MacroVoices #480 Louis-Vincent Gave: What Comes Next After The Trade War Dust Settles
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This is Macro Voices, the free weekly financial podcast targeting professional finance, high net worth individuals, family offices, and other sophisticated investors. Macro Voices is all about the brightest minds in the world of finance and macroeconomics telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick Ceresna.

Macro Voices Episode 480 was produced on May 15th, 2025. I'm Eric Townsend. GAVCAL co-founder Louis Vincent Gav returns as this week's feature interview guest. Louis and I will discuss the Trump tariffs, what they mean for markets, China, precious metals, and much more.

And I'm Patrick Ceresna with the Macro Scoreboard week over week as of the close of Wednesday, May 15th, 2025. The S&P 500 index up 464 basis points, trading at 5892. Markets beat the March highs after two weeks of holding above the 50-day moving average.

We'll take a closer look at that chart and the key technical levels to watch in the postgame segment. The U.S. dollar index up 197 basis points, trading at 101.89. Monday's rally had to directly test the retracement zone of the April sell-off. The question, will the U.S. dollar re-resume its sell-off?

The June WTI crude oil contract up 909 basis points, trading at 6315. The low bounced off the previous support, leaving the question if the double bottom is in. The June RBOB gasoline up 545 basis points, trading at 213. The June gold contract down 551 basis points, trading at 318.

After a double top retest, we have the first breakdown below the 50-day since December. The July copper contract up 65 basis points, trading up $4.65. Uranium up 251 basis points, trading at $71.55 as the positive price action continues.

The U.S. 10-year Treasury yield up 27 basis points, trading at 454. A material breakout in yields toward the April highs. The key news to watch this week is the University of Michigan consumer sentiment and inflation expectations. And next week, we have the European and American flash manufacturing and services PMIs.

This week's featured interview guest is Gav Cal co-founder Louis Vincent Gav. Eric and Louis discuss the trade deal negotiations, recession signals, capital flows, commodities, and China's economic situation. Eric's interview with Louis Vincent Gav is coming up as Macro Voices continues right here at MacroVoices.com.

And now with this week's special guest, here's your host, Eric Townsend.

Joining me now is GavCal co-founder, Louis Vincent Gav. Louis, it's great to get you back on the show. Let's start with the burning topic on everybody's mind. Trump tariffs, China, U.S. Okay, first we thought it was this great big tariff buildup. Then it seemed like we had really high tariffs. Then all of a sudden there's a weekend deal. I think everybody's head is spinning, kind of feeling like, okay, where are we in this story? Where

When do the weekend deals end? When do we get to stability? Are we almost there yet? Are we just in the first of several rounds of negotiation? How is this all going to wind up? And how close are we now in terms of the latest revision to the trade deal? My head is spinning for sure. Anyway, thanks for having me, Eric.

It's great to be back. Good to catch up with you. It's been too long since we caught up. I'm delighted to be here, so thanks a bunch for having me. And yeah, it's probably a good time to catch up as to where we are in the world. It's been obviously a pretty roller coaster two months, a lot of facts changing on the ground.

a lot of policy shifts you know china moving to more more stimulus europe moving towards more stimulus now you know you mentioned this weekend we have the uh you know the geneva uh deal between uh the chinese and the us we also have yesterday we had the us government dropping in a budget that's you know pretty stimulative when you think that just a month ago the

The discussion out of the Trump administration was all about Doge and cutting spending and tightening belts, etc. That seems to have gone out of the window almost as fast as the tariffs against the penguins. So...

To your point, where do we stand now? I think we stand where we're probably going to end up, which essentially is 10% on pretty much everybody, and then China somewhere between 25% and 40%. And out of all of this, you could say we could have started here and foregone all the drama, foregone all the...

the headaches, of course, that would have made it less exciting. That would have meant less time in the media for President Trump and for the various members of his administration. You know, how does the world look with 10% on everybody? I think 10% on everybody really doesn't move the needle all that much. It does end up, I think, still being a little bit inflationary for the U.S., especially

since contrary to a lot of people's expectations, it turns out that tariffs does not strengthen your currency. It probably weakens it. And so instead of going up on this news, the US dollar had a tendency to sort of pull back. So if you think, okay, we have 10% on everybody, we have tariffs that bring up some of the cost, even if perhaps some are eaten a little bit by the producers,

the bigger question mark is where does China end up? Is it going to be 25, 30, 40%? If you end up at 40% for most of the Chinese goods, I think that could still lead to some supply chain dislocations, that could still lead to some issues. Now granted, perhaps the big difference is if you'd said, "Okay, we're putting China at 40 and we're leaving it there."

Maybe you get a different outcome than where we're now, what we've just experienced, where you start off saying, oh, we're going to put China at 130%. Everybody freaks out. Everybody is very worried. The impact on growth, the impact on supply chains. Then you turn around and say, actually,

Forget it. We're not going to do 130. We're just going to do 40. But we're just going to do it for those 90 days and then we'll see afterwards. And now if you're Walmart or if you're Costco or Home Depot, do you think, hmm, OK, 40 percent, I don't like it, but I can live with it.

So I'm just going to load up now, make sure the shelves stay stacked for the summer, load up on everything I can. I think this is essentially where we are, which perhaps we wouldn't have been if we'd started at 40%. Bottom line, here we are, 10% on everyone, 40% on China, probably an inflationary impact for the United States, especially if at the same time you get an easing of fiscal policy. I guess that's where we stand.

Let's talk about how that's translated for markets. In the last couple of days or first two days of this week, we saw two nice big green up candles on the S&P, presumably a reaction to the trade deal. Can that be sustained? I mean, we've been kind of ignoring some recession signals for a while here. Yeah, the recession call, look, is the super important one, right? Because to your point,

If you look at all the soft data, your ISM surveys, your consumer confidence, basically any survey that you have, all the soft data does point to a slowdown in the US, does point to a recession. And this has not yet been confirmed by the hard data. And in that regards, the coming week's worth of data will be super important and it'll be fascinating. Usually, hard data tends to follow soft data.

It didn't happen, of course, in 2022, 2023. You might remember that back then a lot of people were arguing for a U.S. recession and a U.S. recession that never came because at that time, if you go back to 2022, 2023, the U.S. government basically followed a massively pro-cyclical fiscal policy. You had Biden's Inflation Reduction Act and

And the government essentially stepped on the gas and added another whatever it was, trillion dollars, trillion and a half to the US government debt. And when you have that kind of stimulus, it's pretty tough to move into a recession. Fast forward to today.

And I think, obviously, up until 48 hours ago, everybody had every right to be massively concerned about supply chain dislocations, number one. And everybody had every right to be concerned about potential fiscal tightening in the United States. You know, you had Doge going around saying, oh, we're going to cut government spending forever.

by a trillion, a trillion and a half, maybe $2 trillion. And then you turn around and say, well, actually, it's not going to be a trillion. It's more like $150 billion. And then out of the $150 billion, you have like only $27 billion of confirmed capitalists.

And then you come to the budget that was just released yesterday, which seems to show pretty big fiscal expansion. And that leaves you with, indeed, the quandary of, is this 22 all over again? Where you had the softening of the soft data, and then you got the fiscal stimulus. And as a result, the...

you know, the recession never came. I think one difference today between, from today between today and 2022 is that, 2022, 2023, is that in 2022, 2023, there was still the perception that the U.S. was the only game in town, that the only place you could invest was the United States. And the U.S. essentially kept sucking in

savings from everywhere around the world. And I don't know if that's true anymore. I look around and it seems that most foreigners are now looking, at least from all of the conversations I've had in Europe, in Asia, in Latin America, most foreigners are looking more to divest from the US than invest in the US. And here, an important point is when you look around the world,

you're actually seeing proper bull markets in a lot of places. You know, if you look at Latin America, you know, you and I have discussed this before, and I've been a big believer in the Latin American debt story. You know, you look at Latin American debt, you know, Brazil, Chile, Colombia, Mexico, Latin American debt indices are up, depending on which one you pick, anywhere from 11 to 15% for the year. And Latin American equity markets are typically up

25% for the year, whether you look at your Chile's, your Columbia's, your Brazil's, your Mexico's. So you have bull markets there. In Asia, Hong Kong, Korea are up 15%.

In Europe, your typical European index is up 20% or more. So everywhere around the world, we're all of a sudden in a situation where the S&P is doing nothing. Even with the rally of the past few weeks, it's essentially flat for the year. And I think it just turned green as we're speaking. It's now up 15 basis points for the year. But if you're a foreigner, all of a sudden it feels like the U.S. dollar is not going up.

U.S. Treasuries are definitely underperforming every bond market out there. And U.S. equities are no longer the end-all, be-all. So, you know, where big difference today relative to 22, 23 is...

You remember the old mantra that the U.S. is the cleanest dirty shirt, that it's the only sharp knife in the knife drawer, etc. I'm not sure that's true anymore. And so you're now in a situation where maybe the U.S. doesn't have a recession. Maybe the supply chain dislocation aren't that bad.

But still, you're still left in a situation where the U.S. runs twin deficits of 12% of GDP. And for the show to stay on the road, the U.S. needs to keep attracting capital from abroad. And that's easy to do when everybody is essentially sucking wind.

But now the rest of the world is not sucking wind. The rest of the world has stealth bull markets everywhere. And there's perhaps better stories everywhere. And I think we just saw that 10 days ago when you started to see the Taiwanese dollar, you know, suddenly break out to the upside. And you started to see the Korean won break out to the upside and Malaysian ringgit and the Singapore dollar.

All of this is a sign of capital coming home, which for me is really the big trend of this year is just it's just capital comes home in the face of policy uncertainty in the U.S., in the face of economic uncertainty in the U.S.,

The first reaction of a European pension fund, a Taiwanese insurance company, is say, look, you know what, I'm going to bring my money home and I'll figure out later what I do with it. This is, I think, what's happening. And, you know, it's leading to all these stealth bull markets everywhere except the U.S.

Louis, this idea of stealth bull markets other than the U.S. is very intriguing to me because I think it invites the question as to whether we're seeing the beginning of a permanent change. In other words, if you were to say, OK, well, look, the U.S. is aggressively negotiating tariffs with China and other nations as leading to lots of volatility. The U.S. markets are underperforming Europe and other markets.

while this is going on. Okay, that makes perfect sense. It's just cyclical markets. That's how they are. On the other hand, if what we're saying is that the long forecast, and I would say in many ways, long overdue conclusion, a lot of people have looked and said, boy, is the U.S. always going to be the cleanest dirty shirt? Is it always going to have that special favor of

of being everyone's favorite market to invest in? Or is it likely to become the case that changing trade policies and foreign policy are going to erode that premium of US assets so that they never have that luster again?

I know it's probably an impossible question to answer on a podcast, but are we seeing the beginning of something permanent, Louis, where this is not just a current trend in market settlements, but it's actually a structural change that the U.S. is not going to be the de facto market for everyone to invest in internationally anymore?

I don't know, permanence is a long time. And a lot of things can happen in between. I know that that's what's happening right now. And I don't see that changing in the near term. In near term, I mean the next two to five years. And maybe that's what you mean by permanent. But let me share with you an anecdote. You know, when I started my GAFCAL with my father,

back in the late 90s, my father would use a rugby analogy and he would say, look, in life, there are those who move the pianos and there are those who play the piano. And you need both to have a good concert. And then he would say, helpfully, he would say, you know, you move the piano and I play the piano. And

People typically come to and pay up the top dollar to see the piano player. They don't really care who's moved the piano in the concert hall. You pay to see the piano player. Now,

There is no doubt that for the past 15 years, the U.S. has been the piano player. The U.S. has been the attraction. It's been where the show was. It's been all the excitement. And that corresponded, I think, to two super important trends that both unfolded around

around 2007, 2008, 2009, the first super important trend was the shale revolution. The US essentially added eight million barrels per day

over the course of eight or nine years, which is, yeah, just in terms of productivity gains, it meant that the U.S. had a cheaper cost of energy than anybody else, meant a dramatic improvement in the U.S. trade balance. I mean, you know, the U.S. added almost to Saudi Arabia in less than 10 years. It's kind of mind-blowing to think of it that way. The second thing, I think, that occurred in the U.S., starting also in 2007, 2008, 2009, was the birth of the smartphone. And...

You know, the U.S. completely controlled the broader smartphone ecosystem, maybe not the manufacturing of them, but everything else, whether Apple, whether Alphabet, whether Facebook, Microsoft, they were instrumental in that smartphone ecosystem. And that drove the U.S. bull market further.

I think from roughly 2008 to 2022. And you had a typical bull market formation when you look back on it, sort of grinding, grinding higher. And then the last two years you get fiscal stimulus, you get monetary policy stimulus.

and the thing goes absolutely bananas. And this is when you had complete stupid behavior in markets. You know, the monkey JPEGs trading for millions of dollars, the GameStop and AMC and all that stuff. It was very reminiscent for people our generation, Eric, it was very reminiscent of the whole dot-com thing of the late 90s, right? It

It felt very much like that. So then 2022, it hits the skids and you think, okay, well, that's over. And then in 23, 24, you get a huge second wind again, thanks to AI. It's like, oh, okay, there's a new third pillar to this US exceptionalism story. This great piano player has come out with yet a new album, which is even better than the previous ones. It's called Artificial Intelligence and it's going to change the world

as we know it. And, you know, for two years this drives the market up until the start of this year where DeepSeek comes out and essentially says, look, with a piece of string and two pieces of bubble gum, I've built this and it can compete with Chad GPT, it can compete with Gemini, and

And then all of a sudden, everybody realizes that this hope and belief that AI was gonna be the new golden goose, that it was gonna lead to outsized profit just like smartphones did, that is actually not gonna happen. Because the story of the past 20 years

is that the last thing you want to do in life is compete with China. You know my old saying that when China enters a room, profits walk out. Well, this is what happened this year. China entered the AI room and essentially blew up any hopes and ambitions that AI was either going to be both an American monopoly, like the smartphones had been, and that it was going to lead to outsized profits. Instead, it

It just looked like AI was just gonna lead to outsized CapEx that now would probably need to be written off. Now, that was the first sort of shaking to the story of the US exceptionalism. I think the second shaking, of course, comes with President Trump and the constant changing of rules. Most investors, most entrepreneurs, most business people just want to know what the rules are. They want to know what the rules are, then they choose to invest or not, and they get on with it.

an environment where rules change on a whim is reminiscent of emerging markets. It's reminiscent of, you know, frankly, just bad times and leads to assets de-rating. So, you know, I think this explains the sort of first five months of this year. And it's led to this situation where, based with the policy uncertainty of the U.S.,

Faced with the fact that, you know, the U.S. exceptionalism story doesn't really have a new growth driver anymore. Investors are just bringing money home and deciding I'm bringing money home and I'll figure it out later. And that's I think that's that's where we are right now in this cycle. And then you have to wonder, you know, to your question, is it permanent? Well, no.

I think to revive the whole US exceptionalism story, revive the whole, I'm going to go see the US pianist because all the other ones are no good. You need...

one of three things to happen. The first possible thing to happen is for Europe to implode and everybody to panic and all this money that has started to come back, all the European savings that have started to come back into Europe to say, oh, I knew it. These guys are hapless. I shouldn't be invested here, et cetera. Now, I...

I'm the first one to beat up on Europe. As a Frenchman, people always tend to be bearish on their own countries. But I look at Europe today and given the low energy costs on the one hand,

Given the fact that bank loans are accelerating, given the fact that bank shares are outperforming everything, given the fact that we're having fiscal stimulus now across Europe, this doesn't seem to me like the kind of backdrop where Europe is going to implode. Usually, Europe struggles when energy prices are very high. This is not the case today.

So that's not going to happen. The second thing that could happen to revive the, oh my God, I got to put all my money in the US trade, is for China to implode. But here again, you have a situation not that dissimilar to Europe, where bank loans are expanding, where you get fiscal stimulus in China, where...

Energy prices are low and China's obviously the biggest energy importer in the world. So none of this seems to point towards China hitting the skids. So then you're left with third possibility to revive the excitement around the United States, which is that the US comes up with a new invention, something new to get excited about.

And something as big as either the smartphones or the shell revolution or the launch of AI back in 23. And you can never, you know, and that's why I said permanence is a long time when you ask the question, because I don't think you can ever write off the U.S.'s capacity to do this, the U.S.'s capacity to come up with something new, cool, and exciting. Right now, I don't see what it is. I'll be honest, I struggle to see what it is. But it doesn't mean it can't happen. It might just be me lacking imagination.

It seems to me that energy is going to have to enter this equation sooner or later. Something Dr. Anas Al-Hajji told me last week is although right now is a time of low and perhaps headed lower oil prices, Anas thinks that the U.S. shale revolution has pretty much played out in terms of its ability to offset the

declining production elsewhere in the world and that that's going to change things going forward. It seems to me like that plus the fact that everybody, as you just said, has already figured out that AI is a really big, important part of the future.

It feels like we may be headed toward a moment of reckoning where everybody kind of picks up those pieces. You talked about bringing the Capitol home and figuring out what to do with it after you get it there. At some point, are we headed toward a moment of reckoning where everybody says, oh, now that I'm home, I got to figure out what the energy situation looks like in my country compared to every place else, because that's going to be the next big squeeze.

I 100% agree, and I think so. Now, first, before I go there, let me just say that amongst all your regular guests, and you have terrific guests, when you invite Anis to speak, I always listen to it almost immediately. He's a font of wisdom on such an important part of the economy. As I never tire pointing out, most economic activity is energy transformed.

which is one of the reasons why right now I struggle to be too bearish. With a low price of energy, what it is, that is going to be supportive of growth in most countries, especially in countries that import a lot of energy, which is the case, of course, of China, of India, of most of the ASEAN countries, of most of Europe. Right now,

The reality is if you're a central banker in most emerging market countries, imagine you're the central banker of South Africa, of Chile, you're in a situation where you look at the world and you think, okay, I've got low energy prices, I have low food prices, I have a weakening US dollar, and I have China and Europe stimulating. For most of these guys, that's Christmas come early, right? What else could you ask for? This is about as good as it gets.

And which is why, you know, historically, the cure to low energy prices is low energy prices, just like the cure to high energy prices is high energy prices. I think we're now, when I look at most emerging markets, we're now in a situation where almost everywhere you're getting fiscal and monetary policy stimulus. And yes, to your point, that is not bearish energy. And yes, I think the very important point you make is a lot of countries are

are gonna be looking at what they've been doing over the past years, how they've managed their reserves, and what they should do going forward. I think that for decades, for basically your entire career and my entire career,

If you were Indonesia or Thailand or China, Korea or anybody, and you earned U.S. dollar, almost by default, you tended to buy U.S. treasuries. It was sort of, yeah, that's what the guy before me at the central bank did, so I'll just keep doing that. And

As you and I discussed in the past, that changed in 22. It changed for two reasons. First, and very obviously, we seized the Russian, we being the Western world, seized the Russian assets. And when we did that, all of a sudden, we increased the risk for a lot of countries of running U.S. treasuries.

The feeling became, well, if the U.S. can just grab my U.S. treasuries whenever they want, then these assets aren't the safe assets I thought they were. I think the second thing that happened in 2022 that I've already mentioned is that the U.S. went on a massive pro-cyclical fiscal bender where the

Nominal GDP growth in the US was running at eight, nine, 10%. Unemployment was below four. And the Biden administration decided, you know what, let's step on the gas. Let's increase the budget deficits. And that made a lot of bondholders feel like a mug. It's like, okay, I understand that you might do fiscal stimulus in a downturn, but doing it in an upturn, why am I stuck here holding these bonds? And so they turned around and I think countries did one of two things.

If you were a non-democracy, if you were Saudi Arabia, if you were China, you started to buy gold and buy gold in size. You know, Saudi Arabia bought like $170 billion over two years. So that was one way to recycle your excess dollars.

The other way, which is what the Swiss National Bank did or Norges Pension Fund did and others, is to say, well, I don't want U.S. treasuries anymore, but tell you what, Microsoft and Apple and Amazon, they're just like U.S. treasuries. They're massive, they're liquid, and they're better than U.S. treasuries because they're actually...

have the ability to increase prices as inflation accelerates. So everybody, well, not everybody, but a lot of people turn to U.S. mega cap stocks as a proxy for the money that used to be recycled in U.S. treasuries. And these mega cap stocks, you know, well, the total U.S. market cap in three years moved from $40 trillion to $60 trillion. You know, absolutely mind blowing. You know, you've never seen in three years

20 trillion added to the global market cap, let alone in just one market, the United States. So as the excess dollar recycling all started to focus on the top 30 market caps in the U.S., valuations went berserk.

So this brings you to today where that trend is ending, where the excess dollars are still going into gold. But you have to wonder to the very point you made where whether you're going to reach the point where countries like France or again, Thailand or China will say, you know what? Instead of gold, maybe I should just stockpile copper. Maybe I should stockpile oil. Maybe I should stockpile gold.

soybeans, or do like China and have a frozen pork reserve. Gold has outperformed every commodity by so much. I think one ounce of gold now buys 55 barrels of oil, which is about as extreme as it's ever been. Does it not make sense to store your excess dollars in these other commodities? Now granted, these other commodities, there's a cost to storing them, but

That brings me to the last point, which is that another super important development of 2025 is how the US turned to the rest of the world, but especially to Europe, and said, look, we're

We're done securing your national security and don't count on us to, and don't count on our Navy to deliver oil to you in a crisis like you counted in the past. Or if you're going to rely on us, then be ready to pay up for it. Essentially, that was the tenure of J.D. Vance's speech at Munich, right? J.D. Vance came to Munich to break up with Europe. Now,

Usually when you break up with someone, you have the courtesy of saying, "Oh, it's not you, it's me. "I'm going through things right now," whatever. JD Vance had no pretense. He came out and said, "I'm breaking up with you "'cause you're fat, you're lazy, and you're stupid."

and laid into Europe. But if you're Europe, from there, what's the conclusion? The conclusion is not only can I no longer rely on the U.S. security umbrella, I also can't rely on the U.S. delivering commodities to me at a time of crisis. So the logical conclusion is the one you just drew. All these guys should be building up commodity stockpiles for oil, for copper. And perhaps the first step was to say, okay, I'll buy gold. Instead of buying U.S. treasuries, I'll now buy gold.

But given the price differentials, I think we're going to start moving to a world in which you are going to start to see stockpiling everywhere happen. Let's talk a little bit more about that and what it means for the price of gold. Because as you just said, we've reached a gold oil ratio, which is at historic extremes. If we get to other ratios, gold to other assets at those extremes, it really suggests that

that the gold market is overdone and maybe overdue for a retrace to some extent. On the other hand, it's likewise pretty easy to make the argument that, boy, everybody seems like they're walking away from U.S. dollars in favor of gold. So should I be bullish, speculatively, that gold is headed up another few thousand from here? Or should I be worried that the blow-off top is overdue and that it's time to get out of gold?

It's a very tough one. Now, to your point on gold relative to other assets, I think we're there. You look at the gold-copper ratio is at all-time highs. If you look at gold, the price of a median house in the United States in terms of gold ounces, that's also at a low, right? So that's the extreme. If you look at...

the average weekly earnings of U.S. employees, historically, on average, it takes about 1.2 weeks for the average weekly earnings of U.S. employees to buy an ounce of gold. Today, we're at over three times. So on all the sort of historical matrix, gold is expensive. But then we get to the argument you just made, which is that essentially it's different this time. We're not in the usual cycle. And

That, you know, given the de-dollarization trend, you know, given that you now have China openly advocating around the world for moving trade away from being settled in U.S. dollars to being settled in local currency and the settlement to happen in gold with China saying, look, we're going to open Shanghai up.

metals exchange branches in Saudi Arabia and in Dubai and in Zurich and in Singapore. And so we can settle our trade over there for gold, given that you're now looking at a world where not only are central banks buying, but ETFs have started to buy. For the past few years, ETFs were actually net sellers of gold as retail was getting rid of it. But that now seems to be over.

And you're left scratching your head with who's going to be the marginal seller of gold from here on out. So the bottom line is the problem you've just highlighted, which is that, yes, gold is expensive. And yes, it's different this time. But then, you know, you and I have been around a few cycles.

When things get expensive, it's always what you hear at the top of cycles, right? You always hear it's different this time, whether it be tech stocks in 1999, whether it be pictures of JPEGs of monkeys in 2022. People will argue with a lot of passion and a lot of credibility that it is different this time. Now, I do believe it is different this time for gold. So I would definitely not short it.

and I still own some personally. What I personally have been doing

in the past couple of months as gold has continued to shoot up is sell some of my gold for other assets, for other commodities, specifically for both energy and for copper. I think that if we're now entering a world in which global trade does continue to expand, thanks in part to the world moving away from the US dollar, I think this will be essentially bullish energy, it'll be essentially bullish copper.

I remain decently optimistic and the way I'd express this optimism at this point is perhaps more through the other commodities than with gold. But I still own some because I think when you reach these blow-off phases where we are now, it can go very high. A lot of people were arguing, "Oh, back in 1999, NASDAQ at 2,500 is too expensive." And then within six months, it went to 5,000.

I wouldn't be surprised if we see something like that for gold. Yes, at $3,500 or $3,400, it starts to get expensive. I still think the odds that we see $5,000 in the next 12 months are actually decently high. You said that you're starting to rotate out of gold into both base metals like copper and also into energy. Are you buying oil or are you buying uranium on the energy side?

I've been buying more oil, to be honest. I do have, you know, you and I discussed this last time. I do have a little bit of uranium positions and I'm a long-term structural bull, but I

I think that the value on offer today in a lot of the energy names, a lot of the energy companies is really quite compelling. Now, granted, you could say at 60 bucks, few of these guys make money, but you get back to 75 and a lot of these guys after tightening their belt, after really constraining a CapEx, et cetera, a lot of these guys at 75 bucks will start spitting out money. So in recent weeks, I've been buying

To be honest, I've been buying copper miners and energy miners and energy producers. Sorry. Louis, let's come back to China because that's so near and dear to your interests with Gavcal and you've got really good exposure to it. Tell me a little bit more about how we should be interpreting the situation in China, independent of the part of this everybody's focused on, which is obviously the Trump trade negotiations. Right.

We've been hearing China's economy is strong. We've been hearing China is headed toward an absolute real estate disaster bust situation. Now, which is it? What should we be looking at independent of the tariff negotiations to understand where China's economy is headed next and what it's going to mean for the rest of the world? Tough one in a few minutes, but I'll give it a shot.

So to answer your point, is it a real estate bust? Is the Chinese economy booming? The answer is it's actually both. Obviously, the Chinese economy is massive. It's the second biggest in the world. So when you're that big, you could point to many different trends and you can point to lots of contradictions and you can prove whatever point you want to prove.

For me personally, the way to understand where you are today is you have to go back to 2018. In 2018, the U.S. launched its semiconductor embargo against China. And to be honest, I think that the Chinese leadership essentially freaked out. They panicked.

They thought if they can embargo semiconductors today, tomorrow it could be auto parts, it could be petrochemical products. Clearly, the US is trying to stifle our growth. They're trying to crush us. So we have no choice but to become independent, resilient, self-sufficient in every single industrial vertical. And so in 2018, the order was given to the banks, normal loans to real estate,

From now on, you only lend money to industry. And so you saw a massive real estate bust. And if you picked up during that time, your Wall Street Journal, your FT, wherever you get your news, more often than not, if it was an article on China, it was about the unfolding real estate bust.

which was very real. More than 70 property developers defaulted on their debt. Real estate prices went down by 30% in most big cities. It really constrained consumer spending because a lot of people took big balance sheet hits, so on and so forth. But at the same time, money was pouring into industry. And I think

As everybody was running around saying China's doomed, China's doomed, they forgot that bit. And now suddenly we wake up to a world in which China has leapfrogged the West in industry after industry. It's leapfrogged the West in auto production and in petrochemicals and in

power plants, turbines, industrial robots, you name it, China is now producing not only at a cheaper level than the West, that was always the case, but very often at a higher quality level, which I think is something that most Western investors still have a hard time getting their head around.

because it goes against all the prejudices that most people have about China, that it's just a low-cost producer. But I think, you know, Jack Farley, the Ford CEO, gave a two-page interview to the Wall Street Journal following his China visit back in September, where he stated very clearly that the challenge for Ford and other Western producers, auto producers, was now to produce to the same quality levels as the Chinese, which is kind of a mind-blowing statement when you think of it. So,

This goes back to your point, is it real estate implosion? Is it a booming economy? The answer is it's both. Having said that, I think in the past nine, 12 months, you've started to see a paradigm shift in China where

Well, for six, seven, eight years, policy was all about how do we cushion our economy against U.S. attacks. Now that, you know, essentially the trade war is full on, the focus of policy has shifted to, okay, how do we stimulate our economy and get things going again for the man in the street? Because if seven years ago the problem was the U.S. embargo,

Now, the new problem is collapsing marriage rates, collapsing birth rates, and essentially millennials that are failing to launch because of lack of job prospects, because their balance sheet is being blown up. And so if you look in...

In 2018, China had 18 million births. Last year, China had nine and a half million births. So you've had the birth rate effectively halve in less than a decade. This is an epic collapse. You've had epic collapses like this before. You had an epic collapse. The birth rate halved during the Great Leap Forward, but back then, people were literally starving. You had a collapse, again, like that during the Cultural Revolution.

But this is one that is happening without a massive crisis like cultural revolution and Great Leap Forward. And it's a real problem for the government because if it continues to collapse, that means that in 20 years, 50 years, you really don't have much of a country. So the policy focus is very, very visibly shifted.

And the rhetoric you get from the government is now no longer, let's cushion our economy against U.S. attacks, but let's get consumption going again. Let's get birth rate going again. Now, on this, I think there's massive frustration amongst Western investors because they hear the government say, OK, you know, consumption is now our focus. And Western investors think, oh, terrific, great news. Perfect. Let's get behind that. This is, you know,

We like it. Then Western investors turn around and say, so what are you doing about it? And the Chinese government says, we want consumption to go higher. Western investors say, yeah, sure. We heard you the first time. What are you doing about it? But I think the misperception here is really how

policy happens in China. The way policy happens in China is that the central government points to a direction and then it's up to the local authorities and very often the banks to do all the hard work and to get you there. Take electric vehicles as an example. Six, seven years ago, Xi Jinping says we need to be number one in electric vehicles. Now, this doesn't mean that the Ministry of Industry wrote a huge subsidy check to BYD. Instead,

It's meant that if I was the mayor of Shanghai or the provincial governor of Guangzhou or the party secretary in Zhejiang province,

I would pick up my phone and I would say, hey, Agricultural Bank of China or ICBC or whoever else, lend money to my local car producer because he needs to transform himself into an EV producer. And before you know it, you got 130 EV makers in China. You have all competing with each other. And that means that for the end consumer, it's a good deal. They get cheap cars and cars.

better and better quality. And this is how policy happens in China. It was the same in 2008 when the government said, okay, you know what, there's a big slowdown globally. We're going to boost infrastructure spending. It was really up to the local authorities to load up their balance sheet with debt and fund local ports and local airports and local motorways and whatever else and subways and, you know, all the infrastructure that happened then.

Today, you're seeing the same thing, but you're seeing it on consumption. So every municipality is now out there giving coupons to their local consumers. You know, Wuhan is doing cash for clunkers. Guangdong is doing coupons to buy home appliances.

Everybody tries different things. The end result is, does it work? Well, it's still pretty recent to say, but one of my favorite data points in China, one that we monitor carefully, is all the tourism data. And we monitor it because you actually get really good numbers on train journeys and on airplane journeys and a number of hotel rooms booked because all these things is official data and data.

and you get it pretty quickly. And here the good news is if you look at the latest golden week around May Day holiday, so the first week of May, you had a 6.9% increase in tourism spending, which came in better than expected. And it's perhaps an indication that things are on demand. Tourism is one of these things that

is highly discretionary. You know, you don't need to go do some tourism. You do it because you've got some money left over. So I do think that the combination of, you know, real estate prices that are no longer falling, you know, to be honest, the affordability ratio that has improved dramatically in China as mortgage rates have gone from six to three, as real estate prices have fallen, combination of all the vouchers they're receiving, combination of

low energy, low food. You put all that into the brew and yeah, the consumer is starting to feel a little bit better in China after, frankly, a pretty hellish seven or eight years.

You talked about how Westerners and others around the world, for that matter, are going to have to get used to the idea that competing with China means competing with a high-quality manufacturer. China has gotten really good at doing high-quality, quality-controlled, high-precision manufacturing, things that we used to stereotypically think they were not good at, they've become very good at.

I'm going to make the prediction that over the next 20 years, something else that they're going to be incredibly good at on a relative basis is energy policy. I think China is going to have, just as they've enjoyed a much lower cost of labor in the past, they're going to enjoy a much lower cost of energy for manufacturing in the future because they're just being smarter than the rest of the world is about their nuclear energy policy and about energy policy generally.

If I'm right about that, the rest of the world is not going to just cheer and celebrate and say, oh, it's wonderful that China has been so successful with these things. They're going to say it's unfair. It's not right. We should impose tariffs. We should do something. How would you see that playing out? What would the consequences be for the global economy if, as I predict, China is just set to have better energy economics than other countries in the future?

In some regions, we're kind of there already. Maybe not 100%, but you look at during the summer months, a province like Shandong has put in so much solar power that in the summer months during the daytime, you essentially get free electricity because they just have too much of it and they don't know what to do with it. So we're not quite 100% there, but we will get there. Look, the reality...

is all this, as a country becomes as competitive as China, and today it is crazy competitive. You have a trade surplus of 1.1, 1.2 trillion US dollars, which to put things in perspective, the surplus of China, not China's trade, the surplus is roughly 4% of global trade, which is stupid. That's so far out of whack relative to whatever we've seen through history.

logically what should happen is the currency should bear the brunt of that adjustment. As China gets more and more competitive, whether because of the efficiencies that you get from massive supply chains, whether because of the low cost of energy, whether because of the low cost of capital or the low cost of labor, it does seem that most of China's input prices are lower than most other countries.

which just comes down to the fact that the renminbi is just stupidly cheap. That's the big anomaly in our system. And I always tell everyone, you know, when people tell me, oh, the renminbi's got a deep value, I always say, when was the last time you were in China? Because if you've been in China in recent years, and especially since after the COVID reopening, I mean, you can't spend money if you try. Like right now, you go to Beijing, you go to Shanghai, you can stay out the four seasons forever.

for like, like for 200 bucks. You know, our own office in Beijing is in Sanlitun, which is the sort of fancy neighborhood of Beijing. It's where all the embassies are, et cetera. And where we're sort of, our building is in a complex where there's the intercontinental. So that's where I usually stay when I'm there. And last time I was there, my hotel room was like 90 US dollars at the intercontinental. Now,

try finding a room for 90 US dollars in any major western city that's not a complete hovel. And even the hovels probably go for more than 90 dollars at this point in cities like London or New York City.

The bottom line is, you know, either the renminbi is going to have to go up or to your point, countries are going to impose tariffs on China to rebalance things because things are too out of whack. And to be honest, that's my frustration with this whole trade war thing is that I think there was an opportunity to put Japan, Korea, Taiwan together.

China in a room. I think that's what Scott Besant wanted to do. That's why he talked about the Mar-a-Lago Accords. I think there was an opportunity to put everybody in the room

and say, guys, your currencies are way out of whack. Your currencies are way, way too undervalued. You have to bring them back up. And if you don't, we'll put on tariffs. But if there's a nice way to do this and a mean way to do this, let's go for the nice way. And it's the old story, you don't catch flies with vinegar. And I think that opportunity that was there was sort of

you know, spoiled by the whole, we're going to use a formula from Chet GPT and punish everybody and their penguins. And so it's a shame because it's an opportunity, but that's where we eventually need to go. The renminbi needs to go up. The Asian currencies need to go up.

Now, this may have started. You've seen the Taiwanese dollar move, you've seen the Korean dollar move, the ringgits, the Sing dollar. The renminbi is now sort of pushing higher. And if that's the case, then, you know, we're...

the next big trend for the markets will probably be an Asian triple merit scenario of rising exchange rate, falling real interest rates, which is a very powerful combo for asset prices. So asset prices tend to go up. Maybe that's what we're starting in Asia. And if we are, then there's a lot to be optimistic about. But if we end up down the path of, oh, let's just punish China with a lot of tariffs,

I'm not sure that, A, that will work. I'm not sure that'll do much good because there'll always be countries out there that will be very happy to have a cheap Chinese car or a cheap Chinese nuclear power plant or a cheap Chinese industrial robot. You know, most emerging market countries are very happy to have these things and are still doing these things. You know, Chinese exports are

For the month of April, we're up 8% year-on-year, with 20% year-on-year gains in India, 28% year-on-year gains in Indonesia. In those countries, China is essentially helping these countries industrialize on the cheap and on credit. And I don't think they'll stop because the US doesn't like it. So...

So hopefully the good path would be for China to revalue. If it doesn't, we end up with a global economy that's completely out of whack. Well, Louis, I can't thank you enough, as always, for a terrific interview. But before I let you go, please tell our listeners a little bit more about what you do at GavCal, what services are on offer for institutional investors, and where people can follow your work and the books that you've written.

Well, how much time do you have? Thanks a bunch for having me. The best place to find out about what we do is on our website. It's gavkal.com. That's G-A-V-E-K-A-L. We started off as a firm publishing research for institutional investors, and that is still very much part of our DNA. We still publish a ton every day. And

and we moved into different directions. Yes, sorry, out of this publishing of research, we will write books every now and then. I'm probably overdue. My last one came out in 2021, so I'm probably overdue a book. I've got one in my head that I need to put on paper. I'm hoping to do this over the course of the summer.

We also manage money for, we have an asset management arm. We have a different Chinese fixed income strategy from, you know, high yield to, uh, to government bonds. We have a Latin American debt, uh, fixed income strategy. We have an Asian equity fund. So we do, we do different things on, on the fixed income front. And then finally we, uh,

We have investments in two private wealth businesses, one based in the U.S. and one based in Mauritius. So if you're, you know, if you go to our website, you can find all that information. And depending who you are and what you're looking for, hopefully the website is designed well enough that you can find it. Patrick Ceresna and I will be back as Macro Voices continues right here at MacroVoices.com. Macro Voices

Now, back to your hosts, Eric Townsend and Patrick Ceresna. Eric, it was great to have Louis back on the show. Now let's get to that chart deck. Listeners, you're going to find the download link for the postgame chart deck in your Research Roundup email. If you don't have a Research Roundup email, that means you have not yet registered at Macrovoices.com. Just go to our homepage, Macrovoices.com, and click on the red button over Louis' picture saying, looking for the downloads.

All right, Eric, let's start off with the equities. What are your thoughts here? Well, Patrick, the overarching market big picture this week, of course, is President Trump surprising everyone yet again with the weekend news that China and the U.S. are now going to have a 90-day ceasefire in effect.

on tariffs. Patrick, as I contemplate all of the different responses that I've heard to this news this week, I think our friend Michael Every is probably the most prescient commenter that I've seen, at least what he said on X, which I'll summarize as basically, for heaven's sakes, people, the only sensible move here is to assume that the volatility and turbulence has only just begun and that there's another wave of it coming.

What that wave is, is it up or down or what's it going to be? We don't know. But we know that President Trump is not done changing things and potentially breaking a few things along the way.

So I haven't turned bullish as a result of this news. I would say I'm just lamenting the realization that I need now to roll my June E-mini put spreads into September because my hedging window isn't going to be long enough now that I realize how this market is evolving. I think that the downside risk is still there in equities, but I think it's likely to take all summer to play out as opposed to happening in the next few weeks or

as I had previously been thinking. Note, however, that all of this seems to change about every weekend or so when we get the latest surprise news as to what President Trump did for his weekend adventure. So let's see what next weekend brings, and maybe it'll all be back in the other direction again.

I'm going to echo your sentiments because I do think that the time frame has now all shifted forward. Our initial analog was that this was a bear market rally and that there would be a re-resumption in the sell cycle and often bear market rallies would last about one to two months.

Now that we've seen this entire period kind of ease off on the pressure on the market, and more importantly, that we've beaten a lot of the key technical hurdles, we're

This puts the market into a neutral zone, one where the dominant sell cycle doesn't have this negative feedback loop that just creates a selling beginning, more selling and distribution. So now that we're up here, the market has almost got to go through another little topping formation rolling over. The likelihood of a double top retest is

is entirely on the table and the uh but will we see something more bullish than that i'm holding out to see more information but at this stage uh the upside of a couple hundred s p points over the course of the rest of may is entirely plausible with that said my bigger picture view just hasn't changed ultimately we're at a moment where the market has got a

put a topping formation in and that another bigger distribution cycle is very likely but the risk of it coming in May and June has materially diminished and the likelihood of it now being pushed out into that July, August, September period is

is much more likely. And so we just have to now change our timeframes and reduce the expectations of something more bearish immediately. And we do have the option expiration coming up this weekend. Sometimes when some of that gamma gets rolled off,

they could lead to some distribution. We did see an incredibly strong two, three week impulse. So it would be very typical to see a 100 or 200 S&P point pullback. But at this stage, that would likely only test

the 50-day moving average and more than likely the bulls will defend it on first test and create some sort of a bounce back to the words of top of the range making the month of may and maybe early june far more trade range bound than in other periods all right eric let's move on to the us dollar well

Well, Patrick, the counter trend relief rally in the Dixie that we've been speculating might be coming for the last few weeks. It's finally upon us. The question is how far it has to run before the primary downtrend resumes, which is my base case for how this happens. We go up.

for a while and then we go down. Are we done going up? We still have a little bit further to go up. I'm not sure, but I think we eventually go down when this plays out. To be sure, though, the Trump tariff curveball helped this dollar bounce. And depending on how that news shapes up, whether we have any opposite direction news coming next weekend will all contribute to what happens next. So let's keep our eye on the tape.

Well, I have that chart of the U.S. dollar index on page three. And what you can observe is that that dollar bounce came straight to the typical 50 plus percent retracement toward the 50 day moving average in a very typical reaction to an oversold market move. This bounce now has come to that resistance level where if the prevailing downtrend remains the dominant one,

then this becomes the level where it's vulnerable for the resumption of the sell cycle back to the bottom end of this range. And so we're at this stage still respecting that the prevailing bear trend in the dollar is the path of least resistance.

And at this moment, vulnerability of it heading a minimum for a double bottom retest is possible. We haven't seen real bottoming formations or any basing formations that are very typical evident before a trend shift. And so at this moment, we're going to respect that prevailing downtrend.

All right, Eric, let's move on to crude oil. Well, Patrick, it looks like the rally in WTI crude may be stalling out right around the 50-day moving average, which is coincidentally around the same level as the April highs, right around $64. Patrick, what do you make of the chart?

Well, Eric, technically that sell-off that we had the other week that brought us for a direct double bottom retest of the low had all the opportunity of breaking down to the low 50s, even $50 on the downside. Right?

Rather, it bounced off that previous support and completely erased the last round of settling in one fluid motion to the upside. This starts to resemble that of a double bottom formation.

Now, are we above the 50-day moving average? Have we seen a new bull trend forming? No, but we are 900 basis points off of that low. And now we're in a situation where if the market stops making lower lows and we start seeing accumulation forming, if we see a breakout into the mid to high 60s above that 50-day moving average,

This might be the first bullish price action that we've seen legitimately in oil in over a year. Will that happen? It's the puzzle to solve. And we'll be watching over the next couple of weeks how this plays out.

All right, Eric, on page five, I have that chart of gold and this is reversed quite a bit. What's your thoughts here? Well, Patrick, it's make or break time for gold with Wednesday's close right on the must hold levels, technical levels just below 3200. So what we would expect to happen from here is either we should see a reversal, a bounce higher or

or we should see an acceleration of selling to the downside in the case of a failure at this key support level that we're on. We'll probably know by the time you hear this podcast on Thursday, 3,200 was the key pivot level. We're likely to have moved considerably beyond that number in one direction or the other by the time you've heard this podcast in the next day or two. That's going to be the tell for the next leg in the market, whether or not

that Keith's support held just below 3,200, right around 3,175, 3,180 on the June delivery contract. Yeah, the 3,200 level is very interesting on the short term. It's the 50-day moving average. It's also where the 61.8 retracement of the April rally lies. Now, if the bulls can hold this area and

and get this back above $3,300, then the prevailing bull trend remains intact.

But that's got to really hold here and now. Now, let's go talk about the other scenario, the scenario that we're going to entering some sort of a big overdue market correction to the downside. Well, here we have gold having done a double top retest. And if we turn around and have a breakdown below $3,200, then a typical market correction would last one to even two months in length

and we could see retracements all the way down to $2,900 to $3,000 on the downside. Now, that in itself I don't think would be a new bear market. That would simply be the gold market pausing after a very extraordinary six-month run on the upside. And so it consolidating, staying at or around $3,000 for a month or two would simply reset the very overbought conditions in gold market

and create the next key buying opportunity. But will that correction now happen? It's all about this 3200 level you just talked about. So let's see what happens over the course of the next week.

All right, Eric, let's touch on uranium. Well, Patrick, we're finally starting to see positive nuclear news flow produce positive market reactions, and that's a welcome change as far as I'm concerned. Seems like the hate for uranium is finally gone. I hate to call bottoms because you're just asking for trouble, but it sure feels to me like the bottom is in and we've

at least seen a substantial new move here. I think that if we had broader market risk on event, that could be the one thing that might turn this around and get us to still a new lower low. But I don't think that's going to happen, Patrick, because it seems to me like finally the market is waking up to the news flow and just how bullish the outlook is for nuclear energy in coming years.

Well, Eric, for months we've now been talking about how the downside selling pressure has subsided in uranium and that essentially we found a base from which uranium has kind of stabilized and all that aggressive distribution has already been washed out of the market.

So now we have a situation where is this now turned into a bull market? Is this where the basing or bottoming formation develops for the next bullish impulse? Well, look, we are getting above the 50 day moving average on the Sprott physical on page six.

This is the first sustained bullish breakout like this since September of last year. Now, September of last year was a false start. And so the puzzle to solve here is that will we see this kind of a breakout lead to a new accumulation cycle? We've got the spot U308 up in the 70s again. And so we're getting a little bit of momentum, a lot of uranium stocks coming

having retraced materially off of their worst levels. What's going to be really interesting to see is that inevitably some sort of a short-term market correction is likely to get underway. And when it does, will we see that it is bought on dip and that it doesn't make lower lows and we see the types of accumulative patterns that potentially we're seeing the turning point in that market.

Patrick, you have a chart of the 10-year Treasury note in this week's chart deck. Walk us through it.

Right Eric, so on page 7 I have the 10-year Treasury note as well as on page 8 I have the 30-year Treasury note and it's important to highlight how incredibly weak the bond market has been and when we're thinking about where potential market vulnerabilities can exist it's often in those areas that nobody is really focusing on or watching. In fact,

There's a lot of people that generally are in the camp that bonds should be bullish in this environment. And certainly with these kind of yields making these bonds attractive. But we continue to see U.S. fiscal imbalances worsening and the treasury bond markets are

are especially on the long end of the curve continuing to distribute. And we're now looking to see whether or not this is just going to be a trade range or whether we're going to see a new downtrend emerge here in these. Now, we've certainly had the basis trade decline

start throw a curveball into the bond markets and now the question is is this something that starts to feed back on itself in a negative feedback loop that causes yields to go spiking higher

And maybe that in itself could be a shock to the markets that nobody sees coming. This is not something I'm predicting, but rather something I'm watching. And we're going to see whether or not this becomes a story or not in the coming weeks. Folks, if you enjoy Patrick's chart decks, you can get them every single day of the week with a free trial of Big Picture Trading. The details are on the last pages of the slide deck or just go to bigpicturetrading.com.

Patrick, tell them what they can expect to find in this week's Research Roundup. In this week's Research Roundup, you're going to find the transcript for today's interview and the chart book we just discussed here in the postgame, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's Research Roundup. That does it for this week's episode. We appreciate all the feedback and support we're getting from our listeners.

And we're always looking for suggestions on how we can make the program even better. Now, for those of our listeners that write or blog about the markets and would like to share that content with our listeners, send us an email at researchroundupatmacrovoices.com and we will consider it for our weekly distributions.

If you have not already, follow our main account on X at Macro Voices for all the most recent updates and releases. You can also follow Eric on X at Eric S. Townsend. That's Eric spelt with a K. And you can also follow me at Patrick Ceresna. On behalf of Eric Townsend and myself, thank you for listening and we'll see you all next week.

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