finance
Welcome to The David Lin Report! I’ll be reporting on the most impactful market-moving events, as well as interviewing experts in finance, economics, science, and technology.
Donald Trump is reportedly pledging to give every American adult $5,000 if Republicans retain control of the House and Senate in the midterm elections. Analyst Mike McGlone characterized this promise as a "classic sign of severe desperation" and a "gimmick" that ignores voter concerns about economic issues.
WTI and Brent crude oil prices have surpassed $100 per barrel, contributing to increased market volatility. This surge in oil prices is a significant factor influencing the likelihood of a Federal Reserve interest rate hike, with the Fed Watch tool indicating a 67-68% chance of a hike next week.
Mike McGlone notes that gold's 100-day correlation with the S&P 500 has reached a multi-decade high, and its volatility relative to the S&P 500 is at a 20-year peak. He suggests gold's performance is heavily influenced by the Federal Reserve's interest rate decisions.
Mike McGlone describes the copper market as an "accident waiting to happen," citing high global inventories and a potentially crushing global economy. Despite strong year-to-date performance, he believes the current price levels are unsustainable.
Mike McGlone admits he was wrong in predicting the US could suppress Iran's offensive capabilities, noting they have shown significant strength. This underestimation contributes to the uncertainty surrounding crude oil prices, which he views as being in a precarious position.
McGlone highlights an unusual July with excessive rain impacting corn yields, causing them to drop below earlier record expectations. This, combined with geopolitical factors affecting wheat and soybean oil demand, is contributing to rising commodity prices.
The upcoming midterm elections are anticipated to be contentious, with a potential sweep against Republicans. Historically, market performance in midterm election years has been negative, with the S&P 500 declining in both 2018 and 2022.
Gary Wagner, editor of goldforecast.com, discusses the current favorable environment for gold, citing rising inflation and a weakening dollar as key drivers. He notes that gold often thrives when inflation increases, creating a strong correlation with current market conditions.
Gary Wagner highlights that crude oil prices, specifically Brent crude, have spiked to near $100 a barrel, a level not seen in some time. He explains that this increase in oil prices significantly impacts the economy by driving up inflation across various sectors, not just energy.
The market is anticipating higher Consumer Price Index (CPI) and Producer Price Index (PPI) figures for September, with CPI forecasted to rise 0.4% month-to-month. Gary Wagner suggests a high probability that the Federal Reserve will raise interest rates next week to combat inflation, despite the recent surge in oil prices likely not being fully reflected in the upcoming CPI report.
Gary Wagner points out a high correlation between the price movements of gold and West Texas Intermediate (WTI) crude oil. He explains this connection is due to crude oil's significant impact on inflation, which in turn drives gold prices, especially when the dollar is weakening.
Gary Wagner suggests a scenario where gold could fall back towards $4,000, potentially breaking below this psychological level. He notes that such a drop would be significant and indicates a need to monitor key economic variables closely.
Richard Teng, co-CEO of Binance, stated that the demand for Bitcoin remains strong and its long-term prospects are "extremely bullish." He noted that August saw renewed ETF inflows totaling $3.5 billion, a significant increase from July's $172 million, and a rise in crypto allocation within combined crypto and equity holdings from 64% to 70%.
Richard Teng suggested that the US Treasury Secretary's announcement of potential intervention in bond markets on August 19th may have been interpreted by the market as a signal that long-term yields would not rise further, contributing to Bitcoin's rally. He also pointed to a broader trend of re-evaluation of portfolios in favor of assets like gold and crypto.
Richard Teng reported that Binance experienced a substantial surge in spot trading volume in August, climbing from $4.755 billion to $13.6 billion daily, an 188% increase. He also highlighted that users are increasing their allocation to crypto assets, with crypto's share of combined crypto and equity holdings rising from 64% to 72% by the end of August.
Richard Teng detailed Binance's strong performance in the perpetual futures market, where its market share grew from 38% to 44% year-to-date. The exchange has introduced new product classes like commodities, petrochemicals, and tradeable perpetuals for stocks, which have seen significant volume, reaching over $100 billion weekly average in July and August.
Richard Teng highlighted that Binance's 'TradeFi' perpetual products address key issues in traditional finance by offering global access and 24/7 trading. He emphasized that this provides a crucial venue for institutions and retail investors to manage risk and take positions at any time, overcoming the limitations of traditional 8-hour trading days and weekend closures.
Richard Teng noted the significant growth in Binance's tokenized equity offerings, with equity AUM surpassing $1 billion and 'B Stocks' (tokenized products) reaching $600 million on and off-chain. He stated that this indicates a strong demand for tokenized equity exposure, facilitated by Binance's 24/7 trading model.
Canada has retaliated dollar for dollar with 50% tariffs on Canadian imports following the US's imposition of similar tariffs amidst a trade war. Chrystia Freeland, former deputy prime minister, acknowledged the economic pain but stated Canadians are prepared to endure it for sovereignty.
Professor Trevor Tom from the University of Calgary has conducted research, featured in Canadian media, quantifying the expected job losses and impacted sectors/provinces resulting from the US-Canada trade war.
US Secretary of the Treasury Scott Bessent criticized Canadian Prime Minister Mark Carney, stating Carney turned the trade dispute into a political shouting match and is not acting in the best interest of Canadians or the Canadian people. Bessent also mentioned that Canada was offered a favorable trade deal but chose to walk away.
Key reasons for the failure of Canada-US trade negotiations reportedly include Canada's reluctance to accept permanent auto tariffs and provisions that would require US approval for Canada's trade agreements with other countries, particularly concerning potential deals with South American nations like Brazil and Argentina.
An expert suggests Canada should not retaliate against US tariffs, arguing it is counterproductive and harms Canada's economy. The US tariff rates are not uniquely high for Canada compared to other trading partners, and these should be viewed as US domestic policy changes.
Major Wall Street firms like JPMorgan Global Research and Societe Generale forecast gold prices to average around $6,000 per ounce in late 2026, with potential to reach $6,300 by the end of 2027. Edgar Denney has an even more aggressive target of $10,000 by the decade's end.
Billionaire investor Eric Sprott has made significant investments in Gold Group Mining (GRO), a producing gold and silver company with multiple North American assets. This investment comes as major financial institutions predict substantial increases in gold prices.
Canada has historically aligned its trade policies with the US, particularly concerning China and electric vehicle imports, due to integrated supply chains. This alignment has included past agreements limiting trade with non-market economies, a practice seen as reasonable by some.
Canada's Deputy Prime Minister Chrystia Freeland acknowledged that the escalating trade war with the US will cause economic pain for Canadians. Despite this, she stated that Canadians are prepared to endure it to defend their sovereignty. This stance is also supported by former Prime Minister Steven Harper.
The United States has imposed significant 50% tariffs on $20 billion worth of Canadian imports following the breakdown of trade negotiations. Canada has responded with equivalent dollar-for-dollar retaliatory tariffs. The specific reasons for the breakdown are complex, involving issues such as auto sector tariffs and restrictions on Canada's ability to form new trade agreements.
US Treasury Secretary Scott Bessent criticized Canadian Prime Minister Mark Carney for turning the trade dispute into a political issue. Bessent argued that Carney's actions were not in the best interest of the Canadian people but rather served the Liberal Party and his own political agenda. He also stated that Canada was offered a favorable trade deal, which they chose to reject.
Professor Trevor Tombe suggests that Canada's retaliation in the trade war might be counterproductive. He argues that the US tariffs are a broad domestic policy change, not specifically targeting Canada, and that retaliation further harms Canada's economy. Tombe advises Canada to focus on domestic policies to improve economic outcomes.
Major financial institutions like JP Morgan Global Research and Societe Generale are forecasting significant increases in gold prices. JP Morgan predicts an average of $6,000 an ounce in Q4 2026, with potential to reach $6,300 by late 2027. Edgar Danni has an even more aggressive long-term target of $10,000 gold by the end of the decade.
Precious metals investor Eric Sprott has made significant investments in Gold Group Mining (ticker: GOO), a company producing gold and silver. Sprott has invested millions in multiple tranches, indicating strong confidence in the company's prospects. Gold Group Mining owns producing mines and development projects in North America, including the Don David Gold Mine in Mexico.
Geopolitical tensions in the Middle East have escalated with reports of Iranian missiles hitting U.S. warships, including an aircraft carrier, and Houthi forces attacking a key Saudi oil refinery. These events have spooked markets and raised concerns about uncontrolled escalation and its impact on global energy prices.
The price of diesel in the US has reached a record high of $5.90 a gallon due to attacks on refineries and disruptions in the global supply chain. This impacts transportation costs for a wide range of goods, including groceries.
Market sentiment suggests a strong likelihood of continued diesel price hikes, with traders predicting a 69% chance of the price surpassing $6.40 per gallon by the end of the year. This outlook is based on ongoing supply chain concerns and refinery vulnerabilities.
The United States is identified as the largest net exporter of diesel fuel globally. U.S. refineries are operating at exceptionally high capacities, shifting their product slate to prioritize diesel production in an effort to stabilize international markets amidst refinery attacks in other regions.
An expert argues that attacks on oil refineries are more damaging to the global economy than attacks on crude oil extraction. Refineries are critical choke points in the supply chain, and their disruption has a more immediate and severe impact on the availability of refined products like diesel.
Energy Secretary Chris Wright has defended the ongoing engagement in the Iran conflict, stating it is necessary to reset the Middle East and address the existential threat of a nuclear-armed Iran. This comes amid increased military actions and market volatility in the region.
John-Clark Levin, Head of Research at Kurzweil Technologies, predicts that Artificial General Intelligence (AGI) could be accessible by 2029, based on the exponential growth of computation price performance. He emphasizes that this timeline relies on the continued trend of doubling computation power every one to two years, a pattern observed since 1939.
John-Clark Levin suggests that once AGI is achieved, it could automate a vast array of white-collar tasks, including coding, design, and writing, performing them more cheaply and often better than humans. This automation extends to any task performed by a remote worker that doesn't rely on human trust or relationships.
John-Clark Levin warns that while extreme unemployment predictions are unrealistic, the economy is highly sensitive to labor shocks. He highlights that a mere 4% job loss among Americans aged 25-54 due to AGI could push the labor market into 'unprecedented territory,' given how narrow the fluctuations have been historically.
AI capital expenditure is projected to reach nearly $1 trillion by 2028, according to Doubledine research. John-Clark Levin notes that this spending is driven by the immense inference compute demand anticipated from widespread adoption of humanoid robots and wearable smart glasses, rather than current chatbot usage.
John-Clark Levin clarifies that while AI systems can fool unsuspecting humans in some chat scenarios, passing versions of the Turing test do not indicate true human-level AGI across all economically valuable tasks. He states that current AI capabilities can be indistinguishable from humans in specific, controlled settings but lack broader real-world applicability.
John-Clark Levin believes a market correction is likely before AGI becomes mainstream, not due to AI capability plateaus, but due to the gap between peak AI performance and reliability. He reiterates that AGI's arrival around 2029 is contingent on continued compute scale advancements.
President Trump issued a threat to end trade with countries that have surpluses if the Federal Reserve does not lower interest rates. This statement coincided with the release of August payroll numbers, which showed 162,000 jobs added, exceeding expectations. Despite Trump's comments, the probability of a Fed rate hike increased from 50% to 60%, suggesting markets focused on economic data over political statements.
Devlyn Steele, Director of Education at Augusta Precious Metals, commented on the Federal Reserve's potential actions, suggesting that new Fed Chair Kevin Walsh's approach may differ from historical patterns. Steele noted that while economic data initially pointed towards a rate hike, Trump's statements did not significantly alter market probabilities, which remained focused on the numbers.
Devlyn Steele expressed a personal feeling that the Federal Reserve, under Chairman Kevin Walsh, might not raise interest rates at the upcoming meeting, despite strong job numbers. He suggested that Walsh's focus on discipline rather than immediate decisions could lead to a wait-and-see approach, making market predictions based on historical Fed behavior less reliable.
Devlyn Steele believes that persistent inflation is likely to continue due to ongoing government spending and debt, making the Federal Reserve's 2% target difficult to achieve. He advised retirement savers to think long-term about their economy and consider diversification, including gold and silver, to maintain purchasing power and dignity in retirement.
Devlyn Steele highlighted the challenge of persistent inflation for retirees, stating that their fixed incomes often do not keep pace with rising costs, leading to a reduction in lifestyle. He contrasted this with the working population's ability to seek raises and career changes to maintain their living standards. Steele emphasized the critical need for retirees to protect their purchasing power.
The price of diesel has increased by 61%, reaching $5.64 a gallon, driven by escalating tensions in the Middle East and the ongoing conflict involving Iran. This surge is directly impacting food prices, as diesel trucks transport 83% of US agricultural products, increasing transportation costs from farm to table.
Fertilizer prices are also increasing due to the conflict in the Middle East, impacting farmers' ability to purchase necessary inputs. Consequently, farm bankruptcy rates have risen significantly this year. The report highlights that seven out of ten crop farmers struggled to afford adequate fertilizer supplies this year.
The United States is experiencing its lowest cattle herd numbers in 75 years, leading to increased reliance on beef imports. This shortage contributes to rising beef prices. In response, the government has allowed a significant amount of beef to enter the country duty-free.
Speaking about the challenges facing farmers, Joel Salatin of Polyface Farms expressed a sentiment that the agricultural sector needs more freedom than financial aid. He believes that current policies are not addressing the core issues hindering farmers.
The average food item travels 1,500 miles from farm to table, with transportation fuel accounting for a significant portion of the energy required. Approximately 4% of the total calories needed to get food to the consumer's plate are used for this transportation.
The rise of efficient logistics services like Amazon, UPS, and FedEx is beginning to challenge the dominance of traditional supermarkets. The cost of maintaining physical stores is increasing, while doorstep delivery becomes more affordable, allowing small producers to compete on price.
The cost of doing business in urban areas, including high wages, regulations, and crime, is becoming increasingly expensive. This trend makes it more cost-effective for rural producers to ship goods directly to consumers, even competing with local farmers' markets.
Economist Steve Hanke predicts that the 10-year Treasury yield could increase by another 50 basis points due to the escalating conflict with Iran and rising oil prices. He attributes this potential rise to several factors, including the rapid growth of the money supply, fiscal deficits driven by war spending, and a perceived loss of credibility by Treasury officials.
Professor Steve Hanke described President Trump's escalating strategy in the Iran conflict as 'insane,' stating that the US has consistently lost and Iran has grown stronger with each escalation. He pointed out that despite threats, the US has lost control of the Strait of Hormuz, which Iran now controls.
Professor Hanke highlighted that diesel prices have risen by 50% since the war with Iran began, impacting truckers and farmers. He also noted that fertilizer prices have significantly increased, contributing to potential Republican losses in the midterm elections in states like Iowa.
Professor Hanke asserted that inflation is fundamentally a monetary phenomenon, driven by the money supply rather than solely by oil price fluctuations. He cited the rapid growth of the Divisia M4 measure of money supply as evidence that inflation is likely to persist or increase.
David Rosenberg believes the Federal Reserve is poised to make a significant policy mistake by hiking rates into an oil shock, warning that this could lead to negative consequences and a riskier investing environment. He advises de-risking in the stock market and avoiding duration in bonds.
Treasury yields continued their upward trend, with the 10-year yield reaching 4.79% on Tuesday, marking the fifth consecutive day of increases. This surge is attributed to renewed strikes against Iran, which have pushed oil prices higher.
David Rosenberg is launching a new ETF, ticker ROSY, on September 9th. Managed by Corton Capital, the ETF will track top conviction themes from Rosenberg Research, constructed as a barbell between fixed income in areas with flat yield curves and high real interest rates, and hard assets.
David Rosenberg highlights that his Rose model portfolio, started in early 2023, has gained over 60% with a low beta of 0.4 to the S&P 500 and 0.7 to the 60/40 portfolio. He aimed to demonstrate that a 'perma-bear' can achieve returns thoughtfully.
David Rosenberg expresses skepticism about Fed Chair Kevin Morse's assessment of the economy and inflation, noting that Morse relies on metrics like the Dallas Trim-mean PC deflator, which is only slightly above target, while downplaying other indicators. Rosenberg suggests Morse may be trying to project an image of inflation-fighting toughness.
David Rosenberg observes a historical pattern where new Federal Reserve chairs often face a financial or economic crisis early in their tenure. He draws parallels to past Fed leaders and suggests that current Fed Chair Kevin Morse might be following a similar script by emphasizing inflation credentials.
Oil prices, specifically WTI crude, have climbed above $92 a barrel following new strikes on oil tankers in the Strait of Hormuz and retaliatory US strikes on Iran's Revolutionary Guard. Traders are predicting a significant chance of WTI crude exceeding $115 by year-end due to these escalating geopolitical tensions and potential supply disruptions.
Following US strikes on Iran's Revolutionary Guard, President Trump has issued a stern warning to Iran, threatening significantly harsher attacks if Iran retaliates. This exchange escalates the ongoing conflict, with concerns growing about further disruptions to oil supply.
The White House announced a new oil deal with Venezuela, granting the United States a 35% stake in an estimated 65 billion barrels of reserves, with production intended for US refineries. However, the effectiveness and timeline of this deal are questioned, with limited progress seen over the past six months.
The Energy Information Administration's (EIA) failure to release its June oil report due to system reconciliation issues has added to oil market volatility. This data quality problem is compared to the 2022 silver market event, which saw significant price surges, suggesting a potentially large impact on oil prices.
Josh Young, CIO of Bison Interests, argues that the oil market is facing a significant under-supply, contrary to narratives of a potential glut. He highlights that persistent attacks by Iran and its proxies have materially limited oil transits, contributing to price increases.
Josh Young dismisses recent US strikes on Iran as largely ineffectual, suggesting they are not the primary driver of oil price increases. He points to the increased severity of attacks by Iran's IRGC on tankers, with reports of more significant damage, as a key factor influencing the market.
Josh Young highlights that reduced rig activity in the Middle East, coupled with depleting global oil inventories, poses a significant risk for future oil supply. He suggests that even if Iran's actions were to cease, the lack of new drilling could make it difficult to ramp up production quickly, leading to sustained higher prices.
Despite rising prices, China's refiners are increasing their oil purchases due to concerns about potential shortages. Combined with low global inventory levels and insufficient drilling activity, this demand from China is seen as a strong factor pushing oil prices higher, according to Josh Young.
The current market conditions, including high refining margins and a European energy crisis, could lead to a substantial increase in oil prices without necessarily causing further demand destruction. This is due to factors like Russia's reduced refinery capacity and China's decreased refined product exports.
Federal Reserve Chair Kevin Warsh delivered a speech at Jackson Hole suggesting inflation is above target and requires action, which markets interpreted as a signal for a September rate hike. This hawkish sentiment led to a sharp market downturn on Friday, with the S&P 500 selling off, gold gapping down 3%, and Bitcoin also experiencing a sell-off, while Treasury yields climbed.
Following Federal Reserve Chair Kevin Warsh's hawkish remarks at Jackson Hole, the probability of a 25 basis point rate hike on September 16th has surged to 66%, according to the CME FedWatch tool. The report highlights the tool's historical accuracy, especially closer to the event, suggesting this is a significant indicator of future monetary policy.
Despite hawkish signals from Fed Chair Warsh, Colin Martin, head of fixed income strategy at Charles Schwab, maintains a low-conviction view that the Fed might hold rates in September. He indicates that while some committee members favor hikes, they haven't yet found a definitive reason, but this could change if August inflation data is unexpectedly high.
Federal Reserve Chair Kevin Warsh noted that significant economic growth has been fueled by advancements in Artificial Intelligence, with substantial capital pouring into AI infrastructure. He highlighted that token sales for leading AI labs alone exceed $100 billion annually, a 500% increase in 12 months, and that over half of recent business capital expenditure growth is linked to AI build-outs.
Kevin Warsh criticized the Federal Reserve's past use of forward guidance, suggesting it may have delayed policy responses to high inflation in 2021 and created a 'hall of mirrors' effect where markets and the Fed rely too heavily on each other. He argued that in normal times, forward guidance should be limited to avoid ambiguity and over-committing future decisions.
Treasury Secretary Scott Bessent stated that Iran is taking sanctions 'very seriously,' noting the leadership's acknowledgment of their economic distress and severe gasoline shortages leading to long queues. Bessent believes Iran's kinetic actions are a response to economic weakness, and he thanked the European Union for their support of 'Operation Economic Outcast.'
Treasury Secretary Scott Bessent described the US economy as having stabilized after facing significant challenges, comparing the situation to an emergency room patient now in the healing phase. He highlighted increasing real incomes, a technological surge, reshoring of industries, and growth in private sector construction jobs, noting that these private sector gains are benefiting lower-income workers.
Treasury Secretary Scott Bessent believes the era of secular stagnation is over, replaced by a new period of 'secular growth.' He contrasts this with previous views that suggested innovation had peaked, noting that current economic conditions, including technological advancements and investment, point towards sustained growth rather than stagnation.
Clem Chambers, founder of FN, expressed skepticism about Bitcoin's security, citing instances of theft and personal danger. He believes Bitcoin may drop to $40,000-$50,000 before any potential rise and that its future lies in blockchain-enabled real products, not speculative trading.
Clem Chambers notes that gold and Bitcoin have seen a resurgence, with gold showing upward momentum since late July and Bitcoin reaching $80,000. He attributes this trend, in part, to Treasury interventions in the market, particularly concerning the yen.
Clem Chambers predicts a significant economic boom over the next decade, driven primarily by advancements in technology. He believes this period will be marked by an economic explosion, contrasting with the market's current state.
Clem Chambers suggests that the increasing need for money supply due to onshoring and AI build-out will likely lead to inflation. He predicts potential inflation rates of 5-7% over the next five to six years, driven by these factors and government printing.
Clem Chambers declared that 'We're in the bottom of a bubble' and advised listeners to 'get out before the bust.' He believes the market is entering a phase that requires caution despite the potential for long-term technological growth.
Clem Chambers expressed a strong negative opinion on Coinbase, calling it an 'incompetent company.' He stated that he would not invest his money in the company, regardless of any positive press releases.
Clem Chambers views meme coins and speculative crypto tokens as 'nonsense' with little future. He contrasts this with his view that blockchain-enabled products have potential, but he personally prefers to watch rather than trade these assets.
Gianni Kovacevic suggests that despite current geopolitical tensions involving major oil producers like Russia, Saudi Arabia, and the United States, oil prices have not reached the levels they might have in a previous era. He posits that oil should be trading at around $200 a barrel, especially considering gold's price.
Gianni Kovacevic believes that Schlumberger's commercialization of direct lithium extraction (DLE) technology is a significant development, calling it a "hinge of history." He explains that this innovation could enable the lithium market to grow by five times in the next 15 years and potentially produce refined lithium products at the wellhead, bypassing the need for Chinese refining.
Gianni Kovacevic predicts a period of "extreme volatility" in global markets stemming from unsustainable US government debt. He believes that when a settlement for this debt occurs, it will trigger significant market instability, potentially happening at any time.
Gianni Kovacevic identifies the electrification of the economy as the "most mispriced opportunity" in the stock market. He believes this trend, which is heavily reliant on copper and aluminum, will continue to grow and that its significance is not yet fully appreciated by investors.
Gianni Kovacevic views the oil and gas industry as being at a "hinge of history" due to its adoption of direct lithium extraction (DLE) technologies. He highlights that major service providers like Schlumberger are developing these methods, which could revolutionize lithium production and its supply chain.
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