Transcripts
Erik: Joining me now is Izabella Kaminska, who is the editor and publisher of The Blind Spot. Most of you know her back from her FT Alphaville days when Izzy used to do, boy, just some of the best writing. Izzy, I think, in the industry, at least in terms of journalists, a lot of what you wrote, I thought, was much more on par with what I would expect in the quarterly letter from, let's say, a world class hedge fund manager, because you were really deep into the trades at a level that most financial journalists don't really ever go to. Then something happened. I'm not sure what, you defected to the dark side of the force and became a political journalist. You're running The Blind Spot. Now you're also the senior financial editor for Politico. Tell us a little bit about how you got there, but particularly, I really think it's timely, this is part of why I wanted to get you on the show this week. I think you've made this journey for whatever reasons of your own, into political reporting, but I think that finance is being carried much more into politics. If you want to understand macro investing, you better understand politics pretty darn well, at least that's my thought in this environment. Is that what led you to this? Or what's going on? And what do investors need to know about the increasing politicization of finance?
Izabella: It's a great question, because the truth is that most of my life, I've tried to dodge politics. I've always found it incredibly insufferable. Hence, I ended up doing finance, because markets don't lie and I love that you get that sort of immediate feedback, and there isn't any, you know, it's honest. So, I kind of avoided politics. It wasn't something I was very interested in, but increasingly I was being pulled in that direction, because obviously, everything, money and power, all goes together. I left the FT mainly because I felt there was a big transition coming in terms of how mainstream media operates, and I wanted to be part of the sort of independent media, I was always a contrarian at the FT, and I just found towards the end of my time that it was getting harder to be a contrarian, whereas before, that market attitude of like, we must explore all sides of any story, that was being constrained a little bit at the FT, I felt that certainly there wasn't as much tolerance for contrarianism as there used to be. So, I left to start, effectively, a contrarian independent newsletter called The Blind Spot. And whilst I was doing that, I was very happy doing that, I got a call from Politico, from another former FT editor over there, asking me to join Politico because he felt that finance was being politicized now, and he wanted me to come and help Politico tell that story to the finance community, because politics is notoriously, sort of, bubbly. Everything happens on a very bubble level. Then we had the Liz Truss fiasco, and politics merged with finance and in ways that hadn't since the 1980s, really, or 2008, and I agreed. When he pointed it out, I really agreed with that assessment. I was like, wow, that's so true. The era of financialization is now giving way to politicization, and I wanted to be part of that story, so I was persuaded. And luckily, Politico were very nice and allowed me to maintain my little Blind Spot operation. So, I still do that. The day job is Politico, with the newsletter on the side. So that is where I am now. And I think the more I've got to understand how politics works, especially in Europe and in Brussels, I've become utterly persuaded that the financial community is missing a trick, in terms of not knowing or understanding how politics and what's going on at the policy level, and now is the time that you can't afford to miss out on policy developments, because the age of diregisme is back in Europe, at least, and if you're not paying attention, you won't make money. I certainly also echo the sort of thoughts of Russell Napier, another very well-known investment advisor, that this is going to be coupled with an age of financial repression in the West. So that's the overview I would say.
Erik: Luke Joining me now is Forest For The Trees founder, Luke Gromen. Luke, we've got a new year, you're the first voice on MacroVoices for 2025. We chose you intentionally because you have such an excellent, high level macro perspective on so many different markets. So, holy cow, we've got a new year, rapidly changing geopolitics, an incoming presidential administration that couldn't be much different from the outgoing one. Where should we start? How should investors think about the big picture of what 2025 looks like? How's it going to be different from 2024?
Luke: Thanks for me on, Erik. It's great to be here. Happy New Year to you. I think this year, we're exiting ‘24 and entering ‘25 with the US dollar, as measured by DXY, both that and the 10-Y Treasury Yield, basically on knife's edge of a, won't say a crisis, but I'll say a bumpy period. The dollar has borderline too strong, it's causing Treasury Yields to go up with the dollar. And so, it leads to me to an outlook, as I listen to what the incoming administration and its representatives are saying, they're talking about a lot of things that all else equal would further strengthen the dollar, tariffs, DOGE, the Fed may be trying to be a bit more hawkish, geopolitical tensions, all these things, all else equal are good for the dollar. And anything it's good for the dollar is going to be bad for 10-Y Treasuries, long term Treasury market, and anything that, you know, I think we're at about 4.7% on 10-Y Treasury Yield today, as we record this, I think 4.8%, 5% then there or beyond. I think things are going to start to get really sloppy in risk markets and in the economy, etc., and then we'll see where we go from there. And so it leads to this, I think, sort of two discrete periods of time, as I look out to 2025. For me, it's the next two to three months where I have very little visibility and very little conviction in what's about to happen, because I have very little visibility or conviction in, you know, the 16 cooks that are in the kitchen of the Trump administration, seemingly, but it seems like a lot of them are wanting policies that all else equal would send the dollar up, which is going to send everything else down from here for a period of time. And so, I think we're in for a period of bumpiness the next 2, 3 months. And then I think ultimately, 12 months from now, 6 months from now, later this year, whatever. I think we're going to get policies that weaken the dollar in order to kind of smooth things over and to boost nominal GDP growth. Because in the end, the only way out of this debts issue that we have is with higher nominal GDP growth. So those are kind of the two discrete periods of time, next 2 to 3 months, I have no idea, but I think it's going to be bumpy. And then after that, I think bullish for stocks. It's bullish especially industrials. I think it's bullish for gold. I think it's bullish for Bitcoin, as I think the dollar is going to get weak in one way or another.
Erik: Joining me now is Copenhagen Atomics founder and CEO, Thomas Jam Pedersen. We've prepared a slide deck to accompany today's interview. Registered users will find the download link in your Research Roundup email. If you don't have a Research Roundup email, it means you haven't yet registered at macrovoices.com, just go to our home page macrovoices.com and click the red button above Thomas Jam's picture that says, looking for the downloads. Alternatively, the YouTube version of this podcast will have the slide deck on the screen as we're speaking. You can find that on our Macro Voices YouTube channel. Thomas Jam, welcome back. I think our first interview last week was well received by the audience. I'm really excited to dive into this one. Let's go ahead and start right into the slide deck at page 3, talking about thinking at scale. You know, something I've noticed is your presentations almost always start with the same slide. I like to start with, which is the Our World in Data Series that talks about global energy consumption by source and breaks down how much energy we're using on a global basis. It seems like you and I both like to think, in terms of the big picture, of how much energy the world needs, how much we need to supply, how we're going to do it. I've noticed that almost nobody else in the nuclear space thinks that way. Why do you think that is?
Thomas Jam: Thanks, Erik, for having me back. Yes, you're correct that this slide is the one that got me started many, many years ago, because that was when I personally started to understand how the global energy system works. So, I went back to that slide many, many times. This is 15 years ago now, and it gives you a good picture of how the whole world works, because the whole world is built on a fundament of energy. And therefore, by understanding the history of how we got the energy as humans, and how this is supposedly changing over the years, you can sort of make the strategy for, in my case, Copenhagen Atomics, into the future. Because from that strategy, we can kind of understand how the energy systems globally are going to change.
Erik: Joining me now is Copenhagen Atomics founder and CEO, Thomas Jam Pedersen. We have prepared a slide deck to accompany this interview, registered users will find the download link in your Research Roundup email. If you don't have a Research Roundup email, it means you're not yet registered at macrovoices.com. Just go to our homepage, macrovoices.com and click the red button above Thomas Jam's picture that says, looking for the downloads. Alternatively, the YouTube version of this podcast will have the slide deck on the screen as we're speaking. You can find that on our //www.youtube.com/@macrovoices7508">MacroVoices YouTube channel.
Thomas Jam, it's great to have you back on the show. We're really excited about this special. We're going to spend this week talking about advanced nuclear reactor designs, and then next week, we're going to get really deep on the fuel cycle, particularly the thorium fuel cycle, which is very much central to your reactors design. So, it's great to have you back on the show.
Thomas Jam: Thank you.
Erik: Slide 2, we are going to discuss in this episode, most analysts are talking about, whether or not tripling nuclear energy, which is the talk of the town these days, is too ambitious, or if it's realistic, if it can really be done. That, of course, started at the COP28 conference in Dubai in late 2023. My argument is that three times nuclear isn't enough. If you wanted to fully replace all of the energy that we now derive from fossil fuels, that would take 24 times as much energy from nuclear, not just three times. Thomas Jam and I disagree on that point. We'll come back to that in just a few minutes. So, the purpose of this episode is going to be to explore, is it even possible, and frankly, is it even desirable to try to solve all of the base load energy needs of energy transition, replacing all the energy that we get from fossil fuels with advanced nuclear energy. Is that even a good idea? Is it possible? And if so, which advanced nuclear energy technologies would enable that? Then next week, we're going to go really deep on the fuel cycle, page 3, talking about what the different kinds of fuels are for nuclear reactors. It's not just uranium, and it's not just one kind of uranium. There are several different fuels that are made from uranium, and also, thorium is a very important fuel to understand. So ,all of the fuel conversation, and particularly the thorium energy conversation, we're going to save for next week's podcast, and we definitely encourage you to tune in for that one as well.
I want to start here on page 4, on a chart. Thomas Jam, I know this is one of your favorite charts, as well as one of my favorites. Let's just talk about energy consumption. What blows my mind is, some people will say, yeah, but this is all going to turn around. We're going to start conserving energy, and this is going to peak, and we won't be consuming as much energy in future years as we do today. I think that's crazy. What do you think?
Thomas Jam: Well, this is for the last 120 years, and we can see that it's just been going up and up and up, and the number of people on this planet has also been going up. And as more and more people get more prosperity, they get refrigerators and cars, and running water or toilets, and we will use more and more energy. The question is, what is the composition of that energy? Is it mostly fossil fuels, as it is now, or has been in the last 120 years? Or will there be other forms of energy in the future? And I think that's a very interesting discussion.
Erik: Joining me now is Robert Kahn, who's the Managing Director of Geo-Economics for Eurasia Group. Robert, it's great to have you on the show as a first-time guest. Needless to say, there's no shortage of geopolitical topics for us to discuss. Let's start with President Trump 2.0, I think a lot of markets are discounting the idea that, boy, when President Trump comes in and does all the things he says he's going to do, it's going to be great for markets. I think there's another view, which is there's a few folks in Washington that are pretty threatened by President Trump and are probably going to do everything they can to sabotage him. So, what does this really mean for the outlook for markets?
Robert: Well, Erik, thank you for having me on. And you're right to start with Trump 2.0, I think you're right to raise the question the way you did. I think we are on the cusp of what might be an extraordinarily transformational period for the US economy. I think the markets are likely too sanguine, underestimating how disruptive the Trump policies that are going to likely be put in place over the next few years are going to be. There's both upsides and downsides to these policies. The first thing I always emphasize is the high degree of uncertainty that we're dealing with right now, part of that is Trump's own decision making style. He can be volatile. He can change his mind. He can override his advisors in ways that even his advisors don't know or don't well predict. So, we certainly have a degree of Trumpian uncertainty, if you will, that we're dealing with. But that said, market pricing, particularly over the period since the election, has leaned towards being quite sanguine about what's to come. And I think there's a number of factors for that. Certainly, part of that seems to be that there's a lot of confidence that the economic advisors that President elect Trump has picked will act as guardrails to bad policy decisions and buffer him from maybe some of his worst impulses, or other advisors. I think that can be overestimated in a chaotic decision making environment with a lot of different voices in the room. I do think that there is also a view out there that the threats, particularly on tariffs, that President elect Trump makes, are more for leverage than for actual implementation that the President recognizes that the US has a lot of leverage in these negotiations, a lot of influence and power. And look, it's the best way to get people to the table, and to make concessions is to threaten the use of tariffs, and he likes to do that. Certainly, I think in the recent threats to Mexico and Canada, that was an element. And indeed, I think he will get some concessions from trading partners that do not want a trade war with the US. So, in some sense, that's part of the upside. So, it's not without merit, and the markets are anticipating that, but mistakes can be made. In many cases, I think the President will want to put tariffs in place. I mean, if you can go back and look at his statements going back to the mid-1980s, he has a strong protectionist streak. I think he feels like the US has cheated on trade and that he needs to finish the job he started in his first term. So, my expectation is that tariffs are going to go up quite a bit over the course of the next four years. In the first year alone, I wouldn't be surprised to see tariffs against China double to around 25%, in that range, 23%-25%, I wouldn't be surprised to see tariffs coming on Mexico and Canada at some point on other major trading partners, particularly those with bilateral trade surpluses against the US countries in Southeast Asia, for example. And when you put that all together, this is a tariff increase that we really haven't seen in almost 100 years. It will be disruptive. It's a major change in the trading environment. Will have knock on effects to other countries as well.
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