Tom welcomes Luke Gromen of Forest for the Trees back to the show.
Luke explains the remaining options available to Russia and why the Chinese may benefit from the situation. We can’t sanction Russia’s energy because our own markets are so interconnected. Russia could ask for rubles or gold in exchange for energy. If that occurred Europe would have little choice. The real leverage in the Petrodollar system is on the ‘petro’ side. It will be interesting to see how this develops.
If energy payments begin moving outside of the SWIFT system, then the Petrodollar will be severely damaged. Regardless, it’s going to be disruptive and we’re going to see additional problems. Very likely we will see further money printing and more stagflation.
The United States’ attempts to simultaneously take on both Russia and China is a bad idea. We’re forcing the two of them together while Europe is trying to play both sides. This situation will end with China and Russia gaining status.
Russian citizens have also been buying gold. This crisis will hurt their citizens, but this isn’t Russia’s first rodeo. The fact that Putin has done this either means he’s lost his mind or he has a plan and found a window of opportunity.
Luke discusses many of the problems that could be created because of sanctions being imposed on Russia. We could see serious spillover effects on bonds and real yields. The United States can’t afford higher rates, and they can’t remove Russia’s oil without destroying their own markets.
Luke notes that we could see big changes should Russia use their gold as leverage. He gives us several possible scenarios that could occur should gold be revalued.
Given everything that is occurring, the Fed will only make a token effort on rate hikes.
Lastly, Luke discusse why having Bitcoin could be just as important as holding physical metals.
Time Stamp References:
0:00 – Introduction
1:31 – Russia’s Options
7:55 – Forced Solutions
10:14 – China & Europe
16:06 – Russia’s Gold
20:37 – Bond Market Risks
24:57 – LBMA & Comex Risk
27:29 – Scenarios
35:38 – Weaponizing Bitcoin
38:26 – Fed & EuroDollar
43:30 – Taper/Tighten?
47:20 – Gold in 2019
49:58 – Trudeau & Miners
53:53 – Crypto & Fiat Risk
58:05 – Hedging Options
1:01:55- Wrap Up
Talking Points From This Episode
Luke Gromen began his career in the mid-1990s in Research at Midwest Research before moving over to institutional equity sales and becoming a partner. While in sales, Luke was a founding editor of Midwest’s widely-read weekly summary (“Heard in the Midwest”) for the firm’s clients. He aggregated and combined proprietary research from Midwest with inputs from other sources.
In 2006, Luke left FTN Midwest to become a founding partner of Cleveland Research Company. At CRC, Luke continued to work in sales and edit CRC’s flagship weekly research summary piece (“Straight from the Source”) for the firm’s customers.
In 2014, Luke left Cleveland Research to found FFTT, LLC (“Forest for the Trees”), a macro/thematic research firm catering to institutions and individuals that aggregates a wide variety of macroeconomic, thematic, and sector trends in an unconventional manner to identify investable developing economic bottlenecks.
Luke also provides strategic consulting services for corporate executives. He is a graduate of the University of Cincinnati and received his MBA from Case Western Reserve University and earned the CFA designation in 2003.