Transcripts

Erik: Joining me now is Jeff Currie, partner at Carlyle Group, and also well  known as the former Commodities chief at Goldman Sachs. Jeff, it's been way  too long and it's great to get you back on the show. Since you're Mr.  Commodities, I've gotta ask you, I think what we're seeing is the stock bull  market of the early 2020's is giving away to even bigger commodity bull market  of the late 2020s, is that what's happening? And if so, what's the macro driver?  Why is it happening?  

Jeff: Oh, absolutely. I think started back in October, 2020 through the middle of  22. You know, oil got up to like 130. We saw a big run up in commodities  during that time period. The drivers of, you know, we, in fact, we made a call  when I was at Goldman, you know, for a commodity supercycle. 

In October of 2020, and I'd argue every point that we made at that point in time  are valid, even more so today than it was then. So if you liked it, then you really  gotta like it out. So why don't we just kind of go over the big drivers and, you  know, from a supply perspective, you know, it. You know, the, the  underinvestment, you know, you know, years of poor returns going back to  2014 saw capital redirected into other sectors, you know, like, like tech. 

And as a result, you know, you look at like, whether, if it's metals or, or oil or  yeah, agriculture. Most of these real assets have faced years of underinvestment  with, like with oil. This year is the last time you have. Big surge in non OPEC  production. In fact, it was in, you know, this coming month of March. 

That's it. There's really nothing behind it. Refineries, there's nothing behind it.  Copper. I can go down all the metals, you know, you, you, the underinvestment  thesis it's been in place since then. Still very much in power. And when you  look at metals, they've just been a straight line since 2020 actually, you look at  the equal weighted you know, commodity indices, like, you know, the  underweight oil, and we'll talk about oil a little bit later. 

It's just been a straight line since, since 2020. So what were, you know, the, the  drivers on the demand side and I really the same three are there, and it was  deglobalization. Decarbonization. Well today you call it electrification, but let's  call it electrification for current term, current terminology. 

And then the third one was redistribution. So another way to say it is the you  know, the deglobalization is the war on free trade. The decarbonization was the  war on climate change. And the redistribution is the. War on income inequality.  So let's go with the first one. The, on the, you know, the, the, the  deglobalization.

It is so much further than what I ever envisioned. You, you know, whether, if  it's defense spending supply chains, you know, like to say we've weaponized the  periodic table. It's gotten so severe since then with, you know, China curtailing  critical mineral supply in 22 natural gas you know, even more recently with the  US sanctions on Iranian and in Russian oil, you know, all of it's been  weaponized. 

So that story, that theme is just turned up in volume. And that's even what's  driving gold because ultimately. You de dollarize 'cause you don't want any  own, any dollar assets. 'cause the Americans can employ sanctions on you  through the Swift system. So even gold is going up because that, so that de globalization theme you know, alive and kicking and you know, again, another,  actually another data point Europe. 

5% of GDP committed to defense spending. It's all commodity. So anyway, that  theme as, let's go to the next one. You know, we called it decarbonization in  2020 today called electrification Turbocharge. By the way, US, I'm putting US  Europe and China record installation of renewables in 2025 and 2026. 

And in China, as you and I are one of our favorite topics to talk about, nuclear  capacity installation. China is just leading the world in that. So electrification  that story, you know, is, and then you throw data center demand on top of that  electrification story. It's far stronger than we ever dreamed of in 2020. 

And then the, the third one, the redistribution. And that really goes to fiscal  policy. And the need to you know, redirect capital into lower income groups to,  to deal with the civil unrest and the problems that are associated with which are  all over the world right now. And when we think about the spending, and this is  the argument and you, you and I have talked about in the past, Eric, is when you  money goes to the lower income groups, you get a proportionally larger spend  on commodities. 

So you put it together you know, demand even in oil. Surprising to the s upside  for many different reasons. We'll talk about oil later, but we're seeing across the  board, and I just wanna address one last point here before we leave this topic. A  lot of people are gonna go, you know, curry, you're so wrong on oil. 

Yes. I was so wrong on oil. It went down. And we think about commodities, all  the ones that have a atomic number associated with them that are in the periodic  table and the, I like to say the weaponization of the periodic table have gone  straight up anything that has a carbon hydrogen into it. Really struggle.

What's carbon? Hydrogen hydrocarbon. So oil gas in coal carbohydrates like  corn, wheat and so forth. What do these organic chemistry commodities all have  in common? Affordability. They drive inflation. And when we think about.  What, you know, the primary driver of every politician in the Western  hemisphere in the Western West is get inflation down at all costs. 

And so we think about what happened is that we go back to 22, 23, and we saw  that the drop of inflation was globally synchronized. It occurred against record  demand of commodities. Very strong US, GDP growth, relatively good GDP  growth in China. So it really could not have been demand, it had to have been  supply. 

Because again, globally synchronized strong demand. So where did they get the  supply? Turn a blind eye to Russia, Iran, Venezuela. Hey guys, turn up the  volume. And then you look at immigration. Where did, how did you get the  wages down? I mean, just tell anybody, go back and look at immigration across  us, Canada, Europe, and the rest of them's a line going straight up. 

Get your wages down. How did you get the food prices down? We don't care  about what's, you know, the palm trees in Philippines, or you know, the, the  land in Latin America, just harvest as much as you possibly can. Turn a blind  eye to environmental. Regulations. So they did that. Now, what problems are all  these countries facing with right now? 

Well, US went into Venezuela. You got a problem in Iran, you got a problem in  Russia. You're not doing that trick again. These guys are producing at max.  Then you look at, and so you're, now you're turning them off again. And then  you look at what happened with. You know, with immigration, you know, by  the way, places like Canada were up, I think like two or three X, and here in the  UK was up like a hundred percent. 

US was up 50%. And now you're getting the backlash from that. So, you know,  I'm not gonna say, you know, I'm not there. I know there's a lot of sensitivity  around immigration. I don't wanna put it down, but, but I think the key point  here is those CH commodities, those affordability, anything associated with  affordability was forced out. 

Eventually you're running out of those tricks. There's no more insurance  policies. Next, this next time around, you're not gonna be able to open the  floodgates on immigration. You're not gonna call up Iran going, Hey we don't  care. Start exporting again against the sanctions. This is not happening again.

Anyway I think you get the point here is that story started back at the beginning  of this decade, continued on in the, in the metal space in the Organic chemistry,  the ch commodities, grains, and oil and food and fuel. It was delayed. And I  think what we're witnessing right now, and especially with the hype of AI  settling down that commodity supercycle is reasserting itself. 

And as you point, I think it's not, it's, it's a continuation story, and it's only  gonna get bigger as we go to the end of this decade. I can say, where are we in  this right now? We're in the foothills of the Himalayas,  

Erik: Jeff, A quarter of a century ago, you wrote a piece called Revenge of the  Old Economy. You were diagnosing what went wrong with the.com bust and so  forth. 

You told me off the air, you've recently written a piece. I'm not sure if it's titled  The Revenge of the Revenge of the Old Economy, but basically the same theme  is back. Why is it recurring now? What. The new piece about,  

Jeff: Yeah, we just bas I basically was a cut and paste of what we wrote back  quarter century ago,  

Erik: a few years back. 

How's that?  

Jeff: Yeah, yeah. Okay. Alright. All right. But the, but I think, let, let's talk  about what we observed there. By the way, at the time I thought it was a one off  and I'd seen something that, you know, and now I realize it's a cycle, so let's go.  What I thought about in 2001 is that the story we told was due to poor returns. 

In the in the old economy. And by the way, the stat that we had for it in in, you  know, 2019 99 was that US emps destroyed 27 cents on every dollar they were  given during that decade of the 1990. So they, they, they returned, they kept 73  cents of it. You know what that number is? In the 2000 and tens all the way up  to 2021, 54 cents was destroyed. 

That means they kept 46 cents of it. So you know that that's the type of wealth  destruction that that occurred back in the, in the 1990s on that slide. So all the  capital chased where the returns were, which was the new economy. Eventually  you choked off so much investment into the old economy, you got shorted.

And by the way, that bull market really started in the late nineties, early two  thousands. And then took a breather around September 11th, and then the whole  thing came crashing down in, you know, late 2001 2002. And then you had that  rotation. The story, why we called it the revenge of the old economy was pretty  simple. 

Lack of investment in old economy. You starve to the capital it needed and then  you are off to the races. Then you throw in a demand shock like China on top of  it, and then it got turbocharged. Now let's go back, and I'm gonna say at the time  I thought, oh, it's unique. Then we started realizing, no, this stuff happens all the  time. 

And what are the two most important industries in the global economy?  Technology and energy. If you can't, you know, if you can't turn the lights on  nothing ever happens. If you don't innovate, you never progress. So technology  and energy are the two most important sectors, and all we do is rotate over time  between technology and energy. 

And in fact, I saw somebody put this chart going, what are the big themes in  investing? You look at it, you know, they don't really observe. They call it, oh,  it was China, or something like that. But reality, you're always rotating between  those two. And lemme give you, so I really realized it was about 2022 or 2023. 

It's not old economy, new economy. It's actually asset light, asset heavy. And by  the way, in what is a commodity supercycle. Or a, a asset heavy boom or an old  economy boom. It is nothing other than a CapEx cycle. Really simple. And if  you, you look at some of these charts we have just look at the CapEx cycle and  that's, these are, you know, 25, 30 year cycles and that's what, what, what  happens here. 

But I wanna go back to the nifty 50. Let's start there and why do I wanna use the  term asset light? So we, we, we begin the 1960s. We have excess commodity  supply from the rebuild from the, the, the, the second World War. This put  downward pressure on on interest rates, so you got low and stable inflation and  boy equity markets like low and stable inflation le leads to low interest rates. 

You know, you had LBJ Browbeat, Arthur Burns get interest rates down as  much as you possibly can, and then he started spending. And so that you laid  the foundation of those low interest rates. Now, what do low interest rates do? a  lot of people think low interest rates should lead to CapEx boom because  money's cheap.

No, it leads to a duration. Boom. You go, you, you wanna buy growth way out  in the future when interest rates are low. And what were the nifty 50?  McDonald's, Coca-Cola, they're all brands franchise. Think about McDonald's.  It's identical to Microsoft. It was infinitely scalable at zero marginal cost  because it was a franchise. 

So it had that long-term growth story. It was all the same stuff in that 50 as the  dotcom boom was in the nineties because it was all long-term growth.  Technology companies, again, software infinitely scalable, zero marginal costs.  And then in the 2000 and tens, when you had the low and stable inflation, it was  like Google. 

And so you look at the rotation in like 1968. Coca-Cola was the most valuable  company in the world, and like Exxon was at the bottom. Fast forward to 1980  after you ran out of commodity supply, you had a huge inflationary shock.  Exxon was at the top end. Coca-Cola was lower down. But I think the point  here is don't underestimate the demand shock. 

What was the demand shock that caused that inflationary boom in the, in the  seventies? It wasn't you know, OPEC just turbocharged it with the Arab oil  embargo, but the real cause of it. Was LBJs great society. Remember guns and  butter. And then we go into a period of a commodity. Boom, you, we  debottleneck the energy. 

And then you go into the, you know, the eighties and the nineties interest rates  low. You get the.com boom. Now it's Microsoft at the top, Exxon at the bottom.  And then you run out of supply. And then your big demand shock was ch, was  China. Note that all those demand shocks were policies. It was LBJ in the late  sixties with his, you know, war in Vietnam, plus the the, the, the war on  poverty. 

The Chinese one was a decision by policy makers to let them into the WTO.  And then you get to the, the the twenties. It was COVID, you know, it was a  shock to the system on their investment. Now what is it gonna be this year?  2026. Big, beautiful bill. Germany with, by the way, you have a fiscal policy  bonanza this year. 

You've got big, beautiful build. You have Germany, you have Japan, you have  China. I think we, we haven't seen this big of a global synchronous pop to the  system, actually, I would argue since, since COVID and look what COVID did.  So I, you know, I, you know, I'm taking a long thing about why these cycles  here.

So just, I think the way we, I could think about it now is it's. Rotation between  asset light, asset heavy. Asset light is usually tech. Asset heavy is usually  energy and, and commodities. Now there's one last twist, and I know I'm, I'm  dragging on here, Eric, so bear with me. Is that if you can think about the, the  asset light booms being driven by bits and the asset, heavy booms being driven  by atoms. 

One thing that is really different, and this is the core, the twist in the piece we  put out. Yesterday is this time the bits meet the atoms. And how do you get the  bit atoms take about? Think about what is AI compute? The, the technology  companies are becoming asset heavy. They're putting steel in the ground and as  they put steel on the ground, the bits meet the atoms. 

You get a bit atom commodity called AI compute, by the way, you know, it sits  on your Bloomberg screen. You can trade it. AI compute, send I think dollars  per hour. And you have cryptocurrencies or mining where you're burning vast  amounts of atoms to get a bit. So we're in a new world where the bits meet the  atoms, so they have, that may be a normal rotation. 

But I think it's, we're in an exciting new world and, and I think it's just gonna  create even more demand for the physical world. Think about AI requires less  labor, more commodity. So this one's gonna be bigger than the ones in the past.  But I think around a long answer to your question these are big cycles. 

We're in the beginning of new one. I'd say it's the bottom of the first ending.  

Erik: Jeff, you mentioned China several times. I want to come back to that and  I'll get to AI and energy demand in just a minute. But first, let's just touch again  on China. They are stockpiling everything like it's going outta style. 

Actually, let me correct myself. They're stockpiling everything. As if they are  preparing for either war or major sanctions and embargoes. Is that what's  driving this? I I, I, you know, are we headed imminently toward a US China  conflict and what will it mean in terms of commodity markets if it happens?  

Jeff: By the way, everybody's hoarding. 

It goes back to the geopolitical. Going back, what was one of the key drivers to  the supercycle call? It's the deglobalization. And, you know, deglobalization in  the war on free trade, you can't get it. And if I'm China, think about this. I'm  China. I watched the US go into Venezuela, just cut my oil.

I put a hundred billion dollars into that country to develop all that oil. And they  just stopped it and they, the Russian escort to the tanker just got stopped, pulled  over. My supply is being curtailed. And by the way, I, we wrote a piece recently  talking about Venezuela, Russia, and Iran. These guys are all Chinese colonies. 

I mean, let's just be blunt about it. But I think the key point here is if you are a  consumer of oil, you're China, you're India, you are Europe world's really  dangerous because the US just cut your supply off. 

You know, there's these sanctions, particularly if you're India or China. So  whatcha gonna do, you're gonna hoard, what did President Trump just announce  the vault? He's hoarding critical minerals. You know, I can go down the list. I  mean, if you're, if you're sitting there and you're, you're procurement officer in  one of these companies, you gotta be going, Hey, how does my supply chain  look like for tomorrow? 

So I, I think what you're, you're arguing whether you wanna say you're  preparing for war or whatever. Bottom line, the world's more dangerous. And  let's put gold into this story. Why is gold into the moon? You're hoarding gold.  Why are you hoarding gold? Because owning dollars is dangerous. So it's all of  the same story. 

Look at the US in the Comex it's hoarding all of the world's copper into the  Comex. Why fears around tariffs? So the list goes on and on and on. So you're  absolutely right. China is hoarding all sorts of commodities, but we're seeing  this everywhere and people go, oh, what's going on in, in, in China? It's gonna  end tomorrow. 

Let me remind all these listeners that the US hoarded oil like this in the 1980s,  late seventies, from 77 to I think to like 88 or 89, for over a decade, it doesn't  stop. And so when we think about how long this can go on, it can go on for an  incredibly long time. And by the way, we, I don't, in fact, I do wanna get into  this oil glut narrative. 

I've never seen that a narrative take hold with zero credibility or evidence  behind it. You know, 'cause this stuff is demand. It's real demand. And I think  gold is the one that's most sim symbolic of it.  

Erik: Jeff, I definitely want to come back to gold and silver and the oil glut. But  first I want to go a little bit deeper on what you said before about AI and the bit  atom connection.

It seems to me like AI is something that has become an existential, if you will  an arms race of AI technology. Its military implications are so strong that. You  can't just say, oh, well AI started to take off too much energy. Let's scale it  back. They can't scale it back because it's an arms race. So I think we're gonna  get into AI becoming the bad guy on the public stage that used up all the energy  and made everybody's electric bills, you know, double. 

Is that a realistic fear? And if so, how do you see it playing out  

Jeff: by the way, the, the digital demand for, for power. It is just a steady,  upward trend. It was crypto before AI. It was big data. It was cloud, big data. It  keeps going back. This has been going on for two decades. People talk About,  it's just a steady upward trend. 

It's just becoming so large now that it, it, it's now starting to put some demand  growth in places like the US where we haven't seen it before. Am I willing to  say it's going to be the primary driver? I mean, at the edge we're talking, you  know, moving from flat to two to 3% or maybe even 4% starts to put a lot of  pressure on it. 

But I, but I think that people are underestimating the technological innovation  and the ability to do this stuff. You know, I look at the, the, I always compare  AI to the shale revolution. You know, on the eve of 2014 or 13 on the eve of  the, the collapse in oil prices you know, everybody was investing in shale  because they, it was gonna be the demand. 

Everything's gonna be there wasn't the demand that destroyed shale. What  destroyed shale is the engineer pumped out three times more than what anybody  ever thought. They, you know, I had to say, don't bet against an engineer. Give  them enough time and money. They, they'll solve the problem. By the way, in  2013, they loved energy and they hated tech. 

By the way, there was a tech supply glu back then. You didn't, it was peak pc.  Demand. Didn't wanna go near it. Just wanted energy, energy, energy. But the  reality is. Did those engineers create an oil supply glut in 2014 and 15? I think  when we think about what's going on in AI today, I would argue, you know,  

that, that by the way, you look at AI compute, yeah, it's going down because of  obsolescence, but that price is weakened from like three bucks down in like to  the $2 range. 

And part of it is they just get better and better at. So I would be cautious about.  Ai, by the way, where everybody's focused on the oil supply glut today, and 

nobody thinks there's an AI compute glut. I'd be a lot more worried about an AI  compute glut because these engineers are so bright than I would be of an oil  one. 

Erik: You're worried about an AI compute glut, too much computing capacity,  including the energy to run that computing capacity? Or do you just mean too  many computers  

Jeff: too, too many that the price of compute goes down. By the way, if it goes  down, they'll even use more of it and use more energy. But the the, the ability  to, by the way, every single one of these technological revolutions always ends  in tears for the equity guys always. 

You and I live through the, through the shale one. And by the way, the shale  one looks identical to the AI one. Even the SPVs, the, the structures of the  financial engineering identical. It's like they took the pitch books from the shale  guys, rubbed out the names of the energy companies and wrote in all of these  open AI and the rest of it and just redid it. 

'Cause, think. They had the MLPs. The only difference is, is the oil guys went  downstream into the MLPs Here. The data center guys go upstream into the  power guys. Other than that, it looks identically the same. So, you know, I I, I, I  look at, that's why, so I wanna say it, AI compute blood. I'd be less worried  about energy collapsing than I would the price, because remember, there's a  commodity called AI compute. 

It's H hundred. Look at silicon H hundred on your Bloomberg terminal. It's gone  up. It's at 2 42, but it's still well off the $3 range. So I think the, the key point  here is I would be, I'd like to say don't bet against the engineers. Give them  enough time and money they can really surprise you  

Erik: on that theme. I'm convinced that the give them enough time and money  for the AI compute demand ultimately is going to lead to a really increased  nuclear renaissance, because that's the right technology solution for AI energy  demand. 

The problem is until we get off of conventional lightwater reactor technology  onto something better, and that's gonna be a while. It takes just too darn long to  build a new nuclear power plant. I think it's going to create a natural gas boom.  It's an interim boom. You know, from now until we can really build out the  nuclear, I think we're gonna have to figure out how to build more energy some  other way.

And I think natural gas is the obvious benefactor. Would you agree? And if not,  why not  

Jeff: a hundred percent agree with that? And by the way, I'll be very careful.  While I say the price of computes going down, it doesn't mean I'm saying that  it's, it's gonna lead to less energy demand. I just think they're gonna get more  efficient at it. 

But the, when we think about the, about the demand out there, ultimately when  we think about AI, where are the bottlenecks gonna be? It's gonna be the natural  resources and the data you feed the LLM bottles, that's it. Everything else, that  margins are gonna get crushed. And so you wanna own the commodities and  particularly power, and you wanna own the. 

You wanna own the, the, the data that gets fed into the LLMs. And so if you're  think about power, you know the place that you're gonna get the, the, the most  efficient increase in power is gonna be through, through nuclear generation. So I  absolutely agree, but that's not gonna happen for another two decades or decade  So what's your best bet for today? 

It's gonna be natural gas. It's the easiest, fastest way to bring on power. So I,  hundred, you a hundred percent agree, but I know people who put that trade on  last year and it's been a really rough, rocky road we went up to. $7 recently and  came crashing back down to three 20 of where we are today right now. 

But I think the, yeah, the key message there though is I think you're absolutely  right. You start to get the summer of this year, summer of next year. I think  natural gas is gonna see a lot of upsides.  

Erik: Jeff, let's go back to gold and silver. We just had a, I don't know what to  call it, a gut wrenching correction. 

$1,200 correction in gold. The catalyst probably that triggered it was the market  misinterpreting the Warsh nomination. I think it was really just the, the market  was so overstretched, it needed a correction. I thought with something of that  magnitude, surely it would take months and months and months to consolidate  before we could move higher. 

But the news, I think this week, at least so far as we're recording this on  Wednesday afternoon, is gold has moved above the 61.8% Fibonacci  retracement. The, the old adage in technical analysis is once you're past the 61  8, you're probably headed to a hundred percent retrace. If we get a weekly 

signal, if we're above 5166 on gold, and I'm looking at 5224 as we're recording,  if we're above 5166 at the end of the week, it says to me that, you know, maybe  this is already recovering and headed higher. 

Could that be true this soon after such a big correction?  

Jeff: Absolutely. And if you think about the period in the 2000 supercycle, it  was incredibly volatile. I like to point out. You know, these, these super cycles  are just sequence of, of price spikes. You know, I, they go, oh, you know, it's  down, and then you catch, here's the way I like to think about what happens,  particularly in silver in this case. 

Is the, the system gets overstretched. Investors buy it and they run the price up  so high and demands pushing up against supply constraints. Eventually, the  demand gets so high, demand collapses underneath it, then it falls off, the  supply constraint comes crashing back down. Then people go, oh my God, this  is cheap. 

They start buying again and boom, smashes into the supply constraint again.  Explodes. And it just does that over and over and over. And by the way, that  discourages the investment. 'cause everybody gets scared. Oh, it's gonna  collapse again. It's gonna collapse again. And so you don't get the investment on  a long-term basis. 

And that's why you know, the initial phase of these super cycles, they get really,  by the way, you remember like aluminum and power back in 2001 and 2002. It  was that same type of dynamic. It was like you're going up and down and up  and down and it makes it nearly, you don't trade this stuff and you don't, unless  you absolutely have to. 

And so I think, you know, that's, this is gonna be what you're seeing in gold and  silver is we're gonna see this across the the, the com commodity complex. And  that's what all these super cycles. It becomes a common feature of, again, the  equities. By the way, the equity trade for the, for the metals and energy has been  a nice, smooth, easy ride. 

So, by the way, if you, if you want this nice, easy, smooth ride, own the  equities, don't own the commodity but the commodities, it's gonna be, it's gonna  be a rough rock. Like we're just talking to natural gas, seven bucks to three 20.  And by the way, we, all it takes is, you know, get you throw in some more  weather and, you know, put some data center demand on it.

You'll be up the races on that one too. So, you know, I think, hang on and on  gold this, I don't see how you come up. It's not as price sensitive as silver or  natural gas. And the underlying theme there in this environment, it's like the  Swiss Franc as strong as it's there's, there's no end in sight. 

And I, you know, what the demand is coming out of. Not only people hedging  themselves against the Debasement trade, but you have de Dollarization going  to buy central banks all over the world afraid to own dollars for sanction  reasons. And then you gotta own the stuff for diversity reasons in your  portfolio. 

Everybody's still under invested this space. You know, I could point out the  metal space. 200 billion a market cap. You know, so, you know, you start  throwing money and it's explosive. Anyway, I think this is a feature of a, of a  Subaru cycle and expect to see a lot more of it. And I, we're gonna go higher. 

Erik: Let's talk about silver. Some people have suggested the dynamics there  are different because silver had really gotten ahead of itself before the  correction. Some people thought that that was really a result of the people who  were pimping it, the Wall Street, silver, and all that kind of stuff. And. 

Maybe after that blow off that we saw it was certainly, it, it, it is recovering, but  it's not recovering on a percentage basis as strongly as gold is. And it was  outperforming gold before the correction. What do you see ahead for silver?  

Jeff: I mean, you're, you're back to 91 right now. Yeah, it briefly got up above a  hundred and hit I think 120 at, at, at, at the high. 

You know, long run, you know, it's a turbocharged version of gold. I mean, that  was one of our favorite picks back in 2020 when, when we first made the  supercycle call because it, you know, it has the same underlying precious metal  dynamics as gold, but it's a key input to all this electrification. 

Back then we called the decarbonization today, we call it electrification solar  panels, and, and it's a core input. To all of that electrical equipment that places  like China make, and again, China short this stuff, which is part of the reason  why China has been, you know, a big buyer of it. And again, the demand from  corporates to afford it and things of that nature. 

I'm not in the forecasting visits anymore, but some of those banks I think it's  BOFA, Michael Wi, I think, does he have like 170 or something like that? He's 

been doing this as long as you and I have. So I, I, I, I think there's a, you know,  the potential here, there's, there's a, you know, for significant upside still. 

Erik: Jeff, let's come back to the inflation outlook, which you mentioned earlier  in, in your first answer. With all of this appreciation that we're seeing in gold  and silver, what are we really seeing? Is the price of gold going up because of  greater central demand, are we really seeing the value of the dollars that gold is  priced in going down? 

Jeff: I think it's a combination of both the, the initial surge, the de dollarization  occurred the first time the Trump administration used sanctions against the  Russians back in 2018. That was a shock to the system and you realize you own  US bonds, you got problems. Then it, then after you look at when it got  turbocharged, soon as the US sees the Russian Central Bank assets in 2022,  after the invasion we're off to the races that is d Dollarization. 

You don't care. You're getting rid of your dollars. 'cause you don't want to get  sanctioned in votes on you. And at this point, emerging markets are doing this  all over the world. And now they just continue to add to the reserve. That's not,  that has nothing to do it. The debasement demand, which is mainly from  investors. 

That's what you're talking about. But you put the two together, it, you know, I  like to point out dollar. Yeah. It's trading what, 1.34 against the pound sterling?  Well, 1.17 against the Euro. The only, the only currency out there that it's just  been, you know, slaughtered by is the the Swiss bank. I think it's trading 0.77  against the dollar. 

So there, yeah, I think a story you're talking about the rest of them, you know,  it's, it's, it's not that big of a shift. And when we think about the, you know, the  dollar you know, it's, it's weakened, but in nowhere, think about an oh eight at  the end of that commodity supercycle, it was trading 1.61 against the Euro. 

The Euro. That was the peak of the dollar against the euro. And so we're at 1.17  today. That's a long ways to go. So the answer to your question, there's been a  little bit of it, but this is real. Like, hey, all these currencies are in a bad shape.  Another way to think about this is, this is not the dollar being singled out as  being the bad character. 

this is FIAT currency been singled out as the bad character. 

Erik: Let's come back to the oil glut narrative that you said you wanted to  debunk. I couldn't agree with you more that the notion that there's a  fundamental oil glut is crazy. I think that the long-term fundamentals for oil are  extremely bullish, but hang on. 

Between now and the midterm elections, president Trump really doesn't have  anything more important on his agenda. Than keeping energy and affordability  prices low through the elections. So it seems to me like there's likely to be a, a  lot of invisible hands at work trying to keep energy prices low for the next six  months. 

Would you agree with that or are we looking at fundamentals that nobody can  manipulate?  

Jeff: I'm gonna have to answer that question. Is I think there is gonna be a, a  tipping point where it can't be manipulated, but there's no way. How, how do  you manipulate it? I, I look at back at this. And I asked myself, how did this  happen? 

I've ne I've, I've been doing this 30 years. I've never seen a narrative without  any real fundamental evidence. And when you look at the actual fun, the real  data inventories are low. You know, they're in the OECD countries today.  They're lower today than they were a year ago. A lower data a year ago. 

That's, that's the real data they have. Yeah. You may have the satellite data.  Some, and even there, they showed that the inventories floating at sea have  turned over. The curve has been very backwardated. You and I both know a  

backwardated curve is bullish. Refining margins are really wide. Spreads are  early. 

Yeah. The OSPs of the, the, the, the OPEC countries have come off, but they  come off from relatively high levels. I'm just going, what are they looking at?  And I don't know where the narrative it, how did they get started? And where  did it come from and how did it get it go on for 18, 19 months? You know,  

when we think about AI in the productivity gains. 

You know, the one thing is that is, is that you, you gotta verify the results of ai.  We don't know if it is, is telling the truth or not. And as people in workplaces  start using it more and more and more, you need more humans to actually verify  that what they're doing that's not measurable is right. And you could think of it  about the same way in in markets, you have more markets being traded by  algorithmic trading than we've ever had before.

They tee off sentiment numbers and things like that that can drive it down  because every other measure that you and I know says this oil market is bullish  except for the flat price. But the flat price can trade off the sentiment, but there's  nothing there left to verify because it's too expensive to verify it. 

And I think that's, you're gonna see that in the productivity. The, the workshop's  gonna go, Hey, the cost to me to verify this is so much, and the potential for it  error becomes so great, they're just gonna quit using it. And it's the same thing  going on in oil that is being driven by algo's trend followers and the sentiment  to a point.  

Where it cannot correct itself unless you can go down underneath and go at the  micro level and create enough upside to it. Maybe it's the, you know, an  invasion in Iran or something that gets us outta this trap. The price level is  driven by liquidity. 

Not by fundamentals or anything like that, and the liquidity's been drained out.  People are just, they don't want trade. I thing is that a lot of people have lost a  lot of money trading oil, whether it's short or long over the last two years. But to  answer your question, it's gonna happen. When is it gonna happen? 

And the you a crude awakening. And so yeah, it's, you know, is it between now  and the midterms? Is it, you know, a potential with Iran? It could be. But I think  it, it's definitely it's not a question if it's a question of when.  

Erik: Jeff, final question. You told me off the air that you're expecting an  explosion of liquidity. 

What's that about? And the other thing I wanted to follow up with you on is  you've been in touch with our good friend, Josh Crumb, founder of Abaxx  Technologies. Those guys were doing some really exciting stuff specifically  around liquid Natural gas and futures trading and so forth. Do you have any  update? 

'cause we've had a lot of interest on our listeners for an update on what Abaxx is  up to.  

Jeff: Yeah, I think they, the, the, this discussion just goes hand in hand. You  know, when we think about the liquidity explosion, I like in, you know, what  we've seen in the Genius Act Web3 0.0, I don't like the word crypto.

Call it DLT, distributed ledger technology, or whatever it might be in ai. You  put those three together, it's just like the CFMA act of 2000 and Web 1.0 that  unleashed a liquidity explosion in commodity markets like we had never seen  before in the two thousands. Why? Because the technology allowed you to go  

downstream and trade things we could never trade before because of Web 1.0  was big data and what we're on the cusp of right now. 

You put, you know, Web3 0.0 combined with ai, combined with the Genius and  Clarity Act, I think you're ready to unleash a, a liquidity explosion like the  world has never seen before. And what's really gonna be allow us to get down.  Really what it's gonna do is allow us to go downstream and trade things that  we've never traded before. 

And how is it going to do it? Is, is, is Crypto was never made for human beings.  It was made for machines. It's clumsy, it's hard to do. We're gonna have AI, bots  trading, crypto, or trading you know, tokens. I don't like the coins. I don't like  the crypto. I like the d the, the technology. I like the tokens that are in  commodities like gold and silver, real world assets. 

Tokenized real world assets that we can partition into levels that are going  downstream, unlike ever before. And like to point out in the first wave. At  Goldman Sachs, we could never trade plastic because we couldn't get  downstream enough into the plastic markets because they're so fragmented.  When you put AI and crypto together, we're gonna be able to go and make  markets there. 

And we take somebody like, like Abex, and it's doing this in natural gas and  getting into markets that you couldn't make before. The technology is allowing  us to, to make market in natural gas, LNG hubs all over the place, getting into  lithium carbonate power markets that are further downstream. So, you know, I,  I'm really excited about the future of trading. 

You know, I'm. I'm a NED and a, you know, a non-executive director at, at  Abaxx. And you know, I, I, I think the technology is extremely well positioned  as we go into what we have to say, a liquidity explosion.  

Erik: Well, Jeff, I can't thank you enough for another terrific interview. Before  I let you go, please tell our listeners what you do at Carlyle Group. 

I know it's only institutional, so you can't help our retail audience directly, but  for our institutional listeners, what services are on offer there? 

Jeff: I'm with the energy teams and, and do work with like the aerospace and  defense team. And going back to this, this supercycle theme and theme around  deglobalization, let's forget, you know Carlyle caught space in the aerospace  defense sector. 

So Carlyle's extremely well positioned as we go into this commodity  supercycle, whether if it's in, you know, the energy team. You know, he is got a  long history of, you know, developing assets in, in, you know, the upstream and  refining and, you know, obviously given the defense spinning going around the  world. 

So I, I'm super excited about the opportunities at Carlyle,  

Erik: Patrick Ceresna and I will be back as Macro Voices continues right here  at macrovoices.com.

Erik: Joining me now is Michael Every, global strategist in the Economics and  Markets team for Rabobank. Michael, I've really been looking forward to this  interview and getting you back on the show because frankly, I've noticed that  you have an uncanny ability to translate what President Trump says into what  he really means and even go. 

The next step is to intuiting what maybe he intends to do next. Frankly, I'm  confused by a lot of the things that are going on right now. It seemed like the  president was signaling that he was. Really gonna go just Max Dovish on his  choice for Fed chair. Then he picked Kevin Warsh, which surprised a lot of  people. 

Then we had absolutely positively striking Iran. No, wait a minute. The entire  fleet's on the other side of the planet. We're repositioning the fleet. Now we're  gonna strike Iran. Now we're not gonna strike Iran. Oh, maybe we made a deal  

with Iran. I, I don't get it. Can, can you help me sort out the geopolitics and  what's going on? 

Michael: Thank you very much for that hospital pass, as we say in, in British  football. Yes, I'm very happy to be back on the show and very happy to try and  be some form of Trump whisperer there. But what I would say first of all is A  welcome to 2026 and B, welcome to President Trump because these are, these  are things we have to get used to when we're dealing with both of those  particularly, you know, conflated together. 

Let's start. With what you mentioned in terms of Kevin Warsh, I've, I've  mentioned already in writing that I really think that the market got things wrong  in terms of portraying this as a hawk dove decision because. First of all, let's get  down to the brass tacks of it. Everything that Trump looks for in a new  appointee is loyalty, first and foremost. 

And you know, Warsh has a close relationship with Bessent at Treasury, which  is incredibly important. And he's the son-in-law of one of Trump's friends, Ron  Lauder. So, so that already speaks volumes in terms of why Trump may have  wanted to look to him. Secondly, and this is, you know, more in terms of a  political economy, architecture above and beyond the fact that we now have one  where being close to somebody matters more than it did in the past. 

Although, although I think it always did matter, to be honest with other  presidencies too, is that what we are going to see unfold this year. And in 2027  and 2028 as well, I'm quite sure is a new fed because if we have economic state  craft to the fore now as the driving force in the US and we've spoken about that 

on more than one occasion recently, so I don't want to go over that again, but I  think you understand what I mean. 

And I hope most listeners understand what I mean by economic state craft. It's  really completely irrelevant or just a complete tangent to reality, to worry about  whether the fed is hawkish or dovish. In fact, it reminds me of that old adage of  you know, the from feminists in the sixties, a woman needs a man, like a fish  needs a bicycle. It's just two different things that you are looking at because  where interest rates need to be low is abundantly clear in the US economy. 

Where interest rates probably need to be high. If you're trying to reshape the US  economy in a certain direction, which Trump is and Bessent, is he's also  abundantly clear and you don't have one interest rate to do that. I, I, if the Fed  were to be really Dovish and slash rates to 2% or 1% purely hypothetically, I  think, you know, you, you would be immediately eager to say where you think  markets would go and where the investment opportunities would be. 

But that's not economic statecraft. Economic statecraft is where do you need the  USA Inc to be? What does the ship of state need to look like and maybe parts of  it get where they need to go with a one or 2% rate, and parts of it do completely  the wrong thing. So in other words, Warsh is being brought in A, because he's  

loyal to Trump. 

B because he's friendly with Bessent, but C because. Obviously, although he  won't say it out loud and he shouldn't do politically, he is going to be  completely on board with this new reshaping of the Fed into a very, very  different institution with a very, very different toolkit, which I think will sit  under treasury, under Bessent, under economic statecraft to try and make the US  and the world around it look very different.  

Erik: Ok, that's a huge difference from the theoretical and I, I do emphasize  theoretical concept that the Fed was designed entirely for independence. It's  theoretically not even part of the government. So you're saying it becomes a  subordinate under treasury, you know, do what you're told kind of organization.  

Michael: It already is to a degree. 

In fact, I, I,  

Erik: well, I've noticed that, but they, they used to pretend that it wasn't, 

Michael: well, pretend is the accurate word, because let's not get into real  conspiracy theory stuff here. Okay. But let's just be honest. So the Fed is much  younger than most other central banks. Most other central banks in the western  world was set up. 

A long time before the Bank of England, of course being, you know, the  grandfather or the grandmother, the old lady at Thread Needle Street as they call  it, that was set up specifically to help the government fight a war against France.  So there was no pretense whatsoever of it being independent until 1997 which is  pretty recent, you know, even in market terms. 

And the FED even thought there has been previous iterations as you know in  american history. Only got set up in 1913. It's always been a quasi-government,  quasi-private entity. If you actually look at the architecture of it, it's not  structured like modern western central banks, which are purely in the public  realm. It's always been a, a kind of hybrid. As soon as it gets set up in 1913, it  gets dragged into World War I. 

Well, there's an opportunity for a bank to show that they're only interested in  market forces. He said sarcastically. So of course it was involved in statecraft.  Within a year of being set up. Then we have the 1920s, which are absolute  chaos globally. Then we have the 1930s with the Great Depression, which are  absolute chaos globally. 

Then we have the 1940s and World War II, in which the Fed proudly says on its  own website, they helped win World War ii. Nothing to do with being  independent there, and it isn't until 1951. We actually have any kind of compact  where the Fed turns around and says, you know, in the Korean War, if we have  to finance that, finance that too. 

Now that the economy isn't locked down like it was during World War ii, it's  gonna be really inflationary. And only then do we start moving towards any  kind of pretense. Of independence. But what I want to add on top of that is in a  piece that I wrote fairly recently looking at the structure of the US economy, I  said, if we are really genuinely cynical and realist and take a step back, the US  economy now is overly financialized. 

And I think you would agree with that, that term most people objectively would,  but the part and parcel of that is that asset prices in the US have to be high if  you want. Cash to flow in from the rest of the world, capital to flow in from the  rest of the world to fund your trade deficit. Whether that's a good thing or a bad 

thing, and we can have a separate conversation about that, you need to have  assets for them to go into. 

Ergo, those assets can't just crash left, right, and center. So the fed's role is to  make sure that assets are un affordably high, to foreigners effectively. It doesn't  say that anywhere. It talks about financial stability. So I, I really think we have  to be quite cynical and realist in terms of how we're framing it and recognize  that that role of the Fed doesn't help the US anymore because the trade deficit  doesn't help it anymore. The capital inflows from large exporting countries like  China don't help the us. They're a hindrance as it needs to re industrialize. Ergo,  there is no way, shape, or form. The Fed as the tech quote, neutral, apolitical,  technocratic animal that it pretends to be, which it's not, is gonna be able to  carry on with the same techno Babylon gnostic nonsense that Greenspan and,  and his ilk were coming out with year after year. 

And whether it admits it or not, it's going to have to be part of usa, Inc, Inc, to  try and get it out of the foxhole that it's currently in.  

Erik: So it sounds like your perspective is essentially Bessent sits down  probably behind the scenes with wars and says, look, if we make you fed share,  do you understand that the name of the game in 2026 is economic state craft? 

We're, we're changing the world. We've got a big agenda. You work for us, you  do what you're told and you're gonna be part of our negotiating toolkit. Do you  get it? Warsh says, yeah, I get it. And that's how the nomination comes about.  Obviously it wasn't quite that blunt, but is that. The gist of what you're saying,  

Michael: well. Let's try the conterfactual to that because when you put  something forward like that people may immediately push back. Let's put it the  other way. You have a US administration, which I think everyone would  recognize is running really radical policy in almost every direction  simultaneously, whether it's in terms of domestic things, economic things,  international things. It's really pushing the envelope everywhere, all at once. 

And you think against that backdrop where it's trying to reshape everything it  can. They're going to appoint a Fed Chairman and say, most important thing in  the world for us is 2% CPI, oh. And keep the stock market out please. But apart  from that, do whatever you want. Make whatever political statements you want  you know, adopt whatever position you like. 

We really don't care because that's the most important thing. I, I really think I've  a bridge to sell you. I don't mean you personally, Eric, but I mean anyone 

listening who thinks that's how the world actually operates. Very clearly what  you just said is what did happen.  

Erik: Okay. So if that's the agenda, help me with the next step, because it  seemed like, and this is very much consistent with what I'm trying to understand  of the president's style of diplomacy, which as someone recently said, is kinda  like. 

Throw a hand grenade into the room before you enter, and then as the dust  settles, sit down and say, Hey, you wanna make a deal? It seems like we've had  a lot of really heavy messaging. Boy, you don't want to be Iran. They're about to  get hit. That's it. It's a strike. It's, it's coming. It's coming. It's coming. 

We're moving the fleet into position. Then there's a tweet over President's Day  weekend saying. Maybe we're gonna make a deal and there's an economic you  know, transaction to be had here. Maybe there's an investment. Was this whole  strike ran thing a, a lead up to a negotiation on some economic front? 

Michael: On that one, we have to wait and see. I think we won't have to wait  long to see vis-a-vis the fed, even though it's still a few months until Warsh  officially gets in, I think from Iran. We'll have to wait and see another few  weeks at least until all the pieces are in place. You can absolutely understand  that Trump doesn't want to get sucked into another Middle Eastern war because  if his one thing ahead of the midterm elections that wouldn't go down with  either independence or his base, it's, Hey, we're in war in the Middle East again. 

But that didn't stop him bombing Iran last year and very pointedly in the run up  to it. The media were completely fooled, completely fooled you know, that  there was a disagreement between the US and Israel, whether there was or  wasn't going to be an attack. And people thought that the US had basically  chickened out and wasn't prepared to do it, and had talked tough and wouldn't  attack. 

'cause no one actually well at least in the mainstream press, thought that he was  prepared to bomb Iran's nuclear sites because of what they saw as the, you  know, the fat tail risks there. Is that going to be repeated here? I think in his  heart of hearts, Trump would very much like to avoid doing that because  Venezuela with Maduro went as well as something as risky as that can possibly  do. 

And while Venezuela has not been quote unquote dealt with or sorted out, the  message was sent globally. The geostrategic and geopolitical table was. 

Definitely reset in a way that many people were shocked by. And if he tries  again in Iran and that fails, and you do get sucked into a war, the US is very,  very significantly weakened. 

E. E equally if you knock out the Iranian regime, but what you get coming back  is ISIS in the broader region, an absolute chaos. That's not such of a big win for  the US either. But if he can manage to get them to agree some kind of deal, and  I actually think the chances of that are extremely low. But if he were able to do  

that without any fireworks, that would be a geopolitical win. 

Where again, the US can say, look, I talk tough, didn't have to do anything.  Now I've gotta Iran on board. That's, that's something he would aim for. And if  that doesn't happen, if you look at the continuing day by day movement of  military power. Into that region as we speak. That's continuing to go on, and I  would imagine on the day this podcast goes out, it'll still be going on in the  background. 

It seems very hard to climb down from that tree because all the geopolitical  credit as a, you know, as a tough guy that he got from acting completely by  surprise in Venezuela, and even though he had a fleet off of Venezuela, it was  still a surprise when it happened. That would be squandered if you then move  everything to the Middle East and actually don't do anything. 

So I would say that the local intelligence in that region still suspects that you  have an irresistible force meeting an immovable object when it comes to Trump  and Iran, and that will end up with military action. And then we have to see  what happens on the other side of that.  

Erik: Let's talk about the road in this environment as you describe it, of  economic statecraft, the road from here to the midterm elections, because it  seems that one thing is very clear, which is President Trump is not the  personality type to say, Hmm, seems like the Democrats don't really approve of  everything I'm doing. 

Maybe I should back down and moderate a bit. That's not his, his mo. So. It  seems to me that he's very committed to the Hail Mary, passive. He's gotta do  something to win the mid midterm elections, because let's face it when he was  impeached twice, they didn't really have a whole lot of dirt on him at the time. 

The Democrats, regardless of whether you think President Trump is right or he's  wrong, or he is the best or the worst president ever there, there's really no room 

to debate that His actions in this presidency have been. More aggressive and and  more radical as you put it, radical policy than in the past. 

So if we get to the Democrats taking the House of Representatives, and  especially if they got both houses of Congress it seems to me that we're back to  impeachments and gridlock and nothing but that. Would you agree with that  forecast? And if so, does that mean that the economic statecraft is all going to  be focused on somehow making sure that Republicans keep the House of  Representatives in November?  

Michael: Yes. And yes, because on one hand it's crystal clear that were Trump  to lose, first of all the house and of course the House and the Senate. It would be  a political disaster. It would be for any sitting president and very much so given  the, the radicalness of what he's trying to achieve on multiple fronts. 

All at once. So on that basis, it was very clear to me from last November when  the special elections didn't go very well for him that he would pivot  immediately to being as radical as possible on all fronts. But that includes  focusing on affordability. Now, I'll admit the messaging on that I think is not  getting through to some of his base. 

For example, if you say the DOW is up to record levels again. That doesn't  speak to people who haven't got, you know, a couple hundred bucks to put  together. And that's exactly the kind of language that we saw from president  after president in the past, which just sailed over people's heads and actually  ended up with people like Trump elected, but that doesn't mean he isn't actually  trying to move things significantly to genuinely put money in people's pockets.  Let's just go through a few. Obviously there have been a couple of different  measures floated, but not yet acted on housing to try and get mortgage rates  down. I expect we're going to see a lot more being done on that. 

Over the next couple of months, we've had attempts to try and get credit card  rates pegged down to 10% temporarily. Again, very controversial. Obviously  credit card issuers don't like it. I'm not making a judgment, I'm just listing that  makes a big difference for some people's income. Short term, you've had tax  against meat packing companies, particularly foreign owned ones. 

Of course, that's a long-term issue. But again, it's focused on affordability.  You've got this new discounted drug company where you know you can get the,  the fat jabs. Much, much cheaper now than they were previously, which is you  know, an interesting policy move. But you can actually join that one up in a  couple of ways because if people have more money in their pocket because 

they're not spending money on other drugs because they've managed to bring  their weight down to a manageable level rather than being really big well on  that level they have more money to spend on other products. 

And guess what? You might be able to afford a Made in America one if there's a  one-off price shift. Cost basis that you know, if it's made in America one off, it's  gonna cost you more than in China. And then after that it will level off. The  price will maybe even start to drift lower so you can join lots and lots of  different dots. 

And in fact, it's a no-brainer, an absolute no-brainer if you understand what  economic statecraft is to see that it would be foolhardy to think of anything  other than that being the policy backdrop for the next couple of months. And in  fact, I think that would be the case in any normal election anyway that you want  to do within November. 

But doubly triply, so this time.  

Erik: Well, let's talk about what that's going to mean for financial markets then,  because as you said, the Trump administration has already taken a bit of a risk  by, you know, telling everybody, look, stock market's at record highs, that's all  because of me. Which means if that starts to reverse in any way you know, it's  going to be a loss of credibility. 

But it seems to me markets don't like uncertainty and. If you assess this  situation objectively, again, regardless of whether you love President Trump or  hate him, you know the best that can be hoped for is if his radical policy works  and he is able to save the midterm elections so that Republicans keep both  houses of Congress well. 

The best you can hope for is his political opponents will be even more pissed  off, and we will have gone through a period of great uncertainty because until  that election is actually over, nobody really knows that that's the outcome. On  

the other hand, the market, I think, is going to start discounting well, wait a  minute, what if he doesn't keep? 

And particularly what if he loses both houses of Congress? Then we're going to  have basically I think a hard stop on all of this radical policy as a new Democrat  controlled Congress intervenes to block it, and we end up with the last two  years of this presidential term basically being a gridlock.

That's about, you know, the next 17 reasons for impeachment. So. How do we  get to here to November without the market really being subject, I think, to a lot  of headwinds from uncertainty?  

Michael: Well, there are only two things that I would add to that. The first one  is that were Trump to suffer that political setback. 

The logical thing for him to do is if he can't enact as much policy as he'd like to  just move over to executive orders, which he's already relying on anyway, and  then probably have to be even more radical again. To try and use them to clear  the way through to 2028 for whoever succeeds him. And at the same time, of  course, presidents traditionally, when they have trouble at home, do even more  internationally. 

So that can also be very radical because there are lots of ways in which what  happens internationally now directly interfaces with what happens in the us like  trade deals, for example. I wouldn't think that it ends just in November. That's  the first thing I would say. And the second thing, and this is not in any way to  try and segue because I think you're asking a very good question. 

I'm making a very good point. It's this, a lot of what I think we're seeing in  terms of market volatility over the past few weeks. Even though it's very related  to Trump's agenda at core isn't actually being driven by anything he's said or  done specifically, it's much more to do with the AI effect, which is something  that Trump, of course, is very aggressively backing as I think any US President  would in this particular situation because it appears to unlock so many magic  boxes as well as Pandora's boxes. 

But that. That destabilizing impact, of course, is just rolling through markets  like a herd of elephants. And that I think is going to absolutely guarantee  volatility going forward. Even if we were to see Trump suddenly have a  complete change of heart and say, okay, here's complete predictability over  everything I'm going to do, and no one's gonna stand in my way or do  something bipartisan, even if those very unlikely scenarios were to unfold. 

That wouldn't change the fact that on a almost daily basis you are seeing  suddenly some new sector of the economy where people hadn't thought up until  recently, well, that doesn't need to exist anymore because of AI suddenly  thinking, well, maybe that doesn't need to exist anymore because of AI. So  yeah, it's, it's, it's, it's already what you were saying, but it's even more on top.

Erik: So what would the opposite scenario be? 'cause frankly, I'm having a hard  time seeing one. I do see where there's significant left tail risk to markets.  Things could get uncertain heading into the election. We're, we're definitely at  nine months out now where we're in the scope of where the, the timing is right  for the election outcome to start. 

Impacting the market. I see the left tail risk. Is there a right tail risk where  economic statecraft is somehow fantastically victorious and somehow takes us  to, you know, much higher highs on stock markets?  

Michael: Well, yes and no. Let's, let's take the yes part first of all. If you  actually look at the leading indicators, not on your Bloomberg screen, but  looking at logistics, and this is, this is publicly available. 

I'm not talking about proprietary sources. Freight companies are now saying that  they are seeing the signs, the early signs of a really significant industrial pickup  in the us But what they're finding interesting in terms of the amount of freight  that they're shipping is, it isn't coming in from US ports as it traditionally  would. 

IE. The US is importing more, particularly from China, for example, as a  precursor to the fact that it's gonna invest more or consume more? No, no,  actually this is shipping freight around within the US as part and parcel of  

making things in the us. You are starting to see that, you know, just under a year  into the admitted chaos of these new Trump trade deals and Liberation Day,  some of the dust is settling and potentially it's, it's, you know, it's not a done  deal yet, but they're starting to see it could be, we are going to get a genuine  endogenous pickup in US manufacturing. 

Now, a lot of that may be driven again by robotics. A lot of it may be driven by  AI. It may not be as labor intensive as it used to be, but it's exactly what  economic statecraft aimed at. So watch that space really carefully, because if it  were to unfold, it is a significant feather in the cap, for Trump and whether it  can be translated across to a voting populace, I dunno, but it's really important. 

Where I was going to say no though, is at the same time, alongside that, you are  seeing, of course, extreme price pressures and overheating in some sectors of  the economy. Again, primarily led by AI, but also linked resource areas. And on  one level, people will turn around and say, well, that's where I'm going to make  my money.

I'm not gonna be able to make my money in services anymore, which is where I  thought I was gonna, or in it because AI is destroying that. But I can go into raw  materials. But statecraft again, isn't about making easy money. It may sound  completely character intuitive 'cause Trump obviously doesn't dislike the stock  market and doesn't dislike people making money far from it. But, statecraft as a  whole even if it's not Trump's iteration of it 

Is not the kind of entity or thought process which says, okay, the Fed's gonna  cut rates to 2% because of statecraft. Therefore you need to invest your money  here, here, or here to make a 10 or 20% return. I've made that point to you  before. I don't think that's the game anymore. And if it looks like, well  resources, that's the area to go. 

Well, no. The state will step in and say, we're capping that we we're gonna do  everything we can to make sure that price inflation doesn't get outta control one  way or another. And so expect a lot more. Leaning on, or you know, fingers on  the scale there, which will again, make it more difficult to invest because what  you're looking at logically and rationally within a free market environment isn't  the environment you are in anymore. 

Erik: I wanna come back to something you said a couple of minutes ago, which  is when things are not going ideally well in the United States, a lot of presidents  have tried to divert attention by getting much more active internationally. Okay.  Well, the usual way that tends to go down is Middle Eastern wars, but as you  

said, president Trump is strongly incented not to do that. 

So are you thinking when you said that in terms of a military escalation in other  parts of the world, or are you thinking about. Trade deals or, or tariffs or, or  what kind of international distraction would would come to mind.  

Michael: Well, I'm in no way thinking of a wag the dog scenario where a war is  started to distract people's attention because even though you can get a rally  round the flag effect, I, I don't think that would last very long. 

And I think it would be a very, a very foolish move. And certainly one that, you  know, any American. Would tell you he's unlikely to play well with Trump's  space, which he needs to motivate. What I was implying instead, or what I I'll  state openly rather than implying is that yes, this sits firmly within the world of  trade and investment deals, and particularly what I expect to be with a new Fed  chair on under Warsh a shift towards dollar stable coins as part of the nexus of  US trade.

And of foreign investment flows coming back into the US as part of those trade  deals, which we're now starting to see crystallized, particularly vis-a-vis Japan.  South Korea, South Korea, we are starting to see those two countries in  particular being given blueprints of, we need your money to go into these  sectors right now. 

And by the way, they're not the 10, 20% return sectors that you might do if you  are a private sector investor, just trying to maximize your return, you know, in  the shortest possible time. These are long-term strategic plays, which are good.  

The USA Inc. Which will therefore be good for Japan Inc. And South Korea  Inc. 

And I think a lot more of those will be Inc. And one of the levers to get us there  will be dollar stable coins.  

Erik: You know, that really set a light bulb off in my head when I joined that.  With what you said earlier about the outlook for Kevin Warsh and the Fed, are  you imagining a scenario where Kevin Warsh takes office and says, okay,  everybody first press release or pre first press conference? 

I have a slightly different view than Jay Powell. The Fed is going to lead. The  charge on replacing the US dollar as the world's global reserve currency with,  you guessed it, the US dollar stable coin. And the Fed is going to champion this  and it's going to be a new digital CBDC type of move that we're making. 

But it begins with US dollar stable coins, which are tied back to the US  currency and we're going all digital. Is that the, the kind of thing you're thinking  of?  

Michael: Lemme caveat that. I don't think it will be CBDC, which is a central  bank digital currency. I think quite the inverse. I think it will be private money. 

Very similar to what we had pre World War I. In, in Europe in particular, but  globally, which were called Sterling Bills of Exchange, where the most  commonly used trade currency was tied to sterling, which was tied to gold, but  it wasn't the Bank of England issuing it. They were just basically promissory  notes issued by private sector firms, banks. 

Trading houses, individuals, etc, etc. And everyone thought they were as good  as gold and they were literally, but the Bank of England had nothing to do with  it. So I think that's what will be replicated. But yes, it'll be digital. I'm not  forecasting this will happen to be abundantly clear.

Okay. But if it were to happen, I would just whistle and, you know, look eyes at  45 degrees, like, wow, who's surprised by that? Because it's entirely logical.  Were that to happen within Thes a of what we have heard from Bessent from  Iran. What we are seeing being chatted about in Warshington in terms of how  they want stable coins to work, where we only have one piece of key legislation  waiting. 

To be finalized, which is the Clarity Act, which is going to determine whether  stable coins can effectively earn a yield or, and it won't be called a yield. Of  course, it'll be called a fee, but whether you can get paid a fee for holding them  similar to a bank deposit. And of course, banks don't want that. 

But the, and what the Fed thinks banks should or shouldn't be doing in the US  will be part of this equation. Once that's passed, you've got the new Fed chair,  you've got the Clarity Act. Following the Genius Act, you have these new trade  deals. You have these pledged investment schemes coming in, which are  basically capital controls being steered into the US at the highest geopolitical  level and geo-economic level, and a very, very good guardrail or mechanism to  encourage that capital to come in where you want it to go and to make short  term borrowing costs in terms of Tbill, much, much lower, which will therefore  of course mean you have a low Tbill rate inside the us, but. And this is getting  technical, but not necessarily the same low cost of borrowing offshore. 

It could be a significantly higher interest rate in dollars and stable coins  offshore, which is an interesting weapon for the US to have, interesting  arbitrage opportunity for some. If you were to have all that, it makes perfect,  perfect logical sense within Statecraft. But again, if you're not starting with  Statecraft, every single point of that will appear madness and unconnected. 

Erik: Now, it occurs to me that there's an angle here that I'd have to think  through, but you know, all investors understand there's a profound difference  between holding a large. Cash balance in US dollars as a bank deposit versus  holding Tbills, which you know, carry the, the full faith and credit of the United  States government. 

And you, you don't have to worry about bank failures and so forth. Do you  envision a stable coin being engineered that has all of the same safety  characteristics of a tbi? But you can transact it more like a bank deposit because  it seems to me that could be somewhat revolutionary. And if the Fed were  driving it and basically saying to the world, look forget about swap lines.

We're going, those are antiquated mechanisms. We're gonna replace it with this  new idea of the US having a major stable coin reserve. That's, that's backed by  US Treasuries and anybody who holds those stable coins both. Earns a yield  like they do on a Tbill, but they also have the same safety characteristics of  holding T-bills as opposed to a bank deposit. 

That would be revolutionary.  

Michael: It would be. And it's what I think they're aiming towards. And just to  add to that, of course, banks don't like that. Of course they don't. I mean, this  feeds back to, you know, investment angles. And should you, shouldn't it be  holding the financial sector? I don't give advice on that, but I'm just talking  thematically. 

Lemme ask you a question before I, I continue. Making this point off the top of  your head, Eric, do you know what percentage of US bank loans actually go  into productive capital in terms of capital stock? As in we're gonna build a  factory here. We're gonna build something with a machine that makes  something have, have a guess what percentage of US bank loans do that? 

Erik: Productive capital, not consumer capital. So we're not counting buying  SUVs. A, a very small percentage. I don't know a number, but not much.  

Michael: Yeah, it's around 20%. So four out of five bank loans don't do  anything to help build up the capital stock, which is absolutely crucial at the  moment. They are for consumption or they are just to other financial entities. 

So it's just money for money on money. That's just financialization for you  basically. So if you are the Fed. And you have got statecraft in mind because  that's what the treasury has in mind. Obviously, you don't wanna blow up the  financial sector, that's the last thing they want to do. But what uses of financial  sector, if four fifths of it, don't do anything for you if, if four fifths of it are  doing everything to inflate the parts of the economy, which you have the least  use when you're trying to take on China in any different dimension over any  timeframe. 

What's it for? And that, that of course flows back to the question I asked you  when we first talked. You know, what is GDP for? That's what economic  statecraft is all about answering. So it wouldn't surprise me to go back to that  stable coin if you do end up with something whereby it is a form of threat to  banks to a degree, because banks then have to get with the program, they have 

to realize, okay, we can't just have this asset base, which is purely consumer and  financial. 

We need to be getting approval from the treasury to actually start doing more  useful stuff, and then, then we get a gold star and a pat on the head rather than  being hit with the stick. And that's a way in which you can use a market  mechanism and it's still a market mechanism to actually achieve a statecraft  outcome, which is what it's all about. 

Erik: Do you think there's an angle to that that plays out as part of this now to  the midterms timeframe? Because I could imagine Kevin Wars coming in as the  new fed share and then the White House making an announcement saying look  with the, the new Fed in place don't put your money in the bank. You can now  buy these, you know, consumers. 

Can get a much better return on your savings by just directly buying stable  coins. You don't need banks anymore. Now, Scott has been messaging pretty  hard that it's time for Main Street, not for Wall Street. Is there room that the  Trump administration kind of does a frontal assault and says, screw the banking  system. 

You know, we're gonna fix the money system through our reforms in a way that  Wall Street's not gonna be happy about. But we're not here to take care of Wall  Street. We're here to take care of Main Street. By the way, make sure that you  vote for us and. November I I is, could it all happen that quickly? 

Michael: Thematically and logically, I think it could. I'm not saying it will, and  obviously you're walking a razor's edge doing that because this is a fed, which  everyone knows, has always been there for the financial sector. That's what it's  there for. I already made that point earlier suddenly saying, that's not what we're  there for anymore. 

That's not who we're there for. And you know, the, the, the pushback would be  enormous, particularly in terms of lobby groups going into the midterms, if  nothing else. Also looking at, of course the, the macro effect and the market  effect. But I do think that is the logical game plan. The question being how you  get their, you know, with, with the least bumps along that particular road, and  they would be the best arbiters of that, those individuals, they would've the best  read on the economy. 

But I, I think there's, again, taking the counter counterargument, which is how I  try to do everything. Nothing else makes sense if they're not going to do that. 

And this is the same fed with a different person running it, just moving a  mechanical fed funds rate, which is less and less used to anybody, less and less  of a guide to anything up and down, which is either inflating all of the economy,  the good bits and the bad bits, or deflating all the economy, the good bits and  the bad bits. 

How does that help anyone achieve anything? Not just in the midterms, but but  longer term? So yes, logically I think we go there. Yes. Logically, I think stable  coins are part of that journey, and I can't tell you how few people actually grasp  this yet. And I understand why. It took me a long time to get my head around it,  and I'm, I'm not even looking at the technology of how it works. 

I don't even focus on that side of it. I'm not, I'm not a tech bro like that, but I'm  just looking at the geopolitics, the geoeconomics, and the balance sheets of it.  And if you can suddenly get. A flood of funds going into T-bills and not just  from within the US but internationally too. 

So you have a flood of dollars going into the US, a flood of dollars going into  T-bills, which pushed down the TBI rate significantly. You can refinance a lot  of treasury debt, the short end of the curve at a much, much lower rate, and  suddenly you can be spending a bit more into the midterms too or you can be  pumping up the military industrial base and getting back into shipbuilding, etc,  etc, or at least saying, vote for me. 

And we continue to do this. We've just broken ground on that. We need another  couple of years to, to really get, you know, the, the steel pouring. I think it's a  very, very powerful combination with big risks, with big caveats that it can be  done wrong, but again, I think it's a more logical outcome. Than forward, just  going back to where we were and moving something mechanically up and down  and hoping for the best. 

Erik: If these stable coins are transacted internationally on open digital markets,  does that open up a whole new realm of investment capital for the US treasury  market? In other words, in lower yielding countries where, like Japan until very  recently, where the, the interest rates are next to nothing. There wasn't a good  way for the average, you know, individual investor to buy US treasury bills. 

If they were a sophisticated investor, they might figure out how to do that, but  it's not something the average guy knows how to do. If buying these stable coins  was simple enough that everybody in the world could do it on their iPhone, does  that potentially create a whole bunch in of indirect US treasury paper demand?

Michael: Trillions and while there may be large entities where it doesn't play  well, and I, I would think Europe, for example, it won't pay particularly well in  Europe for, you know, patriotic, political and even economic reasons that you  have the Euro. So why would you look at anything else? Fair enough. But in  most of the emerging world, which is a big, big slice of the global population,  provided that they can manage to make them attractive enough that su supply is  less than demand. 

And yet supply is still significant enough to help the US achieve what it wants.  Yeah. You can manage to make sure that there's a decent yield on that, which  competes with any local currency. And as you said, it's on your iPhone outta  reach of the tax man outta the bank, even so no one knows where it is and you  can still transact in it. 

Domestically within that network and internationally, and you've effectively  dollarized much of the global economy alongside, you know, the existing Euro  dollar network, which frankly operates for the financial system and for the, you  know, the global commodity trading system and at the highest level. But for the  man in the street, unless you are somewhere like, you know, parts of Africa or  Southeast Asia where they still have physical dollar notes, it doesn't work the  same way. 

Now, it can, as you said, it can be on your Android phone, on your iPhone.  Trillions and trillions, trillion. And then on top of that, just to add to that, you  can even start saying that US importers, you know, huge, huge import demand  globally, start saying to people, well, we're gonna pay for you, sorry. We're  gonna pay you in stable coins. 

So for example, a US importer instead of sending dollars to a factory in  Southeast Asia, hypothetically, they send dollars to a stable coin issuer in the  US who use them to buy a Tbills again, Tbills go lower. They get that stable  coin and they send what is a digital token, not a dollar, a digital token backed by  a Tbill, which stays in US hands in the US funding the US government at a low  rate to that Southeast Asian entity. 

And from there, that can flow on and on and on. You can either say, okay, we  now want you to bring that back into the US as investment capital and build a  shipyard here for us because you have your government assigned a trade deal  with us, and that's part and parcel for that. So it's buy one, get one, and you get  

it invested back into the us.

Or you can say, do whatever you want with it. There are no guardrails. Just  don't send it to this country or that country because if you do, we'll, cancel it,  because electronically the US can. So amount of power. That puts in us hands  potentially if it's done right, is phenomenal and it is market moving in a way  few people realize. And it takes us from a two dimensional world into a three  dimensional world. 

And most balance sheet thinkers can't conceive of how it's going to work, but I  can assure you it could, and I think it will.  

Erik: Michael, the, the light bulbs going off in my head are just phenomenal in  this interview. I'm just thinking from all of my travels around the world I've  never met anybody in Latin America who trusted their own nation's currency  and who didn't want to keep any savings they had, although most of them don't,  unfortunately, have very much savings. 

What they do have, they want it to be on US dollars. In a lot of those countries,  the government restricts banks and doesn't allow them to offer. US dollar  denominated accounts to to retail banking clients and so forth. But you could  easily see the Trump administration go on a crusade to announce to the world  on X that look a lot of the world's corrupt, and we're gonna fix it for you. 

And the way we're gonna do that is by making it possible for anyone on the  planet who's got a cell phone to invest in. Something that is, first of all,  eliminates the foreign currency risk of staying in your own home country's  currency. You can invest in US dollars, which across most of the world, most  people trust much more than their own country's currency. 

And you can do it all in your phone and your government can't stop you and  your government can't even know what you're doing because we are going to  engineer the system So you can. Deal directly with us, the US government, and  our banking system, and our stable coin system. Oh, by the way, there's this  fellow named Don Jr. 

Who just might be launching a a business associated with that pretty soon. And,  and that would make Trump a hero in Latin America. That would mean that a  lot of the Latin American immigrants that maybe were otherwise inclined to  vote Democrat in November might change their vote. There could be all kinds  of consequences to this. 

Michael: Absolutely. And in fact, you've hit the nail on the head. I'm glad the  light bulbs are going off because I do get, for example, resistance from some 

people who, you know, very, very smart people who have said, well, you're  basically just substituting a Euro dollar for, you know, a token, a digital token  rather than an actual dollar outside the us. 

Why would anyone agree to that? And I said, for the reasons you've just stated.  

Erik: I never met a guy in Chile who was buying Eurodollar futures. I know  lots of people in Chile with cell phones that would love to buy US dollar  denominated savings that their banks and their government doesn't know about. 

Michael: Well ex exactly my point. But secondly, I mean, these tend to be you  know, from Europe, these people. But then they turn around and say, well, you  know, well we wouldn't want that. You know, we are happy with euros. Why  would we accept that? And I'll say, because the US can make you because of  nato, because of others, you know, other forces, energy, etc, etc. 

But above and beyond that, it's even more devious or clever or cunning than that  because think about the balance sheet dynamics of it for a moment. I know this  is really dull and dusty, but just for a second, indulge me. Imagine you've got  one of these countries, you know, country X, and within Country X, somebody  wants to hold that dollar stable coin and they've got local currency. 

Well, the way it works is they're going to have to contact a stable coin, stable  coin issuer. They're going to have to basically transact and give them their local  currency. That local currency at some point is going to be given back to their  central bank. Their central bank is gonna swap that for the requisite number of  dollars. 

Those dollars go via by the stable coin issuer to the US Treasury, which issues  the T bill. For the stable coin, which it's given to the individual who's buying it,  right? You follow me? That's a very simple dynamic, but what are we having  there? The dollars are sucked out of that economy. FX reserves disappear, and  they're replaced by stable coins. 

So not only do you have this liberalization where everyone can get hold of  them, and they will do, but the, the financial tier, which again goes back to  banks and the 80% of their loans are financial rather than productive. That  global tier of Euro dollar liquidity at its at the base of collateral, the actual FX  

reserves starts a decline. 

So suddenly countries which are reliant on the Euro dollar have a euro dollar  squeeze, which pushes up the interest rate even more, which makes a stable coin 

even more attractive. So, so you basically lock others into a spiral where they're  just rewarded more and more and more for doing it. Now can it blow up? 

Sure. Can it go wrong? Absolutely. They, I'm not, I'm not here to say there  aren't ways it couldn't go wrong. Right. But I think it's a very, very, very  misunderstood. And a tactic which I think is likely to be deployed well, as I  said, as soon as this Clarity Act is passed and of course you can see why  lobbyists who don't want it to happen, don't want it to happen because it upends  so much of what remains of the global system, but it will be a very different  system on the other side of it. 

And I think one in which America sits a lot prettier and potentially so does Mr.  Trump.  

Erik: Michael, this just tracks very closely with a lot of the, between the lines  that I've been trying to read from Scott Bessent. It's very clear that they have an  agenda to do something big, and I wasn't sure exactly what it is. 

And, and you've just painted a, a picture in my mind as to what it might be. I do  want to move on to another topic before we close. At the beginning of the  interview, you said that you think the market got the message wrong about the  worst nomination. Now, one of the things that happened in reaction to that  nomination was just a huge correction in precious metals, both gold and silver. 

Just really took it on the head. Did the market get that wrong? And I, I think  clearly they were, they had been on a, a, a very overextended run, so they were  overdue for a correction, but. Did the market misinterpret that? Is the market  still misinterpreting that? You know, should, should we expect this to continue  for a long time? 

Or is this gonna be, oh, wait a minute, we got that wrong. And we move back to  the trends that we were on before?  

Michael: Well, we were just discussing one kind of revolution. And let's be  clear, everybody who's piling into gold and silver, unless you are just a trend  follower, you are of course, and, and, and very often openly banking on a very  different kind of revolution and saying that fiat money is over. 

We're going to go back to a gold standard or a silver standard, or some kind of  biome, Methodism, etc, etc, and everything around us, which is based on fiat, is  done. That's a really revolutionary stance, and we take it as normal because that  faction have always been in the markets. And if you look at the, the debt levels 

in many Western economies, and if you look at the, the bill for, you know,  reindustrialization and for building up a defense base, again in most of them to  say nothing of, you know, future welfare requirements, you can understand why  some people are voting with their feet like that. 

But it's still a revolution that they're marching towards in doing it, whether they  recognize that or not. And what worries me is that while the logical arguments.  Is there number one, you are talking about something which is supposed to be  the ultimate safe haven and which, you know, gold bugs in particular will  always tell you, you know, under gold we didn't have any inflation. 

That's not true. Actually. On average you didn't, but you had massive inflation  followed by massive deflation. And so that the, you, the average was low, but  you had incredible swings up and down. And ironically that is what you're  seeing here. Now, you're seeing something that's supposed to be a safe haven  trading. 

Trading like a crappy meme stock. Which is not very reassuring. So that's one  thing that I think everyone should be cognizant of. Whatever they, whatever  they're doing with their money. But the other one is this. If we are looking at  this potential revolution via stable coins, and I think we're, but again, you know,  that's open to debate. 

And you've got issues over Bitcoin in the background, which is having a terrible  time a bit. But you know, is the US gonna potentially move towards using that  in some form too? That remains to be addressed. They promised they would,  but they haven't so far. 

Gold in particular is still being held up by some as a potential new architecture  as I just said. But I wonder how many potential new architectures you can have.  So if for example, you backed the view that I just put forward, that dollar stable  coins are gonna be a big thing, is there really room in the marketplace for that  and for gold at the same time? 

Erik: Well, what if it was dollar stable coins and gold stable coins and Bitcoin?  What if those were the, the three digital assets and the Fed was actively  promoting all three of them, including a strategic Bitcoin reserve?  

Michael: Well, okay, that's, that's an interesting question. I think you are more  likely to see a duality in the US where you have dollar stable coins and Bitcoin.

And where that would happen, for example, to give a very complex answer very  quickly, is that I think people who US allies will be using dollar stable coins.  And if they're not allies, now by dollarizing them, they'll become them. And  people who really push back and say, we're not going to allow that to happen. 

Capital controls, you know, whatever is necessary to stop that happening, fine.  We're not dealing with you. You are gonna use bitcoin. You're not gonna get  Euro dollars from us the way that you used to. We're just gonna switch to  something neutral instead. So that's what I think the US may do, but that has yet  to unfold. 

And at the moment, as I said, Bitcoin's having a bad time of it on a lack of faith  in that which, which may be justified. But in terms of gold, I don't think that the  US is going to do that because dollar stable coins are still fiat, but a digital  token for fiat. And so you're expanding the Tbill supply albeit into what you  hope is productive sectors rather than financial areas or consumption areas, but  it's still fiat, so then go to gold at the same time. 

Seems to be really. Mixing your metaphors from a monetary policy perspective,  I don't see that helps the us I can see there may be revaluing against gold, which  is a separate argument people make, but then basically cashing in and walking  away from it. It's other countries I believe, that have been leaning towards  talking about maybe trying to do some kind of stable coin back by gold, but  that, and this is a critical point to make in 30 seconds if that were to occur. 

We don't have a global architecture anymore the way we do now. We have  multiple. Global architectures. We have different currency blocks the way we  did in the 1930s, a US block, a US stable coin block, and a gold back block  doing their own thing, their own way, and not trading so much with the US  block. But that's the risk that's always been there. 

And that is certainly something that still should be at back of mind and in fact,  front of mind when you're looking at these assets move. 'cause it's ultimately  about who you think has the power and who sets the rules and draws the board  game for the 21st century. That tells you what you should and shouldn't be  buying. 

Erik: So if I draw an analogy to the 20th Century Cold War arms race, we  could be looking at a 21st century stable coin arms race where the US says,  look, the, the answer here is US dollar stable coins, Russia and China. Partner to  counter and say, no, no, no, no. That's, that's basically stable coins for fiat  currency.

What you really want is stable coins that are backed by gold and we're the ones  that are gonna give that to you. And you end up, as you said, with blocks where  there are some countries that are. Gold-based through a gold-backed stable coin  and others that are US dollar based through a US treasury paper backed stable  

coin. 

And you have very similar dynamics to, as you said, the 1930s and different  country, different economic blocks in different parts of the world. Is that part of  the future that you foresee?  

Michael: Again, not a forecast. It's a, it's a tail risk, which I've been warning of  for over a decade, which you can start to see. 

Gradually emerging. Just a few caveats that are really, really important. If were  that to happen, what you will immediately see is the other block. Basically  saying what you use is not tradable here, so there's no clearing. So in other  words, if you're using dollar stable coins, don't even try and get a market  exchange rate on your screen for our Gold Bank stable coin into that dollar  stable coin. 

They're just different things, which you've had in the past. We did during the  Cold War, you couldn't transact between the Soviet ruble and the US dollar.  Except very narrowly at a ridiculous exchange rate via a couple of guys in  Moscow. So if that were to happen, supply chains from upstream to midstream  to downstream, downstream have to fragment because you have to have two  different blocks for everything with everything you know, in contained within  them. 

That's the first point. Second one is, of course, you know, in China's case, they  still have massive fiat. I mean, you know, they, they're borrowing and printing  money, like no one's business, just like everyone is. So it's not as if I would  actually be You know, gold based in the way that you would expect. It's just  that because they run a huge trade surplus, they can afford to, you know,  nominally peg to whatever they want because it flows to them, except it  wouldn't flow to them from the us. 

There's no exchange rate here. Which would allow trade to clear. That's the  clear, that's the key point. Don't think that if China were to do that, somehow  the US devalues against that and therefore the US and China are friends again,  just at a different exchange rate. No, they're separate. Don't talk to each other.

Berlin wall between them and, and the last point very quickly is you've probably  seen the headline that came out last week. There are rumors going round,  although they haven't been substantiated, the Russia is already saying they want  back in onto the dollar system and walking away from any talk doing something  China. 

The big players potentially are more flexible than one might think.  

Erik: Michael, I always enjoy our conversations. I'll look forward to the next  one. But meanwhile, before we close, I want to touch on what you do at  Rabobank. Tell our listeners a little bit more about the services on offer and  what your team in the global strategy in economics and markets is all about. 

Michael: Sure. Well, that's the easy part. Basically, it's what I was just talking  about to you there. We don't give investment advice. We talk to stakeholders  from, you know, farmers to the C-suite, trying to help people understand what's  going on in the very chaotic world around us. And trying to explain what we see  as the underlying themes and drivers that are emerging and to try and translate  that into effective strategies for them to then implement because it's as much  about risk mitigation as it is looking for opportunity, and both of them have to  go hand in hand. So that's that part of the story. And of course, Rabobank is the  leading one of the leading banks in the Netherlands and the world's leading food  and agri and energy bank and is attempting to, you know, grow a better world  together. So those two sit alongside each other.  

Erik: Patrick, Ceresna and I will be back as Macro Voices continues right here  at macrovoices.com.

Erik: Joining me now is HonTe Investments founder and bestselling book  author Alex Guravich. Alex has a new book out, of course, the first book  everyone remembers is the Perfect Trade. The next book is called The Next  Perfect Trade. We'll talk about that at the end of today's interview. But Alex, I  want to jump in and start with your specialty, which is fixed income. 

Boy, talk about a moment in fixed income markets where there's a lot of variant  perceptions. Some people are saying, look with Jay Powell going out, Trump is  gonna get his way. We're headed toward much lower interest rates. At the same  time there's other people saying no, it's it's the opposite. 

Too low of a policy rate is going to ignite inflation fears. We could see a crash  in the backend of the bond market. What's your take? How should we  understand the fixed income market and the outlook for bonds?  

Alex: Eric, thank you for having me here. It's good to be back. And yes, let's  start with a fixed income market because I think US fixed income market lies at  the heart of everything, and it responds to probably the most robust set of  economic data, which is US economic data. 

Though admittedly economic data in the US over the last few months has been  quite confusing. Even like to think of the Government shutdown, which  disrupted various economic statistics reports and made them very distorted and  a lot of conflicting data. We could dig into this a little more, but just to look at  the big picture. 

The data has been inconclusive. As for the fears that over easy policy by the Fed  will crush the long end of the curve, I think it legitimate to expect serious  steepening of the yield curve. The beginning of every easing cycle. It's not that,  for example, when people were giving an example, people were talking about  how last year there was a bunch of easings, but long dated yield didn't budge. 

That is actually not strange at all for someone. Who traded almost 30 years of  fixed income markets like myself, I've seen this picture many times over,  starting from, for example, the years like 2001, 2002, when there were periods  when the short term interest rates fell dramatically. But the long term interest  rates were sticky, causing a steep yield curve.

That's a somewhat normal picture. What happens? At least in my experience  that first should't rate and interest rates go down and then long and sticky. Then  eventually, when rates stay low for a while, people get excited about going out  on the curb and picking up the carry and that carry hogging if you wish, leads at  some point a very intense rally in the long end. 

Which is usually also overdone, like it was in 2000, beginning of 2003, ended  up in a sell off. It was overdone during Partially in 2016 and of course overdone  in 2020. All of those, in hindsight, overdone. So those overdone long end rallies  come, but they come much later. So I don't think we're very different from that  playbook so far. 

Just in terms of behavior of market itself. Now a separate thing is to discuss is  what is actually under the hood and how is this economic environment  different?  

Erik: Alex, let's keep that thought going and dive a little bit deeper.  

Alex: There is a concern about the Fed being over easy and creating inflation  with this administration. 

Now I'm probably fall on the side of not being too concerned about the facts of  Fed policy. Different constitution or different like slight hawkishness of ishness  of the Fed, about, I'm not too concerned about this having a major impact. Why  

is that? So I really believe that the difference between hawkish and dovish fed is  at most 50 basis point range for a couple of meetings because eventually the  data dictates. 

One way or another. The reason there is a little bit of range of outcomes right  now, because this data is ambiguous, if the data becomes unambiguous. For  example, if we have inflation continuing to moderate and employment  continuing to deteriorate, any FED hawkish or dovish will take rates down and  eventually take them to zero until the situation rectifies. 

So the difference between dovish and hawkish Fed is really how quickly they  get to inevitable policy, inevitable convergence of policy. Now of course, you  could argue that is the history of the Fed operating on a somewhat reasonable  assumptions versus highly politicized FED I really cannot give you a full 

picture on this because we dunno if the Fed will be completely different.

My intuition for now is that it won't be that different. That's the first thing I'll  start with. And the second thing is what is really gonna win? Inflationary  deflationary impulses on the economy right now.  

Erik: Alex, let's go ahead and dive into those economic drivers. Then, as you  say, we'll set the politics aside and talk about the fundamentals. 

Alex: So what really drives interest rate? Let's start with a very simple principle  that the Fed has dual mandate inflation and employment, and inflation, as we  know has been particularly high, but not necessarily deteriorating even probably  there are many signs of softening inflation and employment. On the other hand  is softening, but not yet convincingly, there is no convincing down spiral. 

So we have that picture of somewhat push pull, both not very strong push pulls  on either side. So that's what creates ambiguity. Now I have to confess, I have a  confirmation bias because for a couple of years now, I've been pounding my fist  

on the table to say that this higher real interest rates will lead to eventually  deterioration in employment because once you make money more expensive,  the balance sheet. Balance sheets start shrinking and people are incent less  incentivized to expand and employ people. 

That's just a normal process. So I was waiting for the cycle to happen. So as I'm  seeing the cycle happening, I'm of course getting a confirmation. Yay, I told  you. The job market is deteriorating, however, it is not de deteriorating awfully  fast. I cannot really claim victory. There are many indications that show it's still  being relatively stable. 

Furthermore, there is a little bit of ambiguity. How much of it's AI Now I fall  into the camp that AI has not yet made a significant dent in the job market, but  will in the long run. That's my view of the situation. I believe that AI will lead  to tremendous deterioration of job opportunities, which is, and again, we can go  into this deeper, but very differently from any other past technology. 

In some aspects, it'll act similar to past technologies in technological advances,  but in some areas it'll act differently. So it's not a single one way how AI will  affect job market. So there will be areas in which AI will do, which past  technologies did, which just change the texture of the job market and in sa and  change the structure of certain economic activities, but without actually taking  them away in certain areas AI will eliminate a whole categories of economic  activities and that interesting it might be headwind not just for employment, but  for GDP as well. This is where I'm not sure, like everybody talks about 

explosive AI growth, and as a person who believes in singularity, of course I  have to subscribe to long term explosive AI driven growth. 

It's hard not to subscribe to it, but I not necessarily see explosive AI driven  growth in the short horizon.  

Erik: Alex, I wanna ask you how you think about where AI fits into the  economy and how it's gonna play. 'cause some people say, ah, AI, it's an  interesting trend, but once they figure out how much the energy's gonna cost,  it'll probably fizzle out. 

I don't see it that way at all. I see AI as being. A cold war like arms race thing,  where it's going to be so important from a military perspective that  governments, particularly US, Russia, and China, are going to recognize that  whoever wins AI was just like, winning the space race in the 1960s was all  about military dominance. 

Once you controlled space, you could drop nuclear warheads from space on the  other guy. I think AI is gonna be that important. And I think that whether you  like the fact that it's going to create an energy crisis, and I think it will or not it's  going to happen because it's going to be a matter of national security. 

Am I just being a conspiracy theorist to say things like that, or do you think it's  gonna be that important?  

Alex: I would say I wholeheartedly agree with you. I think it almost  mathematically impossible to be otherwise. I think that already we're already at  the stage when being skeptic about AI role in the military developments is a  thing of the past. 

There is really almost no room left for skepticism about what you're saying. It'll  almost inevitably will be an arms race in terms of ai. What is interesting, I was  even thinking, which is completely independently of what you just said.  Specifically this morning I was thinking about the impact of AI, and military,  and I was thinking that paradoxically, it'll probably increase dramatically  military budgets because of this AI paranoia. 

But on the other hand, it actually will increase employments because eventually  we're not gonna need ground troops. I think we are outliving the age of ground  troops or just generally military personnel? I think people pointing and shooting  is very close to becoming a thing of the past. And actual human troops will be  used more like mediators.

Peacekeepers rather than as assault force because like it's moving much more to  I think, Autonomous weapons and autonomous weapons will not far function  without complicated AI. And there's just no way a human being can push  buttons as quickly as AI can. So there will be no competition. You cannot have  a human army fighting a robotic army. 

If anybody reads murder Bot diaries, which is popular books this day, so watch  the show. They can feel that humans cannot. Fight against bots, it's not gonna  work. That's kind. But that's my view on the military. So I think it's almost  unavoidable. And I think it touched on something which I think a lot about and  also agree with you, is the energy crisis. 

Erik: Let's move into energy next then, because these are so tightly related. I  think that we're headed toward an energy crisis before AI hit the stage. With AI  hitting the stage, I think AI is gonna become a really big deal. A lot of people, a  lot of regular mom and pop Main Street folks are gonna say, Hey this AI thing  is using up too much of our energy. 

It's making our electric. Bills double in price. We gotta shut AI down. We've  had enough of it. We want our energy bills back to what they were. And the US  military is gonna say no. We absolutely have to keep the emphasis on winning  the AI race because it is an existential threat in the new world, and we have to  continue. 

I think it create, I think it exacerbates an energy crisis that was already certain to  happen. And I think that energy crisis is gonna be. Bigger political topic than  the energy crisis of the 1970s. Do you agree with that? And if so, what's the  outcome and which energy sources do we see need to see the most investment  in where the investment plays? 

Alex: first of all, I will say that like the actual structure of energy market. It's  very hard to predict it. As a macro trader, you almost have to be a scientist,  right? Or a futurist because you don't really there is a political factor. For  example, certain things like Thorium reactors, right? They might be, they  probably feel, we probably all know that they're feasible, but the adoption of  them, there is various political aspects and problems of adoption of various  types of energy could be an issue. 

However. There is a lot of like scientific questions. We don't know what kind of  energy sources will become most efficient or cheapest in the future. How  quickly we're gonna be able to build energy efficiency of computation. So I do  not know exact structure, what's gonna happen, but what I think is undeniable is 

that compute is growing and okay, you could say, I told you I have to say I have  tons, I've been pounding my fist on the table over there for probably about a  decade long before I even knew anything about LMS and chat GPT, it was  always in my head that when I look at the growth of compute, that eventually it  would consume the vast share of energy of humanity that was unavoidable now  for decades. 

The only reason why it was not noticeable, because compute was taking very  small portion of all overall energy, but the way it was growing, it was very clear  that the charts were undeniable. It would overwhelm everything. And I think it's  continuing to, it. It's continuing to grow and it overwhelm all other energy  demands. 

Like there and no, and there is no way, at least in my mind, technology, whether  it's. Renewable sources or introducing more nuclear sources or even fusion will  be able to catch up with it because I know that you tend to be more skeptical of  fusion than I am, but even in the most optimistic prognosis of introduction of  fusion, like even if you're the biggest fusion enthusia, by the time you put fusion  online and actually the actual capacities of fusion, I think the demand for  compute will outrun it. 

And even with the most optimistic view of energy efficiency, improvement of  compute, still compute will grow faster than any of other stuff. I just don't see  how and what would stop that, I think that train is off the rails. So energy will  unavoidably become a bottleneck. What has been a conundrum for me? The  

question that you ask, how to invest in energy. For example, a couple of years  ago I was reasonably constructive on oil. 

I was not long front oil contracts, but I was for long deferred oil contracts. But  and for a while the trade worked okay because whatever the front end was  flopping around deferred oil was earning carry from backwardation. I was able  to sit on it, but last year it went all into downtrend and I just got out of oil. 

I had to wave a white flag there with oil. And my question is now will oil even  be meaningful in terms of powering the compute of the future? Does it even  matter what the oil price is? For now obviously it does, but will we just, the  other sorts of energy become so overwhelming that oil does not even matter? 

Now I've obviously an interesting place to look at has been uranium and it has  been done doing very well, and I've been constructive on uranium mining and  remains so. But then we can see will that be efficient enough? Should we look  at some other chemicals elements, so should we look at other sources of energy.

So overall, the demand of energy will continue growing. That's, for me, that is a  given for me. It's very likely that energy will be the bottleneck for civilization,  for the growth, for I think energy, what we're gonna run into. To me that's the  most likely stumbling block for the next few decades. But the last question. 

What kind of energies actually will be mining and will prove to be most  profitable? I feel a little bit outta depth because. There is a lot of scientific  questions there.  

Erik: It makes sense. Alex and I couldn't agree with you more, that the most  important thing is going to be a thirst for energy and a shortage of energy. 

I see it as a competitive issue between nations and frankly, this scares me a bit,  but China is kicking ass. China is building more. They have more planned and  under construction conventional lightwater reactor based nuclear plants already  

in the works than the entire US fleet of nuclear plants. They are doing more  with, you mentioned thorium reactors earlier. 

They're doing more with molten salt and thorium reactors than anyone else, and  they've advanced the technology that was developed at the Oak Ridge  Laboratory in the 1960s and taken it to the next level. Already, they've already  announced a fleet of container ships to be powered. By thorium reactors, they're  doing on both the conventional and advanced nuclear more than anybody else. 

Meanwhile, they're building out wind and solar and and every kind of  imaginable power plant, and they're doing it. At a pace that's not constrained by  the, in North America we have to have public hearings and consider the  implications on the Native American tribes and so forth before we build  anything. 

They don't follow those kind of rules. The government just says we're gonna  build and build like crazy. And that's what they're doing. And I don't see how  we're going to keep up in what I think is a race for who can build enough energy  to power AI to create military dominance, which is what I think this race is  really about. 

Alex: Yes, I would agree. This is scary. The only thing I would say is that the  history shows when a communist run country starts, this kind of by decree build  out of anything, it usually goes sideways. The history of the Soviet Union  shows, even if it at the moment, it is terrifying, but it's not none less, no less  terrifying.

Those build outs are terrifying. They just in the end sometimes for reasons  which are very hard to predict and that being pointless or useless. Or obsolete or  dysfunctional. So I will not completely, I'm not completely certain that China  will succeed, at what're doing not waste end up huge. Failed state debacle. That  is, at least that's what the history would suggest is gonna happen. 

But first of all, it could be different this time. And secondly, it's terrifying  nonetheless, because failed states can become dangerous as well. 

It's more like the arms race itself is terrifying. It's as you mentioned, this  situation, when there is such a counter position, it is definitely something to  really worry about. I don't know how to trade that, but it's definitely something  to worry about. 

Erik: Going back to what types of energy and maybe things that we could  trade. 

Let me run my thoughts on this past you and get your feedback. It seems to me  like the AI crowd has already figured out that the right strategic long-term  answer is nuclear, and they're already doing a lot of investment on that. But I  think what they're going to find out very quickly is, although that is exactly the  right long-term solution, it. 

It takes longer and costs more to build than you bargained on, and particularly  the takes longer part, I think is going to become debilitating for the hyperscalers  that are used to doing things on a much more immediate timeframe. It seems to  me what's coming is there's gonna be this moment of reckoning where  everybody says, oh boy, we gotta figure out. 

At any cost. What can we build quickly from available fuels that doesn't take as  long as nuclear? And I think the answer is natural gas fired power plants. And I  think that probably the biggest bottleneck is going to actually be the gas  turbines. Those great big turbine machines that are used to create the dual cycle  gas turbine plants, the efficient gas. 

Fired electric generation things, there's like a six year lead time to order those.  Somebody is going to have to massively ramp up production of those. And it  seems to me that gas fired power plants as an interim solution until nuclear can  be built is likely to be a really important investment play of the next decade. 

What do you think of that thesis? 

Alex: It makes a lot of sense for me especially because US definitely has some  natural gas. So that is not probably, as you say, it's probably natural quantity of  natural gas we could get is probably not gonna be the first bottleneck. And it is  also true, yes. Nuclear plants have a 10 year cycle to put them online. 

I don't know if it's correct, but that's my impression. So there is definitely  something like this might happen. The thing that I would say that my take on  this Military Cold War ramp up crisis situation? I think the current, the way the  current wind blows and with the current administration, I feel like us will have  some flexibility to just declare with the various, with our military production  acts to clear some of the obstacles and make things happen much faster. If  they're if they're on the same page as those hyperscalers who are trying to do,  then they could clear a lot of regulations outta the way. That's my impression.  So things might go faster than they have in the past, even in terms of nuclear  power, but in, but that could also pertain to production of those turbines you're  talking about. 

Erik: I think that is already happening in nuclear power. And for anyone in the  audience who's not aware, normally the Nuclear Regulatory Commission has  been in charge of all things nuclear and frankly they're a bureaucratic  organization that I think, has done more to stand in the way of progress than to  regulate it over the 50 or so years that they've been in business. 

The DOE, the Department of Energy is literally end running them and has  introduced their own. Regulatory process to say if you wanna bypass the NRC  completely, you can go for a DOE approval maximum. I think right now they  just increased to 30 megawatts thermal nuclear reactor energy can be prototyped  in a DOE permit without NRC approval. So that's, I think, the first time in the  history of the United States that a that a private sector company could apply for  taking a nuclear reactor critical that means actually making, nuclear energy  from it without an NRC approval. You can get it from DOE now, and as I  perceive this, it's basically some political infighting where DOE says, we're not  gonna wait for the NRC to get its act together. 

Provide the people who need it with an alternate path to, to get to nuclear  energy. And already a bunch of companies have jumped on that. Now, that  doesn't allow you to build the gigawatt power plants that we need, but it does  suggest that maybe we're on the path to getting there. And what I think is gonna  happen is we're gonna realize, it still takes years to get some of these new  advanced reactor designs figured out and scaled up and ready to really build at  scale. In the meantime, we need a whole bunch more natural gas. We got plenty  of gas. It's not gonna be a question of there not being enough gas and. As I 

understand it now, it only takes about a year and a half to build a new natural  gas fired power plant. 

Once you've secured the the turbine the turbine itself, there's something like a  six year backlog to order those things, and that's where I think somebody's  gonna have to do some, as you say, wartime kind of thinking to dramatically  upsize the capacity for building. More natural gas, fire power plants quickly,  and I'm trying to figure out what the investment play is in order to get on top of  that one. 

Alex: Yeah, definitely that would be an interesting play. But under this thesis,  anything related to energy build up where the nuclear natural gas could be a  good play because both of them could work out because as a, you could argue  that if energy demand will grow as far and as rapidly as we think. Any marginal  energy will be good. Any sort marginal source of energy, any incremental  energy will go up in price. That could be one argument, but another argument  would be that certain energy sources will just go outta style and nobody will pay  attention to them. That those are the two arguments I'm torn between. 

But definitely energy is an interesting sector and whatever happens in energies I  wanna reiterate, I do think that will be the bottleneck.  

Erik: Let's move on to another sector, which boy is really getting your attention  if you are long, precious metals. We've just seen a whipsaw in the precious  metals market as well. 

It's a whipsaw in gold. It's more knocked out and down for the count in silver  and bitcoin. What's going on with precious metals? Why, a lot of people are,  were saying that it was caused by Kevin Walsh's nomination. I don't believe  that. I think it may have been a catalyst to bring about a, an overdue correction. 

But what do you think happens next here for precious metals and what caused,  what just happened?  

Alex: Yeah, first talking about the nomination to me. It is more likely as what  you're saying, and that's what I wrote in my recent investor letter, that if you  notice, the nomination didn't really impact the dollar or the interest rates that  much. 

Everything moved just a tiny bit, but there was no real big repricing. So clearly  precious metals were reprised because there was some vulnerability there and  it's unsurprising given, like how huge and relentless was the rally in, for 

example, silver that probably some people are very long silver and then they  had probably some trailing stops and, which as people often do, when you have  a market on which you have huge gains, you don't wanna quite give them up. 

So you put a trailing stop, right? But then when as trailing stops starting getting  taken out, suddenly markets starts gapping down and it has to clear at the level,  which is more like. Close to the long term trend. I do not honestly know if that  signifies the end of the precious metal cycle. 

It's hard for me to say because silver ran for, I was constructive on silver for  very long period of time, but it ran much further than my price targets. It  reached my price targets in 2025 and went past them and went further and  further. Like I did think that silver would get to 50-60 I didn't really have. 115  penciled in for January, 2026. 

Not that I said it couldn't go there, but my conservative price targets were lower.  To me the most interesting about precious metals is they have very long, multi year cycles and they're not simultaneous. There is gold wind. Much earlier than  silver. 

And while gold was making new highs recently, it definitely slowed down  compared to silver. And silver was dormant forever, and then silver took off and  overtook gold. If you look at gold silver ratio, it went from extremely high to  actually to the lower end of the range in January. Now Platinum was sitting  dormant for even longer. 

Platinum was basically sitting at $900,000 forever, and then it took off in 2025  and started trying to race to catch up to silver, but it's still way behind now.  They all corrected, but to me gold seems to be a flatlining. Silver is trying to  decide. Platinum I think is still early in its cycle. Of course we can also go to  Palladium, which I'm working, watching currently slightly less, but also  interesting metal. 

And it has to do like platinum palladium ratios have to do with, of course EV  adoption and like the industrial use. But platinum has pretty solid underlying  other, some store of value demand, some jewelry demand. So there are, it  cannot be just attributed all to. Automobile industry usage. So I think it's very  hard to pinpoint what moves precious metals on a given day. 

It's easier to just look at the charts and see what are the price ranges for them.  And to me, if you look at historical range, I see silver might have done the full 

cycle. Gold has gone further than one would've expected, and platinum has not  yet gone very far.  

Erik: Alex, let's move on to Japan and the Japanese Yen. What's your take of  what's going on there?  

Alex: There has been, like, if you really think about global macro markets, the  moves in Japan are probably away from the volatility and precious metals.  Japan had probably the most movement, the most interesting movement, and the  interest rates. Rose dramatically in Japan with curve Steepening. 

Who would've thought that like some bonds yield in Japan will touch 4%? I  think like a few years ago it would be completely unthinkable and yen in Japan  actually running persistent inflation and yen significantly weakening. Against  dollar and even more so against other low yielding currencies you could look  like, for example, Yen weakening significantly against China, against Swiss  Franc is probably the most dramatic currency pair. 

That trend has been relentless and it seemed like every single thing that  happened in Japan on the political front reiterated this trend, like the elections,  the new election. Iteration of the power of the current ruling party. All of this is  like more spending weak again, strongest stock market higher interest rates. 

That seems to be the theme. I do think that we could be at an inflection point of  this theme because now I think all of this is priced in and also all of this is  priced in. And also besides. The story, there's also location. We're seeing very  high interest rates in Japan and extremely weak currency. 

Typically, we develop market currencies. There is some sort of pendulum that  eventually slows down and starts swinging in that direction. And one of the  things I started to think of about, and particularly recently is, okay, we got  strong stock market, very pro growth policy. We have high bond deals, why  wouldn't people wanna invest in Japan right now? 

And if people wanna invest in Japan. Either by repatriating money to jbs or to  foreign foreigners buying JGBs or people trying to still get a piece of Nikkei, as  it keeps rallying and Japanese stock market or investment, why wouldn't that  eventually lead to stronger yen? And just over the last couple of days, that  sentiment seems to have shifted in that direction. 

I still don't know if it's a long term Tectonic shift, just a blip compared to the  overall trend. But that is something for me, interesting to look at. And what is 

interesting for me is that in my first book, the next Perfect Trade I talked about,  certain perfect scenarios that occur sometimes. And one of the great trades of  the past was in 2014 to be long dollar when dollar was very weak and long US  bond market when the shortterm interest rates were low. But the curve is very  steep and we have the setup in Japan right now. We're having very steep yield  curve and very steep yield curve. Still low. Very low real rates because of  inflation. 

Very low nominal rates in front, steep yield curve, and very weak currency. And  we have the situation that if BOJ is not going to tighten you just make money on  the roll down of the long end of the curve. But if BOJ continues to tighten,  eventually it'll strengthen the currency and the long end of the curve will  probably be fine anyway because the curve will just flatten.. 

So I'm seeing that. Seeds of the really positive situation to long currency.  Maybe you should belong everything stock market there too, but I'm a little  more ambiguous on stock market, but long currency and bonds in Japan.  

Erik: Alex, you just mentioned your first book written in 2015, the Next Perfect  Trade. 

I wanna come back to that. That book got a lot of attention when it was first  published. You talked about being a macro trader and really broke down what  you did and how your process works, looking for dislocations in markets. Then  in 2022, you wrote another book called The Trades of March, which was all  about the COVID pandemic and the trades that you had to make in March of  2020, and what that process was like. 

You've got a new book out. You've gone back to the original title, which is, it's  not the same book. It's a new version of the Next Perfect Trade. Why now for a  sequel to your first book and what's it about?  

Alex: I wanna go back to what always bothered me about strategy books. It's  them survivorship bias. 

So when I wrote the book in 2015, which came out, I was writing it 2014-2015  It's was a strategy book it is a set of strategy principles, how I choose trades,  which are more likely to make money in the long run, how to make myself be a  casino rather than a gambler. Basically turn the how to gain the edge in the  market, in my favor in the markets, regardless of whether my economic views  are correct or wrong. So I was trying to focus on how not to figure out the  economic outcomes, but how to structure.

We need trades which bring you positive expectations. So that was what my  book was about, but by definition, this book arose from the fact that I had some  success trading up to that point. And people who don't make any money,  generally, it's much harder to get your people to read your book. So but it had an  element of looking back and just saying that worked for me and hence I'm  proposing it. 

So the question would have to remain with the readers. Whether the principles I  laid out in this book would continue to work going forward. Do they actually.  Have value or is it just a coincidence that those principles worked prior to the  time the book was published? 

Now, in, in when I wrote the trades of March about COVID trading, I refer to  my first book a lot and like how the principles lined up, they popped up, but it  was not in a systematic way obviously a very unusual enviroment and  navigating those highly unusual situation, and I did talk about how I drew from  the experience of previous crisis such as September 11th or global financial  crisis, what I've learned and the mistakes I made back then and how I was, what  things I was able to do better in 2020 and what things came up again. But that  was more of a feel of a trading diary. 

Now I went back and wanted to do a second edition of my first book. Because I  wanted people to really be able to judge objectively how my principles did  actually work out, and also I wanted to be judged whether I'm occurring to  them, myself or not. That's one of the reason, going back to the trades of March. 

That's one of the reason the trades of March that published our internal trade  chatter without reductions so people could see all our screw ups, all our  successful, so people could really be in a cockpit with us and see the process.  What I'm doing here, I wanna put more like intellectual cockpit and say, okay,  this is my text on 2015. 

This is what I said in thousand 15. And then I added notes from 2025. Saying  this did indeed work out correctly here I was wrong. Or this principle, I've  actually succeeded in applying in such and such situation. And this principle I  failed to apply. And those are mistakes I actually made even. 

According to my own strategy, which is probably the worst kind of mistake, the  worst kind of mistakes, which you laid out your own strategic principles and  then ended up not having the discipline to follow them. And I'm totally open  about the fact, and I think really every trader has to be open about the fact that it  does happen to all of us.

We all have our vulnerabilities, our moments of. Either stubbornness or  confirmation bias or laziness or procrastination or fear or whatever it is that led  us or succumb being succumbing to external pressure, which leads us to deviate  from what we think is the absolute best we can do. All we can strive is to be the  closest we can to the best we can do, but none of us can do it perfectly. 

And I'm trying to really delineate in this book where and how you can notice  both the successes and the flaws of my thinking of 2015. The ideas were quite  current I believe that artificial intelligence will step in to augment everything we  do. But what I said back then that there was a certain horizon, in my opinion,  left for discretionary trading. If anything, I think the horizon shot on the bit  because artificial intelligence grew even a little faster. 

Then I expected, even though I was always optimistic on artificial intelligence,  but it went unscheduled and I'm giving this as an example to trace my thinking,  was my thinking aligned with what happened afterwards, and was my trading  aligned with my thinking? 

Those are two separate questions, but both of them are important.  

Erik: Alex, I really wanna salute you for the honesty that you show and the  approach that you take of highlighting your own mistakes. As you say we all  make them. There's nobody who's exempt from that. What's quite unusual  though, is Wall Street guys admitting their mistakes publicly. 

So many people in this industry, just to highlight, look at what I did here. I  made this incredible winning trade. Hooray for me, without acknowledging that,  their actual long-term trading record is not nearly so good. So I really applaud  you for. Are, taking this open book approach to doing things for people who are  fascinated with this. 

Help us understand, though, because this new book is really a rewrite or a new  version of the original next perfect trade. Does it make any sense at this point to  read the first one? Should people start by reading the new edition of the Next  Perfect Trade and then maybe the trades of March? Is there any reason at this  point to, to read the 2015 book? 

Alex: No, I think people should read the current book because all the material  which was in the first book is still there. In fact, I mostly kept the wording of  the first book, even though I could have edited it more because I wanted people  to read what I wrote back then and what I wanted to be very exact about.

This is what I was thinking back then. And then I have a note. This is what  happened Now. So I take everything, all the content, everything you can get  from the first edition, you can have in the second edition. So now it's the second  edition of this book that is for sale on Amazon and that's what, or in other  venues, and that's what I encourage people to purchase. But however, if you  read the first book, you can still find a lot of value to in reading the second  edition.  

Erik: And the second edition is very reasonably priced at only 10 bucks on  Kindle right now. I assume that's an introductory price. It looks like the the  normal price is 32 bucks and it's 10 bucks right now. 

How long does that last?  

Alex: I think Kindle will be there for a little bit. It's $32, I think it's for hard  covers. So there is like a hard car or paperback, Kindle versions. There will be  Amazon. You know, I cannot really control honestly the prices. So that Amazon  does always, because Amazon does its own things. Yeah, just I incur, I'm just  asking people to give it a shot. 

And if you read it please leave reviews on Amazon. It's very helpful and also  generally helps me to know what people think about it.  

Erik: And of course Alex, when you're not writing books, you also run a very  successful hedge fund for our accredited investor audience that's able to invest  in hedge funds than our institutions. 

How do they get a tear sheet and more information about your fund?  

Alex: People who wanna find out more, either about my fund or about any  other. Any of my writing or publicly available information should go to my  website, Honteinv.com It's HONTE INV .Com. And there will be like a publicly  accessed areas with various articles and books are published and everything like  that. 

And also for qualified purchases they could apply to get kind of Insight and  discuss investments, but that's not something that is open to general public.  

Erik: Alex, I can't thank you enough for a terrific interview. Patrick Ceresna and I will be back as Macro Voices continues right here macrovoices.com.

Erik: Joining me now is Uranium Insider, founder and newsletter editor Justin  Huhn. Justin, great to have you back on the show. I can't believe it's been a year  since we've had you on, folks. Justin prepared a slide deck to accompany today's  interview. You're definitely gonna wanna download this one. You'll find the  link in your research roundup email. If you don't have a research roundup email,  just go to our homepage, macrovoices.com. Click the red button above Justin's  picture that says, looking for the downloads. 

Justin. Wow. First of all, I want to give you credit just a few weeks ago, this  correction that we saw in uranium stocks. I think you called the bottom of that  exactly to the day in the newsletter. 

And that was a great help to me and your other newsletter subscribers. I wanna  move on though to another call that you've just made in the last few days. You  guys are starting to trim some positions just because, boy, this, as much as I'm  incredibly bullish, we've had such an incredible run the last few weeks. 

I look at the Stochastics now that we're extreme oversold on both the daily and  the weekly charts. Eh, now they're falling into overbought territory. So what do  you think is are you guys trimming just because it's discipline and you've done  

so well? Or is it maybe a turning point where we're about to get a swing trade  lower? 

Justin: It's definitely the former. First of all, happy to be back. Thank you so  much for having me on. Always enjoy speaking with you. I know you guys  have done a lot of work in this space so always enjoy these conversations. Yeah  the space right now has had a stellar start to the year. In fact, the fast four weeks  have basically been straight up for the uranium equities. 

The ETFs are up 30 plus percent to start the year. It's pretty, been a pretty  incredible move. We have as a trading portfolio that we established last year  that did extremely well for us last year. In fact we established it in February of  2025, and it's up over a hundred percent since inception, and that involves  swing trading, a basket of highly liquid stocks in the space. 

So for us, this is more of a chart and interpretation as well as some influence  from either the physical market and or sentiment. So sentiment is definitely  heating up here. That's one sign. But the physical market is chugging along. We  just had the UXC print today over $91 a pound up from the low eighties to start  the year.

So it's been a solid move so far in physical, we think that move has plenty of  legs. So as far as trimming positions, that primarily is the swing trading  portfolio for the most part. We do have a bit of cash in both portfolios, but we're  very net long here and expecting further moves. So not expecting a big trough,  the broad market is not necessarily my forte, but if that, loses some momentum,  we could definitely see some downside here for the equities. 

But for now it's looking very strong. And Sprott here has a war chest. They're  gonna end the day with over 200 million in cash and that's a lot of money to buy  physical uranium. And luckily they're not the only players in the spot market  right now, but we can dive deeper into that if you want. 

Erik: Yeah, let's go a little deeper on that subject because SPUT, this sprott  physical uranium trust. I think most investors don't understand how pivotal of a  role it plays when SPUT is trading at a discount to NAV. It does not have the  ability, somebody buying some more SPUT is not. Like buying uranium in the  market and taking any supply, off the market. 

But when SPUT trades at a premium to NAV like it is right now, every, share  that somebody buys where this trust itself can issue a new share and raise cash,  that's cash that you would think is immediately in the most immediate sense. In  the moment that you buy that share. 

You would think that's buying uranium on the spot market, but that's not really  how it works. There's a lag effect there. SPUT built up a war chest, as you said.  Why are they doing that and what happens and when will it happen that they  start to put that money to work? Because for, for the longest time everybody  was saying SPUT's not raising money. 

That's the reason we're not really seeing the spot price moving. Now we are  seeing the spot price, moving SPUT is raising money, but they're not putting the  money to work. How come.  

Justin: So they bought, the monthly average of the prior negotiated limitation  of annual purchasing of 9 million pounds in January, already 750,000 pounds. 

And in our estimation, they were doing this because they needed to do a couple  of things before they could come back in and raise a lot more money or buy a  lot more pounds, which is reestablish their ATM and renegotiate the, not only  the shelf prospectus and file the shelf prospectus, which they did for 2 billion.

And their ATM now has a fresh 1 billion, but also renegotiate that annual  limitation with the Ontario Securities Commission, which I believe they are in  process of doing right now or if not in, in the coming weeks. Either way, they  are back in the market doing some purchasing today, but leading up to filing  that new prospectus. 

Negotiating with the OSC, it seemed like they were treading lightly, so they  weren't issuing as much as many units as they normally would when trading at a  premium. And as mentioned, we've had a very equities risk on environment for  the entire month so far, with the exception of a couple of days. 

And so they just traded at an increasingly large premium to their net asset value.  I think the highest closing nav that they had this month was pushing 9%  premium. So yesterday, once we saw that their ATM had been re-up to a billion,  we saw SPUT trade down pretty heavily, taking it all the way essentially back  down to nav. 

And what that was SPUT actually ising issuing units into the market. They  raised almost 20 million yesterday. As far as we can tell, they've probably raised  north of 50. I think they've raised somewhere between 60 and $70 million today  alone on Tuesday the 27th as we record this. So the war chest is basically a  factor of them not buying uranium because they were treading lightly prior to  negotiating again with the osc. 

So that is all coming to a close and they're gonna be back and it feels to me,  Eric, there's a bit of a Wall Street awareness of some type of kind of uranium  squeeze environment here. In fact, we're seeing multiple elements in the  physical market that are resembling Q3 of 2023, which is essentially, we had a  firmly established trend in the spot price and the sellers started to hold on a bit  more tightly to their pounds. 

And we started to see that, that dynamic over the past, let's say week or so.  Wasn't there to end the year, not in the beginning of the month, but it's not just  spud in there buying, we see traders in there as well. Other financials, hedge  funds and banks are in there as well, and utilities also. 

Some of the utilities are chasing the spot price here, and there's decent activity  in the term market, so all signs are pointing to further tightness in the physical  market and higher prices. 

Erik: So just to recap all of that, the story of the last quarter of 2025 was  basically, look the fundamentals are really terrific for the uranium market, but  unfortunately the spot price just isn't moving for some reason. 

And until it does, this thing can't really be unleashed. Then you get all of a  sudden SPUT raising all this money. They've got the cash to buy a much more  uranium, they're not allowed to do it because their agreement with the OSC  limits the amount that they can buy. As a result, they're getting all of this cash  built up, and despite the fact that they're not allowed to put that cash to work in  the spot market, we're still up 30% on the year in January is not over yet. 

So when they hopefully negotiate with the OSC and are allowed to invest the  money that they're sitting on, the cash that they're sitting on it potentially is a  big pushup on prices. Now, what I want to come to next, because I think it's  really important for investors to think about is a lot of people have been saying,  look. 

If you look at the charts as much as the the uranium miners have done  fabulously well, that seems to be a lot of speculation. The spot price of uranium  wasn't really doing so well, and therefore, the smart money ought to not be  buying any more uranium stocks. We ought to be buying SPUT and other  proxies for direct investment. 

In not uranium miners, but uranium itself because it's the commodity as  opposed to the stocks that hasn't moved yet. So you really ought to be doing a  sector rotation, if you will, out of the uranium miners into Spot and other  proxies for uranium itself like YCA and the other tickers that are just uranium. 

Now that's a pretty popular view. I don't agree with it. Justin, what I think is  going on is the commodity market has to balance itself in real time. The stock  market is forward looking. The stock market saw this coming. That's the reason  you saw such a big appreciation in the miners, and I think the miners have been  at a point where they can't get too far ahead of SPUT. 

Is SPUT finally takes off. I think the miners are set to explode higher. Which of  those views is right? 'cause there, it really affects where you're gonna put your  money in this sector.  

Justin: I think that the, an investment in SPUT or physical uranium, let's say  here, a proxy for physical uranium is a very strong risk reward proposition.

The downside for the spot uranium market here is relatively minimal. Of course,  you can have markets go risk off and SPUT can technically trade at a much  larger discount to n as it has a few times in the past, pushing a 15, 16, 17%  discount. I would argue the downside for spot here is, 15 to 20% maybe in a risk  off environment. 

But spot price is highly unlikely, at least right now, to be moving down at all,  let alone, a five or $10 move down. Now we will see this move up eventually  peak and eventually pull back probably to a higher low. The low of last year  was in the low sixties. Then we had a floor move up into the seventies, and I  would argue the floor now is probably in the mid to high eighties as we're  trading 91 here. 

So the confidence in SPUT moving higher is very high. And so your risk reward  for spot is extremely attractive. Your downside might be 10, 15, 20%  maximum, and the upside here could potentially be a hundred percent, maybe  even more if things get really wild. So it's a very, it's a much safer investment. 

It's very liquid. So for large institutions that don't want to take on individual  mining, stock risk buying SPUT is a no-brainer. With that said, I agree with  you. I think that Q4, Q3, late Q3 into Q4 of last year was the equities market for  the Iranian mining stock. Looking over the valley and expecting the prices to  eventually move and that was a pretty consensus type thought back then and  still is. 

We had the term market start to move up after 15 months of consolidation. We  had the spot market slowly start to mo move up. Like I said, we saw the floors  move from the sixties into the seventies. Over just a few short months, we were  seeing evidence that utilities were starting to step back into the term market. 

And in particular last summer, we saw large, very large utilities placing very  small RFPs into the term market, seemingly dipping their toe in the water,  testing the market to see where, what sort of responses they would get. And all  of that tightening has, one obvious conclusion, which is a move up in price. 

So are the equities technically overbought? If you're looking at unbiased view of  the charts? Yeah, sure they are. But what is the backdrop? How do you value a  company like NextGen, like Denison Mines these emerging producers. If you  price in $120 uranium, instead of going back to their feasibility studies pricing  in 50 or 60 uranium, it's a very different environment.

So I agree with you. I think the equities are looking over the valley expecting  this price move that we're currently in. I would argue the early stages of. I  would say yes, and I own both. I think it's a, if you're gonna buy uranium  stocks, that's best to, diversify. I think that just the classic investment capital  preservation tactics are, you shouldn't spare those. 

If you're investing in uranium, definitely be diversified and don't go all in on  one mining stock 'cause it's still mining and crazy stuff happens in mining. You  can have permitting risk, you can have all sorts of things, accidents, Etc, Etc. So  diversified basket of miners plus a reasonable holding in a Sprott, physically  random trust or yellow cake, I think is really the way to go to allocate long hair. 

Erik: Let's look at some of the charts in your slide deck, which is excellent. On  the first page, you're talking about nuclear growth projections, and I think this is  really important to get into because as much as you and I are both extremely  bullish on this sector I think it's the trade of the decade, if if not longer than a  decade. 

But look, our job as professional investors is to take the contrarian side and say,  how could we be getting this wrong? It seems to me like the growth projections  for nuclear. We have to ask ourselves, okay, what could turn this trend around?  Because as your chart on page one shows, it's just. 

Crazy high projections in terms of what's likely to happen, especially if the  Trump administration continues to get its way and is able to promote the  nuclear Renaissance as much as Secretary Chris Wright has been seems to me  like we do have a political risk here in the sense that President Trump fronts that  are completely unrelated to energy is maybe starting to not have as much  unified support in the Republican party for all of his policies. 

Do we have a risk that maybe the Trump administration won't be able to pump  this as hard as they have been, and we're going to have some of these  projections come back down?  

Justin: The good thing with Trump's proclamations in this particular case is that  this is something that the industry actually wants. 

So you're seeing utility interest in building new nuclear. You're obviously  seeing the Trump admin highlight the absolute imperative to increase electricity  generation capacity domestically. Not only just the growth of AI and data  centers, Etc, but just the growth of electrification and demand for electricity.

Even X data centers is set to grow significantly. So they see the problem, they're  trying to invest in it, they're trying to do what they can to support it. But you  also have the tech companies and the tech companies have extremely deep  pockets, arguably almost as deep as the government itself. 

And they're investing directly in nuclear. And there's a further slide on this as  well, a slide number three if you wanna jump to that. A tech company  investment is huge. We're seeing meta Oracle, Amazon Microsoft, all invest  billions and billions of dollars either with power purchase off takes from nuclear  utilities that are currently operating or restarting island reactors like  constellations deal with Microsoft to restart three Mile Island. 

And we're actually seeing big tech companies make direct offtake deals like one  Amazon made a deal with Rio Tinto for copper supply. And I highlight this  question here, just throwing it out there, but it really is more of a tongue in  cheek statement is, will big tech companies secure fuel for their nuclear  investments? 

I think that they will, I think that's an extreme right tail. Driver and potential  catalyst for this investment for the price of uranium is to actually have a tech  company make some sort of deal with a producer or an emerging producer to  

secure pounds as an offtake for future production of uranium, an eventual fuel  for these reactors that they're either funding to life extend or funding to build. 

So how many reactors will we see the United States build in terms of new  capacity is difficult to say. It's obvious. Been a, obviously been a challenge for  many decades. Clearly there's support not only from the federal government, but  from all the entities I already mentioned. So I think if it's going to happen, it's  probably going to happen now and soon. 

Will they be able to have 10 large AP 1000 reactors under construction by  2030? I think so, but it remains to be seen. And this graphic, of course, goes out  all the way to 2050. That on page one here, and the big red bar is government  targets. So anytime you're modeling that far out, you have to make a bunch of  plugs and a bunch of assumptions. 

But the, which, the World Nuclear Association, arguably, a pro-nuclear, but an  unbiased analyst in terms of uranium demand, like they don't necessarily want  to see more uranium demand or whatever you might say on that front, but  they're taking all of the government targets and factoring those into this  extremely bullish graphic.

But if you even go over to 2035, so a 10 year picture. There's barely any plugs  for those government targets on that 10 year timeframe. And in our own  models, Eric, just looking at what's currently operating, what is likely to be life  extended or already officially approved for life extension and what's currently  under construction and expected to hit the grid over that timeframe. 

That's the demand We actually model out for out to 2035 with very few plugs  besides China continuing on the pace they're currently at now. That's how we  model it. That's what we see for demand. Obviously the WNA even going way  out like this is a, this is more than a three X in global nuclear capacity by 2050,  will we hit those targets? 

It's hard to say, in my estimation, it doesn't actually matter for the length of time  for this investment thesis, in my opinion, but. Clearly there's an enormous  amount of momentum, not only in the United States, but on many other  sovereigns that are looking to build nuclear here  

Erik: On this theme of tech companies. I want to touch again, on another  potentially bearish risk factor, and again I couldn't be more bullish on this  sector, but if I think about what could go wrong, one of the things that could go  wrong is Russia has a very large percentage of the enrichment capacity. So even  if we can mine all the uranium that we need, and we can't, but the uranium  bullish thesis is based on the idea of growing. 

Demand not for raw uranium, although it can be raw, uranium can be used in  just a few reactor types. Most of them require enriched uranium and we're very  dependent on foreign sources, particularly Russia, for that enrichment capacity.  It seems to me that if the tech boys could figure out how to help, let's say,  improve the pace at which something like laser enrichment is being adopted. 

By improving that technology, it could take a risk factor out of the market and it  could accelerate demand dramatically. Because if I look at what the demand for  the next 25 years for uranium is gonna be, it seems to me like, there's no  question in my mind that there's gonna be more demand than we could possibly  build mines for. 

If we can figure out how to refine and enrich it, and it's that enrichment capacity  that I'm not so sure about. What do you think in terms of maybe the tech players  getting more involved in enrichment or investing directly in enrichment?  

Justin: I think it's definitely possible. With that said, we're seeing a lot of  investment at least domestically here, coming from the US federal government.

We just saw three $900 million awards to general matter centris and Orano  which is ironically a French company that wants to build enrichment capacity  here in the us. And a smaller award for global laser enrichment. It's certainly  possible. I'm honestly expecting the tech companies to get more involved in  direct investment in the fuel cycle now that they're putting billions and billions  of dollars down to build out the actual new nuclear capacity for the data centers.  So that has yet to really hit, we have heard kind of whispers over the past year  that the tech companies have been poking around the fuel cycle and now seeing  this direct offtake investment by Amazon with Rio Tinto for copper offtake. 

I don't think it's a wild estimation to believe that this is going to continue to  happen on the uranium front. But yeah, the enrichment capacity I think is an  interesting one. We're definitely seeing some being built out in China. Russia  still has the largest capacity. The French are building some, there's a bit more  being built out in the United States. 

Will it keep pace with the existing demand in the market? It seems to be, will it  be sufficient for these lofty projections like that graphic on page one of the slide  deck? No. So if we're going to meet those needs, we're gonna have to see much,  much more capacity of both conversion and enrichment built out. 

Assuming that this build out is largely light water, boiling water or advanced  reactor designs and not heavy water, which so far it has been not a whole lot of  heavy water being built besides in India. And those are smaller reactors, much  smaller capacity. So a lot more of the fuel services fabrication, enrichment  conversion is going to be needed to meet these targets. 

Again, these targets are also based on a lot of the reactors that haven't started  construction yet either. So we hypothetically need that capacity right now based  on what's under construction. It does appear that we see growth of enrichment  capacity relatively in line with the growth of nuclear capacity. 

Erik: Ultimately what really matters the most is whether the buyers are buying  and whether the sellers have enough to meet the amount they wanna buy. Let's  move on to page four. Talk to me about what the history of this market has been  and how it's evolving in terms of the attitude of fuel buyers. 

Because it seems like for a while, the last couple of years, we just had this buyer  strike where the buyers were convinced that increasing uranium prices were just  a blip, that the prices were gonna go back down, and they seemed to be waiting  it out. Is that changing finally? 

Justin: It does seem to be changing. 

It's very difficult for the investor mindset to, to fully comprehend how utility  fuel buyers generally operate and think about this market. You have fuel buyers  that in many cases have been working in this industry, sometimes for the same  utility, for multiple decades. And the history of this market is very different  from the present reality of this market. 

So if you go back, go back into the nineties and the two thousands following a  huge price spike in the seventies where you had a, just a gigantic nuclear build  out. You had 40 or 50 reactor construction starts per year in the mid seventies. It  was a huge build out and in a massive mine supply. 

But you had utilities clamoring for uranium, you had the US buying uranium,  you had the Russian buying uranium. It was crazy. Just an absolute huge price  spike in the seventies with the oil crisis. Then you had the price crash because  

we had so much secondary supply. So starting in 1993, we had a, the Megatons  of Megawatts program with 20 million pounds of Russian down blended high,  enrich uranium into fabricated fuel that was sent over to the United States fleet,  20 million pounds a year for 20 years. 

So the history of this market is big fluctuations in price, but most of the time,  with the exception of a few spikes, one in the seventies, one from oh four to oh  seven, and one theoretically potentially happening now, although I wouldn't  argue that this is a temporary spike being driven by either some, exogenous  event or financialization. 

I think the financialization is influencing things here, but I just think SPUT is  buying the marginal pound. We're seeing a hundred thousand pounds, 200,000  pounds move price. It shouldn't be happening if it wasn't such a tight market,  but the fuel buyer is looking back and saying, okay, forever there's been all of  the uranium I need at a relatively reasonable price. 

With very few exceptions. And their view of 2004 to 2007 was a massive  commodities run. The Chinese did a decent amount of buying for a couple of  years there we had some mine floods and we had Uranium Participation  Corporation, which became SPUT in 2021, buying uranium along with some  hedge funds. 

It was a temporary spike, came right back down after the GFC, but it started to  grind higher again because the fundamental drivers were there. So that was a  contracting cycle going back, and you can see in the graphic page four, that we 

had greater than replacement rates. So replacement rate essentially is how much  uranium is being burned up in the nuclear fleet on globally on an annual basis. 

So going back to 2005, we had 250 million pounds contracted, but we probably  had about 170 million pounds burned up in the reactor fleet. So greater than  replacement rate contracting, big volumes. And that really led to that big move  in price. Following that, following Fukushima, Japan shut off all the reactors. 

Germany started shutting them off. A few other countries had phase out plans  like Belgium and Taiwan. And you had an abundant amount of uranium that  was just hundreds of millions of pounds of oversupply. Liquid mobile inventory  globally. The price crashed and utilities did not need to contract. 

So this is long-term contracting. This is a, these bars here are utilities calling up  Cameco, Kazatomprom, Uranium One, Orano and saying, I want a contract for  a few million pounds a year, delivered out for a five year period, whatever it  might be. They didn't need to do that because there was so much uranium  floating around the spot market. 

They engaged in in hundreds and hundreds of carry trades and not thousands  where utilities engage with a trader and say, I want a couple million pounds  delivered, let's say 2, 3, 4 years out. They're usually more midterm, usually  slightly smaller volume, and the trader goes and buys that material in the spot  market. 

The carry trade went a long way to cleaning up that mobile inventory. Those  mobile inventories are largely gone. In fact, UXC, which is the primary nuclear  fuel consultant in the space. Has essentially was warning, let's see, this was  August of 23, so two and a half years ago, they were warning that the age of  inventory overhang is over. 

The buffer is largely gone. So fuel buyers here are starting to see that liquidity  in the market has largely dried up. You can still buy in small volumes in the  spot market or the carry trade if the math is right, based on the forward curve.  But their options are running out in terms of what else can they do besides  stepping up and signing large long-term contracts with the primary producers,  which is what they're starting to do. 

So we saw 71 million pounds added to the long-term tally in Q4 of 2025 alone.  A lot of tenders came into the market. A couple of large contracts were signed.  And so how much can be bought in the spot market and carry trade? That 

number is diminishing. Secondary supplies are diminishing. Inventories are  diminishing. 

They can only flex up on contracts so much. So the flex provisions that were in  these contracts that signed back in late 20 teens, early two thousands that are  still being delivered on now, those flex provisions were for contracts that were  majority, if not entirely base escalated or fixed price contracts. 

So if you signed a contract in 2020 for 80% fixed price and 20% market  referenced at the time of delivery, and that fixed price was $40 a pound, and  you're taking delivery now, you flex up, whatever's allowed in the contract,  20%, 30% flex provision, sometimes volume. Now that we're shifting to mostly,  if not entirely market reference contracts, those flex provisions start to look less  attractive because you end up paying the same amount as the market reference  delivery for the added pounds. 

So not only are there fewer flex provisions in the contracts signed last year or  the year before this year and moving forward, but the types of contracts have  shifted. So all of the signs are there that we're shifting from a buyer's market to  a seller's market. And this is a really difficult position for a fuel buyer right  now. 

I'll give you one example just to finish off this thought. These fuel buyers and  these utilities are signing other fuel buyers. The utilities are signing power  purchase agreement off takes with electricity consumers. And oftentimes these  are long-term agreements, 10 year agreements that basically fixed prices with,  inflation adjustments so they know what they're going to be earning on the  electricity side of things, right? 

With these agreements. Then they go and they call up Cameco, whoever it  might be, and say, I need to buy uranium to, to feed into this, right? So Cameco  says, okay, we're here at $91 spot. We'll sign a contract at $85 floor, 150, $160  ceilings reference to the market at the time of delivery. We're talking 50, 60,  $70 spread between the floors and the ceilings. 

It's very difficult for utility to know what they're going to be bringing in on the  revenue side of things to not know what they're going to be paying on the fuel  side of things. Really what it comes down to is they don't really have a choice  and they're going to have to pay that. And they're starting to come to, let's say,  an acceptance.

They've moved past the denial stage. Now they're moving into that acceptance  stage and signing these larger, higher price contracts that are largely referenced  to the market at the time of delivery. And why are they referenced to the market  at the time of delivery? Because producers want exposure to higher pricing  environment, which they're all very confidently betting on. 

And that really should tell you more than my pontifications, more than anyone  else who's analyzing this market. What are the sellers asking for and what are  they getting in their contracts? If you want stability in an uncertain market,  you're going to sign fixed price contracts. 

If you want exposure to what you are highly confident, it's going to pan out.  You want reference to the market with ceilings that are sometimes close to a  hundred percent higher than where we are here. So that's what we're looking at.  Utilities are slowly coming around. Fuel buyers, from what I'm hearing that  have been multiple fuel buyers for large utilities that have been largely reliant  on the spot market and carry trade for literally decades are shifting their strategy  and focusing on security of supply rather than pulling every lever they possibly  can to get a little bit here, a little bit there, as cheap as they can. 

That strategy is shifting and that's important as we go forward for term market  volumes. Term market pricing, ultimately spot pricing.  

Erik: I would think that the seller's confidence has also got to be increasing  with just the mechanics of what we're seeing in SPUT right now. Because if  you're Cameco and you're asking for those really high, a floor that's just barely  below the market, a ceiling that's way above the market. 

And the guy on the other side of the table is saying, don't pull this crap on us or  else we're gonna pull a buyer strike. You can just say, no, you're not SPUT is  just awaiting regulatory approval to unleash a huge amount of cash that they're  sitting on, 

which will easily support the spot market as long as we need to. You guys are  not in a position to negotiate anything shut up and sign. It seems like all of the  sudden Cameco and the other big uranium suppliers can engage in I'll go out in  a limb here and say, Trump style negotiating tactics of you don't have a choice. 

You're gonna do what we tell you to do.  

Justin: Sure, yeah. The confidence in where this market is headed is very high  amongst producers. And I think that the financialization of the sector is 

certainly supporting what the producers are wanting. To your point and like I  said, SPUT being able to buy a hundred thousand pounds here, 200,000  thousands pounds there in a highly liquid market, that shouldn't really matter,  but it's that marginal pound is moving the price here. 

And that, that alone is as evidence of how tight the market is. And, there's  always some production coming into the spot market. It's not the static bucket  that once it's gone. It's just a settlement. It's a, it's a surplus settlement market.  But for the producers seeing the SPUT activity. 

Seeing the pressure on the spot market is certainly something that, that supports  them wanting market referenced contracts that they're signing with utilities here.  And like I said, seeing how high these ceilings are going, that actually is  literally telling you where they expect the price to go and who's done more work  on the sector than the actual producers, especially the big producers that are  having to sign these binding contracts for delivery 3, 4, 5, 6, 7, sometimes 10  years out. 

This is very important to their shareholders, very important to their bottom line.  And they're seeing shareholder pressure that, that wants them to capture more of  the upside in the future. And you see some of these brownfield restart  companies that sign base escalated contracts at 80 bucks a pound, were coming  under fire from their shareholders. 

Stop giving this away. We know the price is going higher. Hold out and capture  that. And shareholder value is something that I think the utility fuel buyers don't  really give enough attention to. These companies don't exist to break even. And  they all went through hell from, 2008 all the way till, just recently. 

So these companies went through ab absolute hell, shareholders had been  diluted to oblivion in the 20 teens. Finally, the market is returning to bring some  value to the actual producers and they're going to be beholden to their  shareholders. And the shareholders want exposure to these rising prices. 

And that's something that utilities definitely have to understand going forward.  

Erik: Something he said earlier, Justin, was that the alignment of the industry  with government policy meant that, you're not getting a lot of pushback. One  place, I think there might be some pushback if we move on to page five, is the  talk of a strategic uranium reserve.

Intuitively you'd think the industry would be all for that. From what I hear, the  utilities don't want there to be a strategic uranium reserve. What's that about?  

Justin: It's just about the government being, potentially a price insensitive  buyer and adding pressure to an already tight market. 

The utilities are fully aware of the financialization of the sector and that you  have, very aggressive financial entities. And SPUT is just a vehicle. It's really  the investors that are coming into that and providing it with the capital to raise  cash. But you also have hedge funds and banks and plenty of trader  commodities traders that are all positioning net long. 

So the utilities are aware of all of this and they don't see a strategic uranium  reserve being in their best interest. Despite the fact that the spirit of the reserve  potentially would be to hold, a bunch of uranium for harder times in the future  when perhaps that uranium could be sold or distributed to those utilities. 

That's really the spirit of the potential reserve and the existence of the reserve as  it is now with this tiny amount of buying needed a few years back. Our  understanding is that the buying that the SUR did, let's see, I think this was  2022 when they did buy from a couple of US producers that uranium is now in  possession of the DOD. 

That's my understanding. So we believe that the Department of Defense actually  is on the lower side in terms of their inventory, and that's not just for weaponry.  That's of course with the nuclear navy and nuclear aircraft carriers. They're  building multiples of these very large multi-billion dollar ships currently. 

Take a lot of uranium, actually it's very highly enriched uranium that goes into  these subs and these aircraft carriers, and they're fueled once and we're talking  many millions of pounds for a single fueling for one of these ships. So we, we  think that there's pressure coming from that, but yes, of course the utilities have  

a strong lobby and I guarantee you they're doing what they can to put pressure  against this establishment. 

So we're not necessarily betting on it. We're just going off of what we're hearing  for the administration. They did establish, or there's a proposal currently. In  Congress for a two and a half billion dollars stockpile of critical minerals of  which uranium is one. And we hear Christopher Wright mention multiple times  that they're considering a strategic uranium reserve.

So maybe it happens, maybe it doesn't. It obviously would be intelligent for the  security of the nuclear fleet of the United States to do that because the US  utilities typically only hold about two years of inventory. So whether it happens  or not really, not sure, but you're absolutely right, utilities don't want it to  happen and are doing what they can to pressure pressure, interest in the US  government to, to keep that from happening. 

Erik: So the government wants to underwrite free of charge and insurance  policy to protect the nuclear utility industry from hard times by providing a safe  haven resource of available uranium so that those utilities don't have to absorb  the cost of holding those long-term reserves themselves. And the utilities are  objecting to that because it potentially interferes with what the prices are in the  next three months. 

Sounds brilliant to me.  

Justin: Yeah  

Erik: just genius. It's and about and not at all out of character, from what I've  heard from Mike Alkin about these nuclear fuel buyers. It sounds like exactly  their mentality.  

Justin: Yeah, it's and I think the spirit of the reserve really is more of an  acknowledgement of the reliance that 20% of our grid is on foreign entities. 

We're mining a couple million pounds of uranium and consuming 50 highly  reliant on Russia for conversion and enrichment. Highly reliant on Kazakhstan  for uranium, and then secondarily Canada. So it's more of a just wanting to  establish that to support the uranium miners in the United States than it's  necessarily a basket of uranium for utilities. 

But to your point. Utilities. Again, looking at that W&A graphic on page one,  looking at the analysis that we do, that Goldman Sachs has been doing, that a  number of other entities in the space have been doing, showing a clear and  obvious very large growth in demand and struggling supply response. 

On the uranium side of things the utilities and the fuel buyers don't really pay  attention to that. And now that's speaking generally they, there are a few fuel  buyers in the United States that I know of personally that are very ahead of the  curve. Their utilities are very well covered. They've done their own supply and  demand modeling, for example.

So they get it and they're well covered and they know and believe that prices are  coming. Higher prices are incoming for most of the rest of the utilities. They  buy what they need to buy when they need to buy it, and they have to get  approval to do so from their upper management that has a budgeting committee  and their bottom line matters. 

If the US strategic uranium reserve announcement causes a $5 jump in spot, and  then the actual buying causes another few dollars. Jump in spot. That's tens of  millions of dollars to their bottom line that they're looking out for not only on  deliveries, but for their future purchases as well. 

So I understand why they're pressuring, but at the same time, it doesn't really  feel like it's in line with kind of the spirit of what's happening here.  

Erik: Justin, you mentioned some of the international aspects of this. Let's talk  about the other side of slide number five here, where you talk about a huge  amount of demand from China and India for uranium. 

They're engaging with Canada for uranium supply. As soon as I saw that, I  thought, well, wait a minute. Last time anybody tried to sell anything to China  or India, president Trump intervened and said, no, you're not allowed to do that,  or, I'm gonna hit you with tariffs. 

Is there a risk that the US government in for the sake of America first policies,  tries to veto or nix those deals and say, Canada, don't sell your uranium to India  or China. It is only sell it to us. Does that potentially affect the market?  

Justin: It's hard to say really. It's hard to really predict exactly what Trump will  end up doing on this front. 

Obviously he wasn't happy to see that Kearney was meeting with Xi and trying  to establish a critical minerals, deal selling, selling uranium and a number of  other elements to China. I think that he's trying to influence that deal, not  necessarily to make more uranium and other things available to the United  States, but also just to throw his weight around and influence these decisions. 

And I think that there's, a lot of this stuff with Trump and in my personal  opinion, there's just so much more that's going on behind the scenes that, that  any of us have any idea of. So what's really behind this, I have no idea, but we  do know that China is scouring the globe for critical minerals, uranium  included.

China. China as a sovereign, has the largest inventory of uranium by a long  shot. Their numbers are huge, like north of 600 million pounds of uranium. But  importantly, that's total strategic commercial inventory. It's not just utility  inventory. That also includes military inventory. So how much of that is  actually allocated for the, for their new civilian nuclear program is harder to  say, but they also have the more, most aggressive builds, and that uranium is  never leaving the country. 

This is strategic. Once it's on their shores, it doesn't leave. The only exception is  that is sometimes they buy and then resell. So for example, they been buying  Russian enrichment and reselling it into Europe and the United States. Those  volumes are small, but they engage in that type of trading. With all of that said. 

Simply seeing both the Chinese and the Indians. And most importantly to this  point is that they're both sovereigns, right? The Chinese utilities state owned,  the Indian nuclear operators are state owned. They are looking at Canada for  supply, and Canada has been the most reliable supplier to the west by far  because Kazatomprom has been perfectly reliable, but they've had trouble with  their shipping routes when the West is trying to avoid shipments out of Russia. 

And they've had much more business engagement with both the Chinese and the  Russians. So Canada is really our best source of uranium in the western world.  And to see two Eastern sovereigns start to negotiate with Canada and potentially  with Cameco directly especially on the fa on the side of India, should be and is  somewhat of a wake up call to multiple Western utilities that the sovereigns are  stepping up because you have these private or publicly owned utilities that are. 

That are hemming and hawing about large procurements and mu much more  price sensitive. And then you have the eastern sovereigns just stepping up and  I'm your huckleberry and let's get it done. So this is something that I think is  going to be a trend going forward is, we're seeing that general trend anyways,  just globally right now. 

We're going much very quickly away from a multipolar world to more of a  nationalization type of world. And I think that a lot of countries are starting to  look out for number one in a way that we haven't seen in a number of decades  forth turning type stuff. So will we see more sovereigns engage in, america first  type policies for themselves. We've heard the EU talking about having a  strategic nuclear fuel stockpile. I think more of this is coming. And importantly,  Eric, this is all right tail. These strategic stockpiles, this secondary demand is  not something that is very modeled out.

So in our own models, that secondary demand, we have a plug number of 10  million pounds a year. Last year we saw the financials do almost double that  alone. That's not talking utility inventory restocking. That's not talking  sovereign stockpiling, that's just the financials. So that secondary demand is a  very potentially large number. 

I think more of this is coming in the near future.  

Erik: Now we've been talking about western supply. Let's also cover the  Eastern Hemisphere supply. Russia has, as we discussed, most of the  enrichment capacity, but they don't produce a whole lot of uranium in Russia.  It's Kazakhstan. That's the big producer in that part of the world. 

Tell us what's going on here on page six.  

Justin: Yeah, this, I think, is a really interesting element of this market that is,  is emerging. And, the table on the left hand side came from some analysis that  came out from Ocean Hall. So I wanna plug those guys. They did some good  work on this front. 

So Kazakhstan is by far the world's largest producer. They produce about 40%  of the uranium supply on an annual basis right now. And what happens in  Kazakhstan affects this entire market. Now, the graphic on the upper right of  slide number six shows their existing production profile. They expect their  production to peak in the next, two or three or four years. 

And that is based on a very large project, the Budenovskoye project, which is a  joint venture with Russia. So Russia, like you mentioned, has the largest  capacity for both conversion and enrichment and conversion is the process of  turning U308 or mined uranium into a gas uranium, hexa fluoride so that it can  be enriched in a gas centrifuge? 

Despite the fact that Russia has the most capacity for conversion, they net  buyers of UF6, the product of conversion. That's how much demand they have  for their enrichment services globally and how short they are on the uranium  front. So they need uranium and they need it now, and they need it badly. 

So they're putting a lot of pressure on Kazakhstan to develop this large JV. If  you look at the production volume ladder with these new mineral extraction tax  hikes, you know that Budenovskoye project, it's max capacity, a hundred  percent of subsoil use is 6,000 tons a year.

So assuming they reach that, which is possible we model out that they do, but  it's no guarantee that they do, they'll have an 18% tax on that. And look at the  uranium price, we're already above $90 a pound. They could potentially be  paying a 20.5% tax on the uranium coming out of the country. And this of  course, is a move on behalf of Kazakhstan, which is the state is 75% owner of  Kazatomprom and 25% publicly floated on the London Stock Exchange. 

The state is trying to do what they can to establish this taxation and ownership  of the joint ventures as well to maximize what they will be earning and  benefiting out of these limited deposits in the country. Yes, they're very large.  They'll be able to produce for decades going out into the future, but they want to  capture this lightning in a bottle. 

So what this means is that the Budenovskoye project in the second largest is the  Katco JV with the French, who are also very short uranium, and that can  produce potentially up to 4,000 tons. So the two largest projects are gonna be hit  with the largest levels of taxation coming outta Kazakhstan by the two entities  that most need uranium globally. 

The French and the Russians. They need it, and they need it very badly. They're  both very short with pipeline problems for the uranium projects. I don't see this  increase in the MET. In lowering production out of those projects, I see it  affecting price, so they're going to wanna do what they can to ramp those  projects, which means prices have to go higher based on that. 

This is all to say that Kazakhstan is limited and you can see their own  production profile going out into the future. Yes. They don't have years on this  X axis, but this is about a 2050 graphic. So after peaking, you can see it declines  very rapidly. Some of their existing legacy projects are already in decline, many  more hit de sharp decline rates in the next 5, 6, 7 years. 

So they need to invest a lot of money in establishing new deposits, which of  course are less attractive than the deposits they first started to develop back in  the two thousands, 2000 teens. And this all plays into, the, just the looking at  this price graphic at the lower right of this slide is, this is inflation adjusted. 

And so if you look back at the inflation adjusted spike, even the term price went  to 150 inflation adjusted back in 2007. And now we are at $88 term with a  much, much more favorable environment. And all of the elements I've been  discussing today, including these high mineral extraction taxes and the  increasing moves that the country is making to to increase their ownership of  their joint venture projects when they renegotiate the license for the joint 

ventures so that some of these projects, all these JVs that are existing now have  to be negotiate renegotiated over the course of the next 10 years when they are. 

Ownership goes from many cases, 50 50, 49, 51 goes to 90 10 Kazakhstan, and  the new developments for the JVs is automatically 75 25. So Kazakhstan is  starting to take much more seriously the ownership of their mineral wealth, and  that is only going to have a creative pressure on the price.  

Erik: Let's jump ahead to page eight where you talk about secondary  commercial inventories. 

First, let's define that term, what we're talking about, but then explain what this  trend is about, where it seems like everybody had plenty of inventory and all of  a sudden they don't. Why don't they?  

Justin: A lot of that inventory drawdown has simply come from the lack of  procurement in the long-term market and the lack of supply response. 

Erik: Let's just start with a definition of what we mean by secondary  commercial inventory. Who's holding what inventory of what, where?  

Justin: Sure. So this is a little bit tricky because this data and this graphic  comes from UXC and UXC counts inventory drawdown as secondary supply.  They've come under a little bit of criticism for doing that over the years because  they're technically double counting, right? 

That those pounds come out of the ground and year X and that's counted as  supply and then when they're draw down, that's counted as secondary supply.  The reason they do that is because we're not seeing reactors actually not be able  to operate because there is no fuel. So anytime you see the purchasing volumes  on any given year, less than the burnout rate, that gap is quote unquote  inventory drawdown and or secondary supplies. 

So in this case, you see that giant orange bar in 2021 as inventory drawdown or  secondary supply that was largely influenced by SPUT buying, right? We had,  what did they buy? 20 something million pounds in 2021. So they were buying  

excess inventories that were in the market. And so these commercial inventories  is basically just any inventory that's held by any commercial entity. 

And so in 2021, a lot of that came from traders who were holding pounds in  carry, meant to deliver to utilities. The following year, two years, three years  down the road, the spot started buying the spot price spike. These traders sold 

those held pounds to spot and then went back into the midterm market to  procure from a producer. 

So that was this reverse carry trade. And the reason why that inventory that  inventory number and that secondary supply number is so big for 2021, but  secondary supplies, they're always a part of this market. And so you can put  

those in two different buckets. One is actual mobile inventories that are held by  somebody commercially somewhere, and the other is actual supply coming into  the market. 

That's new secondary supply. Now that would primarily come from enrichment  underfeeding or tails reen enrichment. And without getting super geeky with  this is a number that was pushing 25 to 30 million pounds annually just five  years ago. This is probably closer to 10 million pounds a year right now. 

And this is basically when there's excess enrichment capacity. What Enrichers  will do is they'll actually spin those centrifuges down to a lower tails assay than  what was. Dictated in a contract that the utility has to provide to them the feed  stock for that enrichment contract. So they spin to a lower tails, they have a  little bit of extra feed and they under feed the centrifuge and sell that excess  feed stock into the market as UF six. 

That is underfeeding tails. Reen enrichment is actually when there's really a  trough in enrichment demand, they can actually take tails material and spin it  back up to natural UF six and sell that into the market as well. So that is, that  has literally been cut by two thirds over the past five years. 

The other bucket is just these buffer inventories. Utilities hold them. In some  cases sovereigns hold them, and this is just material that's been sitting around  from decade of overproduction in the 20 teens. Now that material is largely  gone. But utilities will always hold some inventory. And the reason they do that  is because the fuel cycle takes so long for uranium to go from mine out of the  ground into fabricated fuel takes at least 18 months and most commonly 24 to  sometimes even 30 months. 

So because it takes so long, utilities will always hold inventory and they usually  hold it across the fuel cycle. So every utility will at least have one extra core  load of fabricated fuel onsite at all times. But they'll also hold some uranium,  some UF six at the conversion facilities. They'll hold some enriched uranium. 

And then, like I said, the fab fuel. So utility inventories are kind of always there  and what you're seeing when this UXC is projecting this out into the future is 

that buffer inventory is gone. So all we really have is a small amount of utility  inventory that can buffer some, some temporary swings in price or some  temporary issues around supply, whatever it might be. 

But it's not this enormous amount of material that's overhanging the market.  And as you see these big numbers, 21, 22, like I mentioned, August 23, the age  of inventory overhang is over. They can see that, and that's why they're  projecting this out into the future. They're just no longer is that buffer and the  conditions are absolutely there for this market to be disrupted. 

I say this all the time, Eric, you don't really have to even know exactly what is  going to be the disruptor. Just that the conditions are there for something to  disrupt this market. And I'm not necessarily betting on disruption, but it's so  obvious to me that something will disrupt this market. We don't know where the  eventual supply is going to come from. 

The balance, the market and the inventory side of things. The secondary supply  side of things are so tight that. A shock to supply, whatever it might be.  Whether that's the announcement of a stockpile from some sovereign, whether  it's one of these large development projects like NextGen's Arrow, the entire  nuclear industry is expecting this to be producing 29 million pounds a year,  starting in 2031. 

That isn't happening. They don't know it yet, but that's not happening. Will it be  producing eventually? Absolutely. How much and how soon is harder to say.  But even by their own timelines, we see 2032 as first production and that would  be ramp up. And the company is already taking advantage of the power of the  narrative here and the power of the story of this deposit because it's so  fundamental to the supply. 

Even approaching anything balanced in the 2030s, which it will maybe barely  do if it comes online on time and on budget, but they're already saying, Hey, we  will be producing according to the market signals. Such a low cost high grade  project, they can cycle that production up and down as they see fit and  essentially control that narrative and they're starting to express that to the  market. 

So it's just very fragile. Something's gonna disrupt it. You don't have to know  what that something is, just that the conditions are there for it to happen.  

Erik: Okay, so to summarize all of that, because I wanna make sure I'm  interpreting this right. If I went back 10 years and I said, oh my gosh, this 

uranium trade's gonna be great because boy, look at the balance of supply and  demand. 

If just one mine went offline, they could unbalance the market and the price  could skyrocket. People in the know would've said sorry, it doesn't work that  way. There's plenty of inventory hanging around. If the price goes up to the  point that incentivizes those people to sell it, they'll sell it. 

There's plenty of buffer to absorb something going wrong. That was how it  worked until last year that it stopped working that way. Now it really is back to  if just one mine went offline, we'd be screwed and it would rocket the price  much higher. Is that right?  

Justin: Absolutely. Yeah. I don't know if I would necessarily agree with the  statement that we'd be screwed. 

I do think that there's sufficient inventories out there to buffer something like  that. But the price response would be massive. And, this could really happen at  any time. I think the most likely disruption is these very important larger  development projects not panning out exactly as the industry expects. 

And the industry is basically looking at what the investors are looking at, right?  They're looking at the feasibility studies. They're looking at what the company  is telling investors that what they'll be producing and when, and of course, that  historically speaking, especially in the uranium world just never happens. 

These mines are never built on time. They just aren't. And that disruption is  highly likely to pan out, but are there inventories? Yes, of course. The problem  is those inventories largely are not for sale. So what are there, I remember  there's a very popular uranium investor out there. 

I'm not gonna mention him by name, but he basically was bearish at this  moment in time over the past couple of years, basically saying there's, there's  1.3 billion pounds of commercial inventories. It's yeah, okay. Half of that's in  China. The rest of it is distributed around the global nuclear utilities. 

So US utilities of two years of inventory, EU utilities of three years of  inventory. They don't draw those down besides maybe a five or 10% draw down  here or there to try to buffer what they might feel is a temporary price spike.  And that's it. They're not gonna draw them down to zero. Yes. If we go to a  hundred dollars, $115, $130, $150, will we see supply shake out here and there?

Absolutely. We will see some inventory be sold in the market. We'll see some  profit taking. There's a decent amount of positioning here on behalf of hedge  funds. They're not holding those pounds into perpetuity. They will sell them  eventually. So there's always a little bit, a tiny bit of flex, but the big buffers are  gone. 

There's no megatons of megawatts. Underfeeding is almost entirely gone. In  fact we would expect that we'll potentially see some overfeeding in the coming  years, which has the opposite effect, extra demand for that enrichment process.  And then of course, commercial inventories are on the low end, historically  speaking as well, because Adam proms at a 10 year low in their own  inventories. 

So just the general buffer is very small here.  

Erik: Justin, final question. We cannot responsibly both be as bullish as we are  without asking the critical question of, okay, what could happen to turn this all  around? There has to be something, obviously, I guess the big one would be a  worse than Fukushima sized nuclear accident that completely changes public  sentiment globally around nuclear energy. 

And that could happen if somebody blew one of these things up as an act of  terrorism. In the world we live in it it's not at all impossible. Aside from that,  what else can go wrong that could derail the extremely bullish hypothesis that  both you and I share?  

Justin: Yeah, the nuclear accident potential. 

It's always there. I, in my opinion, the industry is. Has much, much better safety  checks in place following the Fukushima Daiichi disaster. So that was  something that happened, had no fatalities, but it did affect the industry. It  caused Japan to shut off all the reactors and a number of other countries do the  same. 

So it had demand destruction effectively, 10 and eventually about 15% of global  demand that was there in 2010 was gone by 2015. So demand destruction of  some form or another is probably the biggest potential to turn this investment  around because we don't see, at least in the near term, let's say the next five  years, where supply is going to change the investment thesis. 

Eventually are we above 150, $200 and it stays there for a while and all of a  sudden we see, phosphate projects producing uranium and all of these marginal 

producers eventually get in production. Yeah, it will be a, a natural commodity  cycle. This will have a peak someday. We don't see that happening in the near  to the midterm. 

So the only thing that we could see that would change this thesis for us, would  be some kind of demand destruction. It wouldn't necessarily be because of a  nuclear accident, because that doesn't necessarily mean demand destruction  depending on how the accident actually would pan out. 

Certainly it'd be terrible for sentiment, at least in the near term, and probably  really bad for the equities in the near term. But would we see. 50, 60, 70, 80  reactors shut off because of that. I don't really know, and I don't really think so.  With that said something else, like if China all of a sudden says, okay, we're  done building nuclear, we've reached our goals, if that narrative is going to hurt  and if they change their actual demand projections and their growth projections  for nuclear, that affects the bottom line in terms of the supply and demand  calculation. 

So a change in demand projections for whatever reason, is really the only thing  I can see that's going to derail this in the near to the midterm. But like I said,  eventually this will be a commodities trade where high enough prices for long  enough incentivizes enough supply that will eventually cap that price move and  eventually will turn the price down. 

How soon that happens, I can say very confidently. I don't see how that happens  in any way, shape or form. Assuming the demand stays as what we're  projecting, which I believe that it will in the next 5, 6, 7, 8 years, I really don't  see that happening. So even if we were at $150 uranium next week, it's still  gonna be years and years and years down the road for these marginal projects  that could be profitable at that price to actually be producing into the market. 

So I think we have a strong runway here, Eric. I know that you agree with me  there, but hard to say what would cause that demand destruction, but that's the  only thing that we would be looking for to actually change this trajectory.  

Erik: Justin, I can't thank you enough for another terrific interview. 

Before we close, tell us about what you do at Uranium Insider. You publish a  terrific newsletter. I quite enjoy receiving it. You got videos and all kinds of  stuff. What's involved? How much does it cost and how do people sign up? 

Justin: Yeah, thanks Eric. Appreciate the support on that front. So yeah, we  basically cover this sector in and out on a daily basis. 

We've got a small team behind us. We've been doing this since 2019. We put a  lot of focus into the physical market. This, in our estimation, is the most  important thing to fully understand if you're going to be invested in the sector.  So we have multiple price reporters, multiple services, multiple connections in  the industry, fuel buyers, traders, and we're communicating with these folks on  a daily basis. 

We wanna know what's happening out there in the physical market. The equities  markets will definitely fluctuate. Sometimes they get way overbought relative to  physical. Sometimes they get way oversold relative to physical, but generally  speaking, they move. At least directionally with the price of uranium. 

So that's the most important thing that we follow, and we track that and we  report on that to our membership on a daily basis. We have a very in-depth  monthly newsletter. We do weekly update videos for our membership. We do a  daily data sheet that follows the ETF and spot flows, as well as the most  important pieces of news on the physical market on a daily basis. 

We do a weekly watch list that does a technical analysis of the stocks that we  cover. And I do a physical uranium market report once a week. That dives much  more deeply into what's happening in the spot, the term markets. And in my  estimation, if you have a decent amount of money along this sector you have to  have this information. 

It's an absolute must to stay on top of what's happening here. And like we  mentioned at the top of the interview, we have something called the dynamic  model portfolio, which is a trading portfolio, which as I mentioned, we  established last February, 2025. And that portfolio is up over a hundred percent. 

So that aims to track physical sentiment and charting to give us trade signals  buying and selling to trade this sector because even though we are directionally  very bullish for even the long term, we do have very strong swings to the upside  and the downside. It's a very tradable market. 

So that's been a huge success for us. The newsletter is 7 99 a year, which I think  is a pittance compared to what this sector offers in terms of upside potential, if  you have even a small amount of money invested here. 

Erik: Patrick Ceresna and I will be back as Macro Voices continues right here  at macrovoices.com.

Erik: Joining me now is Craig Tindale. Craig is a private investor, longtime  Macrovoices listener, and has recently penned an article called Critical  Materials, a Strategic Analysis, which has gone absolutely viral. The Financial  Times reported that it has gained the very direct attention of the White House  and the Pentagon. 

So this is really just incredibly great work that you've done. Craig, as as a long  time listener, this is not. The first time that our listeners have heard concerns  about how China's dominance, in terms of the supply chain has considerable  strategic implications. But I think you've done a far better job than anyone else  of just concisely writing about exactly what the issue is. So congratulations on  that. Why don't we dive right in strategic diagnosis of what you call the end of  infinite materiality. What is this article about? Why is it important?  

Craig: I guess it's the ultimate genesis of state capitalism versus stateless  capitalism. 

You've got on one side a a state that is intent on dominating all areas of  commerce internationally. And on the other side, you've got a free market.  Philosophy that is gained by, price. And so the Chinese are basically the system  by lower the cost of refining and smelting so that they gain control. If you look  at 50 to 98% of the critical metals needed by the west to, to go forward with all  their electrification, their data centers, their the EVs, just about everything, you  can think of the, even the nuclear build out, it requires critical metals. 

Without those critical metals, you can't go forward. And what the Chinese  supply chain has done is grabbed it in the middle and directed it towards itself.  And it's done that at multiple layers. The one layer is the smelting refining,  which I just mentioned, the other is the Offtake agreements and the mine  ownership which directs towards those smelters. 

Another area is, the ownership of the actual mines. If you look at Xin Jing and,  and some of the, the Chinese state owned mining conglomerates, they've  gradually bought everything in the west, in particular gold, silver and copper  and many of the others and then directing those outputs. 

Until the last few years, those outputs haven't been used by the west. They've  been used by China. They now control everything that we need to control to  reshore, everything. And it's Alexander Hamilton, I think pointed out in 1791  article of manufacturers that went Congress. That liberty and freedom exists,  not by itself.

It's a contingent on having a manufacturing and a supply channel that allows it.  That at that stage, Hamilton was looking at the dependence on the english And I  I guess I put it today that we're looking not at the English, but at the Chinese  and that all his assumptions about the importance of that existing and the  manufacturing existing is actually, you know, conditions precedent 

For the West to be successful. And without that, we'd be, we'd become  enslaved. We're almost serfs in the whole global supply chain. I guess I, I frame  it like this, that we have a, financial balance sheet, and we're good at that. 

Putting claims upon claims. But we've disconnected from the physical or the  balance sheet that matter. And so these two things are separating as we speak  and as they separate the ability for us to control our destiny becomes less and  less.  

Erik: You write about the feedstock paradox. 

I love that terminology. You're describing this phenomenon where it seems like  there's something about human nature, that people think about the raw material  as the strategic asset. President Trump has clearly become aware of the  importance of rare earth elements, but. He's talking about where we can mine  them and the reality of the situation is China's got you've done some fantastic  statistics, so I shouldn't speak for you. 

Give us a perspective how much of the refining and Processing that's necessary  in order to get any benefit from these raw materials. How much of that does  China control today? And what would it take if the United States were cut off  from that Chinese supply? What would it take for the United States and the rest  of the West to recover if that event were to happen? 

Craig: They've got 50% to 98% control depending on the category of the metal.  90% is, things like scandium, I'll start at scandium. Scandium is used in an  aluminum alloy, and that aluminum alloy is I guess relevant to the new combat  drones. And F 35 was built on the physics of G force 9 because that's all human  beings can connect with 

A combat drone can do 20 to 30 G because there's nobody sitting in it and the  alloys required of that are a new industrial material. The whole west produces  15 tons of scandium per year at the moment, and they need hundreds, if not  thousands of tons of scandium to build these combat drones.

The only source of that scandium at the moment is virtually China. And so if we  wanna build our combat drones and defend ourselves and not create incentives  for war, that is, there's two sides of this. One side is we have to defend  ourselves. I think what people miss is if we can't defend ourself, we create a, an  incentive for the more powerful nation, the foreign nation, to take advantage of  that and having a good defense is, is important to creating a world piece as  anything else, but copper's the same. Copper goes into almost everything, , in  some of these ultra high voltage Cables per kilometer. There's about 60 tons of  copper. 

I read an article yesterday there's 2177 tons of copper in Microsoft's new AI  data center in Texas. The US planned to build 13 to 15 of these. That's a lot of  copper. Everything we look at the physical intensity of copper is apparent in it.  The, and it go, and not just the copper, it goes into everything. 

Siemens at the moment have 138 b euro back order on equipment, things like  the major transformers the major transformers are taking four to five years to be  delivered. So we can build as many nuclear power stations as we want, but if  you can't put the transformers in place to actually move the electricity, and if  you can't put the UHV in place that is the ability to transmit over power lines.  They're stranded assets, these nuclear power stations. That's why a lot of these  new these new AI data centers are being set next to nuclear power stations  because they already have equipment in place and they don't have to wait. 

So you end up in a situation where they control our destiny they've already  licensing a double licensing program and, it was a few days ago, they decided  that they work gonna supply rare earth to Japan for the defense industry. You  know on, the other side of it, Siemens with their 138B Euro back order 

Relies almost a hundred percent on rare, heavy, rare earth from China. The  order book from China is about 15%. You can really imagine China going well,  if you want your rare earth, we want our transformers first. So they, they layer  upon layer the ability to dominate the supply chain just by the, their initial  influence. 

And, this happened in history if We look, go back to 1914. There was a thing  called the zinc crisis. A company called Metallgesellschaft German company  was established as the major refiner of zinc and copper and a whole bunch of  the other industrial metals. They had subsidiaries in North America and they  

had subsidiaries in Australia.

Ironically called Australian Metals and American Metals, and they basically  took the off takes from those mines and sent 'em to Germany. And the Battle of  Algiers in 1914, the French were overrun because they ran outta shells. A lot of  people don't understand why the French got overrun so easily. 

A lot of people say, they lost to the old generals were relying on horse cavalry  and things like that. The reality is they ran outta shells. And Lloyd George the  Future British Prime Minister was made minister for, munitions in those days  because the fear was that they wouldn't be able to supply themselves. 

So this has happened before many times. It's not actually a unique thing in  history. It happened, you go back in the 16th century Spain, the Spanish had, all  the gold from the Americas and silver as well. But they couldn't, eventually they  couldn't buy, anything because the Dutch were making everything and Europe  was making everything and no take their gold because they couldn't  manufacture anything themselves. 

And eventually the Spanish Empire fell, even though they had, a mountain of  gold. So you, we've got rhyming right through history of this kind of thing  happen. We just haven't had that happen at this scale. Now how can we fix it?  That's a complicated subject. It obviously depends on will. 

Whether we can optimize the political skills to do that. I think President Trump  obviously sees it and I think he's probably seen it intuitively. He's almost  hamiltonian in his regard of manufacturing and Reshoring the future materials  and manufacturing capacity of the USA, he almost follows a complete  Alexander Hamilton playbook. And Hamilton came up through, intense conflict  and so he knew the importance. Eisenhower was similar. Everybody reads their  Eisenhower speech and says, watch out for the military industrial complex.  Eisenhower was even more interesting if you read the rest of the speech. 

He was worried about the manufacturing complex and the ability to be self sustaining, and that's what he warned about. We take one message it's similar to  this freedom and liberty. It's an ideal, but we forgot what the foundation of that  ideal was, and that's interdependence. 

If we're beholden to foreign powers. We risk that liberty and freedom right  across the west because we become beholden to the supplier of our goods. And  they can withdraw them. They can stop our reassuring, they can do all the things  that they need to do. 

Erik: Craig, I think that your focus on the midstream, in other words, it's not  where the rare earth elements get mined from, it's who's got the ability to  actually separate those rare earth elements and produce the final product that we  need for all of these applications. 

Some numbers taken directly out of your article, and by the way, I should have  mentioned at the beginning, folks. Craig's article is linked in your research  roundup email. It's free on his substack, and I very strongly recommend that  everyone read it, start to finish. It is cover to cover, just an outstanding piece of  writing. 

But if you look at something like Gallium, which is essential for certain kinds of  military radar and 5G networks and semiconductors and so forth. China controls  98% of gallium production, not where it's mined, but where it gets refined and  produced. Magnesium smelting, 90 to 95% rear earth separation, 90%. 

The high tech magnet production, which is the heart of electric vehicle motors  wind turbines for for wind powered energy and so forth, and the actuators in  defense mechanisms. More than 90% controlled by China graphite. Anode  production for lithium ion batteries, more than 90% controlled by China. 

Tungsten production, more than 83% controlled by China. And there's a long  list that continues after that. Craig, what would it take? If president Trump were  to get together with other Western leaders and say, boy, this leaves us exposed  to where if China cut us off from all this stuff, we would be completely  helpless. 

We can't have that vulnerability. Let's reshore and rebuild all of that capacity so  that we're not dependent on China for any of this stuff. How many years and  how many dollars would it take to eliminate this dependency?  

Craig: Short answer is trillions. I think it's variable because there's a lot of stuff  on foot at the moment. 

They can already see this, the White House and Congress and the Department of  War as they call it now. I track a lot of companies who are receiving funds. You  know as far back as two or three years ago to develop our capacity to refine rare  earths and all these metals. 

If you look at a company like UCU UNICOR I think they've received  something like a hundred million dollars already to produce a rare earths  capacity in Louisiana

Which has gone into initial production, I think this month or the or next month.  You've got companies, an Australian company like IPX, Hyperion X. Now  they're producing titanium. Outta Virginia. And they've got a new process that  they took from the University of Utah from a, a scientist called Zach Fang  which I is a delightful name. 

He works in the University of Utah. He's like the Steve Jobs of. Of materials  science, he's come up with a way of making titanium powders, at 80% less cost  than the current method. There's another company that comes from Metal is also  Australian lead. 

It takes the, technology and the IP from James Tour outta Rice University. And  they use a thing called flash dual heating, which heats everything up to 3000  joules, injects some chlorine into it. You get a methyl ox oxide out it that then  can be separated into its different streams. 

You know, not many people realize it but, the department of energy tend put out  just before Christmas for three $25 million worth of funding to take rare earth to  titanium gold and silver out of fly ash out from from coal fired power plants, for  every coal fired power plant is billions and tons of fly Ashes sitting around it  

that were, the output of the burning so much coal. , they all have a a significant  amount of minerals still in them. They just have to be extracted. There's a  number of innovations that we're doing, and it's like fits the old American,  Yankee knowhow innovation cycle, that a lot of this stuff is coming to the floor  But what it take is lowering the cost of capital for these projects. These projects  haven't, flown in the past because, we've been funding things that give quarterly  results. Like social media, like a lot of the software's gonna eat the world type  stuff. You learn the code type of stuff where the cost of capitali not Not high at  the start, and once you've built the software, you just have to incrementally add  to it. 

It's not a 10 year return and it, the return is fairly significant. So we haven't, we  measure bread and milk as far as inflation, but we don't measure the asset  market as inflation. 

So we measure bread and mild but we don't measure the price of shelter. And so  when bread and milk have gone up, we've raised the cost of capital and not  notice that a lot of the industrial projects have been killed off. It be, as soon as,  we go to four and 5%, the industrial projects, die on the vine. And we go back  to the kind of hollowed out economy that the Fed policy.

Creates for us. And it's the Fed policy that's, at the core of the problem, the core  of the problem is that industrial projects just don't get the funding that they  need. Now the other one is weaponized pricing. We've gotta deal with that.  Weaponized pricing is, every time, at the moment there's great example is  copper melting in China is being done at negative cost. So if Peru and Chile  ship their copper to china they're getting paid $50 a ton to, to process it. Now  you imagine what that does to the copper refiners in the west. They can't  compete. It's their method of, gaining complete control. They send us broke in  the key areas that we need to evaluate. 

I think one example is the chairman of Palantir has put together another startup  called Epirus, and Epirus basically shoots a gallium gun, microsecond at drones  drone and they just fall out of the sky. It fries their internal electrics. You put  these gallium guns in low earth orbit and you can fry the electrics of an ICBM  inside the silo. 

So they have very consequential, you, if you take it away from us because it  changes the, the pathway of our defense. You know we talked about copper, if  you cannot put the copper in place. The end product it you can't build anything  that we're talking about. So we need to do what we did in 1914 and what we did  in different other scenarios and bring that onshore now. I think there is a  pathway to do that. I've got another paper coming out on how to change the fed  to do that and separate the Fed's ability to price control consumer prices, but  separate out the infrastructure and industrial items so that they can survive. 

So they're not measured as part of inflation. And, we may even have an interest  free bond or something like that type solution where we offer. Not an interest  free bond. A tax free bond where we offer pension funds, an alternative to  investing where a pension fund would flow money into an industrial project and  it wouldn't be paid by the treasury. 

It would be paid by the industrial project and a tax free rate.  

I guess the industrial project owners would be would part, would, partner with  the state like the Chinese do to produce the industrial output that they need to  do. There's no other way of doing it. State capitalism on the Chinese side I think  is, 50 points ahead at half time. 

And has got, we're not playing well enough to make a comeback.  

Erik: Let's talk about how the AI trend plays into this, because a lot of military  experts have opined that basically the AI race between the US and China for 

leadership on AI is akin to the US Soviet arms race because AI has such  profound implications in terms of its military applications and so forth. From  reading your article, it sounds to me like we're headed, this is 1947. We're  headed into an arms race, not with the Soviets this time, but with China, and it's  about AI, and the strategy is gonna be that we'll buy our nuclear warheads from  Moscow. 

What? That doesn't make sense. How much of you know you gotta do two  things to build an AI data center, you've gotta have all of the copper and all the  materials that go into building that data center, and then you've got to power the  data center. How much are we dependent on China? If China, th thought that the  str, if we be ever did get into a kinetic conflict where we're actually at war with  China and they decided to cut us off. 

How much would that impair our ability to build AI data centers?  

Craig: It could potentially totally impair, you'd end up with a situation where  you've gotta do rationing on the western side to make sure that they get the  materials they need, build the data centers. If we. If we start looking at AI not as  a consumer device I guess Michael Burry sees it, and as a weapon system which  you've just outlined then, it becomes a different equation because. 

If you can't build these ai da data centers and they're weapon systems, the arms  race takes a whole different feel, look, and feel, and all of a sudden, you return  on investment and the various metrics that you would put on it as a con, as  consumer item go out the window and it becomes a must do. 

OpenAI to me is a weapon system manufacturer of the future to  reconceptualization. But You know, it, it essentially is. And so a lot of this  Michael Burry thing about, it's a bubble. It doesn't equate properly with where  it, it actually sits. It's making it sound like it's a new Google. 

Where in fact if they don't succeed. The West might not succeed either. Now,  individually, they, they may or may not succeed. But I think the workloads that  are potentially coming onto these, systems are so important that, we can't look  at them as a consumer device Now. If you've got Transformers taking, four or  five years to get to you from Siemens or Hitachi and the rare earths they're  depended on, and then you're in quite a chokehold you need to find that stuff  from somewhere else. 

And, I think in the article I outlined. Potential areas that would probably  unthinkable today, but they won't be unthinkable tomorrow. They, it's 20 grams 

of silver in a solar panel. I propose that you tear all them up if you get into real  desperate circumstances and use them for data centers and weapon systems. 

The same goes for gallium and all the other things. Where we have to reframe  the world to some extent. The world is not how we see it or how we've seen it.  The world is a different place and we have to, reframe our conceptual building  

blocks to, to look at the world this way because a denial by China or Russia  because trust Russia control some of these, these things as well, in particular  titanium. 

That framing changes how we look at capitalism. We have to adopt some type  of state capitalism and everyone will think that's nationalization. It's not  nationalization, it's just an admittance that stateless capitalism that followed  price to the point of efficiency so far that letting our foreign power supply the  things that are crucial to the ongoing perseverance as, as the west, it's that  important. And the density of copper is significant. The density of silver is  significant as well.  

Erik: Now you wrote this article, Craig, from the perspective of geostrategy  and basically trying to get policymakers attention to recognize how vulnerable  we've made ourselves to being cut off by Chinese dominance of supply chains,  but. 

You actually got to this through your own research. Not trying to research  geopolitics, but research investments. So let's talk about where the trades are  and where some of the opportunities are. I hate to take such a grim topic and try  to make a buck out of it, but, that's what we do here on Macrovoices sometimes. 

Craig: That's what I do too.  

Erik: Let. Let's talk about that. I wanna start with silver, which you mentioned  a couple of times. Most analysis that I've read recently about silver says, okay,  look, what's going on here is silver is basically gold on steroids. We've got  central banks buying up a lot of gold because they're concerned about US policy  that's just causing the bubble in silver that's about to blow off. 

There's really nothing substantial behind it. I think you've got a very different  perspective from reading the article. Tell us about silver's atrategic importance. How does it play into the rest of everything that we're talking about? And is this  a bubble that's over in silver or is it just getting started?

Craig: It's, yeah, let's just do some numbers. We've been 5,000 ton of silver  short For the last four years, I think the overall it's 24,000 tons. Since 2020.  When we're in deficit, we have to drag it outta vaults or people's cutlery drawers  in order to pro provide it, silver is actually central to the whole electrification.  The AI, there's 20 to 40 grams of silver in a major missile. There's eight tons of  silver in a data center. There's almost, in the robotics world, if Elon's gonna  build these robotics armies there's a good percentage of silver. 

In each robot. So it becomes a substantial input. Now, 70% of our silver comes  as an off take from copper, zinc, and lead refining. That's 60% happening in  China. Now we are already in deficit, let's take that into account, even with the  chinese output. Now just before christmas they put some licensing in that  basically said that all silver would be licensed to the end supplier. I think there's  43 different Chinese companies that can output silver. 

Now, what if they decided to cut all that off from us, from the west? All of a  sudden the 5000 ton a year deficit turns into maybe 10000 ton a year deficit or  more now they all must have to come from the cutlery drawer so one analyst  says there are 200000 ton in inside people's cutlery drawer . Like I doubt that  because I actually don't think anyone knows how much is in the cutlery drawers  and the jewelry drawers. But we would have to drag it out the vaults and that's  gonna send silver. Obviously skyrocketing because the net cost of silver in  some of these products is marginal anyway. 

There's a lot of silver in an EV, but, if silver doubled it's only gonna add 1% or  so to the cost of the EV And then we've gotta prioritize what silver goes into  what, we if we look at AI as weapon systems rather than consumer items, they  would get priority over an EV. 

I'll give you another thinking model. And this is triggered by what happened to  BHP recently. BHP were told that they were gonna take offshore C&Y.  

As payment for iron ore and BHP refused for a month. And then they decided  that they would accept the offshore C&Y They were the last holdout of all the  iron ore producers. What if China said to us you can have these rare earth  minerals but we're gonna require offshore C&Y to pay for them. That would  introduce a really weird dynamic because all of a sudden you've gotta have  industrial companies in the west trying to reshore the AI companies building the  data centers, the defense companies trying to sell C&Y in order to pay for these  things.

I noticed there's a number of gold producers being acquired by, if you look at  the quantity of that, it's getting quite significant. What if they gave for golders  money and they backed the C&Y with gold and they require all of the rare  earths and critical metals to be purchased under offshore C&Y. They could still  run their internal renminbi. As a currency that was fiat and then they run the out  outside currency as a as a reserve currency, so to speak. 

All of a sudden you, the tables change. There's, doesn't mean that USD would  crash or Euro would crash or anything like that because they're still required to  service debt, but it would change the whole dynamics of the currency market.  Still put them in a place because, you even go down to the machinery level. 

Linus Metals put out a note. A few months ago, basically saying it's all well and  good for us to start building these refining points in Texas. But we need the  Chinese machinery to do that because we are not making in the west, the  machinery to refine these metals. We're beholden to them for even the  machinery. 

So we've gotta learn how to do that. So that puts a lot of gap, that puts a lot of I  guess risk in the west, climbing back into a situation where they enjoyed for the  last four decades, and that is dominance over, Hegemony, the over the east.  

Erik: As you look at this picture overall, where do you think the most  opportune trading opportunities are? 

We talked about silver briefly, but what else is going to get scarce? As much as  the solution to this problem would be for governments to make big investments  in reshoring, you've also said in the article that you don't think that reshoring  will be. Profitable for a lot of American companies in the short term. 

So it's not the actual reshoring that you want to invest in. You probably wanna  invest in scarcity. First of all, would you agree with that? And if so, what other  things besides silver that, silver's already seen a huge move. What hasn't moved  yet? Where's the ripe trading opportunity? 

Craig: Isaac's, the ripe training opportunities are the ones where our own form  of state capitalism starting to show their face. You know, I mentioned a few of  them before where, the Department of War and the Department of Energy are  starting to finance some of these companies, and I think they give us, the trails  to follow about the companies that will flourish in this new era

You know, the, the new scandium plays, the new gallium plays. There's some  winners being picked and being subsidized with state capital from the West, and  that's happening right across Canada, and it's happening in the Australia as well.  And they're the, I guess they're the sense to follow to, to good returns. 

Some of these companies that I'm sitting on at the moment have already had,  you know, four, five hundred up to a 1000 percent near term increases in price  as far as stocks. MTM for instance, I think I bought at 8 cents and it's near a  dollar at the moment. I wouldn't be surprised that goes to $50 at some stage. 

Now that's crazy. I know, but they're the kind of returns I think you'll get from  this circular economy. IPX that I mentioned, basically uses some IP out of the  Rice University. And what it does is it heats up fly ash and e-waste so all the  circuit boards and that, is sitting in millions of tons in the US and it, he heats  them up and injects some chlorine into it and makes a chloride, metal chloride  mix outta it. 

And then you can separate it at the chloride stage. I can envisage a company and  then, I just don't mean this one. There's a there's a dozen of these types of  companies where all of a sudden, we're processing the e-waste. They just made  an agreement to take 2,500 tons of e-waste off glencorp. So they're fraternizing  with the large industrials and they take that e-waste and, out a ton of e-waste is  about 500 grams of gold. Out a ton of e-waste is about 300 grams of silver. I  mentioned fly. The same thing is if you heat it up. 

And in that add the chlorine mix, you get this chloride that all of a sudden  makes it a circular economy. We can start processing these things. And this  kind of fits the mode that we've used in the past in war situations under, under,  under conflict where we've had to use our own resources and I think ultimately  it serves us because it's gonna teach us to be innovative. There's another one  Hyperion X that's gonna make titanium outta Virginia. 25% of an F 35 is  titanium. I don't know. The, we're letting the, I guess the. The capabilities, even  now downgrade. 

But they've been given $115 million outta Department of Defense to, upscale  this titanium capability so that they can produce titanium oxides. Now, this is an  innovation story. We've just had the two last two decades where we've  worshiped at the altar of, Zuckerberg who I guess is, main claim to fame. This is  hypnotizing our attention and distracting us where we've had, real scientists  developing IP that hasn't been recognized yet because they can't get it off the  ground because they can't get the capital. Now if you look at some of these 

places they're moving from pilot to commercialization and you've obviously got  that risk element there. 

But if they can make it through the commercialization stage, and they've  virtually done that, certainly in the IPX case. These are the industrial companies  of the future. These are the materials company that have to emerge. If the West  is gonna survive. There's no other way to do it. 

If you think of all the paths of doing this it's gonna be innovation and it's gonna  be reestablishment of this materials capability onshore. Whether it's, whether it's  in Australia through the allies, or whether it's onshore in the US. It has to be  developed. 

There's no other way of doing it, and you're not gonna do it the same way.  That's not the American way. They'll do it in a more innovative way, to stop the  pollution. One of the reasons that we offshore everything is that we didn't want  the pollution tax the, we didn't want the pollution in our country. 

I think Ricky, Gervais, know, made it great analogy About you, slavery being  relocated to Foxcon factories with nature around them that, just because we  haven't got ships and we're not bringing people over we're still enslaving them  in their own countries. Now we can divert past that with innovation. 

We can, I, me, I mentioned UCU. I'll mention them via symbols because I'm an  investor first. There in Louisiana they're developing an amazing closed loop  system that doesn't have any heavy, rare earth pollution with it. But throughput  is lower costs than the old metric. 

Now obviously the, the limitations on this is, we have a limited skill base. We  have a limited education base. We're teach, we're telling everyone to learn to  code a few years ago, and now we should be teaching them, learn to go to  chemistry or learn to go to engineering in order to create the, I guess the  industrial age 2.0. 

There's a number of these companies I mentioned Linus, they're building a,  they've got the go ahead in Texas, they had ESG problems in Texas. You've got  all these I guess folks who are worried about the development of some of these  capabilities in US states slowing the whole process down with. 

Agreements and bureaucracy, they're now starting to be taken out the way. So  you know, Linus has been trying to get this thing off the ground in Texas as a 

rare earth refining project for a few years. And now they're going forward and  we have to get these things out of the way for them. 

But I think it's just common sense. I would go down the rabbit hole of all of  these critical mineral plays, and chemical plays too. We're gonna need the  chemical. There's a lot of a chemical association with critical metals plays, and,  if you go down there you'll find that, that's the future of investment. 

The future of investment. This era is, pivoted to a critical metal survival.  Industrialization 2.0 that provides the feedstock and supply chain into the things  that we've talked most about in the greater financial environment, investment  environment. We keep talking about an AI bubble. 

In order to do an Ai, whether it's a bubble or not, and I don't think it is. I think  it's a military capability. We need to, understand the conditions precedent to  creating those massive AI data centers and those, and the, all the electrification  that goes with it, the energy, the gas the nuclear needs, copper. 

Like I said, the, that one, that Microsoft one, I just read a report on 2,177 tons in  one AI data center and there's 20 of 'em around the world. That's a lot of copper.  That's but I think we have to be, careful of where this is not an automatic  commodity play either because China's gaming that system too. 

I put a note out yesterday about iron ore the Simon the the Guinea iron ore play.  For China and Rio Tinto, they've put $20 billion into an iron all play. It's, I  think, a large percentage of that goes into a railroad and, $20 billion. And it's  not something that we would've risked in the west because we'd have to have a  return of 20%. 

If you look at what China uses, they use about a billion ton of copper a year In  all their industries for 20 billion, they get, I think, stage four and five. They get  up to about 60,000 ton By the, when the mine's fully operational, they get to  about a hundred thousand ton per annum. But that's at 65% mineral  Concentration.  

You if you look at something like fmg, they're at 56% mineral concentration.  Now that nets out that you've gotta process 8500 tons more. In ore, in dirt to get  the same amount of via ore out, sorry, I think I said copper. You've gotta get the  same amount of via ore out. 

So you've got this thing where if they finance it they might lower the cost of,  iron ore They might lower the cost of iron ore by 10% Say $10 a ton. And that 

$10 a ton will give them an overall saving across their their iron ore usage of 10  billion dollars. 

And that $10 billion gives them an ROI of 50% of their investment straight  away in, inside, say, 12 to 24 months. You know that's a significant difference  because if their return on investment. Also looks at the price. It means that the  iron ore they, that they, them investing in iron ore production and making these  mines and making an oversupply is pay pays them back. 

Their ROI is differently configured to our ROI and so where we're saying the  copper demand's going up. Significantly so the price will go up. That's old  analysis. The new analysis says the copper demand's going up. They have  complete control of the supply, so our copper costs might go up. But their  copper cost, if they decide to, stop refining it for us and giving it to the, and start  giving it to themselves exclusively, means that they've lowered the cost of  copper from all their supplies. 

And that changes everything because it changes the valuation of, a company  like Escu fmg, it changes the valuation of bhp. It changes the valuation of Rio  altogether because Rio, all of a sudden, even though they own 45% of the,  similar, our mine, they're in a cost plus situation. 

They're not in a, an iron all price situation.  

Erik: And Craig, you've got an entire section in your article, which is about  disruptive technologies and where some of the investment opportunities are. So  again, I very strongly encourage all of our listeners to read the article. Craig,  you told me off the air you're not really promoting anything as a private investor  other than reading your articles. 

Tell us where your substack is and if there's anything else you'd like to tell our  listeners about what. You do  

Craig: well, my Substack is just my name, Craig Tindale. You'll find it there.  Same with my @ctindale for X. And then you can find me on LinkedIn as well  because I'm publishing there as well. 

Just my name again. All I'm asking from anybody. I've done pretty well at  investing over the last decade and I don't really need to promote anything. What  I'm really trying to promote is our own survival and awareness of what we need  to do for our own survival. So it's pretty pure in that context.

I just ask you to read it thoroughly because it's important to every one of your  investment portfolios out there and to forward it to other people because we  need to get the word out. We need to change the way we're thinking about  things in the west to so that we. We become resilient, that we survive as a  culture, as a civilization. 

And that if we don't do that we have a different future than I think we're all  we've grown up with.  

Erik: And again, folks, the name of the article is Critical Materials, A Strategic  Analysis, and you'll find a link to that article in your research roundup email.  Patrick Ceresna and I will be back as Macrovoices continues right here at  Macrovoices.com.