The 2025 Macro Playbook: Central Banks, Crypto & Chaos ft. Andreas Steno Larsen from Real Vision Pro & Steno Research

0:00Join over 7 ,000 attendees on June 18th to 19th at Super AI Singapore, Asia's largest AI event. East will meet West as industry leaders converge for two unparalleled days exploring the exponential AI age. Join us to unveil the future of LLMs, the intersection of AI and crypto, robotics, drones, space tech, the societal and economic impact of generative AI, and much more. Get tickets at superai.com with promo code Real Vision for an exclusive 20 % off, only while tickets last. Hi, everyone. I'm Raoul Pal, the CEO and co-founder of Real Vision. Here at Real Vision, we're committed to give you the best knowledge, tools, and network to help you succeed in your financial future.

0:41If you're enjoying this podcast, please take a moment to give it a five-star rating. It truly helps us continue to bring top-tier content. Thank you so much. Hi, I'm Raoul Pal, and welcome to my show, The Journeyman, where I journey to that nexus of understanding between macro, crypto, and the exponential age of technology. Now, at Harm, I'm a macro guy. I've lived macro for 35 years. It's how I see the world. It's what I do. It's how I build my frameworks of understanding. So it's always a pleasure to sit down with somebody to talk macro, to understand what's going on. And there's a shit ton going on right now, whether it's tariffs, whether it's economic slowdowns, whether it's fear over bond markets, everything is happening.

1:25So there's no better person to sit down with than a good friend of mine, Andreas Steno. Andreas and I have known each other for a long time. He's been a long-term guest on Real Vision and then joined Real Vision Pro as part of the product with myself and Julian Battelle. So we bring our GMI firepower, and he brings his Steno research firepower, and we come together to try and help people in their journey of understanding. Now, what's great about Andreas is he and I share similar ways of looking at the world, but he comes at it somewhat differently. He uses more geopolitics. He's also shorter term in his time horizons, but within the same framework of understanding that I have.

2:04So it dovetails really well. Sometimes we'll have differences and sometimes we'll come to agreements on where the opportunities lie. So in a time like this, when there's a lot going on, it's a great conversation to have. And I think you're really going to enjoy hearing what Andreas has to say. So let's dig in. join me Raoul Pal as I go on a journey of discovery through the macro crypto and exponential age landscapes in the journeyman I talk to the smartest people in the world so we can all become smarter together andres finally I get you on the journeyman yeah it's great we've we've been planning this for a while Raul uh but we're finally here I know so I mean for those of you who don't know obviously from the intro I've mentioned that Andreas is part of uh Real Vision Pro Macro with me where we try and kind of navigate the landscape of what's doing and we'll cover a bunch of that today but really Andreas I want to go back in time and and hear your journey how you got to where you are today yeah so you know like at least professionally I'm born and raised in the northern european bank called nordia and those of you who are familiar with that bank will know that it's a large bank in mainly in scandinavia but also in eastern parts of europe and i grew up at the trading floor there um trading everything from foreign exchange out of university you joined yeah yeah uh great bank actually and uh and one of the few banks that actually allows for some freedom of speech for analysts and uh and traders and so on and so forth so it was actually a really good professional environment to grow up in um i had a couple of great mentors there um one of them told me very very early on that if i could not show uh my macro thesis in a chart then it wasn't true that thesis and i think that's a really really good point and something that i've always been very aware of in my professional life that you know you need to be able to showcase your thesis visually and that was something i learned during my time at trading desk in nordea and what were you trading equities or mostly foreign exchange actually um and i i guess i guess the reason why i ended up in in fx was that i kind of liked that interplay between various regions around the world politics uh how decisions from central banks impact markets and all of that so i actually think it's a really good macro play and it used to be enough more macro currencies than it was now now a lot of them don't move versus each other but yeah yeah yeah and foreign exchange seems so boring relative to what's going on elsewhere right um but you're absolutely right When I started, it was actually right after Lehman at the FX desk.

5:09It was a pretty interesting time for foreign exchange, especially during that 2010-2011 time span where we had the whole discussion on whether the euro would survive and all that. Really, really interesting times on an FX desk. So I learned a lot from that. And it basically led me to being a macro strategist after spending time in foreign exchange because I figured out that macro was really what interested me by the end of the day. And I wanted to venture into something that was a much more cross asset. and at some point you know during that uh time span at nordia i got in touch with you ral and i i remember that day because you know nordia allowed me to just be out there uh so i was on twitter instagram you name it um and i was one of the very first bank analysts to be on solmi uh especially on twitter it wasn't really populated by bank analysts back then it still really isn't right I know it's not because most people aren't allowed to talk publicly.

6:10Yeah. Yeah. But for some reason, they allowed me to do so. And I ended up with a couple of hundred K followers pretty swiftly thereafter for some reason, probably because the content was OK. And, you know, all of a sudden, Nordea was like, OK, that was probably a pretty good idea to bring you on Twitter. Right. Because hedge funds and institutions around the globe started reading the strategy and research from a little northern European bank there. And for some reason, it ended up on your table as well, Raoul. Here we are, right? So it's been a great journey, and I'm very thankful that I met you.

6:44Hi, Raoul here. Listen, I think we've got until 2030 before the economic singularity arrives. Now, it might not be the exact date, but it's around then. So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. It's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now. So talk to me, when you started as a macro strategist, what framework did you build? How did you think the world worked in terms of, were you looking at ISM and cyclicality?

7:27Were you looking at more traditional economic flows? How are you looking at things and how has that evolved as time went on? So I essentially started my trading career at the trading floor right after Lehman. So I'm born and raised in a world of QE. I have no clue how markets work without QE. I'm not really, you know, I don't really have a background where I can talk about how markets worked before central banks got involved to the extent that they are today. so i think the first task which is probably a plus point i would say because you're not scarred by how things should be but you're dealing with how they are yeah yeah and and you know one of the things that led me to where i am uh through that 2010 to 2020 time span was that i kept saying that interest rates would be artificially suppressed by central banks because that was the only thing I do.

8:28And it proved to be a right point. And therefore, the framework I started building was very centered around central bank balance sheets and how they impacted bond yields. That was essentially my first thesis. And I remember the very first interview I did with one of your colleagues at Real Vision back in maybe 2014, something like that, was about how QE impacted bond yields in the opposite way of what the consensus was. Because every time I remember this, you were saying bond yields go up every time there's QE, and everyone was thinking they're buying bonds and bond yields should go down. I remember seeing that going, huh, he's right.

9:10Yeah, and it actually proved to be right for quite a few years in a row. I've struggled with that thesis for the past couple of years. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus 500 Futures, you can trade crypto without the hassle of opening a wallet. With just a few clicks, you can register and start practicing with their free and unlimited demo. See a trading opportunity? You'll be able to trade it in just two clicks. Feel ready? You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus 500 gives you access to a wide range of instruments.

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10:23I can't trade bonds anymore. I used to be really good at bonds. I just cannot get them right. No, it seems like this thesis that central bank balance sheets impact bond yields in the way you just described is not really working as it intended anymore. So we need to come up with a new thesis on that. But that was my first thesis, and it played out very beautifully. and then I moved on from there to try and assess okay how is this central bank balance sheet regime going to impact across assets and that was essentially also what ultimately led me to consider crypto as an asset class too late compared to others but you know the whole notion that central banks would get involved to the extent that we've seen over the past 15 years or so was something that I you know I was just thrown right into that mix I started investing trading exactly when this became a thing so it was my journey to to to become a trader and become an analyst in that environment and that's why i've always focused on that and i don't think anything else matters and when did you start steno research um after the pandemic uh so you know i i actually spent uh maybe 10 11 years at nordair ended up as like the global head of of the strategy and research team.

11:46But ultimately, during the pandemic, I got annoyed with all of the rules that were implemented about, you know, my ability to speak publicly and all of that. So Nordea basically ended up more or less as the rest of the pack in the investment bank space, trying to limit strategists from tweeting stuff and so on and so forth. And, you know, I've always been a contrarian thinker uh and when you when you start seeing rules like that being implemented it's impossible being a you know it's just not possible to be a contrarian in such a setup right uh so it led me to um to open my own research shop uh and i've never you know really looked back since uh it's been the right move and i enjoy being able to speak my mind uh because you know the worst thing and i guess you've been in a ton of these meetings as well rahul is to listen to a strategist constrained by some sort of political landscape by his employer right his or her employer that's not worth value adding to any extent right you need to be able to say exactly what you think yeah that's just marketing it's not a transfer of knowledge no exactly uh and it's kind of the same no matter whether you work at Goldman Sachs or JP Morgan or whatever, it's very difficult to actually state your opinion.

13:12You're influenced by a lot of political factors internally, and that's something you have to deal with when you work at an investment bank. So one of the things you talked about is, you know, you were very early to understand, because you knew no different, that the central banks were large players in how economies and markets work. Did you realize early on that governments were in cahoots with central banks, that they weren't now separate entities, even though they claimed they were, they weren't? Because, I mean, you've been a pioneer of the flows of this kind of stuff as well. When did you start to realize they were actually working all together in concert with each other?

13:56You know, to be honest, Raoul, I think it became crystal clear to me in 2020, not before. I agree. You know, we had a bill to pay in one way or the other during the pandemic. Everyone had to get a bailout. And it was impossible to fund that without central banks ultimately funding the issuance of all of the T-bills and sovereign bonds issued worldwide. and it felt exceptionally coordinated and it probably was coordinated between treasuries and central banks, what happened in March, April, 2020. And globally coordinated as well amongst all of us. Yes. Because we kind of thought that in 2008, but we didn't really see evidence maybe in 2012 with Draghi, but then we weren't sure.

14:48But yeah, this was like, oh, they're all the same thing. Yeah. And then Silicon Valley Bank happened, right? it was on a Friday afternoon. And remember this rule of thumb, right? A bank will always go bankrupt on a Friday afternoon. So you have 48 hours to fix stuff before it reopens. And between Friday afternoon and Monday morning, the US Treasury and the Federal Reserve fixed it. And they coordinated it once again, right? Liquidity injections and the Treasury basically backstop banks at the same time. So, you know, the last two major crisis events you know it's it's not even been um it's been transparent that they work together now it's actually not something that they're hiding anymore uh which is something new i think they worked together back in 08 as well it was right about uh when i started my trading career but it wasn't transparent that they did so but it's it's been pretty transparent in 2020 and 2023 with Silicon Valley Bank.

15:50So they're not even trying to hide it anymore. And Janet Yellen's, one of her final remarks as the Treasury Secretary was this remark around the ability to afford the debt load of the US Treasury. And she basically told the Federal Reserve that we cannot have interest rates at this level for a prolonged period because then we're not able to finance this. And it wasn't really even hidden. It was kind of in officialese terms, but if you understand officialese, it wasn't it. It was a clear hint to the Fed Reserve that they would have to bring interest rates lower, which they did during that autumn space, right?

16:36So it's not hidden anymore, Raul. It's out there and it's something we'll have to deal with. So now we've got... Scott Besant, who is a macro guy, so he understands the game, interest rates are still way above GDP growth or whatever. So interest payments keep escalating. What are they going to do here? How do they get out of this mess of just – because they're going to have to debase currency a lot to pay for all these instruments. What's your kind of framework of where we are and how this is going to solve itself in this cycle, not in the long term? We'll talk about the long term in a bit. Yeah.

17:17So, you know, we're approaching a massive refinancing cycle right now. And that's something you need to consider when you assess central bank balance sheets, bond yields and the impact across assets. because we're not going to make it through the next 24, 48 months without lower bond yields. I essentially rule that out. And if we get a market that is not willing to play ball, the central bank will essentially have to solve it. So how do we get to a point where the central bank needs to step in? I think they're kind of engineering that scenario right now in front of us. We basically need a market that is sufficiently weak for the Federal Reserve to be able to use the excuse that financial stability is threatened.

18:17Because with inflation running a little bit above target still, even though I think it's declining here, and with a debt load that is as fierce as it is, they'll have to be able to use this financial stability excuse to come up with some sort of way of solving this. So you're suggesting we have to break something. Yeah. You know, at least that's, I think it's a valid thesis here, because otherwise I think they would have stopped a few weeks ago. That's point number one. Point number two is that if the central bank is a little bit scared of restarting QE for a list of reasons, whether they're political or whether they're related to the inflation pressure, they could find alternative ways of asking the private system to buy the bonds for them.

19:10I've floated the idea that they... This is why I've been using total global liquidity as almost a better measure because they're using the private sector. Yes. And that's a new thing because, you know, a couple of years back during the pandemic, it wasn't needed, but it's needed now. So they have a couple of options here. One of them is to basically, via regulation, force banks to hold more U.S. treasuries in their liquid assets. And if a bank is forced to do so, it happens, right? They cannot do anything about it if they're forced to do so via legislation. And I think that's a very simple way of solving this.

19:53So I've talked to a lot of guys telling me that the Fed is cornered here because inflation is too high for them to restart these bond backing schemes. And, well, my response to that is basically, well, then they'll force someone else to fix it. and they could easily do that even if let's assume that the federal reserve will kind of turn a little bit political here against everything that trump is doing let's just assume that the trump administration could itself impose these rules on banks right via all sorts of tricks they have up their sleeve so i don't think that will you know avoid some sort of situation where the private sector will have to accept being used as a funding vehicle here.

20:45And there are many ways of solving this. The other way is the Trump administration could do it itself, right? There's also the pension system. I mean, Europe did this decades ago, which has forced the pension system to hold more bonds. There's also the insurance sector. You can force them to hold more bonds. There's infinite bond buyers. People are like, well, if China don't buy bonds, it's the end of the bond market. I'm like, no, there's trillions of dollars of savings sloshing around between the insurance companies and the pension plans and then the banks. That liquidity alone is enough. Yeah, all agreed.

21:18And, you know, Raul, given that we've been through, you know, a couple of months of extreme market turbulence, you know, I get this question every single time. Has something structurally changed? Is this more of a structural bear market? Will geopolitics play a role over the next five, 10 years, sort of changing the whole structural narrative around technology, crypto and all of that? And the simple answer is no every single time, because everyone in this administration, everyone in Congress, they're all incentivized to bail out the system once again. uh and you know especially the generation you belong to is incredibly indebted uh in housing etc and they all have an incentive to solve this every time the issue arises right so i i don't see and the baby boomers do as well which is most of the government because they it's their pension plan yes so ultimately you need to look at the incentive structure of those taking decisions and they're all incentivized to reset the system once again via debasement.

22:33They're all incentivized to do so. And so my view on this is, and people don't realize this because you say all the time, it's going to be 1929 over again. It's going to be 2008 all again. It's going to be, I'm like, they have taken the left tail risk out of markets. And so if that is the case, then the risk reward is so skewed that I think it's the greatest macro risk-taking opportunity of all time because they've taken the big risk off the table, which is the black swan. Because you and I know the second anything bad happens, the second collateral gets affected, they print money. Yeah. Yeah.

23:12And just look at it this way, Raul. From a technical standpoint, we've even seen that the administration has molded the idea of backstopping the so-called basis trade of hedge funds. And that's, you know, it's a very technical thing, but what it basically means is that they want these hedge funds to take part in funding the deficit as well. They want to ensure that the liquidity conditions remain stable. And all of the hedge funds are obviously very levered and they want stable liquidity conditions. to be able to fund the Treasury via these basic straits, etc. So my point is just everyone with access to this administration, everyone within the administration, they're all incentivized to do this reset once needed.

24:05And then on top of it, at government level, we also have the fact that they're playing with the financial levers using the Treasury General account now as well. And it's not, you know, it used to be in the past a nothing burger. And now it's being used to either juice what the central bank is doing or offset what the central bank is doing. So the government is now playing the game of money as well. Yeah, it is. And, you know, the Fed Reserve also clearly caved into this already a few meetings ago. they cited this whole development around the treasury general account as a reason to end the quantitative tightening and i know that they've not ended it but they've ended it for all practical purposes already right we're talking minuscule numbers now uh in the bigger scheme of things so again this is a clear sign that the u.s treasury and the federal reserve uh they're cooperating around this uh and we kind of know what the conclusion is ultimately of all this uh given that the corporation is not hidden anymore and they're incentivized to do the same thing so what does that mean for asset prices in the market on a longer term basis and you know and where we are in the cycle i mean because now we've got these super players that have taken the left tail risk of and debasing currency what does that mean for investors what does it mean for people so be watching this like i don't quite know what you're talking about what does it mean to you so first of all rao um if we look at the central bank balance sheet in the context of everything that's ongoing with tariffs nato um the negotiations with china etc uh let's just address a question that i get a lot around that because we obviously know that china japan etc they hold a lot of u.s treasuries and it's a theme that is always brought up when we get these geopolitical uh tensions back and forth between the countries so yesterday the bond market moves one day and everyone goes china's jumping dumping treasuries i mean all the time yes uh i don't buy that, by the way, but let's just assume that China sells US treasuries and Japan will decide to do the same as a consequence of what's ongoing on tariffs.

26:43I don't buy it, but let's just assume that. I think the worst, quote-unquote worst case scenario would be that the Federal Reserve will have to step in with some sort of light yield control in such an environment, which ultimately leads to the same conclusion that the currency will be debased because they'll have to print to avoid escalating tensions in bond space. So the layman terms conclusion of all of this is that the dollar that you hold at a bank deposit will be worth less over time as a consequence of the central bank bailing out the bond market. And I don't hold high hopes on behalf of the Doge project.

27:26I think it's almost impossible to bring the deficit down. Ideologically, I think it's a good idea. It might offset some of the increase that's coming from the interest payments, but it's just slowing down the rate. It's not reducing it. Yeah, and as we speak, it also kind of feels like Elon has thrown in the towel on that job to some extent, even though you'll have to praise him for his efforts. But it's an impossible task to really change the trajectory of the deficit, in my opinion. So the point here is that we'll have to do something to avoid a scenario where interest rate payments just grow and grow and grow and grow as a part of the budget.

28:12and take a look at the Japanese case over the past two, three decades to get some sort of feeling of where we're headed. Because Japan ultimately had to protect the yield curve. Otherwise, the budget would simply not, yeah, it would not be sustainable without it. And now we're seeing, you know, small signs of higher bond yields in Japan. And as soon as that happens, it doesn't really work, right? The central bank always have to either rhetorically of wire market interventions step in every time something happens and bond deals in Japan. And I ultimately think that we're moving towards, over the next decade or so, some sort of similar scenario in the U.S.

28:56Because, and I think there's a lot of literature proving this. As soon as you're above, say, 100 % to 120 % of debt to GDP, it's the point of no return. It's very, very difficult to get back. Because my view on that is, at a very simple level, GDP growth, annual GDP growth, is the income or revenues in the system that services the debt. Now, if the public sector is 100 % of GDP in debt, and let's say interest rates are 4%, and let's say for easy maths, interest rates are at 2%, and the economy is growing at 2%, that's basically all of the economic revenue pays government. But the private sector is 130 % of GDP in debt on top of it or more.

29:43And in which case, there's just not enough revenue to service the debt. That's kind of what I got to with this everything code thesis. And therefore, there has to be a mega player in that absorbs all of one side of the balance sheet, which is the government, which has to be done by the central bank and the government. Yeah. And, you know, if we look 5, 10, 15 years ahead, Raoul, as an economist, I think what's upcoming here is an incredibly interesting time for productivity. And, you know, you and I just chatted earlier today around how solid an analysis of the current macro backdrop you can get from chat GPT.

30:28It basically spits out the conclusions. uh there's now like probabilistic understandings joining the dots which i didn't think it would get to the kind of macro dots i mean i showed you that chat gpt thing it's like oh shit okay this is getting really smart yeah and you know in a few years you and i will just have to entertain people we we cannot really add any value relative to drinks with raul and dress getting shit face there's nothing else to do exactly um let's see whether people will pay for that for now Hopefully so, right? But joking aside, Rao, the point here is that in five years' time, an entity will be one person most often, I think, or two persons.

31:15You know, we will have much fewer companies with a lot of employees because you're essentially able to set up a company and get a lot of stuff fixed by AI instead of having an accountant and having a lawyer and all of that. To some extent, right? I'm just trying to think ahead here. That's a big productivity boost because I can be a lawyer. I can be an accountant, at least if it's not too complex, right? and if productivity grows at a much much faster pace it's actually possible that gdp on a trend basis starts growing a lot faster than what we've been used to since 08 and that could alter the picture a little bit in terms of debt to gdp what i don't know and i'm curious to hear whether you have thoughts on that is what happens to the workforce in in this environment uh will we have to ultimately pay 50 of the work for some sort of you know universal basic income or what will happen here uh or will we end up as you know solo entrepreneurs all of us or my my view on this is yes to both of those and also that we will adapt and find new ways and you've said it is entertaining each other i being humans the humanistic things whether it's music can be done by ai but to be live on tour can't be to be at a restaurant is valuable to be on holiday is valuable to be a live event where you're meeting other people is valuable to be communicating with people and just being a human whatever that means so i think that's where and david mattin talks a lot about this is like we're just gonna have to lean into being human because that's the only thing the ai can't be the ai can't come into a room give you a hug say how you doing let's have a drink whatever it can't do that and that's a very human thing so i just think we do adapt over time the question is is where do the revenues come from for the state how do you tax ai how do you tax you know because a lot of this can be just agents how do you tax them how do you tax the robots you know how do you bring the income side in to pay the the ubi on the other side that's not sure while gdp growth could be 10 because of the insaneness of the productivity boost that happens so you're getting massive gdp accruing to whom not clear it's not large corporations employing 30 ,000 people.

33:55So yeah, how the fuck does distribution of wealth happen? Does it matter anymore? I don't know. And this is why I came up with this idea of the economic singularity where it becomes so much of, I don't know anymore, that I just think, I just don't want to be trying to make a living in six, seven years' time. I want to have made my living so I can observe it and not have to adapt young kids will adapt but you know even for you and i seven years time yet unlikely to adapt to the scale of what needs to happen um and so i just think we'd better be careful now coming back into the current day the pushback or the fears that everybody expresses are tariffs it's the end of the global system everything's going to break it's recession It's inflation.

34:48What is your mental framework for tariffs? What are they trying to do? Why? And what will be the likely outcomes? So, you know, at least for now, Raoul, it looks to me like they're actually expecting to get some revenue out of these tariffs. That's right. And that's a newcomer in a sense, because initially I thought that reciprocal tariffs would lead to some sort of race to the bottom. And the whole purpose of it would be to create a race to the bottom because if you add reciprocal tariffs on Indian exports, they would have to get rid of their very, very high tariffs on US imports, right? But as of now, it doesn't really look like that's the game plan.

35:40So I have to accept that I need to change my thesis a little bit here. And what we do know, Raoul, is that even though we ultimately end up only entertaining each other in the future, we'll still have to eat food that crosses a border. And I actually think it's a decent revenue source for the government to tax that banana moving from Nicaragua to the US. I live in the Cayman Islands. We don't have taxes, but we have import duties, which are tariffs. Yes. The whole country here works on a 30 % import duty-ish, depending what it is. Between books might be zero and cars are 30%. But everything you pay on import duty, it's all a tariff.

36:26Yes. And most of the so-called tax havens, they're orchestrated exactly as you mentioned here. yeah yeah uh and the more digitized the economy becomes the more important it will be to tax the few first physical goods left and you know that's kind of why i'm or you tax consumption you tax consumption of stuff yes because it's easier to capture like the 80 is very easy to capture versus capital gains tax and all the other more complicated things yeah and you know let's see when we end up driving in road with taxis and all of that, but to give you a piece of anecdotal evidence from Denmark, we tax cars, the VAT on cars is, it was 180 % when I bought my car.

37:17But you need a freaking car, right? So it's a very, very efficient way of taxing people. And it will become, on a relative basis, even more efficient as the economy becomes more and more digitized because it's so difficult to tax digitization base. And arguably, you know, here in the Cayman Islands, it's so much easier not having to file tax returns, company tax returns, company accounts, capital gains tax, inheritance to any of these things, but you pay it through a eye-wateringly expensive supermarket or whatever you're bringing in, but that's based on consumption. So it's difficult for super low income people, workers, but there's abilities for them to get supported.

38:10But beyond that, it does seem to work. Yeah. And coming back to the inflation question based on this, right now, live observations do not point in the direction of high inflation, rather the opposite, which is a huge contrarian call of mine right now. Every one I talk to is in-camp inflation. Yeah. And it seems so obvious that when you increase input prices on goods coming from outside of your borders, that prices will have to increase. But you need to look at the side effects of all of this. and we have plenty of observations now of falling service prices amidst all of this. So sure, the good side of the equation will likely be impacted by these input costs when you import stuff, but the service prices will drop.