Lyn Alden: MacroVoices #538 Lyn Alden: Is The War Really Over and What’s Next For Markets?

[00:07] This is Macrovoices, the free weekly financial podcast targeting professional finance, high- netw worth individuals, [music] family offices, and other sophisticated investors. Macrovoices is all about the brightest [music] minds in the world of finance and macroeconomics, telling it like it is, bullish or bearish, no holds barred. Now, here are your hosts, Eric Townsend and Patrick [music] Serezna. Macrovoic's episode 538 was produced on June 25th, 2026. I'm Eric [music]
[00:38] Townsendant. Traffic is starting to flow through the straight of Hormuz and many indications suggest that the Iran conflict is finally coming to an end. Although the jury is still out on the nuclear negotiations with US and Iranian officials making diametrically opposing public statements about what has and hasn't been agreed to. And to my great surprise, the dollar index broke out to the upside and the stock market started to roll over slightly lower, coincident with the news suggesting that the
[01:09] conflict is finally ending, which certainly wasn't what I was expecting. So, to make sense of whether the conflict is really over and what it all means for financial markets, I'm pleased to welcome back best-selling author and Macrovoic's all-time listener favorite, Lynn Alden, as this week's feature interview guest. Lynn and I will discuss the hormone's crisis status, what to expect from the Federal Reserve and its new leadership, budget deficits, the AI trade and whether it's a bubble that's about to burst or a trend that still has
[01:39] legs, the demands AI will place on energy markets, and much more. Then be sure to stay tuned for our postgame segment after the feature interview, starting with Patrick's trade of the week based on Lin Alden's interview. Due to my flight schedule this week, I'll be leaving the postgame segment in Patrick's able hands. And I'm Patrick Serezna. We continue to see aggressive repricing of oil week overweek. WTI dropped roughly 885 basis points, falling to 6928
[02:10] as the market continued to price out geopolitical risk and unwind the prior risk premium. At the same time, the US dollar staged a technically significant breakout, rallying 210 basis points to 10154 on the dollar index and decisively breaking above a 15-month trade range. Another notable move was the continued selling in gold, which has now declined roughly another 900 basis points, falling back towards the 4,000 level we
[02:41] have not seen since October of last year. So, some very important macro levels been broken this week. We'll take a closer look at those charts and the key technical levels to watch in the postgame segment. This week's feature interview guest is best-selling author Lynn Alden. Eric and Lynn discuss fiscal dominance, stable coins, and dollar demand, the long-term implications of persistent deficits, and why energy, infrastructure, and hard assets remain central to the evolving macro landscape.
[03:12] Eric's interview with Lynn Alden is coming up as Macrovoices continues right here at macrovoices.com. And now with this week's special guest, here's your [music] host, Eric Townsend. Joining me now is best-selling author and Macrovoic's all-time listener favorite, Lynn Alden. Lynn, you live in Egypt part of the year, very close to
[03:43] the Iran conflict. So, I'm particularly curious to get your take. It seems like most of the world is celebrating. Woo! That's finally over. It's all wrapping up. It's ending. The Secretary Chris Wright said on Wednesday that traffic has returned to normal in the Straight of Hormuz. Iran no longer has the ability to shut it down. It's over, folks. Celebrate. Yay. Pop the champagne. Is it really over? Are there still concerns? I know you wrote a piece about this for your subscribers recently. Can you give us at least a
[04:13] quick summary of what it said and what your take is? >> Sure. So, first of all, thanks for having me back. Always happy to be here. I certainly hope for my sake that it's over. You know, back in April, Egypt had to do an energy curfew just because, you know, all these countries are scrambling for natural gas. So, you know, they had to do like a a forced pressure on on companies to to shut down at certain hours of the day uh just just to kind of preserve energy. they were luckily able to get out of that in May and I kept kind of watching the situation to say well I really hope this doesn't uh return and so I think like like many
[04:44] other people I'd be happy to see that the conflict is is resolved you know I still think the I think this is unfortunately going to be a headline that continues with us probably for at least weeks let alone months because you know that the memor memorandum of understanding still leaves a ton of details to work out and even in kind of the opening days kind of around the signing and around some of the talks that that go into some of those details, there are still pretty big divides. You know, what's going to happen to the enriched uranium? What's going to happen
[05:15] in terms of on-site inspectors being able to go in like enforcement mechanisms? What type of funding? They talked headline numbers, but what kind of like in what form does that funding take? How do you manage political headlines around that funding? And can Iran told the straight after say a 60-day period? And so there there's still a ton of moving parts here. I I think you know I would expect and hope that we're past the worst part of this. That's a pretty consensus view I think. So I'm not it's not really breaking news there. But you know as good of a step as
[05:47] this was uh I think there's still a lot of work to be done. And unfortunately, a lot of, you know, a lot of the, if you kind of just go down the list of the the memorandum of understanding, a lot of it is basically trying to reconstruct the deal that was in place, uh, you know, back from what was it 2015 to 2018 roughly that we left. So, a lot of it is kind of scrambling to get back to a situation that already had a a solution in place and and by most accounts was being enforced and being monitored. Now, as a
[06:17] result of the perception that it's completely over, crude oil has sold off to basically precrisis levels or about the same level as where the crisis started, both time spreads and flat price. And as we're recording on Wednesday afternoon, we're actually below the 200 day moving average, which is at 69 spot 92 on the WTI August chart. And we're only about a dime below that as we're recording. So, it's it's not much. This is the price level that's
[06:48] held up the market really. We we haven't traded below it hardly at all in 2026. Do you think that uh it keeps going? Are we are we done yet? Or is we going to are we going to find a bottom here in crude oil? >> Well, in terms of short-term trading, I would defer to you. You trade oil more directly than I do. I tend to invest in longerterm positions in energy stocks, uh energy pipelines, things like that. My view kind of going into this was uh you know kind of before the war I wanted to be long energy companies when they started to run up right ahead of the war
[07:19] and stay pretty elevated. My view was I'm not really chasing them here. I'm still going to keep holding but I'm not chasing and that that so far that's been the right move because we haven't had you know the big oil spikes that many analysts uh feared that we would uh given this this long of a straight closure. And so you know I think that it's really going to depend on what happens with the straight. I mean, if a week from now it's all closed again and, you know, some more attacks are happening and it does look like they're getting along, then I think, you know, we can see oil start to to climb up
[07:50] again. If the straight stays open, I think this is a kind of a near-term rational place for oil to be from a a price standpoint. I think over time it trends higher. Um, I certainly, you know, for countries uh or buyers that have emptied reserves, I think this is time to not be emptying them and to be refilling them, you know, where possible. commercial reserves and things like that because I think one of the things that kind of saved us during this time was pretty large reserve stock piles across the world in some cases strategic other times commercial drawing
[08:21] down um and especially you know like some of the markets that don't have a lot of pricing power like I mentioned Egypt with their energy you know with their energy curfew uh you certainly want to this is the time to get contracts in place and to get storage in place going forward >> well I definitely agree with you there it's going to be really interesting interesting to see whether the appetite to do the responsible thing and refill all of the uh strategic and commercial storage that was drawn down during this
[08:51] crisis. Are we going to do the responsible thing and fill it all back up or are we just going to celebrate the low prices and uh you know wait till it's not an election year to to think about refilling these things? It'll be interesting to see how that plays out. In any case, I want to move on to the Fed. We've got one meeting so far with new Fed share Worsh in at the helm. Uh what do you make of you know a lot of people thought he was going to come in and start cutting aggressively. If anything the signaling in the dot plot seems to be more towards a hike is in
[09:23] our future. What do you think about both Fed policy but also the changing character of the Fed under new leadership? >> Yeah. So a lot of moving parts there. I think I mean in a different environment like if he came in a few months ago before this war started before we had a period of higher energy prices and kind of trailing you know rising inflation levels then there's a very good chance that he would have taken a more doubbish tone. Um now he's he's historically been on the hawkish side more so on the balance sheet but also on interest rates. uh and you know in kind of later
[09:54] you know as he's kind of auditioning for the federal role to a president that is known to like rate cuts and and what what president doesn't but he's been particularly outspoken about it you know he he made arguments for a more doubbish take at least on interest rates which was basically that AI and other productivity uh you know might over time you know have them be able to cut rates without kind of contributing to inflation uh even from someone who's historically not that much of a dove you know but in order order to maintain credibility, in order to not look like,
[10:25] you know, a puppet that many people would would criticize him as being, not not me, they had to come in and say, well, look, the numbers are high. You know, obviously the market is way more worried about inflation right now than unemployment, and that's what the metrics show. Uh, so it makes sense for them to take a kind of a hawkish but vague tone on what they're going to do. Now, going back to the prior discussion we just had, is this war over? Is the straight gonna at least mostly stay open, you know, most of the time, you know, and can oil stay and it's, you know, a little bit more comfortable range here. If they start to show that
[10:56] inflation's rolling over, we might start to see more patient language by the Fed. I mean, there was no urgency here. Historically, the Fed does tend to look through energy crisis. Uh, and so, you know, I I I think they're going to look at like non-energy types of inflation and make a decision. Uh, and as far as the balance sheet, you know, I I've been on record. I've been calling it for the gradual print scenario, which is that I'm fading kind of these narratives that there's like a really big QE around the corner and and you know, crisis going to happen. They're going to print a ton of
[11:26] money. I mean, there's there's certain tail risks that could happen. And for example, when the Iran war broke out, I was like, okay, what is the possibility this could lead to something like that? I was like, whatever chance it was, just went up a little bit, but it still wouldn't be my base case. But I think we're we're back in that just gradual print scenario. We're going to see what their task forces come back with in terms of balance sheet reduction options. There are a handful of things on the table that they could do, but I would describe most of them as liquidity neutral, meaning that treasuries have to be bought. They're not going to allow a
[11:57] liquid treasury market. They're not going to allow problems uh in in repo and and you know, kind of those those shorter term lending markets to persist. And so uh you know the way that the prior Fed fixed it was going back to balance sheet expansion at a gradual pace. Another option or or a co-op option uh is to find ways to let banks hold more of them. You know kind of deregulation on certain kind of capital requirements to let banks and their fractioners or balance sheets hold a little bit more. [snorts] But that's at the end of the day that's similar to QE
[12:28] in terms of like just a pro liquidity move. So I think that there's some kind of like balance here uh that ultimately results in treasury still going to be bought still liquid uh and still kind of conducive to gradual growth of the money supply uh which all else being equal is is still pro-inflationary just not as high as many of like the kind of the alarmist uh would say at least any any sort of like near-term time horizon that I can that I can cover. Speaking of near-term time horizons, I am personally
[12:59] uh caught dumbfounded by the breakout to the upside on the US dollar index. It seemed to me like it was probably the conflict in Iran that was holding the dollar up as a safety trade as everybody was worried. Now they're getting unworked and the dollar's breaking out to the upside. What do you make of it? >> I think a lot of it is just the repricing of the odds of rate hikes for the rest of the year. uh you know a little little you know obviously the um the the trailing inflation they've had plus the the somewhat as you mentioned
[13:29] somewhat more hawkish tone from the Fed than the base case was and I think the market is is you know driving on that in addition the AI trade at least for the moment is still mostly alive and so there's still there's still capital that wants to go into US uh equity markets and so you know it's a little bit of a an aggressive move I think in the dollar I wouldn't get in front of it right now but I at the more it continues the more it will pressure ironically you know not just international economies but the US economy and it'll end up just flatlining
[14:00] again I think I think for the foreseeable future at least any sort of time horizon that I'm monitoring I think the dollar trades in this choppy band especially given that in you know if you're using the typical waiting rather than broader waitings uh you know the biggest comparables you know the biggest comparable is the euro and I mean not that many of us I think are super bullish on the European economy and euro. So, I look more at things like the dollar verse Chinese currency. I look at uh some of these emerging market currencies often more than I look at a
[14:31] very eurow weighted type of uh index. >> Let's move on to a forgotten topic, deficits. We kind of spent a lot of money on this war and other stuff. Uh we ever going to pay any of it back? >> I think that nom nominal debt levels are going to keep going up at a pretty aggressive clip. Uh the Treasury Secretary I I think his recent forecast was uh that they can get back to 4% deficits as a share of GDP by the end of this administration. I'll take the uh over on that. I don't think they're
[15:02] going to get back to 4%. I don't think it necessarily blows out on a percentage basis uh any any more than it is now unless unless something else unprecedented breaks out. I think we have a combination of kind of high nominal GDP growth but also still large deficit growth. And so you get that kind of um mid mid to high single digits for deficit as a share of GDP and uh a a pretty aggressive clip of treasury growth. You know, if you ask a lot of bears over the past five plus years, why
[15:34] do they keep underestimating what the market can do? I think a lot of I I would say a lot of what they're what they're missing is the fiscal side. You know, even when occasionally there are bubbles, I get concerned about little pockets of excess. You know, I I have a kind of a background tendency in value investing. So, I'm always a little bit sensitive about valuations of things, but what the kind of the the north star that I keep airing toward is that fiscal is more powerful than people expect. And so, any sort of trimming of fiscal tends to be a pretty big force to the
[16:04] downside. And any kind of um just ongoing surging of fiscal deficits or at least m maintenance of existing large fiscal deficits is a hard thing to stand in front of. uh in terms of wanting to own high quality assets uh especially like the the really kind of just big structural uh you know high quality equities, scarce assets and they all they all take their turn with little you know periods of outperformance and underperformance you have a good year bad year but when you own a collection of them in this kind of run it hot
[16:34] fiscal environment that's the north star and I think that you know it's going to stay in that kind of mid mid to upper mid high single digits for any sort of time horizon that I'm looking at. >> Okay. Now, I just want to sanity check this because not that long ago, 10 20 years ago, anything over 3% of GDP as a deficit was considered, you know, extreme emerging market banana republic stuff. Is there a real fiscal reason
[17:04] that because the United States is such a large economy that it's okay to be running? I mean, if we're trying to get down to 4%, that's like a a target low number, but you don't believe it's possible. You think it stays higher? What happened to the good old days when 3% was too high? Demographics is the is the big thing. Yeah. When we used to the the problem is terms like okay, that's there's a subjective element there. What does it mean to be okay? I think that the we can break that into a couple different answers. One is that because the US has a large and diverse economy
[17:36] and in addition because we are the global reserve currency and there's plenty of international crossber debt denominated in dollars. It it means there's a ton of inflexible demand for dollars and a lot most of that debt's not even owed to the US. I mean that the US is a net uh debtor not a net creditor. A lot of it's like just crossborder between entities in other countries that that owe each other dollars. There's all this just persistent inflexible demand for dollars and o over the long arc of time. For
[18:07] example, if they buy a lot of gold in their reserves and gold goes up a ton, you know, you can get out of that sort of debt trap. Uh but that that that just is a very strong structural bid. If you take a country like Egypt, there's not a lot of like structural external demand for the currency. You know, certain trading partners might might use the currency. Obviously people in the country use the currency. So certain traders might at any given time find the currency attractive for a trade, but not that many entities around the world structurally need Egyptian pounds in the way that they need the dollar. And and
[18:37] of course the dollar is even more needed than other developed countries. So that does give like the US a longer runway where you get something more like an acute crisis. I think people keep underestimating the the kind of the depth of a problem it would take to really destabilize this to like a a complete spiral. That being said, uh you know, the consequences are already partially being felt, but instead of being felt in terms of like a failed auction or, you know, persistent double-digit inflation in the near term, it's often felt in this two-speed
[19:08] economy. So, for example, part of the kind of the two main reasons why we have this twospeed economy or K-shaped economy, you know, people call it different things, uh, is that if you're on the right side of either obviously AI capex or fiscal deficits, you're generally in a pretty good position. On the other hand, if you're not on the right side of either of those things, and if anything, if you're on the the wrong side of kind of like restrictive policy on housing in terms of higher rates and and affordability issues, that's where you're struggling. uh you
[19:38] know, if you're an asset owner, again, we just talked about how these structural fiscal deficits are generally pretty good for the nominal price of assets. Uh if someone is long assets and short a 30-year mortgage or other types of, you know, if they're a corporation that that took out 10, 20, 30-year bonds, they're generally pretty happy with the current status quo. But if someone's like a young family looking to buy a home, I mean, that's I think why we're seeing some of the the kind of ongoing political polarization that we have in the US is these very large fiscal deficits that are not necessarily
[20:09] directed at the young or not directed at productive things per se. They're more directed at consumption and they're more directed at ironically those that already have often a decent amount of of wealth. So I think a lot of this issue shows up not in these kind of spectacular debt crises at least anytime soon. Instead it shows up in just ongoing political dissatisfaction, rising populism and all the other complications that we feel indirectly on a on a
[20:40] somewhat regular basis. Now, our friend Michael Every over at Robbo Bank has told our listeners his view of uh essentially a new strategy where Secretary Bessant and President Trump are really embarking on this stable coin statecraftraft idea of using US technology leadership around stable coins to kind of rebalance the playing field in US favor. What do you think of that view and would it help maybe add to a sustainability argument that the US
[21:12] really can get away with bigger deficits than anyone else can and can sustain that for quite a while? >> A good set of questions. I I mean I think the funny thing with stable coins is they just have to not get in the way of stable coins and they'll keep growing. There's certain things are obviously around the margins that they can do to let domestic entities get more involved in them which some of these recent pieces of legislation are are, you know, looking to address, but stable coins are already growing. You know, I kind of first wrote about how bullish I was on them back in I think it was January 2021. It was like a $30 billion market cap and I was like, I think this
[21:42] is headed higher, way higher. And now it's, you know, what 300 billion and climbing. I I think eventually we'll see well over a trillion in stable coin market cap. You know, once we get to that number, I'll reevaluate from there. But you know there there are certain like magnitude things that I think people somewhat overestimate which is you know stable coins is as powerful as they are that at least in their current form they're mostly yieldless products. So anyone holding them uh is getting dollar exposure but no yield. Uh which
[22:12] generally means that they're good for payments. They're good for working capital. They're less ideal for savings. And so and there's so there's but there's many businesses around the world uh that would would happy to use them for working capital. You know one of the things I pointed out before is Africa has something like 40 currencies. Latin America has something like 30 plus currencies obviously many more currencies in Southeast Asia. You know, imagine if every state in the United States had its own currency and anytime you were a business and you had customers and other business businesses
[22:42] across the country that you do business with. And if every border was a friction, a currency exchange managing kind of the differentials between different currencies, it'd be a really big solution to just be able to use a much bigger unified currency if if it became available. And stable coins is really good for many businesses in many users in many parts of the world that want to solve those types of issues. Obviously, anyone anyone who sent an international wire more than once and and has run into probably some frictions. It's opaque. It's often slow. It's often expensive. Um uh and stable
[23:14] coins can just really speed that up. So, I am bullish on stable coins. When you run the numbers, I mean I there was a I think it was maybe a year ago, what was it? Cityroup ran uh a pretty detailed analysis and they were calling for they had like a a bare case, a base case and a bull case on stable coin market caps by you know let's call it 2030 I think it was and I don't have the numbers off hand but maybe the base was in the trillion plus range whereas their bull the bull case was kind of closer to 3 trillion and even the treasury secretary cited it I you know when you actually
[23:44] read that report I think it was a pretty good report that city put together you know for one the treasury secretary cited the bull case uh which you know it's fair, but that was their bull case. That wasn't their base case. And when you actually look through their cases, they were kind of listing the different sources of demand where stable coins might take market share from other types of pools of capital. And ironically, some of those other pools of capital that stable coins were potentially taking market share from are things that own treasuries, right? So they're like
[24:14] taking market share from other things that hold treasuries and then using that to hold treasuries. Now because of the way stable coins are supposed to work, they generally have to hold a much higher allocation of treasuries than other things. So that still is on around the margins net new demand for treasuries. But if we just kind of run these numbers and we say let's over the past call it five and a half years or you know five plus years we've gone a 10x in stable coins but we started at pretty low base. So you know we went from tens of billions to hundreds of
[24:45] billions. Now, I'm on the record saying that I I think, you know, eventually get over a trillion and maybe keep climbing from there. But let's say we do add a full trillion in stable coin market cap over the next several years. And then let's say a full half of that represents like entirely fresh treasury demand. So 500 billion plus uh in in new treasury demand from this trillion dollars of stable coins. Or let's let's say even more bullish. Let's say um you know 750 billion in new treasury demand out of
[25:16] that trillion in new stable coins. That's still if you if you call it 500 billion that's what 3 months of deficits. If you use you know 750 billion it's at four or five months of deficits. If you use say a full trillion you're getting you know somewhere in a half a year of deficits. Just this the size of the deficits relative to the kind of the stable coin opportunity. They're both very big numbers, but I think when you compare them, I mean, I think stable coins around the margins extend what is already a pretty long
[25:46] runway for, you know, the dollar and the treasury, but it's not like a just a permanent band-aid that just solves everything. I think that politicians kind of always need a narrative to point to, especially narratives that avoid hard trade-offs. So, if you can just make a kind of optimistic case for something, you're naturally going to kind of use that a lot in talking points. And it's again, it's not without merit. I just think that as bullish as I am on stable coins, this the size compared to just the stock of US debt uh
[26:16] is is just it's another variable. It's another type of buyer in in many types of buyers rather than just some magical fix. Now, one of the reasons that the US dollar has been able to essentially maintain a monopoly on global reserve currency status is that the depth of liquidity in the US Treasury market is just something that nobody's ever figured out a way to match. So, if another country tried to, you know, say use our yuan or our ruble as as the
[26:46] global reserve currency, there's no bond market behind it that could possibly absorb central banksiz capital flows. Is that true of the stable coins that are built on top of the US Treasury? In other words, can you sell as many uh stable coins as you can treasuries without moving the price or are they a little bit more price sensitive? >> Well, I mean, so far stable coins have been tested in the the billion, the tens of billions, and the the hundred billions market. You know, I think that it they're still it's still a growing
[27:16] market. They are they do tons of volume. They are incredibly liquid. Now, not all stable coins are the same. There are like little stable coins that have much less liquidity because they're issued by someone that that people are focused on. And then there's, you know, like the top two stable coins that are responsible for just tons of liquidity on the market. And for those, yeah, they have they have pretty high depth of liquidity. I mean, it's it's still not as big as, you know, repo or or big as treasury liquidity, but it they are very large and climbing. And if you know, if
[27:46] one day the the stable coin market does go up 3x or 5x or it adds a full extra zero to its market cap, I would expect liquidity to have gone up a ton as well. There'd be way more businesses and individuals moving around stable coins. You know, obviously there's some mechanisms of concern there. Like it makes sense that regulators are kind of watching that space because, you know, if you get a rapid selling of stable coins, you can potentially obviously destabilize the assets underneath them. But yeah, I I do think that stable coins
[28:17] in general contribute to the dollar's liquidity network effect. But again, it's it's not a magical solution. But I do think that that is that's that's one of the primary reasons why all these runways, all these changes take a lot longer than many people think because people routinely underestimate the power of network effects. And I think stable coins are just one more reinforcement for the dollar. And it mostly it's it's again it's just it's a pretty organic demand like on the streets of Cairo when
[28:48] people want to hold a foreign currency that they buy in the you know the black market or the gray market it's almost always dollars you know maybe sometimes it's a near it could be a currency from a surrounding country uh around the margins but it's almost always dollars and that's just or that's just bottomup demand you know in countries like Egypt stable coins have not really caught on yet it's still mostly a physical dollar market whereas in countries like Nigeria area a little bit more tech forward. They, you know, they've been very, you know, bullish and and using stable coins a ton. And again, a lot of that's kind
[29:20] of bottom up demand. Uh, so for the most part, the countries just have to get out of the way and kind of let that demand happen. The US can, if they wanted to go after all the stable coin issuers. I mean, they could maybe not necessarily eliminate them entirely, but they could really take the liquidity out of the market. If whatever reason the US decided it just wants to go after like, you know, the the top five stable coin issuers and say you you can't operate anymore and if you try to operate with our assets, we're going to sanction you and take them away. And just by not doing things like that and then around
[29:51] the margins by letting US banks, you know, kind of safely handle them, it just it lets the organic demand that's already there keep growing. Let's move on to another topic that you've written quite a bit about which is artificial intelligence and the technology that it depends on. Boy, it seems like that's really the main thing uh holding up the market. How long can it continue and what's your outlook? >> The short answer, I think it continue longer than people think. I mean, we just saw breakout earnings from from Micron which are not that surprising. Uh
[30:21] I think RAM demand is going to continue to be pretty high for at least quarters. I touched on in my recent report, I actually touched on SpaceX because while I do think it's very overvalued, you know, I think people should learn from Tesla how long some of these companies, if there's strong narrative momentum behind them, how long they can stay expensive. You know, Tesla hasn't had revenue growth really in in 3 years. And yet, you know, a company like Toyota trades at what, like seven times price
[30:51] to sales, whereas something like Tesla trades at 14 times price to sales. again despite technically growing slower than Toyota in the past three years. Obviously, if you extend the time frame, then Tesla's growing faster. And so, some of these like stocks can just levitate more than people think. And then the ironic thing is I if they can kind of like mean themselves to solveny and success in a way because like for example, years ago Tesla had a weak balance sheet, but because they drove this the stock price up so much, they were able to issue more equity and
[31:21] essentially fix their balance sheet. You know, we just saw headlines that that you know, SpaceX was announcing a $60 billion all stock acquisition using what is many would say overvalued currency. So, it's like by being you could say that and I would say that that the uh valuation is quite decoupled from the fundamentals, but then there's that feedback loop where the valuation actually impacts the fundamentals. It can shore up the balance sheet, rate, help them raise more capital, help them buy things at pretty cheap levels basically. And so while I'm not a I'm
[31:53] not a buyer, I think that bears that expect this to just roll over and and die like next quarter, I I think that's premature. You know, we've already seen, for example, some of these like chip stocks, you know, you have a really big bull run, it gets completely euphoric and then I mean, whenever you have volatility to the upside, some of the pullbacks can be pretty violent. But it depends on the name. I especially the chip stocks, you know, if they p if they ever get pullbacked enough, that's when I get interested. So I I I still think this this whole kind of capex cycle has legs to it even though from an
[32:24] investment standpoint a lot of them are in my opinion getting quite concerning and so I I but I think on I think entities on the right side of capex spending are probably still going to be happy for the coming quarters. I I do think that what's interesting is that while we see some of these AI stocks go vertical. Uh the other side of that is kind of like where's the liquidity coming from like what's being sold to fund them. Uh I would say at the current time I think there's a little bit too much bearishness on stocks that are seen as kind of on the wrong side of AI. You
[32:55] know they could be software stocks, they could be certain types of consulting stocks even like for example we talk talking about we were just talking about stable coins like the um the core software companies that provide the software that that US banks run on. You know there's only like three or four of them. They're trading, they're pretty much all trading at like six times earnings despite most of them still have flat to higher earnings growth. And so I kind of like how some of these AI names get ahead of themselves from time to
[33:25] time even though the you know the use case is there in many cases like say Micron the revenue is there a lot of but occasionally they'll get ahead of themselves. Some of the bare narratives also I think get ahead of themselves which is like you can say okay this company is facing headwinds is likely going to have slower growth but at what point does the valuation get so cheap that it's kind of like the inverse of a SpaceX situation you know where SpaceX trades 100 times revenue you know at what point is five or six times earnings
[33:56] for a technically still growing company overly bearish and so I think that there there's certainly a lot of stocks that I'm watching where I'm not looking to catch falling knives. You know, there's two of them I dabbled in clearly a little bit on the early side because they while their fundamentals are still good, I mean, their price just kept going down. So, I'm just kind of I'm making a pretty big watch list of a bunch of different types of companies that uh you know classify as companies that in many cases were growth stocks and are now value stocks,
[34:27] but they're kind of priced at deep value. Many times it some of them have more cash than debt on their balance sheet. So, a lot of them have fortress balance sheets, others don't. And I I just think that for everything that that's going vertical, there's often another stock out there that's going vertically down that maybe shouldn't be or at least maybe shouldn't be going down that quickly. Um, so I I think that I wouldn't jump in front of trends while they're still trending and I I think this still has some legs to it, but I do think that when this does start to turn, you know, just just think that always
[34:57] kind of invert the question. So what has gone up a ton and might be a short versus what has collapsed and might still not be dead yet? >> Well, I couldn't agree more that narratives can outlast everyone's expectations. And to my thinking, that should be even more true in the case of AI because I think it is at this point a national security issue. You know, we're in an AI arms race. We can't just decide AI is not important and let China be in charge of AI. That that that creates a a
[35:27] national security imbalance. That's intolerable. So, it has to go on. But I kind of think the people at the dot boom who thought the internet had to be a big thing and had to go on were right. But it didn't stop the, you know, the bust from happening in equities in the meantime. And it seems to me like, wow, we've got with anthropic and open AI coming up and SpaceX already happened, you know, Anthropic and Open AI are the pure play AI uh IPOs. It's like $3
[36:01] trillion between the three of of those or or almost $3 trillion. That's bigger than the than the United States entire national debt when I was a kid. uh [laughter] pretty big number, you know, all hitting the market at once. We've never had that much money have to be absorbed all at the same time with a new IPO offering. And of course, the actual raises are smaller than the valuation of those
[36:31] companies, but it's not that much further out that the founder shares become unlocked and potentially people start selling. So are we setting up not I agree with you it's not right now but are we setting up in the next few years for an internet like phenomenon where you know it is the correct bet that it's going to be a big deal for a long time but the market still got ahead of itself and we still had a great big bust because of it. >> I do think so. Yeah, I think I mean we've already seen I think smaller versions of those. I mean there there are times that Nvidia just went straight up and then literally got cut in half by
[37:01] a third or more and then just kept going straight up even higher. So those have been like mini versions. I I think we probably do see a much bigger version. You know, I think SpaceX is is I think again like 100 100 plus times price sales is really kind of testing I think market appetite. Uh we've seen most of the hyperscalers go free cash flow negative. They've aggressively issued bonds. They've even, you know, turned to non US markets to issue bonds because they have to kind of, you know, scrape all the bottom of the barrel to get
[37:31] liquidity where they can for the buildout that they're going for. you know, in terms of like it being a national security issue, I mean, there's already so much capital going toward it, you know. So, I think that when the when that pullback eventually happens, I think that probably will be healthy for the market. I think one of the worst things that the US could do is kind of help blow the bubble even bigger and then get a worse bubble on the other side. Right now, I don't see a lot of economic moat in the AI models themselves. I mean, as customers have shown, I mean, they're pretty low switching costs. If one model was the
[38:01] winner, uh, and then another model comes along and is better. I mean customers and both individuals and businesses can switch over. So I'm not particularly super bullish on those. You know, more bullish on the actual bottlenecks, the the things that are harder to reproduce. Ironically, you know, one of the few things that Bernie Sanders and JD Vance both agree on is they both talked about partially nationalizing AI companies. Uh you know, the US government taking shares in AI companies and their proposals. They are different. You know, we obviously saw the the pressure that
[38:31] the US put on anthropic recently, and if anything, that slows down some of these centralized AI companies and is basically marketing for these open- source AI solutions, many of which are non US. And so, I think the problem is there's kind of mixed messaging at the moment. There's certain things that can be done to support them. There are certain things that can be done to give them headwinds. Some of these companies don't do themselves any favor because they just they keep talking about like doomsday scenarios and then they wonder why they get like hit by a regulation or
[39:02] a sanction. And so obviously a ton of moving parts here. There are I think real cyber security risks just from kind of the rate of these tools that are able to poke around on code bases and find things that that have been sitting there for a long time. Uh I think it's it's I think it's problematic for DeFi because you know one hack can lose your fund forever. it's problematic really for any any company any sort of cyber security any sort of data leak scenario and so I think that's a real concern that in it of itself is kind of a potential
[39:32] national security or corporate security concern but you know I I think that if a country wants to be a leader in AI I think it's one of the things it can do is just for the most part let the private sector cook and build things and sometimes win and sometimes go bust and just be a a relatively businessfriendly environment and then around the margins to see okay what is what is dangerous you know what what certain protections can be provide but realizing that whenever they go too aggressively at the centralized models
[40:02] is basically marketing for open- source versions where businesses and individuals you know one is they want to be able to use the models and two uh they often want some privacy for business secrets just for personal data leak risks and stuff like that so both individuals and businesses they in many cases are going to care about privacy and If the centralized ones have to collect additional identity information and and log all sorts of stuff from their customers, again, it just it's it's marketing for the open source ones,
[40:32] which in many cases are are not in the US. Some of them are. And not only are they not in the US, but some of them are in China, which happens to be a country that frankly has a better thoughtout energy policy than the US. And the concern that I see or the the storm cloud I see on the horizon for AI is even though there's a lot of really exciting stuff going on right now, there's AI companies that are making huge investments in advanced nuclear, which I'm really excited about because it's going to help accelerate the nuclear renaissance, which I think is
[41:03] essential to just the right outcome for humanity. Look, it takes 10 years for that stuff to to actually come true. Meanwhile, what are we going to do to support this exponential increase in AI energy demand? And how do we avoid it becoming a gigantic conflict with, you know, the average guy on the street feels like his electric bill has tripled because of AI and he's upset about it and, you know, he wants to burn the data center down. Meanwhile, in China, they
[41:33] don't have that problem. Partly because people don't have as much freedom and liberty as they have in the United States, and they can't easily go burn the data center down, but also because they've got more power in China to power the data centers because they thought ahead for this stuff. What does that mean for the US dominance in this sector? Yeah, China has a tremendous amount of power and I before even AI really broke out, I was highlighting that for the industrial base aspect which is when we talk about the ease taking some of the huge industrial base
[42:03] that China has and either bringing it back to the US or otherwise distributing it to other countries and investing elsewhere. Part of it is that in order to do that, you have to move uh or or recreate, I should say, uh really big power systems. You know, production um not just electricity, but also just heat for things like steel making uh you know, especially for heavy industry, but even even lighter industry needs a ton of power. And that that's a huge just economic moat that China has built. And then now it it translates to AI just as much if not more than the industrial
[42:34] base. So I do think that China's well positioned for that. I think I mean I think the US is at least better positioned than Europe. You know I think that we're nowhere near the back of the pack here in terms of uh what we could do with energy and there you know there there are some studies that have shown obviously right now like data center water usage gets a ton of attention but it you know if you compare it to say water for like almonds just and how many people at the current time are complaining about water for almonds versus water for data centers and the same thing for power for data centers.
[43:06] Some studies show that, you know, when data centers like states with more data centers don't necessarily have higher power and even like the delta of of what has happened to their power since data centers have kind of emerged there. There's not this like necessarily clear data that says, you know, if a state opens up to power of data centers, then suddenly all the consumers suffer. I think some of these narratives are simpler than the the um actual numbers. But sometimes it's it's like a combination of multiple things. Like for example, data centers in many cases are quite loud. Uh so when you have
[43:36] something that's that's loud, that does use a lot of power, that does use a lot of water, if at any point at any of those variables, it disrupts too, you know, too quickly the community it's come to or if it's politicians have kind of allowed agreements that allow them to kind of socialize the costs, you know, kind of like say sound pollution for example, push that on the community, obviously that's going to get pushed back and I mean realistically that should get pushed back. And so I I think it's, you know, I I view that more on like a state basis or a community and a state basis where some places are going
[44:08] to be more unfriendly toward data center constructions. Uh and other places I think are going to be friendly toward it. And I think that obviously I would advise them to make sure that they're you managing the costs properly like they're not, you know, letting sound pollution just just filter out and things like that. But I I view all of these as solvable problems. Uh I think at least the US has a lot of natural gas that can help longer term like you mentioned. I think I think nuclear is a powerful solution. Uh ironically part of why SpaceX has such a high valuation right now is because one of their
[44:38] narratives is they want to put data centers in orbit to use the fact that solar panels are a lot more efficient in space without the atmosphere. Uh and then they get all that natural cooling. Obviously the challenge is that that's eaten up by the launch costs and the lack of ability to do maintenance in space. So a SpaceX bull would say that the launch cost will come down and make that a viable solution. Whereas the bears would say, you know, in any sort of investable time horizon, uh, that's not going to happen. Uh, you know, I'm not going to predict decades out, but
[45:08] just on an investable time horizon, that's that's a no. So, but putting things like that aside, I I think that China does have a massive advantage here. the US is is not in the front pace like in front of the pack there. But I think that compared to many other parts of the world, we still are viable in terms of our energy situation. And then when you add to that, you know, some of the best tech talent and at least for the for the current time still reasonably businessfriendly, that might be changing. Uh I still think that the we have a lot of pros and cons compared
[45:39] to China in terms of our competition. And I think it's not a mistake that China and the US are are, you know, the top two in AI. >> Lynn, you have an engineering background, so I'm curious to get you to go a little bit further on SpaceX and its viability. This is something I've thought a lot about, frankly. Um, the concept that, you know, it's much cheaper to take something that's hard to make economic in Utah in the, you know, the back woods someplace. Let's launch it on rocket ships into space into
[46:09] orbit. And the cost of doing that, well, it's coming down, so don't worry about it. I think if you actually do the math there, it's pretty darn hard to justify any kind of scale because unlike, you know, the cost of RAM chips or something, there is a physical upload cost of putting something in orbit requires a certain amount of energy consumption in order to lift so many kilograms of weight. a whole bunch of orbiting data centers, I think is a
[46:41] great way for SpaceX to make money on government contracts. But as far as it being coste effective to build data centers in space rather than on the ground, I'm having a really hard time buying it. What do you think? >> I would side with you. I So I'm I'm always cautious about fading ultra long-term things. I mean, given enough time, humans can often figure stuff out, but in any sort of investable time horizon, call it 5 to 10 years. I would take the under from what the SpaceX bulls are saying on that. Mainly a variable that they have to get almost perfect is they have to radically
[47:12] increase kind of the reusability of their rockets. Uh obviously what SpaceX is known for is uh making these you know self-landing kind of reusable rockets and a lot of that cost obviously there's a fuel cost which you you don't get back but a lot of that kind of cost is can you build a reusable rocket that you can just use 10 times or or 100 times you know with with minimal kind of maintenance to make that work because the greater the number of kind of the higher like reliability rate of their reusability reusable rockets uh the
[47:44] longer average like the higher number of reusability numbers they get which brings down the per lift cost. You have to be pretty aggressive on their engineering and the physics behind that in order to see that happening at any sort of scale in the next 10 years. Uh so it's it's I mean I'm not investing in SpaceX. Um now I've been on the record that I mean I've been you know I think that among that collection of companies like I I I've generally liked SpaceX more than Tesla. They've been very
[48:14] successful on Starlink. So, it's like it's not that I I dislike a lot of what they're doing. Yeah, I would take the under on how many orbital data centers we have, you know, between now and 10 years from now. So, 2036. Well, Lynn, I can't thank you enough for a terrific interview. But before I let you go, please tell our listeners a little bit more about what you do at Lynn Alden Investment Strategy, what services are on offer there, and how people can find out more about your work. Thanks for having me. People can check out lint
[48:44] aldden.com. I have uh free newsletters there as well as uh lowcost research services for uh institutions and individuals that cover macro conditions, specific opportunities, kind of analyses that are somewhat similar to what we talked about today on on certain topics and go into a little bit more detail with with charts and quantifiable data. But always happy to catch up. Patrick Sesna and I will be back as macrovoices continues right here at macrovoices.com. >> [music]
[49:17] >> Now back to your hosts, [music] Eric Townsend and Patrick Serzna. Eric, it was great to have Lynn back on the show. Now listeners, you're going to find the download link for this week's trade of the week in your research roundup email. If you don't have a research roundup email, it means you have not yet registered at macrovoices.com. Just go to our homepage and look for the red button over Lynn's picture saying looking for the downloads. Patrick, with apologies. I've got a flight to catch, so I won't be able to record the full postgame segment with you, but please
[49:48] share your trade of the week with our listeners and give them your usual summary of what's going on in the markets. Well, coming out of Lynn's interview, one of the more interesting second order themes is the growing importance of power demand in the AI buildout. Lynn's point is that the next bottleneck is not just chips, it's electricity and what makes natural gas increasingly important as a bridge fuel that can actually meet the demand in the real world. So for this week's trade of the week, I want to focus on the idea of
[50:18] being long natural gas as a way to express that power bottleneck theme. Now, the first place a lot of investors naturally look is the UNNG natural gas ETF because it has the more liquid options chain and is easier to trade. But the problem with the UNG is structural. It owns and rolls the front month futures contract. And when the curve is in contango, particularly as it rolls into the winter gas series, that
[50:48] creates a drag on performance through the negative roll yield. So, while the UNNG may be the better trading vehicle, it's not always the cleaner way to express the thesis. For investors simply looking for a delta 1 exposure to the broader natural gas strip. The UNL is often the cleaner product because it holds a laddered exposure across the curve rather than concentrating all of the risk in the front month even though its options market is far less liquid.
[51:19] Now, for those who want to express the view with options, the cleaner path is often to go directly into the natural gas futures themselves. In this case, I've been looking at the December 2026 natural gas futures contract, which is basing along its yearly lows at a place where one could consider using option structures such as bull call spreads. That gives you a way to build convex upside exposure with defined risk while aligning the trade with a longerdated
[51:50] thesis rather than getting tied up in the distortions of the front month ETF role. Patrick, every Monday at Bigger Trading, your webinar explains how retail investors can put on our most recent trade of the week. For those listeners that want to explore how to put on these trades in greater detail, don't miss out on a 14-day free trial at bigpicturetrading.com. Now, let's dive into the postgame chart deck. So, now I want to just do a quick recap of what's going on here in the markets and what all of our listeners need to know. So, the S&P 500 has been
[52:22] retracing a portion of its recent post peace deal gap higher rally and so far the index has given back roughly half of its prior advance. The initial pressure really came from the stress out in Asia where the South Korean Cosby suffered a dramatic 10% limit down move which in turn spilled over to the US semiconductors and put pressure on the broader index. But overnight, sentiment shifted again after Micron delivered a spectacular earnings beat, triggering a
[52:53] relief rally and immediately raising the question as to whether this pullback is already over and whether the semiconductor complex has once again re-energized the bulls for another leg higher. That said, the bigger issue remains market structure. leadership continues to be extremely concentrated with semiconductors doing almost all of the heavy lifting while overall breath remains weak. So even if the index stabilizes here, the rally is still being carried by a very narrow group of
[53:23] momentum names and that leaves a broader market on shakier footing than the headline index level alone might suggest. Now turning to crude oil, we have to address what continues to be the most dramatic move in the market. After last week's sharp breakdown, the selling has remained relentless with oil collapsing from the 80 handle all the way down to 69 trading right now near 6918 at the time of recording. That kind of move has left the market extremely
[53:54] oversold on the short term. The real question now is not whether oil is stretched, because it clearly is, but rather where the fair value actually sits once the force selling exhausts itself. There is a growing view that crude oil's more reasonable intermediate value may lie somewhere around the 808 $88$85 range and that this latest leg lower has been driven less by fundamentals and more by forced flows as a large number of traders who are
[54:24] positioned the wrong way are being pushed into liquidation. So the key issue from here is twofold. First, where does the intermediate selling pressure finally begin to subside? And second, once we do get a reversion rally, where does oil actually settle out on an interm basis? Many argue that that $80 area remains a reasonable magnet, but for now, it makes sense to take this one step at a time and first determine where the wash out phase is likely to end. And
[54:54] while the move in crude oil has been the most eye-catching, the more technically important development may have been the US dollar breakout. The dollar index has now decisively broken above the 100 level, clearing what has been a ceiling for roughly 15 months. The breakout is also showing up across the major crosses with the dollar yen now holding above the 160 handle on a sustained basis and the euro breaking down through a major support at 114. So there is clearly
[55:26] bullish momentum behind the dollar here. The bigger question now is whether this marks the start of a sustained dollar bull market or whether it is simply a shorterterm move driven by funding stress and positioning unwinds that could carry the dollar a few handles higher before stalling. The next key test will come around the 102 103 area where more meaningful overhead resistance may come into play. Finally, I just want to turn to gold with a quick update. We uh did see a brief reaction
[55:56] higher off the peace steel headlines, but broadly speaking, the metal has remained under active distribution. In fact, the selling pressure has accelerated in the post FOMC period, pushing gold to a fresh lower low and back towards 4,000 level, a price we have not seen since October of last year. What is technically clear is that gold remains in a corrective phase defined by lower highs, lower lows, and rallies that are consistently being met
[56:26] with supply. Now, there's still plenty of arguments for why gold can be much higher over the long term, but on the short to intermediate time frame, the dominant trend is this ongoing profit- takingaking cycle. So, the key level to watch here is this 4,000 handle. If that level can hold, we may see some stabilization. But if it gives way, then the next major magnet becomes the 50% retracement of the entire 2-year bull market, which comes in closer to 3600.
[56:57] So, this is where we're going to wrap up this postgame update. Now, this week in the research roundup email, you're going to find the transcript for today's interview, as well as the trader of the week chart book we just discussed here in the postgame, including a number of links to articles that we found interesting. You're going to find this link and so much more in this week's research roundup. We appreciate all the feedback and support we get from our listeners, and we're always looking for suggestions on how we can make this program even better. Now, for those of our listeners that write or blog about
[57:28] the markets and would like to share that content with our listeners, send us an email at researchroundup macrovoices.com and we will consider it for our weekly distributions. If you have not already, follow our main account on Xacrovoices for all the most recent updates and releases. You can also follow Eric on X, Eric S. Townsen. That's Eric spelled with a K. You could also follow me at Patrick Serzna. On behalf of Eric Townson and myself, thank you for
[57:59] listening and we'll see you all next week. That concludes this edition of Macrovoices. Be sure to tune in each week [music] to hear feature interviews with the brightest minds in finance and macroeconomics. Macrovoices is made possible by sponsorship from bigpicturetrading.com, the internet's premier source of online education for traders. Please visit
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