Ozan Tarman on What's Driving The Nonstop Rise in Gold and Tech

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1:51Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal. And I'm Traci Alloway. Traci, every day feels like stocks and gold go up. Every day, stocks and gold and stocks and gold. And it's just, it's relentless. I'll tell you what, it's good for anyone invested in an index fund and a bunch of gold coins that their dad gave them. Yeah, good for you. Yeah, thank you. The Traci Alloway portfolio doing very well. Yes. No, you're absolutely right. And the big thing about this is it's not really supposed to happen, right? Like you're not supposed to see stocks shoot up because of optimism about the future while gold simultaneously goes up because gold traditionally is this sort of dour yellow rock, as you like to describe it, which usually signals something bad is about to happen.

2:38I'm going to relent. I'm going to relent on something. Are you a gold bug now? No. Well, I'm going to relent on something. OK, here we go. I admit that gold is a metal. This is my big cave. It's no longer a rock. Yeah, this is my big cave. I used to say, oh, those yellow rocks. You know what? I'll acknowledge it's a metal. If it's a metal now, will you admit that it has industrial application? Yeah, but they're very minor. And this is also I will not acknowledge that there is a it is mainly a store of value or perceived to be. And when people are fearful, when people are mistrustful and people don't trust fiat currencies or the governments, And there's all kinds of reasons to be skeptical about the governments that issue paper currencies.

3:18I understand why people want to hold this medal that people have used as money for thousands of years. I'm going to take you back to the jewelry district in New York and get you more excited about gold again. No, and I'll just say on gold, I loved it. And I wore that big chain when we went to the diamond district. And I wish I had bought it. Like, because now that's like my bigger. It was like$35 ,000 gold necklace. and that today would probably be a$45 ,000 or$50 ,000 gold necklace. Imagine how much that diamond-encrusted Furby would be worth. This is the thing they don't tell you about gold, by the way.

3:49If you spend$10 ,000—this is my crank take on gold. It's not crank. If you spend$10 ,000 on a gold necklace, they give you a$10 ,000 gold necklace. Yes. It's free. It's like you spend$10 ,000, they give you something worth$10 ,000 back. In a sense, it's a free transaction. No, you get two things. You get something to wear and an investment. Yeah, you actually—yeah. I wish I had had this realization when gold was like$200 an ounce. But anyway, it took me a while. We'll make a gold bug of you yet, I'm sure. So these are really exciting wild times in the market. And the last time we talked to this guest was another wild time and an exciting time in the market.

4:27That was, of course, April. We do, in fact, have the perfect guest to try to understand everything that's happening all around the world in global macro. We are going to be speaking with the vice chair of global macro at Deutsche Bank, Ozan Tarman. Ozan, thank you so much for coming back on Odd Lots. Last time we talked to you, we were in London. This time you're in New York. So thank you for coming to visit us. Very good to be in New York. I love to be on this show. I mean, honor to be invited again. Ungar, Mercrediners, this is the highlight. Thank you. Thank you. And by the way, I was going to bring my United Amamim jersey.

4:59Dear Joe really looks like him. And some baklava for Tracy, but couldn't find in the airport. Next time. Well, that's a good reason to do another future episode. Actually, we talked a lot about gold at the beginning, but I don't want to first ask about gold. Is NVIDIA swallowing the entire U.S. or maybe even global economy? Almost hand in hand, right? These two questions. I mean, they both continue to go higher and higher. Actually, let me start with gold because you did put such an intro in it. One of the very famous memes on the Internet, caricature, done maybe two, three years ago. this gentleman or lady running a big macro hedge fund looks around i'm i run very complicated products but at the end i buy gold and these days that resonates even more mentioned even more and more in these uh round tables in tv studios like this normally that jinx things but it doesn't because at the moment it works in risk on and risk off last time you were around again you called me at a very relevant time, questioning U.S.

6:01exceptionalism, I'm sure we'll go into that, what's going on with U.S. institutions. Those question marks, all those question marks against the dollar help gold. FX is about stories against the dollar, I'm sure we'll go into this as well. Some of the stories are now having a less easy time than people like to go into gold. And we may be going into a rate cut period, cycle or not, whether you're Miran or Hamak, that differs. But gold works in that as well. So for the moment, I always feel, you know, when it's the top trade on TVs, on my roundtables, I put the orange sign on. But at the moment, it works for a reason.

6:39Now, NVIDIA. Yeah, I mean, if we had this show a year ago as well, you could have said Ozan. As of this morning, one of my partners in success, Saravellos, his piece is already viral. He's claiming tongue in cheek that NVIDIA is almost keeping U.S. away from a recession. All that chip story, all that capex spending, if it wasn't for that, maybe we could either question or be in a recession. I'm not sure he's saying it that tongue in cheek, though. Agreed. And also others are joining him. Again, I'm hearing from my dear friends' clients this very morning. Bain claims, unless revenues quickly catch up with all this AI capex spend, we may be in big trouble.

7:21All of this will burst by 2030 and will go into recession before that. Now, we can say a lot can happen before 2030, but warning signs are there. Last night's big headlines, the reason why, again, Nasdaq closed on the highs. NVIDIA investing into OpenAI, that also becomes almost circular. I mean, this is not tongue-in-cheek either, TASY. Oracle invests in OpenAI, OpenAI invests in NVIDIA, back and forth, back and forth. Is this a closed circle? I hear all the skepticism also mainly coming from those who haven't caught this big rally since. A bubble is a bull market that you missed out on. I call gold a bubble.

8:01Tracy calls it a boom because of the difference. Exactly. Who inherited a bunch of gold coins. Exactly. I should just mention we're recording this on September 23rd. Yeah, I like that. Right before Powell's speech, right before Trump's speech. So just on AI and the sort of self-dealing, circle-ish, circuitous, incestuous relationships, perhaps, one of the reasons we like talking to you is because you talk to a lot of clients. And so you hear a lot of feedback from the buy side as well. What are people looking out for in terms of saying, OK, this is a bubble? Because it seems like, all right, people have been talking about high valuations for a really long time.

8:37The stock just goes up. Is there something else that people are like watching for, in which case they might say, actually, we're going to start cutting back positions? Excellent question. Almost like two months ago, I was hearing more. I'm skeptical, but Fed cuts are also coming. You can't fight this. Now, especially from the pros who've been around 90s and beyond, I do hear, look, this does feel a bit like end of 90s, beginning of 2000s. By the way, the year you pick is very important there. But we may still run. That's one thing that more seasoned equity beyond macro pros are saying. I also, it was a bit the beginning of my career, but I was around in late 90s, early 2000s.

9:17Then the denominator almost didn't exist in this valuation discussions. There was hardly any cash around. Everybody stuck. Joe.com is excellent in B2B, even better in B2C. And of course, hindsight is the world's top hedge fund, but you could feel it. Whereas this time around, you can question the 100 billion thrown around in a circle, but you cannot question much the revenue, the cash Jensen, NVIDIA, OpenAI is bringing to the table. You cannot question much. Let's go beyond NVIDIA a bit into Magnificent 7. Microsoft, Apple, Alphabet, they have customers. All of us are their customers. They make money.

10:01And in a way, talking about Circle, more positive way, more glass half full way of looking at it. NVIDIA is the big champ. Okay, but take NVIDIA aside. All of a sudden, Oracle became a story for a reason. From Oracle, we go to Alphabet because for this time around, Judge decided favorably on Chrome. The story continues, moves from one asset to another. Also, yeah, NVIDIA is doing great. We'll talk about how NASDAQ to Hercules is catching up with my blue hat, Mega. But it's rally spreading. NVIDIA is not the top stock in S &P year to date. Talking about waiting for Godot. Finally, small caps rose up since the famous now Jackson Hole, another famous Jackson Hole, Dovish Beach.

10:46So it's not just one. One guy is very important. November 19, NVIDIA earnings are very important, but it's not just one stock. By the way, Ozan was regaling us or showing off his Make Europe Great Again hat. It's signed by Mario Draghi. If I owned that. I'm very jealous. I would not be carrying it around. I would be carrying it in a glass case and selling it maybe for eBay. You'd have it in the vault along with your gold coins. I would have it in the vault along with my gold. But I respect it. That's how much I respect my clients I want to show off. Before we go further, actually, for listeners who maybe didn't hear our previous episode with you in April, can you just give us a little back?

11:23You talk to everyone. You have these dinners. it affords you an incredible perspective on what a range of people on the street are thinking about, just so that people can understand your perspective and where you're coming from. What do you do on a day-to-day basis? Who are the range of people that you talk to and how do you interact with them? My job is to talk to my bank's top institution clients. Oh, your job. Hedge funds, real money, but also because of experience, talent, relationships going deep. This also includes now sovereign wealth funds, key private banking institutions. And as you know, I'm a person who tries to bring things together.

12:01So in these round tables, small or big, it's not just hedge funds, it's not just real money, it's not just sovereign wealth funds. All asset classes, credit rates, FX, emerging markets, my proud terroir, equity, of course. So they learn from each other as well. Because we talked about it in these shows, an equity perspective can be very different to a race perspective. right as we speak again we are in one of these doldrums on if you define macro just as rates and effects it's almost like a magnet 412 okay we try we on us 10 year we tried below four percent 412 413 414 as Tracy said we are recording this on September 23 at 9 a.m in three hours Chair Powell will speak let's see if he changes tone or sticks to his so-called hawkish presser Some people hope that may again ignite a little bit of dollar stronger, raise higher tone.

12:52Otherwise, volatility in FX and rates are struggling. Meanwhile, equities continue to do better and better. And back to your question, different sets of clients coming to my roundtables, coming to my realm, learn from each other on why different assets classes act different.

13:16Thank you.

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15:14Learn more at chase.com forward slash business card. Chase for business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank and a member FDIC. So you mentioned the dollar just then. And of course, you have a very international group of clients that you're talking to. Can we talk about the dollar drop this year? Because I think it's really important. Even though it gets some attention, it's nowhere near enough because we're talking about stocks rallying. rallying, U.S. stocks rallying, things look a lot different when you start to adjust for currencies.

15:48How are people thinking about U.S. assets in light of the dollar drop? Very fair. I'm team odd loss, so I also remember last time we met is April 16 in London. So just a week before the big fear. Eurodollar was right around 110, 111. We were beginning to sense that this could be a historic year in terms of this de-dollarization, hedge fund ratios changing, but we swiftly moved beyond 115 as well. Now, looking at the picture, two things are very important. First of all, the flows. Back to our friend NVIDIA, back to our friend Magnificent 7. Because one pushback from some of my, especially fast money friends who all either smell, want, or wish a dollar squeeze after such a soft dollar move is what will the flows do?

16:34World continues to buy NVIDIAs and Microsofts. Do they buy it hedged? So, I was a little bit skeptical on that. By the way, flows are back. So, a big difference to April 16th. We can talk about that as well. Retail-led rally, look where we are, all-time highs. My research reports and claims, again, George Cervalos, that in the last recent 30, 45 days or so, those flows, almost 80 % of them are hedged. So, people are buying their NVIDIA hedged. So, believe it or not, 80 % is a big number. say it's 70, say it's 60. That definitely helps the soft dollar side of things. What continues to help is, of course, institutions decreasing their exposure to U.S.

17:18Like hindsight, I said rightly on that April 16, nothing to end the U.S. private side exceptionalism. NVIDIA, Microsoft so far are fighting back the threats of DeepSeek, even though champion of the year is China Tech in terms of performance. But from Asia to Nordics, big, big funds are reducing their dollar exposure a little bit. 70 to 65, 60 to 55, that makes a difference. That made a difference. This is really important. I think we should just continue on the specific line because what it sounds like is all around the world, you have to have dollars to buy NVIDIA. NVIDIA is a stock that's sold in dollars.

18:01Its profits are denominated in dollars. It sells things in dollars. And that's the same for all of the Mag7, including Microsoft and Apple. And all of them are doing phenomenally well. They have real profits, real earnings, and so forth. They're very excellent businesses. And it sounds like basically all around the world, people want exposure to a handful of extraordinary U.S. companies. Correct. They just don't want to take the risk that that denominator and this time we're not talking about earnings, but that or that the dollar that they trade in or sell in, et cetera, is going to go down further.

18:37So they want everything about this. They just basically don't want the U.S. sovereign exposure that's connected to these American domiciled companies. Completely correct. And honestly, I was a little bit skeptic. I wasn't sure. If you told me, Ozan, this year, this big surge back in NVIDIA, Microsoft won't happen, then I would feel even more comfortable with the short dollar position. But Magnificent Seven roared. It may even pass mega. Despite that, dollar is also remaining soft. So whether I was skeptical or not, what you explained is happening. But I think for the next legs, ours included a lot of by Ancel side, are calling for 120, 122 like levels.

19:17You need now the European side of the story or whoever you want to talk about. Japan, China, the lagger side of the story. FX is two-legged. We talked about why dollar side of short dollar worked. Yeah. We need now a bit more help from our European story. Tracy, you know what strikes me as interesting about this, which is that when we think about countries where there's political risk and so forth, we don't often associate them with the most impressive enterprises in the world. And it strikes me that that's the tension we're talking about here, which is that there's all this anxiety about the U.S.

19:50as a sovereign for all kinds of reasons. That's not unusual. Other countries have sovereign risk. They're just usually not home to literally the most impressive companies in the world. No, and it is true that most of the investor nervousness around the U.S. has shown up on the sovereign side. Yeah, not the corporate side. Rather than the corporate side, which we've been writing about in the Odd Lots newsletter. Which everyone should subscribe to. Yes, seamless plug just then. OK, one of the other, I guess, big questions about the market right now is there's clearly nervousness about fiscal dominance and Federal Reserve independence.

20:22And that is playing into the drop in the dollar, too. And yet, at the same time, stocks seem to be taking off and a lot of investors don't seem to be that nervous, at least on the equity side. What accounts for the discrepancy there? Two different roles. Talking about plugins, I also love the New York Times piece. I think you guys deserve all the, trust me, all those French clients, they listen. They get very excited when I'm on. Now, Tracy definitely hit the right point. De-dollarization is one key big theme. going into the end of the year, fiscal dominance or not, and the famous Fed independence.

20:58Those are my second and third key topics. By the way, where are tariffs? All the way down to four. I forgot about those tariffs. Fiscal dominance. So we talk, right? I love brainstorming with you guys. Remember what I said in August as well? Summer, everybody was everybody. Like some key investors, especially Fast Money, were gunning for, from my dear island, four key trust moments in four countries at the same time. What does that mean? I mean, trust moments, we sadly know what I'm talking about. Long land is getting out of control for people's, for markets, big fiscal. US, UK, Japan, what's the fourth?

21:32For the right reasons, Europe, boom. For the right reasons, because ramp up, the German spending will come at the end of the year, et cetera. Some key investors were asking, well, one trust moment, We know how we handled. Chancellor, then Prime Minister goes, different sets of policies. What happens if four goes at the same time? And we tried this on, talking about dates. September 2, when you guys came back from wherever you came back from on the final long vacation, long weekend. UK, Gilt's big move, followed by France because the Prime Minister was about to go in six days. Jo and Tracy, how long did it last?

22:13Four hours. That long-end sell-off lasted four hours And I'm not trying to be funny Since then, US 30 years, Europe, even UK Has been much more under control Up until the hawkish pressure Almost threatening below 4 % Even more than short dollars, Tracy Over the summer and into fall What were the real money and hedge funds Common favorite trade? Steepeners, steepeners, steepeners Europe, US, everybody and their brother had steepeners first for different reasons on u.s more due to the short end that sooner or later will come to the fed independence the trump side of the equation would win more finally the power would cave in the cut would come in and on the european side even more popular because of the long end german spending coming through in october november and people believed in their steepness First, U.S.

23:11got hurt. Two NFPs missed. Long end moved big. Flatteners hurt. Gold aside, whenever you say, or NVIDIA aside, whenever you say, somebody says, a trade is untouchable, watch out. European steepeners were supposed to be untouchable. Two days after that flattening washout in U.S., Europe also got reduced. And since the Hokkish pressure, we are more balanced. On to Fed independence. Again, just this morning of the press, Matt Raskin, my head of U.S. rate strategy, previously from the Fed, very respectable analyst, wrote about this Fed independence fear not being in the price, not in the break-evens, not in the term premium.

23:52Why? I think a little bit because so far, let's dive right into it if you wish, I think this cut is justified. In my mind, even if they cut 50 a week ago, it could have been justified. Talking about some dear client's friends, public, so I may say. Rick Reader, publicly on TV and on his writing, said they may and they should cut 50. Because I think if they saw the revisions in June and July, they probably would have cut in June and July. And going forward, OK, they cut 25. Not only they cut 25, Miran did his thing, probably. That's the dot. But Waller, Bowman stuck to 25. Even some of the previous Fed governors racing for the job, Bullard, says they should have done 25.

24:35So people are thinking and hoping that there is still some Fed independence. Powell, even though he's the past man, has some control over the situation. That's why we're not getting any Fed independence here on the long end. Joe, it is interesting, and I would not have expected this earlier in the year, but if you look at the move index, so the index of bond market volatility, it's going down. It's gone down quite a bit, which is not exactly what you might expect to happen when we're talking about things like fiscal dominance and Federal Reserve independence. But there you go. That is a good chart I haven't looked at in a long time.

25:11I want to go back to the gold conversation because we've kind of been dancing around. We're like, oh, political volatility in the U.S. and sovereign risk in the U.S., et cetera. But let's talk about gold in the U.S. or gold in the dollar. Like when you talk to clients, setting aside that it's a good trade, people want to ride a good trade, et cetera. How much fear, anxiety, et cetera, is there about U.S. political stability? And what are the and I mean, a prominent political commentator got assassinated recently in the United States. What are people at your dinners, maybe inside the U.S. or outside dinners saying about the U.S.

25:52when they look at our country? That's why more and more countries are building up their reserves in gold, shying away from dollar more. My motherland, Turkey, is an example, again, publicly known in terms of reserves. Also, let's remember what is still going on versus Ukraine and Russia, the sanctions that Russia face or may face. So different countries are also, because of that, leaning more towards gold. So besides our macro discussions, ups and downs of rates, that's uncertainty. That question mark over U.S. policy, that question mark over geopolitics, lead central banks to accumulate more gold.