MacroVoices #557 Michael Every: The Blue Tsunami Lands on Markets... and Geopolitics

Marathon Petroleum

Across the shows: 1 speaker in other episodes, past 30 days

• Patrick Ceresna · Big Picture TradingBullish

  MPC has overshot to the downside; a bull call spread targets a tactical rebound from constrained refining.

  Refining profit depends on the spread between crude costs and the prices of gasoline, diesel and other fuels. Continued attacks on refineries could keep refining capacity constrained even if crude retreats, which supports the refining margin thesis. MPC fell about $116, or 23%, peak to trough over just sixteen days, back to its September lows. Patrick sees this as an overshoot and expects a tactical mean-reversion rebound. He pairs this with a defined-risk December bull call spread for a partial recovery within a limited window.

  “What attracts me here is the magnitude of the recent correction. Over just sixteen days, the stock has declined approximately a $116 or 23% peak to trough, returning back to its September lows. The opportunity is to express the view that this sell off represents an overshoot.”at 44:27

Middle East & Iran

• Michael Every · Rabobank

  A US retreat from the Middle East would leave a power vacuum that Iran or regional rivals could fill.

  If the US concludes it is done with the Middle East, the region is effectively told it is on its own. Power abhors a vacuum, so either Iran fills it, aligned with Russia, China and North Korea, which changes the world dramatically, or the region is destabilised by rival powers. Either way, the outcome is costly for America and gives no argument for lower energy prices in the short term.

  “...and really tells the region that you're on your own now and power abhors a vacuum. So either Iran could fill that vacuum...”at 4:31

• Michael Every · Rabobank

  Israeli nuclear escalation is an extremely fat-tail risk, not something to lose sleep over now.

  Crossing the nuclear red line would be a last-moment, life-or-death option for a small country rather than a great power, with enormous implications for Israel. He cites the 1973 Yom Kippur War, when Israel feared annihilation early on and Golda Meir still did not reach for the nuclear option. He does not rule it out, but sees it as a remote tail risk and doubts Israel has tactical nuclear weapons.

  “but I have to say I still think that's an extremely fat tail risk and nothing more than that.”at 6:08

• Michael Every · Rabobank

  Trump more likely to stage a token Iran action and retreat, though escalation before the new Congress remains possible.

  His base case for months had been an Iran escalation after the midterms, before a new Congress arrived, with more forces in place in the region. Now Trump is licking his wounds after a political drubbing, so a token action followed by retreat, the 'taco', is more likely than before. He doubts a retreat would bring energy prices down sustainably, and says continuing the blockade or going home are both bad options, so escalation is not ruled out.

  “But there is obviously now, I think, a higher chance than previously that Trump does this taco slash the whole enchilada and says, okay, you know, here's a token action, and then I just retreat.”at 23:46

Oil & fuels

• Michael Every · Rabobank

  Energy prices and refining crack spreads stay high until a real resolution; Middle East peace may not be imminent.

  Oil fell sharply in the last couple of days on expectations that Middle East peace is imminent, but he says that may well not be the case. Escalation in the Middle East alongside Russia-Ukraine refinery strikes would keep crack spreads and energy prices high until some resolution. A US pullback would be bullish for crack spreads, since Ukrainian strikes on Russian refineries would continue. A Middle East rolling conflict would also support energy prices.

  “at which point, yeah, crack spreads stay high, and frankly, so do energy prices until there's some kind of resolution.”at 26:55

• Michael Every · Rabobank

  Recent oil price move reflects optimism rather than realism; no clear view of the new trajectory.

  Energy prices over the last two days showed how wide the range of outcomes has become after the election. Michael argues there is an enormous amount of optimism rather than realism in what that short-term move has done. No one has a clear view of the new trajectory, and none will for a while, until the new Trump-led policy direction becomes clearer.

  “there is an enormous amount of optimism rather than realism in terms of what that short term move has done. And no one right now, and no one will for a while, have a really clear view of what that new trajectory is.”at 41:43

• Patrick Ceresna · Big Picture Trading

  Oil's $18 post-election selloff is almost entirely risk premium, so an overshoot likely to bounce.

  Oil fell about $18 peak to trough from Friday's high to the day after the election. Patrick says this is almost entirely risk premium, since the underlying situation in the Middle East has not meaningfully changed. The electoral defeat adds pressure to end the war, but a deal needs a meaningful settlement, and both sides may not want one equally. He expects that once the dust settles and the situation is seen as largely unchanged, some risk premium could return to oil and cause a bounce, as happened after Liberation Day.

  “we saw an $18 peak to trough correction in oil. Now this is almost entirely risk premium as there really has not been any meaningful changes in where things were before the elections.”at 48:48

US global standing & alliances

• Michael Every · Rabobank

  A Congress-constrained US becomes a greatly constrained geopolitical actor, leaving power vacuums for rivals to fill.

  If Congress, now Democrat-controlled, won't back the kind of foreign adventures that were normal until recently, the US becomes a greatly constrained geopolitical actor. He argues it is hard enough to win a war in the Middle East, and far harder when fighting a political war at home without congressional or public backing. He frames this as a return to a 1920s-style isolationist US, which lets other powers expand into the space the US vacates.

  “that The US is now constrained on foreign policy by a congress that doesn't want the kind of adventures that have been quite normal up until recently, it means that The US is a greatly constrained geopolitical actor”at 3:17

• Michael Every · Rabobank

  US military and financial retreat will crumble the post-war order, creating power vacuums and rising international crime.

  The post-war world system was built on US military power in World War II and US military and financial power in the Cold War. If the US is deindustrialized, it cannot sustain the military industrial complex needed to keep that role. Once that support goes, the system will crumble, leaving a power vacuum, and international crime rates will soar.

  “a core argument of mine that I'm making for years... is that the world system is crumbling... was built by US military power in World War II and US military power and financial power in the Cold War.”at 36:34

US dollar

• Michael Every · Rabobank

  The dollar's usual geopolitical safe-haven bid is failing as US political uncertainty weighs on it.

  Traditionally geopolitical tension sends money back to the dollar, and that held somewhat, but earlier this year it did not work as well because of doubts over the US political framework under Trumpism. Now geopolitical risk is coinciding with the absence of Trumpism, and the market still appears to dislike that combination. He explicitly declines to give an FX forecast, so the conclusion is tentative.

  “And now ironically, you could have geopolitical risk coinciding with an absence of potential Trumpism, and the market's still saying we don't like that either.”at 20:27

• Patrick Ceresna · Big Picture Trading

  Dollar bull trend intact; a buy-the-dip setup unless an oil breakdown and imminent peace deal emerge.

  The dollar gave back some of its recent gains but is settling at levels where it traded before the election. There is no big reversal that would suggest the dollar bull trend has been reversed, so the setup still looks like a buy on the dip. Patrick says the only meaningful reason the dollar could break down is if the oil breakdown was correct and a big peace deal was imminent.

  “Overall, this still has all the characteristics of a buy on dip, and the only meaningful reason why the dollar could actually break down here is if this oil breakdown was correct and a big peace deal was imminent.”at 50:59

Tariffs & trade policy

• Michael Every · Rabobank

  Removing tariffs would forfeit US reindustrialization leverage and accelerate America's decline as global hegemon.

  Removing tariffs would cut government revenue and lower costs in the short term, but it removes the main lever for reindustrialising, since subsidies are just as costly. Without reindustrialisation, the US struggles to sustain a resilient economy and the military-industrial complex needed to be global policeman. Projecting current trends forward, that accelerates America's decline as global hegemon, which is not a painless isolationist exit, and zero-sum resource competition would leave it worse off.

  “tariffs are historically, as neomechanicalist history shows, pretty much the only way alongside other aspects of industrial policy that you are going to re industrialize.”at 32:59

• Michael Every · Rabobank

  Trump may drop some tariffs while keeping China ones and offering trading blocs a common external tariff.

  He hypothesises a bargain where Trump removes some tariffs but keeps those on China and on transshipment. The same deal would be offered to Europe, which is close to aggressive anti-China tariff legislation, in exchange for lower tariffs between them. This extends the USMCA and Americas approach toward a broader block, which he thinks was a logical endpoint of Trump's grand macro strategy. If it fails, things get messier.

  “what I think could be logical, and I'm hypothesizing, is you could see some kind of bargain being struck where Trump says, look. I don't mind removing some tariffs, but I want to keep the ones on China.”at 34:25

AI infrastructure & data centers

• Michael Every · Rabobank

  Data center pauses would cede the AI lead to China if the buildout is truly a national security priority.

  A wall of money is still going into the sector, and officials are likely to frame data centers as national security in a Sputnik or Manhattan Project style race with China. Yet the inputs (water, copper, chips and electricity) may not have been ready, so some of the buildout may have been washed out anyway. If the buildout is genuinely national security, pausing it throws the lead to China, with unknown long-run consequences.

  “is it genuinely national security? And if it is, then The US is throwing that lead away to China, and we don't know what the long run implications are.”at 9:58

Nuclear energy

• Erik Townsend · MacroVoices

  Nuclear and uranium stocks are being dragged down by the AI data-center trade despite being the power solution.

  If electricity bills and power shortages are the concern, the administration's energy-dominance and nuclear build-out strategy should still be viable. Yet nuclear and uranium stocks took a much bigger hit and are still down while the broader market recovers. He thinks they are being pulled down with the AI and data-center trade even though nuclear is the solution to the power problem. Michael Every agreed the logic was sound.

  “But actually nuclear and uranium stocks took a much bigger hit. They're still down even as the rest of the stock market is recovering,”at 10:46

Power demand & the grid

• Michael Every · Rabobank

  Abundant cheap power is a necessity that won't go away, likely requiring new nuclear generation.

  Whoever has power and electricity has power, and China has lots of it, with widespread recognition that the power needs to be built. Other AI issues such as inequality need separate answers, but if you can provide abundant cheap power, that logically has to come from some new nuclear mechanism. He sees this need for power as a necessity that persists regardless of the AI backlash.

  “which as you said, would logically have to come from some new nuclear kind of mechanism, that speaks to me for a necessity which isn't going to go away.”at 11:45

US tax & spending policy

• Michael Every · Rabobank

  Fiscal gridlock may last two years, but Democrat-led spending bills will likely be quite generous.

  A credible argument exists that Washington will be in complete gridlock for two years, but that cannot continue indefinitely given debt ceilings. At some point Congress will put forward spending bills, and with Democrats driving them he expects them to be quite generous. It is unclear whether Trump, as a fiscal hawk, would accept them or indulge them, so the fiscal outcome is hard to predict.

  “And at some point, spending bills are going to be put forward by Congress. And I think they're going to be quite generous given that, you know, the Democrats will be putting them forward.”at 12:50

Russia & Ukraine

• Michael Every · Rabobank

  Russia will likely hold out for better terms, making escalation more probable than a Russia-Ukraine deal.

  A de-escalation deal needs US backing plus agreement from both Russia and Ukraine. Ukraine, seeing Trump weaker, may want a deal now, but Russia will likely reason that Trump will be even weaker in six months and that a harder bargain is available later. So while any outcome is possible, escalation on that front is more likely, potentially alongside Middle East escalation.

  “But Russia almost certainly will look around and say, well, why now? You know, Trump will be even weaker six months from now.”at 26:29

US elections & politics

• Michael Every · Rabobank

  MAGA has had its day, and traditional Republicanism offers no solutions to current problems.

  Michael argues that many people already believe MAGA has had its day. He questions whether traditional Republicanism, the MAGA critics' 'rhino' alternative, has any solutions to where the country is now, and he says it does not. He also notes that no traditional party framework that ignores the link between top-down geopolitics and local politics has all the answers, so something will need to be reinvented.

  “You can make a convincing argument, and many people already are that, you know, MAGA has had its day... does traditional republicanism really have any solutions to where we are now? I would argue no.”at 38:05

AI chips & semiconductors

• Patrick Ceresna · Big Picture Trading

  Semiconductors broke to fresh multi-month lows despite the hyperscaler rally, so the AI trade keeps correcting.

  Apple, Microsoft and Amazon gapped 5-6% higher after the election, which would normally have turned semiconductors and the AI story around. Instead, AI infrastructure and semiconductor names fell and broke to fresh multi-month lows. Patrick concludes that the AI trade continues to correct, and the question is whether the hyperscalers have enough strength to keep the index elevated.

  “many of the AI infrastructure trades, semiconductors, were all breaking down and selling on such a big update. In fact, they were not just breaking down, but they were breaking to fresh new multi month lows.”at 47:10

US stock market outlook

• Patrick Ceresna · Big Picture Trading

  Nasdaq reclaiming its 50-day moving average would be meaningfully bullish; it has not done so yet.

  The index is heavily weighted toward the Mag Seven, and breadth is improving, but the Nasdaq did not take part in the post-election reversal. Patrick would view it as meaningfully bullish if the Nasdaq reclaimed its 50-day moving average and resumed its trend. The evidence for that is not there yet, and the key question is whether the hyperscalers have enough strength to keep the index elevated.

  “I would turn everyone's attention to the Nasdaq, which did not participate in this reversal at all, and I would view that it would be meaningfully bullish if the Nasdaq was able to reclaim its fifty day moving average and resume its trend.”at 48:00

US Treasuries & yields

• Patrick Ceresna · Big Picture Trading

  Treasury yields stayed in pre-election ranges, so bond traders do not see a regime change.

  Ten-year, thirty-year, two-year and shorter-term SOFR yields barely moved after the election. If the election had changed the macro regime, the dollar and yields should have responded, and they have not. Yields remain within their pre-election ranges, which Patrick reads as bond traders not being convinced anything has dynamically changed.

  “what we've basically seen is that the bond market did not move in any meaningful way. In other words, bond traders are not convinced that something has dynamically changed, and this to me is a big tell.”at 51:32

Gold & precious metals

• Patrick Ceresna · Big Picture Trading

  Gold's bounce is an oversold rebound after a near-20% drop, not the start of a new bull market.

  Gold fell close to $900, just under 20%, over two months before the election, and became very oversold. The election acted as a trigger for a counter-trend bounce. The macro backdrop that typically underpins robust gold bull markets, a weak dollar, lower rates and central bank easing, is not in place. Patrick sees this as an oversold bounce, expects it may fail even if gold gains another $100 to $200, and says there is no evidence a new bull market has started.

  “And so in my mind, this is an oversold bounce, and I would still be suspect that even if we get another 1 or $200 on the upside... I don't think that there's any evidence here that a new bull market has started.”at 53:26