May Market Pulse (Audio)

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Episode Transcript

(00:08):
This is Market Pulse by Faster Forward from
Northern Trust Asset Servicing,
the podcast where experts share their insights on
current trends in the markets and financial landscape.
My name is Nadia Kobalovic, global head of
Omnium Services at Northern Trust, and I'm really
excited to be serving as the host for
today's episode.
Joining me for today's discussion is Grant Jonsie,
head of client solutions, banking and markets, Americas

(00:29):
at Northern Trust. Today, we'll be discussing a
number of global macro trends that will impact
the financial markets over the next decade.
Grant, it's great to be here. I'm really
excited to be here again with you today.
In the recent market brief webinar webinars you
hosted, you covered market outlook in detail.
Today, I wanna talk a little bit more
about macro trends instead, and I'd really like
to start by discussing some data from our

(00:51):
recent global asset owner peer study,
that was titled asset owners in focus, where
we surveyed about a 80 senior leaders.
We asked about their external investment challenges, and
the number one response was interest rate changes,
which probably comes as no surprise. We're living
in a higher for longer interest rate environment.
But why do you think that's the case,

(01:13):
and
how
is it reshaping global capital flows and investment
decisions?
And kind of a follow on to that
as well, do you feel like that higher
for longer interest rate environment is really based
on the fact that we were in an
incredibly low interest rate environment for such a
long time? Yeah. Absolutely, Nadia. I think that's
the key driver, and it took a lot

(01:33):
of investors a couple of years to recognize
that the interest rate environment has changed. It's
not that interest rates today are really high
historically, but if you think about where we
came from, really starting in the early eighties
from a higher interest rate environment,
we had a period of declining interest rates
that really took us up to about the
global financial crisis.
And then we had a period of very

(01:54):
low and, in many cases,
negative real rates,
that followed the financial crisis really up until
the, the the COVID crisis, the COVID pandemic.
So that's taken a couple of years, I
think, for investors to get accustomed to. We're
still seeing it a little bit in The
US housing market
where there's not as much housing selling or

(02:14):
buying because of the interest rate environment. But
you're starting to see that change a little
bit, especially in some of the the the
regions in the Southern Part of The US
that had more home price appreciation.
There's more concessions there as people kinda come
to grips with the reality that these interest
rates people pay for mortgages in this example
are are higher and will probably remain that
way into the into the near to intermediate

(02:36):
future.
From a corporate standpoint, the one area that
I really wanna be thinking about in the
back half of twenty twenty five and into
2026
is
the sheer number of corporate bonds that need
to be rolled. So when interest rates were,
again, marked almost to zero in the early
throes of the COVID pandemic,
the, there's a lot of demand from corporations

(02:58):
to to borrow at those really low rates.
Those are typically five year in in in
in length, the the, the the the bonds
that they issued, and those are coming due
soon. And, of course, we have much higher
interest rates
right now. So there is a bit of
a cliff of
corporate refinancing needs to happen.
I would imagine,
is, you know, the through the beginning of
twenty twenty five and and into the spring,

(03:20):
we have seen a lot of share repurchases,
a lot of corporate, buybacks of their stock.
My guess is that'll,
at all time highs, that'll start to decline
as corporations start to rethink their,
the debt side of the equation and how
they either buy back those bonds or refinance
them at higher rates. So I think that'll
have some impact on on buybacks.

(03:41):
How do you think with rising interest rates,
access to liquidity and and the importance of
access to liquidity is changing either how companies
are adjusting their strategies or what you're hearing
from our clients? So liquidity management did come
up on our asset owner survey as well.
That was a key point. And when I
talk to a lot of institutional asset owners
and allocators,
liquidity comes up quite a bit as a

(04:02):
as a a a challenge and an opportunity
at the same time. It's it's an opportunity
because now cash management has a lot more
importance in higher interest rates. Before, people were
accustomed to getting close to zero interest on
their cash that they were using for
operating purposes and so forth. Now
you can actually get, you know, four or
5% depending on how aggressive you wanna get

(04:23):
with that cash. So you can actually get
a a real yield on that cash. I
think that's changed a lot.
What I'm seeing is people are starting investors,
institutional investors are starting to rethink
the cash investment side of it so much
so that it's now being viewed kind of
as part of the fixed income continuum within
their portfolio.
So instead of thinking about cash entirely separately,

(04:45):
which might have been the case in a
zero interest rate environment,
now a lot of institutional investors are actually
thinking about that is part and parcel of
their overall fixed income mandate. And as a
result, we're seeing a little bit more creativity
around liquidity, sometimes internal management,
use of repos, etcetera. So,
that's that's definitely changing. And the other element
is there's a lot of private,

(05:08):
investments right now. Right? Private equity,
private, credit,
and alts and so forth. And there are
capital calls associated with that. And so a
lot of investors have to also think about
liquidity
to to fund those types of calls and
those types of private investments. So that's also
shaping the liquidity, and it's definitely an area
where a lot of people are focused right
now institutionally.
So you would say cash becomes part of

(05:29):
the strategy. Yes. And I'm curious, and we'll
get into it a little bit later on,
how FX hedging might come into play when
we think about cash. But before we get
there,
another area again, probably
not as much of a shock that came
out of the survey was concerns around geopolitical
risk,
and geopolitical instability.
What would you say is driving that heightened
concern today? Is it ongoing conflicts, shifting alliances,

(05:53):
the growing impact of global fragmentation on markets,
maybe all of the above? What are your
thoughts? It's all the above. I really wanna
reframe
the way that I think we should be
thinking about all this geopolitical change. I mean,
there's so much happening so fast. It it
it seems somewhat haphazard and,
and at times very surprising, but I think
there's actually a a a simpler explanation for

(06:15):
what's going on. And the way I see
it right now is we are going through
a pivot
away from post World War two era policies.
So if you if you take a step
back, before World War two, the United States
generally was isolationist
in its foreign policy. So that goes all
the way back to George Washington, his farewell
speech. He he warned about getting involved in

(06:37):
foreign entanglements and advised against permanent foreign alliances
with other nations and countries. And The US,
by and large, kept that policy up until
about World War two. And even on the
eve of the Pearl Harbor attack, the US
population
was, by and large, against getting involved in
the war, even though our allies were were
under a lot of pressure at that point.

(06:58):
So World War two happens. We all know
what what what what came out of that.
And post World War two,
there The US,
did not retrench back to isolation, isolationist,
ways and policies. And the number one reason
is that there was a an adversary,
a superpower in the form of the Soviet
Union
that The US is very worried about, was
very worried about coming back again, and so

(07:20):
you had this cold war standoff.
For The US, what the policy was at
that time, the end of World War two,
to to build allies and to also push
its, you know, capitalist and democratic
system and and and ways.
The US offered three things.
The first is it offered access to its
consumers. So that's very important, largest,

(07:41):
consumer base in the world. The second is
it offered military support and cooperation. Right? So,
and even defense,
strategies for many regions like NATO.
And then the third is The US offered
four eight, and that started with a very
ambitious and successful Marshall Plan.
So what's happening today is The US no

(08:02):
longer is going to provide
its consumer base unfettered
to to allies and and to world trading
partners. It's no longer gonna provide blanket,
defense,
protection and and military cooperation. And, we've already
seen with USAID. I mean, it's not looking
to provide a lot of aid anymore. It
it appears as though The US is now
going into a a new era, a little

(08:24):
bit more focused on The Americas and and
and being a little bit more isolated than
it has been on the world stage. And
that is by and large because The US
no longer views
Russia as a superpower capable of of defeating
Europe, and moving to the Atlantic. So I
think that's a huge pivot right now that
can explain a lot, if not all, of
the geopolitical,

(08:45):
you know,
conflict and and, challenges that are emerging. That's
incredibly interesting. So just in terms of the
markets, I mean, what do you think the
impact will be with this pivot away from
World War two policies? Well, I the first
is trade, and that's the most obvious everyone
sees. When you look at what's happening in
The US and the trade tariffs, essentially, what
The US is saying is The US consumer
is no longer gonna be offered as the
world consumer. We're no longer gonna buy everything,

(09:07):
in the way we have post, World War.
That's gonna force everybody, not just The US,
but everybody to rethink supply chains. It's gonna
rethink, trading relationships.
You're going to and that'll be see some
level of trade wars. We're already seeing that.
You're gonna see some sort of trade tariffs.
These things are all very expected when you
start to decouple The US consumer,

(09:27):
you know, from the world, which has been
the standard for the last eighty years. And
I think through that, you're gonna see new
trading partnerships emerge,
new suppliers.
There's gonna be a real focus,
you know, as we move into multipolar,
world of, you know, where who are you
buying your essential goods and services from and
diversifying that. So I think there's gonna be

(09:47):
a real rethinking of trade. That's the first
and most obvious, and that's the one that
most people see. And, again, I think that's
tied back to The US, you know, no
longer wanting to,
be in that sort of post World War
two era where The US consumer was offered
to the world. What immediately jumps to mind
for me then is what does that mean
for the strength of the US dollar and
the global economy? Yeah. It did we're absolutely
gonna see some de dollarization. They actually already
started in 2022. So there are, three reasons

(10:11):
behind the, dollar being
used a little bit less.
One is, frankly, the The US led the
weaponization of the Western banking system. So we
saw it with Russia. And when Russia attacked
Ukraine, The US and its allies in Europe,
primarily
froze Russia, not just Russia, the country, but

(10:31):
even a lot of the oligarchs and some
of the population supporting Russia. Yeah. With sanctions,
freezing assets,
and so forth. So,
that's the first. And at that point in
2022, you started to see countries like China
start to,
buy fewer treasuries and buy a lot more
gold for their reserves. And and in fact,
over the last three years since the, Ukraine
was invaded by Russia, there's been not just

(10:54):
China, but a lot of Poland, India, Azerbaijan,
Turkey have been buying a lot more gold
for their reserves,
to dedollarize. So that that's gonna happen. It's
already happening because the banking system's been weaponized.
I think it's gonna happen even more because
you have to remember, if you think about
just basic economics, right,
when you have a very high trade deficit,

(11:14):
that means you've got, in The US's case,
more dollars flowing to the world, and those
dollars are then brought back to The US
in the form of capital.
So right now,
the,
US stock market's about 25%
foreign owned, treasuries are over 30% foreign owned,
and investment grade credit, corporate bonds are about
30% foreign owned. That's because those dollars get

(11:35):
recycled.
We're filming this in Chicago today. I mean,
you look at all of our parking meters
are owned by a consortium of global investors
for the next fifty years. Right? So there's
a lot of foreign ownership and capital that
flew flew into The United States through this
post World War two that's not gonna happen
as much. So there's definitely gonna be de
dollarizing.
I think uncertainty is gonna add to that

(11:55):
more. When you are uncertain, what do you
do with your money? You bring it back
home.
You're not gonna put it into a country
that's seemingly creating
a lot of this,
uncertainty and and a lot of this change.
So, I do think gold is going to
continue to rise,
in prominence. And, yes, remember, the only other
bank of international settlements only has two tier

(12:16):
one reserve,
currencies. It's the dollar and treasuries, and it's
gold. So that's why I think gold will
will,
continue to be purchased by central banks and
and use as a reserve. Do you think
the US dollar then is at risk of
continuing to be the world reserve currency?
No. Simply because
there's nothing to replace it. There's not enough
gold Mhmm. In the world to be a,

(12:37):
means of trade for all the all of
the trading partners around the world. The only
other currency that's probably big enough and stable
enough is the euro, but it's really a
consortium of whatever in many different countries and
cultures and languages in Europe. So it doesn't
have the the same gravitas as the dollar.
So I don't see the dollar losing its
reserve status. I see more trade being conducted

(12:59):
in other currencies and maybe even gold, but
the dollar, at least in the, you know,
foreseeable future will and should remain as the
reserve currency.
So just on gold. So in a recent
market brief webinar that you did, you talked
a bit about, gold not always being a
safe haven asset. Can you explain that a
little bit? Yeah. So where people, I think,
get

(13:19):
mixed up on gold is it's unpredictable, and
it doesn't always perform in the way that
you would expect it. So if you look
at most recent recessions, I mean, even COVID,
the financial crisis, there are periods of time
at the beginning of the financial crisis and
at the beginning of COVID. Gold actually sold
off. It it re it didn't rally. And
so someone who's looking at holding gold in
their portfolio
to rise and offset declining values elsewhere in

(13:43):
their portfolio is gonna get frustrated with gold,
in many instances. And then you have a
period like last year, 2024,
when the economy was doing relatively well. Right?
The, earnings corporate earnings in The US and,
and other countries were generally strong to very
strong depending on where you looked. And, yet
gold was the number one performing asset as

(14:03):
I recall last year, besting even the S
and P 500 over that time period. So,
you know, what was driving that? Again, that
was causing some of the de dollarizing in
the central bank buying of it. But unless
you really understand gold, it can be very
frustrating
to own as a safe haven asset. It's
not that it's not going to, but really
what I wanna underscore for our clients is,

(14:24):
gold is not going to offset losses in
a,
a a difficult
environment.
And if you get into gold and there's
definitely you know, it looks like there are
some tailwinds behind gold's continued price movement, you
really have to understand what's driving that and
how gold's performing. So that's why I say
it's not always a safe haven asset and
buy there are better ways of managing portfolio

(14:45):
risk than simply buying gold. So knowing that,
we talked a little bit about currency, and
I mentioned that I really wanna get your
perspective on FX hedging and and how investors
might be thinking about FX hedging.
With trade wars going on, currency volatility, market
volatility,
how do you think about FX hedging and
and what are investors thinking and how are
they using it as a tool in their

(15:06):
portfolios? It definitely looks like we made a
period of higher FX volatility. You're gonna see
some secular shifts with currencies as well.
When there are trade wars that that, break
out and evolve, and that looks to be
we've already got a few of those now.
The real push, and you're seeing Donald Trump
do this in The US, is to weaken
one's currency.
Because if the currency is weaker, it makes
your goods more attractive

(15:28):
to another country with a relatively,
stronger currency. So I expect any number of
countries may try to figure out how to
right size their currency,
namely by lowering it to improve their ability
to export.
And, and as a result, there's gonna be
FX volatility.
What we're really, looking at thinking about from
the capital markets perspective is,

(15:50):
not straight hedges in FX because there's volatility,
but dynamic hedges. And so I think that's
where,
I would think about how to manage FX
is we look at value. Right? So purchase
power parity.
We look at momentum.
We look at the carry trade where interest
rate differentials may be. So all those could
factor into a dynamic FX hedging, platform

(16:13):
that's probably gonna be more effective when you
have a lot of ups and downs,
between different currency pairs. Purchase power parity is
a real tongue twister, isn't it? It is.
Just, you know, you mentioned Trump, and thinking
about and we talked a lot about volatility
and geopolitical risk and what have you.
What do you think about relationship with The
US and Europe and the NATO alliance and

(16:34):
just the impact that might have
as we think about post war policies and
where The US is positioning itself today? Yeah.
That's another big shift that's gonna happen from
this end of the post World War two,
era.
So in you know, at the end of
World War two, the US was very focused
in particular on Europe
and,
thus NATO. Now The US

(16:55):
does not see NATO as being as relevant
anymore and why it's spending so much money
to protect Europe
from,
you know, a Russian
threat
that the US administration and policymakers now no
longer see as a threat to Europe. So
that is going to be a a very
impactful shift shift within Europe.

(17:15):
The other shift, the other sort of World
War two era, post World War two era
shift that's going to change, I think, is
the Middle East. So The US has been
very heavily,
focused in on the Middle East, and that's
primarily because that was where a lot of
energy came out of. And now that The
US is energy
independent,
it is US people don't realize in many

(17:36):
instances now. US is by far the largest
oil and natural gas producer in the world,
courtesy of the shale revolution.
As a result, The US is no longer
worried about the Middle East. If you look
at Donald Trump's most recent trip to the
Middle East, his number one goal he didn't
even visit Israel. His number one goal was
to really try to rally
Saudi Arabia,
Turkey,

(17:57):
Qatar, you know, other players like Kuwait
to build more of an alliance in Middle
East so that they can work against the
biggest threat that's still left there, which is
Islamic,
extremists.
And let them manage,
that threat because it's a bigger threat technically
to those countries and those governments than it
even is to The US. And The US

(18:17):
can then peel out and and and stop,
spending all this money and resources on trying
to protect interest in the Middle East because
our interest there are not the same as
they were in that post World War two
era.
Consider this. I mean, The US has last
I saw over 700 military bases around the
world in over 80 countries. It's just not
sustainable.
And so The US is gonna continue to

(18:37):
to pull those out, and I think the
Europeans
and The Middle East are probably gonna be
two areas where you see that most clearly.
And I would argue too, in The Americas,
post World War two, the US did not
pay any attention to Latin America really meaningfully,
and I think you're gonna see The US
pay a lot more attention to, to The
Americas, North And South America. It's one of

(18:58):
the reasons that the, markets in South America
have actually done really well. Both equity and
bond markets have been performing very well in
the last few months. So just, you know,
to to kinda go back to the around
The US and our military footprint,
As we potentially peel back from some of
that, what does that mean in terms of
military spending and just the impact that that'll
have considering what a large portion that is

(19:20):
of government spending,
not just in The US, but globally?
Yeah. It's a huge expenditure in The US,
and, The US is going to look for
ways to decrease that as you talked about.
I mean, some of the spending that The
US has, and we mentioned the number of
military bases,
is is just not something The US can
continue to afford when we're running over $2,000,000,000,000
fiscal deficits. So
US is going to look for every which

(19:41):
way to decrease spending.
They're still going to be the number one,
you know, defense spender in the world, I
believe. But I could see that coming down
on relative terms,
because on top of that, I would expect
to see countries in Europe,
particularly
start to ramp up their spending because they're
gonna see The US,
be a lesser player in their defense and

(20:03):
their defense strategy in NATO. So, I think
that'll happen where, other countries will end up
spending more. I think net net, there'll probably
be more defense spending worldwide,
just, probably less in The US in a
relative basis.
I would worry a little bit that you
might see some countries
develop nuclear
capabilities to protect themselves as a deterrent,

(20:23):
particularly in Europe. I mean, any number of
European countries could relatively easily
develop,
you know, nuclear armaments. So you might see
some proliferation there. And then I think the
other thing that's interesting to look for here
in this post World War two era,
or, you know, moving on from the post
World War two era, in World War two
and the decades that followed, armies
and air power were the most important components

(20:46):
to really, being able to deal with any
conflict.
We've seen in Ukraine that air power has
been rendered almost,
unusable
by current technology,
and whole armies have been able to be
defeated by drones and and satellites. So I
think you're gonna see a military shift away
from holding and hosting large armies

(21:07):
and and into, call it, you know, attack
airplanes and and bombers and such and more
into drones, more into
satellite,
you know, use to
to, to support ground operations and then eventually
and probably into into space in some way,
shape, and form, in the coming years. So
I think you're also going to see, now
that we're out of the post World War

(21:28):
two era, a different type of military strategy
and spending also evolve. Any other thoughts or
anything that you wanna add just in terms
of The US really potentially taking a bit
of a different,
place in the world stage and a a
much smaller
kind of, presence in the world stage? Any
any other things that you might wanna add?
Add? I think the navy is another point
that I would wanna, to bring up. You
know, The US is gonna continue to focus

(21:49):
in on its, on its naval capabilities because
it views the oceans as being an area
where it could be more vulnerable
than on land. So that's one reason you're
seeing The US want to invest more in
shipbuilding and and why it's worried about things
like the Panama Canal and Greenland because it
really wants to secure
the Americas.
That's gonna be, I think, the focus going

(22:10):
forward. So look for more of that. I
think that's gonna be a a definite trend
you're gonna see in the coming years. You
mentioned
earlier that The US brings to the table,
large number of consumers willing to spend.
Let's talk a little bit about demographics and
how that might play into all the things
that we've talked about and changes that we're
seeing in the world stage.
As the world's aging and populations age, as

(22:32):
birth rate rates decline,
what do you think what do you think
we can see happen just globally as we
continue to think about population growth or population
shrinkage and the impact that might have? Huge
story. I also think it's underappreciated.
The
the again, post World War two era,
we had
young population, baby boomers, growth. We've got the

(22:53):
opposite now. We've got an aging population. Not
all countries. Africa is obviously an outlier. But
in most developed
countries and even many developing countries like China,
you're starting to see those populations level out
and start to decline. I mean, China's declines
already
well, you know, fourth or fifth year of
population decline you're seeing in China. Europe's already
turned over. That's gonna be a huge story

(23:14):
that people don't appreciate. And again, you look
at the the perceived threat from the Chinese.
Long term, it's not gonna manifest in the
same way. Somewhere between one point two and
one point four billion people now.
And a lot of the,
you know, demographers who study this
are expecting
China

(23:35):
to have as few as 700,000,000
people by the end of this century. So
that's a huge loss of population
and is really gonna make it hard for
China to continue in the same way that
it has been,
up to this time period. Russia is in
a similar,
situation. Brazil's in a similar situation. Europe. There
are a lot of countries that are on
the cusp of losing,

(23:57):
massive amounts of their population.
And you also see from The US Policymakers,
it's a bit of a third rail right
now because immigration,
is perceived by the, populating,
by the,
by the voters in The US and the
population is is is being a sore spot.
But eventually, you're gonna have to see The
US reembrace more immigration so that The US

(24:17):
population doesn't decline the same way. So definitely
demographics is an area that it there because
it's so slow moving that the average investor
doesn't pay a lot of attention to. But
if you look out even five and ten
years, there are gonna be some significant,
struggles
that many of these countries that are losing
population, first and foremost, China,

(24:38):
are going to face. And it's gonna be
very impactful on economics,
on military,
and real and overall relations. So it's definitely
something to keep an eye on because we're
at the very early stages of those demographic
shifts. I wanna pivot a little bit back
to The Middle East. So earlier, you mentioned
that The US is just not as focused
on the Middle East. Certainly, The Middle East
has gotten a lot of airtime recently due
to president's Trump visit and other things, at

(25:00):
least here in The US. It's gotten a
lot of airtime.
But The US now being the largest oil
and gas producer in the world and really
no longer being reliant on foreign oil,
how do you think about US energy dominance
and shifting our global influence or shifting those
markets? Oh, that's a great question. There's a
lot to unpack there, but in a in
a high level, in a nutshell, The US
is going to The US has incredible oil

(25:21):
and gas reserves, and many of them haven't
been explored.
So I think what you're gonna see the
Trump administration do is to continue to
favor projects that,
allow better access to hydrocarbons to oil and
gas,
and, to build more pipelines, more,
liquefied natural gas export facilities.
The US is never gonna be a large
exporter of oil, and the main reason for

(25:43):
that is that oil is usually used in
transportation,
and it is a another third rail topic
for politicians when gas prices rise in The
US being still car dependent
and a lot of, let's be honest, still,
you know, ICE cars,
you know, gas powered cars still dominate our
roads. I have one. Me too. And, still
dominate. And so as a result, when gas

(26:04):
prices rise, consumers notice, voters notice, and and
there's an impact on, on how they vote,
when the votes come up. So that's oil
is kind of something you'll still mostly in
in domestic. Natural gas is a different story.
Natural gas is used a lot more in
industrial chemical manufacturing processes.
It's also used, to, to make fertilizer and

(26:25):
and farming.
So very important for economic growth, even more
so than oil. And The US is blessed
with huge supplies of natural gas.
What I believe will continue to happen is
The US will look to export that. And
instead of offering military aid in the same
way, they're going to use natural gas to
have an influence
on their,

(26:45):
relations with other countries around the world, which
is to say, look, if you want access
to relatively cheap and very abundant,
natural gas for all your industrial and manufacturing
processes, you need to work with The US
and things. So look for that to happen.
I I think that will continue to to
be a real trend. And I think as
it comes to The Middle East, what I
I think The US, strategy there is going

(27:07):
to be is to figure out a way
to get normalized relations between Israel and Saudi
Arabia,
and other countries there so that it can
really extract itself from the Middle East and
not have to worry about,
you know, events as they unfold there. I
think that's why this,
negotiation right now with Iran is also so
important so The US could really just vacate
that area. And hopefully, it it doesn't,

(27:29):
you know, take a turn for the worse
if they can get the right, alliances
and and so forth. So this shale revolution
and the secular impact from that cannot be
underestimated.
And I I think it's going to have
a real impact on, unfortunately,
on the transition to clean energy Mhmm. Because
hydrocarbons, oil and gas are gonna be so
cheap if The US continues to follow this

(27:49):
policy. So speaking of clean energy, I mean,
what do you think there's any impact just
in terms of the current US administration
and the thoughts and policies around clean energy
that that might have in The US or
even globally and the influence that The US
has globally as we think about those things?
The The US Policymakers right now are not
very favorable on clean energy.
Again,

(28:10):
they're awash in very cheap hydrocarbons, but the
other element of it,
look who controls all the clean energy. Right?
Almost all solar panels come out of China.
Rarest going into batteries,
come out of China. The other thing that,
that's concerning is the sheer cost
of pivoting to a clean energy environment because

(28:31):
you need, you know, hydrocarbons,
and we've talked about this in some prior
podcast,
hydrocarbons are much more energy dense. They're also
much more reliable for use in power generation.
You know, the solar panel needs the sun
to shine. You know, wind turbines need the
wind to blow, and it's not consistent. But
you can always burn natural gas and oil
and, you know, and and split atoms in
a nuclear reactor. So, those are just much

(28:53):
more reliable and ultimately energy dense. And in
fact, if you look at what happened in
Spain when it's lost its energy,
it wasn't necessarily directly because of of the
renewables and the clean energy. It was because
they didn't have the batteries kicking in when
some of the renewables were not,
producing as much power. And that's why they
had some blackouts. It was in part because
of the reliance on clean energy. So if

(29:14):
you build clean energy power supplies, you then
have to duplicate that and you have to
build battery capacity and so on and so
forth. So,
and if that's all controlled by one of
your adversaries, it's just not where The US
is going to put its efforts.
The US is very active in building more
LNG export facilities, liquefied natural gas, and they
are also going to be encouraging, and you're

(29:35):
seeing this, for example, in, parts of Europe,
more pipeline building so they can take those
LNG carriers, take them out of our export
facilities, and send them over to Europe and
Asia in particular
to supply,
their cheap power. And again, it's going to
encourage
more hydrocarbon use. And this isn't just US
that's realizing this. China, for example,

(29:56):
they had they started to decrease the reliance
on coal.
They have now, are building more coal plants,
right now that are planned and in process
than in ten years. It's about a hundred
gigawatts of coal plants that they are actively
building right now because, again, coal is cheap,
it's reliable,
it's gonna be their base load, and they
have a lot of coal deposits in the
kind of northern parts of their country that

(30:18):
they can access where they are net oil
and LNG importers. So I think you're gonna
see this play out in global politics because
if you can control cheap energy, it it
feeds so much of your wealth and your
military strength. It's interesting, especially as the changes
in the political environment and what we're focused
on and how we're focused on changes.
So we covered a lot today. We covered

(30:39):
energy. We covered FX rates. We covered currency,
gold,
interest rates.
Anything else that you wanna make sure we
cover off on? We mentioned gold. I I
always like to mention silver right now.
Silver is, another,
metal that, is not in the news very
much, but it's relatively cheap. Normally, the gold
to silver ratio is 60 to one.

(31:01):
It's a hundred to one today. Right? Gold's
3,300 an ounce, and silver's about 33 an
ounce. So that's a very high ratio.
Gold should probably, either be worth less relative
to silver or silver more. The other thing
about silver, it's used in solar panels, and
it's used a lot in defense.
It's actually used to, for batteries, and a
lot of aerospace and also for guided missiles.
So as the world uses more defense, more

(31:24):
satellites, more solar panels, you're gonna see demand
for silver to go up. So that's something
to keep an eye on. And then the
other thing, this is
unknown, but we are moving to a multipolar
world if The US starts to isolate itself
more.
And with that, you're gonna typically see more
populism.
You'll probably see more local power struggles, and
I don't necessarily mean coups, but look what
happened in Canada. Right? You're gonna have,

(31:44):
you know, surprise elections as more populism rises.
And with that too, I think you'll see
more fiscal spending. You're seeing that in Europe,
emerge as well. So those are the kind
of trends I would keep an eye on
in the coming years, as The US becomes
a little bit more isolationist, as we move
away from post World War two policies.
A multipolar world is something that we haven't
seen in eighty years. Thank you, Grant.

(32:07):
Thanks for joining us today. I always love
sitting down with you and hearing your perspective,
and I know our listeners do too.
The market landscape is changing in ways that
matter, and we've unpacked a lot today on
the trends driving it and the transformation. So
thank you. Thanks for your insights.
And to our listeners, thank you for tuning
in to Market Pulse by Fast or Forward.