1 00:00:08,320 --> 00:00:10,480 This is Market Pulse by Faster Forward from 2 00:00:10,480 --> 00:00:11,939 Northern Trust Asset Servicing, 3 00:00:12,320 --> 00:00:14,675 the podcast where experts share their insights on 4 00:00:14,675 --> 00:00:16,855 current trends in the markets and financial landscape. 5 00:00:17,394 --> 00:00:19,475 My name is Nadia Kobalovic, global head of 6 00:00:19,475 --> 00:00:21,635 Omnium Services at Northern Trust, and I'm really 7 00:00:21,635 --> 00:00:23,154 excited to be serving as the host for 8 00:00:23,154 --> 00:00:23,975 today's episode. 9 00:00:24,515 --> 00:00:27,015 Joining me for today's discussion is Grant Jonsie, 10 00:00:27,320 --> 00:00:29,800 head of client solutions, banking and markets, Americas 11 00:00:29,800 --> 00:00:32,039 at Northern Trust. Today, we'll be discussing a 12 00:00:32,039 --> 00:00:33,960 number of global macro trends that will impact 13 00:00:33,960 --> 00:00:35,899 the financial markets over the next decade. 14 00:00:36,359 --> 00:00:37,960 Grant, it's great to be here. I'm really 15 00:00:37,960 --> 00:00:39,739 excited to be here again with you today. 16 00:00:40,255 --> 00:00:42,575 In the recent market brief webinar webinars you 17 00:00:42,575 --> 00:00:44,755 hosted, you covered market outlook in detail. 18 00:00:45,134 --> 00:00:46,655 Today, I wanna talk a little bit more 19 00:00:46,655 --> 00:00:49,454 about macro trends instead, and I'd really like 20 00:00:49,454 --> 00:00:51,695 to start by discussing some data from our 21 00:00:51,695 --> 00:00:53,954 recent global asset owner peer study, 22 00:00:54,399 --> 00:00:56,560 that was titled asset owners in focus, where 23 00:00:56,560 --> 00:00:59,140 we surveyed about a 80 senior leaders. 24 00:00:59,600 --> 00:01:02,559 We asked about their external investment challenges, and 25 00:01:02,559 --> 00:01:05,299 the number one response was interest rate changes, 26 00:01:05,359 --> 00:01:08,325 which probably comes as no surprise. We're living 27 00:01:08,325 --> 00:01:10,905 in a higher for longer interest rate environment. 28 00:01:11,605 --> 00:01:13,444 But why do you think that's the case, 29 00:01:13,444 --> 00:01:13,944 and 30 00:01:14,245 --> 00:01:14,745 how 31 00:01:15,284 --> 00:01:18,165 is it reshaping global capital flows and investment 32 00:01:18,165 --> 00:01:18,665 decisions? 33 00:01:19,204 --> 00:01:20,564 And kind of a follow on to that 34 00:01:20,564 --> 00:01:22,700 as well, do you feel like that higher 35 00:01:22,700 --> 00:01:24,859 for longer interest rate environment is really based 36 00:01:24,859 --> 00:01:25,979 on the fact that we were in an 37 00:01:25,979 --> 00:01:28,539 incredibly low interest rate environment for such a 38 00:01:28,539 --> 00:01:31,340 long time? Yeah. Absolutely, Nadia. I think that's 39 00:01:31,340 --> 00:01:33,579 the key driver, and it took a lot 40 00:01:33,579 --> 00:01:35,840 of investors a couple of years to recognize 41 00:01:36,545 --> 00:01:38,064 that the interest rate environment has changed. It's 42 00:01:38,064 --> 00:01:40,224 not that interest rates today are really high 43 00:01:40,224 --> 00:01:42,305 historically, but if you think about where we 44 00:01:42,305 --> 00:01:44,305 came from, really starting in the early eighties 45 00:01:44,305 --> 00:01:46,405 from a higher interest rate environment, 46 00:01:46,784 --> 00:01:48,864 we had a period of declining interest rates 47 00:01:48,864 --> 00:01:50,465 that really took us up to about the 48 00:01:50,465 --> 00:01:51,844 global financial crisis. 49 00:01:52,200 --> 00:01:54,040 And then we had a period of very 50 00:01:54,040 --> 00:01:55,900 low and, in many cases, 51 00:01:56,280 --> 00:01:57,739 negative real rates, 52 00:01:58,200 --> 00:02:00,700 that followed the financial crisis really up until 53 00:02:01,000 --> 00:02:03,879 the, the the COVID crisis, the COVID pandemic. 54 00:02:03,879 --> 00:02:05,959 So that's taken a couple of years, I 55 00:02:05,959 --> 00:02:09,375 think, for investors to get accustomed to. We're 56 00:02:09,375 --> 00:02:10,574 still seeing it a little bit in The 57 00:02:10,574 --> 00:02:11,634 US housing market 58 00:02:11,935 --> 00:02:14,414 where there's not as much housing selling or 59 00:02:14,414 --> 00:02:16,334 buying because of the interest rate environment. But 60 00:02:16,334 --> 00:02:18,094 you're starting to see that change a little 61 00:02:18,094 --> 00:02:20,590 bit, especially in some of the the the 62 00:02:20,590 --> 00:02:22,189 regions in the Southern Part of The US 63 00:02:22,189 --> 00:02:24,129 that had more home price appreciation. 64 00:02:24,509 --> 00:02:26,590 There's more concessions there as people kinda come 65 00:02:26,590 --> 00:02:28,909 to grips with the reality that these interest 66 00:02:28,909 --> 00:02:31,169 rates people pay for mortgages in this example 67 00:02:31,229 --> 00:02:33,245 are are higher and will probably remain that 68 00:02:33,245 --> 00:02:36,044 way into the into the near to intermediate 69 00:02:36,044 --> 00:02:36,544 future. 70 00:02:37,085 --> 00:02:39,564 From a corporate standpoint, the one area that 71 00:02:39,564 --> 00:02:41,245 I really wanna be thinking about in the 72 00:02:41,245 --> 00:02:43,405 back half of twenty twenty five and into 73 00:02:43,405 --> 00:02:44,284 2026 74 00:02:44,284 --> 00:02:44,759 is 75 00:02:45,159 --> 00:02:47,439 the sheer number of corporate bonds that need 76 00:02:47,439 --> 00:02:50,120 to be rolled. So when interest rates were, 77 00:02:50,120 --> 00:02:53,019 again, marked almost to zero in the early 78 00:02:53,239 --> 00:02:54,780 throes of the COVID pandemic, 79 00:02:55,560 --> 00:02:57,979 the, there's a lot of demand from corporations 80 00:02:58,435 --> 00:03:00,114 to to borrow at those really low rates. 81 00:03:00,114 --> 00:03:02,914 Those are typically five year in in in 82 00:03:02,914 --> 00:03:05,394 in length, the the, the the the bonds 83 00:03:05,394 --> 00:03:07,235 that they issued, and those are coming due 84 00:03:07,235 --> 00:03:08,754 soon. And, of course, we have much higher 85 00:03:08,754 --> 00:03:09,574 interest rates 86 00:03:09,875 --> 00:03:11,235 right now. So there is a bit of 87 00:03:11,235 --> 00:03:12,030 a cliff of 88 00:03:12,669 --> 00:03:14,689 corporate refinancing needs to happen. 89 00:03:14,990 --> 00:03:15,969 I would imagine, 90 00:03:16,669 --> 00:03:18,430 is, you know, the through the beginning of 91 00:03:18,430 --> 00:03:20,750 twenty twenty five and and into the spring, 92 00:03:20,750 --> 00:03:22,930 we have seen a lot of share repurchases, 93 00:03:23,229 --> 00:03:25,569 a lot of corporate, buybacks of their stock. 94 00:03:26,134 --> 00:03:26,935 My guess is that'll, 95 00:03:27,414 --> 00:03:29,594 at all time highs, that'll start to decline 96 00:03:30,134 --> 00:03:33,114 as corporations start to rethink their, 97 00:03:33,414 --> 00:03:35,014 the debt side of the equation and how 98 00:03:35,014 --> 00:03:37,114 they either buy back those bonds or refinance 99 00:03:37,254 --> 00:03:39,334 them at higher rates. So I think that'll 100 00:03:39,334 --> 00:03:40,875 have some impact on on buybacks. 101 00:03:41,409 --> 00:03:43,250 How do you think with rising interest rates, 102 00:03:43,569 --> 00:03:45,889 access to liquidity and and the importance of 103 00:03:45,889 --> 00:03:48,689 access to liquidity is changing either how companies 104 00:03:48,689 --> 00:03:50,689 are adjusting their strategies or what you're hearing 105 00:03:50,689 --> 00:03:53,569 from our clients? So liquidity management did come 106 00:03:53,569 --> 00:03:55,409 up on our asset owner survey as well. 107 00:03:55,409 --> 00:03:56,985 That was a key point. And when I 108 00:03:56,985 --> 00:03:58,745 talk to a lot of institutional asset owners 109 00:03:58,745 --> 00:03:59,324 and allocators, 110 00:04:00,025 --> 00:04:02,185 liquidity comes up quite a bit as a 111 00:04:02,185 --> 00:04:04,925 as a a a challenge and an opportunity 112 00:04:04,985 --> 00:04:07,004 at the same time. It's it's an opportunity 113 00:04:07,064 --> 00:04:09,544 because now cash management has a lot more 114 00:04:09,544 --> 00:04:12,240 importance in higher interest rates. Before, people were 115 00:04:12,240 --> 00:04:14,639 accustomed to getting close to zero interest on 116 00:04:14,639 --> 00:04:16,419 their cash that they were using for 117 00:04:16,720 --> 00:04:18,740 operating purposes and so forth. Now 118 00:04:19,040 --> 00:04:20,639 you can actually get, you know, four or 119 00:04:20,639 --> 00:04:23,040 5% depending on how aggressive you wanna get 120 00:04:23,040 --> 00:04:25,245 with that cash. So you can actually get 121 00:04:25,245 --> 00:04:26,605 a a real yield on that cash. I 122 00:04:26,605 --> 00:04:27,985 think that's changed a lot. 123 00:04:28,685 --> 00:04:31,245 What I'm seeing is people are starting investors, 124 00:04:31,245 --> 00:04:33,425 institutional investors are starting to rethink 125 00:04:34,125 --> 00:04:36,365 the cash investment side of it so much 126 00:04:36,365 --> 00:04:38,539 so that it's now being viewed kind of 127 00:04:38,539 --> 00:04:41,180 as part of the fixed income continuum within 128 00:04:41,180 --> 00:04:41,919 their portfolio. 129 00:04:42,539 --> 00:04:45,759 So instead of thinking about cash entirely separately, 130 00:04:45,979 --> 00:04:47,899 which might have been the case in a 131 00:04:47,899 --> 00:04:49,120 zero interest rate environment, 132 00:04:49,819 --> 00:04:51,899 now a lot of institutional investors are actually 133 00:04:51,899 --> 00:04:54,035 thinking about that is part and parcel of 134 00:04:54,035 --> 00:04:56,194 their overall fixed income mandate. And as a 135 00:04:56,194 --> 00:04:58,115 result, we're seeing a little bit more creativity 136 00:04:58,115 --> 00:05:00,294 around liquidity, sometimes internal management, 137 00:05:00,915 --> 00:05:03,014 use of repos, etcetera. So, 138 00:05:03,314 --> 00:05:05,875 that's that's definitely changing. And the other element 139 00:05:05,875 --> 00:05:07,814 is there's a lot of private, 140 00:05:08,680 --> 00:05:10,939 investments right now. Right? Private equity, 141 00:05:11,319 --> 00:05:12,540 private, credit, 142 00:05:13,000 --> 00:05:15,160 and alts and so forth. And there are 143 00:05:15,160 --> 00:05:17,000 capital calls associated with that. And so a 144 00:05:17,000 --> 00:05:18,680 lot of investors have to also think about 145 00:05:18,680 --> 00:05:19,180 liquidity 146 00:05:19,720 --> 00:05:21,480 to to fund those types of calls and 147 00:05:21,480 --> 00:05:23,905 those types of private investments. So that's also 148 00:05:23,905 --> 00:05:25,985 shaping the liquidity, and it's definitely an area 149 00:05:25,985 --> 00:05:27,345 where a lot of people are focused right 150 00:05:27,345 --> 00:05:28,004 now institutionally. 151 00:05:28,384 --> 00:05:29,905 So you would say cash becomes part of 152 00:05:29,905 --> 00:05:32,465 the strategy. Yes. And I'm curious, and we'll 153 00:05:32,465 --> 00:05:33,824 get into it a little bit later on, 154 00:05:33,824 --> 00:05:35,665 how FX hedging might come into play when 155 00:05:35,665 --> 00:05:37,345 we think about cash. But before we get 156 00:05:37,345 --> 00:05:37,845 there, 157 00:05:38,480 --> 00:05:40,259 another area again, probably 158 00:05:40,560 --> 00:05:42,560 not as much of a shock that came 159 00:05:42,560 --> 00:05:44,819 out of the survey was concerns around geopolitical 160 00:05:44,879 --> 00:05:45,379 risk, 161 00:05:45,759 --> 00:05:47,060 and geopolitical instability. 162 00:05:47,520 --> 00:05:49,279 What would you say is driving that heightened 163 00:05:49,279 --> 00:05:52,340 concern today? Is it ongoing conflicts, shifting alliances, 164 00:05:53,204 --> 00:05:56,004 the growing impact of global fragmentation on markets, 165 00:05:56,004 --> 00:05:57,444 maybe all of the above? What are your 166 00:05:57,444 --> 00:05:59,845 thoughts? It's all the above. I really wanna 167 00:05:59,845 --> 00:06:00,345 reframe 168 00:06:00,964 --> 00:06:02,485 the way that I think we should be 169 00:06:02,485 --> 00:06:04,985 thinking about all this geopolitical change. I mean, 170 00:06:05,230 --> 00:06:07,550 there's so much happening so fast. It it 171 00:06:07,550 --> 00:06:09,569 it seems somewhat haphazard and, 172 00:06:10,270 --> 00:06:12,750 and at times very surprising, but I think 173 00:06:12,750 --> 00:06:15,389 there's actually a a a simpler explanation for 174 00:06:15,389 --> 00:06:17,470 what's going on. And the way I see 175 00:06:17,470 --> 00:06:19,550 it right now is we are going through 176 00:06:19,550 --> 00:06:20,290 a pivot 177 00:06:20,735 --> 00:06:23,795 away from post World War two era policies. 178 00:06:24,574 --> 00:06:25,935 So if you if you take a step 179 00:06:25,935 --> 00:06:28,895 back, before World War two, the United States 180 00:06:28,895 --> 00:06:30,274 generally was isolationist 181 00:06:30,654 --> 00:06:32,574 in its foreign policy. So that goes all 182 00:06:32,574 --> 00:06:34,574 the way back to George Washington, his farewell 183 00:06:34,574 --> 00:06:37,379 speech. He he warned about getting involved in 184 00:06:37,379 --> 00:06:41,240 foreign entanglements and advised against permanent foreign alliances 185 00:06:41,379 --> 00:06:43,699 with other nations and countries. And The US, 186 00:06:43,699 --> 00:06:45,620 by and large, kept that policy up until 187 00:06:45,620 --> 00:06:47,779 about World War two. And even on the 188 00:06:47,779 --> 00:06:50,019 eve of the Pearl Harbor attack, the US 189 00:06:50,019 --> 00:06:50,519 population 190 00:06:51,784 --> 00:06:54,185 was, by and large, against getting involved in 191 00:06:54,185 --> 00:06:56,824 the war, even though our allies were were 192 00:06:56,824 --> 00:06:58,685 under a lot of pressure at that point. 193 00:06:58,985 --> 00:07:00,745 So World War two happens. We all know 194 00:07:00,745 --> 00:07:02,264 what what what what came out of that. 195 00:07:02,264 --> 00:07:03,805 And post World War two, 196 00:07:04,449 --> 00:07:05,569 there The US, 197 00:07:05,970 --> 00:07:08,949 did not retrench back to isolation, isolationist, 198 00:07:09,329 --> 00:07:11,409 ways and policies. And the number one reason 199 00:07:11,409 --> 00:07:13,509 is that there was a an adversary, 200 00:07:13,810 --> 00:07:15,729 a superpower in the form of the Soviet 201 00:07:15,729 --> 00:07:16,229 Union 202 00:07:16,555 --> 00:07:18,394 that The US is very worried about, was 203 00:07:18,394 --> 00:07:20,235 very worried about coming back again, and so 204 00:07:20,235 --> 00:07:22,095 you had this cold war standoff. 205 00:07:22,954 --> 00:07:25,115 For The US, what the policy was at 206 00:07:25,115 --> 00:07:27,115 that time, the end of World War two, 207 00:07:27,115 --> 00:07:30,014 to to build allies and to also push 208 00:07:30,449 --> 00:07:32,709 its, you know, capitalist and democratic 209 00:07:33,089 --> 00:07:34,709 system and and and ways. 210 00:07:35,089 --> 00:07:36,470 The US offered three things. 211 00:07:37,009 --> 00:07:39,250 The first is it offered access to its 212 00:07:39,250 --> 00:07:41,490 consumers. So that's very important, largest, 213 00:07:41,810 --> 00:07:44,414 consumer base in the world. The second is 214 00:07:44,414 --> 00:07:48,034 it offered military support and cooperation. Right? So, 215 00:07:48,334 --> 00:07:49,314 and even defense, 216 00:07:49,774 --> 00:07:51,714 strategies for many regions like NATO. 217 00:07:52,254 --> 00:07:54,414 And then the third is The US offered 218 00:07:54,414 --> 00:07:56,974 four eight, and that started with a very 219 00:07:56,974 --> 00:07:59,074 ambitious and successful Marshall Plan. 220 00:07:59,500 --> 00:08:02,459 So what's happening today is The US no 221 00:08:02,459 --> 00:08:03,759 longer is going to provide 222 00:08:04,220 --> 00:08:06,080 its consumer base unfettered 223 00:08:06,620 --> 00:08:08,860 to to allies and and to world trading 224 00:08:08,860 --> 00:08:11,199 partners. It's no longer gonna provide blanket, 225 00:08:11,925 --> 00:08:12,425 defense, 226 00:08:12,964 --> 00:08:16,004 protection and and military cooperation. And, we've already 227 00:08:16,004 --> 00:08:18,085 seen with USAID. I mean, it's not looking 228 00:08:18,085 --> 00:08:19,685 to provide a lot of aid anymore. It 229 00:08:19,685 --> 00:08:21,845 it appears as though The US is now 230 00:08:21,845 --> 00:08:24,165 going into a a new era, a little 231 00:08:24,165 --> 00:08:26,085 bit more focused on The Americas and and 232 00:08:26,085 --> 00:08:27,660 and being a little bit more isolated than 233 00:08:27,660 --> 00:08:29,580 it has been on the world stage. And 234 00:08:29,580 --> 00:08:31,259 that is by and large because The US 235 00:08:31,259 --> 00:08:32,320 no longer views 236 00:08:32,779 --> 00:08:36,379 Russia as a superpower capable of of defeating 237 00:08:36,379 --> 00:08:39,179 Europe, and moving to the Atlantic. So I 238 00:08:39,179 --> 00:08:41,019 think that's a huge pivot right now that 239 00:08:41,019 --> 00:08:43,524 can explain a lot, if not all, of 240 00:08:43,524 --> 00:08:44,264 the geopolitical, 241 00:08:45,524 --> 00:08:46,105 you know, 242 00:08:46,404 --> 00:08:49,365 conflict and and, challenges that are emerging. That's 243 00:08:49,365 --> 00:08:51,524 incredibly interesting. So just in terms of the 244 00:08:51,524 --> 00:08:52,644 markets, I mean, what do you think the 245 00:08:52,644 --> 00:08:54,565 impact will be with this pivot away from 246 00:08:54,565 --> 00:08:56,470 World War two policies? Well, I the first 247 00:08:56,470 --> 00:08:58,230 is trade, and that's the most obvious everyone 248 00:08:58,230 --> 00:08:59,350 sees. When you look at what's happening in 249 00:08:59,350 --> 00:09:00,710 The US and the trade tariffs, essentially, what 250 00:09:00,710 --> 00:09:02,870 The US is saying is The US consumer 251 00:09:02,870 --> 00:09:04,389 is no longer gonna be offered as the 252 00:09:04,389 --> 00:09:07,049 world consumer. We're no longer gonna buy everything, 253 00:09:07,750 --> 00:09:10,009 in the way we have post, World War. 254 00:09:10,945 --> 00:09:12,625 That's gonna force everybody, not just The US, 255 00:09:12,625 --> 00:09:15,345 but everybody to rethink supply chains. It's gonna 256 00:09:15,345 --> 00:09:16,965 rethink, trading relationships. 257 00:09:17,424 --> 00:09:18,865 You're going to and that'll be see some 258 00:09:18,865 --> 00:09:20,384 level of trade wars. We're already seeing that. 259 00:09:20,384 --> 00:09:22,080 You're gonna see some sort of trade tariffs. 260 00:09:22,879 --> 00:09:24,879 These things are all very expected when you 261 00:09:24,879 --> 00:09:27,139 start to decouple The US consumer, 262 00:09:27,840 --> 00:09:29,279 you know, from the world, which has been 263 00:09:29,279 --> 00:09:31,360 the standard for the last eighty years. And 264 00:09:31,360 --> 00:09:33,360 I think through that, you're gonna see new 265 00:09:33,360 --> 00:09:34,899 trading partnerships emerge, 266 00:09:35,360 --> 00:09:36,100 new suppliers. 267 00:09:36,595 --> 00:09:37,975 There's gonna be a real focus, 268 00:09:38,355 --> 00:09:39,894 you know, as we move into multipolar, 269 00:09:40,434 --> 00:09:42,514 world of, you know, where who are you 270 00:09:42,514 --> 00:09:46,034 buying your essential goods and services from and 271 00:09:46,034 --> 00:09:47,875 diversifying that. So I think there's gonna be 272 00:09:47,875 --> 00:09:49,554 a real rethinking of trade. That's the first 273 00:09:49,554 --> 00:09:50,914 and most obvious, and that's the one that 274 00:09:50,914 --> 00:09:52,540 most people see. And, again, I think that's 275 00:09:52,540 --> 00:09:54,620 tied back to The US, you know, no 276 00:09:54,620 --> 00:09:55,840 longer wanting to, 277 00:09:56,220 --> 00:09:57,500 be in that sort of post World War 278 00:09:57,500 --> 00:09:59,420 two era where The US consumer was offered 279 00:09:59,420 --> 00:10:01,259 to the world. What immediately jumps to mind 280 00:10:01,259 --> 00:10:02,620 for me then is what does that mean 281 00:10:02,620 --> 00:10:03,980 for the strength of the US dollar and 282 00:10:03,980 --> 00:10:05,975 the global economy? Yeah. It did we're absolutely 283 00:10:05,975 --> 00:10:07,654 gonna see some de dollarization. They actually already 284 00:10:07,654 --> 00:10:11,014 started in 2022. So there are, three reasons 285 00:10:11,014 --> 00:10:13,274 behind the, dollar being 286 00:10:13,894 --> 00:10:15,274 used a little bit less. 287 00:10:16,455 --> 00:10:19,370 One is, frankly, the The US led the 288 00:10:19,370 --> 00:10:22,570 weaponization of the Western banking system. So we 289 00:10:22,570 --> 00:10:25,370 saw it with Russia. And when Russia attacked 290 00:10:25,370 --> 00:10:27,769 Ukraine, The US and its allies in Europe, 291 00:10:28,009 --> 00:10:28,509 primarily 292 00:10:28,970 --> 00:10:31,735 froze Russia, not just Russia, the country, but 293 00:10:31,735 --> 00:10:33,014 even a lot of the oligarchs and some 294 00:10:33,014 --> 00:10:36,215 of the population supporting Russia. Yeah. With sanctions, 295 00:10:36,215 --> 00:10:37,195 freezing assets, 296 00:10:37,575 --> 00:10:38,715 and so forth. So, 297 00:10:39,095 --> 00:10:40,855 that's the first. And at that point in 298 00:10:40,855 --> 00:10:43,355 2022, you started to see countries like China 299 00:10:43,740 --> 00:10:44,480 start to, 300 00:10:44,940 --> 00:10:47,179 buy fewer treasuries and buy a lot more 301 00:10:47,179 --> 00:10:49,100 gold for their reserves. And and in fact, 302 00:10:49,100 --> 00:10:51,659 over the last three years since the, Ukraine 303 00:10:51,659 --> 00:10:54,139 was invaded by Russia, there's been not just 304 00:10:54,139 --> 00:10:56,720 China, but a lot of Poland, India, Azerbaijan, 305 00:10:57,100 --> 00:10:59,455 Turkey have been buying a lot more gold 306 00:10:59,455 --> 00:11:00,355 for their reserves, 307 00:11:00,735 --> 00:11:03,294 to dedollarize. So that that's gonna happen. It's 308 00:11:03,294 --> 00:11:05,634 already happening because the banking system's been weaponized. 309 00:11:06,095 --> 00:11:07,855 I think it's gonna happen even more because 310 00:11:07,855 --> 00:11:09,294 you have to remember, if you think about 311 00:11:09,294 --> 00:11:11,315 just basic economics, right, 312 00:11:12,230 --> 00:11:14,730 when you have a very high trade deficit, 313 00:11:14,789 --> 00:11:16,549 that means you've got, in The US's case, 314 00:11:16,549 --> 00:11:19,029 more dollars flowing to the world, and those 315 00:11:19,029 --> 00:11:20,629 dollars are then brought back to The US 316 00:11:20,629 --> 00:11:21,690 in the form of capital. 317 00:11:22,070 --> 00:11:23,110 So right now, 318 00:11:23,509 --> 00:11:23,829 the, 319 00:11:24,389 --> 00:11:26,389 US stock market's about 25% 320 00:11:26,389 --> 00:11:29,524 foreign owned, treasuries are over 30% foreign owned, 321 00:11:29,584 --> 00:11:32,225 and investment grade credit, corporate bonds are about 322 00:11:32,225 --> 00:11:35,105 30% foreign owned. That's because those dollars get 323 00:11:35,105 --> 00:11:35,605 recycled. 324 00:11:36,144 --> 00:11:37,824 We're filming this in Chicago today. I mean, 325 00:11:37,824 --> 00:11:39,184 you look at all of our parking meters 326 00:11:39,184 --> 00:11:41,345 are owned by a consortium of global investors 327 00:11:41,345 --> 00:11:43,559 for the next fifty years. Right? So there's 328 00:11:43,559 --> 00:11:46,040 a lot of foreign ownership and capital that 329 00:11:46,040 --> 00:11:48,600 flew flew into The United States through this 330 00:11:48,600 --> 00:11:51,000 post World War two that's not gonna happen 331 00:11:51,000 --> 00:11:52,679 as much. So there's definitely gonna be de 332 00:11:52,679 --> 00:11:53,179 dollarizing. 333 00:11:53,879 --> 00:11:55,639 I think uncertainty is gonna add to that 334 00:11:55,639 --> 00:11:57,644 more. When you are uncertain, what do you 335 00:11:57,644 --> 00:11:58,845 do with your money? You bring it back 336 00:11:58,845 --> 00:11:59,345 home. 337 00:11:59,805 --> 00:12:01,485 You're not gonna put it into a country 338 00:12:01,485 --> 00:12:02,785 that's seemingly creating 339 00:12:03,165 --> 00:12:04,144 a lot of this, 340 00:12:05,085 --> 00:12:07,485 uncertainty and and a lot of this change. 341 00:12:07,485 --> 00:12:09,404 So, I do think gold is going to 342 00:12:09,404 --> 00:12:10,625 continue to rise, 343 00:12:11,720 --> 00:12:14,120 in prominence. And, yes, remember, the only other 344 00:12:14,120 --> 00:12:16,279 bank of international settlements only has two tier 345 00:12:16,279 --> 00:12:17,019 one reserve, 346 00:12:17,559 --> 00:12:19,480 currencies. It's the dollar and treasuries, and it's 347 00:12:19,480 --> 00:12:21,320 gold. So that's why I think gold will 348 00:12:21,320 --> 00:12:21,720 will, 349 00:12:22,200 --> 00:12:24,524 continue to be purchased by central banks and 350 00:12:24,605 --> 00:12:26,445 and use as a reserve. Do you think 351 00:12:26,445 --> 00:12:28,205 the US dollar then is at risk of 352 00:12:28,205 --> 00:12:30,305 continuing to be the world reserve currency? 353 00:12:30,845 --> 00:12:32,465 No. Simply because 354 00:12:32,845 --> 00:12:34,925 there's nothing to replace it. There's not enough 355 00:12:34,925 --> 00:12:37,725 gold Mhmm. In the world to be a, 356 00:12:37,965 --> 00:12:40,539 means of trade for all the all of 357 00:12:40,539 --> 00:12:42,699 the trading partners around the world. The only 358 00:12:42,699 --> 00:12:45,579 other currency that's probably big enough and stable 359 00:12:45,579 --> 00:12:47,100 enough is the euro, but it's really a 360 00:12:47,100 --> 00:12:49,740 consortium of whatever in many different countries and 361 00:12:49,740 --> 00:12:52,154 cultures and languages in Europe. So it doesn't 362 00:12:52,154 --> 00:12:54,154 have the the same gravitas as the dollar. 363 00:12:54,154 --> 00:12:56,394 So I don't see the dollar losing its 364 00:12:56,394 --> 00:12:59,434 reserve status. I see more trade being conducted 365 00:12:59,434 --> 00:13:01,995 in other currencies and maybe even gold, but 366 00:13:01,995 --> 00:13:04,154 the dollar, at least in the, you know, 367 00:13:04,154 --> 00:13:06,554 foreseeable future will and should remain as the 368 00:13:06,554 --> 00:13:07,455 reserve currency. 369 00:13:07,830 --> 00:13:09,750 So just on gold. So in a recent 370 00:13:09,750 --> 00:13:11,590 market brief webinar that you did, you talked 371 00:13:11,590 --> 00:13:13,910 a bit about, gold not always being a 372 00:13:13,910 --> 00:13:15,670 safe haven asset. Can you explain that a 373 00:13:15,670 --> 00:13:18,410 little bit? Yeah. So where people, I think, 374 00:13:18,710 --> 00:13:19,210 get 375 00:13:19,750 --> 00:13:22,315 mixed up on gold is it's unpredictable, and 376 00:13:22,315 --> 00:13:23,835 it doesn't always perform in the way that 377 00:13:23,835 --> 00:13:25,914 you would expect it. So if you look 378 00:13:25,914 --> 00:13:28,154 at most recent recessions, I mean, even COVID, 379 00:13:28,154 --> 00:13:30,315 the financial crisis, there are periods of time 380 00:13:30,315 --> 00:13:32,475 at the beginning of the financial crisis and 381 00:13:32,475 --> 00:13:34,075 at the beginning of COVID. Gold actually sold 382 00:13:34,075 --> 00:13:36,129 off. It it re it didn't rally. And 383 00:13:36,129 --> 00:13:38,209 so someone who's looking at holding gold in 384 00:13:38,209 --> 00:13:38,949 their portfolio 385 00:13:39,570 --> 00:13:43,329 to rise and offset declining values elsewhere in 386 00:13:43,329 --> 00:13:45,750 their portfolio is gonna get frustrated with gold, 387 00:13:46,129 --> 00:13:48,164 in many instances. And then you have a 388 00:13:48,164 --> 00:13:50,585 period like last year, 2024, 389 00:13:50,884 --> 00:13:53,865 when the economy was doing relatively well. Right? 390 00:13:54,004 --> 00:13:56,884 The, earnings corporate earnings in The US and, 391 00:13:57,125 --> 00:13:59,605 and other countries were generally strong to very 392 00:13:59,605 --> 00:14:02,089 strong depending on where you looked. And, yet 393 00:14:02,089 --> 00:14:03,929 gold was the number one performing asset as 394 00:14:03,929 --> 00:14:05,850 I recall last year, besting even the S 395 00:14:05,850 --> 00:14:08,009 and P 500 over that time period. So, 396 00:14:08,009 --> 00:14:09,690 you know, what was driving that? Again, that 397 00:14:09,690 --> 00:14:11,209 was causing some of the de dollarizing in 398 00:14:11,209 --> 00:14:13,289 the central bank buying of it. But unless 399 00:14:13,289 --> 00:14:15,475 you really understand gold, it can be very 400 00:14:15,475 --> 00:14:15,975 frustrating 401 00:14:16,355 --> 00:14:19,154 to own as a safe haven asset. It's 402 00:14:19,154 --> 00:14:21,475 not that it's not going to, but really 403 00:14:21,475 --> 00:14:24,054 what I wanna underscore for our clients is, 404 00:14:24,434 --> 00:14:27,235 gold is not going to offset losses in 405 00:14:27,235 --> 00:14:27,735 a, 406 00:14:28,514 --> 00:14:29,495 a a difficult 407 00:14:29,795 --> 00:14:30,295 environment. 408 00:14:31,079 --> 00:14:32,839 And if you get into gold and there's 409 00:14:32,839 --> 00:14:34,440 definitely you know, it looks like there are 410 00:14:34,440 --> 00:14:37,399 some tailwinds behind gold's continued price movement, you 411 00:14:37,399 --> 00:14:38,919 really have to understand what's driving that and 412 00:14:38,919 --> 00:14:40,839 how gold's performing. So that's why I say 413 00:14:40,839 --> 00:14:43,095 it's not always a safe haven asset and 414 00:14:43,095 --> 00:14:45,654 buy there are better ways of managing portfolio 415 00:14:45,654 --> 00:14:48,695 risk than simply buying gold. So knowing that, 416 00:14:48,695 --> 00:14:50,695 we talked a little bit about currency, and 417 00:14:50,695 --> 00:14:52,615 I mentioned that I really wanna get your 418 00:14:52,615 --> 00:14:55,034 perspective on FX hedging and and how investors 419 00:14:55,095 --> 00:14:56,955 might be thinking about FX hedging. 420 00:14:57,370 --> 00:15:00,409 With trade wars going on, currency volatility, market 421 00:15:00,409 --> 00:15:00,909 volatility, 422 00:15:01,449 --> 00:15:03,769 how do you think about FX hedging and 423 00:15:03,769 --> 00:15:05,610 and what are investors thinking and how are 424 00:15:05,610 --> 00:15:06,809 they using it as a tool in their 425 00:15:06,809 --> 00:15:08,809 portfolios? It definitely looks like we made a 426 00:15:08,809 --> 00:15:11,049 period of higher FX volatility. You're gonna see 427 00:15:11,049 --> 00:15:12,945 some secular shifts with currencies as well. 428 00:15:13,664 --> 00:15:15,745 When there are trade wars that that, break 429 00:15:15,745 --> 00:15:17,264 out and evolve, and that looks to be 430 00:15:17,345 --> 00:15:19,044 we've already got a few of those now. 431 00:15:19,424 --> 00:15:21,264 The real push, and you're seeing Donald Trump 432 00:15:21,264 --> 00:15:23,105 do this in The US, is to weaken 433 00:15:23,105 --> 00:15:23,924 one's currency. 434 00:15:24,304 --> 00:15:26,304 Because if the currency is weaker, it makes 435 00:15:26,304 --> 00:15:27,764 your goods more attractive 436 00:15:28,259 --> 00:15:30,600 to another country with a relatively, 437 00:15:30,980 --> 00:15:33,460 stronger currency. So I expect any number of 438 00:15:33,460 --> 00:15:35,639 countries may try to figure out how to 439 00:15:35,700 --> 00:15:37,000 right size their currency, 440 00:15:37,460 --> 00:15:39,700 namely by lowering it to improve their ability 441 00:15:39,700 --> 00:15:40,360 to export. 442 00:15:40,784 --> 00:15:43,264 And, and as a result, there's gonna be 443 00:15:43,264 --> 00:15:44,164 FX volatility. 444 00:15:45,345 --> 00:15:48,065 What we're really, looking at thinking about from 445 00:15:48,065 --> 00:15:50,004 the capital markets perspective is, 446 00:15:50,384 --> 00:15:52,884 not straight hedges in FX because there's volatility, 447 00:15:52,945 --> 00:15:54,865 but dynamic hedges. And so I think that's 448 00:15:54,865 --> 00:15:55,365 where, 449 00:15:56,039 --> 00:15:58,279 I would think about how to manage FX 450 00:15:58,279 --> 00:16:01,240 is we look at value. Right? So purchase 451 00:16:01,240 --> 00:16:02,059 power parity. 452 00:16:02,440 --> 00:16:03,980 We look at momentum. 453 00:16:04,360 --> 00:16:06,279 We look at the carry trade where interest 454 00:16:06,279 --> 00:16:08,995 rate differentials may be. So all those could 455 00:16:08,995 --> 00:16:12,455 factor into a dynamic FX hedging, platform 456 00:16:13,235 --> 00:16:15,075 that's probably gonna be more effective when you 457 00:16:15,075 --> 00:16:16,434 have a lot of ups and downs, 458 00:16:16,995 --> 00:16:19,394 between different currency pairs. Purchase power parity is 459 00:16:19,394 --> 00:16:21,059 a real tongue twister, isn't it? It is. 460 00:16:22,179 --> 00:16:24,820 Just, you know, you mentioned Trump, and thinking 461 00:16:24,820 --> 00:16:27,320 about and we talked a lot about volatility 462 00:16:27,460 --> 00:16:29,720 and geopolitical risk and what have you. 463 00:16:30,179 --> 00:16:32,419 What do you think about relationship with The 464 00:16:32,419 --> 00:16:34,340 US and Europe and the NATO alliance and 465 00:16:34,340 --> 00:16:35,684 just the impact that might have 466 00:16:36,404 --> 00:16:38,085 as we think about post war policies and 467 00:16:38,085 --> 00:16:40,485 where The US is positioning itself today? Yeah. 468 00:16:40,485 --> 00:16:42,644 That's another big shift that's gonna happen from 469 00:16:42,644 --> 00:16:44,745 this end of the post World War two, 470 00:16:45,044 --> 00:16:45,544 era. 471 00:16:46,085 --> 00:16:47,845 So in you know, at the end of 472 00:16:47,845 --> 00:16:50,004 World War two, the US was very focused 473 00:16:50,004 --> 00:16:51,465 in particular on Europe 474 00:16:51,899 --> 00:16:52,339 and, 475 00:16:52,779 --> 00:16:54,799 thus NATO. Now The US 476 00:16:55,259 --> 00:16:57,980 does not see NATO as being as relevant 477 00:16:57,980 --> 00:17:00,299 anymore and why it's spending so much money 478 00:17:00,299 --> 00:17:01,519 to protect Europe 479 00:17:01,899 --> 00:17:02,399 from, 480 00:17:03,019 --> 00:17:04,079 you know, a Russian 481 00:17:04,380 --> 00:17:04,880 threat 482 00:17:05,414 --> 00:17:07,975 that the US administration and policymakers now no 483 00:17:07,975 --> 00:17:09,975 longer see as a threat to Europe. So 484 00:17:09,975 --> 00:17:12,855 that is going to be a a very 485 00:17:12,855 --> 00:17:14,955 impactful shift shift within Europe. 486 00:17:15,335 --> 00:17:17,495 The other shift, the other sort of World 487 00:17:17,495 --> 00:17:19,599 War two era, post World War two era 488 00:17:19,599 --> 00:17:20,960 shift that's going to change, I think, is 489 00:17:20,960 --> 00:17:22,880 the Middle East. So The US has been 490 00:17:22,880 --> 00:17:23,619 very heavily, 491 00:17:24,400 --> 00:17:26,400 focused in on the Middle East, and that's 492 00:17:26,400 --> 00:17:28,400 primarily because that was where a lot of 493 00:17:28,400 --> 00:17:31,519 energy came out of. And now that The 494 00:17:31,519 --> 00:17:32,659 US is energy 495 00:17:33,039 --> 00:17:33,539 independent, 496 00:17:34,404 --> 00:17:36,805 it is US people don't realize in many 497 00:17:36,805 --> 00:17:38,825 instances now. US is by far the largest 498 00:17:38,884 --> 00:17:41,144 oil and natural gas producer in the world, 499 00:17:41,285 --> 00:17:42,825 courtesy of the shale revolution. 500 00:17:43,365 --> 00:17:44,884 As a result, The US is no longer 501 00:17:44,884 --> 00:17:46,565 worried about the Middle East. If you look 502 00:17:46,565 --> 00:17:48,789 at Donald Trump's most recent trip to the 503 00:17:48,789 --> 00:17:50,470 Middle East, his number one goal he didn't 504 00:17:50,470 --> 00:17:52,789 even visit Israel. His number one goal was 505 00:17:52,789 --> 00:17:54,089 to really try to rally 506 00:17:54,470 --> 00:17:55,289 Saudi Arabia, 507 00:17:56,149 --> 00:17:56,649 Turkey, 508 00:17:57,349 --> 00:17:59,690 Qatar, you know, other players like Kuwait 509 00:18:00,045 --> 00:18:02,045 to build more of an alliance in Middle 510 00:18:02,045 --> 00:18:04,525 East so that they can work against the 511 00:18:04,525 --> 00:18:06,684 biggest threat that's still left there, which is 512 00:18:06,684 --> 00:18:07,184 Islamic, 513 00:18:07,805 --> 00:18:08,305 extremists. 514 00:18:08,765 --> 00:18:10,545 And let them manage, 515 00:18:11,164 --> 00:18:13,664 that threat because it's a bigger threat technically 516 00:18:13,725 --> 00:18:15,799 to those countries and those governments than it 517 00:18:15,799 --> 00:18:17,799 even is to The US. And The US 518 00:18:17,799 --> 00:18:20,859 can then peel out and and and stop, 519 00:18:21,400 --> 00:18:23,799 spending all this money and resources on trying 520 00:18:23,799 --> 00:18:25,400 to protect interest in the Middle East because 521 00:18:25,400 --> 00:18:26,840 our interest there are not the same as 522 00:18:26,840 --> 00:18:28,359 they were in that post World War two 523 00:18:28,359 --> 00:18:28,859 era. 524 00:18:29,305 --> 00:18:30,904 Consider this. I mean, The US has last 525 00:18:30,904 --> 00:18:33,305 I saw over 700 military bases around the 526 00:18:33,305 --> 00:18:35,384 world in over 80 countries. It's just not 527 00:18:35,384 --> 00:18:35,884 sustainable. 528 00:18:36,184 --> 00:18:37,945 And so The US is gonna continue to 529 00:18:37,945 --> 00:18:39,384 to pull those out, and I think the 530 00:18:39,384 --> 00:18:39,884 Europeans 531 00:18:40,265 --> 00:18:41,865 and The Middle East are probably gonna be 532 00:18:41,865 --> 00:18:44,430 two areas where you see that most clearly. 533 00:18:44,890 --> 00:18:47,789 And I would argue too, in The Americas, 534 00:18:48,170 --> 00:18:49,769 post World War two, the US did not 535 00:18:49,769 --> 00:18:52,350 pay any attention to Latin America really meaningfully, 536 00:18:52,490 --> 00:18:53,850 and I think you're gonna see The US 537 00:18:53,850 --> 00:18:56,250 pay a lot more attention to, to The 538 00:18:56,250 --> 00:18:58,170 Americas, North And South America. It's one of 539 00:18:58,170 --> 00:19:00,945 the reasons that the, markets in South America 540 00:19:00,945 --> 00:19:02,625 have actually done really well. Both equity and 541 00:19:02,625 --> 00:19:04,305 bond markets have been performing very well in 542 00:19:04,305 --> 00:19:06,305 the last few months. So just, you know, 543 00:19:06,305 --> 00:19:09,045 to to kinda go back to the around 544 00:19:09,424 --> 00:19:11,204 The US and our military footprint, 545 00:19:12,039 --> 00:19:14,039 As we potentially peel back from some of 546 00:19:14,039 --> 00:19:16,039 that, what does that mean in terms of 547 00:19:16,039 --> 00:19:18,039 military spending and just the impact that that'll 548 00:19:18,039 --> 00:19:20,599 have considering what a large portion that is 549 00:19:20,599 --> 00:19:21,880 of government spending, 550 00:19:22,200 --> 00:19:23,820 not just in The US, but globally? 551 00:19:24,184 --> 00:19:25,944 Yeah. It's a huge expenditure in The US, 552 00:19:25,944 --> 00:19:27,944 and, The US is going to look for 553 00:19:27,944 --> 00:19:29,544 ways to decrease that as you talked about. 554 00:19:29,544 --> 00:19:30,825 I mean, some of the spending that The 555 00:19:30,825 --> 00:19:32,265 US has, and we mentioned the number of 556 00:19:32,265 --> 00:19:33,164 military bases, 557 00:19:33,944 --> 00:19:35,785 is is just not something The US can 558 00:19:35,785 --> 00:19:38,444 continue to afford when we're running over $2,000,000,000,000 559 00:19:38,585 --> 00:19:39,964 fiscal deficits. So 560 00:19:40,319 --> 00:19:41,919 US is going to look for every which 561 00:19:41,919 --> 00:19:43,460 way to decrease spending. 562 00:19:43,759 --> 00:19:46,259 They're still going to be the number one, 563 00:19:46,960 --> 00:19:49,119 you know, defense spender in the world, I 564 00:19:49,119 --> 00:19:50,880 believe. But I could see that coming down 565 00:19:50,880 --> 00:19:52,019 on relative terms, 566 00:19:52,654 --> 00:19:54,654 because on top of that, I would expect 567 00:19:54,654 --> 00:19:56,115 to see countries in Europe, 568 00:19:56,894 --> 00:19:57,394 particularly 569 00:19:57,775 --> 00:19:59,775 start to ramp up their spending because they're 570 00:19:59,775 --> 00:20:00,894 gonna see The US, 571 00:20:01,375 --> 00:20:03,615 be a lesser player in their defense and 572 00:20:03,615 --> 00:20:06,009 their defense strategy in NATO. So, I think 573 00:20:06,009 --> 00:20:08,329 that'll happen where, other countries will end up 574 00:20:08,329 --> 00:20:10,250 spending more. I think net net, there'll probably 575 00:20:10,250 --> 00:20:11,630 be more defense spending worldwide, 576 00:20:12,009 --> 00:20:14,009 just, probably less in The US in a 577 00:20:14,009 --> 00:20:14,910 relative basis. 578 00:20:15,450 --> 00:20:17,690 I would worry a little bit that you 579 00:20:17,690 --> 00:20:18,910 might see some countries 580 00:20:19,369 --> 00:20:20,349 develop nuclear 581 00:20:20,914 --> 00:20:23,335 capabilities to protect themselves as a deterrent, 582 00:20:23,634 --> 00:20:25,234 particularly in Europe. I mean, any number of 583 00:20:25,234 --> 00:20:27,255 European countries could relatively easily 584 00:20:27,714 --> 00:20:28,115 develop, 585 00:20:28,595 --> 00:20:30,515 you know, nuclear armaments. So you might see 586 00:20:30,515 --> 00:20:32,914 some proliferation there. And then I think the 587 00:20:32,914 --> 00:20:34,755 other thing that's interesting to look for here 588 00:20:34,755 --> 00:20:36,534 in this post World War two era, 589 00:20:36,970 --> 00:20:38,250 or, you know, moving on from the post 590 00:20:38,250 --> 00:20:40,089 World War two era, in World War two 591 00:20:40,089 --> 00:20:42,190 and the decades that followed, armies 592 00:20:42,889 --> 00:20:46,029 and air power were the most important components 593 00:20:46,889 --> 00:20:49,049 to really, being able to deal with any 594 00:20:49,049 --> 00:20:49,549 conflict. 595 00:20:50,014 --> 00:20:52,494 We've seen in Ukraine that air power has 596 00:20:52,494 --> 00:20:53,794 been rendered almost, 597 00:20:54,734 --> 00:20:55,234 unusable 598 00:20:55,694 --> 00:20:56,994 by current technology, 599 00:20:57,615 --> 00:20:59,534 and whole armies have been able to be 600 00:20:59,534 --> 00:21:02,414 defeated by drones and and satellites. So I 601 00:21:02,414 --> 00:21:04,894 think you're gonna see a military shift away 602 00:21:04,894 --> 00:21:07,450 from holding and hosting large armies 603 00:21:07,990 --> 00:21:10,549 and and into, call it, you know, attack 604 00:21:10,549 --> 00:21:13,350 airplanes and and bombers and such and more 605 00:21:13,350 --> 00:21:15,130 into drones, more into 606 00:21:15,430 --> 00:21:15,930 satellite, 607 00:21:16,710 --> 00:21:17,930 you know, use to 608 00:21:18,424 --> 00:21:21,304 to, to support ground operations and then eventually 609 00:21:21,304 --> 00:21:23,464 and probably into into space in some way, 610 00:21:23,464 --> 00:21:25,304 shape, and form, in the coming years. So 611 00:21:25,304 --> 00:21:27,224 I think you're also going to see, now 612 00:21:27,224 --> 00:21:28,505 that we're out of the post World War 613 00:21:28,505 --> 00:21:30,585 two era, a different type of military strategy 614 00:21:30,585 --> 00:21:32,909 and spending also evolve. Any other thoughts or 615 00:21:32,909 --> 00:21:34,509 anything that you wanna add just in terms 616 00:21:34,509 --> 00:21:36,829 of The US really potentially taking a bit 617 00:21:36,829 --> 00:21:37,569 of a different, 618 00:21:38,269 --> 00:21:39,789 place in the world stage and a a 619 00:21:39,789 --> 00:21:40,529 much smaller 620 00:21:40,829 --> 00:21:43,069 kind of, presence in the world stage? Any 621 00:21:43,069 --> 00:21:44,474 any other things that you might wanna add? 622 00:21:44,474 --> 00:21:46,075 Add? I think the navy is another point 623 00:21:46,075 --> 00:21:47,835 that I would wanna, to bring up. You 624 00:21:47,835 --> 00:21:49,835 know, The US is gonna continue to focus 625 00:21:49,835 --> 00:21:52,714 in on its, on its naval capabilities because 626 00:21:52,714 --> 00:21:54,954 it views the oceans as being an area 627 00:21:54,954 --> 00:21:56,255 where it could be more vulnerable 628 00:21:56,714 --> 00:21:58,794 than on land. So that's one reason you're 629 00:21:58,794 --> 00:22:00,839 seeing The US want to invest more in 630 00:22:00,839 --> 00:22:03,640 shipbuilding and and why it's worried about things 631 00:22:03,640 --> 00:22:06,039 like the Panama Canal and Greenland because it 632 00:22:06,039 --> 00:22:07,339 really wants to secure 633 00:22:07,799 --> 00:22:08,619 the Americas. 634 00:22:09,000 --> 00:22:10,599 That's gonna be, I think, the focus going 635 00:22:10,599 --> 00:22:12,279 forward. So look for more of that. I 636 00:22:12,279 --> 00:22:14,519 think that's gonna be a a definite trend 637 00:22:14,519 --> 00:22:16,144 you're gonna see in the coming years. You 638 00:22:16,144 --> 00:22:16,644 mentioned 639 00:22:17,184 --> 00:22:19,424 earlier that The US brings to the table, 640 00:22:19,744 --> 00:22:22,085 large number of consumers willing to spend. 641 00:22:22,704 --> 00:22:25,184 Let's talk a little bit about demographics and 642 00:22:25,184 --> 00:22:27,105 how that might play into all the things 643 00:22:27,105 --> 00:22:28,865 that we've talked about and changes that we're 644 00:22:28,865 --> 00:22:30,005 seeing in the world stage. 645 00:22:30,359 --> 00:22:32,920 As the world's aging and populations age, as 646 00:22:32,920 --> 00:22:34,299 birth rate rates decline, 647 00:22:35,240 --> 00:22:36,519 what do you think what do you think 648 00:22:36,519 --> 00:22:38,519 we can see happen just globally as we 649 00:22:38,519 --> 00:22:40,920 continue to think about population growth or population 650 00:22:40,920 --> 00:22:42,920 shrinkage and the impact that might have? Huge 651 00:22:42,920 --> 00:22:44,539 story. I also think it's underappreciated. 652 00:22:45,079 --> 00:22:45,579 The 653 00:22:46,355 --> 00:22:48,775 the again, post World War two era, 654 00:22:49,154 --> 00:22:49,815 we had 655 00:22:50,195 --> 00:22:53,634 young population, baby boomers, growth. We've got the 656 00:22:53,634 --> 00:22:55,955 opposite now. We've got an aging population. Not 657 00:22:55,955 --> 00:22:58,420 all countries. Africa is obviously an outlier. But 658 00:22:58,420 --> 00:22:59,480 in most developed 659 00:22:59,779 --> 00:23:02,359 countries and even many developing countries like China, 660 00:23:02,420 --> 00:23:04,500 you're starting to see those populations level out 661 00:23:04,500 --> 00:23:06,339 and start to decline. I mean, China's declines 662 00:23:06,339 --> 00:23:06,839 already 663 00:23:07,380 --> 00:23:09,380 well, you know, fourth or fifth year of 664 00:23:09,380 --> 00:23:12,180 population decline you're seeing in China. Europe's already 665 00:23:12,180 --> 00:23:14,315 turned over. That's gonna be a huge story 666 00:23:14,315 --> 00:23:16,634 that people don't appreciate. And again, you look 667 00:23:16,634 --> 00:23:19,295 at the the perceived threat from the Chinese. 668 00:23:19,595 --> 00:23:21,595 Long term, it's not gonna manifest in the 669 00:23:21,595 --> 00:23:24,555 same way. Somewhere between one point two and 670 00:23:24,555 --> 00:23:26,654 one point four billion people now. 671 00:23:27,720 --> 00:23:29,180 And a lot of the, 672 00:23:30,039 --> 00:23:32,619 you know, demographers who study this 673 00:23:33,079 --> 00:23:33,820 are expecting 674 00:23:34,279 --> 00:23:34,779 China 675 00:23:35,160 --> 00:23:37,640 to have as few as 700,000,000 676 00:23:37,640 --> 00:23:39,525 people by the end of this century. So 677 00:23:39,525 --> 00:23:41,384 that's a huge loss of population 678 00:23:41,845 --> 00:23:43,924 and is really gonna make it hard for 679 00:23:43,924 --> 00:23:46,164 China to continue in the same way that 680 00:23:46,164 --> 00:23:47,065 it has been, 681 00:23:47,765 --> 00:23:49,525 up to this time period. Russia is in 682 00:23:49,525 --> 00:23:50,105 a similar, 683 00:23:50,724 --> 00:23:53,285 situation. Brazil's in a similar situation. Europe. There 684 00:23:53,285 --> 00:23:55,119 are a lot of countries that are on 685 00:23:55,119 --> 00:23:56,579 the cusp of losing, 686 00:23:57,200 --> 00:23:58,819 massive amounts of their population. 687 00:23:59,279 --> 00:24:02,099 And you also see from The US Policymakers, 688 00:24:02,319 --> 00:24:03,759 it's a bit of a third rail right 689 00:24:03,759 --> 00:24:04,740 now because immigration, 690 00:24:05,519 --> 00:24:07,460 is perceived by the, populating, 691 00:24:07,839 --> 00:24:08,159 by the, 692 00:24:08,804 --> 00:24:10,565 by the voters in The US and the 693 00:24:10,565 --> 00:24:13,284 population is is is being a sore spot. 694 00:24:13,284 --> 00:24:15,125 But eventually, you're gonna have to see The 695 00:24:15,125 --> 00:24:17,845 US reembrace more immigration so that The US 696 00:24:17,845 --> 00:24:20,585 population doesn't decline the same way. So definitely 697 00:24:20,644 --> 00:24:22,804 demographics is an area that it there because 698 00:24:22,804 --> 00:24:25,750 it's so slow moving that the average investor 699 00:24:25,970 --> 00:24:28,049 doesn't pay a lot of attention to. But 700 00:24:28,049 --> 00:24:29,569 if you look out even five and ten 701 00:24:29,569 --> 00:24:31,109 years, there are gonna be some significant, 702 00:24:32,450 --> 00:24:32,950 struggles 703 00:24:33,409 --> 00:24:35,569 that many of these countries that are losing 704 00:24:35,569 --> 00:24:37,589 population, first and foremost, China, 705 00:24:38,105 --> 00:24:39,305 are going to face. And it's gonna be 706 00:24:39,305 --> 00:24:40,684 very impactful on economics, 707 00:24:41,224 --> 00:24:41,965 on military, 708 00:24:42,664 --> 00:24:44,744 and real and overall relations. So it's definitely 709 00:24:44,744 --> 00:24:46,265 something to keep an eye on because we're 710 00:24:46,265 --> 00:24:48,365 at the very early stages of those demographic 711 00:24:48,424 --> 00:24:50,505 shifts. I wanna pivot a little bit back 712 00:24:50,505 --> 00:24:52,970 to The Middle East. So earlier, you mentioned 713 00:24:52,970 --> 00:24:54,490 that The US is just not as focused 714 00:24:54,490 --> 00:24:55,769 on the Middle East. Certainly, The Middle East 715 00:24:55,769 --> 00:24:58,089 has gotten a lot of airtime recently due 716 00:24:58,089 --> 00:25:00,169 to president's Trump visit and other things, at 717 00:25:00,169 --> 00:25:01,450 least here in The US. It's gotten a 718 00:25:01,450 --> 00:25:02,190 lot of airtime. 719 00:25:02,889 --> 00:25:04,649 But The US now being the largest oil 720 00:25:04,649 --> 00:25:06,855 and gas producer in the world and really 721 00:25:06,855 --> 00:25:08,954 no longer being reliant on foreign oil, 722 00:25:09,255 --> 00:25:11,575 how do you think about US energy dominance 723 00:25:11,575 --> 00:25:14,134 and shifting our global influence or shifting those 724 00:25:14,134 --> 00:25:15,815 markets? Oh, that's a great question. There's a 725 00:25:15,815 --> 00:25:17,414 lot to unpack there, but in a in 726 00:25:17,414 --> 00:25:19,654 a high level, in a nutshell, The US 727 00:25:19,654 --> 00:25:21,575 is going to The US has incredible oil 728 00:25:21,575 --> 00:25:23,159 and gas reserves, and many of them haven't 729 00:25:23,159 --> 00:25:23,899 been explored. 730 00:25:24,200 --> 00:25:25,319 So I think what you're gonna see the 731 00:25:25,319 --> 00:25:28,220 Trump administration do is to continue to 732 00:25:28,679 --> 00:25:30,220 favor projects that, 733 00:25:30,759 --> 00:25:33,240 allow better access to hydrocarbons to oil and 734 00:25:33,240 --> 00:25:33,740 gas, 735 00:25:34,200 --> 00:25:36,279 and, to build more pipelines, more, 736 00:25:36,875 --> 00:25:39,055 liquefied natural gas export facilities. 737 00:25:39,755 --> 00:25:41,355 The US is never gonna be a large 738 00:25:41,355 --> 00:25:43,275 exporter of oil, and the main reason for 739 00:25:43,275 --> 00:25:45,355 that is that oil is usually used in 740 00:25:45,355 --> 00:25:45,855 transportation, 741 00:25:46,555 --> 00:25:49,230 and it is a another third rail topic 742 00:25:49,309 --> 00:25:51,470 for politicians when gas prices rise in The 743 00:25:51,470 --> 00:25:52,929 US being still car dependent 744 00:25:53,309 --> 00:25:55,390 and a lot of, let's be honest, still, 745 00:25:55,549 --> 00:25:56,849 you know, ICE cars, 746 00:25:57,390 --> 00:25:59,390 you know, gas powered cars still dominate our 747 00:25:59,390 --> 00:26:02,285 roads. I have one. Me too. And, still 748 00:26:02,285 --> 00:26:04,525 dominate. And so as a result, when gas 749 00:26:04,525 --> 00:26:07,964 prices rise, consumers notice, voters notice, and and 750 00:26:07,964 --> 00:26:10,045 there's an impact on, on how they vote, 751 00:26:10,285 --> 00:26:13,085 when the votes come up. So that's oil 752 00:26:13,085 --> 00:26:15,164 is kind of something you'll still mostly in 753 00:26:15,164 --> 00:26:17,559 in domestic. Natural gas is a different story. 754 00:26:17,700 --> 00:26:19,220 Natural gas is used a lot more in 755 00:26:19,220 --> 00:26:21,400 industrial chemical manufacturing processes. 756 00:26:22,019 --> 00:26:25,140 It's also used, to, to make fertilizer and 757 00:26:25,140 --> 00:26:25,720 and farming. 758 00:26:26,099 --> 00:26:28,740 So very important for economic growth, even more 759 00:26:28,740 --> 00:26:31,305 so than oil. And The US is blessed 760 00:26:31,305 --> 00:26:33,964 with huge supplies of natural gas. 761 00:26:34,424 --> 00:26:36,105 What I believe will continue to happen is 762 00:26:36,105 --> 00:26:38,045 The US will look to export that. And 763 00:26:38,184 --> 00:26:40,345 instead of offering military aid in the same 764 00:26:40,345 --> 00:26:43,130 way, they're going to use natural gas to 765 00:26:43,349 --> 00:26:44,490 have an influence 766 00:26:44,789 --> 00:26:45,529 on their, 767 00:26:45,910 --> 00:26:48,390 relations with other countries around the world, which 768 00:26:48,390 --> 00:26:50,309 is to say, look, if you want access 769 00:26:50,309 --> 00:26:53,049 to relatively cheap and very abundant, 770 00:26:53,829 --> 00:26:56,329 natural gas for all your industrial and manufacturing 771 00:26:56,390 --> 00:26:58,005 processes, you need to work with The US 772 00:26:58,005 --> 00:26:59,924 and things. So look for that to happen. 773 00:26:59,924 --> 00:27:02,005 I I think that will continue to to 774 00:27:02,005 --> 00:27:03,204 be a real trend. And I think as 775 00:27:03,204 --> 00:27:04,964 it comes to The Middle East, what I 776 00:27:04,964 --> 00:27:07,045 I think The US, strategy there is going 777 00:27:07,045 --> 00:27:08,325 to be is to figure out a way 778 00:27:08,325 --> 00:27:11,125 to get normalized relations between Israel and Saudi 779 00:27:11,125 --> 00:27:11,625 Arabia, 780 00:27:12,250 --> 00:27:14,490 and other countries there so that it can 781 00:27:14,490 --> 00:27:16,569 really extract itself from the Middle East and 782 00:27:16,569 --> 00:27:17,950 not have to worry about, 783 00:27:18,490 --> 00:27:20,490 you know, events as they unfold there. I 784 00:27:20,490 --> 00:27:21,549 think that's why this, 785 00:27:21,929 --> 00:27:24,089 negotiation right now with Iran is also so 786 00:27:24,089 --> 00:27:26,250 important so The US could really just vacate 787 00:27:26,250 --> 00:27:28,644 that area. And hopefully, it it doesn't, 788 00:27:29,125 --> 00:27:30,484 you know, take a turn for the worse 789 00:27:30,484 --> 00:27:32,505 if they can get the right, alliances 790 00:27:32,805 --> 00:27:35,545 and and so forth. So this shale revolution 791 00:27:35,684 --> 00:27:38,164 and the secular impact from that cannot be 792 00:27:38,164 --> 00:27:38,664 underestimated. 793 00:27:39,445 --> 00:27:40,884 And I I think it's going to have 794 00:27:40,884 --> 00:27:42,345 a real impact on, unfortunately, 795 00:27:42,740 --> 00:27:44,900 on the transition to clean energy Mhmm. Because 796 00:27:44,900 --> 00:27:46,980 hydrocarbons, oil and gas are gonna be so 797 00:27:46,980 --> 00:27:49,220 cheap if The US continues to follow this 798 00:27:49,220 --> 00:27:52,039 policy. So speaking of clean energy, I mean, 799 00:27:52,340 --> 00:27:53,940 what do you think there's any impact just 800 00:27:53,940 --> 00:27:55,640 in terms of the current US administration 801 00:27:55,940 --> 00:27:58,105 and the thoughts and policies around clean energy 802 00:27:58,105 --> 00:27:59,625 that that might have in The US or 803 00:27:59,625 --> 00:28:01,544 even globally and the influence that The US 804 00:28:01,544 --> 00:28:03,944 has globally as we think about those things? 805 00:28:03,944 --> 00:28:06,345 The The US Policymakers right now are not 806 00:28:06,345 --> 00:28:08,204 very favorable on clean energy. 807 00:28:08,984 --> 00:28:09,484 Again, 808 00:28:10,159 --> 00:28:12,559 they're awash in very cheap hydrocarbons, but the 809 00:28:12,559 --> 00:28:13,779 other element of it, 810 00:28:14,079 --> 00:28:16,559 look who controls all the clean energy. Right? 811 00:28:16,559 --> 00:28:18,900 Almost all solar panels come out of China. 812 00:28:19,119 --> 00:28:21,059 Rarest going into batteries, 813 00:28:22,159 --> 00:28:24,494 come out of China. The other thing that, 814 00:28:25,134 --> 00:28:27,475 that's concerning is the sheer cost 815 00:28:28,174 --> 00:28:30,994 of pivoting to a clean energy environment because 816 00:28:31,215 --> 00:28:32,515 you need, you know, hydrocarbons, 817 00:28:32,815 --> 00:28:34,414 and we've talked about this in some prior 818 00:28:34,414 --> 00:28:34,914 podcast, 819 00:28:35,295 --> 00:28:38,009 hydrocarbons are much more energy dense. They're also 820 00:28:38,009 --> 00:28:40,250 much more reliable for use in power generation. 821 00:28:40,250 --> 00:28:42,090 You know, the solar panel needs the sun 822 00:28:42,090 --> 00:28:44,170 to shine. You know, wind turbines need the 823 00:28:44,170 --> 00:28:46,170 wind to blow, and it's not consistent. But 824 00:28:46,170 --> 00:28:48,330 you can always burn natural gas and oil 825 00:28:48,330 --> 00:28:51,210 and, you know, and and split atoms in 826 00:28:51,210 --> 00:28:53,365 a nuclear reactor. So, those are just much 827 00:28:53,365 --> 00:28:55,924 more reliable and ultimately energy dense. And in 828 00:28:55,924 --> 00:28:57,285 fact, if you look at what happened in 829 00:28:57,285 --> 00:28:58,904 Spain when it's lost its energy, 830 00:28:59,285 --> 00:29:01,924 it wasn't necessarily directly because of of the 831 00:29:01,924 --> 00:29:03,924 renewables and the clean energy. It was because 832 00:29:03,924 --> 00:29:05,924 they didn't have the batteries kicking in when 833 00:29:05,924 --> 00:29:07,785 some of the renewables were not, 834 00:29:08,200 --> 00:29:10,119 producing as much power. And that's why they 835 00:29:10,119 --> 00:29:11,799 had some blackouts. It was in part because 836 00:29:11,799 --> 00:29:14,039 of the reliance on clean energy. So if 837 00:29:14,039 --> 00:29:16,440 you build clean energy power supplies, you then 838 00:29:16,440 --> 00:29:18,440 have to duplicate that and you have to 839 00:29:18,440 --> 00:29:20,440 build battery capacity and so on and so 840 00:29:20,440 --> 00:29:21,105 forth. So, 841 00:29:21,585 --> 00:29:23,585 and if that's all controlled by one of 842 00:29:23,585 --> 00:29:26,065 your adversaries, it's just not where The US 843 00:29:26,065 --> 00:29:27,444 is going to put its efforts. 844 00:29:27,904 --> 00:29:30,144 The US is very active in building more 845 00:29:30,144 --> 00:29:33,184 LNG export facilities, liquefied natural gas, and they 846 00:29:33,184 --> 00:29:35,329 are also going to be encouraging, and you're 847 00:29:35,329 --> 00:29:37,750 seeing this, for example, in, parts of Europe, 848 00:29:37,890 --> 00:29:40,309 more pipeline building so they can take those 849 00:29:40,529 --> 00:29:43,089 LNG carriers, take them out of our export 850 00:29:43,089 --> 00:29:44,690 facilities, and send them over to Europe and 851 00:29:44,690 --> 00:29:45,670 Asia in particular 852 00:29:46,049 --> 00:29:46,710 to supply, 853 00:29:47,170 --> 00:29:49,809 their cheap power. And again, it's going to 854 00:29:49,809 --> 00:29:50,309 encourage 855 00:29:50,744 --> 00:29:53,704 more hydrocarbon use. And this isn't just US 856 00:29:53,704 --> 00:29:55,724 that's realizing this. China, for example, 857 00:29:56,424 --> 00:29:58,585 they had they started to decrease the reliance 858 00:29:58,585 --> 00:29:59,244 on coal. 859 00:29:59,625 --> 00:30:02,265 They have now, are building more coal plants, 860 00:30:02,585 --> 00:30:04,605 right now that are planned and in process 861 00:30:04,950 --> 00:30:06,789 than in ten years. It's about a hundred 862 00:30:06,789 --> 00:30:08,950 gigawatts of coal plants that they are actively 863 00:30:08,950 --> 00:30:11,450 building right now because, again, coal is cheap, 864 00:30:11,509 --> 00:30:12,089 it's reliable, 865 00:30:12,390 --> 00:30:14,390 it's gonna be their base load, and they 866 00:30:14,390 --> 00:30:16,390 have a lot of coal deposits in the 867 00:30:16,390 --> 00:30:18,615 kind of northern parts of their country that 868 00:30:18,615 --> 00:30:20,855 they can access where they are net oil 869 00:30:20,855 --> 00:30:23,174 and LNG importers. So I think you're gonna 870 00:30:23,174 --> 00:30:25,115 see this play out in global politics because 871 00:30:25,255 --> 00:30:27,815 if you can control cheap energy, it it 872 00:30:27,815 --> 00:30:29,734 feeds so much of your wealth and your 873 00:30:29,734 --> 00:30:32,630 military strength. It's interesting, especially as the changes 874 00:30:32,630 --> 00:30:35,509 in the political environment and what we're focused 875 00:30:35,509 --> 00:30:37,049 on and how we're focused on changes. 876 00:30:37,670 --> 00:30:39,509 So we covered a lot today. We covered 877 00:30:39,509 --> 00:30:43,130 energy. We covered FX rates. We covered currency, 878 00:30:43,269 --> 00:30:43,769 gold, 879 00:30:44,309 --> 00:30:45,210 interest rates. 880 00:30:45,589 --> 00:30:48,505 Anything else that you wanna make sure we 881 00:30:48,505 --> 00:30:50,585 cover off on? We mentioned gold. I I 882 00:30:50,585 --> 00:30:52,424 always like to mention silver right now. 883 00:30:52,825 --> 00:30:54,365 Silver is, another, 884 00:30:54,985 --> 00:30:57,065 metal that, is not in the news very 885 00:30:57,065 --> 00:30:59,465 much, but it's relatively cheap. Normally, the gold 886 00:30:59,465 --> 00:31:01,319 to silver ratio is 60 to one. 887 00:31:01,720 --> 00:31:03,480 It's a hundred to one today. Right? Gold's 888 00:31:03,480 --> 00:31:06,200 3,300 an ounce, and silver's about 33 an 889 00:31:06,200 --> 00:31:08,299 ounce. So that's a very high ratio. 890 00:31:08,759 --> 00:31:11,159 Gold should probably, either be worth less relative 891 00:31:11,159 --> 00:31:12,759 to silver or silver more. The other thing 892 00:31:12,759 --> 00:31:14,519 about silver, it's used in solar panels, and 893 00:31:14,519 --> 00:31:15,819 it's used a lot in defense. 894 00:31:16,674 --> 00:31:19,315 It's actually used to, for batteries, and a 895 00:31:19,315 --> 00:31:21,715 lot of aerospace and also for guided missiles. 896 00:31:21,715 --> 00:31:24,195 So as the world uses more defense, more 897 00:31:24,195 --> 00:31:25,955 satellites, more solar panels, you're gonna see demand 898 00:31:25,955 --> 00:31:26,914 for silver to go up. So that's something 899 00:31:26,914 --> 00:31:28,275 to keep an eye on. And then the 900 00:31:28,275 --> 00:31:29,414 other thing, this is 901 00:31:30,170 --> 00:31:32,109 unknown, but we are moving to a multipolar 902 00:31:32,250 --> 00:31:34,569 world if The US starts to isolate itself 903 00:31:34,569 --> 00:31:34,730 more. 904 00:31:35,529 --> 00:31:37,369 And with that, you're gonna typically see more 905 00:31:37,369 --> 00:31:37,869 populism. 906 00:31:38,170 --> 00:31:40,730 You'll probably see more local power struggles, and 907 00:31:40,730 --> 00:31:42,410 I don't necessarily mean coups, but look what 908 00:31:42,410 --> 00:31:44,349 happened in Canada. Right? You're gonna have, 909 00:31:44,998 --> 00:31:48,005 you know, surprise elections as more populism rises. 910 00:31:48,464 --> 00:31:49,984 And with that too, I think you'll see 911 00:31:49,984 --> 00:31:51,744 more fiscal spending. You're seeing that in Europe, 912 00:31:51,984 --> 00:31:54,065 emerge as well. So those are the kind 913 00:31:54,065 --> 00:31:55,424 of trends I would keep an eye on 914 00:31:55,424 --> 00:31:58,110 in the coming years, as The US becomes 915 00:31:58,110 --> 00:32:00,029 a little bit more isolationist, as we move 916 00:32:00,029 --> 00:32:01,730 away from post World War two policies. 917 00:32:02,269 --> 00:32:04,670 A multipolar world is something that we haven't 918 00:32:04,670 --> 00:32:06,930 seen in eighty years. Thank you, Grant. 919 00:32:07,309 --> 00:32:09,070 Thanks for joining us today. I always love 920 00:32:09,070 --> 00:32:10,670 sitting down with you and hearing your perspective, 921 00:32:10,670 --> 00:32:12,315 and I know our listeners do too. 922 00:32:12,875 --> 00:32:15,115 The market landscape is changing in ways that 923 00:32:15,115 --> 00:32:17,835 matter, and we've unpacked a lot today on 924 00:32:17,835 --> 00:32:19,994 the trends driving it and the transformation. So 925 00:32:19,994 --> 00:32:21,615 thank you. Thanks for your insights. 926 00:32:22,394 --> 00:32:24,474 And to our listeners, thank you for tuning 927 00:32:24,474 --> 00:32:26,575 in to Market Pulse by Fast or Forward.