An Epic Battle for the Rules Based Order
What this covers
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Wild Fires, Presidential Inaugurations, Rallying Stock Markets, Mass Deportations, Airplane Crashes, Technological Breakthroughs, Semiconductor Stocks Crashing, Volatility Spikes, and the escalation of Trade Wars...
And that was just January!
In short, 2025 is off to an Epic start and as the Rules Based Order is challenged, we expect the rest of the year to follow suit. The clip found in the link below sums it up about as well as possible.
https://www.youtube.com/watch?v=4KB2xignE6c
In short, Buckle Up!
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Enjoy!
FULL-LENGTH EPISODE 109 (February 2, 2025)
Source description (no synthesized summary yet).
The breakdown of the post-WWII rules-based international order is driving geopolitical and market volatility in 2025, with Trump's protectionist stance accelerating the challenge to US dominance, likely producing 6-9 months of disorientation before potential stabilization and renewed gains.
- Trump views the US as the 'king of the jungle' and is acting aggressively on tariffs, annexation rhetoric, and trade renegotiation to reassert dominance
- Tariffs function similarly to interest rate hikes by constraining dollar flows globally, forcing a 6-9 month adjustment period for the world to understand the new regime
- 2025 mirrors 2022's structure: regime change (tariffs vs rate hikes), uncertainty, and early downside before potential recovery once the new order settles
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The rules-based order established post-World War II set up the United States as the top dog and favors its policies, creating structural advantage for the US while disadvantaging other countries that naturally seek to climb the pyramid.
“this system also sets up a certain country to be the top dog were as it were and it favors um you know their policies and some people see the rules-based order as a bad thing for lack of a better way of saying it and over time people who are not at the top of the pyramid like to climb to the top of the pyramid and so that's kind of what we have going on”
Countries ranked below the top of the rules-based order pyramid naturally seek to climb to the top over time, causing the current wave of geopolitical and market instability as challengers like China confront US dominance.
“over time people who are not at the top of the pyramid like to climb to the top of the pyramid and so that's kind of what we have going on over the last I don't know I would say several years now but it's kind of coming to a head”
As an investment analyst, the proper job is to forecast what will happen in the world and markets, not to judge whether geopolitical outcomes are morally good or bad; moral judgment is separate from analytical responsibility.
“as analysts it's not our job to figure out whether this is a good thing or a bad thing it's not our job to figure out whether this is a moral uh prerogative or if this is a negative thing that the us is going to unleash on the world it's fine to have those opinions but as analysts especially analysts for investment portfolios our job is to figure out what's going to happen whether or not it should happen in the first place or not”
As analysts, the task is to predict what will happen, not to judge whether Trump's policies are morally good or bad, or whether US dominance is justified—the focus must be on outcome analysis, not value judgment.
“as analysts it's not our job to figure out whether this is a good thing or a bad thing it's not our job to figure out whether this is a moral uh prerogative or if this is a negative thing that the us is going to unleash on the world it's fine to have those opinions but as analysts especially analysts for investment portfolios our job is to figure out what's going to happen whether or not it should happen in the first place or not”
The rules-based order is the post-WWII playbook for global governance that enabled free trade, integrated supply chains, and a more globalized world, but it systematically favors the top-ranking country (the US) and its policies.
“it's essentially the playbook for how the world was set up up to be governed post World War II and there are many positive aspects of this and you know we we had we were able to rebuild Europe and we had free trade lanes and you know trade greatly expanded and Supply chains became integrated and we had a more globalized and somewhat peaceful world than we did during World War II however this system also sets up a certain country to be the top dog were as it were”
Despite the US's aging demographics and relative decline, it still has superior power projection capabilities compared to any competitor, and since geopolitical outcomes are relative, the US is still favored to prevail.
“I just happen to think the US still despite its aging profile and despite perhaps it isn't what it used to be it's still has the ability to throw a knockout punch better than anybody else in the world and since this is a relative game then I think that they still favors the us as we move forward”
Critics of Trump's tariff plans argue they are inherently and automatically harmful and will not work; the speaker disagrees and argues these critics have not accounted for: (1) the big picture context of US dominance, (2) the problems other countries currently face, and (3) Trump's willingness to actually push through on tariffs this time (unlike his first term restraint).
“we've talked about this a lot over you know over a couple different episodes in December and there's this popular idea out there that tariffs are just an absolutely horrible thing it's going to lead to all kinds of problems and the us is going to really get hurt by this and and I'm not going to go over everything we've talked about before I would just say that I think people who automatically say that they're bad and they're automatically not going to work I don't think they've taken the big picture into account I don't think they've taken into account where other countries are with respect to their own problems and I don't think they have taken into account Trump's um willingness to really push the issue this time”
Those who automatically say tariffs are bad and won't work haven't accounted for the big picture, other countries' problems, or Trump's demonstrated willingness to actually implement tariffs this time (unlike his more cautious first term).
“I think people who automatically say that they're bad and they're automatically not going to work I don't think they've taken the big picture into account I don't think they've taken into account where other countries are with respect to their own problems and I don't think they have taken into account Trump's um willingness to really push the issue this time I think in his first term he was much more careful Than People expected him to be”
Tariffs and interest rate hikes function similarly: both reduce available dollars globally, forcing foreign entities to operate with less dollar cash flow while maintaining debt service obligations and energy purchases, creating analogous stress.
“rate hikes are similar to tariffs rate hikes cause uh fewer profits uh for the whole world because um it makes the dollar stronger and as the dollar gets stronger it puts pressure on them it means they end up with less dollars in their pockets tariffs kind of do the same thing you know if tariffs tariffs are kind of attacked on imported goods and so the rest of the world will be getting less dollars or potentially fewer dollars than they typically do but yet they still need dollars to operate they still need dollars to service their debts they still need dollars to buy energy”
Trump's tariff threat may partly be driven by concern over gold imports into the US from London, causing gold flows to shift geographically as US entities seek to secure supply before potential tariffs, driving recent gold rally.
“part of the reason that the gold has been rallying is it has to do with Trump's tariffs he hasn't specified exactly the details of what will be tariffed and what won't be tariffed and he hasn't talked about exceptions and one of the worries is that people who are who are who have exposure to gold in the United States um and may have to deliver have been have been um you know asking for the gold from London for delivery and so gold has been coming into the United States from London as as price has risen so it'll be interesting to see how that plays out over the next couple weeks”
Trump has already escalated trade wars, begun mass deportations, and caused stock market volatility through tariff announcements and threats—this is evidence that his rhetoric is translating into action, not bluster.
“we have already had uh escalation of trade Wars we have already had plain loads of uh Deportes from the United States to foreign countries being returned and then being sent back again we have already had volatility in the stock market because every time Trump says something the market about tariffs the market sells off”
DeepSeek's announcement of a revolutionary AI breakthrough that would require less capex and fewer Nvidia chips than previously expected caused semiconductor stocks (led by Nvidia) to sell off 15-20% on a single Monday in January.
“over the weekend uh or the Friday night uh week ago was when the news came out about the Deep seek out of China um having a new revolutionary breakthrough in the AI technology that would not require as big of capex as many had previously expected and perhaps wouldn't need as many Nvidia chips as previously expected so Nvidia but all the chip stocks but led by an Nvidia had a huge draw down uh last week and on Monday they were down I think Nvidia was down 15 to 20% on Monday Alone”
The US will not come out of this geopolitical confrontation unscathed; it will get hit and may even bleed, though it retains superior knockout-punch capability compared to any other competitor, favoring US positioning in a relative contest.
“I do not think that the us is going to come out of this without getting hit I think they will get hit I think that the US will maybe even bleed I just happen to think the US still despite its aging profile and despite perhaps it isn't what it used to be it's still has the ability to throw a knockout punch better than anybody else in the world and since this is a relative game then I think that they still favors the us as we move forward”
The US dollar will likely break above 115 on the DXY (Dollar Index) in 2025, triggering chaos globally because stronger dollars reduce dollar cash flow to foreign entities, creating debt service and energy purchase stress worldwide.
“I think this chart if you look at this chart it's actually a very big cup and handle formation for me and at about the 115 level if the dxy were to break above 115 I think you're going to start to see a lot of Chaos in in the world because as the US dollar gets stronger gets stronger it causes all kinds of problems around the world for many of the reasons we've discussed many times before”
The 30-year dollar index (DXY) chart shows a long-term uptrend since a significant drawdown 25 years ago, resembling 'a pretty good-looking chart'; many observers dismiss this as unsustainable due to US fiscal problems, but the speaker argues the relative strength of the USD versus its competitors makes continued upside viable.
“this is a chart of the dollar this is a 30-year chart of the dollar now I think you know anybody who who would look at this chart if if they didn't know it was the dollar they would look at this chart and they'd say well that's a pretty good-looking chart you know it obviously had a big draw down 25 years ago but since then it's been steadily moving up and to the right but because it's the dollar a lot of people think well it just can't continue higher the has way too many problems and this is just doomed to fail”
Tariffs function similarly to interest rate hikes in constraining global dollar flows: rate hikes strengthen the dollar and reduce profits for exporters (fewer dollars in their pockets), while tariffs do the same by reducing dollar flows into trading partners.
“rate hikes cause uh fewer profits uh for the whole world because um it makes the dollar stronger and as the dollar gets stronger it puts pressure on them it means they end up with less dollars in their pockets tariffs kind of do the same thing you know if tariffs tariffs are kind of attacked on imported goods and so the rest of the world will be getting less dollars or potentially fewer dollars than they typically do but yet they still need dollars to operate they still need dollars to service their debts they still need dollars to buy energy so in many ways I think the Tariff regime could be similar to the interest rate hiking regime”
The best tactical trade occurs when multiple extremes align: price at extremes, sentiment at extremes, relative strength at extremes, positioning at extremes—allowing traders to act with high conviction on mean reversion trades.
“we've talked many times the the easiest to do a trade when everything lines up so if you have positioning at extremes you have sentiment at extremes you have price at extremes you have relative strength at extremes then that is something that that that that that typically bodess well for at least a shortterm tactical trade”
Trump is unlikely to walk back tariff threats or geopolitical threats (annexing Greenland, retaking Panama Canal, tariffing Canada/Mexico/China) because he does not want to be seen as a loser, making dismissing his threats as bluff a fundamental misreading of the situation.
“now this is not something that he would want to walk back on all of these things he doesn't like to be seen as a loser whether or not you see him as that again it's irrelevant he doesn't want to be seen as that and so I think the idea that all of this is just Bluster and it's all a bluff I I I think is completely misreading the situation”
Tactical trading strategy (buying hedges at VIX 15-16, selling at VIX 20+) has worked consistently over the last year and will likely continue until market structure changes, allowing traders to monetize VIX reversion cycles.
“despite being macro guys that we're always looking for different ways and places to make money we keep coming back to the US Equity Market is probably the best place to do it if money is going to be made but we don't think you can do it without protection you should always have some kind of protection on the downside that's why you always hear me talking about either I have some Hedges or cash on the sidelines or t- bills lined up or or whatever it is but one of the things that we've done is we buy Hedges when the vix is around 15 or 16 and we sell those Hedges when the vix is above 20 and you can see over the last year or so you know the vix jumps up into the 20 23 20 to 23 range and then inevitably it comes back down to 15 and then it jumps up into the 20 to 25 range and it comes back down to 15 and then it spikes then it comes back down so we've kind of been doing that off and on for the last couple years and and it seems to be working so we'll continue to do that with a portion of the portfolio until it stops working”
2025 can be very similar to 2022 from a price action perspective because both involve a regime change: 2022 had an interest rate hiking cycle nobody fully understood, while 2025 has a tariff cycle nobody fully understands, both creating uncertainty in risk assets.
“I I think that 2025 can be very similar to 2022 from a price action perspective if remember at the beginning of 2022 it was kind of a regime change as far as interest rates the FED had embarked on a uh an interest rate hiking um cycle nobody was sure how far they would go how fast they would go they didn't know what the terminal rate would be and so it caused a lot of uncertainty not only uncertainty but just unfamiliarity people hadn't been used to an interest rate Rising cycle for for over a decade and so for the first six to nine months of the year we saw significant Downs side um in the equity markets”
Gold's long-term price target remains $5,000, and current tariff regime and geopolitical instability reinforce this thesis rather than changing it.
“we've said for a long time that we think gold will end up going to $5,000 um with what's happening in the world now I think that is still very much the case”
Tariff cycle is a wholesale change in how the US conducts business after 30-40 years of minimal dramatic tariff use, requiring significant adjustment time (6-9 months) for global markets to adapt to unfamiliar policy regime.
“we don't have an interest rate hiking cycle necessarily on Deck but we have a tariff cycle on deck and we haven't this this is a wholesale change in the way the United States has done business you know for the last 30 40 years the US has not at least not dramatically used tariffs you know Trump wants to dramatically change the way the US does business and that's going to take a lot of getting used to it's going to cause a lot of uncertainty”
When positioning becomes extreme, sentiment becomes extreme, price becomes extreme, and relative strength becomes extreme—when all four align—that typically creates a favorable setup for tactical trades.
“the easiest to do a trade when everything lines up so if you have positioning at extremes you have sentiment at extremes you have price at extremes you have relative strength at extremes then that is something that that that that that typically bodess well for at least a shortterm tactical trade”
The speaker explicitly rejects the accusation that he is an American exceptionalist, clarifying that the US will suffer significant harm from tariff escalation but will still ultimately prevail relative to competitors due to superior power projection.
“I want to be absolutely clear whenever I talk about this stuff I do not think that the us is going to come out of this scot-free I do not think that the us is going to come out of this without getting hit in fact one of the analogies that I've used used many times”
Speaker and friend Todd identify the US equity market as the best place to make money despite macro uncertainty, but advocate always having downside protection (hedges, cash, T-bills).
“I have done a lot over the last couple years and you guys have heard me talk about my friend Todd and my friend Todd and I talk about this all the time is despite being macro guys that we're always looking for different ways and places to make money we keep coming back to the US Equity Market is probably the best place to do it if money is going to be made but we don't think you can do it without protection you should always have some kind of protection on the downside”
Speaker and Todd employ a specific tactical hedging strategy: buy hedges when VIX is around 15-16, sell those hedges when VIX is above 20, and repeat this cycle, which has been working over the past 1-2 years.
“one of the things that we've done is we buy Hedges when the vix is around 15 or 16 and we sell those Hedges when the vix is above 20 and you can see over the last year or so you know the vix jumps up into the 20 23 20 to 23 range and then inevitably it comes back down to 15 and then it jumps up into the 20 to 25 range and it comes back down to 15 and then it spikes then it comes back down so we've kind of been doing that off and on for the last couple years and and it seems to be working”
The speaker has a long-term target for gold of $5,000 and still believes this target is very much the case given what is happening in the world.
“gold looks fantastic as far as the longterm you know we've said for a long time that we think gold will end up going to $5,000 um with what's happening in the world now I think that is still very much the case”
Trump was elected in part because he was willing to articulate what few political leaders were saying: that the US remains the dominant power ('king of the jungle') and should act accordingly, confronting challengers rather than accommodating them.
“part of the reason that Trump got elected and Trump is obviously contributing to the craziness but part of the reason that he got elected was he was one of the few people saying listen the United States is still the king of the jungle and while all of these jackles and upstarts and other Predators want to come around and nip at the heels of the king of the jungle we are still the king and we're going to start acting like it”
Gold's recent rally has been partly driven by Trump's tariff policy uncertainty, as gold traders and people with US exposure have been importing gold from London in case tariffs are applied to gold shipments, creating a physical demand flow.
“part of the reason that the gold has been rallying is it has to do with Trump's tariffs he hasn't specified exactly the details of what will be tariffed and what won't be tariffed and he hasn't talked about exceptions and one of the worries is that people who are who are who have exposure to gold in the United States um and may have to deliver have been have been um you know asking for the gold from London for delivery and so gold has been coming into the United States from London”
As of late November/early December 2024, equity markets reached July 2024 highs with RSI and stochastic indicators at extreme levels, signaling an expected pullback which occurred in the first 7-10 days of January 2025.
“at one point uh I think it was either late November or early December we talked about how markets had gotten back to where they were in July High when everything was at its high we had the RSI at extreme highs we had the stochastics at extreme highs and that we were looking for a pullback well we got the pullback we got the pullback into the first I don't know first seven to 10 days of January”
The industrial sector surged substantially over recent weeks (largest surge in 2 years), with six consecutive days of 68%+ of stocks advancing, which signaled buy signals in some technical systems and indicated breadth expansion.
“we saw a substantial surge in the industrial sector um over the last couple weeks you know again we had the Hard Sell Off into like January 10th 11th and then we had a two-e rally that was really pretty significant um and it's one of the most biggest surges in two years for industrial the industrial sector so you know it's it was real and so much so that it actually started in some some systems that people use it was starting to to Signal buy signals and here here we just you know it was one of the big a record for for for Brett in other words um I think there was six days in a row where more than 68% of stocks went up”
Gold may rally to test $3,000 in the next week or so as commercial shorts increase further, and if sentiment reaches 80s-90s while price remains at extremes, this would present a tactical short opportunity (separate from strategic gold positioning).
“my guess is that over the next week or so gold probably runs up I don't know maybe it even tests $3,000 and I would expect expect this commercial short to get a little bigger if that happens then sentiment is going to probably be in the 80s or 90s and I think you know that may be an opportunity if you if you do tactical trades perhaps an opportunity to do um some puts or some kind of a tactical short again I wouldn't do that with your strategic gold position but if it's something that you look to also have do tactical trades on that would make sense”
Santiago expects more downside in equity markets between now and end of March 2025 across all equity markets, not just semiconductors, though timing is uncertain.
“I do think still between now and the end of March we're going to going to see more downside in the equity markets not just semiconductors but about all Equity markets um but you know whether that happens right away I I don't know”
Trump views the United States as the king of the jungle and believes he has a mandate from Heaven to put the king squarely on the throne and keep him there, demonstrated not just by rhetoric but by rapid execution on tariffs, deportations, and geopolitical threats.
“Trump views the United States as the king of the jungle and he believes he has a mandate from Heaven to put the king squarely on the throne and keep him there and so what we've seen even when he was running before he was inaugurated and certainly since he's been inaugurated is him not only talking about doing it but doing it and doing it with speed we have already had uh escalation of trade Wars we have already had plain loads of uh Deportes from the United States to foreign countries being returned and then being sent back again”
VIX is expected to spike above 20 multiple times in 2025, with a pattern similar to 2023-2024 (VIX oscillating 15→20→15 range), but potentially with larger spikes similar to August 2024 (when Japan turbulence and Mag-7 volatility caused VIX spike).
“I I think we're going to have it I don't know if we're going to have a year like 2020 that would be pretty extreme but it wouldn't surprise me at all if we have a couple spikes the way we did uh last August”
2025 will be characterized by volatility in both directions (neither uniformly bullish nor bearish), with January serving as a perfect microcosm: terrible drawdowns mixed with furious rallies as Trump executes policy and the market reprices expectations.
“I I am of the belief that this year is going to be uh characterized by volatility if I could think of one word to sum up this year of what I think it's going to be volatile is the best word I can come up with now that doesn't necessarily mean it's all to the downside I do think there's going to be downside but I think it's going to be volatile in both directions in other words I think January is probably a perfect microcosm for the whole year we're gonna see terrible draw Downs we're g to see Furious rallies we're going to see Trump being Trump we're gonna see Trump haters hating Trump and we're going to see a challenge and a of this rules rules-based order”
January 2025 is a microcosm of what 2025 will be: terrible drawdowns, furious rallies, Trump acting true to form, Trump opponents opposing him, and ongoing challenge to the rules-based order.
“I I I am of the belief that this year is going to be uh characterized by volatility if I could think of one word to sum up this year of what I think it's going to be volatile is the best word I can come up with now that doesn't necessarily mean it's all to the downside I do think there's going to be downside but I think it's going to be volatile in both directions in other words I think January is probably a perfect microcosm for the whole year we're gonna see terrible draw Downs we're g to see Furious rallies”
Trump has publicly discussed annexing Greenland, retaking the Panama Canal, and imposing tariffs on Canada and Mexico (two of the US's biggest trading partners and allies), and he dislikes being seen as a loser, so he is unlikely to walk back these positions.
“he's already talked about annexing Greenland and he's talked about taking back the Panama Canal and he's talked about putting tariffs on our two biggest trading partners and two of our biggest allies now this is not something that he would want to walk back on all of these things he doesn't like to be seen as a loser whether or not you see him as that again it's irrelevant he doesn't want to be seen as that”
The US dollar 30-year chart shows a big cup-and-handle formation, and if the dollar index (DXY) breaks above 115, it will trigger significant chaos in global markets due to the dollar's critical role in servicing global debt.
“I think this chart if you look at this chart it's actually a very big cup and handle formation for me and at about the 115 level if the dxy were to break above 115 I think you're going to start to see a lot of Chaos in in the world because as the US dollar gets stronger gets stronger it causes all kinds of problems around the world”
It may take 6-9 months for the world to figure out what Trump will actually do on tariffs and at what pace, after which clarity may allow markets to stabilize and potentially see good gains.
“I think it might take six to nine months for the world to kind of figure out what the heck's going on what Trump's going to do and get clarity on how fast he's going to do it but I think after that happens we have have the potential to see some good uh gains as a result of it um I just think we have to get through it first”
Gold versus commercial short position relationship historically signals pullbacks when commercial shorts reach current extreme levels, and speaker expects gold to potentially test $3,000 over the next week or so before pullback occurs.
“whenever the commercial shorts get as large as they are now it typically ends up being a pullback for gold now we can see that that happened a little bit at the end of the year you know as as as as as price as as price came down then the commercial shorts started to get a little smaller but then as gold has rallied into January um you know the commercial shorts started building up again and remember the commercial short here this is a week delayed um this is only up through Tuesday of last week so it's actually four days delayed so the short position is actually probably a little bit bigger than this which means the commercial short position is probably the biggest it has been since 200 early 2020”
The VIX has remained mostly between 15-20 since COVID, with occasional spikes (22/23 around rate hikes, August spike with Japan turbulence and Mag7 issues), but speaker does not expect 2020-like extreme volatility, only potential spikes similar to August 2024.
“this just shows that since Co you know really um the vix has really stayed you know around 20 or lower for most of that time now we had a couple of spikes up in early 20 or late 22 or I'm sorry around 22 when the rate hikes were going on uh we had a big one last fall or last August uh you know when um we had some turbulence in in in Japan and in the mag 7 um but by and large for the last couple years you know the vix has remained between 15 and 20 and so I I think we're going to have it I don't know if we're going to have a year like 2020 that would be pretty extreme but it wouldn't surprise me at all if we have a couple spikes the way we did uh last August”
The Marvin Haggler vs Tommy Hearns fight (1985) is an apt analogy: Hearns hurt and cut Haggler badly in Round 1 but Haggler recovered and knocked Hearns out in Round 3, illustrating that challengers will land devastating blows on the US but the US retains superior knockout power.
“the Haggler versus Hearns fight now Haggler is on the right and Tommy Hearns is on the left Tommy Hearns on the left his nickname was the Hitman and he was you know known for throwing incredibly fast and Incredibly power powerful punches and the reason I bring this up is in this was a fantastic fight in the first round Tommy Hearns hurt hit Marvin Haggler so hard that a huge cut opened up above Marvin hagler's eye and it was bleeding so much they almost stopped the fight in the first round but somehow his trainers got it stopped and then they went another round and then in the third round Marvin Haggler knocked Hearns out”
Nasdaq (QQQ) exhibited similar pattern to S&P 500: hard selloff into early January, rally into mid-week, hard selloff as semiconductors rolled over when China AI news emerged, then late-week rally, followed by rollover when Trump announced tariff news.
“as far as the NASDAQ or the qqqs we had the same thing we had a hard sell off into the first week of of January and then we had a rally uh then we had a hard sell off last week as the semiconductors rolled over but then towards the end of the week um you know rallied again and then again in the last couple hours when Trump came out with the Tariff news we rolled o we started to roll over again”
DeepSeek's announced AI breakthrough requiring less capex and fewer Nvidia chips than expected caused Nvidia and semiconductor stocks to sell off 15-20% in a single day (Monday following announcement), sitting at multiple support levels with significant near-term downside risk still possible.
“at the the last week it was almost back up at its all-time high and then over the weekend uh or the Friday night uh week ago was when the news came out about the Deep seek out of China um having a new revolutionary breakthrough in the AI technology that would not require as big of capex as many had previously expected and perhaps wouldn't need as many Nvidia chips as previously expected so Nvidia but all the chip stocks but led by an Nvidia had a huge draw down uh last week and on Monday they were down I think Nvidia was down 15 to 20% on Monday Alone”
Industrial sector experienced substantial 2-week surge (one of biggest in 2 years) into January, with 6 consecutive days of 68%+ stock participation, signaling breadth expansion and generating buy signals in some technical systems.
“we saw a substantial surge in the industrial sector um over the last couple weeks you know again we had the Hard Sell Off into like January 10th 11th and then we had a two-e rally that was really pretty significant um and it's one of the most biggest surges in two years for industrial the industrial sector so you know it's it was real and so much so that it actually started in some some systems that people use it was starting to to Signal buy signals and here here we just you know it was one of the big a record for for for Brett in other words um I think there was six days in a row where more than 68% of stocks went up”
The DIA (Dow Jones ETF) pulled back into early January as expected, then rallied furiously, with RSI only in the 60s and stochastics at 98, indicating sustained but not extreme bullish positioning compared to December extremes.
“we talked about how markets had gotten back to where they were in July High when everything was at its high we had the RSI at extreme highs we had the stochastics at extreme highs and that we were looking for a pullback well we got the pullback we got the pullback into the first I don't know first seven to 10 days of January and then we've seen a furious rally now the RSI has only gotten back into the 60s which is not high at all but the stochastics are back at 98 so that's getting pretty high up there but we're not at extreme territories as far as sentiment and and and these measurements as we were back in December and certainly not as high as we were back in July”
Semiconductor stocks are sitting at multiple levels of support and the next couple weeks are critical for determining whether more downside occurs in equities through March 2025.
“so I think the next couple weeks are very important for semiconductors I do think still between now and the end of March we're going to going to see more downside in the equity markets not just semiconductors but about all Equity markets um but you know whether that happens right away I I don't know but we're sitting at a pretty interesting place on the semic”
Speaker clarifies that his VIX hedging strategy does not necessarily mean buying call options on the VIX itself, but rather hedging equity positions, which trades with similar dynamics.
“to be clear I'm not necessarily saying buying call options on the vix uh you can do that if if you're if you're familiar with how those Securities work but we typically will do it on you know the equity markets but it it kind of Trades the same anyway it's just an idea something to think about”
Santiago Capital is the speaker's wealth management business; they started the Macro Alchemist research service in June/July, put it behind a paywall at the beginning of the year with founder signups.
“Santiago capital is my wealth management business you know we've been doing this show now for a little over two years uh two and a half years um we started the macro Alchemist uh last July or last June and that is kind of a high-end uh research service one of the things and and then we we we started we put that behind a pay wall at the beginning of the year and we've had a number of people sign up for it thank you for everybody who signed up as as as Founders”
Trump came out on Friday and said tariffs on Canada, Mexico, and China that he had talked about before are still in play, which sent markets into decline in the final hours of trading before the weekend.
“but then later in the week we started to see a rally again and at the by Friday everything was back or very close to its all-time high until about an hour and a half too when Trump came out and said the tariffs that I talked about putting on Canada and Mexico are still in play the tariffs that I talked about putting in China are still in play and so now here we are over the weekend and we're going to come in on Monday morning and see how that uh how that affects things”
The speaker does not recommend buying call options on the VIX directly but typically does tactical trades on equity markets, which trade similarly to the VIX but are more accessible.
“to be clear I'm not necessarily saying buying call options on the vix uh you can do that if if you're if you're familiar with how those Securities work but we typically will do it on you know the equity markets but it it kind of Trades the same anyway it's just an idea something to think about”
The Pool Hall Junkies scene with Christopher Walken illustrates the dynamics of what will unfold: a dominant power enforcing its status through superior force when challenged, even at cost.
“one of the best movie scenes that I have ever seen features Christopher Walkin in a uh in a movie called pool hall junkies now I'm not going to spoil this for you but will leave the link to it in um the description of the video here I strongly encourage everybody to watch this two-minute video because to me it just really sums up where we're at and why we're here and probably what's going to happen going forward”
Santiago Capital is the speaker's wealth management business that has been running for 2+ years, while the Macro Alchemist research service was started in June/July 2024 and went behind a paywall at the beginning of 2025.
“Santiago capital is my wealth management business you know we've been doing this show now for a little over two years uh two and a half years um we started the macro Alchemist uh last July or last June and that is kind of a high-end uh research service one of the things and and then we we we started we put that behind a pay wall at the beginning of the year”
The NASDAQ (QQQ) has experienced repeated sell-offs and rallies in January: a hard selloff into the first week of January, a rally, then a hard selloff last week as semiconductors declined, followed by an end-of-week rally, then another rollover when Trump announced tariff news.
“as far as the NASDAQ or the qqqs we had the same thing we had a hard sell off into the first week of of January and then we had a rally uh then we had a hard sell off last week as the semiconductors rolled over but then towards the end of the week um you know rallied again and then again in the last couple hours when Trump came out with the Tariff news we rolled o we started to roll over again”
Sentiment indicators show no extreme readings currently: gold sentiment is in the 70s (which is elevated but not extreme without reaching 80s-90s), and most other sentiment metrics are mid-range, providing limited signal value.
“the only thing that's really kind of getting up there well coffee is high but I mean that's not something we talk about a lot here but you know gold is in the 70s now gold and silver have had a really good start to the year um finished at an all-time high on Friday but it's in the 70s you know again for something to get extreme it needs to be in at least the 80s and the potentially the 90s”
Silver shows a similar technical picture to gold with commercial shorts growing again as price rallied in January, though not yet at extreme levels like gold, and positioning remains delayed by ~4 days.
“silver um you know kind of a similar picture as as price pulled back in December you saw the commercial short position decrease but now as uh price has rallied a little bit to start the year the commercial short position started to get big again again not an extreme territory it's not as Extreme as as the gold position is but again this is delayed too so it's very possible that over the last couple days the commercial short position increased uh dramatically”
After the 6-9 month tariff adjustment period, the US might have to go back to QE or the whole world might, which could support equity prices in the 1-2 years following the clarity phase.
“and I don't know maybe that's due to the US has to go back to QE or something maybe the whole world does I don't know what will be I just think that that that that that's a possibility that that should not be ruled out”
A Christopher Walken scene from 'Pool Hall Junkies' serves as an analogy for the likely outcome of Trump's assertion of US dominance: the dominant power reasserts its position decisively through aggressive action.
“one of the best movie scenes that I have ever seen features Christopher Walkin in a uh in a movie called pool hall junkies now I'm not going to spoil this for you but will leave the link to it...to me it just really sums up where we're at and why we're here and probably what's going to happen going forward”
The macro Alchemist premium subscription service launched in January with long-form monthly research reports on themes/trends, bi-weekly 'think laugh cry' reports, twice-monthly live Q&A sessions, special deep-dive reports, and guest reports, plus access to milkshake master class.
“what you get for being a macro Alchemist member is you get the two times a year or two times a month we put out fairly you know long form research reports on a theme or an emergent Trend that we think is important or some kind of uh you know something that's going on in the markets that we think is is worthy of digging in to on a deeper basis we also put out two think laugh cry uh reports a month we're going to start having two times a month we're going to have live q&as online where subscribers uh we can ask questions and we're going to go over the reports that we have recently uh put out or whatever questions the community wants to discuss we're also going to have special Deep dive reports from time to time as well as guest reports and at some point this year we'll do the the milkshake uh master class and anybody who has signed up for the macro Alchemist the premium subscription has access to that as well”
Substack newsletter launching with approximately 3-4 times per month (weekly) articles on timely/important market topics at depth shallower than Macro Alchemist reports, available free (with existing Macro Alchemist subscribers receiving complimentary access).
“we launched a substack account um now so far we've only posted things for the premium version which is also the macro Alchemist version but tomorrow will be our first release um on on the basic uh platform of substack and what we're going to write and in in in this probably three to four times a month you know once a week type thing I'm going to write an article or a paper on something that I think is either timely or is important to understand now this these are not going to be as deep dive they're not going to be as long as the typical macro Alchemist reports uh but for those of you who are interested in this type of stuff we think that you might uh be interested uh in reading these but you don't want to subscribe to the full macro Alchemist then this is an option for you”
The put-call ratio was at historic lows in December (lowest in two years), then rallied into the middle of last week before declining again, and remains pretty low (indicating bullish positioning) but not at the extreme lows seen in December.
“at the end of the year we showed how the put call ratio was as low as it has been in two years now it it rallied a lot um you know into into the middle of last week and then it came down again and now it's it's still pretty low it's just not as EX it's not the extreme lows that we saw in December”
There were 10 to 14 days of good market action and higher prices until the AI news about DeepSeek broke a week prior to the current commentary.
“there were certainly you know 10 to 14 days of good Market action uh higher uh until we had the the AI news a week ago”
Macro Alchemist members receive two long-form research reports per month on themes, emergent trends, or market developments worthy of deeper analysis.
“what you get for being a macro Alchemist member is you get the two times a year or two times a month we put out fairly you know long form research reports on a theme or an emergent Trend that we think is important or some kind of uh you know something that's going on in the markets that we think is is worthy of digging in to on a deeper basis”
The speaker has just launched a Substack account with basic (free) and premium tiers; the free tier will feature 3-4 articles per month (roughly weekly) on timely or important topics, shorter than full Macro Alchemist reports, starting tomorrow with a report on the rules-based order.
“another thing we just started uh is we launched a substack account um now so far we've only posted things for the premium version which is also the macro Alchemist version but tomorrow will be our first release um on on the basic uh platform of substack and what we're going to write and in in in this probably three to four times a month you know once a week type thing I'm going to write an article or a paper on something that I think is either timely or is important to understand now this these are not going to be as deep dive they're not going to be as long as the typical macro Alchemist reports... but tomorrow we're going to release the report on the rules-based order”
Anyone already subscribed to the Macro Alchemist gets complimentary access to the basic Substack tier.
“anybody who's already subscribed to the macro Alchemist gets complimentary access uh to the substack”
The speaker has been absent from content creation for a while but is excited to return and discuss the craziness happening in markets, politics, and social contexts.
“I know I haven't been here for a while uh but I'm excited to be back and to talking to everybody today we're going to talk about all the craziness that's going on in the world”
First Substack article (releasing tomorrow) will cover the rules-based order theme mentioned at episode opening, positioning this as starting point for Substack content.
“but tomorrow we're going to release the report on the rules-based order this is what I referred to at the beginning of this episode and I hope you guys check it out I would encourage you to check it out is that I think that's going to be a fun way to continue um kind of building the whole milkshakes markets Madness Santiago Capital macro Alchemist community”
Sentiment readings (not specified which sentiment index) show gold in the 70s, which is not extreme (would need 80s-90s for extremes), meaning no extreme positioning signals are present across risk assets currently.
“you know gold is in the 70s now gold and silver have had a really good start to the year um finished at an all-time high on Friday but it's in the 70s you know again for something to get extreme it needs to be in at least the 80s and the potentially the 90s”