Interview: Macro Discussion with Tom Bodravics
It is my pleasure to be back with Tom on his own show this time, The Competent Investor Podcast. We talked all things Macro and Geopolitics.
It is my pleasure to be back with Tom on his own show this time, The Competent Investor Podcast. We talked all things Macro and Geopolitics.
Here is the interview on YouTube:
youtube.com/watch?v=jkLqRZyCtVw&feature=youtu.be
Show Notes:
As always, I include detailed Show Notes, replete with links and charts.
Tom opened by asking me about my most recent post:
I will be referring a lot to this Macro Regime Matrix, accessible on UrbanKaoberg:
I referred back to my various contrarian writings on the Trump 2.0 Playbook (insofar as it pertained to the Tariff Wars) as a DEFLATIONARY set of policies:
We talked about why the Tariffs did not fuel a strong Inflationary impulse:
The current Supply Shock Inflation is totally different from the Demand Led Inflation of 2021 which was from an overloading of Fiscal Red Bull, whereas the Reverse Marshall Plan redirected Fiscal Red Bull flows, which allowed for Disinflationary Growth:
As I wrote in Into the Void, my hope is that these secular forces represent a “benign gravity,” but the risks are rising that Inflation Expectations get embedded:
One concern I have is politically-induced handouts to address the flagging consumer; if this happens, it would bring us back to the Biden-era Demand-Led Inflation in my opinion.
A Tour of Macro Indicators
I next walked through 5 categories of Macro Indicators: Inflation, Labor, Growth, Consumer, Housing.
You can walk through these indicators yourself on UrbanKaoberg:
My Macro Worries:
I hope we don’t go back to an era of Fiscal Red Bull handouts, that would juice us back to 2021-style Demand-Led Inflation.
I worry about the downstream effects of Oil-led Inflation.
A Nuanced Look at China’s Geopolitical Games with Oil
Could China be artificially keeping Oil prices low by drastically cutting its Refinery Runs while simultaneously stoking consumer-led Inflation by banning Product Exports?
I said this in yesterday’s Weekly KAOS:
For the first time, I am buying travel insurance because I am worried about jet fuel shortages this fall.
The LA Branch of the SF Fed
We talked a little about my recent experience participating on a roundtable at the Fed.
The Fed’s moderator was asking a lot about Input Costs, and that reflects the current angst facing the Fed, which I believe is boxed:
Should Warsh cut? No reason to cut given the Inflation and benign Unemployment
Should Warsh hike? Also no, because of Oil’s Demand Destructive tendencies and a buckling Consumer.
Oil is the Macro Linchpin
I can’t emphasize enough the importance of Oil and its potential downstream effects on Inflation.
I think this Oil Shock will further spur the eventual substitution of Natural Gas for Oil as America’s primary hydrocarbon dependency.
Iran is sowing the seeds of its own destruction from a leverage standpoint, because this Oil Shock will also inevitably redraw the Oil transport maps. I think Hormuz will play a far less important role in 3-5 years.
Geopolitically, it could behoove the US to let this play out given our ability to weather this storm better than our Geopolitical rivals, like China. But there would be serious collateral damage amongst friendlies in Europe and Asia and Rest of World (RoW).
The Gazillion Dollar Question:
Can the secular “benign gravity” of Disinflationary Growth offset the current Stagflationary backdrop with no obvious offramp in sight for the Iran War?
I am cautiously optimistic that we can get back into that Goldilocks zone, because I think the Disinflationary forces from AI will ultimately prove stronger, and we talked about the Productivity-led surpluses from the mid-1990s.
How I Position for this Tightrope
I wrote about my big picture Asset Allocation a while back and talked about how I try to construct a portfolio of return streams that are Orthogonal to broad market Beta and to each other.
Unlike many, I don’t have traditional passive Beta exposures and like to position in terms of Alpha With Asymmetry.
My UrbanKaoberg Journey
We talked a bit about my journey with AI-coding and UrbanKaoberg, as well as my views on SaaSpocalypse (or not):
I walked through a couple cool features of UrbanKaoberg:
MOATS
DCF Goak-Seeking
EARNS Instant Earnings / Transcript Analysis
I talked about my current Data Epistemology Project in UrbanKaoberg as well as my other Second Brain project:
If you haven’t checked out UrbanKaoberg yet, there is a Free Trial Offer for KAOBOY MUSINGS / URBANKAOBERG that is good until 6/30/26!
Conclusion: Beware the Fog of War
Is today’s Fog of War truly less than it was 2000 years ago? I am not so sure.
The markets will leave cookie crumbs as to what’s really going on, and that’s what I’m always watchful for.
The Return of the USD Wrecking Ball?
Something we did not cover but we should have covered is Oil’s link to a potential resurgence of the USD Wrecking Ball.
I think a resurgent USD Wrecking Ball could be a serious headwind to asset prices and is a currently overlooked risk that most are not even focusing on:
Check out the Free Trial Offer for KAOBOY MUSINGS / URBANKAOBERG that is good only until 6/30/26!