Andreas and Mikkel are back to break down the biggest headlines moving markets.

0:00Before we begin with the show, I just want to take a minute out to shout out our friends over at Bitwise. Bitwise has a lot to offer people like us who live and breathe crypto. They are a crypto asset manager with more than$10 billion in client assets. They offer more than 30 products, and they've been building some of the most successful solutions in crypto since 2017. But here's what really stands out for me. Bitwise actually gets the crypto community. They donate a percentage of their profits from Bitcoin and Ethereum funds to the developers who help keep those networks running. What's their philosophy?

0:30If the ecosystem wins, everyone should win. And that includes the builders. You can't help but respect that. So go check out Bitwise. Go to bitwiseinvestments.com and see all they've got to offer. And that's bitwiseinvestments.com. There are tons of ways to invest in crypto. Do it with the people who care. Look for Bitwise. Binance is the world's number one crypto exchange. Over 275 million users already trust their world-class security. Binance makes starting crypto as simple as it should be. Whether learning about crypto on Binance Academy or browsing hundreds of assets and viewing your newly created portfolio in a clear, easy to track dashboard, Binance helps you go at your own pace.

1:11For the hardcore traders, Binance Pro opens a industry leading services for trading professionals with fully bespoke trading products, along with a suite of white glove services for VIP and institutional clients. Need support? 24-7 customer services on hand whenever you need it. And with some of the lowest fees and deepest liquidity in the market, it's no surprise over 285 million users trust Binance for everything crypto. Download Binance today and get started in minutes. Binance is not available in certain countries, including the US. Check its terms for more. Hey, everyone. As you know, on this podcast, I bring the best guests in the world at that nexus of understanding of macro crypto in the exponential age of technology.

1:58If you're enjoying the show, a quick five-star rating goes a long way. It helps us grow and keep these conversations coming with the best guests in the world. Thanks a lot.

2:15Hello out there. Hello, everyone. Welcome to another edition of Macro Mondays. My name is Mikl Rosenwald. I'm your usual host every Monday, or I should say almost every Monday. We missed last week due to the, was it Labor Day, Andreas? I'm not even sure anymore. But anyway, we're back with our take on global macro. We have a couple of great topics today. We're going to be talking about the US labor market, the crisis in the French government, possibly a little bit about oil and gold as well. We'll see what we have time for. We have a few listener questions as well that we got in on X beforehand.

2:47So lots to talk about. And as usual with me, my usual co-host, Andreas. Welcome to the show, Andreas. Yeah, thank you very much. It's been a hectic two weeks since we sent last time, so lots of stuff to pick up on Andreas. I just want to give people a quick reminder that this is our weekly free show where we give a little bit of a dip, a little bit of insight into our analysis and macro research. We publish all our articles over at Real Vision, so you have to go there and sign up to our pro subscription for more. That also includes our or your, Andreas, monthly State of the Union show that's coming up this Wednesday, I believe.

3:27And we'll also give you access to Raoul's Shooting the Shit show with Julian Bittell. That's tomorrow at 10 a.m. Eastern time. So lots of great content over at Real Vision. You also get, Andreas, you published today your weekly Steno Sickles article comparing Donald Trump to, was it McKinley his name was? One of the older presidents. Very, very interesting historic stuff for those of you interested in historical parallels to the current situation. Very interesting stuff, Andreas. Remember, however, we try to be very, very actionable, tell you what we trade and why we trade it. But remember that these trade ideas and all our recommendations might be...

4:07Sometimes it may be good, sometimes it may be shit. There we go. Genaro Gattuso, ladies and gentlemen. So, Andreas, let's get on with it. Let's start with the laugh of the week, which also dips into our main theme of the US labor market. I love this headline. Howard Lutnick is one of my favorites always. Very, very interesting stuff. Job numbers will get better once the new BLS chief is probably his thing. So essentially, as they've said, numbers were too bad. They hired the guys responsible for calculating the numbers. That's very to the point, isn't it? I hope that he means that the quality will get better and not the volume of the headline number, if you know what I mean.

4:52I mean, it was a pretty lukewarm job report on Friday, to say the least, right? A little bit more than 20K jobs added to the economy. And a few of the usual culprits were back, right? We've seen, I think, five or six months straight of layoffs in the federal government. I guess it's a lagged response to everything related to Doge early in the year. We also saw weakness in manufacturing for the fourth or fifth month running, which is a string of weakness that we haven't seen in a while in the manufacturing sector. So, I mean, the missing link here, and I want to really stress this point, is that, well, given the major turnaround that we've seen in migration trends, can we read the labor market through the same lens that we could read the labor market by just, say, two, three quarters ago?

5:56And the answer to that question is a resounding no. I have spent a lot of time over the weekend, also published my early thoughts on it on Friday. And if you look at the so-called break-even rate of jobs created per month to keep unemployment roughly stable, well, we're talking less than 50K now, most likely, given the trends in the workforce. So even though a job report of, say,$25 ,000,$50 ,000 looks abysmal, it's probably sufficient, more or less, given that you don't have that influx of cheap labor coming from the south of the U.S. anymore. So we've seen a tectonic shift in the labor market, and no one's really on top of what that means yet.

6:45I have a thesis, a working thesis, and we'll get back to that. But I think it's overstated, this weakness. I mean, you need to put it in a context. The U.S. economy is no longer optimally looked through what I call a nominal lens. You need to look at it per capita simply since the labor force is changing. Very interesting stuff, and we'll dive much more into that. I wanted to get your take on this because I always like really simple guides that says, should you be bearish or bullish if this or that happens? We had this one we can get on the screen from Sven Henrich, a guide to the NFP. I like very, very much.

7:25If the number misses, it's very bullish because the Fed will cut. If it's a beat, the economy is strong. That's bullish. If it's in line, there's no surprise. That's bullish. If there's a big surprise, well, nothing matters. They're still bullish. I like this very, very much. And so we'll get back to the NFP and what this actually means for the economy and how to interpret these numbers, because that is very, very much a dynamic factor. Andreas, we usually cover some of the hot takes we've seen mainly on X during the week. And this time I find one from a guy named Andreas Denno. We've discussed all.

8:02We regularly discuss all. We don't always agree on it. And we had messages indicating a further future production hike from OPEC. Very, very solid supply picture out there. Still, you think oil is bottoming around these$60 to$65 level. Just explain to me, what's going to drive up oil from here, you think? Well, I mean, first of all, this production hike that they agreed upon this weekend was pretty well trailer-graphed last week. So we obviously had the response in market prices last week. We're also talking about an OPEC group that is now very close to fully normalizing its trend production. Maybe they'll have one more production hike left, but that's kind of it now.

8:52So the underlying latent production that was always there in case prices started to increase is no longer particularly meaningful going forward. And given that, we're approaching the point where if the economic cycle starts to recover, especially in manufacturing, we can get back to whether that's the case. we're talking about an OPIC group that no longer is able to respond to that. So I'm actually surprised how well the market has coped with these production hikes. If you look at positioning data both from retail investors, but also institutional investors, hedge funds in particular, we're talking about a very, very, very negative positioning in the energy space.

9:47So a lot of people rushed into this trade on the OPEC production hikes, but also rushed into the trade on hopes that Russian sanctions would be lifted and all of that when we had the meeting in Alaska. And that's obviously more or less off the table right now. We're probably even going in the opposite direction, if anything, at least Europe is. So I think the stars are aligning now for a pretty decent contrarian setup here where everyone's involved on the short side in the trade. And we're getting to the point where even a production hike, as announced this weekend, is not able to push down the price.

10:25And that's very telling from a price action perspective, in my opinion. So oil is going up now, and I think we'll place some chips on that. Interesting, Andreas. I tend to agree with you. I think we are close to the bottom level. We're also at a level where governments will look to refurbish their stockpiles, et cetera. So I agree with you there. Andreas, let's get back to the non-farm payrolls because I pulled this off Bloomberg.com. Very simple. We can get it on the screen here. Explain to me, like I'm 10, why is this not bad news for the U.S. economy? I'm not trying to construct an overly optimistic picture around the labor market.

11:06I'm just merely stating the fact that we're amidst the tectonic shift in the labor force. So first of all, why is that important when you look at the non-farm payrolls? In layman terms, the non-farm payrolls basically just counts the number of payrolls in the U.S. economy. So Michael, let's assume that you work two jobs. You would be counted twice by the Bureau of Labor Statistics in the non-farm payrolls. And, you know, who are the typical suspects, sorry for just stating the fact here, of two or three jobs? Well, it would be that migrant now being sent home or returned to the home country. You don't have super solid data on this, but if you look at various investigations on the topic, a migrant worker is more likely than a native worker to have more than one job.

12:03So it basically means that there is a lot of double counting in both directions. It was also the case both last year and in 23, where we had that massive influx of labor that you counted twice or three times for a breach piece of labor coming in. And now we're seeing the opposite. So I think it kind of overstates or exaggerates the trend a little bit here since we have this double counting issue. Outside of that, obviously, the unemployment rate is going up and it's been pretty well telegraphed. It's been the direction of travel for at least a year or so. We had a similar scare roughly at the same time last year.

12:49Remember a couple of weak labor market reports, a couple of bad unemployment prints, and then we got 50 basis points from the Fed Reserve in September. Here we are one year later, and it could very well repeat itself. I mean, I wouldn't rule out 50 basis points at least. So I think it's manageable still what's going on. We're talking about a very low hiring, low firing kind of labor market. And if you look at, you know, I try to look through the noise oftentimes when there's a lot of, you know, discussions around the methodology and whether there's double counting or triple counting and all of that.

13:25And if you look at the tax receipts withheld by employers on behalf of their employees, basically the most like natural way of gauging whether there's income in the payrolls tax base. We're still talking about an economy that is growing nominally. So, I mean, job craziness is not good, but it's not through the flow either. And part of that, take a bit unemployment, is probably natural here. You know, we had unemployment below what is probably considered natural unemployment levels, right? So I still don't think we're in crisis mode. And it would be, I'd say, almost amusing, in my opinion, if we saw a reacceleration of employment trends right now, because no one's really willing to bet on that.

14:19No one's really willing to bet on the Federal Reserve reviving the economy here. So I think there's an asymmetrical outcome space here. Again, I'm not trying to paint a picture of a solid labor market, but it's just not as bad as it looks here. Binance is the world's number one crypto exchange. Over 275 million users already trust their world-class security. Binance makes starting crypto as simple as it should be. Whether learning about crypto on Binance Academy or browsing hundreds of assets and viewing your newly created portfolio in a clear, easy-to-track dashboard, Binance helps you go at your own pace.

14:58For the hardcore traders, Binance Pro opens a industry-leading services for trading professionals with fully bespoke trading products, along with a suite of white-glove services for VIP and institutional clients. Need support? 24-7 customer services on hand whenever you need it. And with some of the lowest fees and deepest liquidity in the market, it's no surprise over 285 million users trust Binance for everything crypto. Download Binance today and get started in minutes. Binance is not available in certain countries, including the U.S. Check its terms for more.

15:57with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments, S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, Forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus500. With over 20 years of experience, Plus500 is your gateway to the markets. Visit us.plus500.com to learn more. Trading in futures involves the risk of loss and is not suitable for everyone.

16:31Not all applicants will qualify. Plus 500. It's trading with a plus. So part of it is obviously what you need to look at. So some of this is migration. Some of it is humans need not apply. That entire trend of a workplace is going about without humans, perhaps. Yeah. And then obviously, let's just round that off, Andreas, because I hear increasing chatter of a 50 basis point cut here in September. Is that realistic? What's your percentage valuation of that? Well, I think it is a feasible outcome. It depends a little bit on the inflation report this week, right? Because it's kind of the last piece in the puzzle.

17:17And the inflation report is expected to be, I mean, hot-ish. So I even think there is a bit of leeway here for it to be a decently hot report, and they still deliver cuts, obviously. So let's call it a 50-50. I'd put more emphasis on it than market pricing right now, at the very least. And even with a very, very hard inflation report this week, they'll still cut. I'm pretty sure about that, which sounds detrimental to me, but I think they'll look through it. And I'll actually like to return to this topic of inflation a little bit in the context of this non-farm payrolls report. I think this morning when I showed up at the office, or morning is a bit of an exaggeration there as well, early afternoon.

18:08I told you, Mikkel, that I saw a TV clip following a few of the, I think they're called berry pickers in Oregon. And the ICE patrols had returned quite a few of those over the past months. And the owner of that farm lamented the development, even though she was a Trump supporter, stating that it was impossible to find any new members or new berry pickers locally because they didn't want the job. And, you know, I'm not a farmer, but I think the apples needed to be harvested more or less now. Otherwise, yeah, they'll end up being useless, right? So the point here is this is a very, very practical consequence of what's going on right now.

19:06And an example of why a wheat non-farm payroll is not necessarily equal to a wheat demand for labor. because that farm owner, she clearly had a demand for labor. She's just not able to fit her demand into the supply side, right? And the question is now that we're amidst the tariff regime and all of that, how do you really solve this puzzle right now? Because they're not going to turn the tide on this migration policy. It seems carved in stone that it's almost a cornerstone of this administration, right? And it's one of the few areas where they get solid approval ratings from their electorate. At the same time, you're not really incentivized to import strawberries or apples from abroad.

19:54Just putting it very lightly. So what do you do as a farmer? You simply have to invest in automation. To me, that's the only outcome here. And whether you can sort of interpret charts that to happen during a much shorter time span than otherwise, let's see. It was exactly what I spent some time on this weekend for my editorial, whether, you know, is it a feasible scenario that we get massive CapEx spending from a lot of, you know, small and medium sized companies just because they're forced to. and so to me this this is a cocktail that's you know it screams capex boom but we're yet to see it outside of the data centers and ai and all of that yeah yeah and and that's exactly the nurse i've been looking a lot into this because i i massively buy into this thesis it's it's it's it's a case especially for our european welfare states as well we we we need all these uh we need robots for all the manual labor that we don't want to do ourselves uh there's not really anything to buy out there.

20:59It's still very much in test state. Even the solutions that are more or less operational, there's no scaling in it yet. So it's going to take some years. And that's okay for tech to take some years to develop. But this is a here and now problem for people. I mean, people are getting kicked out now and the robots may come in five to 10 years. So there is sort of an interim period that's going to be very, very realistic. As you say, it's sort of a trifecta of objectives here. You want immigrants and workforce is being ejected from the US, imports are being discouraged, and prices need to be controlled.

21:37It's very, very tough to make that work at the same time, unless robots come in and fix everything. And if I was running a farm or orchard or whatever, I simply don't know what kind of robot I would go out and buy. I'm not saying I'm an expert on. And if people know of some companies that are producing these, it's very, very tricky. But there is a huge potential if you have a robot capable of picking cherries or berries or whatever. What's it interesting? I actually know for sure that there is a robot capable of picking cherries because I've watched a film of that with my son, but that's the only reason why I know it.

22:16So, you know, there are some solutions out there, but obviously you're right. You cannot just, changed this whole landscape in a matter of months. I saw a video of a prototype out of China that was able to fill the dishwasher in a test environment, and that was huge news. And I mean, if that is cutting edge, that it's able to fill a dishwasher at test level, then we are still five to 10 years away from mass implementation of this. But the demand is incredible, enormous for these kinds of solutions. So it's a very, very good business. I honestly think that that will end up somewhere in between to some extent, Michael, because it's not out of the world to think about an optimist robot walking around one of those berry farms, but controlled via joystick in India.

23:05Absolutely. That could very well end up being the compromise here. You kind of keep the cheap labor just via robot locally, right? Yeah. So you don't have to have them roaming around your streets. They can sit at home in India, whatever you say. that's very much true. That's how warfare is being conducted now. So why not farming as well? That's a very interesting thesis. We'll have to develop that a bit more into companies because, as you say, the CapEx potential in this is simply incredible. Yeah. And if you look back at William McKinley's Paris back in 1897 or whatever it was, whenever it was, we had a capex boom worth roughly 20 of gdp during that four-year time span that followed immediately after i think right now between friends for roughly half of that uh so 10 of gdp in capex something like that so there's really a potential for a capex boom here the question is just whether it you know will we see a short-term uh light crisis in the labor market before we get to that boom.

24:14And I think the Trump administration will do more or less whatever it takes to avoid that. Not turning the tide on immigration, obviously, but they can turn the tide on everything from the housing market to other such components to try to underpin the demand side anyway. So, Andres, I just want to get through one or two list of questions here. We had one on X here from Dom. We'd love to hear your thoughts about the growing, a big crash is coming, worry, that some of the macro guys are flooding here next. And we don't have to mention who's culpable of that, Andreas. I know we touch upon this a lot, but it is very big out there that a big crash is right around the corner.

24:58Just briefly, your take on this. Should you be worried about this? So I kind of get why you get those historical comparisons right now with the labor market that looks to be softening and unemployment going up, et cetera. It kind of smells like a very late cycle, early stage recession kind of dynamic in the labor market. But given that we have this complete reversal of migration and given that we have this known unknown of how much AI will impact hiring, I mean, you just need to take a look at the contribution from the technology sector in terms of GDP versus their contribution to hiring. It's just decoupling.

25:40It's one of the most crazy charts I've ever seen. I think the technology sector is adding plus 1 % of GDP a year right now, given the CapEx boom. And they're not hiring, which is out of this world, that disconnect. So I'm not sure you can read the labor market the way many of these do. At least I would like some more evidence. So I'm, for now, calling me very skeptical that this is actually a labor market crisis. Let me put it like that. And if you look at it live right now, I mean, the September weakness is one that is highlighted over and over and over and over each year. And now I'm just, you know, live staring at the NASDAQ here.

26:25I mean, it's basically just flat on the month. It's up 0.7 % actually since exactly a month ago. So, I mean, despite all of this, we're just moving sideways, which is not too bad, right? It goes to show that the positioning is still not particularly upbeat. And I kind of like to draw parallels to what I said on oil earlier. I mean, the positioning is so negative. And it remains the case that a lot of people have reluctantly bought into this rebound since Liberation Day. a lot of people keeps telling me that okay the goalpost has moved fair enough but the tariff trade war will still cause a recession ultimately and that's why we don't see hiring right now okay so let's look at the size of this shock i mean one thing was the shock to sentiment early on in the tariff war which was nasty it was very nasty but now that we've sort of turned the page on that sentiment shock and uh tariffs ended up being a little lighter than what was feared initially um we're talking about tariffs incoming that are worth say between friends 0.3 percent of gdp it's not a particularly big tax hike uh and if you square it with the tax cuts that were delivered in the big beautiful bill i'm not sure that this is a macro event i'm simply not sure uh we talk about tariffs all the time and i don't get the fuss anymore i i don't think tariffs are worthwhile spending that much time on um it's a tax as you know you obviously see taxes elsewhere in the economy and the tax hike that we've seen here yes it is big in the context of tariffs and import taxes but it's not big in the context of taxes overall you know if you've Ever wished you could ask me a question, any question, 24-7?

28:23Well, now you can. The Rauppel bot is my AI assistant trained on all of my insights, macro research, macro views, even wine and travel knowledge. The Rauppel bot is available for everybody who subscribes to either Connect, Alpha or Pro. It can really change your life. You get me as your mentor 24-7. The link's in the description. I think you're going to love it. Interesting interest. Very good points there. I just want to touch upon, we've had a lot of questions on the, once again, political crisis in France, in the UK as well, Japan, lots of other countries. So just a very quick take on this and some perspectives on this.

29:08We have a very big demonstration in France tomorrow. We expect the French government to fall, essentially. When we say government, it's not President Macron. That's important to remember. It's his prime minister. So the French political system is essentially paralyzed right now. There are three parties of more or less equal size, and they have no willingness to engage in any coalition building. And this is a big trade union demonstration tomorrow to block air. I believe it means block everything. And that is a very good moniker of what's going on in France right now with this instrument because they have a nice pension age.

29:45They have retirement ages. They have a very nice system. It's just not sustainable because they have a yearly deficit of around 5 % to 6 % of GDP. They have a debt-to-GDP ratio of more than 100%. So something has to change, but there's no political will to act on it. That's essentially why this government is crashing. I don't think you should expect a right-wing nationalist government to come in place here. We might get elections, but they're not going to change the picture massively. We need the presidential elections to truly stir up French politics here. And it is a very, very poor situation.

30:21I think, Andreas, one point here, that there's a lot of criticism for the Trump regime and all the trouble that he's stirred in international markets. But you have to say that the current U.S. political system is capable of taking action. You can disagree with the action, but a big, beautiful bill was put forward to Congress, which was passed through relatively easily. I know there was a lot of back and forth, but compared to this, I mean, nationwide demonstrations block everything. The U.S. currently has a political system that for all its flaws is actually delivering reform. And that's very, very positive for markets.