Good Wednesday evening MacroEdge Readers & Community,

We’re navigating what could be finality to the US-Iran conflict with the digital signing of an MoU today between the two countries - and I will be covering more on that tomorrow. Tomorrow’s Midweek Macro Note will focus on the centralization of markets, an update to our Global Bubble Index, and we’ll take a look at the MoU details in better detail to understand the impact - particularly on energy markets. While organizations and analysts are now massively net short oil and related equities - it appears that additional opportunities will emerge and the drawdowns are going to continue with haste through the summer:

It is going to take significant time for boats leaving Hormuz to actually get underway, and traffic will remain suppressed below pre-war levels until at least August, by our estimations. Given that China also kept a lid on purchasing Iranian crude, this should be another tailwind for prices to attempt to find a higher base. If we see broader macro pressures build, and equities fall (which are now much of the economy) - then we may see the dip expand further than what we’ve seen.

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This evening, John & Six will deliver a separate update - covering the FOMC meeting outcomes from today, the press conference, and much more - and Six will provide a portfolio strategy update…

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The Fed is Fighting the Last War (@SixFinance, Head of Research)

The Dot Plot is Already Stale and the Curve is a Gift

The new regime unveiled today of a shortened statement and a near-total elimination of forward guidance (ex-dot plot), was a welcome change. Since the Bernanke era, the Fed has fed, coddled, and tucked-in markets cozy in their pajamas by giving so much insight that the outcome of nearly every Fed meeting was already nearly totally priced into the interest rate curve, and the only thing to trade was the new forward guidance issued at said meeting.

That era appears to be coming to an end. Warsh explicitly discussed markets taking a more active role in adjusting positioning based on public and private data, encouraging participants to react to market developments, not to how they believe that the Fed will react to those developments.

Today’s split Fed on what Warsh called “low conviction” has scared the market, with December SOFR futures fully pricing in 2 rate hikes. This comes following other central bank hikes in response to inflation from the Iran war. The icing on the cake was the steadfast final wording in the statement “The Committee will deliver price stability”.

The market has reacted aggressively, with nearly a full rate hike priced in today alone between now and the end of year. This is where I am buying hand over fist.

Why this is all backward looking:

The Fed dot plot is responding to May CPI at 4.2% YoY. Producer prices near four-year highs. A wartime energy shock that caused oil prices to double.

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Continued below: ‘The Fed is Fighting the Last War, I Smell a Rate Cut, Today’s Equity Warsh Out - John Galt)

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Good Sunday evening MacroEdge Readers & Community,

This will be somewhat of a brief note, given that we have yet to see concrete and final details of the MOU between the US and Iran. Of note, this deal/MOU does not include Israel, who was a very important player in the conflict. While I hope this conflict is finally in the rear-view mirror - on Tuesday - we’ll dive into the details further as they come available. With oil inventories plummeting, and countries like Singapore just weeks away from running out of oil (US ~45 days of supply), it was clear in my mind that the President was going to walk away from this timebomb given his track record. In addition to the oil and bond market action, he is also responding to the looming massive IPOs that are dead ahead in Q3 and Q4, where I expect that timelines get accelerated on some of them due to the rates of cash burn that we’re seeing.

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Markets are enjoying the announcement that the conflict is officially halted between the US and Iran, which will contribute to a gradual reopening of the Strait of Hormuz, and the lifting of the US blockade on Iran. It appears that based on the terms, between $12 and $24 billion will be transferred - which is currently *frozen* or in the process of being released, and there are other material details that we’ll cover on Tuesday. Technology equities are leading the move higher this evening, especially with WTI retreating to the $80 level. It appears that this marks somewhat of a *last stand* point for WTI prices as warned in my technical coverage a few weeks ago - and a bounce could happen now for any number of reasons - but specifically for the fact that the market may actually pay attention to inventory levels and data rather than Axios and AlArabiya headlines that were deployed to control oil and natural gas prices over the past 3 months with decent success. Bitcoin is leading the risk on rally, and I flagged this at the end of last week after a member of our internal team chat noted that Bitcoin had not made a new low - and I hope that we can now transition our attention back to the things that matter - like the actual hard data in the energy sector, and the AI bubble - which poses a large risk to valuation and tech equities where it currently stands. This war period has been an exhausting one, and one that has demanded tremendous attention from myself and others - and while we’ve performed fantastically through it for the most part - with our portfolio strategies and commentary, to have to worry about headlines every 5 seconds is not sustainable, nor, after some point, as we saw, does it become useful for anyone.

With the Nasdaq and other indices set to open fairly close to ATH levels Monday, we get to now see how oil and gas prices hold up, and how the associated equities hold up as well. With the dated curve still well-elevated versus pre-war levels, the market has to assess how this data is actually going to matter - given that we saw little to no demand destruction from the elevated prices during the conflict. A failure to see a new high on the Nasdaq - and other major bubble indices like the KOSPI (below) would be a red flag:

… to all-time high, or to stall? The latter would be a significant red flag:

Trump just so happens to end the war for FOMC week… and a potential hike in Japan? Watch that yen…

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Report Schedule for the Week

Tuesday: War Note & MOU Update

Thursday: Midweek Macro Note

Friday: Federal holiday

Sunday: Weekly Macro Note

Macro Week Ahead - Rate Decisions

Monday: NY Fed Empire State Index, Industrial Capacity

Tuesday: BoJ Rate Decision (final hike of the cycle?)***, permits and housing starts

Wednesday: FOMC and Rate Decision under Warsh, Advance Retail Sales

Thursday: Japan National Core CPI

Friday: Federal holiday - USA

***of note: if this is the final BoJ hike, keep an eye on that cutting date, since that usually signals global trouble

The Gasoline, Oil, and Natural Gas Situation

… another day as an oil and gas investor (and owner) in 2026

Materially, it will take quite some time for flows in Hormuz to get ‘normalized’ from their absolute lows. If the market has really been forward-looking, then some of this is priced in, and given the curve, it appears that downside will be limited, barring any summer demand destruction, which looks increasingly unlikely. SPR releases will continue for a time, and Cushing is near operating minimums, and we have to see what happens in China (as well as SE Asia)... If I was a betting man, which I am, the move is probably way over done in the short term, and there ends up being some kind of whiplash either due to the MOU falling through, the data catching up, shortages, or a combination of many of those elements in one.

Continued below: The Gasoline, Oil, and Natural Gas Situation … Why I learned to love the SpaceX IPO - John Galt

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Good Friday morning MacroEdge Readers,

We don’t usually publish Macro Notes in the morning but I’ve been up since about 4:50 so it seems like a suitable time to, especially with the ‘festivities’ happening today. The SpaceX IPO will debut in about 20 minutes and is slated to open about 20% higher than the $135 price. Many holders are locked up for months in SPVs, and retail faces the same fate, and I expect employees and insiders that have the liquidity option to get very busy as the tape gets fired up.

Six will also provide a portfolio strategy update, and I will briefly cover the latest on the war & oil market… welcome to the ‘casino’, and have a fantastic weekend.

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SpaceX IPO - Sign of the Times

SpaceX contracts listed on ‘Hyperliquid’ -> trading about 20% higher than the IPO price, but still significantly off of the highest levels.

Given the volume and volatility of this event, I expect we can start to draw our real conclusions and determinations from it come mid-July. Elon runs a tight shop as an innovator, and his investor base is a religion that I refuse to fight, even though there are plenty of warning signs, and this IPO acts as a signpost, in my opinion, for US markets.

The key facts:

• Valuation and Capital Raise: SpaceX is launching its IPO on the Nasdaq under the ticker SPCX, targeting a valuation between $1.77 trillion and $1.78 trillion. The company aims to raise $75 billion by offering 555.6 million shares at a fixed price of $135, making it the largest IPO in stock market history by total dollar volume.

• Pricing and Lock-Up Structure: The company bypassed the traditional investment banking bookbuilding process by offering shares at a strictly fixed $135 price rather than a preliminary range. The offering also utilizes a multi-stage insider lock-up schedule tied to upcoming quarterly earnings reports, rather than a single 180-day restriction.

• Financials and Investor Demand: For the fiscal year 2025, SpaceX reported a net loss of $4.9 billion on $18.7 billion in revenue. Despite the net loss, institutional demand for the shares reached approximately $250 billion, leaving the offering roughly 3.5 to 4 times oversubscribed ahead of final pricing.

• Index Inclusion Rules: Nasdaq adjusted its fast-track rules to allow top-40 mega-cap companies to bypass the standard seasoning period, qualifying SpaceX for Nasdaq-100 inclusion within 15 trading days. The S&P 500 maintained its existing rules regarding profitability and seasoning, making SpaceX temporarily ineligible for that index.

• Market Catalyst Effect: The debut has initiated a broader technology listing cycle in the United States. Following the SpaceX filing, companies including OpenAI and Anthropic filed confidential IPO paperwork, shifting market issuance from semiconductor infrastructure toward software and aerospace platforms.

The scale of the current IPO pipeline has led analysts to compare market conditions to previous periods of high valuation and high concentration.

1. 1987 United States Comparison

Current equity markets reflect a high concentration of capital in mega-cap technology firms, similar to the market structure observed prior to October 1987. SpaceX is entering the public market at approximately 92 to 95 times trailing sales. The accelerated index inclusion of a company this size forces passive index funds and ETFs to rebalance their portfolios rapidly to buy shares, creating structural liquidity pressures that mirror the automated trading risks seen in the late 1980s.

2. 1989 Japan Comparison

The valuation models for SpaceX incorporate long-term assumptions regarding orbital space data centers and interplanetary logistics. This reliance on future infrastructure growth parallels the 1989 Japanese asset bubble, where asset prices were driven by projections of multi-decade technological and real estate expansion. Independent analysts have noted a divergence between these long-range projections and current cash flows, raising concerns that valuation metrics are compressed beyond historical norms.

Mark Spitznagel, who has provided useful signposts on the way up, has been very, very quiet recently, during this ‘blowoff’ period. I still continue to expect that defense at all costs will be the norm for US equities - though it’s going to get more difficult to do that as AI eats into companies’ cash piles, and it becomes a risk ‘whack-a-mole’.

Latest Oil Market Update - Iran Deal or No Deal

Oil equities have been resilient in the face of a relentless beatdown of CL through various ‘deals’ and headlines. An early morning fake deal announcement sent spot back into the mid-80s, though WTI has now recovered above $87/bbl:

I do not expect that Trump will concede a lot of the terms outlined in the Iranian version of the ‘deal’ - if they are accurate - and giving up the war stance means the market would actually have to focus on the reality of things like AI starting to atrophy margins, etc. etc.

XLE - still consolidating in the war range:

Tomorrow, I will provide a brief update on the oil market - including with inventory levels - and I would actually prefer that they get to a resolution at this point so we can get to price discovery. I expect that the 40mb SPR release announced this week will mark one of the last, though don’t underestimate their ability to run Cushing below operating minimums.

Gasoline has not fallen to the degree crude has in recent days, and I believe it is working on another base:

The Global Bubble Index - Warning Signals Flash, No Confirmation

Our Global Bubble Index was designed to track broad cycles from a global perspective. The KOSPI, Nikkei, IBEX, and TSX give us a solid view of where things are likely to go in the United States. Right now - we’re seeing momentum stall out in the index, but a new direction has not yet ‘snapped’ into place… That moment could be close.

Continued below: Big Tech is Selling Stock…? Should we?

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Good Sunday evening MacroEdge Readers & Community,

This evening we’ll keep the kickoff into the week quite brief as we continue to navigate ‘sillyland’ from a headline, algorithm, and markets standpoint. Late in the afternoon ET, we saw Iran launch 5 rounds of ballistic missiles towards Israel and drones toward the Kingdom of Jordan.

Sums up the entire risk environment:

The President stated that he’s in the driver’s seat and is trying to hold back from a retaliatory response from Israel, and it’s clear that Trump is getting very burnt out of the operation as we drag past month 3 and the Strait of Hormuz being closed for 100 days. While some are ‘surprised’ and ‘shocked’, we’re not yet living in some Mad Max-style-movie - the expectation was never that for the United States - given the size of our petroleum production and how much is being exported abroad (record levels right now). I still do not expect Iran to play ball on the Strait of Hormuz and uranium until at least the end of the month or past the 4th of July - and they know with midterms that the longer they can keep this level of pain going on the global economy, the larger the ramifications will be later in the year. With the level of intervention required to keep the market (which I consider to be the economy in the eyes of this Administration) afloat, it begs the question: is there any ‘real’ economy left? It seems quite counterintuitive, but the Gilded-era approach of simply pumping nominal values into the sky, higher and higher, continues to hollow out the productive economy as human capital and intelligence shift into things like government-backed capital incineration in projects we label ‘national security requirements’. If bailing out OpenAI and Altman is a national security requirement, I am going to go into retirement and start selling oceanfront property in Nevada, seriously…

We don’t need to go into my latest rantings on what a joke the whole bailout story that was released Friday & Saturday has become - and it’s clear that the AI companies are looking for their exit liquidity and puck save to be the US taxpayer. From outrageous capex suggestions like data centers in space and the whole token economy starting to atrophy corporate budgets, we’re starting to see additional pressures on the data center and ‘industrial revolution’ buildout. When this is all said and done, we’re likely going to be staring at a giant crater wondering what we just blew hundreds of billions of dollars on. When someone demonstrates an actual profit moat for these LLM companies - maybe, just maybe, I will be a little less jaded about it… but for now, I expect my early 2025 projections to come to fruition about taxpayer bailouts (acquisitions as they’ll call them) of some of these companies - especially the worst capital incinerators like Altman’s machine.

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For futures (as of about 8pm) - oil is up modestly (~3%), the Nasdaq is flat, and Bitcoin is up about 2.5% on news that Trump is trying to restrain Netanyahu from retaliation. At one point in the weekend, CFDs - oil was up about 7%, and quickly we saw the maximum TACO approach to rein in the gain. Regardless, I expect Iran to sit in this ‘wait and see’ approach on what comes next, and I do not expect that Israel is simply going to let the retaliatory strikes slide. The ‘bear trap’ that are wars in Persia are gnarly ones, and the President finds himself in quicksand that he’s trying to use every tool and object to attempt to get out of the ‘pit’ of Persia.

This evening, we’ll cover the macro week ahead, discuss the employment report, talk about the Yen living above 160, highlight what’s next for oil and natgas, and wrap up with a technical look at the Nasdaq. It’ll be another headline-driven week, so buckle up and let’s have a great week as we speed toward the second half of the year (hard to believe!).

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Macro Week Ahead

This week, it is expected that the ECB will begin hiking their policy rate. This may be a one-off due to the Israel-Iran war, but sticky inflation pressures are spreading across the globe, and EU rates have been on the up and up.

• Monday: NY Fed Consumer Expectations

• Tuesday: Balance of Trade, Wholesale Inventories

• Wednesday: May Consumer Price Index

• Thursday: May Producer Price Index

• Friday: UMich Sentiment Prelim (June)

Additionally, Oracle reports on Wednesday, and Adobe reports on Thursday.

A Look at the Employment Report

The payroll report presented another mixed picture. While the weakest prints are in the rearview mirror for the time being, the report came in line with our expectations. On a population-adjusted basis, these reports are barely above break-even, and job growth was driven almost entirely by a brief spike in part-time jobs.

Nonfarms came in with a positive YoY read:

The unemployment level remained largely unchanged for the month.

Full-time employment hasn’t changed for the better part of three years, and there are some very alarming underlying trends, like zero growth in male employment, while retirements continue to surge:

The ‘nice-looking’ headline figure is likely due to a combination of FIFA-related hiring for the past month, and a rebound in corporate hiring, though layoffs are still elevated. It’s just a bizarre employment environment - and low immigration along with worsening demographics are making the labor market look better in the data than it actually is.

Expect this mixed picture to continue through the June and July data.

The Yen is Not AI’s Friend

The Yen is back in ‘critical’ territory, weakening and staying above the 160-threshold. It’s near levels that have previously forced the BoJ to hike - and we’re once again, close to that with the BoJ potentially hiking this month.

Time to hike Bank of Japan? Likely once more…

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Good Thursday evening MacroEdge Readers & Community,

It’s been a relatively slow week thus far in US markets as momentum traders have lost some ‘pep’ in their steps and both companies and investors are getting more wary of the AI ‘super’ bubble… I’ve upgraded this from a run of the mill bubble since this disaster that they’ve created is one that’s going to either require massive government intervention to save, result in a full credit cycle, or both. Right now we’re sort of in a ‘wait & see’ pattern, and they’re bringing in the final liquidity batch, as made evident by the elimination of the pattern day trading rule, a reduction in the SpaceX investor minimum for the pre-IPO round, and I can go on for days as I have many instances over the last 24 months. This cycle is unique in that the government is likely going to provide unprecedented support and a backstop as soon as things look a little bit wobbly - with how broken the ‘real’ economy is. Couple that with the Strait of Hormuz closure (now over 90 days, which we’ll discuss more in the Redeye Macro Note), and the political Administration is looking for any straw to grasp at this point.

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The Nasdaq and other indices are starting to show weakening technicals, and internals are softening outside of the AI-sphere, even as the Dow led the rally higher today on slightly higher rates:

One of the larger risks now is what’s happening in Asia - so keep an eye on Japan and Korea in the coming days - namely, with how weak the Yen is, and how the carry trade has supported this massive bubble across our indices, and with Korea having the most severe reading in the MacroEdge Global Bubble Index reading. Tomorrow is more nonfarm payroll noise - which comes in the face of once-again elevated job cuts in May. Job Cuts in May landed at just over 80,000 - per the MacroEdge Job Cuts Tracker - at 82.7K:

Tomorrow - I expect to see an okay nonfarm reading - but for many of the wrong reasons that we’ve discussed for the past few months. The data center buildout (which is a more ‘supersized’ version of the shale boom from 2011-2014) continues to mask some of the cyclical labor market weakness - and contract employment is acting as a boon as well. With demographics as poor as they are and with retirements surging, a trend that will continue for the remainder of the year, this is keeping unemployment at a structurally low level in appearance, though not in reality. Job seekers know (as highlighted in some of the data below) that the actual job search reality is telling a much different story than the data itself right now, and much of the data itself is becoming more & more noisy, making it less and less useful in how we approach the macro reality both here & abroad.

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The idiocy and failure of policymakers to prevent the bubble that they’ve supported in places like Korea will have massive ramifications around the globe, and we need to work through the next round of IPO-exit liquidity here in the US before meaningful downside opportunities are generated. I expect that we will see policymakers attempt to balance their bubbles with interventions and other short-term policies that will eventually be bulldozed by reality when that day comes.

Additionally, we’ll take a look at a preview of the second half for MacroEdge and beyond - there are a lot of exciting things we’re bringing to the mix - especially with Portfolio Strategy. While we had planned to include The Macro Club as a second half addition, we have decided to merge this in functionality with Portfolio Strategy so anyone upgrading (or signing up for) Portfolio Strategy will also get access to all of the community elements and functions we’ve been wanting to introduce.

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A Preview of the Second Half - MacroEdge & Beyond

The second half of the year is going to be a busy one for us. I will be in the Dallas area next week to expand our footprint as we continue to expand the oil and gas side of our business - not only on the Macro Research & Transform front - but also through our partnership with an upstream firm located in the area. We’re continually innovating and adapting to this rapidly changing world, and even in a landscape of new X algorithms and changes to things like our Transform business, Macro Research remains at the heart of everything we do.

As promised, there’s a lot coming in the second half of the year - specifically with our oil and gas partnership, with Portfolio Strategy - under our Macro Research umbrella, and with our Substack in terms of how we continue to grow and expand our community here. I will also be starting media appearances in the second half of the year - and this is something that many, many people have requested for many years now.

What’s new in H2:

• Portfolio Strategy (Macro Research)

• Trident

• Announcement of our Oil and Gas Partnership

• Expansion of our Substack Capabilities

• & More…

Look for more in-depth information in the Redeye Macro Note.

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Energy Portfolio Strategy Update

The Energy Portfolio Strategy has had a very strong week. Even with our trimming of SND, the remainder of the basket: ACDC, CHRD, and KGEI have had a fantastic week.

Continued below: Energy Portfolio Strategy Update, The Moab - Korea, Japan, & the AI trade, NFP Preview, Portfolio Strategy Discussion - Six, Driving in the Rearview Mirror - John)

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Good Sunday evening MacroEdge Readers & Community,

This evening we’re back to wrap up May and head into June during this continuation of an ‘asset melt-up’ that is pushing retail past an ‘all-in’ mode that we last observed during the 2021 period. Jawboning and other government interventions have managed to keep WTI around the ~$90/bbl level, while financial conditions are being kept extremely loose alongside AI earnings tailwinds that are driving an all-out parabolic move in semiconductor equities. While signs of slowing continue to emerge in the real data - especially with things like the data center buildout - the timing instrument remains greatly elusive as we continue to see our Global Bubble Index push to new highs. The phenomenon is not limited to the United States, as Korean, Canadian, Spanish, Chinese, & other equity markets continue a vertical move upward. The reality is much more complex than this being a simple net positive signal that good things are happening in the economy, because under the surface, as we’ve analyzed for the better part of two years, we’re seeing GFC-style delinquency.

This is very much looking like the ‘all-in’ bubble in everything: consumer credit, private credit, student loans, equities, equity leverage, etc., and it does not look like it is going to stop in the interim until a shock event (potentially oil inventories hitting tank bottom?) actually shifts the mood on the matter. The pro-nominal price inflation regime, which is fully in charge of the current environment, knows very well that they cannot stop the party for the dot on the ‘i’ within our ‘i-shaped’ economy - even as the bifurcation grows more and more extreme.

Just look at margin debt:

Again, not an indicator that matters until it actually rolls over, and that is not happening for the time being. There are excuses across X and the ‘Fintwit’ world right now why this environment is going to continue forever - and we’re quite close to the permanently high plateau period that Irving Fisher once outlined so eloquently during a previous period that shares many resemblances.

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At the futures open - oil (spot WTI) is at about $92/bbl - equities are flat across the board, and crypto is down slightly today. The pain range for markets is a return >$100/bbl WTI for oil - and the setup as outlined below is really a constructive one if acute shortages begin hitting global economies from June onward. Iran is sitting with significant leverage right now as it pertains to global energy markets - and they know that the longer they can hold out and keep countries running down emergency supplies, the worse prices will get on a longer-term basis.

Prices paid are sending mixed signals, but directionally, we continue to move higher - especially for producers:

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Macro Week Ahead

This week is another mixed bag in terms of the importance and relevance of the macro data. Markets have largely enjoyed much higher inflation to this point - largely stemming from the Strait of Hormuz closure - but a long-term supply shock is not going to be a positive catalyst forever.

Monday:

• Fed Chair Kevin Warsh statement

• ISM Mfg PMI (May)

Tuesday:

• JOLTS

Wednesday:

• ADP Private Payrolls

• ISM Services PMI

• Federal Reserve Beige Book

Thursday:

• Initial Claims

Friday:

• May employment report

For earnings >500bn this week, AVGO is the lone name. I expect that it is not this week that we start to see things get worse yet, but over June and by late June, I expect that the acute shortage discussion becomes more relevant if the Strait remains closed, which is looking more likely.

A Preview of the Second Half of the Year

For us, an organization, I will provide a critical update on Wednesday regarding changes to our product offerings and mix for the second half of the year. Importantly, we will be expanding our footprint with a new location in Southlake, TX, which will enable us to continue and expand our service to our oil and gas customers across the state of Texas and beyond.

Stay tuned for that Wednesday update, and I am departing shortly to begin several days of discussions regarding changes to what we offer.

The Latest Geopolitical Developments

This weekend has been much of the same from a geopolitical standpoint - no real signs of a deal, more fake headlines and fake news (like news of a resignation from Iran’s President which turned out to be false), and the saga continues.

• Trump Toughens Terms, Halting Near-Deal: Just as negotiators appeared to be approaching a formal memorandum of understanding (MOU), President Donald Trump announced he was in “no hurry” to strike a deal. Citing deep concerns over specific clauses that would unfreeze restricted Iranian assets, the White House significantly toughened Washington’s terms, causing the peace agreement to fail to materialize over the weekend.

• Irreconcilable Disagreements on Nuclear Sequencing: The core structural roadblock remains a fundamental impasse over nuclear commitments. The U.S. demanded firm, upfront verification and the complete extraction of Iran’s Highly Enriched Uranium (HEU) stockpile. In contrast, Iranian officials flatly refused to transfer their HEU outside the country or lower enrichment limits, viewing zero-enrichment demands as an absolute red line while aggressively demanding upfront economic concessions.

• The Sovereignty Battle Over the Strait of Hormuz: Reopening the critical maritime artery remains deadlocked due to conflicting sovereign demands. Iran insists it will only permit civilian shipping to resume under exclusive “Iranian arrangements” and regulatory traffic systems, which it views as its ultimate geopolitical leverage. The U.S. has explicitly rejected any framework involving an Iranian fee system or restricted navigation, maintaining that full freedom of navigation through the international waterway is non-negotiable.

• Iran Exploiting the Truce to Reconstitute Military Sites: Adding to Washington’s resistance, freshly analyzed satellite imagery revealed over the weekend that Iran has been actively using the recent ceasefire windows to execute tactical military expansion. Significant reconstitution efforts were identified at the Yazd Missile Base, reinforcing intelligence assessments that Tehran is exploiting diplomatic pauses to shore up its operational capabilities.

• Domestic Political Pressures on Both Sides: Domestic political dynamics crippled the closing stages of the talks. In Tehran, a powerful faction of hard-liners inside the Iranian parliament and the Supreme National Security Council launched aggressive public campaigns to undermine President Pezeshkian’s negotiating team, slamming any potential compromises with Washington. Concurrently, U.S. negotiators faced intense pressure from defense think tanks and hawkish congressional factions demanding nothing less than a complete, permanent ban on Iranian uranium enrichment and missile development.

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The Global Bubble Index - Charging Higher Forever?

Our global bubble index (KOSPI + IBEX + TSX + Nikkei) is showing no signs of cracking yet. Until this shows signs of cracking/rolling over, I would be very careful fighting this trend… even with how ridiculous it has become.

For the KOSPI & Nikkei - still no signs of slowing, though breadth warning flags are becoming more apparent:

Spain is either setting up for another massive leg higher in this consolidation pattern, or for an impulse move lower - no real in-between on this setup:

Canada continues to move higher as well, even as its real economy suffers a recession:

For Bitcoin, the current price environment has completely separated from the equity action, which has been driven almost entirely by gains in AI/semiconductors.

Pretty decent chance that this divergence turns into a correction/downside over the next 30-60 days in the semiconductor space.

This global monetary environment is creating massive bifurcation, and I expect that the melt-up in everything continues as the everything bubble continues. This is going to surpass Dotcom and represent a combination of warning signals surpassing anything that we’ve seen across cycles in the past.

Semiconductor technicals are showing some early warning signals, but nothing to act on.

Look for a day that signals an environment change (crack), like a 5-7% downside move, which may signal a shift in sentiment that will spook out some of the retail insanity that we’ve seen the last few months.

What’s the Scoop for Oil and Gas?

The dynamic in oil and gas since the last move to the $107/bbl level or so has been quite ugly. As soon as that pushed bonds low enough for the Administration to start to ‘panic’ again, we’ve seen an unrelenting level of intervention in financial markets, primarily in oil, to push yields slightly lower for the time being.

(Continued below… what’s the scoop for oil and gas? - continued, the turn of the tide - Six, portfolio strategy… Marigold, LBJ, and Tehran - John Galt)…

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The setup is mixed - there are really two key technical potentials now - though the one I think is most relevant is the Strait remaining closed through June for the time being. This area for WTI has acted as a huge demand zone over the last three months - and I do expect that if we were to break to the downside (which right now has very low odds), then WTI will sink further. The setup that looks more likely is a return to the upper end of this range band:

We made key adjustments to the energy portfolio strategy last week - cutting SND and KGEI for the time being - and reducing exposure in ACDC. I don’t like the fact that E&Ps are starting to even marginally get rig count higher given the current global war on oil prices by governments.

A return to the $110/bbl level is in order if the shortage narrative enters the news cycle (and people actually start paying attention to the data)... The fact that markets have been intervened in to this significant degree is concerning because real supply and demand signals have not been transmitted that would actually contribute to demand destruction. I guess right now the plan is to run the clock down to the very last second - which they likely know around when that is - and see if they cannot pull off some bargain or deal. Structurally, I am still bullish on the entire commodity sphere, regardless of developments in Hormuz, and with each passing hour, stories of normalization will only become more distant.

I really think until there are actual shortages and people have to pay consequences - very few will care - thinking that commodities simply fall out of the sky on a day-to-day basis (at the pump, grocery store) or wherever, so keep that in mind… On the semiconductor insanity front - look for signs of an intermediate topping process if we get one - that will mark a shift in the forward outlook for the sector - there are plenty of reasons under the hood for why we may begin to see that.

The Turn of The Tide (@SixFinance, Head of Research)

The Speculative Regime is Intact and Broadening.

The environment remains ripe for speculation, and the character of that speculation is changing in a way worth front-running. The thesis I want to lead with, because it is the one most likely to be wrong, is that this is late-cycle melt-up behavior, and chasing laggard rotations into a tape that has already re-rated the leaders is precisely how you buy the top. I do not believe that the top is in, and fundamentals may later inflect should economic conditions improve and inflation recede. I am ready to be proven wrong, and will revisit the thesis the moment that breadth deteriorates rather than improves.

The laggard basket I led with weeks ago - ORCL, NOW, QCOM - is inflecting on schedule. QCOM saw the meatiest move and in my view has now largely discounted its fundamental inflection before the fact. When this happens, and the good news is pre-emptively priced, the easy money in that name is behind you, and the marginal speculative dollar starts hunting for the next “not yet discounted” home. I have high conviction in QCOM’s fundamental inflection, but only moderate conviction that QCOM has significant upside from here.

DELL

Dell is a perfect example of the current market regime. A blowout quarter reported tonight led to a 30%+ gap higher in overnight trading. This move structurally resembles ORCL’s late 2025 surge, the one that later more than fully retraced. The takeaway is not “short DELL”, but that the speculative engine is running hot enough to gap an already up triple digits on the year name over 30% higher after hours, and that energy will not stay contained in the names that have already moved. This is a bridge to the real trade, and the hot money flowing into the market, as evidenced further by NBA players increasingly taking to Twitter to share their investment theses on AI and robotics.

Beyond Tech

After going long CAI recently, the move I am watching is the spread of speculative capital out of the mega-cap AI complex and into sectors that have been left for dead. The single most compressed, most hated, most un-owned major sector in the index right now is healthcare. And the catalyst that could un-stick it is the one thing the market has spent two years pricing exclusively into semiconductors and hyperscalers: artificial intelligence.

The market has paid up enormously for AI as a cost-and-compute story, or the “picks and shovels”. It has paid almost nothing for AI as a therapeutic output story, which actually discovers and commercializes the drugs the compute is supposed to produce. When those two narratives reconnect, the re-rating likely accrues to the cheap side of the trade.

On a relative forward PE basis, the S&P 500 Healthcare sector is near its lowest relative valuation to SPX in three decades. This de-rating was driven by multiple overhangs, including Medicare price negotiation, pharmaceutical tariffs, “most favored nation” fears, patent-cliff anxiety, and a multi-year capital rotation into AI and tech that have starved the sector of marginal flows.

Core Thesis: AI Arrives in Therapeutics and Genomics

Healthcare is far from my personal edge, and my positioning reflects that. The structural argument however, does not require me to pick molecules; rather only that the market begins to re-rate the sector’s innovation premium as AI compresses the discovery timeline. This is the same innovation premium that has been bleeding out of the relative multiple for years.

Catalyst Stack

1. DeepMind’s Isomorphic Labs raised a $2.1B round in May 2026 and now guides its first AI-designed drugs entering clinical trials by end of the year.

2. Nvidia and Eli Lilly stood up a $1B AI lab with dedicated infrastructure aimed squarely at drug discovery foundation models. The picks and shovels vendor is co-investing into the output layer. The output layer is likely to be re-rated.

3. Insilico Medicine pushed a fully generative AI-originated molecule into Phase 2 trials. The proof-of-concept risk in “can AI molecules reach trials” is now largely retired. The open question now is hit rate and final approvals, a massive step forward.

The counterpoint to the argued points is that although AI may accelerate the discovery phase, it is unlikely to compress the years of clinical validation required in drug trials. The fundamental payoff is therefore longer dated, but luckily, equities are a long duration instrument. Therefore, at this stage, this is a trade on the re-rating of the sector, not the FDA process.

Because this is outside my circle of competence at the single name level, I am expressing it through two thematic vehicles rather than concentrated stock bets, and sizing up the exposure while deliberately diversifying away the idiosyncratic biotech risk I have no edge on.

Those vehicles are:

1. IDNA - Tracks an index of global developed and emerging market companies positioned to benefit from long-term innovation in genomics, immunology, and bioengineering. It is a passively managed product, following a Factset index.

2. ARKG - This is the higher octane vehicle and, in my view, the best speculative beta to the theme. Actively concentrated in DNA sequencing, gene editing, and AI-enabled diagnostics with a much smaller average market cap than IDNA. In a genuine sector re-rating, it has the highest leverage to this theme. The problem, bluntly, is the manager. Cathie Wood has a chronic and well-documented inability to get out of her own way. A structural tendency to buy high into momentum and sell low into drawdowns. She habitually buys when she should be selling and sells when she should be buying. It is the right basket (which can be copied if desired), but with a heavy behavioral tax attached. An inflection of the magnitude I foresee in this sector is a rising tide that lifts all boats. If the relative multiple mean-reverts toward its historical average off a multi decade base, the rising tide should account for that in this vehicle, which again can be recreated as a basket of single names. The ETFs are for simplicity’s sake.

What flips the thesis:

1. A regulatory shock (one that could come if the democrats retake political control).

2. Failed or stagnated progress in AI healthcare innovation.

3. An equity market breadth rollover.

As of today, I see this as the best sector thematic trade on the board, and one with a multi-year runway ahead of it. I hope to hold this position for years, and am proud to invest in and hopeful that the technology that we are pouring trillions of dollars into globally actually allows for major medical breakthroughs.

Marigolds, LBJ, and Tehran (@RealJohnGaltFla, MacroEdge Contributor)

The number of Americans who have a clue about this title probably is under 100 out of 350 million.

What the hell does a common garden flower, an egotistical maniac President, and the capital of Iran have to do with anything then or now?

Everything, as history is one’s guide to understanding the present.

I. The Current Situation

As of tonight, Trump has rejected the super secret Iranian position that has been leaked all over social media then imposed new demands on the regime in Tehran. Of course, none of the demands that Trump presented are acceptable nor are the new sanctions against any nation or entity paying the ‘environmental toll’ that Iran imposed so basically the ceasefire is status quo. Unless of course one is an IRGC missile crew being killed by “defensive” US military strikes or a US soldier killed or wounded in Kuwait after an Iranian missile strike.

If any of this seems redundant it should.

The Persians have survived being conquered by Alexander the Great, defeating the Roman Empire in battle, the Sunni attempt to extinguish the Shi’ite Sect and rewrite the history of Ali, Genghis Khan’s genocidal destruction, and a period under the British Empire.

For some reason I do not think another US President who is only interested in his own personal economic glory intimidates nor will force Tehran into a rushed agreement to satisfy Trump’s poll numbers before the midterm elections.

This brings the entire point of this analysis back to history, a point in time where an arrogant ass as a US President thought he could intimidate what he perceived as a third world power that should have been vanquished under colonial ru

II. How a Common Garden Flower Can Teach Everyone About the Iran-US War

The simplistic beauty of the Marigold. Easy to grow most of the time, easy to maintain, and having absolutely nothing to do with the alleged negotiations via Pakistan between the US and Iran.

Unless one starts to open a history book and review the history of Operation Marigold, a peace negotiation which realistically could have ended the Vietnam War in 1966 and then draw the parallels to what happens when the Generals who were warmongers along with a President whose arrogance created a false bravado which would be exposed by 1968.

The North Vietnamese Premier Pham Van Dong made the first proposal to push for a ceasefire with a return to the conditions of the 1954 Geneva Accords plus the following four demands:

1. Recognition of the basic national rights of the Vietnamese people – peace, independence, sovereignty, unity, and territorial integrity… The U.S. government must withdraw from South Vietnam U.S. troops, military personnel, and weapons of all kinds, dismantle all U.S. military bases there, and cancel its military alliance with South Vietnam. It must end its policy of intervention and aggression in South Vietnam…

2. Pending the peaceful reunification of Vietnam, while Vietnam is still temporarily divided into two zones, the military provisions of the 1954 Geneva agreements on Vietnam must be strictly respected…

3. The internal affairs of South Vietnam must be settled by the South Vietnamese people themselves, in accordance with the program of the NLF, without any foreign interference.

4. The peaceful reunification of Vietnam is to be settled by the Vietnamese people in both zones, without any foreign interference.

Sound familiar?

So where does “Operation Marigold” come into all this?

The New York Times on February 3, 1966 published a story about the proposed peace negotiations from North Vietnam with this key excerpt:

In the view of United States officials, acceptance of Hanoi’s terms would mean surrender to the Vietcong in South Vietnam and agreement to eventual unification of Vietnam under Hanoi’s control.

The negotiations were top secret as the US intelligence community believed that the initiative was the work of the Eastern Bloc nation of Poland facilitating false negotiations on behalf of the USSR to embarrass the US militarily in Vietnam. In the end, as discussed by Wallace J. Thies, in When Governments Collide: Coercion and Diplomacy in the Vietnam Conflict, 1964-1968, the truth might even be more painful:

Perhaps the most thorough scholarly analysis of all the secret diplomatic probing efforts during this period to open Vietnam peace talks, written after the declassification of a substantial portion of the U.S. record, concluded in 1980 that, “With the benefit of hindsight, it appears that the MARIGOLD contact offered the best opportunity for the Johnson Administration to negotiate a settlement of the conflict.”

Many of the details of these negotiations were still denied by LBJ after he left office, as the blunders committed by his administration lead to an increase in US involvement, more unnecessary deaths on both sides, and worse for the Democrats in power at the time, a massive power shift to their mortal enemy Richard Nixon and the Republican Party of that era.

Does this sound familiar?

Over this past weekend it was believed a serious negotiation was underway once again using the intermediaries in Oman and Pakistan to codify the ceasefire and begin the de-escalation phase of the conflict. Suddenly, on May 30th, Trump once again changes his mind (or had a third party convince him) that it’s time to take a harder line with Iran and he posted this nonsense on his dying social media platform:

The unique position of strength North Vietnam attempted to negotiate from parallels the positions Tehran has adopted now. Both nations were then, and are now, technologically inferior to the United States yet displayed strategic defiance knowing the economic and political tolerances for a major conflict favored their approach of attrition, delay, and tactical military victories designed to reduce the geopolitical effectiveness of the hegemonic behemoth.

LBJ would pay for the price of his blind presumptuousness with his loss of power and the election of Nixon. While Trump does not face this same risk, the ability of the opposition party, including some from within his own party, could create an extremely untenable political situation for Trump and the Republicans in 2027.

III. Paranoid Parallels and Economic Consequences

As a historian and avowed Federal Reserve bashing agent, one does not have to look far in my social media history or articles to understand my disdain for erroneous central bank policies but worse, political incompetence be it George W. Bush and Greenspan instigating the housing disaster or Barack Obama and his corrupt group of merrymakers setting the standard for Executive Branch corruption and graft; only to be out done by President Trump, I might add.

The inability to end the geopolitical uncertainty regarding petroleum supplies and the byproducts from the region only further engenders the mistrust of the US government by its citizenry. In fact the data, economic propaganda, and denial of reality for the poorest in American society has become the standard policy of the past two administrations, a decision which will have consequences a the Republic begins to splinter.

A prime example is the headline from the May 26th Financial Times displayed below which was dismissed out of hand by the Trump administration economic team over the weekend. The pain for the average lower middle to lower class American is not going to change not matter how many times Bessent or Hassett appear on Sunday morning talking head television to pump Wall Street algorithms or investor confidence.

If anyone inside the administration continues to feed the belief that Tehran is not aware of this issue, then history truly has failed to provide a necessary lesson.

Should this conflict and the closure of the Strait of Hormuz continue through June or worse, July, the impacts on the energy markets will hit Asia and Europe first and slam into the American heartland by early September. The reality is that it is the economy stupid, and to refuse to take a moment to smell the marigolds along with finding an avenue for a lasting peace might well have complications far beyond an economic slowdown and shifting of the geopolitical axis away from the West.

Just as ignoring the flowers created a decade of instability in the United States from 1966 to 1976, all in the name of Presidential ego and a refusal to understand the historical roots of the crisis our government helped create.

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Good Monday evening MacroEdge Readers & Community,

I hope you all have had a fantastic long weekend and Memorial Day. It certainly went by quickly, and this marks the end of my tenure in Texas after three weeks on the road in the Lone Star State. In the coming weeks, we will be making several key announcements regarding adjustments to our current base of operations, and I look forward to sharing these with you. I am a strong advocate for creating an environment that is conducive to broad success within our organization, down to the individual level, and we are adjusting to continue to meet that vision not only for the remainder of the year, but for years to come.

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On the weekend headline front - Saturday and Sunday were packed with ‘trash’ headlines from the usual suspects. We are now shifting into a fundamental & technical only outlook with this noise, so these headlines - unless actually verified beyond the ‘source’ level - are going to get covered for the time being. On Saturday and Sunday, we heard of ‘deals’, ‘progress on deals’, ‘incredible deal’, all with no context and being sourced frequently from anonymous texts through Arabic news media outlets. When and if there’s actually a ‘deal’ - which has not yet happened - the Administration will be going on a grand parade of said deal - and we have seen none of that. While conflict restraint is in force, given the collapsing oil inventories in the US & abroad (US - domestic -1mmbpd drawdown), we’re going to see this jawboning continue during the war, given how effective it’s been to this point. I do expect that advisors are becoming more alarmed with the fact that we’re now through Memorial Day and heading into peak driving season with inventories plummeting across the board - but the strikes this evening show that they’re attempting to play both sides of the coin without letting front-month oil and gas get beyond their comfort levels… This also has to do with the bond market, as well, which staunchly rejected the war last week. I expect that the Administration will continue to be driven by rates & oil prices now, and inflation is going to run hot as long as the Strait remains closed (which is at least through June given announcements from the ‘sources’ today). I have a hard time saying that Iran is in a rush to give up their two major negotiation levers, being Hormuz & uranium, even if the Chinese are more heavily involved in the discussion now.

Futures are opening the short week to the upside in equities - with the Nasdaq up about .9% - and green across the board. This is largely due to the decline in price of crude, which is down about 4.9% at the time of this writing. The move off of the headline ‘sources’ has created a large downside gap above the $96 spot level. On Thursday, we will get the next EIA report, which is expected to show another large decline, though down w/w in terms of magnitude (last week was the largest inventory decline on record). Yields will start the week down slightly - and as reiterated many times - bonds and oil will be the driver of most (if not almost all) magical headlines for the foreseeable future. It’s actually net advantageous for the Administration that no deal gets made until we get an actual product shortage in crude/gasoline/distillates, which is extremely unlikely. They still have about another month to dilly dally around with the negotiation, and by July, I expect things to get considerably more serious if no final deal has been displayed or announced.

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Macro Week Ahead

This week is a short week. Continue to monitor WTI/yields & semiconductor/data center equities.

Tuesday:

9:00 AM ET: S&P CoreLogic Case-Shiller Home Price Index (March)

10:00 AM ET: Conference Board Consumer Confidence (May)

10:30 AM ET: Dallas Fed Manufacturing Survey (May)

Wednesday:

7:00 AM ET: MBA Mortgage Applications (Weekly)

10:00 AM ET: Richmond Fed Manufacturing Index (May)

Thursday:

8:30 AM ET: Core PCE Price Index (April) [Fed Preferred Inflation Gauge]

8:30 AM ET: Gross Domestic Product, Second Estimate (Q1 2026)

8:30 AM ET: Initial Jobless Claims (Weekly)

8:30 AM ET: Durable Goods Orders (April)

10:00 AM ET: New Home Sales (April)

Friday:

8:30 AM ET: Advance Wholesale and Retail Inventories (April)

9:45 AM ET: Chicago PMI (May)

This week, Costco and Salesforce are reporting as ‘notable’ earnings with mega-cap size.

‘On the Ground’ Research Part 2.2 - Another Discussion in the High Plains

The winter wheat harvest across the Texas High Plains is shaping up to be one of the most volatile and unusual seasons in modern agricultural history. To understand the dual pressures of severe domestic weather and unprecedented international geopolitical conflict, we sat down for an in-depth conversation with an ag-economist. This individual has been navigating ag cycles for longer than many of us have been alive. The following is a comprehensive synopsis of this discussion as of May 15, 2026 - focusing again on the wheat sector in our wheat, corn, and fertilizer deep-dive. Part 2.2 will be followed by Part 2.3 this week. Given commodity volatility due to the weekend announcements, we will continue to make any adjustments to our report schedule as needed.

The Ground Reality: A Devastated Dryland Crop

“If you drive through the Panhandle right now, the visual contrast is staggering,” the economist notes. “We are looking at a fundamentally broken winter wheat crop on the dryland side, while the irrigated acres are essentially acting as a life support system for the regional supply.”

The localized crisis aligns directly with the sobering figures released in the May 12, 2026, USDA World Agricultural Supply and Demand Estimates (WASDE) report. The federal data confirms that the United States is facing its smallest winter wheat crop since 1965, with total production projected to collapse by 25 percent, down to just 1.048 billion bushels.

(WASDE - USDA)

Current wheat futures:

Down slightly from the cycle highs - but not nearly as much as CL/RB - reflecting the tightness we’re seeing in the data.

(Continued below: On the Ground Part 2.2 Continued, Oil Market Update - a ‘WTF’ weekend, War and Geopolitical Update, Report Schedule for the Week, Warsh/Rinse/Repeat - John Galt Note)

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Good Thursday evening MacroEdge Readers & Community,

This week has been largely uneventful - with some oil volatility in the 100-110 range (WTI spot) - the same old games with a lot of headlines that don’t really mean much - and a continued climb in technology and AI equities. We also saw a slightly hawkish pivot in the Fed minutes - and markets continue to change the rate pricing dynamic out, especially with almost a 50/50 chance of a hike this year. For the time being, it does not look like the Fed is still in any immediate hurry to hike, though other central banks have taken a tougher stance - and beyond Australia, which we called out early, we can turn our attention to Europe & Canada next for a barometer of where the Fed might head.

A look of the ‘West’ - the 2-year yield continues to move higher, and looking at the ‘East’ - in Japan, which is actually catching up to the EU02Y.

Going into the long weekend, it looks highly unlikely that we’re going to see any sort of resolution to wrap up the week with, though they’ve been very active in pushing the ‘deal’ narrative again the past 2 days in order to push WTI back to the $100/bbl level. The slop garbage merry-go-round is actually something that we’ve taken note of in targeting on X - namely, with accounts like ‘FinancialJuice’ which are publishing false and old information frequently - directly impacting front-month pricing. As @HFI Research notes - it’s death by 1,000 headlines… None of that impacts the actual supply drain itself - where we saw our largest crude drawdown in US history, with about 18 million barrels being removed from inventories on a week/week basis, drawdowns should continue to remain robust as driving season heats up. Really, at this point, the only outcome for the market is going to be outright shortages, an export ban, or some kind of massive under the table deal done to reopen Hormuz that will be paraded around as a massive victory-in-kind. In my opinion, regarding the next action, I believe that with the Chinese meeting in the background and the holiday ahead, the Administration has a window for escalation if they are going to pull off some kind of operation - especially regarding the Strait - though right now there’s still no definitive signal on if that’s going to happen or not. Risks are going to be completely ignored for the time being with the speculation occurring in equity markets - which has acted as a huge distraction away from the commodity and price sphere (for some in the economy), though firms like Walmart noted that the outlook is becoming much more cloudy as inflation rips, yields remain high, and the potential for a rate hike this year creeps back to the 50% level.

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It still remains a mostly positive portfolio strategy environment for macro, and we will target opportunities as they come in. Below, I cover the energy portfolio strategy and much more, including Part 2.1 of the ‘On the Ground’ series from the High Plains, focusing on ags, so enjoy & have a fantastic long weekend.

PS… tomorrow should hopefully be quiet, likely another deal headline or two pushed through - though the asset ‘crash up’ still has winds in its sails for the time being.

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‘On the Ground’ Part 2 - A Look at Troubling Times in the Ag Space

My coverage of the ‘On the Ground’ series from the Texas Panhandle will go in chronological order in the order in which I had my discussions - this will be called ‘Part 2.1’.

Hopping back into Part 2.1 of our ‘On the Ground’ series from Amarillo took me into a discussion with an individual who has been a grain broker for the better part of their lifetime (~40 years) - and I arrived sight unseen to this discussion, so I appreciate the time again for the opportunity to learn much more about the entire wheat-sphere and Panhandle farming environment. Additionally, after this discussion (which I will add more color to below), I embarked with Six over to West Texas A&M University for a possible discussion in their Agrilife Extension Center on our first day of data/discussion collection. I compiled the key discussion points into some high-level points below, which help shape the final comments section at the end. The discussion with the broker primarily focused on the impact of the Strait of Hormuz and how the market was actually mispricing the event - especially given all of the other risks materializing in the wheat harvest for the current season (which Six covered wonderfully a week ago). Part 2 will continue in the Redeye Macro Note tomorrow, and then over the weekend in a third Part 2.3 - which will lead us into the corn-focused (yes, corn) discussions.

Wheat has continued to enjoy a positive year from a price standpoint, which absolutely does not reflect the pain that farmers are feeling, especially in markets like Amarillo. Input prices are the top cited issue this year, with weather and other issues coming up in a more distant second. In the immediate term, while some farmers hedge events like the Strait closure, one might think they benefit from the higher sale price of the crop, but that doesn’t help if a farm is not producing it. Wheat performance YTD sits around ~30%, obviously a steady gain, but nothing like what we saw back in 2022 or 2008 (for the time being). Whether or not we get there depends on just how long the Strait remains closed, which is looking like until mid to the end of June or beyond right now. The US & other Western countries are not going to accept a tolling system in the long-term in Hormuz, which leads us to two resolutions: one being the payment and release of funds to Iran with a lifting of sanctions, or actions by US forces to secure Hormuz, both of which I am undecided on being more likely at the current time. It appears that China has gotten more involved on the Iranian side in recent days, which makes sense due to their oil price sensitivity. With how reliant China is on Iranian crude, expect them to continue to try and force Iran’s hand to the negotiation table in a controlled fashion, even though China would prefer that Iran retain control over Hormuz transits for commercial vessels. Travel in Hormuz for tankers and commercial cargo ships is still between 5-10 a day, so not zero, but just enough to keep some ships going out, while a few go in on a weekly basis.

Wheat YTD gain:

Below, I am including my key discussion notes from the discussion with a grain broker who has been in the region for the better part of 40 years. There are many takeaways, and most highlight how difficult the current environment is for wheat production in the High Plains. Ironically (or not), very large wildfires and dust storms swept through Amarillo on my final 3 days in the region, highlighting just one of the risks that are materializing against this critical industry. In some of the other discussions, I was able to ask more politically oriented questions - focusing on things like another round of stimulus for farmers & another potential farm bailout - which I hope you all find interesting in this holistic look at the wheat, corn, and fertilizer picture.

(Below: ‘On the Ground Part 2.1 continued’ - Part 2, Fed Minutes Overview, On the Headline ‘Merry-Go-Round’, Portfolio Strategy Update & Commentary - Six)

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Good Sunday evening MacroEdge Readers & Community,

I am writing to you this evening from Fort Worth, TX, as I embarked on a brief trip to catch up with my business partner and get things organized as we approach the second half of the year (crazy, yes - I know)... We’re continuing to be at the forefront of shaping key narratives in the macro landscape, and that will only accelerate in the second half of the year as Portfolio Strategy arrives to MacroEdge. While we continue to expand our Ozone efforts through the Substack (that you are reading this on), we are also making strategic adjustments in our organization to stay competitive in this fast moving world. Some of these adjustments involve shifting out of unfavorable industries and into things that we do best - and consolidating our resources & impact into the strike-zone, a term that I’ve been more frequently using of late. As a ‘lean & mean’ organization, we will continue to deliver great impact through our Macro Research, Transform, & ‘Other’ service areas - and look forward to doing things like resuming MacroEdge Radio in the weeks to come. Additionally, our partnership with TREX is only going to further our efforts in our key focus areas of the economy, and I am excited to build on the existing relationships and partnerships that we’ve developed over the past 3 years.

In the markets, futures are down slightly off of the Friday close as commodities continue to move higher. There’s very little tanker traffic in the Strait of Hormuz - and there’s the potential for a resumption of the war this week in the Middle East, given that fact. The tolling system is churning boats through far too slowly - and this continues to cause an accumulation of issues that will eventually resolve through massive cost increases, not only in the commodity-heavy import regions like Southeast Asia, but these same pressures will make it to the United States in the coming months as we continue to do things like run down the SPR at the fastest rate we’ve ever seen. At current drainage rates, we will be looking at pretty massive issues come July now on the fuel & distillate front, and we’re already hearing anecdotes from motor oil suppliers saying they’re being warned of looming difficulties in delivering said oils and products. I firmly expect that we’re going to see more manipulation from the media companies in the US to attempt to control WTI prices, but for the time being, people are growing more skeptical about the Trumpian approach to resolution in always saying that there’s a deal just moments away. Iran has little to gain by making a deal right now, and they have their largest leverage with the Strait of Hormuz, and second largest leverage point in high oil prices (with third being control over the Houthis in Yemen)... Iran’s goal of finding a sweet spot in WTI that causes max pain for US consumers while still being able to export product w/o demand destruction is their end goal, though inevitably it’s going to take shortages to resolve the demand side right now, which has shown no signs of abating to this point.

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The economy remains in a very lopsided state, in its ‘i-shaped’ state, and directionally without assets and equities falling to any significant degree. This trend is going to continue for months and years to come, as the gap eventually gets so large that there’s little hope for mean reversion to past trendlines.

This evening we’re going to briefly cover Part 2 of the On the Ground series from Amarillo, in a preview form, look at the Macro Week Ahead, discuss the technicals in our ‘Technical Overview’, highlight the Energy Portfolio Strategy, & Six will have more in his Portfolio Strategy note…

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‘On the Ground’ Research Part 2

I continue to compile the last few discussions from Part 2 of our ‘On the Ground’ Research trip from Amarillo. Given that I’ve been on the road to meet my business partner here in the Dallas-area for a few days, two of the five discussions I am covering in Part 2 have yet to make it - so apologies for the delay on this component. At almost 30 pages thus far, the ‘On the Ground’ series is surely to be one that everyone will have enough to craft their own strategy and takeaways from - and I continue to be surprised at the sheer # of people on platforms like X discussing what a difficult year farming is facing to this point. Add in the wildfire element as well, and historic dust storms in Kansas, and this is already looking like it will be a memorable year.

Both wheat & corn are starting off the week on a positive note (from a commodity price standpoint), and I continue to expect that this will be the case as long as oil (WTI spot) lives above the 100-105 range.

Macro Week Ahead

This week is not that crazy from a data release standpoint, with the FOMC minutes coming out, as well as some key real estate data. Notably, April saw rents increase on a YoY basis for the first time since the major 2022 inflation wave, and this is something we should really keep an eye on for the next several days. On the earnings side, we have Nvidia, which means the resumption of a war will likely wait until then (or after), and that’s really all for the week.

Macro Data Releases:

• Monday: Empire State Mfg Index, Industrial Production

• Tuesday: Housing Starts & Permits, Fed Barr

• Wednesday: FOMC Minutes, Fed Waller

• Thursday: S&P Flash PMIs, Philly Fed Mfg and Price Data

• Friday: Existing Home Sales, KC Fed Mfg Data

Earnings >$500bn MC:

• Alibaba (Wed)

• Nvidia (Wed)

Nvidia is going to get a horse-race-like obsession given the speculative mania in the entire AI-space, though I will not pay much attention to it. We will likely have an update from Six in the Thursday Midweek Macro Note to recap earnings and see what lies ahead in this very fast-moving market environment. The question remains if we just completed a leg up and a ‘blow-off top’, or if inflation will run so hot to the point that assets and equities directionally are locked in to accelerating to the upside.

Continue to watch inflation data in the weeks & months to come as the odds of hike(s) before the end of the year are now being meaningfully priced in. WITHOUT demand destruction (which we are not close to those price levels for the time being in the liquid and soft commodities space), expect that hike odds will continue to be priced in. Navigating the summer is going to directionally tell us if this is a massive fakeout in bonds, or if we have another, much more significant wave of inflation ahead of us (like 73)...

Technical Overview… A Ticking Risk Clock

(Continued below: ‘Technical Overview… A Ticking Risk Click, Energy Portfolio Strategy Update - In Watch & Observe Mode, Report Schedule for the Week, Portfolio Strategy Update and Commentary from Six, and more…)

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Good Thursday evening MacroEdge Readers,

This evening we’re going to have a brief ‘debrief’ on the last few days in markets & beyond. Inflation is running very hot as we’ve consistently been beating the drum on, and actual price pressures are catching up to the obvious ‘real-time’ signals in some ways. There is still a lag to another leg higher in prices, because prices at these levels are still not yet conducive to demand destruction. I am wrapping up my time in the Panhandle of Texas this evening, here for a final night, and I had to enjoy some fantastic Texas BBQ… the background of a wildfire and near ‘dust bowl’ conditions set quite the mood that this was going to be an interesting summer for not only this town, but the entire High Plains region. There is a general calm, but concerned consensus about not only what the rest of the year may look like, but what next year may look like too. Farmers & ranchers are sitting with very little insulation to broad-based price pressures and the result is margin compression as they lack control over the broader commodity market for the goods they are selling. Inevitably, this is going to lead to more failures in the farm (and ranch space), and one just needs to spend 20-30 minutes driving around south of Amarillo to see the sheer number of for sale signs on the land that was once occupied by crops.

I still strongly expect that we are seeing a topping process in the number of data centers under construction, and the Silicon Valley shadow crew is going to lose the narrative there with the general public in a larger way as we head toward November. Opposition to the data centers hasn’t found a single force to unify behind, but I do expect that becomes a bigger reality. Guys like Kevin O’Leary hopping in the ‘grift tank’ for an outlandish mother of all projects in Utah are just further evidence. I have still yet to see any clear pathway to profitability for 90% of the AI investments I am seeing made today - outside of headcount reduction - and I really do sit and read through several of these articles a day, wondering what the broader agenda at play is here.

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Inflationary pressures are going to continue to shift into investor view - and I would not be surprised if we don’t hear the Fed mention possibilities of hiking come the next meeting (even as they ramp up the balance sheet)... Notable cases like the Bank of Australia - which we’ve covered now for the last 3 or so months - are moving rates higher, and watch the domino effect as yields continue to move higher globally. If you recall from a note last fall, global markets really don’t start seeing trouble until Japan begins easing - and not the other way around. It once again looks like they are going to need to hike again. Central banks are behind the inflation 8-ball, and with how much money there is in the system, we’re seeing it materialize in an asset crash-up in equity markets, not only in the United States, but across our Global Bubble Index basket that tracks this sort of thing. Pouring gasoline on the fire through the relentless balance sheet expansion - which is now positive y/y and accelerating:

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All-in-all - it remains a very dynamic situation with inflation, and I expect that even if the ‘crash up’ continues - as a result of inflation (though there are reasons why one might be cautious of this) - the broader consumer base in the US continues to suffer tremendously, as evidenced by things like delinquency data that we dive into below. K-shaped is a total misrepresentation of the on-the-ground situation in the latest data releases, and I continue to believe that ‘i-shaped’ is the reality we’re shifting to. The window for a course correction on this direction is narrowing, but either way, we continue to position intelligently - based on both our data and the data available to us for said intelligent decision making. There continues to be opportunities outside of the stupidity - and that is where I am most comfortable keeping the strategy ‘kayak’...

Below, we’re going to dive into the ‘tightrope’ we’re walking on - economically and globally - and tee up the next ‘On the Ground’ report - Part 2 from the Panhandle - where we’re going to cover in-depth the discussions I have been having with corn, wheat, and fertilizer experts over the last 2 weeks. Embedding directly into these communities has been an incredible experience, and I believe it provides our team with a unique opportunity to furnish data to you all as if you were here, too… This is going to continue to become more relevant in how we share data with you all going forward, and I look forward to the next one with Part 2 in the oil and gas space, and more.

Walking the Tightrope

The delinquency data that dropped from the NY Fed is quite concerning - even in the backdrop of an inflation-driven asset meltup. The bottom 20% of the economy is quite literally ‘tapped out’ and it’s likely that many of the figures get to levels higher (worse) than the GFC…

With mortgage delinquencies starting to pick up as of Q1, directionally these tides are quite difficult to change - and eventually I think these forces are going to materialize in things like broader opposition to data center construction at the community level. Inflation has the broader population trapped in a spiral of either needing to gamble everything and max out credit lines to stay ahead of the ‘curve’ - which is now becoming a banana:

Continued below:

‘Waling the Tightrope, Continued - ‘On the Ground’ Part 2 from the Panhandle, Technicals, a Preview of our Next Reports…’

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Good Monday evening from Amarillo, everyone. The article below ‘introduction’ is entirely from Six. We’ve had the pleasure of spending 4 days with the world’s foremost experts on wheat, corn, fertilizer, and much more in the Panhandle of Texas. Academics, farmers, brokers, and commodity experts helped us collect this data, and there are several whom I will provide attribution to later in the week. Since I wrapped up my discussions today with some of our thought-leader pool, I haven’t yet had time to put it in proper article form, and we want to get Part 1 out prior to the WASDE report release tomorrow. You’re probably wondering - why corn, wheat, and fertilizer…? Well, the entire ag sector is facing a historically challenging time - waiting for the next round of bailouts to be passed alongside the ‘Farm Bill’... Challenges are compounding, and Part 1 of our ‘On the Ground’ series is a look into what’s going on in the world of agriculture - specifically in the wheat, corn, and fertilizer areas.

To those who participated in our discussions on the ground - I greatly appreciate the time you set aside for us to make these discussions a reality… It made me really understand what a modern marvel our food supply chain is - and you have to see it first hand to get just half-a-grasp on the scope of some of these operations - and how many people are fed downstream from the producers in the High Plains. This is Part I of what will likely end up a three-part series - and my time in the Panhandle does not come to a close until later in the week.

Have a great Monday evening.

Don, Six, and the MacroEdge Team

(ps… what an adventure this has been)...

Introduction

Since the onset of the Iran war, we have been bullish ags. They have made modest price increases relative to their input costs (oil, fertilizers). So, we decided to go straight to the source, and get the information straight from the horses mouth in farm country. Why aren’t ags making larger moves higher? Is our thesis correct, or are the assumptions too inconsequential to actually move the needle in a substantial way?

We set out for farm country to find out what is actually going on in these markets, and had the absolute pleasure of talking with industry experts who were welcoming, helpful, and happy to share their insights. It was truly refreshing to receive these insights from real-economy Americans.

Below, we will double down on our prior bullish grains outlook and highlight why we believe that grains are perhaps the most asymmetric asset class at current levels, as inflation accelerates in the backdrop.

We will begin with an agricultural commodities primer, which you should feel free to skip if you already have a solid foundation in the space.

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Ags for Dummies - An Agricultural Commodities Primer

*This section is intended as a crash course in agricultural commodities for those unfamiliar or looking for a basic high level refresher of how ag markets operate, and what drives price fluctuations. Skip this section if not needed*

“Ags” or agricultural commodities, are the raw materials that become food, animal feed, fuel, and fiber. Ags are different from other asset classes in that they are biological, with their own unique challenges. You can’t make wheat grow faster by spending more money. A corn plant takes roughly 120 days from seed to harvest, no matter what. These biological constraints are what create scarcity, volatility, and opportunity within the sector.

For the purposes of this report, we will focus on three primary agricultural commodities: corn, wheat, and soybeans.

Corn:

Corn is the most produced crop in the United States by volume. There are three major demand channels. The two largest demand channels are animal feed at 35-40% of demand each are animal feed (cattle, hogs, poultry), and ethanol production (blended with gasoline). The rest is used in food and industrial products or exported. Corn is planted in April and May and harvested in September and October. It is the most input-intensive major crop. It requires more nitrogen fertilizer, more water, and more general upkeep than wheat or soybeans.

Wheat:

Wheat is the primary food grain in the United States. Unlike corn, which primarily feeds animals and cars, wheat feeds people. There are multiple different classes of wheat grown in different regions. Hard Red Winter (HRW) is grown in the Southern and Central Plains (Texas, Oklahoma, Kansas, Colorado) and is used for bread flour. Soft Red Winter (SRW) is grown east of the Mississippi and is used for pastry flour and crackers. Hard Red Spring (HRS) is grown in the Northern Plains (North Dakota, Montana, Minnesota) and is the highest-protein wheat variety, used for premium bread products. Each class has its own futures contract.

The critical thing about wheat is its planting calendar. Winter wheat is planted in the fall and harvested late spring-early summer. The crop goes into the ground before winter, goes dormant under snow or cold, and then resumes growing in the spring. Spring wheat is planted in April and harvested in August.

Soybeans:

Soybeans or “beans” are the most valuable US crop export by dollar value. The single most important thing to know about soybeans for reference in this report is this: soybeans fix their own nitrogen. Unlike corn and wheat, soybeans have a symbiotic relationship with soil bacteria that allows them to pull nitrogen from the atmosphere rather than requiring it as a purchased fertilizer input. This means that soybeans are largely immune to nitrogen fertilizer price increases through first-order conditions. When nitrogen gets expensive, farmers plant more beans.

How Farming Actually Works:

Every year, a farmer makes one decision that matters more than any other: what to plant. This decision is made in late winter or early spring based on a comparison of expected revenue per acre minus expected cost per acre for each plant the farmer could grow. The crop that produces the highest expected net return wins the acreage at the margins.

These decisions, at the margin, are based on the enterprise budgets laid out by agricultural economists. These standardized budgets lay out every cost line item for each crop, including seed, fertilizer, herbicide, fuel, labor, equipment, land, insurance, and financing costs. When input costs change, the math changes, and acreage allocations adjust.

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Inputs:

Growing grains requires five things: land, water, seed, nutrients, and crop protection.

Land is either owned or rented. Roughly 40% of US farmland is rented.

Water comes from rainfall or irrigation. In the Eastern Corn Belt, rainfall is usually sufficient. In the Western Plains and Texas Panhandle, irrigation from underground aquifers supplements rainfall deficits. The Ogallala Aquifer, which stretches from South Dakota to west Texas, is the primary source and is currently being depleted faster than it refills.

Seed are purchased from companies like Bayer, Corteva, and Syngenta. Modern seeds incorporate biotech advancements, increasing pest resistance and herbicide tolerance. Seed cost runs $60-120/acre for corn, $30-70 for beans, and $15-30 for wheat.

Nutrients are the fertilizers. Nitrogen is the dominant cost for corn and wheat. It is manufactured from natural gas using a process called Haber-Bosch, which structurally links grain prices to energy prices.

Crop protection includes herbicides, insecticides, and fungicides. These are purchased from the same major agrochemical companies that sell seeds.

Farming Economics:

Farming operates on thin margins. A simplified example for a Corn Belt farmer growing irrigated corn might look something like this: yield of 200 bushels/acre at $4.50 per bushel = $900 per acre in revenue. Total all in costs of $800-850 per acre, profit $50-100 per acre. That margin is one bad weather event, one input cost spike, or one price decline away from zero. Farmers are highly levered to the price of the underlying commodity being grown, both to the upside and the downside.

Farm to Financial Asset:

A farmer harvests grain with a combine, which cuts the standing crop and separates the grain from the stalk. The grain is dumped into a truck and hauled to a grain elevator, which is a tall concrete or steel structure that stores and handles bulk grain. The elevator weighs the grain, tests its moisture and quality, and pays the farmer a cash price. At this point, the farmer has done his job to completion.

The elevator then aggregates grain from many farmers, stores it, and sells it to end users. Flour mills, ethanol plants, feedlots, and export terminals are primary end users here. Export grain moves by truck, rail, and barge to Gulf ports, primarily New Orleans and Houston, for shipment overseas.

Physical vs Financial Ag Assets:

The two parallel grain markets are the cash market and the futures market. The cash market is where physical grain actually changes hands at a local price. This cash price is determined by a futures price plus or minus a “basis” adjustment that reflects supply and demand conditions, transportation costs, and crop quality premium or discount.

(Continued below: ‘Basis’, ‘How Farmers Sell’, ‘What Moves Grain Prices?’, ‘Ending Stocks’, ‘Farmer Risk Management’, ‘Ags as an Asset Class’, ‘Important Relationships’, ‘Boots on the Ground Discussions Pt. 1’… The CTA & the Broker…

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Good Sunday evening MacroEdge Readers & Community,

It’s very late as I write this from the High Plains. Texas has treated both myself and Six thus far, and we’re excited to share much more over the course of the week with Part 1 of our agriculture data in our ‘On the Ground’ report. Monday evening (tonight) - we’re going to be releasing Part 1 of this extensive series - and we’re going to be focusing on the opportunity as we see it from a portfolio strategy standpoint. This leads into our broader launch of our portfolio strategy infrastructure come June and July, and we continue to focus on macro-intensive strategies that the mainstream is staying away from. As retail and speculators continue to pile into a more and more extremely concentrated asset bubble - which I call the ‘crash up’ - I continue to place high emphasis on seeking out assets that avoid this concentration risk - and we’ve been doing just that since the beginning of the year while continuing to put up strong performance figures.

Without a slowdown in our Global Bubble Index, this crash-up is one that is not one I have any interest in fading - especially during wartime posturing in a midterm election year with an Administration that cares most about nominal assets appreciating above all else. While again, we could go into the blatant and appalling examples of manipulation in oil markets the past several weeks - the jawboning is going to continue - so I’d rather position and profit (while calling it out) versus just calling it out and complaining online. The physical reality of the Hormuz closure is one that I still expect is going to catch up with the world in a major way, and taking off between 20-40% of critical commodities markets is not something that can be printed or papered over as we run down emergency reserves globally in oil markets, Asian countries warn of food shortages, and other critical materials and inputs are going to get increasingly more scarce as we head into the summer months. Oil at $100/bbl WTI spot this evening is a comfortable spot for companies in our portfolio strategy basket to continue enjoying, though the volatility and price action continues to be rather violent in this range. It’s tough to want to drill more, though I do think activity is going to increase, with this kind of rhetoric against oil prices to begin with.

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Outside of that, equity prices are continuing to advance higher, with Korea entering a full-on parabolic move to the upside, Spain not showing signs of slowing, and NQ/ES relatively flat but now slightly up in the late evening hours. The music continues to play - but when the tunes finally slow - it’s not a party that I would want to stand at for long - hence why I am not playing in those ‘sexy & flashy’ baskets to begin with. One of the most effective strategies that I learned from a mentor several years ago was that we play our best ball when we bat knowing our own strikezone - and for me that might be different than Six - and for you, it’s probably different too. This week is going to be relatively light on the macro data side of things - though pay close attention to that April CPI reading. Some well respected analysts that I follow are forecasting prints as high as the low 4s, which likely shifts Fed policy even further after the latest employment data. I know we’re not diving into the employment data tonight - but with the On the Ground Report Part #1 coming tomorrow night, we will discuss the April employment data later in the week. Lastly, with cryptocurrencies (many of the ones that matter) retesting their 200dma’s or close, we’re likely at a turning point that warrants monitoring for the broader risk environment.

With that being said, it’s nice to be back, and I look forward to sharing many interesting findings with you all over the next week on the ag front.

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Macro Week Ahead

In the macro week ahead, we look to CPI and the end of the Powell term. While it’s unlikely that Powell cedes a position in the Fed, this final print will likely leave yet another stain on a term that was a complete and utter failure for the Fed’s stable prices mandate. Even in adjusted terms, Powell oversaw some of the worst inflation the US has ever seen, massive balance sheet expansion, etc… the list really goes on and on.

Something to keep an eye out for… the resumed expansion of the Fed balance sheet into a new Warsh term - who I do not think will be much of a ‘hawk’ at all…:

For earnings this week >300bn market cap:

Notes from Amarillo

Thus far, my time in Amarillo has been fruitful - and most of all interesting. We’ve had discussions with experts and business owners from across the ag-sphere the past few days, and the general consensus is that commodity prices for wheat and corn are not reflecting the coming upside price risk from a multitude of factors that are all currently swirling into a ‘perfect storm’ for higher prices… As the Strait remains closed, critical fertilizer exports remain greatly strained - and these markets are global, just as the oil markets are. While natural gas prices remain low in the United States, the same cannot be said for Europe & North America.

Corn & wheat - the primary focus for this trip - remain near the local low:

Wheat:

Tomorrow I will have more stories from my discussions, and photos, and I truly hope you enjoy the start to this new series.

Another ‘No Deal’ Sunday

The rejection of the latest ceasefire and de-escalation proposal from Iran marks a definitive pivot toward a “long-war” scenario for global energy markets. With the Strait of Hormuz now effectively closed for over 60 days, the market is moving out of the “temporary shock” phase and into a period of severe structural deficit as lag impacts begin to hit physical supply chains.

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Below: The Breakdown of Negotiations (yet again…), A Crude Update, Gasoline Price Trends, and what’s next…

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Good Tuesday evening MacroEdge Readers and Community,

This evening, we’re going to briefly cover the latest developments of the week, with the latest geopolitical updates and coverage of some of the macro data and market action we’ve seen to start the week. Today marked another day of ‘crash up’ price action on the back of slightly lower WTI prices and yields. The 10Y is above Bessent’s danger zone - and looks set to continue higher - but investors remain in a crisis mode, flooding into equities across the globe - but most notably in the US, South Korea, and Japan - where technology (and semiconductor) equities continue a record-setting ‘crash up’. It is impossible for the time being to step in front of a freight train, and with debasement running at full throttle (with the Fed expanding its balance sheet), the signals have not aligned to signal downside for the time being in the beta equity basket.

Needless to say, the Dow has continued to lag broader equity market acceleration - and inflation expectations continue to move higher - the investors… and especially the retail investor crowds… have their ears plugged to anything resembling reality right now as absolutely asinine figures are dropped daily in the AI capex-sphere. Regardless of whatever is happening in that space, our focus continues to be on the macro-heavy side of things in commodities and energy, more specifically. The situation is worsening by the week, and the API readings today were extreme in terms of the inventory draw. We’ll get the latest EIA data tomorrow, along with the latest update on SPR levels, but the oil market remains extremely mispriced relative to the fundamentals of 13.5-14mbpd remaining offline. Even though US firms like Diamondback are pledging to boost output slightly in their earnings calls, it doesn’t even come close to what is required to resolve the physical shortages and drawdowns.

Continue to pay close attention to this performance divergence here - though for the time being it is not a major red flag for the technology sector as the ‘crash up’ continues:

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Tomorrow we will get the latest Fed balance sheet readings, which will show another w/w increase, and the Treasury is heavily involved in global market stabilization as the conflict continues in the Middle East. As discussed below, the Fed is letting inflation run ‘hotter for longer’ though don’t expect them to play ball forever as other central banks continue to move their policy rates higher, like Australia, which hiked for a third meeting in a row. As stated over the past 12-16 months, it is not until Japan begins easing and we see the MacroEdge Global Bubble Index roll-over before we start to see any sort of pain in US equities. With leverage and max risk-on for a variety of reasons, the insanity will continue, so I am continuing to play ball in the niches we know and understand best while the crowds flock to risk.

I look forward to providing our next updates over the coming week from Texas as I depart tomorrow midday towards the Panhandle of Texas. We’re meeting with stakeholders in the ag-space for our ‘On the Ground’ series Part 1.

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War Update: Operation Freedom Suspended

This evening, after market close, the President announced the immediate suspension of Operation Freedom. This came on the heels of the news of the API draw (discussed below) and the Strait of Hormuz traffic update, which highlighted just 1 ship crossing the Strait in 24 hours.

(Source: JaguarAnalytics on X)

While we continue to reside in total fantasy land for the time being, this is absolutely going to catch up at some point - regardless of printing or not. Operation Freedom was yet another botched idea to actually get traffic moving through the Strait - and it’s going to take more for the Iranians in terms of concessions to restore things on the traffic front. I expect that the situation in the Strait will likely not return to *normal* now before late summer or fall right now in terms of traffic levels - especially with the stated goals of the IRGC in maintaining long-term control of the Strait as a revenue stream (of course the power factor is relevant, too), though don’t expect GCC countries to want to play ball with that for any long period of time. The infrastructure is simply not there in the Middle East for the closure to not impact things on a much larger scale in the coming months, and it would take years for the GCC to build out and up workarounds to the Strait if that was something they actually wanted to pursue.

Expect that these wild jawbones will continue while they still work, though the EIA data tomorrow could be another wake up call for the Administration that they better find a way out of the situation quickly, or things are going to get much, much, much tighter on the oil front over the summer.

Latest API Crude Stock Reading… Yikes

The API reading was another wake up call for inventory level doubters today - with total products falling by about 24 million barrels.

(Continued below: Latest API Crude Stock Reading… Yikes (EIA Tomorrow), Energy Equities… Blowout Earnings for the Most Part Thus Far, and Commentary), available with Ozone…

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Good Sunday evening MacroEdge Readers & Community,

It’s nice to be back for another Weekly Macro Note, which will include the Macro Week Ahead, a discussion on our partnership with TREX, a technicals overview, and a look at our ‘Global Bubble Gauge’. We’ll also discuss how we continue to find opportunities in inflation as price pressures mount across the economy, and Six will provide a Portfolio Strategy Update.

MacroEdge Portfolio Strategy will be available in late June or July 2026, and will include all of our active portfolio strategies in one place.

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On Wednesday, I depart for several locations in Texas for our first sector coverage in our ‘On the Ground’ series. Beyond excited to begin collecting findings in the agriculture sector, and our three focus areas for the trip should give us all (including me) a very interesting context and background to the entire ag situation. There are a lot, lot, lot of clickbait headlines and titles swirling around in the press and on X right now - so we’re going to actually discover what’s real, and what’s not. By connecting with farmers and people at the source directly, we hope to uncover portfolio strategy opportunities… the movement in the soft commodities (and fertilizer) in recent days gives us a nice place to pull the trigger from if the opportunity is actually there, and we’ll know much more after the coming week of discussions, data collection, and anecdotes. If we find horizontal trades not directly in the three major areas we’re targeting, equally as positive in my mind.

In the futures open, the markets remain largely muted, there were a few headlines - notably the launch of ‘Project Freedom’, which aims to help ships navigate the Strait of Hormuz amidst the latest targetings by IRGC assets. We’re approaching 2 months of the Strait of Hormuz being almost completely closed - and the ramifications from that are going to be enormous, even though we aren’t feeling the full force of the storm at the current moment. In the oil markets, spot WTI is roughly flat after an initial sell-off, and continues to look incredibly constructive. In the West, there are few signs of demand destruction at this price level, and I remain net bullish on the sector with WTI prices this high. At $100/bbl - the amount of FCF machines is immense, and the tailwinds continue to blow in the favor of these companies the longer prices stay higher. It’s going to take a couple of months at minimum just for traffic flows to get to half of their former levels in the Strait - and that’s not an event I anticipate occurring this week. Inflation for the time being remains net positive for speculation and equities - and there remains a relatively narrow choice palette for investors to hedge against inflation (especially as real estate price gains continue to slow).

This week, we’ve got markets closed in Japan for a few days, and in the US, more macro data that is going to continue to paint a very mixed picture. I continue to observe the energy data on both the inventory and frac front to see if there’s any additional activity happening there. Inventories are going to continue to plummet in the US as we’ve ramped exports up to all-time highs, and the SPR is likely to be at all-time low levels in the next 3 months. Earnings this week are reserved for the sub-$250 billion market cap companies, and we’re going to continue to see markets revolve largely around the oil/commodity/inflation picture & headline-induced volatility.

Oil working on the ‘right’ handle to the cup…

Expect the ‘crash up’ to continue as the Fed balance sheet expansion ramps up, and little is done to combat CPI from running at a 4-5% clip on a YoY basis.

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The Macro Week Ahead

This week is another major earnings week, and there’s some macro data we’ll also cover as the week progresses. Friday, we’ll get employment data, but I think the CPI data for April is going to be a lot more interesting than the employment data.

• Monday: Factory Orders (US),

• Tuesday: JOLTS (US), Bank of Australia Rate Decision

• Wednesday: ADP Employment (US), EIA Oil Inventory (US)

• Thursday: n/a

• Friday: Average Cash Earnings (JP), Nonfarm Payrolls (US)

For earnings of companies >250 billion market cap: n/a

TREX Oil and Gas Partnership Discussion

On Tuesday evening, we’ll have an update on our exciting partnership that is developing with TREX.

Portfolio Strategy - Arriving June/July 2026

MacroEdge Portfolio Strategy, led by Six, will be available late June or July 2026. We’re already experimenting with this offering through two core portfolio strategies you’ve likely been seeing the last few weeks - and this offering is only going to continue to take a more solid shape over the next couple of months:

Technicals Overview - Global Bubble Gauges

In looking at the latest update to our ‘Global Bubble Gauges’ - the pro-inflation and asset melt-up regime continues in this historic equity bubble. Our ‘Global Bubble Gauge’ consists of the Nikkei, KOSPI, IBEX, and TSX with a weighting by market cap in USD terms. None of the indices are signalling major red flags at the current time. At the individual index level, the TSX is lagging now, and in the crypto world (another good liquidity proxy - Bitcoin has ticked above $80,000 again). We’re likely witnessing a 200dma test, and nothing more for the time being.

In Japan, markers are on holiday for the first three days of the week.

For the TSX - we’ve yet to see the index make a new high since February:

Spain - still no new high - but not far from one (IBEX):

Korea’s KOSPI is up another 5% and continues a parabolic meltup as their currency weakens to near record levels vs the dollar.

The index has more than tripled since 2023.

While I prefer the IBEX as our best proxy and signal for the Nasdaq and other high-beta indices globally - our basket provides us with useful signal as to when we can expect things to finally roll over more broadly around the globe - and for the time being, the picture is mixed as Korea and Japan continue to ‘crash up’ while gains in Spain and Canada have slowed for the time being.

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Finding Opportunities in Inflation

Historically, and specifically during the 2021-2022 cycle, the strongest equity opportunities are found in sectors with high pricing power and direct commodity exposure:

• Energy (The Scarcity Hedge): Oil and gas firms are the primary beneficiaries of supply-side inflation. As energy prices drive the PPI higher, these firms see immediate revenue expansion.

• Defensive Value (Consumer Staples & Utilities): Companies providing non-discretionary goods (food, power) can pass through cost increases to consumers with minimal demand destruction.

• Materials: Miners and chemical producers benefit as the nominal value of hard industrial commodities (Copper, Aluminum) surges.

• Short-Duration Cash Flows (Value over Growth): High inflation forces central banks to raise interest rates, which increases the discount rate on future earnings. This devalues “Growth” stocks (whose value is in the distant future) and favors “Value” stocks with current, stable cash flows.

• Real Asset Exposure: Exposure to the underlying real assets like farmland, oil and gas assets, mines, and more, which are all beginning to outperform again

For commodity performance by type:

(Continued below: Finding Opportunities in Inflation Continued, Report Schedule for the Week, Portfolio Strategy Update and Commentary - Six)…

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Good Saturday evening MacroEdge Readers & Community,

It’s nice to join you on this Saturday, back from the PST. I will be heading to the Texas Panhandle with Six later in the coming week as we launch our ‘On the Ground’ series - covering agriculture, specifically in the corn, wheat, and fertilizer segments. While we’ve discussed the ‘why’ many times in the last week, and it appears that a major commodity price increase is underway across the board, from food, to metals, to energy inputs, and much more.

We are also busy in the escrow process of a deal we’ve closed on in North Dakota - and I will have more exciting updates on this front as the month of May progresses. This is just the beginning of our expansion into real asset ownership as a firm, and a core component of the research we put out is actually backing it up with our portfolio decisions. The opportunity in the next 5 years on the ‘structural shortage’ front in real assets is one of the best setups that we’ve ever seen - especially given the fact that we have governments around the globe that will do whatever it takes to continue stimulating demand through aggressive borrowing and printing. Tomorrow I will briefly outline the timeline on our TREX partnership & Portfolio Strategy rollout - which will come in the early to mid-summer.

On the labor front, the labor market remained soft in April. Job creation will show moderate to slow growth in the headline numbers, and job cuts were again quite significant. The environment for new grads remains mostly poor, but we’re starting to see more layoffs impact the near-retirement age class, as they usually carry the largest cost burden for organizations.

MacroEdge Job Cuts Tracker - through April 2026

Today, I am going to keep it quite brief as we dive into the latest inflation figures, provide a MacroEdge energy portfolio strategy update, and discuss the Spirit Airlines failure.

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… don’t forget the colorful commentary too…

Inflationary Pressures Continue to Mount

One of the most concerning signals that cannot be ignored is the alarm bells on the inflationary front that are sounding. Similarly to 2021, these are being ignored in the excitement of the broader high beta assets ‘crashing up’ on a daily basis - but everything from food prices, to airline ticket prices, fuel prices, and more are on the move higher. While real estate prices aren’t participating on the aggregate - remaining largely flat over the last year - they’re already prohibitive from a demand perspective.

Domestic Air Carrier - PPI

ISM Prices Paid v CPI

DBA - Invesco Ag Fund

5 & 10-year breakevens are also breaking out to higher levels (so are yields for those paying attention to the 2, 10, and 30-year yields)...

Foreign yields continue to provide a nice signal for direction for where I think we’re heading on the inflation front… The Fed will continue to hold rates as we navigate the energy shock… at least for the time being. (yes, they could hike too).

Energy Portfolio Strategy Update

Since inception, (February 25, 2026), the MacroEdge energy portfolio strategy is up 25.83%. We made some frequent adjustments to the strategy through March, but are keeping things in line with our high-torque outlook for the sector.

(Continued below: MacroEdge Energy Portfolio Strategy Update, Spirit Airlines Failure - Evidence of a new ‘Gilded Age’?, Weekly Macro Note Preview)…

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Good Thursday evening MacroEdge Readers & Community,

This evening, we’re going to kick things off with Part 1 of our ‘On the Ground’ series - beginning with the agricultural sector. A few weeks ago, I outlined how and why we were kicking off the ‘On the Ground’ series, which will act as a natural extension of much of the incredible data we have already been collecting directly from industry experts and participants. Prior to the beginning of the Iran War, we began a quasi version of this series in visiting the Permian Basin, and this same process of collecting, understanding, sharing, and executing will continue as the ‘On the Ground’ series is kicked off.

Next week, I will be visiting the Texas Panhandle with Six to begin the data collection process in the ag sector focus areas that we’ve identified - corn, wheat, and fertilizer. These inputs and staples are critical signals for both ag and broader economic price pressures more broadly - and price pressures here tend to lag other early-inflation warning signals. With fuel and petroleum-associated products soaring, there is still a massive disconnect between these staples and oil (yes, the same goes for natural gas right now)...

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In the macro data picture for the week, the main trend continues to be one of increasing price pressures. With gas and diesel prices pushing to cycle highs (and now in many states - all-time highs) - price pressures are going to continue pushing higher. The deflationista camp continues to sing a loud tune about the looming price compression - but we are still not there yet. While I do believe that the cure to high prices is high prices, we are living in a weird macro-period where the government is now reliant on perpetually pumping assets higher to keep the music playing. This artificially stimulated demand from a small percentage of the population is keeping the party for now, and this will continue until there is the next ‘shock’ event that halts the equity meltup in its tracks. For now, the price environment is looking a lot like 2021 for the time being, and inflation is still not in a red flag area for asset prices (it may actually be a tailwind right now) being way above the 2% target, but not high enough to dent demand.

PPI/CPI usually have a 1-2q lag to the leading regional Fed signals:

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On the Ground for Ag Part 1 - Time for Amarillo

Next week, we will be hitting the road to the Texas Panhandle for Part 1 of our ‘On the Ground series - focusing on corn, wheat, and fertilizer. There is a wide gap between the performance of these lagging critical food staples and input costs and where broader price pressures have trended. Our goal is to uncover if there is an opportunity here in the trade, highlight the risk of potential shortages, discuss the Strait of Hormuz impact, and unearth inflationary impulses directly from the operators. Beyond this, we’re also looking at things like crop yield, and figuring out how the farmers and operators feel about the situation, right from the ground-level.

A look at the equal weighting of wheat, corn, and urea, below:

FOMC Recap

As expected, we saw no rate cut in the FOMC meeting. While this was Powell’s final meeting as Chair, it appears he is going to stay on as a Fed Governor for some time, while an investigation into him & the Fed continues to play out. He’s likely waiting out a political regime change in the midterm environment to give him clearance to finally bail. While I could start a long rant about Powell and his abject failure (failure after failure) to control and keep price levels in check in the United States, it’s not worth giving him the light of day. The fact that we’ve propelled the Central Bank Chair to celebrity status is one of the more bizarre monetary phenomena in the modern era. Powell leaves with inflation running hot, an economy more reliant than ever on money printing, and asset bubble after asset bubble across the board. The ‘inflation is transitory’ line will live in infamy - and low headline unemployment with structural demographic deficits are not enough reason to give Powell a pass for his many failures as Fed chair. The list goes on and on, but I know that John will touch on some of these below.

Below, we outline some of the more important takeaways from the meeting:

Policy Stasis Amid Geopolitical Firestorm: The Committee voted to maintain the federal funds rate at 3.50%–3.75% for the third consecutive meeting. Chair Powell explicitly cited the “prolonged closure of the Strait of Hormuz” and the ongoing conflict in Iran as the primary drivers of extreme economic uncertainty, effectively freezing any plans for further rate cuts in the immediate term.

The “Quad-Dissent” Fracture: The meeting saw four dissenting votes, the highest total since 1992, signaling a total breakdown of committee consensus. While Governor Stephen Miran favored a 25bps cut to mitigate slowing GDP, three hawkish members (Hammack, Kashkari, and Logan) opposed the statement’s “easing bias,” warning that the 3.3% headline inflation spike in March may necessitate a return to rate hikes.

The “Back Side” Energy Mandate: During his final press conference, Powell stated that the oil-driven inflation shock (which saw Brent crude hit $130/bbl) has likely not peaked. He signaled that the Fed will remain in “wait-and-see” mode until they can identify the “back side” of the supply impairment, emphasizing that surging gas prices are now acting as a direct tax on disposable income and consumption.

Neutral Rate Re-Rating: Market participants noted a hawkish shift in the “longer-run” anchor, which moved upward to 3.0%. This indicates a collective belief among policymakers that the era of low-cost capital is over, as structural supply-side constraints and AI-driven productivity gains redefine the neutral rate in a high-intensity conflict environment.

The Warsh Transition: This was Jerome Powell’s final meeting as Chair (his tenure concludes May 15). Incoming Chair Kevin Warsh is expected to inherit an increasingly divided Fed and is already signaling a framework shift toward “price stability dominance” and new inflation metrics that account for the 13.5 MBPD supply deficit.

I continue to believe that the 2-year, and 10-year, and foreign yield curves are signaling a return to an inflationary regime:

The 2Y is now 50bp off of the lows, and even the long-end of the curve looks quite concerning:

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(Continued below: FOMC Recap, Airline Bailouts, Agentic Awakening + Portfolio Strategy Update and Commentary - Six, Fed History - John)…

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Good Tuesday evening MacroEdge Readers & Community,

This evening we will have a short ‘War Note’ update - with the next update this week coming on Thursday, post-FOMC. Today was a relatively uneventful day in markets, with the Dow closing flat on the day, and momentum tech seeing the largest downside. The commodity space (some of which we’ll discuss below) saw its largest upside in a while - as oil moved higher, alongside ag commods like wheat, corn, and canola. The broad direction for the entire agricultural sector continues to be up (and again to the right), and there is still a large mispricing from the 2021-2022 move if we are repeating something similar. With the Strait of Hormuz closure going on 60 days now, we simply cannot wrap our heads around the magnitude of the impact, and the lag, all of which will continue to be observed as we head into the summer and beyond.

In Australia, which we use to monitor yield action, inflation came in at almost 5% y/y - a huge spike and a warning sign for other developed countries of what is to come if this situation continues. While we place a critical emphasis (national security risk) on our equity markets here in the United States in 2026, the lower 70-80% in the ‘i-shaped’ economy continues to get bulldozed by pro-inflation policy, which is a continuation of rising nominal asset prices over everything else. The current regime may be unsustainable from a market standpoint - but there are plenty of other instances that I am even more wary of that we are watching our leaders ‘sleepwalk’ us right into… This explains a core reason for my belief that the Fed should be thinking about hiking soon rather than holding a pause - if the rise in commodity prices continues to accelerate. While the best solution for commodity prices is high commodity prices, we live in a society devoid of and terrified of price discovery, so things continue to spiral upwards.

These are not deflationary signals:

The resulting responses to higher prices are where price discovery can actually take place…

This evening we’re going to briefly dive into the ag reality and our discovery - with Part I of the ‘On the Ground’ Report Series coming on Thursday evening, or later over the weekend. We are preparing to head to West Texas for multiple days of data collection, and we will be sharing our findings and strategy through the ‘On the Ground’ report series. Additionally, we’ll also provide a brief update this evening on the energy portfolio strategy, the latest war updates, and more…

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Agriculture Reality and Discovery - ‘On the Ground’ Report Series Introduction

In a week, we’ll be embarking on a 3-day data collection and discovery trip across wheat & corn country in the State of Texas. We’re going to be collecting input and anecdotes on everything from pricing, to fertilizer costs, to other input costs, the harvest season, risks, potential upside, and much more. This is going to be a unique opportunity for us to again pull the data directly from the ground and output our findings and our opinions on whether or not additional upside is on the horizon. Our focus is going to be primarily on corn, wheat, and fertilizer (while also looking at other factors like Urea and PPI), and how these elements are factoring into the outputs. Purely from a commodity pricing standpoint, there is a ton of room in this basket for things to move higher if we are seeing a repeat of a 2008 or 2021 style commodity inflationary scenario. The food inputs (and food commodities) are typically the last to participate in the rally, and then a more vertical move.

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Looking at the commodities individually, you can see how far off the 2021 highs they still are… They don’t even need to repeat the exact scenario to see substantial upside as the Strait of Hormuz closure and blockade remains ongoing:

Corn

Wheat

Urea/Fertilizer (Gulf FOB):

(Continued below → Ag Reality and Discovery, our FOMC Preview, the latest war updates, schedule for the week, energy strategy note, and much more)…

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Good Sunday evening MacroEdge Readers and Community,

We’re continuing to spool things up after a packed week last week put us behind on the report front. There’s not a lot of information to report from last night to this evening, other than we’re going to hear from the President tomorrow on another potential Iran proposal being discussed. For the time being, it doesn’t look like it’s going to be much, though we’ll have to wait and actually watch the Strait of Hormuz data as it continues to come in. There’s been no change to tanker or ship traffic over the past 24 hours, and the situation continues to result in an accumulating shortage of critical commodities across the board. From oil to distillates, fertilizer, urea, crops, and more - this accumulation is only building and will operate with a lag, which is something that we outlined yesterday evening. Underlying price pressures continue to mount - and gauges like prices paid are going to continue to move higher. Barak had another fake headline from tonight - talking about some ‘concessions’ package which will be addressed by the President from the Situation Room tomorrow. Anything posted from that ‘source’ should be taken with a grain of salt, as it continues to look more likely that the US is likely to strike when Iran gives up ground or falls asleep.

The Administration continues to lean into boosting nominal asset prices - and the climb that we’re seeing now is something out of 99, the KOSPI of a few months ago, and Japan in the late 80s. These unprecedented times are causing us to run out of instances and comparisons - and the rate at which things are climbing continues to accelerate. There are a lot of explanations being offered for why equity markets have essentially shifted to the ‘vertical only’ move, with the Nasdaq rising over 20% in a matter of weeks, and semiconductors over 40% MTD - a move only rivaled by 2000. The simplest explanation is that we continue to find ourselves in one of the most pro nominal asset price regimes that we’ve ever seen, which is unlikely to end until the Strait of Hormuz situation actually begins to cause demand destruction (if at all during the ‘big print’). For the time being, we have the Treasury close to a form of YCC to control the 10-30Y yields, and I do not think that Warsh is going to be hawkish in any way, shape, or form.

Next up… airline bailouts! We’ll have more on this later in the week as Frontier, Avelo, and Spirit are now requesting to be nationalized.

Just look at the current expansion of the balance sheet since December, even as the Fed failed to hit its 2.0% CPI mandated target. Inflation is now moving higher, and no one seems to care as nominal asset and price levels continue to ‘crash up’.

This situation is creating a perceived ‘mirage’ - as most individual investors (of which now there are more than there ever have been) assume that rising nominal asset prices are an inherently positive thing. In the case of a crisis in countries throughout history, we’ve seen retail investors pile into equities as a sign of panic over things like inflation, economic calamity - you name it, and the list goes on. While assets are indeed the place to shield one’s wealth and value from destruction by those spending and printing the currency, positive is not a word that I would always apply to the situation. Instances like the below are hardly wealth creation signals:

I noted on X that I continue to seek out real income-producing assets in lieu of high beta technology speculation, and I will let the speculators continue to seek out those opportunities in exchange for owning the real underlying assets and companies - especially those in niche sectors that we’re all reliant on in this ‘era of scarcity’ for commodities, etc. I mentioned this on X today, and it’s a theme that I strongly believe in over the next 5-10 years.

This evening we are going to dive into the futures preview for the week, which has started off relatively quietly, highlight the FOMC outlook, discuss the physical shortage countdown from the Strait of Hormuz, take a refreshed look at the data center bubble, and highlight notable macro data from the past week. We wrap up with our report schedule for the week - and if you’re not yet a MacroEdge Ozone subscriber, you can get all of our research, data, reports, and more below:

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Futures Preview & FOMC Week Ahead

Futures are mostly green, with the Nasdaq leading, and the Dow lagging. The Nasdaq and Dow divergence is starting to become more noticeable - especially with the Transports & other sectors like real estate starting to lag the broader move in high-beta. Either the Industrials start to catch up, or this disconnect will widen and then correct in a violent way.

The events of the week:

On the FOMC front, it appears very unlikely that the Fed will reduce rates, with odds near zero. We’ll look for any signs of a hawkish pivot this week - but with the balance sheet expansion already underway, expect Powell to say something along the lines of ‘wait and see’ again. In Japan, we’re awaiting the next hike - though Bessent is clearly encouraging them to keep the Yen weak to allow global equity indices to continue surging through cheap borrowing of the yen.

… If anything, the Fed should be hiking right now, but we know that is not going to happen with the broader backdrop.

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(Continued below → Physical Shortage Countdown, A Refreshed Look at the Data Center Bubble,

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Good Saturday evening MacroEdge Readers & Community,

I hope you have all had a fantastic past week and start your weekend. This past week has been a whirlwind, and I apologize for our brief downtime on the reports on our end. I will be making my way out of Mountain Time in the next few days and returning east to get things fired back up from the office. Over the last week, we’ve collected a lot of interesting data and are continuing to watch rapid evolutions in both markets and the economy. The trend of an ‘i-shaped’ economy has accelerated in recent weeks as we’ve seen the Nasdaq make an almost 20% move this month, while consumer confidence and current economic conditions, as measured by the University of Michigan, are near all-time lows.

The report this evening is going to be a nice laying of the foundation for us to kick back into high gear for the weeks and months ahead. We are back to our regular report schedule after the brief delay - and the full schedule for the week ahead will be available tomorrow evening.

The latest on the geopolitical front is one of a lot of noise. Things are pointing more toward a ‘re-arming’ on both sides at this point than any sort of off-ramp. The debacle of the last two days was one where Kushner & Witkoff were supposedly going to visit Pakistan to meet with the Iranian FM, but both parties backed out of actually meeting with each other, and things quickly fell apart. Right now, it appears that there is little to no communication at all between the two sides - and US military resources continue to be ‘surged’ into the region. Israel made new strikes on Southern Lebanon today, and it’s quite likely that we see things continue to flare up there as well for the next week or two. The exact timing of when a broader operation may resume is impossible to time, but some smart individuals that I talk to seem to think between now and May 15th are a potential window if things continue the way that they are. The Hormuz reality is one that is accumulating in its size and impact, and I don’t think people can wrap their head around how severe these impacts will be if it remains closed. While much of the globe has been able to ride through the first almost 2 months of the Hormuz closure without substantial impact, the bite is going to hit now, and especially so if/when Iran begins to curtail oil production.

Iran is now likely within a week of needing to shut-in some of their production capacity, so keep an eye on data related to this in the coming days, and we even saw them bring an old VLCC out of inventory in the past few days to act as an ‘offshore buffer’ for production capacity now that onshore storage is full.

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The Lagging Strait of Hormuz Impacts We Must Continue to Respect

One of the most obvious points to note is that the Strait of Hormuz closure is going to impact Asia, Oceania, and Europe the hardest (and before the United States). As tankers rush to the US to fill up and take product back overseas, we’re going to start seeing aggressive draws on onshore US refined products, which will tighten markets further… This is especially true since we’re not seeing any meaningful production or drilling activity spike right now. I expect that we start to see drilling activity move materially higher come Q3, but for the time being, producers that I speak to are not expecting others (or themselves) to ramp up activity in any meaningful way as everyone remains very cautious about ramping up capex with such a negative outlook on E&P companies from Washington DC. Politicians seem to think that exploration companies want to hold the bag and ramp up production while being targeted - but for the time being (and this is not going to last forever) - capex discipline is still in force.

While there are offsets to things like oil production through the North American valve (and SPR releases) for the time being - the same cannot be said for other commodities. One of the most obvious impacts outside of the oil and gas space from the Strait closure continuing is going to be food supplies and input costs in Urea and fertilizer. Fertilizer costs are starting to ramp back up:

And that will likely produce some sort of ‘farm bailout’ package in the months to come.

Continued below: The Lagging Strait of Hormuz impacts we must continue to respect, Energy Portfolio Strategy update, Portfolio Strategy update and commentary from Six)

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Good Sunday evening MacroEdge Readers & Community,

This evening, we’re going to explore some outlined topics from the past few days - and lay out the foundation for another packed week. It’s going to be an exciting week, as our ‘On the Ground’ report series kicks off this week, and we’ll be talking about the agricultural sector at large, while focusing specifically on wheat, corn, and fertilizer, which remain in very dynamic places.

While we continue to digest the paper v physical reality in oil futures, it appears that we’re moving toward an environment of scarcity in the coming days as it comes to critical materials and more coming out of the Strait of Hormuz… I posted a few of these items on my X earlier (@DonMiami3), and on Tuesday, we’ll take a look at the major physical supply chain impacts, as well as look at the timeline when we can expect things for these items to worsen. May, as one example, is when we likely start to see more significant pressures for energy supplies, and it’s likely that if this situation continues for another week or so, we’re going to see another globally coordinated SPR release, given what refiners are saying. Yes, having this situation going on, while markets have ‘crashed up’ is a totally bizarre dilemma, but we shouldn’t be mistaken that markets are ‘all-knowing’ in their forward-looking nature, this is actually not the case over the course of many shocks throughout history… especially one where we have so many different economic components at risk at the same time.

This evening, we’re going to briefly cover the futures open, and I would largely ignore these nowadays given the headline bombardment that will resume as soon as markets open ET. The most important thing to monitor this evening is to see if the gaps can actually hold (on the downside move in equities) and on the upside move in oil prices. If that were the case, oil can start to seek out higher price levels again, and we’ll see spot WTI move back to the $100+ level as a starting point. The volatility right now has been somewhat awful for energy equities in the past few weeks, but few can grasp what a tailwind this pricing environment is for both E&P and service companies in the sector. While I do not expect a meaningful increase in drilling activity until at least Q3, we can continue to seek out leading indicators that point to that - and in advance of such activity, we added the necessary exposure on this scarcity play. Global actors may be able to convince people through the futures curve of one narrative, but the reality is in the physical markets - and the situation is not going to resolve itself for (at minimum) months.

For the time being, we’re back to a place where the conflict is looking like it could escalate - and that is going to have economic ripple effects for months to come, some of which we talk about below and will cover more on Tuesday evening.

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Futures Open / Week Ahead

Futures have opened in a mostly red way - down across the indices - with international indices also falling in Asia. Spot WTI is about $90/bbl, and a hold of this gap would be a critical next step in higher price action. Technically, oil is at a very key level with this overnight gap up, and we discuss next steps and pathways below. Again, a grain of salt until the day closes tomorrow, but mind the gap.

Week Ahead

• Monday: None Scheduled

• Tuesday: Retail Sales, Inventories

• Wednesday: EIA Petroleum Status Report

• Thursday: Flash PMIs, New Home Sales

• Friday: Durable Goods

No Fed/BoJ meetings until next week.

Tesla is the >$500bn market company reporting this week. With SpaceX on the horizon, watch for the reaction as a test of the market’s appetite for these IPOs amidst this massive speculative blow-off.

Early Inflation Warning Signals

Early inflation warning signals are mounting - and these take time to transmit all the way through the economy… recall 2021? There are many similar red lights flashing right now - and no one seems to care. The Fed is once again asleep at the wheel - pouring fuel on the fire through balance sheet expansion, and we sit here and wonder when they’re going to halt current policy (which looks quite unlikely). Look at copper prices as one of many warning signals:

Let’s take a look at L&G BCOM - All Commodities Index - which continues to explode higher, and we yelled from the rooftops about this from November & December of last year as a new base began to form and the Fed was talking all about disinflation and soft labor...:

(continued below: early inflation warning signals, technicals overview, weekly report overview, froth and friction - Portfolio Strategy note and commentary from Six, and the reality of freight from John)…

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