Markets Weekly June 29, 2024

Hello my friends, today is June 29th and this is Markets Weekly. So this past week we had a lot of chop in the markets and on Friday it looked like we had a pretty big reversal. I remain very cautious on the equity markets. But today I want to talk about three things. First, last week we had our first presidential debate and it seems to have changed the political landscape in the US and that's affecting certain markets. So let's talk about what happened last week there. Secondly, I've been hearing a lot of whispers about the demise of the petrol dollar. Let's talk a little bit about what the petrol dollar is and why I think it's mostly nonsense. And lastly, we have pretty important French elections happening this weekend where the two leading parties in the legislative elections are on the opposite sides of the political spectrum. So no matter what happens, it seems like we're on the cusp of big changes that will also filter into global markets. So let's talk a little bit about what's happening in France.

大家好，今天是6月29日，欢迎收听《市场周报》。在过去的一周里，市场波动较大，尤其是周五，看起来出现了一个相当大的反转。我对股市依然保持非常谨慎的态度。但是，今天我想谈三件事。首先，上周我们进行了第一次总统辩论，这似乎改变了美国的政治格局，并影响到了某些市场。所以让我们先讨论一下上周发生的事情。其次，我听到很多关于石油美元消亡的传言。我们来聊聊什么是石油美元，以及为什么我认为这些传言大多是无稽之谈。最后，法国本周末将进行非常重要的选举，立法选举的两个领先政党处于政治光谱的两端。无论结果如何，我们似乎都处在重大变化的边缘，这些变化也将影响到全球市场。所以让我们谈谈法国正在发生的事情。

Okay, starting with the US. So last week President Trump met President Biden on the debate stage. So if you've been following President Biden for the past year, you can see there are many videos on Twitter of him having senior moments. But at the same time, if you've been reading the legacy media, they've been telling you that actually Biden is fine behind closed doors. He's running things. He's super sharp. Don't be ageist and so forth. But on that debate stage, the American public immediately saw that President Biden is just too old and that the public has been lied to for some time. Now there are many videos of that debate on the internet, but let me play the last few seconds. So, as you can see, President Biden seems to have trouble getting off the stage himself. Now the betting markets took one look at that debate and immediately increased the odds of a Trump victory in November to around 60%. And at the same time, lowered the odds of a Biden victory to about 30%.

好的，让我们先看看美国的情况。上周，特朗普总统和拜登总统在辩论舞台上碰面。如果你过去一年一直关注拜登总统，就会发现推特上有很多他“老年失智”的视频。但与此同时，如果你读主流媒体的报道，他们会说拜登在幕后其实很正常，他在运作事情，非常敏锐，不要有年龄歧视等等。然而，在那个辩论舞台上，美国公众立即看出拜登总统确实年龄太大了，公众被蒙蔽已有一段时间。网上有很多那场辩论的视频，但让我播放最后几秒。正如你所见，拜登总统似乎连下台都有困难。博彩市场看了那场辩论后，立即将特朗普在11月胜选的几率提高到大约60%，同时将拜登胜选的几率降到约30%。

Now President Trump very clearly has been telling you that he wants to run inflationary policy. He wants to cut rates. He wants to cut taxes. And he wants to basically be more protectionist. So I think that seems to be filtering a bit into the rates market where on Friday, we saw the 30-year yield rise notably. Now some of that is no doubt due to quarter-end as well, but it could also be due to the market realizing that there's a better chance now of a Trump victory. Now if you look at some specific Trump trades like prison stocks, they also surged on Friday. Prison stocks have been a favorite Trump trade since 2016 as Trump is a self-proclaimed law and order candidate. Now my only view though is that I think that presidential debate actually increased a lot of uncertainty in the markets and it should be risk negative. Because right now it seems like there's a pretty good chance that President Biden may actually be replaced as the Democratic nominee.

现在特朗普总统非常明确地告诉你，他想要实行通胀政策。他想要降息，减税，并且基本上更趋向于保护主义。所以我认为这多少影响了利率市场，我们在周五看到30年期国债收益率显著上升。虽然部分原因无疑是季度末因素，但也可能是因为市场意识到现在特朗普胜选的机会更大了。如果你关注一些特定的特朗普交易，比如私营监狱股票，你会发现它们在周五也大幅上涨。自2016年以来，私营监狱股票一直是特朗普的热门交易，因为特朗普自称是一个法律和秩序的候选人。不过，我个人认为总统辩论实际上增加了市场的不确定性，对风险是不利的。因为目前来看，拜登总统可能真的会被替换掉作为民主党的候选人。

Now right after the debate, there seems to be a coordinated effort by the media and elements of the Democratic Party to basically full-court press we need a new nominee because President Biden, he's not going to cut it. And I think this is pretty understandable after all the presidency really, really important price but not just that. There are a lot of people who are running down ticket to President Biden. So in the US, when you vote for election, you're presented with a piece of paper. Again, you choose your president but you also choose Congress, Senate and so forth. So a lot of times politics being a team sport is that when you have an unpopular president, people don't show up to vote for that candidate and everyone downstream say the congressmen, the senators, they suffer as well. So you have a lot of people in the Democratic Party who are running for reelection on November. They're really worried that maybe Biden will take their chances. So everyone is trying to do something to try to at least help themselves. So the betting markets are saying that, hey, there's a good chance that President, so Governor Gavin Newsom of California could be the nominee, maybe vice versa and Kamala Harris. And there's even a chance that Hillary Clinton could come back as a candidate. Now, just a couple of weeks ago, there was actually an op-in in the Washington Post reminding everyone that, hey, Hillary Clinton, not so bad, maybe she could be a VP or something.

现在，在辩论结束后，媒体和民主党的一些人似乎在协调一致，强烈呼吁需要一个新提名人，因为他们认为拜登总统可能不行。我认为这是可以理解的，因为总统职位非常重要，但不仅如此，很多与拜登一起竞选的其他人也受到影响。在美国，当你投票时，你会拿到一张选票，选择总统的同时也会选择国会议员、参议员等。因此，政治常常是一个团队运动。如果总统不受欢迎，选民就不会来给那个候选人投票，这样一来，其他竞选人比如国会议员和参议员也会受到影响。很多将在11月竞选连任的民主党人非常担心拜登会影响他们的胜算。因此每个人都在试图做些什么来至少帮助自己。博彩市场显示，加州州长加文·纽瑟姆可能有很大的机会成为候选人，可能还有副总统卡玛拉·哈里斯。甚至有可能希拉里·克林顿会再次作为候选人。就在几周前，《华盛顿邮报》实际上还有一篇文章提醒大家，希拉里·克林顿其实也不错，或许她可以成为副总统候选人。

So there's a lot of power centers in the Democratic Party trying to merge and reach for that price of being a presidential nominee. At the same time though, Biden seems to be standing firm saying that he is going to run for president and most notably, President Barack Obama on Twitter seemed to show support saying that, you know, Biden just had a bad night. We have bad nights. He's going to be our presidential nominee. President Obama is probably the most influential person in a Democratic Party. I don't know if he's able to keep the troops together, but right now it seems like we're in a period of turmoil where we're not really sure who's going to be running against President Trump. And that type of uncertainty I think should be a bit destabilizing for the market. Now the other potential candidates for president, we all know who they are, but I think there's a bit more uncertainty as to how they play among the general public. And you know, right now it looks like the markets think that Trump is probably going to win, but these dynamics are fluid, maybe a debate, let's say against Gavin Newsom or someone like that could really change the public's perception. So we are, I think, in a period of turmoil for the next few months, it's going to be interesting.

在民主党内，有许多权力中心正在尝试合并并争取成为总统候选人。然而，与此同时，拜登似乎坚定地表示他将竞选总统，最引人注目的是，前总统奥巴马在推特上似乎表示支持。他说，拜登只是度过了一个糟糕的夜晚，我们都有糟糕的夜晚，但他将是我们的总统候选人。奥巴马可能是民主党内最有影响力的人物。我不知道他是否能够团结大家，但目前看起来我们正处于一种动荡时期，还不清楚谁将与特朗普竞选总统。我认为这种不确定性可能会对市场产生一定的扰动。至于其他潜在的总统候选人，我们都知道他们是谁，但我认为他们在公众中的反应仍有些不确定。现在，市场似乎认为特朗普可能会赢得选举，但这些动态是不断变化的，比如说与加文·纽森的辩论可能真的会改变公众的看法。所以我认为，在接下来的几个月里，我们将处于一个动荡的时期，这将非常有趣。

Okay, the next thing that I want to talk about is the demise of the so-called petrol dollar that it seems like many people are talking about. So what exactly is the petrol dollar? So as you guys know, historically the US imports a lot of oil historically from the Middle East. Now in the 1970s, during the Cold War, the US was basically fighting on behalf of what it perceived to be the free world. And it was running huge deficits in order to finance its big war. So it went around to many countries and basically said, hey, I'm providing security, I'm trying to fight the good fight. Can you support this by buying more Treasury securities? And so they basically spoke to many Middle Eastern countries. And what seemed to emerge is that the US will continue to buy oil from Middle Eastern countries, send them dollars in the Middle Eastern countries in return will buy US Treasuries. And that was a source of stability for the Treasury market.

好的，接下来我想讨论的是所谓的“石油美元”的衰落，似乎很多人都在谈论这个问题。那么什么是石油美元呢？如你们所知，历史上美国从中东进口了大量石油。在20世纪70年代的冷战期间，美国基本上代表它认为的“自由世界”参战，并为了资助庞大的战争开支而运行巨额赤字。于是美国去各国游说，说“嘿，我在提供安全保障，我在抗击邪恶势力。你们能通过购买更多的美国国债来支持这一点吗？” 他们基本上和很多中东国家进行交涉。结果似乎达成了这样的共识：美国将继续从中东国家购买石油，并向中东国家支付美元，而中东国家则会用这些美元购买美国国债。这就成了美国国债市场的一个稳定来源。

Now you can see this became really important. Let's say in 2007 when oil prices were surging. Now oil prices back then were around $150 today, they're about $80. Now here's some work from the Fed back then showing that the surplus, the trade surplus that the oil exporting nations had in that period was about a trillion dollars a year. So they were earning tremendous amounts of dollars. So what were they doing with those dollars? Well part of it of course was used to invest in Treasury securities, but part of it was also used to buy goods and services throughout the world. So in a sense dollars went left the United States and then they came back in and everyone was happy.

现在你可以看到这变得非常重要。比方说，2007年油价飙升的时候，当时油价大约是150美元一桶，而现在大约是80美元一桶。看看美联储当时的一些研究指出，那段时间，石油出口国的贸易顺差大约是每年一万亿美元。因此，他们赚了大量的美元。那么他们用这些美元干什么呢？当然，他们一部分用来投资美国的国债，但另一部分也用来在全球购买商品和服务。所以，从某种意义上说，美元离开了美国，然后又回到了美国，大家都很高兴。

Now there's been some concern that going forward maybe what if the oil producing countries like Saudi Arabia, what if they don't want to buy Treasuries anymore, what if they don't invoice their oil exports and dollars anymore? So what's going to happen? And you know is that going to mean that the dollar system is going to collapse, the Treasury market is going to collapse and so forth? And I think those concerns are totally overblown for a couple of reasons. First, now oil is traded in dollars but it actually really doesn't matter what it's traded in. Now let's say for example, let's say that oil was traded in Yen. Now let's say the Saudi Arabia and sell the whole bunch of oil and end up with a whole bunch of Yen. Now what really matters is what they do with that Yen afterwards. After all if they have a whole bunch of Yen, what if they don't really want that Yen? They could always just sell that in buy dollars and invest in Nvidia, invest in Treasuries and so forth.

现在，有一些担忧是未来如果像沙特阿拉伯这样的产油国不再想买美国国债了，或者他们不再用美元进行石油出口结算了，那会发生什么呢？这是否意味着美元体系会崩溃，美国国债市场会崩溃等等呢？我认为这种担忧是完全夸大的，原因有几个。首先，现在石油是用美元交易的，但实际上交易使用什么货币并不重要。举个例子，假设石油用日元交易，现在沙特阿拉伯卖了一大堆石油，得到了很多日元。那么真正重要的是他们接下来如何处理这些日元。毕竟，如果他们手里有很多日元，但真的不想要这些日元，他们完全可以把日元卖掉换成美元，投资于Nvidia股票或美国国债等。

So what the, actually the commodity is invoiced in or priced in, I don't really think it's that important. What really is important is what the seller does with the currency that they receive in exchange. Now over the past few decades, a lot of the times what the oil producing countries have done is take those dollars and buy US assets. Is it because they are great friends with the US and the State Department forces them to? You know, I'm not sure maybe there are some reason, maybe that's some of it, but also US markets are the most liquid markets in the world. If you have say a hundred billion dollars, there's really not many places you can put it. Let's say that they start to earn a whole bunch of RMB. Are they going to invest that in China? Well in China, markets are not that liquid. You can't easily take money out and at the same time yields are actually pretty low there.

所以，商品用什么货币开具发票或定价，我认为其实并不那么重要。真正重要的是卖家拿到这些货币后，会怎么处理。在过去的几十年里，许多产油国常常会把收到的美元用来购买美国资产。这是因为他们和美国是好朋友，或者是美国国务院强迫他们这样做吗？我不确定，也许有一些原因是这样，但还有一个原因是美国市场是世界上流动性最强的市场。如果你有譬如说一千亿美元，实际上没有太多地方可以放这些钱。假设他们开始赚到大量的人民币，他们会把钱投资在中国吗？而在中国，市场并没有那么流动，资金也不容易取出，同时收益率其实也比较低。

So it doesn't seem to make sense. Are you going to invest in Euroland? Well, there's not that much growth in your land and their markets are not that deep in liquid. At the end of the day though, in terms of global capital markets, it's really the dollar markets that are the most deep in liquid, regardless of how the US manages its public finances. Now you could say that the US fiscal deficit, unsustainable, Treasury's terrible investment and I would totally agree with you. But that doesn't necessarily mean that you just get rid of your dollars. It could simply mean that instead of buying Treasury's, you buy something like the S&P 500. Now there is real political risk though, where if you have too much dollar exposure, maybe the US government could sanction you. I think that is a real risk and that is some cost for diversification, but that is separate from this whole selling oil for dollars thing.

这看起来不太合理。你打算投资于欧元区吗？嗯，欧元区的增长并不多，他们的市场流动性也不强。然而，从全球资本市场的角度来看，美元市场才是最具深度和流动性的，不论美国如何管理其财政政策。你可能会说，美国的财政赤字不可持续，国债是糟糕的投资，我完全同意。但这并不一定意味着你应该抛售所有美元。你可以简单地选择不买国债，而是投资于像标普500这样的东西。不过，这里确实存在政治风险，如果你持有过多的美元资产，美国政府可能对你实施制裁。我认为这是一个真实的风险，也是分散投资的一些成本，但这与用美元买卖石油的事并无直接关系。

Now the second reason why this petro dollar system collapsing is really a non issue is that if you look at the public finances of say Saudi Arabia, they actually aren't really earning that much dollars on net. So they're earning a lot of dollars, but then they're also importing a lot of goods and services. So their current account is basically flat. Actually if you look at the public finances of Saudi Arabia, you'll see that they've been borrowing a lot. They've been going more and more in debt because they're spending so much money on all these other projects and public welfare and stuff like that. Now looking at their Treasury holdings over the past decade, you'll also notice that they're pretty stable. So as far as I can tell, there doesn't seem to be a big disturbance in the dollar system based on whatever you want to call the petro dollar trade. Further disturbance I think could be caused by political sanctions and stuff like that, but I don't think that has anything to do with what oil was invoiced in or anything like that. So I think the demise of the petro dollar system is greatly exaggerated. On the one hand, they simply don't have as many petro dollar as have your boss of Bloomberg noted.

现在，这个石油美元体系崩溃并不重要的第二个原因是，如果你看一下像沙特阿拉伯这样的国家的公共财政，其实他们净赚的美元并不多。他们确实赚了很多美元，但同时他们也进口了大量商品和服务。所以他们的经常账户基本上是平衡的。实际上，如果你看一下沙特阿拉伯的公共财政，你会发现他们借了很多钱。他们的债务越来越多，因为他们在其他项目和公共福利上花了太多的钱。再看看他们过去十年的美国国债持有量，你也会发现这基本上是稳定的。因此，就我所知，所谓的石油美元贸易并没有在美元体系中引起大的动荡。我认为进一步的动荡可能由政治制裁等因素引起，但我不认为这与石油的计价货币有任何关系。因此，我认为石油美元体系的消亡被大大夸大了。一方面，正如彭博社的老板所指出的那样，他们实际上没有那么多的石油美元。

Okay, so the last thing that I want to talk about is the French elections this Sunday. So as we discussed before, the French are having new legislative elections, but the two leading political forces are on the opposite side of the political spectrum. We have the Rasamblebong Nationale, the Right-leaning Party, far ahead in the polls with the possibility of actually having an outright legislative majority. And right after them, you have the front popular, which is basically a very socialist, somewhat communist party. Below them all, of course, is Macron's centrist party and they are not going to make it. Now in France, legislative elections are done in two stages. The first stage is Sunday and afterwards, the two winners will go off and face a run-off in the second stage. And sometimes there's a third person running as well, depending on how well that person performed during the first stage. So we won't know the final results until later in July, but what it seems to pretend is big changes.

好的，我最后要讨论的是这周日的法国选举。正如我们之前讨论过的，法国即将举行新的立法选举，而两个主要的政治力量位于政治光谱的对立面。极右翼政党“民族联盟”在民调中遥遥领先，有可能获得绝对的立法多数。而紧随其后的“人民阵线”基本上是一个非常社会主义、带有一些共产主义色彩的政党。在这两个党派之下，当然还有马克龙的中间派政党，但他们的表现不乐观，可能无法取得好成绩。 现在在法国，立法选举分为两个阶段。第一阶段是周日举行，之后的两个赢家将进入第二阶段的决选。有时会有第三人参选，视其在第一阶段的表现而定。所以我们要到七月晚些时候才能知道最终结果，但看起来可能会带来大的变化。

Now the Rasamblebong Nationale is mostly about migration. That's their big issue. They're seeing tremendous migration in France, changing culture. They don't like that. They are more nationalistic. They have an economic platform as well, but it doesn't seem to be their main focus. But the front popular though, they are very much an economic-based party. Classically, they want to increase social benefits, so more lower than retirement age, raising minimum wage, more benefits and so forth. And they want to pay for it, of course, by taxing the rich. So they want the marginal income tax to go as high as 90%. And they want to roll out a higher wealth tax level. A wealth tax is basically like property tax, but for everything you own. And so their proposal, I think, is perceived to be very negative to economic growth.

现在，Rasamblemong Nationale（国家集结）主要关注移民问题。这是他们的主要议题。他们看到法国有大量移民，这正在改变文化，而他们不喜欢这种变化。他们更具民族主义倾向。虽然他们也有经济平台，但这似乎不是他们的重点。相比之下，前线人民运动党（Front Populaire）则是一个非常注重经济的政党。传统上，他们希望增加社会福利，例如降低退休年龄、提高最低工资、增加各种福利等等。而他们支付这些福利的方式，当然是对富人征税。他们希望将边际所得税提高到90%，并推出更高水平的财富税。财富税基本上就像财产税，但适用于你拥有的一切。所以，很多人认为他们的提议对经济增长非常不利。

Now right now, there's a tremendous amounts of uncertainty as to how this could turn out. But there is a chance that maybe these economic policies get some way enacted. And so I think that's significantly impacting the French markets. If you look at the French stock market, it's totally tanking. After all, high taxes are bad for the stock market, bad for economic growth. Now at the same time though, both parties are proposing a lot of fiscal spending, and that's impacting the bond market. If you look at French tenure yields as a spread to German bonds, they've been blowing out pretty significantly. Now the ECB has special mechanisms where they're going to come in and save the bond market, but they're not going to do that right away. After all, the European Union wants the member countries to have fiscal discipline.

现在，眼下，对这件事情的结果存在巨大的不确定性。但是，有可能这些经济政策会以某种方式得到实施。我认为这对法国市场产生了重大影响。如果你看看法国股市，它完全在崩盘。毕竟，高税收对股市和经济增长都是不利的。同时，两党都提议进行大量财政支出，这对债券市场也产生了影响。如果你看法国十年期债券收益率和德国债券的利差，它们显著地扩大了。不过，欧洲央行有特殊的机制，他们会介入并拯救债券市场，但不是立即这样做。毕竟，欧盟希望成员国保持财政纪律。

So what we could see is that spreads continue to widen out if we have a fiscal policy that that's just too much spending. Now there's no risk of disaster because if spreads really, really explode higher, you can be sure that the ECB is going to come in and maintain financial market stability. But what I think we're looking at right now is just the fundamental collapse of the establishment in a core European country. Now that means that the future is going to look very different from the past. And so the possibilities become very wide. At the very least, this heightened uncertainty should be negative for global risk assets, for the Euro. But depending on what we find out after the end of the second stage in elections, it could really reverberate. And the worst case scenario, we could have a banking sector in Europe not doing well because yields are selling off so much and that could have some contagion fears to the global financial system. Again, we'll find out in the coming weeks. But what it is though is for sure some interesting times.

所以我们可以看到，如果财政政策花费过多，利差将继续扩大。现在不必担心灾难，因为如果利差真的急剧上升，欧洲央行肯定会出面维持金融市场的稳定。但我认为我们当前所看到的是一个核心欧洲国家的体制正在根本性崩溃。这意味着未来将与过去大不相同，因此未来充满了各种可能性。至少，这种高度不确定性对全球风险资产和欧元是不利的。不过，第二轮选举结束后，我们发现的情况可能会产生更广泛的影响。在最坏的情况下，欧洲银行业可能表现不佳，因为收益率大幅下跌，这可能引发对全球金融体系的蔓延恐慌。我们将在未来几周内得知更多信息。不过，可以肯定的是，这段时间确实很有趣。

Now, as I've been saying over the past few months, I think going forward, the biggest drivers of markets are not going to be the central banks, but what happens with the politics. Because at the end of the day, economy, markets is downstream from politics because the government sets the rules and is the biggest economic actor. Alright so that's all I prepared for today. If you're interested in reading more about my thoughts, check out my blog at saidguy.com. And if you're interested in learning more about markets, check out my courses at centralbanking101.com. Talk to you all next week and don't forget to like and subscribe.

现在，正如我过去几个月一直在说的，我认为未来市场的最大驱动因素将不是中央银行，而是政治。因为归根结底，经济和市场都是政治的下游，政府制定规则，是最大的经济参与者。好了，这就是我今天准备的全部内容。如果你对我的想法感兴趣，可以访问我的博客saidguy.com。如果你想了解更多关于市场的知识，可以访问我的课程centralbanking101.com。我们下周再见，别忘了点赞和订阅。