s not, and then it loses a lot of value. So I think Nvidia is in a place where people are so bowled up on it. And my problem, I’m not making any investment recommendations here, but how much benefit is there versus the risk of the valuation?


I don’t know. That’s something that I try to run every day. I run an artificial intelligence software company and I don’t understand the upside left in Nvideo. You know, but maybe there is. I don’t compete with them at all. So this isn’t a jab at Nvidia. I’m just saying I don’t understand these valuations and I don’t understand where that additional alpha comes from with a company like Nvidia. But maybe I’m just missing it.


Can we turn our attention to perhaps the oil and gas sector, where we see the US is producing around 13 million barrels of crude per day, which is more than any country on the globe, including Saudi Arabia. How do you think this is affecting the influence of OPEC and Russia in determining supply factors such as price? And where do you see oil price trending over the next quarters or so?


Yeah, I think with oil prices. I think part of the reason we haven’t seen a geopolitical risk premium with the conflict in the Middle East is because of the supply that the US has put on the market. If the US didn’t have, let’s say we were in 2007 or something, and we had the conflict in the Middle East that we have, we would definitely see a larger geopolitical risk in the crude price. I also think that natural gas is a factor as well. So if we look at Europe, for example, the US provides, I think, more than 40% of the natural gas for Europe, which just two or three years ago it wasn’t anywhere close to that because they were taking Russian nat gas. But nat gas prices are declining and continue to decline because the US has put so much nat gas and so much lng on the market. So those prices are somewhat paired in European and Asian markets. And again, part of it is the geopolitical risk premium isn’t there because of supply the US has put on the market. The other part is the US has flooded the market with Nat gas in Europe. The US provides 21% of LNG to China and so on. So this supply has really helped to keep those prices down.


Tony, can we just look at the Japanese Yen? It hit high knots against the US Dollar. Well, the weakest against the US Dollar not seen since the 1990s. Nearly ¥151 to the dollar overnight. What’s your outlook on this, especially since the finance minister himself did give a warning that what he’s seeing is undesirable. Does it signal some kind of intervention, maybe?


Yeah, I mean, they’ve signaled that they’re not happy with this a couple of times over the past, say, quarter or so, but they change policy at the edges. They typically don’t make dramatic policy changes. So what I’d see is maybe a small intervention, but I think they’ll likely just talk about it. And I don’t think they’re necessarily going to fight the US data, CPI or other US data. We have to keep in mind Japan is really sandwiched between a booming US and a really faltering Chinese economy. And so they can’t get too tight on monetary policy because China is such a big trade partner for them and there are so many Japanese companies with manufacturing sites and even headquarters in China. And so they have to be really careful to play between the two.


The GDP data is coming out later this morning. Any idea what we can expect?


Yeah, it’ll probably be moderately strong. I don’t think it’s going to be crazy strong. If we look at it in Yen terms, it might look very strong. But if we look at it, say, in Dollar terms, I think it will be maybe moderately strong.


Tony, thanks as always for the chat. That was Tony Nash, CEO of Complete Intelligence, giving us his take on some of the trends that he sees moving markets in the days and weeks ahead.

Week Ahead

Giddy euphoria in US markets; US LNG exports; Germany‘s EV dreams & industrial nightmares

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Welcome to the latest episode of “The Week Ahead” with your host, Tony Nash! We’ve assembled a stellar lineup.



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[00:00:22.650] – Tony Nash

Hi, and welcome to the week ahead. I’m Tony Nash. Today we’re joined by Michael Belkin, Tracy Schuchart and Ralph Schulheimer. A couple things we’re going to cover today. Our key themes. Michael is going to talk about giddy euphoria in us markets. Those are his words. I love those words. So giddy euphoria in us markets. Tracy, we’re going to talk through the geopolitical influence of us LNG. How much influence does us have can they exert through LNG? That sort of thing. And then with Ralph, we’re going to talk about Germany. First we’re going to talk about evs in Germany, and then we’re going to talk about some industrial policies and other things that Germany’s had that’s really resulted in them kind of hollowing out some parts of their economy. So, Michael, welcome back. Ralph, welcome back, Tracy, thanks again for coming on. Before we get started, I want to let you know about a new free tier we have within CI markets, our global market forecasting platform. We want to share the power of CI markets with everyone. So we’ve made a few things for you. First, economics. We share all of our global economics forecasts for the top 50 economies.


[00:01:30.230] – Tony Nash

We also share our major currency forecasts as well as Nikay 100 stocks. So you can get a look at. What do our stock forecast look like? There is no credit card required. You can just sign up on our website and get started right away. So check it out. CA Markets free. Look at the link below and get started ASAP. Thank you. Michael, you put this note together, I think, last week where you really dig into a lot of the US employment data, and obviously you dig into markets and sectors and individual stocks and all sorts of things. You use the words giddy euphoria in us markets, which I think is great, at least for a section of us markets. And I want to dig into that. But first, I think we really need to look at jobs, which is what you start your piece with, and you look at BLS jobs. And in this cut that we have on screen, you talk about phantom jobs from the BLS, which is interesting. Can you talk us through a little bit of that? We’ve had Mike Green talk about that a little bit, but I’d like to hear it from your perspective as well.


[00:02:41.430] – Michael Belkin

Okay, great. So the jobs report, payroll jobs report last week said plus 353,000. And everywhere you see job market, hot blockbuster jobs report, blah, blah, blah, ever. CNBC, it’s unanimous. Like nobody looked at the numbers. Okay. That’s seasonally adjusted. Not seasonally adjusted was -5.6 million. And that’s not an aberration and it’s not a conspiracy theory. But what happens is the way employment works is a lot of people are hired in the last three months of the year for temporary jobs and retail and things like that, and then they’re laid off at the beginning of the year. That happens every year. So January is always down big in the millions. Right. And it was down more this time than last year.


[00:03:30.130] – Tony Nash

I just want to understand because that’s a big number, 5 million jobs. Okay. And I think a lot of people in markets put a lot of weight on these numbers that come out, these headline preliminary numbers that come out because they move markets for a few hours or whatever. Right?


[00:03:48.200] – Tony Nash

But when you say they seasonally adjusted 5 million jobs kind of into the market, how do you seasonally adjust that? And how does somebody look at that number and go, oh, yeah, that’s normal. Numbers grew. Jobs grew.


[00:04:02.430] – Michael Belkin

All right. So they add basically 6 million. So to get from 5.6 to plus three -5.6 to plus 3.353,000, it’s almost 6 million. They pad it again. It’s not a one off like they do that every year. They want everybody to think it’s a smooth cycle. It doesn’t go up and down. But that’s not the way the real world works. Now, going back, if you look at this historically, it usually takes about three or four months for the level of, in the jobs report, payroll jobs report, to get back to the December level. That’s in a non recession year. In a recession year, that’s like 20 01, 20 07, 20 08 or 2020. They don’t get back. So jobs decline and they head down into the economy, goes into a recession. That’s my forecast. So what I do is I have a time series analysis model which is actually similar to what they seasonally adjust the numbers with. It’s based on box Jenkins and Fourier analysis, which I studied at UC Berkeley and then I was at Solomon Brothers prop trading developed this model. Anyways, so my forecast says jobs are going down. And you just contrast that with what everybody’s, it’s unanimous, jobs are great.


[00:05:18.340] – Michael Belkin

And then even smart people go through, well, all these jobs were created in this kind of sector and this kind of sector, those are all imaginary, like they don’t exist.


[00:05:27.570] – Tony Nash

Well, are they adjusted jobs or are they real jobs? I have a chart from you showing your negative forecast for jobs. We hear about job cuts at meta and it seems to be concentrated in tech. We’ve also heard about a bunch of job cuts at ups and some other places. So these job cuts that we’ve heard about in tech and tech continues to kind of do well in markets. But will we see those go into the broader market, into other sectors?


[00:05:55.570] – Michael Belkin

Yeah. So meta is a case in point. Okay, so they cut 20% of their workforce over the last year or so, and their earnings were up 69% or something, right? So I can just see all these people drooling. Oh, boy, this is how to increase my margins. All these other tech companies, it’s a poster child for what to do. But I mean, think about it. When companies are cutting jobs en masse.Right, which is happening


[00:06:22.810] – Tony Nash

20% is on mass, right? I mean, it’s not like they’re doing a 3% marginal cut or whatever.


[00:06:28.270] – Michael Belkin

But.It’S all these other companies, they’re copycat. So, Snapchat, it’s become the thing to do, right? You lay off people so you can keep your margins up and keep your profits up. That makes the pie smaller. That’s what makes a recession. And it doesn’t happen instantly, but that’s going to be the theme this year, I think. Lots of layoffs in the face of slowing top line revenues. What are you going to do? I think it just drives the economy down again, it’s not instant Quaker oaths or something where it happens overnight, but the force is declining by basically it’s a recessionary, contractionary thing that happens to the economy.


[00:07:15.450] – Tony Nash

Hey, I’d like to make sure you know that you can access our AI driven market forecasting tool called CI Markets for free, no strings attached, and it does not require any credit card information. Go to slash Markets to subscribe. Cimarkets is the perfect addition to your analysis toolbox. This free account includes Nikki stocks, major currency pairs and global economics. Of course, we offer much more in our paid account, but this lets you experience CIA markets before making a financial commitment. CIA Markets uses the power of AI to help you make better trading investment decisions. It’s absolutely free. Again. Go to slash markets to subscribe to CI Markets free.


[00:07:55.320] – Michael Belkin

We have to mention just stepping outside of AI about earnings and layoffs and stuff. So outside of tech, all these cyclical stocks are going down. So if you look at the Belkin report, I’ve been short air freight containers, packaging, all these paper products, metals and mining. So the cyclical stocks are weakening. They’re underperforming. There’s only been one thing holding the market up, a handful of big tech stocks, and even those are going like it went so going up anymore.


[00:08:24.650] – Tony Nash

Let’s get into that in just a minute. Michael, I want to make sure we talk through soft landing first.


[00:08:30.340] – Tony Nash

Because I think part of really interesting part of your discussion is on soft landing. And so can you talk us through in what context you say soft landings narratives often precede recessions. So I’ve got a chart up that you sent me about mentions of soft landings. So can you talk us through that? And then let’s also move into the Fed funds rate hike and how that plays into the soft landing narrative.


[00:08:58.340] – Michael Belkin

Okay, so if you look at the chart, we’ve got the biggest proliferation of soft landing quotes in media of all time. And the previous ones that were not quite as big as this came right before a recession. So basically, I think the psychology of the market is really messed up. Everyone, the sentiment is unanimous. It’s going to be a soft landing. I think it’s just an insane number, percentage, super high percentage of portfolio managers.


[00:09:28.720] – Tony Nash

I see it every day. I see people who are normally skeptics have changed to say, okay, it’s going to be a soft, I don’t know, the shoe is not going to drop. It’s going to be a soft landing. I’ve just seen over the last six months all of these people who are like, looking for the downside, except you, who are looking for the downside just kind of surrendering to the soft landing narrative.


[00:09:51.940] – Michael Belkin

Absolutely. So I think what we’re talking about is deviant psychology. So what people think. Okay, so you have to say the market’s always right, right? Well, was it right at the top of the tech bubble? Was it right at the bottom when people were bearish in 2002? Was it right when everybody was bowled up in 2007? Was it wrong at the bottom when everybody was bearish? My point is, you get these extremes of sentiment that you need to fade, and what happens is the psychology changes, and that is what drives the change in markets. A change in psychology where people suddenly, all of a sudden there’s some kind of a shock or something, and all of a sudden people say, oh, wait a minute. And so you see this change in sentiment, and that’s what drives investment flows, flows into different sectors and in and out of the market. So that’s why I think we’re set up a major change in psychology. Not overnight, but it’s coming.


[00:10:57.110] – Tony Nash

Right. And so a lot of what’s driving that psychology, it seems to me, is interest rates and so, you know, there has been an expectation, as we saw leading up to the last fed meeting, march rate cut and so on and so forth. And that’s been kind of destroyed for so, you know, we’ve seen it. We have a chart on screen from you showing, know, steepest rate curve or rate rises, all this stuff. So will that eventually erode the psychology we have in the market now?


[00:11:31.070] – Michael Belkin

Absolutely. So just to put things in perspective, take a look at this chart. So 525 basis points from March 2022 to now. I mean, it’s been on hold for a while. That’s the biggest Fed rate hike campaign on record. So when they started this interest rate targeting thing, that was greenspan. Before that, it was reserve targeting with Volcker. So going back to the. What’s that? It’s like 40 something years. And so I was delighted to be invited to this Vale symposium last week. I was there with a lot of heavy hitters, investment strategists, portfolio managers. And one of the things that emerged, David Rosenberg was there, and he pointed out that it takes, the average lag between the beginning of Fed rate hikes and a recession is 24 months. Well, guess how many months it’s been now since the Fed started raising rates. 23. So here we are in February. So March is going to be two year anniversary. That’s the average. So basically, people have just kind of swept that under the rug and said, oh, it doesn’t matter. It’s just the fed


[00:12:38.470] – Tony Nash

feels good.


[00:12:41.090] – Michael Belkin

But it hits with a lag. And we are setting up for basically the blowback, the delayed response from a serious, serious monetary tightening campaign that is going to slow things down. You see it in the cyclical stocks, not so much tech yet, but that’s what we’re setting up for. The oldest saying, marty Zweig said, don’t fight the Fed. Right. So people think that was back in 2022 when the Fed was raising rates. But the lag effect is about to hit. And if there’s one thing, another along with soft landing, the psychology in the market is unanimous. The Fed’s going to cut interest rates. That’s bullish. For know, everybody says, right. Well, that’s not what in, when it’s a recession, when it’s not a recession, if it is a soft landing, yes, you’re right. Stocks take off. If it’s a recession, the opposite happens. So stocks go down with Fed rate cuts because why earnings decline?


[00:13:46.710] – Tony Nash

Let’s get there eventually.


[00:13:48.390] – Michael Belkin

Yeah, we’re not there yet. I’m actually short bonds now, the model. So I think it’s going to take a few months for this to play out. So basically, I think where I was super bullish on bonds, if you remember back like in October and stuff, when everybody was bearish, my model, I’d been flat on bonds for a month or so. I just entered a short position on bonds. So I think the idea of a fed rate cut campaign was built into forward rates and everybody got too bowled up. So I think we’re going to have. Could bonds go down five or ten points from here? Yeah. So I think for a tactical move, two to three month move, I think bonds could sell off. Even though I’m bearish on the economy, I’m sticking with the model forecast on that.


[00:14:30.790] – Tony Nash

Interesting. So let me bring Tracy in. Tracy, we see a pretty tight fed or relatively tight fed, right. And we’ve talked many times about crude prices and things like geopolitical risk and all that stuff, right. And the impact on, say, evs, and we’ll talk to Ralph about that and green energy and, and it seems like there is kind of no cost to geopolitical risk when we’re in a zerp or nerp environment. But now that we’re in a five and a half percent interest rate environment, it almost feels with all this stuff happening in the Middle east and other stuff, that nobody knows how to factor that into things like commodity prices, crude prices, other things. Am I way off there or have people kind of not realized the cost of risk?


[00:15:37.290] – Tracy Shuchart

I think absolutely. That’s what you’re seeing right now across the commodity sector, and especially when we’re talking about metals and things that are really affected by the US dollar. Right. We’ve seen a rally in the US dollar, so that’s kind of very difficult for. That’s a very big headwind. Let’s say four metals per existence, for example. But if we look at crude oil, crude oil is actually more correlated to ten year yields than it is to the US dollar. It’s almost over 81% correlated. And so recently we have seen kind of a jump in the ten year. Right. Meaning yields have come down. So that’s also put pressure technically just on the sector. But as far as geopolitical risk is concerned, I think that I could go into the minutiae of that, where we can talk about there’s not a lot of oil tankers that actually pass through the Red Sea, even though they’re not going there, know there’s a lot of products that ship from Saudi Arabia, Qatar, everything kind of east of the Red Sea that uses the Persian Gulf which is a lot of product when you’re talking know gas and oil.


[00:16:56.990] – Tracy Shuchart

And so that is part of the reason. But I think know still the markets. I think bonds are applying pressure on the energy markets. And I also think that because there’s not a lot of transit through the Red Sea of oil and products and gas, that that’s also having people kind of dismiss what’s going on. That said, I think the risk is much broader now that we have not only the Israel Gaza issue, we also now have Syria’s back in, Jordan’s back know there’s a lot there and I think the market is highly discounting.


[00:17:51.670] – Tony Nash

Okay, so Michael, if we go back to markets in the US, particularly tech continues to be strong despite these rate rises. You’ve been telling us for quite a while that it’s time for a pullback. And in your report you’ve got semiconductors, software, hardware, social media, et cetera, kind of falling in your one to three month horizon. So help us understand when we see the likes of meta rise 20% in a single day last week and we see snap down pretty dramatically after earnings. Granted it’s down to November 23 levels, so it’s not down to historic multi year levels, but it’s still down 35% in a few days. So can you talk to us about where you expect the sector fund flows to move? I mean it’s overwhelmingly in this chart you sent me, overwhelmingly continues moving into tech. So where do you expect that to move?


[00:18:49.770] – Michael Belkin

Okay, first of, there’s within tech. The AI plays have been attracting all the attention, right? And there’s very few of those. So it’s Nvidia. Right. So those kind of stocks keep going up. I follow a broad bunch of stocks within the semiconductor software space and a lot of those are acting like dog meat. Okay, so the shorts are actually working, not massively, but things are underperforming. Things like cloud software. So those are sort of like tiger global favorite longs. Those are some of my top shorts right now, semiconductors. Outside of the AI space, demand for automotive, semiconductors and consumer electronics, all that stuff is disaster. It’s not good. So those are still shorts and those are working. It’s not, you look at the tech market, you think everything’s going up. It’s not. Portfolio managers know this. They’re getting squeezed into this small handful of smaller stocks. And the mag seven is down to like mag three or something, right? Amazon and meta and a couple of others. Okay. But anyways, the biggest outflows over the last year has been energy and the biggest inflows have been tech. So my model is saying time for a change.


[00:20:07.440] – Michael Belkin

Okay, so the flows are going to reverse. So what’s know. So Sir John Templeton said the time to buy is at the point of maximum pessimism. The time to sell is at the point of maximum optimism. And that’s really held up over time. For know you have to get it. Have my biggest buy signal in the model forecast, three month view at least for going forward. Buy energy, physical energy and also the energy stocks. So etfs, xop, oih, things like that, really depressed. They’re in the doghouse, right? And things that are up a know all the tech etfs. My favorite short is like clou. It’s not very liquid, it’s a cloud software thing. So basically you want to be long energy and short tech. Three month view. That’s what I’m telling my clients.


[00:21:00.290] – Tony Nash

That sound about right to you, Tracy?


[00:21:01.850] – Tracy Shuchart

I love it. I think its Fantastic. No, actually, we actually talked about that a little bit. So, with Mullen. I absolutely agree with Michael.


[00:21:17.020] – Tony Nash

Perfect. Ralph, what are you seeing in terms of just the general impact on markets and fund flows? What do things look like in Europe? Are people still super bullish tech? Are they coming off of some of that? Are they looking more at some more conservative sectors? What does that look like from your perspective?


[00:21:36.120] – Ralph Schoellhammer

Well, I think one of the things, and I know that Tracy is going to talk about this in greater detail, and I think it was just mentioned previously as well, what is underwriting would from a european perspective, still impressive resilience of the US economy is natural gas. I sometimes feel that we might not the four of us here in this group, but very often in public reporting, the impact of the shale revolution strikes. And still, as some would underestimate mean. If you look at the numbers, the role of natural gas that it plays in the US economy is astounding. If you take at electricity production and also heating in the chemical industry, in manufacturing, construction, not everything is rosy. Right. I think Albert is not with us. I think he would immediately shoot me down for any kind of optimistic or positive outlook. But I think that really is a huge issue. And this is something that we are currently lacking in Europe. I mean, there was recently a very interesting report in the Wall Street Journal that I find sums it up perfectly, which is the old saying that the United States innovates, the Chinese imitate and the Europeans regulate is probably more true than ever.


[00:22:43.300] – Ralph Schoellhammer

This is going to be a problem because I agree with what was said by Mike before, right. That maybe the AI thing is a bit of a hype. I don’t know enough about it to really make a qualified statement. But I think one thing we’re all going to agree on is whatever algorithms in the future are going to do is in order to have a good algorithm, they’re going to need a lot of electricity. Because in order for the algorithm to, I don’t know, distinguish between a cat and a dog, you have to show.Them a billion pictures of a cat and a billion pictures of a dog. And that means that the computer who does it has to be running. And while it’s running, it needs to be cooled, it needs to be supplied with electricity. So it all goes back. I don’t want to voice my inner Luke Groman, but in many ways, it all goes back to energy. In many ways. And this is still. I know I sound like a broken record, but this is still a huge problem in Europe. There are signs of sanity. I think once Germany was the role model. I think now they’re more the outcasts. So there is a shift in a new direction. I’m worried because the EU is like a weird construct. I mean, we have european parliamentary elections in June. So now, quote, unquote, they pretend to be much saner than they usually are. So we’ll see after the election, if they not all of a sudden say so all these little bit kind of winking and nodding at maybe we are okay with more nuclear energy and maybe we should find ways to allow more energy production in European Union, that once these elections are over, that they go back to saying no, well, the primary goal, of course, is the usual green goals, the green new deals, the climate agenda and all these kind of things. Interesting.


[00:24:14.900] – Tony Nash

First thing, I don’t believe the european parliament will be sane ever. Second, interest rates are going to dictate that they can’t really focus on green energy. It’s going to be really hard, and we’ve talked about that with you before and Tracy, and going back to the rate rise that Michael talked makes it puts a real cost to trade offs. Right. And it’s going to be really hard to subsidize that stuff at the cost of money that we have now, I think. And that cost, Michael, as you say, is forcing sector adjustments. And so let’s finally look at your earnings expectations. So your s and P 500 earnings index forecast is pretty negative. So can you talk us through what is your outlook on earnings, on quarterly earnings in the S and P compared to, say, where consensus is?


[00:25:05.890] – Michael Belkin

All right, so I’m a real lone voice in the wilderness here.


[00:25:10.050] – Tony Nash

Not the first time.


[00:25:11.510] – Michael Belkin

Wall street consensus is plus 11%. Last time I looked in 2024 earnings. So right now, we’re about halfway two thirds of the way through Q four, 2023 earnings reporting. So we haven’t even started into 2024 yet. Okay. So we’re tracking for about 52 64, according to standard employers operating earnings so far at two thirds mark, which is down, by the way, 7% from the peak. So s and P 500 quarterly earnings peaked Q four, 2021, two years ago. Does anybody know that?


[00:25:50.140] – Tony Nash

Yeah, I just want to back up 10 seconds, and I want you to say that again. S and P earnings, how do they compare to two years ago?


[00:25:58.080] – Michael Belkin

Down 7% quarterly. So the peak of operating earnings, according to index provider standard employers, was $56.73. Q four, 2021. And that, of course, coincided with the boom of COVID stimulus and all the extra money. So basically, corporations made a lot of money out of inflation. They raised prices, increased demand, and since then, we’ve kind of been dribling down, not collapsing yet. Okay, so basically, Wall street is looking for plus 11% to something like $224. I’m looking for 120. Down 40%.


[00:26:39.600] – Tony Nash



[00:26:40.800] – Michael Belkin

Yeah. Which is not ridiculous. It’s come from model forecast. That’s the typical decline in a recession. So there’s nothing conspiracy theory or licking my finger.


[00:26:53.890] – Tony Nash

I love that you say 40% isn’t ridiculous. I think that’s great, because I think it helps remind us where we are. Right in markets. And we had Alex Gurjevich on last week, and he talked about deflation and how that could impact some markets. So what that tells me is, are you expecting some deflationary impacts to hit companies ability to make profits and that then has an impact on markets?


[00:27:26.110] – Michael Belkin

Yes. But it’s complicated, okay?


[00:27:29.010] – Tony Nash

Oh, I know it’s complicated.


[00:27:30.570] – Michael Belkin

Definitely complicated. So the inflation decline that we’ve seen, by the way, I was super bearish on inflation when it was 9%. Model said it’s going down to 3%, which is basically what it’s done. That decline is over in the model forecast. So I don’t think we’re going to get any near term relief on things like the CPI next few months.


[00:27:49.910] – Tony Nash

You don’t expect a kind of deflation or nothing dramatic?


[00:27:54.080] – Michael Belkin

Well, I think the first thing, like, let’s just take it one step at a time here. Row of dominoes. I think, again, the forward rates overreflected. This idea of Fed easing that needs to get pulled out, I think bonds could sell off and actually short sofa and things like that for a trade two to three months later on in the year. Back to the point of your question. Yes. So demand falls, sales fall. The dynamic of a recession is retail sales fall, sales of the product fall, the company starts canceling orders, then the company that makes the stuff for that company cutting back, laying off people, blah, blah, blah, it goes on and on. And that’s deflationary. I think that won’t begin to surface for another maybe six months later in the year. That will become an issue. Right now, I think it’s more the inflation scare is back for a trade, and that kind of pulls the rug out of this idea that the Fed’s going to ease. By the way, one of the last comment on this, one of the best things to emerge from the Vale symposium that I was at was that Lakshman from the ECri Institute was there and he pointed out, I believe he said, that getting back to the idea of a soft landing, when the times that the Fed delayed cutting rates when the economy was weakening, that is what led to the recession.


[00:29:19.720] – Michael Belkin

So when the Fed is sort of preemptive and cuts rates, then you can have a soft landing. Not necessarily, but historically that’s been the pattern. But when they hold rates up, that almost ensures that we’re going into a recession, which is what’s think, you know, all this ironically, all these phony great economic stories from the administration, how great it is, vote for us. We’re doing such a great job on the economy, it actually ties the Fed’s hands and it prevents the Fed from cutting interest rates. So it’s actually going to have blowback. Instead of making people want to vote for the administration, it’s going to say, oh, wow, the economy is going down and it’s going to be too late to save it. So I think it’s going to be counterproductive. So phony strong economic story is actually counterproductive and it’s going to send the economy into a recession for sure.


[00:30:13.200] – Tony Nash

Wow, that sounds pretty tough. Thank you for that. I mean, it’s awesome. I love getting your view on things, Michael, because you’re right a lot. You have very solid analysis around what you say. You’ve run it through models. It’s tested over decades. And so I love getting your perspective. And it’s different from the, don’t worry, everything’s okay. It’s all going to be soft landing, different this time, all that stuff. Love getting that. So that’s great. Thank you so much for that. I guess one last question, kind of. Your model is generally, I think a one to three month horizon is like your sweet spot. So what is the biggest thing that you expect to happen in the next three months?


[00:30:57.170] – Michael Belkin

Okay. Energy goes up again. So that’s my favorite trade, long energy. If you want to be long something, don’t be long. Anything other than that. My longs are chicken longs, consumer staples sector, healthcare sector. But energy is really the number one long idea I have right now.


[00:31:13.880] – Tony Nash

Very good. Thank you, Michael. Thank you for that, Tracy. You must love that. So let’s switch over to you. I want to talk about U. S. LNG exports and its role in geopolitics. So you talked about the Biden administration’s LNG export pause earlier this week. And you talked about it last week too, when it was announced and all that stuff. So there was a hearing in the house this week, and you talked about this a little bit in one of your posts. So I guess what I’m really interested here is, is there a geopolitical importance or a geopolitical lever with US LNG exports? The US didn’t export much LNG until 2014, but by 2023, the US accounted for a third of european LNG imports and just over 20% of China’s LNG imports. So not a long time, but the US has become a pretty significant portion of the LNG imports of major economies. So what does that mean to geopolitics in the US’s, say, energy diplomacy?


[00:32:29.250] – Tracy Shuchart

Well, first. So US has become the world’s largest producer of oil and gas and the largest exporter. Right. Qatar will pass us because of their expansion program. But let’s just look at this right now. And so this is us energy leadership. And in fact, when Biden first suggested this, or first said that he was going to pause export licenses, we had twelve trade associations across the US, including the largest one, API, who basically said, this hampers us energy leadership, it endangers american jobs, and it also undermines efforts to reduce greenhouse emissions because obviously natural gas is a much better choice than, say, crude oil or coal, for example, to burn. It’s much cleaner. That said, now, when we look at this pause, it will not affect anything up until 2026. And so this is reversible, say, if there was a new administration to come into play, because everything that’s already been accepted till now, the build out to 2026 will still move forward. However, after 2026 are some of the biggest projects, and that’s where the problem lies. But I just want to say this. It’s not like an immediate threat, but it is on the radar as far as geopolitics is concerned, obviously.


[00:34:15.730] – Tracy Shuchart

First, let’s look at Europe. I mean, we basically said, stop importing russian gas. We will take care of you. And with this new revelation, Europe’s like, wait, what? You just said that you would be our main supporter and we look like we’re abandoning our allies. It doesn’t look good. In fact, Germany last week came out and basically said, how can we rely on the US if they say that we just changed up our whole energy source? We’ve built out infrastructure, we’re building out new infrastructure for our LNG hubs and capacity to import more, particularly with Germany, because they stopped nuclear. And so now there’s a bigger build out for gas capacity. Right. So that’s kind of shaken up the EU a little bit and led them to kind of question, well. How can we rely on you? So this looks terrible with our allies. It also obviously reduces our footprints in the global energy sphere. I mean, you’re not going to see the Middle east, particularly Qatar, the number one gas producer in the Middle east, stopping. They’re building out the world’s largest capacity out to 2028. I think in general, again, I have to quote API or the trade associations as saying this hampers us energy leadership and our place in the energy scope. I mean, natural gas is not going away. We’ve seen a million contracts over the last two years out to 2040, 2050. These are long term gas contracts. It’s not going away. And whether it comes to fruition or not, again, this won’t really affect projects until 2026. Should we have a new administration or should the bipartisan group that is now having hearings against this? And I want to stress it’s bipartisan. It’s not just the Republicans. We have time to overturn this, in other words, but the message it sends to the global community is bad.


[00:36:43.620] – Tony Nash

The message is out there. Ralph, as a European, how does that make you feel? I need your.


[00:36:54.690] – Ralph Schoellhammer

It’s a good question. Well, I mean, it makes a lot of sense. I mean, I’m worried as a european, not just because, as Tracy correctly pointed out, I mean, this is not going to have an impact as soon as some headlines seem to indicate. But I’m also worried because it is a terrible signal also, of course, to domestic us industries, particularly in this sector, because they want to make a profit. I mean, this is something I know we tend to forget. But most companies exist because they want to make a profit. So if you don’t allow them to export, that’s going to be a short lived sugar rush for the US economy because prices, we see it with the Henry hub at the moment, right? Prices are plunging in many ways. So gas is going to be pretty cheap for the US. But at some point, you stop investing. Why would you stop investing in more drilling, in more exploration if you can’t sell it abroad? So I think it’s also, as Tracy pointed out, this is a terrible signal. You cannot be the energy leader if you put like a cork into the bottle, so to speak.


[00:37:46.870] – Ralph Schoellhammer

Now, from a european perspective, I said this on your podcast many times, Tony. I’m still convinced of this. We’ll see what Tucker Carlsen’s interview with Vladimir Putin will reveal in the next couple of hours. But the Europeans will sooner or later return to at least partially. It’s never going to be as much as it was before, but they will return partially to russian gas as well because pipeline gas cannot be intercepted by the hooties. It’s not depending on a us administration that all of a sudden believes that they have to do something against fossil gas. I think that is still an attempt by the environmental lobby that they want to replace the term natural gas with fossil gas or methane, I think is also something that’s getting more popular because supposedly it sounds scarier. So these battles are still going on. So the energy sector that I find always the most important one in many areas. Tracy has recently posted about coal power plants in India. This is a very unique phenomenon. In the west. We have an ideological, it’s getting weaker, but there’s still an ideological crusade against the energy sector. And I can understand that this is unnerving for many who are active in that particular area of the economy.


[00:38:52.660] – Tony Nash

Yeah, that’s great.


[00:38:54.970] – Tracy Shuchart

I just wanted to add one thing really quickly, and why I say this decision will likely be overturned sooner than later is that I really think this is a boy for votes. I mean, the Biden administration literally said they want to win back younger environmentalists, and they literally, literally had 20 something social media influencers on exiting TikTok in a meeting with the energy board in the government. I mean, this is who they’re taking advice from.


[00:39:31.590] – Tony Nash

Honestly, we’re a two party system in the US. Who else are those guys going to go to?


[00:39:34.710] – Tracy Shuchart

They’re not going to go to, all I’m saying. And so I think it’s a ploy to get votes. I think that ultimately this will be overturned after the election. If the Democrats win, I think this will be given to pressure from, again, bipartisan pressure groups within the legislative branch. And this will be overturned. And I think it’s just a ploy for votes. However, that’s a big risk. You’re taking a ploy for votes versus your message to the global community. Not sure that was the best decision to make.


[00:40:11.490] – Tony Nash

We sure have done over the last two administrations a lot to erode institutional credibility in the US. Right. And from a geopolitical perspective, in terms of wanting to count on the US, we really destroyed a lot of over the last, say, 1520 years as a geopolitical partner. Right. As the US. So this does nothing to help the US geopolitically. Tracy, I want to ask you about China, because if we’re providing a fifth of nacas to China or lng to China, from my perspective, it seems like, I don’t think us necessarily holds China hostage with that. And I don’t think that would be any intention. But it does make sourcing energy from the US a factor within the China geopolitical. And so, you know, I think about Japan in World War II. I’m not making any serious analogy about Japan and China, but part of the reason Japan was so upset with the US is because the US cut off oil. And so I don’t think that the US would do that again and say, we’re not going to sell you lng, but it does become a factor in that. And I think from China’s perspective, there is always a healthy level of paranoia around that type of stuff.


[00:41:24.320] – Tony Nash

Right. So does the US have the opportunity to grow that much? Or do you think China will say, we love your lng, we’ll take 21% of our lng from you, but we’re not going to do a lot more because there’s too much risk in that.


[00:41:38.640] – Tracy Shuchart

I think they would absolutely say that. And I think they’re absolutely looking to Russia right now. Right. They’re going to expand the Siberia pipeline. You have siberian two pipeline. And that’s a double edged sword because does Russia become too dependent on China as a buyer? That’s a whole nother issue. We can get into another, you know. Absolutely. I think it’ll force China to look elsewhere. And they will. I mean, you can go to Qatar. Qatar is offering huge discounts right now. Right. We just saw them make a huge deal with India today, I think I posted. And so I think China would most likely say, yeah, we’re good with what we got, we’re cool, we can look elsewhere.


[00:42:29.480] – Tony Nash

Right. Okay. So there’s a little bit of a geopolitical lever there, but not a lot because the Chinese are going to stay on their guard. Okay, that’s interesting. I appreciate that. I think we have to look at markets and geopolitics together at times. Right. And so this is really helpful for me to think about this stuff. So, Ralph, let’s move on to Europe, which, I’m sorry, but it’s really easy to bash Europe, right? And so, no offense, it’s not you. I’ll bash on our american political leaders any day of the week, so it’s not your fault. But you talked earlier this week about Germany’s electric vehicle dreams fading away. Can you really help us dig into that a little bit? What were those dreams and what’s making them fade away?


[00:43:23.910] – Ralph Schoellhammer

I would just say one thing, Tony. Your president recently said that he talked to Francois Mitteron, who died in 96. So you’re bashing.


[00:43:34.930] – Tracy Shuchart

That’s not the only one, right? That’s the only instance lately.


[00:43:41.250] – Ralph Schoellhammer

Well, I think what we can observe, the Germans, in all fairness, I always get this criticism that people say, well, Germany is not Europe and Europe is not german. And that’s, of course, true. It is also true that german companies, for various reasons, particularly their car manufacturers, have somewhat slept through the EV revolution. I think that is also fair to say that they kind of could not really translate the advantage they had with the combustion engine into the electric vehicles. But there’s, of course, something else going on, and I think that connects nicely with the geopolitical issue, which is that I think many companies kind of had a business model with evs. And that’s true not just in Germany. That’s also true in Austria. That’s also true in Switzerland. That’s also true in France, where the idea was that they say, okay, the government is pouring so much money into subsidies of all various kinds that they officially talked about their EV strategies because they wanted to milk that cow as long as possible. And I think that is now slowly coming to an end. Germany has a huge budget hold due to a recent ruling by their supreme court.


[00:44:46.710] – Ralph Schoellhammer

We see the same in France. We see discussions in Austria, because now governments, a couple of years back, until recently, they subsidized evs. But now they start to realize, if everybody’s moving to an ev, we’re going to lose all these gasoline taxes. I mean, this was also part of the step in Germany because there is a sense that agriculture will not quickly move to battery driven tractors. So they tried to make new diesel taxes for the agricultural sector. But as all of you know, the farmers have not been taking it very well, to put it mildly. And in many ways, just kind of to add on a little bit to this street construction. Highway construction, of course, was for a very long time directly financed out of these diesel gasoline fuel taxes. But now we have this new situation where evs are significantly heavier. So the bearing tear on streets is actually going to be more than it was with the internal combustion engine cars. So you would potentially need more of these taxes to maintain and sustain and keep these roads in shape. Same with parking spaces in Austria and Germany, for example, in the inner city, you can park for free with evs.


[00:45:51.110] – Ralph Schoellhammer

Now, as more and more people have evs, this is a revenue source for cities. But even more than that, parking structures are not built for these significantly heavier cars. And that goes twice in Europe. In the United States, people are also driving heavy suvs and pickup trucks and heavy cars that are heavy, even though they’re not evs. But, you know, Americans always mock Europeans for this. But we had the kind of niche boutique small cars, and if they all get replaced with significantly heavier evs, this is going to have, down the road, unintended consequences. So I think this is where the shift is happening. And the other thing is, people bought it, particularly people with higher incomes, because subsidies were really great. You had subsidies on fueling them, you had subsidies on parking. You had certain insurance advantages. So there was a whole package of subs. It wasn’t just that they give you something that as well, that you got a direct financial incentive so that they give you €10,000. If you sold your gasoline, gasoline car and got an EV, there were all other kinds of incentives as well. And they are now slowly to break away.


[00:46:52.760] – Ralph Schoellhammer

And of course, now people are reconsidering whether or not they shall buy such a car. Now, one option would have been to say, well, then we’re going to buy all these new chinese cars because they overproduced. But the EU is already working on special tariffs on chinese electric vehicles. So that option, it will still be there, but it will get more difficult. So as things look at the moment, I think the mean this is always, and I know we talked about this on the show many times, sometimes it’s maddening if you listen to analysts. So I’m always glad that Tracy and Micah here to bring a sense of realism into this. People look at a development that’s like this, and then they take a ruler, put it on there and say, okay, if this was the development over the last two years, it’s going to be like this over the next 20 years. And then they draw this line and say, by 2040, everybody’s going to drive.


[00:47:37.170] – Tony Nash

An EV extrapolate today and forever.


[00:47:40.270] – Ralph Schoellhammer

Exactly. And this is not how it works. And I think this is not increasingly what we see. Plus, of course, another element that we have touched upon on quite significantly is dcvs need electricity, and Germany has currently less electricity production. I think it’s the lowest level since 2002. Listen, if you turn off all your nuclear power plants and promise, and then the promise doesn’t live up to the expectations that renewables will replace it, you have a problem in this area. So we see this already, that electricity prices are going up. And another element that is barely talked about is insurance for evs is getting crazy, right. Once the government support falls away, this is also an additional cost factor. So they are simply getting more and more expensive. And unfortunately, without being too facetious here, the evs are kind of falling down to the same category as wind and solar, right? There were these huge promises made, what they can deliver, and now it turns out that they can’t. Now, don’t get me wrong, in city areas, I’m a huge fan of evs. I can imagine that if you’re an apartment owner in a high traffic area of a town and all of a sudden everybody drives evs, that’s going to drive up the value of a property because there is no fumes, there is no noise.


[00:48:53.310] – Ralph Schoellhammer

So this is going to be great. But overall, a country that’s either spread out or like in Austria or Germany, where rural populations still commute significant distances to go to work, this is going to be a problem. And as I said before, this was one of the promises, like so many in that area that have been made in the past that are not being kept. And I think you also see a kind of, that’s more in Poland, but also in Germany as the last point, an emotional mean. People identify with cars, people identify with the car industry in Germany. And the ice bashing over the last couple of years, I think, now has a reaction that says, I’m going to buy a diesel car or a gasoline car simply because that’s german, right? In a sense. So I think at the moment it looks like that’s where the journey is going. Of course, always under the assumption that there is no major massive technological breakthrough that can be easily introduced to the market. I mean, this is what I always say in the energy area, if the Wanda battery that we hear about every two months is actually become a reality at any point in time, well, then all bets are off.


[00:50:00.510] – Ralph Schoellhammer

Then things will be different. But for now, we have been hearing the, that battery promise from time to time, I google it. I think it goes now back 20 years. The solid state battery and the salt battery, all these kind of things. And it’s like fusion. They exist theoretically, but so far, I think they’re not ripe for the market. Okay.


[00:50:19.900] – Tony Nash

So there’s real trade offs to be made and subsidies. People are tired of subsidies, it sounds like. And I guess generally in Germany, the business environment there has not. It’s deteriorated. Right. So you tweeted earlier this week that the AfD party said that the german government hates Germany. I think that’s the word they use. Or hate their own country or something like that. Can you talk us through that? First of all, who are the AfD for those of us who aren’t in Europe? And second of, like, what does this mean? Is that a mainstream german thought? Do most Germans believe that the government is not friendly to Germans?


[00:51:05.490] – Ralph Schoellhammer

I mean, the AfD that you just mentioned, right, the so called alternative for Germany. The alternative for Germany was a party that emerged during the euro crisis in 2008, 2009. And the name derives from a sentence that Angela Merkel said when she said, there is no alternative. Right. Whether it was from migration to the euro, there is no alternative. And then the party kind of came up originally as a kind of economic, libertarian, yet eurocritical party that has now morphed into what in the media would be called a far right party. I think if you take a closer look at their positions or their average positions, in many ways, I would argue they resemble common sense, which I believe is one of the reasons why they are very popular or growingly popular with the electorate. And the other thing, this was their leader, one of their two leaders, Alice Weidel, said that in the german Bundesstag, the german parliament, the current german government hates its own people. And I have to admit, if you look at the numbers, I mean, it is really, really very difficult to disagree with her. What the german government has done.


[00:52:04.410] – Ralph Schoellhammer

This is why I think it’s an interesting topic over the last couple of years, the so called ample coalition of the Social Democrats, the liberals and the Greens. It is the destruction of Germany as an industrial superpower. There’s really no other way to put this. I said, I don’t want to be hyperbolic here or be all, but I don’t know any other way to describe it. We talk about a country, and this is an issue we talked about a lot in the past that had paid off, built out world class nuclear power plants, and they turned them off for purely ideological reasons. There was no other reason. The reason is when people say, well, you exaggerate about Germany, I don’t know what to tell you. And you see the same now recently they approved, now, I think ten gigawatts of gas powered electricity power plants, again with this weird thing, in ten years they have to be run on hydrogen. It’s never going to happen. They’re either going to run on american lng or on russian pipeline gas. They’re never going to run on hydrogen. But again, they need to be built first. And the Germans are not as good in building stuff as they have been in the past.


[00:53:05.280] – Ralph Schoellhammer

And they have an electricity deficit for the first time since 2002. They are now a net electricity importer and no longer a net electricity exporter. And just to put it on a broader sphere of Europe, Europe doesn’t have that many net electricity exporters. It’s the Czech Republic, it’s Germany, and there’s another one and France, if the nuclear power plants are not in a state of renovation, in a comatose state. But the situation is very dire. I’m not saying the end is nigh because one of the beauties of democracy is that people can vote those in, power out and vote somebody else in. And I think this is increasingly what more and more people plan to do in Europe now. Will these parties then have silver bullets? I don’t think so. But we just recently one of the major and very old german washing machine refrigerator producers, Mile, has now moved production to Poland because that’s the other story nobody talks about. We have a manufacturing miracle in Europe as well, and that is Poland. So if a country pursues the right policies, economic growth is still possible, even know sometimes insane Europe. But what of course is worries.


[00:54:17.190] – Ralph Schoellhammer

Germany is still the major economy. The old saying is if Germany catches a cold, if Germany sneezes, the continent catches a cold. That is not entirely wrong. And as I said before, I have historically never seen a government pursuing policies at all costs and obviously against the will of the voters. It’s fascinating to observe, it’s very german, but it’s also very worrisome because of course, if the so called moderates are perceived as working against the interests of the people, then the people will vote for those who are not described as being moderate. But if they feel that they are more in line with their interests, they’re going to give them their vote.


[00:54:55.460] – Tony Nash

So is for people doing business in Germany or with Germany. Is there political risk in Germany now or is it just kind of like an inconvenient or uncomfortable discussion to have.


[00:55:10.470] – Ralph Schoellhammer

Well, I would argue, contrary to what you read also in german newspapers, I think the only political risk is if the current government would, at the election sign 2025, if the current government would get an additional period or maybe two additional periods. I think from a purely economic perspective, a rightward shift, maybe even including an AfD conservative coalition government, would be the best that could happen. If you look at the economic program of the AfD, that is a common sense, useful economic program. Again, yes, they have. Particularly in the German east. Let’s say they speak in a way that I would not speak. They use a language that I would not use. But I think the same was true in 2016 with Donald Trump and his presidential election. So this idea that if you have a right winger or a right wing party come to power, fascism is the next thing around the corner. This is not how this works. The german institutions are very stable. The german military, the german police is not going to participate in a right wing coup. Again, the same as in the United States. Donald Trump can say what he wants.


[00:56:11.400] – Ralph Schoellhammer

He doesn’t have the military, doesn’t have the national guard. He cannot erect a fascist dictatorship in the US. I know it’s a good headline. It’s great clickbait, but it’s not going to happen. But just as is Trump in the US, if you then pursue sensible economic policies, at least in some areas, you can create a boom, or a boom like economy. So, as somebody says, what’s the biggest risk for the german economy? I would still argue it’s the green party and the Social Democrats, because when it comes to the economy, they are insane. I mean, there is no other term to describe it.


[00:56:43.410] – Tony Nash

Well, it sounds to me like good old fashioned parliamentary consensus. Right? You’re going to be pulling this way, people pulling that way, and they’ll meet somewhere in the middle. And that’s just the way Europe works generally. I think so. Good. Okay. Well, guys, this has been fantastic. I think, Ralph, I don’t really think that much about Germany, but I need to think more about it. And I think what you talked about with the Mila factory moving to Poland, I had heard about industrialization, deindustrialization, mostly moving toward China. But to hear that things are moving to Poland now as well, I know that’s not new, particularly, but there just seems to be this real exodus from Germany, which is kind of sad to hear.


[00:57:28.740] – Ralph Schoellhammer

But this last point, the United States, the comparisons between the US and Europe, sometimes we are more similar than we think we have both in Europe and the US. I think we have a problem of political leadership, but there is still a huge amount of structural advantages. Now, the US have massive structural advantages simply because of the energy. But in Europe you still have a skilled labor force. The problem we have all from Portugal, partially, again, maybe not to Poland, but at least in France. In Austria and Germany, we have created a welfare system that incentivizes or disincentivizes labor in many ways, right? If part time work pays per hour, if you calculate it more than full time work, then people say, why should I work a full time job? If you have people who are 65 and say, I don’t want to retire, I want to continue to work, but the government kind of then sticks their hands so deeply into your pocket that you say, okay, fine, if my option is to make more money, not working or retiring, then earning money and continue to work, I’m not going to continue to work.


[00:58:31.620] – Ralph Schoellhammer

But these would be highly trade, highly skilled, highly experienced workers that actually the companies would like to hold. But under the current tax structure, it’s not so easy for them to do that. As I say, I don’t know how this in the US, but if you make 2000 after tax as an employer in Austria, Germany, you cost your employer over 5000, right? So this is with all the Social Security payments and so on and so on and so on. It’s similar in other countries as well. But this is the problem. We have created a structure that disincentivizes skilled labor just as a kind of. As a boomois, a sherry on top. And how is the discussion to say, well, maybe we should introduce the four day work week because then we will be competitive. So there is a lot of insanity going on. I blame law schools, because I think the only people who sit in parliaments these days went to law school and none of them ever went actually to found a business or to work in trade or to work a construction site, because they have this weird idea. I mean, it’s amusing, right?


[00:59:31.130] – Ralph Schoellhammer

They say, well, if you only have four work days, you’ll be so motivated that you easily make up for the one day you lost. Really?


[00:59:37.820] – Tony Nash

Doesn’t work that way? Sorry?


[00:59:39.960] – Ralph Schoellhammer

Have you ever worked on a construction site? You show me that you work more. That might be true. Yeah, that might be true. What is the famous us sitcom two and a half man, where Charlie Sheen was like doing these jingles for advertising. That might be true, right? That you can make more jingles in four days than in five days, but for construction, for police, for healthcare, please show me how a nurse that is working for four days can have the same effect than a nurse working five days.


[01:00:10.400] – Tony Nash

This doesn’t work that way.


[01:00:11.720] – Ralph Schoellhammer

It’s political insanity. But I think the people below the iceberg and below the waterline are still fairly sane, and I hope that they don’t lose the courage of their own convictions during the next elections.


[01:00:24.060] – Tony Nash

I love how you say they’re fairly sane. I think we can say that here in the US, most people are fairly sane. So with that, Michael, thank you so much for joining us. Tracy, Ralph, really appreciate your time. Thank you so much. Have a great weekend and have a great week ahead.


[01:00:38.640] – Tony Nash

Thank you.


[01:00:39.640] – Ralph Schoellhammer

Thank you.

Week Ahead

Spiraling deflation?; Coal; Middle East, Venezuela


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Welcome to the latest episode of “The Week Ahead” with your host, Tony Nash! We’ve assembled a stellar lineup.

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[00:00:22.010] – Tony Nash

Hi, and welcome to the week ahead. I’m Tony Nash. Today we’re joined by Alex Gurjevich, Tracy Schuchart, and Albert Marco. We’ve got a few key themes. The first is spiraling deflation, and that’s based on a thesis that Alex has. And we’re going to go into that in detail. We’re then going to talk about coal and us exports and emerging market consumption of coal with Tracy and then with Albert. We’re going to talk a little bit about geopolitics with what’s happening in the Middle east. And we’re also going to talk about Venezuela with some sanctions going back on or coming off or kind of whatever’s happening. So, Alex, thank you so much for joining us. I’m always pleased know people like you or Tracy or Albert will spend time with us, and it’s just impressive that you’ll join us. So I really appreciate it. Obviously, best selling author. The next perfect trade was a fantastic book. I really appreciate. So. So again, thanks for joining us.


[00:01:20.490] – Alex Gurevich 

Thank you for having me. I’m looking forward to it.


[00:01:23.630] – Tony Nash



[00:01:24.190] – Tony Nash

Okay, before we get started, I want to let you know about a new free tier we have within CI markets, our global market forecasting platform. We want to share the power of CI markets with everyone. So we’ve made a few things for you. First, economics. We share all of our global economics forecasts for the top 50 economies. We also share our major currency forecasts as well as Nikay 100 stocks. So you can get a look at what do our stock forecasts look like? There is no credit card required. You can just sign up on our website and get started right away. So check it out. CA markets free. Look at the link below and get started ASAP.


[00:02:02.970] – Tony Nash

Thank you.


[00:02:04.630] – Tony Nash

So you put out a paper last August titled the real rates tsunami, and you outlined your expectation for the path of rates and inflation and other things. And I think that it’s still relevant, of course, especially as we watch the Fed play out their plan. Can you walk us through that paper and what your view is now? Has that changed much?


[00:02:37.970] – Alex Gurevich 

Okay, I will try to do it in an abbreviated fashion, so feel free to guide me or ask me questions.


[00:02:43.720] – Tony Nash

Okay, great.


[00:02:46.770] – Alex Gurevich 

At the core of the heart, what I was talking about is I was trying to understand what I got wrong in the yes, 2021 and yes, 2022. But that also informed me how I started to think about the yes, 2024 and 2025. Like, if you think symmetrically in 2023, I’m thinking both two years back and two years forward.


[00:03:08.240] – Tony Nash



[00:03:08.890] – Alex Gurevich 

And two years is actually, by the way, key to everything, because I came to the conclusion that everything operates for the two year leg. We can get more into that, but that makes a lot of sense. That’s how I was thinking about the world. And I realized that one of the mistakes of team transitory, so team transitory was correct. Just to step back after Covid, that there were always supply shocks that will be unwound and where we’ll see the bull whip. And actually we have seen that bullwip. One of the very important realizations I came to, or like I pounded my table on, when we saw slowdown in economy or inflation in 2022. 2023, it had absolutely nothing to do, I will repeat again, absolutely nothing to do with the fed raising rates. It did not and could not have. Fed raising rates did not and could not have had any effect yet what was happening, just a natural unwind of certain post Covid shocks. Now, what I did not count on, what I didn’t fully comprehend at the moment, how pernicious the civilian negative real interest rate of 2021 would be. And it does not matter that it was for temporary reasons.


[00:04:32.410] – Alex Gurevich 

But when you have severely negative real interest rates, it leads to further expansion of money supply. People have reasons to build inventory, blow up their balance sheets. Everybody wants to have a big balance sheet. If you have negative real funding rate, if you’re a business, you don’t have incentive to push for high labor productivity, you have no incentive to lay up workers. All of those factors created a very inflationary environment, which became sticky and continued on in 2022. And certain effects we’re still seeing now. So if you think of it to your leg, we’re still in the product of the environment of early 2022, which is the environment with rates only started to go up, which is the environment when inflation was very high. Now, the flip side of that is inflation came down. And people can say inflation came down for various, also transitory reasons, because there was unwind of the supply shock. But for whatever reason, the inflation came down, it created positive real rates environment. And this positive rates environment leads to further deflationary pressures. People have incentive now to contract their balance sheets. They have incentive to increase labor productivity, to start layoffs, to hire less workers.


[00:05:57.720] – Alex Gurevich 

It’s a very slow process. It’s a multi year process. It’s not something that happens overnight. It’s not like guacamole. We think high inflation, let’s raise rate by 75 basis points. Inflation print will be lower next month. Same thing when people say if fed starts cutting rates prematurely, it has a risk of rising inflation. Honestly, I’m going to be disrespectful here. I will say this is absolute gibberish. That is gibberish. That is not even like a sentence that makes any sense to me, that cutting rate, because cutting rates now will affect inflation two years from now, it will have nothing to do with inflation. Come up this year or not. This is just, the evidence is overwhelming to that, that you cannot just affect inflation on a month to month basis. You maybe can affect a little bit headline inflation by pushing on commodity prices up and down. You can maybe affect some high frequency economic indicators with a several month lag by changing financial conditions and changing the sentiment, by pushing stock market around. But you cannot really affect what Fed is really looking at core PCE on anything shorter than one or two year horizon.


[00:07:04.450] – Alex Gurevich 

And one year horizon will be very optimistic. So that is the core of my thesis. And since you ask him about real rate tsunami specifically, I’m going to share one chart, if it’s okay, and then start criticizing me or whatever. So this is the chart. You’ll see three things on the chart. There is one line, the wiggly line, which goes, can people see people well? Right, yes, wiggly line. This is the headline CPI. Now I use headline CPI, I calibrate it to whatever you want. You can use core pc, core pc deflator, core CPI. It’s all truly, it’s going to look similar no matter what you use. It’s the principle of it. I’m not going to do homework for everybody in terms of what to use and this line, but this is not just two years, this is average over two years, because remember, everything operates with two year lags. And this is the average two year software. So that just shows us the rates. Now those charts, well, familiar, don’t say anything. But what’s interesting is when you took the real rates calculated that way, and this is the yellow orange thing, and as you see, it shows us that right now we’re in an environment when the real, average real rates over the last two years were still close to negative 2% by this chart.


[00:08:25.910] – Alex Gurevich 

So when people say the economy has withstood rising rates, again, I will call nonsense on that. I’m not saying, by the way, my thesis is not that recession is inevitable. My thesis is not that inflation will not be able to withstand high rates. My thesis is that it’s entirely premature to even start thinking about whether it has withstood the high rates, because what high rates, real rates, have been on average negative over the last two years. So everything has been stimulative. So, in fact, even this environment, we’re already seeing some moderation of job market and some disinflation. It’s tremendously deflationary in perspective, because when this thing will actually become positive, the deflationary pressure supposedly will dramatically increase. Now, why do I think it’ll become positive? Well, look at the charts. This chart is already not stoppable. Those jaws are closing. And we do know that average software keeps rising. Fed is not going to cut rates to zero next month. Right. So this line is going to keep going up and it’s going to go to like 4% or whatever, depending on how fast the cuts will go. But it will go higher. Inflation, we know, is going down.


[00:09:45.580] – Alex Gurevich 

So there is really very little to stop because as high prints fall out of this, two years of inflation and low prints fall out of software, there was no stop to this thing from going. It doesn’t matter even what the Fed policy is now. That’s going to go positive. And that’s when we’re going to start having to start thinking about, okay, now, the average effect of positive real rate can be assessed. And I’m not saying we know what it’s going to be, but my inclination is to think that given what we’ve seen so far, that it will lead to further deflation. And just, again, not to take too much time. The core of my thesis, what I thought about this paper, that the sequence of events, I think is very different. That’s what Isaac Tony was asking. What is different? In the past, the thesis have been that we start with recession, then we get unemployment, then we get deflation. Now with the policy smoothing out, recessions we’re having, and post Covid whiplash, we’re seeing slightly different thing. The disinflation actually came first. Labor market is still robust, as we’ve seen today, particularly. Right? Yeah.


[00:10:53.470] – Alex Gurevich 

There are some mixed numbers you can say, like, this is pro, this is a con, January report is volatile. This is what’s happening on joel’s. This is what’s happening with claims, tons of things. But overall, nobody, I will challenge people yet to say that the job market is falling apart. Yeah, for sure. Very tough.


[00:11:14.470] – Tony Nash

I want to cover some really basic question. Okay. When you say deflation, when we hear the word deflation, we’re kind of programmed to think that deflation is a bad thing. When you say deflation, does it have a good or bad connotation or is it just a fact? Deflation?


[00:11:36.590] – Alex Gurevich 

To me, it’s more of a fact. First of all, I want to be very clear. I’m a trader. I’m not a policy person. When I always say, like, what the Fed should do, it should be taken with a grain of salt. I always think that fed should do whatever is best for my portfolio. I love that perspective because objective functions are very uncertain. I mean, deflation, I think leads to total society outcomes. Deflation probably leads to high wealth inequality. Deflation will probably will lead. And this is my thesis, that it’s not that unemployment will lead to deflation, it will deflation disinflation, which will have to lead to a loosening of job market.


[00:12:18.830] – Tony Nash



[00:12:19.300] – Alex Gurevich 

Because people, under pressure of high real interest rates, people will have to raise productivity and maybe hire less people. Not everybody thinks it’s a bad thing. Some people could think it’s a healthier adjustment on the economy, but higher real interest rates, they kind of clean a lot of things and they could do it in a painful way, like they kill zombie companies who roll over their debt. They could just really help us to figure out who is who. So it’s not all bad, but it can also cause pain. And then inflation leads to unemployment and to high unemployment. And high unemployment leads to erosion of consumer confidence. Then eventually it can lead to economic slowdown. So that’s a very kind of unusual path. And I think this, however, since the changes that occurred in policy since 2008, I think this might be the new thing we’re looking for. Like recessions don’t lead to stock market falling, for example.


[00:13:23.680] – Tony Nash



[00:13:24.930] – Alex Gurevich 

And unemployment might not start with a recession, but might start with actually deflation first.


[00:13:29.840] – Tony Nash

So your order of things is deflation, jobs, then recession.


[00:13:35.970] – Alex Gurevich 

If recession happens, which is not much, it might not even happen because by the time we have deflation and then job losses, the Fed can cut rate so much that they will have no recession.


[00:13:46.920] – Alex Gurevich 

And right now, when people are saying, like, recession, I was like, what recession? Why would consumers stop spending? There is a great job market and positive real wage growth. Why would people not be spending? And if we have consumers spending, why would we have a recession? I don’t see it yet.


[00:14:04.190] – Tony Nash



[00:14:05.390] – Tony Nash

That’s interesting. Albert, what do you think about that in terms of that order of events?


[00:14:11.230] – Albert Marko

No, he’s right about the order of events. I mean, layoff is the key thing. We’ve talked about this for a long time. Wait for layoffs to happen to start triggering things. And I do think that initially I was on the pro, recession is going to happen, so on and so forth. But as the data has been trickling in and policies have been enacted. I don’t really think that we’re going to see a real recession just because things are so under control from the Fed’s perspective now. Deflation? Yeah, it’s coming. I have a dispute on the timing of it, because right now there’s no real deflation in the United States except for the commercial real estate market. I mean, look at China. However, China is in serious deflation, but that helps the US maintain its inflationary policies. The US has too much wealth versus manpower capacity in the economy, and additionally, fund flows are all supportive of north american markets, since a large chunk of East Asia is just uninvestable to passive investors. If I look at the data, we had rates jacked to 5% and wages are still growing 5% to 6%. So wages were secularly depressed in the US for years, and now it’s time for them to recover.


[00:15:28.980] – Albert Marko

And this is probably one of the policies that Janet Yellen and Leila Brainard has laid out for the time being. So until I see a change in the political intent of wages and whatnot, it’s hard for me to see a deflationary event in the next twelve months. After twelve months, it’s a different world, different thing. And I think that Alex’s thesis is going to play out over the next one to three years, in my opinion. So what do I know?


[00:16:05.030] – Alex Gurevich 

I’m okay with one to three years horizon. Yeah. Do I have to say? My signals and kind of cycle indicators do predict peak deflationary pressure somewhere towards the end of 2024. But if it turns out to be like, you’re more of your timeline, I would not feel too wrong.


[00:16:25.580] – Albert Marko

Yeah. My only issue is it’s just Janet Yellen and Lail Breinard and the Biden administration, they have their hands on policy right now, and it’s been intent on keeping the markets of the economy looking rosy.


[00:16:40.500] – Alex Gurevich 

And my opinion, it’s all, what can they actually do now?


[00:16:47.010] – Albert Marko

Not much anymore, but that’s my point.


[00:16:50.360] – Alex Gurevich 

I don’t think they’re really like, fiscal policy is kind of fixed, it’s fairly expensive, but not the way it was in 2020. Right?


[00:16:58.710] – Tony Nash



[00:17:00.630] – Albert Marko

The only thing I could think of is really like, Congress wanting to boost the markets for their own reelection bid. So you’d see subsidies and legislation come out over the next six months. Short term, temporary garbage.


[00:17:12.400] – Tony Nash

But that’s targeted, right?


[00:17:16.490] – Alex Gurevich 

This is actually. You probably know about this more than I do. Wouldn’t the Congress be somewhat locked pre election in terms of extreme fiscal policies, it would be not in the interest of challenging parties to put very big bipartisan plans out.


[00:17:34.550] – Albert Marko

It depends because it depends. In the past you’d be absolutely correct. But in the last election and this one that’s gearing up, I do see a lot of policy and some legislation looking to help the US workers and basically just give people free money. I mean, this latest piece of legislation gives people like $8,000 if they have a kid just to file taxes. These inflationary policies that they have is just, they’re troublesome to me and they just don’t care. They don’t care what happens in a year. That’s my only issue.


[00:18:09.310] – Alex Gurevich 

Well, one of my theories is that fiscal expansion might be not so inflationary when it’s not accommodated. Because if the Fed is not buying. So if you spend deficit and sell more bonds and more bonds, but the Fed is not buying them and not lowering rates, then somebody has to buy them. So they crowd out other investments. They either have to bring in foreign capital and that will be capital surplus and then has to go up. Or though people talk about it’s all confusing because people might buy them but then hedge the currency. It’s confusing, but somehow in the big picture. Or they have to end up with end users because they cannot all end up on banks balance sheets because of tightening of banking regulation. Right.


[00:18:52.810] – Albert Marko



[00:18:53.520] – Alex Gurevich 

So they have to go somewhere and some people will buy those instead of doing something else with their money.


[00:19:00.410] – Albert Marko

Yeah, no, valid points. Valid points. The only thing I do have, I was discussing something with a partner of mine and he brought up a good point, is like what if Yellen, her idea is using only two and three year bonds and having the fed purchase them. They’re talking about duration of all these things.


[00:19:19.040] – Alex Gurevich 

But right now they’re not purchasing, they’re not selling. Tightening. Like if you would see quantitative easing, for example, if you combine fiscal expansion and quantitative easing, you could see this kind of inflationary mechanism going. This is very theoretical. I actually don’t.


[00:19:35.180] – Albert Marko

Yeah, of course.


[00:19:36.100] – Alex Gurevich 

And I don’t have deep conviction. This is my kind of working assumption. And what I’ve seen is that fiscal expansions don’t actually seem to lead so much inflation impact if they’re not accommodated because then rates go up because the bonds have to clear. Like if the Fed is not buying them, somebody has to. All the bonds have to clear.


[00:19:57.230] – Albert Marko

Yeah, you’re correct. And you actually mentioned that earlier, except for commodities. And I say that’s one of the areas that I’ve focused on intently is commodity inflation probably rising, everything else. You’re absolutely spot on.


[00:20:12.950] – Tony Nash

So I think it’s fascinating that we’re talking about deflation so casually. I love it, because again, there’s always this lining of deflation being a terrible thing, and I love that we’re just talking about it. Yeah, it’s probably going to happen, and this is the order of what’s going to happen. Tracy, we talk about commodity prices. Do you see room for further kind of suppression or decline in commodity prices? Because we’ve seen huge geopolitical events and not much has happened with crude and net gas and other things. So what do you see on the commodity side with this kind of environment that Alex is talking know right now?


[00:20:57.220] – Tracy Shuchart

I think that this kind of environment is what investors are looking at right now. Right. And why they’re kind of scared to get into the commodity sector and not to mention what’s happening in China right now. I mean, we’re seeing a massive slowdown. I don’t care what they say their GDP is, we all know those are all fake numbers. And there’s a massive slowdown in the property sector, a massive slowdown in the manufacturing sector, and you can’t have domestic travel, I. E. Trains, planes, automobiles, et cetera, make up for what is happening in the big sectors of this industry, which I think is largely ignored. But that said, looking at China, I will have to say that I think the market is looking too much on China. I think we’re too dependent on China and looking at China for commodities data, China is doing bad, poorly economically speaking. Then we need to sell commodities. But there’s a lot of up and coming markets. And we’ve talked about this before, Tony, where I think know we’re going to see increases in India, we’re going to see increases in Africa, we’re going to see increases. And we’re already starting to see those increases, particularly in fossil fuels and metals, in those industries that are going to kind of make up for the China shortfall.


[00:22:27.720] – Tracy Shuchart

And so I think the market, in one respect, I think that we have to look at China because they’ve been the major driver of commodities for 20 years now. But I think it is time that investors start looking outside of China, maybe because I don’t think they’re going to be the main driver anymore, even though they’re still a huge country and a large consumer.


[00:22:52.190] – Tony Nash

Yeah, I think I remember when I was at the economist, I don’t know, ten or 15 years ago, and people were asking us, so what’s the next China? And for a decade, it was still China. What is the next China? Well, I don’t know. I mean, it’s going to be hard. That’s a once in a lifetime thing, and so it’s going to be really hard to create another China. And although they export deflation from a demand perspective, an investment perspective, not having another China, I think that strengthens thesis. Where does that demand come from? And we have all this installed capacity, but where does it all go? Because we have population declining in Northeast Asia, we have population declining in Europe. We have population declining in Russia. We have population growing in the US, but we don’t have population growing in a lot of other parts of the world, aside from, say, India and Indonesia, I think.


[00:23:50.330] – Tracy Shuchart

And Africa.


[00:23:51.710] – Tony Nash

And Africa.


[00:23:55.930] – Tracy Shuchart

I think it’s almost better that it’s diversified and that we’re not looking to one country to kind of fortify what we look at demand, particularly in natural resources, since that’s my primary focus.


[00:24:12.190] – Tony Nash

Alex, you said India is the next China. I hope India is the next China. I’m not convinced that. And know I love India. I’ve met with senior officials there. I’ve been there many times. I’ve done a lot of work there. I’m not convinced that India has the institutional capacity to do that. And I think foreign investors have been spoiled by. And this is the old anecdote of arrive at the airport, drive to the factory, and it’s a beautiful drive. The rest of the town can look terrible, but the drive from the airport to the factory is a beautiful drive. India hasn’t really got that down. And I think when foreign investors who are accustomed to investing in a place like China, where it’s a beautiful drive, when they go to India and you land in Mumbai and there’s four year olds knocking on your taxi door to ask for money, that sort of thing, it’s really hard for people to.


[00:25:21.510] – Albert Marko

Yeah, yeah, but Tony. But Tony, India has advantages over China in terms of legal system and the finance system. It’s more trusted than the Chinese would ever be. I mean, they’re based on anglosphere laws and regulations and whatnot. They’re more tied in with the western world than China. China, they can just confiscate everything you own and prevent you from leaving the country.


[00:25:43.230] – Tony Nash

As an investor, yes, but in India, you can be in a court case for 50 years, regardless. In India, you’ll have arbitration in Singapore or in London or something like that for whatever can be decided in a place like Singapore, they’ll continue to do that, but you’ve still got layers of kind of payoffs that need to happen and other things in India. But Alex, I am hopeful. I remember when, I think it was flextronics 15 years ago, made their first investment in Chennai and everyone was hopeful. That was India’s big breakthrough on electronics manufacturing, and it just pretty much fell flat. And now we have other things happening. I think Tata with the nano, what they did, what, ten or 15 years ago, really helped indian manufacturing and supply chains. But I’m just not quite there yet. Again, I’m a big fan. I want it to happen, but I’m not necessarily quite there yet on seeing supply chains in India be as robust as China was even 1520 years ago.


[00:26:42.690] – Alex Gurevich 

That’s fair. I also think that when people think of what I’ve always argued, when people kept saying that China is doing in some ways unique, though, because I think China is unique in a way that China, what China did in the end of 20 century, beginning of 21st century, is what it has done several times over its several thousand years of history, which is reason to economic dominance or close to economic dominance in the world. Had a very big chunk of world population who had very good technology and innovative kind of approach, had a very organized authoritarian state make a bid to become a global power and failed at that bid.


[00:27:32.670] – Tony Nash



[00:27:33.350] – Tony Nash

And I think that last thing you.


[00:27:34.950] – Alex Gurevich 

Said is China did it several times in the history. So in some ways, the counterargument to what I said, India is the next China, which is saying, like, India is not the next China. India is the next India. The next China is China.


[00:27:49.040] – Tony Nash

Yeah, that’s a great point. Can I ask you something, Alex? A little bit. A little bit off topic, but we see this China Russia relationship, and I’ve said for years, because I did work in China for a long time, I don’t believe that the Russians and the Chinese trust each other. And I don’t think that’s an enduring relationship. Do you think those sides can really trust each other? And do you think that’s an enduring relationship?


[00:28:16.990] – Alex Gurevich 

First, full disclosure, it’s outside of the area of my expertise.


[00:28:20.990] – Tony Nash

Okay, but just your personal view.


[00:28:26.050] – Alex Gurevich 

I probably have the same skepticism as, you know, historically, like, you know how there are those books like this kind of geopolitical theory, geography, destiny, and typically us and Russia, natural allies. And Russia’s natural opponents are Turkey and China.


[00:28:50.970] – Alex Gurevich 

Russia’s natural allies are us and England. There was only one time, I think, when England and Russia, for example, found themselves on the opposite side in the crimean war.


[00:29:03.090] – Alex Gurevich 

And every other time they were basically on the same side.


[00:29:07.020] – Alex Gurevich 

Us and Russia found themselves on the same side every single time, except for some proxy wars that can’t really count. And there are geographical reasons for that.


[00:29:19.010] – Tony Nash

Okay, yeah, that’s very interesting. I want to ask you one kind of last thing that you mentioned in your paper. You said that AI could be seen as deflationary. Can you talk us through that? You talked us through some of this job stuff. Can you talk us through how AI can be deflationary?


[00:29:36.170] – Alex Gurevich 

Well, we’re in the early stage of singularity. We don’t know yet how the singularity, which, by the way, has already happened, will spread. And there is this whole thing that has been happening throughout human history that they will come up with some new technology and people will be like, oh, this will lead to job loss, but reality, every new technology just led to restructuring of job markets. So they got rid of stable hands, but now they have car mechanics. Right?


[00:30:09.270] – Tony Nash



[00:30:11.170] – Alex Gurevich 

So drivers of car, whatever, people of sales, sailboats now work on whatever fossil fuel driven boats. Right. It’s the same. What I’m saying. Like any kind of advancement, technology led to actually rising levels of standards of life and created new job opportunities. This revolution could be a bit different because every single time, what happened is that the technology would replace the most manual, the least intellectual part of work, letting people do the more intellectual part. So making humans actually express more their human capacity. But this is kind of a displacement from the top. Like, there was an interesting presentation. I thought about that. Right now, the jobs most displayed by AI are not actually the highest paid jobs, not the lowest paid. Like, if you need some simple legal documents, like, I’ve already used AI to draft legal papers for me without. And saving a few hundred dollars here and there on lawyers.


[00:31:19.950] – Alex Gurevich 

It’s not super critical. Chat GPT will draft you any legal template. I also use it continuously now for second opinions on medical questions. I will still go to a doctor, but if I want to get a second opinion, I use Chat GPT, and it gives very reasonable second opinion usually. Right. So it’s displacing those, really. It’s not displacing gardening. Like, I mean, Chat GPT cannot landscape your garden.


[00:31:48.260] – Tony Nash

Exactly. Yeah, it’s very interesting.


[00:31:52.130] – Alex Gurevich 

Cannot give you a massage yet. Right. It’s not doing anything in that area, right?


[00:31:56.210] – Tony Nash

That’s right. Sorry, Albert.


[00:31:58.890] – Albert Marko

No, he’s right. I mean, the AI is definitely a disinflationary threat. I mean, 80% of finance jobs are just robot calculators, 70% of lawyers are just robot readers. It’s easier to replace those type of people, but I guess you can replace them with Walmart welcomer positions later on.


[00:32:16.410] – Tracy Shuchart

Go to tech school, kids. Go to tech school. Become a carpenter builder.


[00:32:21.600] – Alex Gurevich 



[00:32:22.650] – Tracy Shuchart

You can’t be replaced by AI.


[00:32:26.430] – Alex Gurevich 

To replace physical labor by AI, they will have robots. But that technology is far away, and it’s not easy to implement because hardware is very hard to implement and it’s very hard to make it cheap. It will get there, but it might take the case. While displacement of intellectual professions happens within months, it’s just such a different timeline.


[00:32:51.350] – Tony Nash

I have a son about to enter high school, and one of the tracks that they have that he can specialize in is welding. And as silly as it sounds, we’ve thought about trying to convince him to take some welding classes because so much other stuff can be automated.


[00:33:08.460] – Tony Nash

And so we haven’t convinced him yet, but it is a real thought that we’ve had so that he can learn, have a trade to fall back on as other stuff is automated. Who knows, right?


[00:33:18.420] – Tracy Shuchart

Well, don’t you remember back in school, when I went back school, we had shop classes. We learned how to work with. I mean, that was like our required class.


[00:33:28.900] – Tony Nash

Tracy, I was Woodshop student of the year in 7th grade. Say that proudly.


[00:33:37.950] – Alex Gurevich 

I will say officially, I was absolutely hopeless at shop. So nothing would have to do with. I would totally not survive in the society when you have to rely on dexterity of your hands or kind of your practical intuition. I am absolutely hopeless.


[00:33:53.460] – Tony Nash

Yeah, but you’ve got an amazing mind, Alex. So you make up for being.


[00:33:58.190] – Alex Gurevich 

I’m under pressure. I mean, AI replacement, it’s something that I have to really seriously worry about.


[00:34:04.620] – Tony Nash

But that’s the reality of where we are. Everyone who’s a white collar worker should be worried. If they’re not worried, they’re not aware of what’s out there in technology.


[00:34:15.320] – Tony Nash

I’m worried. Albert’s worried, Tracy’s worried, you’re worried. We should all be worried a little bit. Otherwise we’re unaware.


[00:34:24.950] – Alex Gurevich 

Yeah. It’s nice if you have capital, because what happens that AI only makes your capital have more value? Because capital means access to computational capacity, whether it’s a form of digital assets or whatever. But computational capacity will be key. If AI does everything right. That’s right. Then you need energy to fuel computational capacity. The energy efficiency, increase of energy efficiency will never catch up to the need for computation. So we’re going to need more and.


[00:34:58.460] – Albert Marko

More energy for that, which is interesting.


[00:35:01.970] – Tracy Shuchart

I’ve been writing about that, which is.


[00:35:04.310] – Albert Marko

Interesting because when AI starts flipping the script on renewable energy because it’s not efficient enough, there’s going to be all sorts of political problems happening.


[00:35:12.470] – Tony Nash

That’s a great segue. Let’s talk about cheap energy. Thank you very much for that. Before we get started, I want to let you know about a new free tier we have within CI markets, our global market forecasting platform. We want to share the power of CI markets with everyone. So we’ve made a few things for you. First, economics. We share all of our global economics forecasts for the top 50 economies. We also share our major currency forecasts as well as Nikay 100 stocks. So you can get a look at. What do our stock forecasts look like? There is no credit card required. You can just sign up on our website and get started right away. So check it out. CA markets free. Look at the link below and get started ASAP.


[00:35:55.290] – Alex Gurevich 

Thank you, Tracy.


[00:35:56.440] – Tony Nash

Let’s talk about coal for a little while. You had a couple of tweets about coal this week. We’ve discussed the problems with wind and solar companies over the past few months. As interest rates have risen while us coal consumption has fallen, us exports are rising. So we’ve got the tweet on screen. Is this coal headed to emerging markets or developed markets? What are we seeing in this data?


[00:36:19.790] – Tracy Shuchart

It’s mostly heading to Asia, obviously. And so emerging or semi emerging, I’d like to separate because I think know there’s kind of a difference if we’re looking at Pacasia or India, but yeah, most of that’s going to Asia because obviously they have made their plans very clear. They are emerging markets, they want energy security and they want cheap, reliable energy. I mean, if you look at Pakistan, Pakistan hasn’t even been able to afford that gas for a couple of years now and it’s been a persistent problem for them. And so you have to understand that these nations, they need energy security. That’s all they care about. And even India, which is. I’ve heard a lot of things. Well, India’s are. Why is India buying from Russia? Because they’re an ally of the US. Well, first of know, India is focused on their own energy security. For one and two, their relationship with Russia runs deep in its counterbalance to so in the region. So we really couldn’t say anything about that. But if we’re looking at coal. Yeah, absolutely. We’re seeing coal exports because if you look at our numbers, 2007 is really when we peaked at our coal usage.


[00:37:54.490] – Tony Nash

You mean in the US, or globally?


[00:37:56.500] – Tracy Shuchart

In the US. Okay, in the US. And that was mainly for electrical power. And since 2007, we’ve literally declined almost 60%, which is why I think it’s been a rapid decline over a very short time. We don’t use that much coal at all for any more electrical. And I would say it’s completely negligible in manufacturing. It’s nearly nonexistent anymore.


[00:38:27.350] – Tony Nash

Clean coal never happened. The alleged clean coal from the 2008 election never happened.


[00:38:34.100] – Tracy Shuchart

Yes, but companies have largely moved away from that domestically. Why not? Why not use nat gas? It’s a whole lot cheaper than coal, actually, and we have a ton of it, so let’s sell it overseas. And I think one of the reasons we haven’t really seen the big pushback from, say, environmental groups on exports like we have seen on LNG just recently, is because of the rapid decline in usage. And they’re just not really paying attention to it because it’s no longer a significant source of energy in the US anymore.


[00:39:14.760] – Tony Nash

Okay. It’s exports. And we still have. China is still 70 plus percent power generation by coal, is that right?


[00:39:23.690] – Tracy Shuchart

Yes, absolutely.


[00:39:27.110] – Tony Nash

For all the solar and wind and everything else we hear about China developing, they’re still over 70% coal driven for their power generation.


[00:39:36.220] – Tracy Shuchart

Of course. And what you have to understand when we hear all of these, you know, they’ve increased solar know, x percentage, and you have to understand what a low percentage they were coming from. So it makes it sound huge when you’re coming from such a low denominator.


[00:39:56.560] – Tony Nash

Okay, so you mentioned India. I want to go a little bit deeper into India. Modi is looking to coal to shore up energy security as indian power generation is growing by double digits. So going back to is India the next China or whatever, their power generation is growing really fast. So are these coal numbers from India? This is based on a tweet that you put out. Are these coal numbers from India just a blip or do you see this as more of kind of a medium term kind of intention for them to continue growing, using coal to have reliable, cheap electricity?


[00:40:34.980] – Tracy Shuchart

Yeah, I think it’s a medium term thing. I don’t think it’s anywhere part of their long term goals, but I think it’s a cheap interim, easy fix for them. Right. Because they already have plants, they can build that out really easily. They also becoming a really big buyer of LNG and a really big buyer of crude oil. And so I think that when you’re facing such a rapid deployment of energy and you need this for electricity, and you need this to run everything. You’re going to go to your. Go to. What’s the easiest thing that we have means available, then that’s what they’re going to go to. And they’re going to build out those plants. Do I think that they have plans for that forever? No. And they are building out some solar and some wind. But again, that’s not baseload possible.


[00:41:35.470] – Tony Nash

And going back to Alex’s deflation thesis, it looks to me, because interest rates have risen, so the alternative power, the cost of alternative power development is much higher, and so people are substituting with much cheaper generation sources.


[00:41:57.030] – Tony Nash

So that is, at least in terms of headline, that is deflationary. Is that right?


[00:42:03.030] – Tracy Shuchart

Yeah, absolutely. I mean, we’ve already seen. We’ve seen orsted quit plants, quit wind farm projects in the US off the east coast. You had BP literally just say it’s uninvestable in the United States to invest in wind.


[00:42:20.740] – Tony Nash

Beyond petroleum is saying that it’s uninvestable. Remember when they tried to go as beyond petroleum a decade ago? Or.


[00:42:28.830] – Tracy Shuchart

And so, you know, they’ve divested, and so does Ecuador. Ecuador also divested in wind assets of the know. It’s pulling on their balance sheets, it’s pulling down their numbers. It’s not only just rising interest rates, there’s also supply chain problems. You got to deal with China most of the time for a lot of your resources, and it’s just become a huge problem with them and a big drag on their balance sheets. And it’s just at this point, not profitable to sit in these assets. And we have to understand that these companies are here at the behold and are beholden to shareholders that are looking to them to perform well.


[00:43:16.130] – Tony Nash

They need to get margins somehow.


[00:43:17.320] – Alex Gurevich 



[00:43:17.550] – Tony Nash

So they’re trading down in their feedstock costs. Alex, did you have something to add?


[00:43:22.030] – Alex Gurevich 

Well, I have two thoughts. One of them is like something I’m using. Several years ago, I went to a science fiction convention. Yes. I go to science fiction conventions regularly. And one of the presentation was on the economics of terraforming Mars. And one of the key points of this presentation is. So in order to do terraforming projects, you need zero interest rates to begin with, because terraforming projects are so low that any kind of investment yield on such a long project only makes sense in a zero interest rate environment.


[00:43:56.080] – Alex Gurevich 

So that’s kind of an inter. Like. It’s one of the conclusions was immediately derived.


[00:44:00.780] – Alex Gurevich 

Because on any kind of positive real rates, 3% positive real rates, no. 100 year projects ever made sense. But another thought about energy. I have kind of going back to my AI thesis, if you allow me to stay a little science fiction, because it’s Friday and people want a little entertainment. Think about this. You set a group of people who are hungry, and they’re smart and productive and industrious and kind of scrappy. They’ll find food. They’ll start figuring out, okay, where can we hunt? Where can you plant food? What can I do? Now? AI is hungry, and food that needs is energy. No matter how you slice it, AI will start looking for energy. So now we’re having the rise of the greatest, most efficient, most scrappy intelligence, which will start looking for energy. And in my opinion, all paths lead to fusion. Because in the end, even fossil fuels will not satisfy, like neither wind power nor solar panels nor fossil fuels. They will not satisfy the hunger of AI. They will have to turn to nuclear energy. And if they find that nuclear fission is not enough, they’re going to have to eat fusion.


[00:45:16.490] – Tracy Shuchart

I’m all for it. Just tell me when it comes to fruition. I’m 100% for that. I mean, I love the idea. I just hope that we can discover that in time. But absolutely, I think that’s why we’re also finding a nuclear interest in the west that has been long disregarded, particularly after Chernobyl. And, you know, we’re talking about building out these huge data centers that are going to need power and we just don’t have it.


[00:45:53.520] – Tony Nash

Very interesting. Okay, thanks for that. Let’s move on to geopolitics. Albert, I’m really interested in the impact of this. The US approved new strikes on iranian targets on Thursday in retaliation for deaths of us military members. We’ve got the story on screen. Obviously, its proxy has been provoking the US and Yemen, Iraq, Jordan. So none of this is unexpected. But is it surprising that the response has taken so long and that the deliberation has been so visible? I have to believe that the US has kind of some existing list somewhere priorities, or else why would they have an intelligence service? So why did this take so long albert?


[00:46:37.870] – Albert Marko

Well, it’s taking so long because it’s the Persian Gulf area. I mean, it’s the mean. They can sit there and strike a couple proxies and erase a few of them, but what’s that really going to accomplish, especially if everybody in Congress is talking about Iran being behind it? All right? I mean, you can’t go and attack Iran because oil will be $300 the next morning and they’re not stupid. They know this. They’re keen to the realities of this. They’re taking their time. And honestly, as much as I’m critical of the Biden administration, it’s probably the right thing to do, is to take your time and just be more calculated and understand that there could be a wider conflict that you just don’t really want to get into going into 2024, especially with an oil hovering here at $72. Is it right now? Yeah, $72 right now. We could easily surge it. So it’s probably the correct thing to do. But they do need to have a serious response, and the time is ticking away.


[00:47:42.150] – Tony Nash

And also, refinery utilization is below 90% or whatever this month. Those crude prices will translate to higher gasoline prices really quickly if that crude price spikes up.


[00:47:55.830] – Tony Nash

So what are the next steps, Albert? I mean, we talked a couple of weeks ago, and we thought this will be a few months that the US will be involved in Yemen and kind of in the region. And of course, there may be a longer tail on it, but in terms of, say, kinetic action, it’ll be a few months. Do you still hold that view, or do you think this becomes a much more entrenched regional, say, medium term effort?


[00:48:18.420] – Albert Marko

No, I still hold that view. I think that the Biden administration is going to have to lean on the Chinese to put pressure on the Iranians. I’ve said this before, put pressure on the Iranians and even have the Russians put pressure on the Iranians to settle things down for a while. It’s just too much. The Houthis taking shots at ships, iranian proxies in Iraq killing Americans. It’s just too much. And there’s a lot of trade that has to go and don’t want to see any kind of problems going forward, so they’re going to have to. If I was the Biden administration, I would be on the phone with the Chinese immediately and tell them to lean on them. Lean on the Iranians.


[00:48:58.970] – Tony Nash

Do you think that’s already happened?


[00:49:00.890] – Albert Marko

Oh, yeah, for sure. I mean, they’re not that dumb. They’re not that stupid. I mean, I think we saw that a couple of days ago that they said the Chinese were starting to make calls to their reignings to settle things down. Without question, that would happen already.


[00:49:15.780] – Tony Nash

Yeah. I think the coordination is. It seems to me that the coordination is happening with the National Security Council rather than with state.


[00:49:26.870] – Albert Marko

No, not with state. State’s nothing but a postal service. They’re completely dismissive of State Department.


[00:49:33.750] – Tony Nash

Okay, so with the chinese playing ball, this could be a couple months or something and hopefully it’s over before driving season hits or something like that.


[00:49:44.890] – Alex Gurevich 



[00:49:46.250] – Tony Nash

Okay, let’s also look at Venezuela. I know it’s kind of a minor story, but there’s been some news on the wires this week that the US is ordering business to wind down their transactions in Venezuela because of some election reforms that Maduro won’t do. So how much of an impact does this really have? I mean, the Middle east is a bigger geopolitical issue when it comes to crude prices. Does that have a major impact? Are we taking a lot of crude from Venezuela? Do they have the capacity to export to the US?


[00:50:20.000] – Albert Marko

Not really. I mean, this is more of a Tracy question, but I was talking to some of the oil guys and they told me there’s nine blccs still sitting there in port that have yet to make it to the United States. Right? I mean, we all knew that Maduro was going to go back on his word for this democratic election. I mean, it’s just silly, right? It’s just absolutely silly. And the things that I don’t understand why anyone doesn’t talk about, especially in geopolitical world, is the iranian connection in Venezuela, specifically Kaibo. They’ve been siphoning money and sending it back to the. You. Why don’t you take a look at that and start discussing that problem. But the reality is Chevron has to keep their waivers and their sanction waivers intact and that’ll go forward even though that the deadline in April will come and go. Right. And no more american companies are allowed to contract there. Chevron is going to be excluded from that. They still have their waivers and american refineries will be getting supply from chevron into the refineries there in North America.


[00:51:25.300] – Tony Nash

Okay, so tell us a little bit about Maricibos since nobody’s talking about it.


[00:51:29.610] – Albert Marko

Well, Maricibos, back in the, was it the 90s or mid 90s or. No, late 90s, early 2000s when Chavez came to power, he actually invited all the iranian linked groups that were in the tribal region of Paraguay, Uruguay and Argentina and shifted them up to Venezuela. Well, they took over and started siphoning narcotics, arms, oil trade and so on and so forth and shipping that money back. I mean, if you can go to the streets of Maricabo and you can see all the lebanese and iranian influence on the streets there, it’s plain as day. They even put one of the iranian narco terrorists as vice president of Venezuela about two years ago. He was for like six months. I mean, he’s a well known narco terrorist. So this is nothing new, especially to the intelligence community. Just media doesn’t want to cover it for whatever reason.


[00:52:23.860] – Tony Nash

Right. Wow. Okay. Well, guys, thank you so much. I can’t believe how much we covered today. Thank you so much for your time. Alex, thanks so much for joining us for the first time. We really appreciate it. Appreciate it, guys. Have a great weekend. Have a great week ahead.


[00:52:37.160] – Tony Nash

Thank you.


[00:52:37.910] – Albert Marko

Thank you.


[00:52:39.090] – Alex Gurevich 

Thank you.