Louis-Vincent Gave: The Dollar’s Breaking? China’s Winning? The End of U.S. Dominance?

Canada's economic days of casually selling oil and natural gas at a discount to the US while avoiding infrastructure investment are over; the country needs to build BC pipelines and Maritime LNG terminals.

“the days where you just you know fall back and just do business casually with the US and you know sell your oil at a discount to the US and sell your natural gas at a discount to the US. Um because building the infrastructure to do anything else is a little too complicated and uh it's easy to sell to the US so let's just do that. I think those days are over.”

Surveys have become less reliable in recent years compared to hard data; in 2022-2023, many surveys like ISM and PMI pointed to recession but hard data kept clicking upward, suggesting survey-based recession predictions were wrong.

“surveys in recent years seem to have become a lot less reliable... a lot a lot of investors, do you remember going back to 2022 and 2023, a lot of people ran around saying, 'Oh, we're heading into US recession. You know, ISM surveys are bad.' um uh like PMIs etc and power manufacturing a lot of the surveys pointed to a big softening if not a recession in the United States and the hard data just kept on clicking”

China announced construction of the Mouti hydro dam, which will be the largest hydro dam in the world and three times larger than the Three Gorges Dam; such projects cannot be completed in Canada or the US due to government bureaucracy, as demonstrated by the Labrador dam that came online years late and billions over budget.

“the Chinese just announced the construction of this Mouti hydro dam. It's going to be the largest hydro dam in the world. Three times larger than three gorgeous dam which is in China. And you would never see a project like that get done in Canada or the US. Never.”

China's fundamentals have improved dramatically: university graduates have increased from 1 million a couple decades ago to 13 million annually; patents filed per year in China now exceed the US annually; these improvements are visible in biotech, robotics, and energy industries.

“You've had a dramatic improvements in human capital. You've gone from a country that was graduating a million university students uh a couple decades ago to one that's now graduating 13 million university students. You have a country where you now have every year more patents being filed than in the United States. And and you're seeing the impact on things like the biotech industry, the robotics industry, uh the energy industry.”

The US dollar is now positively correlated to global risk, meaning when US equities decline, the dollar declines with them, making US assets suddenly less attractive to foreign investors compared to the previous 15 years when the dollar served as a safe-haven currency that would rise during downturns.

“the fact that the US dollar is now positively correlated to global risk is a super important development because it means that US assets suddenly become a lot less attractive to foreigners everywhere”

The Federal Reserve has a 2% inflation target, but inflation has been above that target for over 39-40 months (more than 3 years), meaning any competent money manager would question their approach and seek to fix the problem.

“the US inflation rate. So, the the Fed has a 2% inflation target, right? Um, it's been above that 2% inflation target for what? I'm I'm gonna I I can't is it what 39 or 40 months in a row now that it's been above that 2% target? I'll have to double check for you. I can double check, but it's in that ballpark. Um, that it's it's over three years that it's been above that 2% target. So, so that's that's number one. So, you know, if you're a money manager and you're below your target and you're missing your target for three consecutive plus years, usually you start questioning what you're doing.”

China is building 150 nuclear reactors between now and 2035 as part of one of the world's largest nuclear buildouts in history, and no other country will be able to catch up to this pace.

“The Chinese are currently building out one of the world's largest nuclear reactor buildouts in the history of mankind. They're building 150 reactors between now and 2035. And no one's going to be able to catch up to them.”

China has achieved cheaper electricity costs than the US following investments in nuclear, alternative energy, LNG plants, and coal plants, reversing the US's previous advantage from the shale revolution over the past 10-15 years.

“China today... has a cheaper cost of energy than pretty much anybody else on Earth following all the investments they made in nuclear in in alternative energy, uh, in in LG plants, in coal plants. They have the cheapest cost of electricity. Now, that is a huge comparative advantage that the US has had for the past 10-15 years thanks to the Shell revolution. that advantage is now shifting to to the US.”

BLS survey response rates have declined from 70-75% pre-pandemic to 60-65% post-pandemic, making job numbers less reliable because fewer businesses respond and responses arrive late, particularly during summer months.

“the BLS sends out a survey to 697,000 work sites, and that represents 147,000 different businesses across the US and across the different regions. And the response rate before the pandemic used to be 70 to 75%. Since the pandemic or after the fact, uh, now it's down to 60 to 65%. So, a lot of people aren't even responding to the survey, and when they do, it's coming in many weeks or many months later.”

The Fed has a 2% inflation target; inflation has been above that target for approximately 39-40 months (over three years), so any money manager missing their target for three consecutive years would start questioning their approach.

“the US inflation rate. So, the the Fed has a 2% inflation target, right? Um, it's been above that 2% inflation target for what? I'm I'm gonna I I can't is it what 39 or 40 months in a row now that it's been above that 2% target? I'll have to double check for you. I can double check, but it's in that ballpark. Um, that it's it's over three years that it's been above that 2% target.”

China produces more than twice the amount of electricity every single day than the US produces, consumes more beef than the US, and consumes more cars than the US, demonstrating that the Chinese economy is not in shambles.

“China produces more than twice the amount of electricity every single day than than the US produces. China today consumes more beef than than the US consumes. China consumes more cars than than the US consumes.”

The US market is disjointed, similar to the late 1990s, with expensive growth stocks and value stocks priced for a strong dollar and China crushing margins, whereas there is value in US industrials, energy, and materials stocks that would benefit from a weaker dollar and moderation in China's aggressive competition.

“I think it's a bit of a disjointed market just like it was in the late 90s between very expensive growth stocks and value stocks that uh uh you know that are essentially priced for you know a US dollar that stays strong which is already rolling over um for a China that keeps crushing everybody's margins.”

The DXY (US dollar index) is down approximately 10% this year and is structurally overvalued by about 20%, so the trend is clearly down even though specific price forecasts are unreliable.

“the DXY, it's down, I believe it's down around 10% this year... the dollar is probably overvalued by a good 20%. Um but uh you know I I don't want to say oh it's going to go down 20%... the trend is down”

BLS survey response rates have declined from 70-75% before the pandemic to 60-65% after, reducing data reliability; surveys have become less reliable than hard data in recent years, with ISM and PMI surveys in 2022-2023 predicting recession while hard data continued to show growth.

“the BLS sends out a survey to 697,000 work sites, and that represents 147,000 different businesses across the US and across the different regions. And the response rate before the pandemic used to be 70 to 75%. Since the pandemic or after the fact, uh, now it's down to 60 to 65%.”

China produced 12 million EVs in 2024 versus 2.4 million in the US, giving China 70% of the EV market; China controls 70-80% of global smartphone production; China controls 80% of the drone market; the lithium-ion battery is the common technology linking all three, and Western EV makers must source from China.

“in 2024, they produce 12 million EVs versus 2.4 million in the US. So they own 70% of that market. Smartphones, they control 70 to 80% of the product production of all smartphones across the world. Drones, they control 80% of that market. And the one element that all of these sectors have in common is the lithium-ion battery. And this is something they've dominated for many years now. But if you're an EV maker and you need a lithium-ion battery, you got to go through China.”

If something ticks all the boxes of a systematic process, you have to follow through on it, otherwise the process itself becomes meaningless.

“if if something ticks all my boxes then I feel I have to go for it because otherwise what's the point of having a process?”

Some costs (like telecommunications) have gone to zero because alternatives like WhatsApp and FaceTime replaced paid services, but these zero-cost categories cannot fall further, so future deflation is limited while costs like insurance keep rising.

“there's no doubt that there's some of our costs that have essentially gone to zero like you know telecoms is is a great example. Who still pays for international phone calls when you can call on WhatsApp or FaceTime or whatever else. So some of our costs have gone to zero. But this is where it gets interesting is you know these costs that have gone to zero, they're now at zero. So they can't fall anymore. Um, and meanwhile, to your point, insurance keeps going up.”

There are two kinds of people: those who have visited China and seen factories and future being built there, and those who haven't and believe Western claims that China is doomed; Westerners apply ideological blinkers to China because it is nominally communist.

“there there's two kinds of people in the world. There's people who've visited China and there's not so many because in the past 5 years there was COVID and then there was the Russian invasion of Ukraine and everybody decided China was the enemy etc. So most people haven't visited China in the past five years but there's the people who visit China and visit the factories and look at the products being made and they come out of there thinking and saying openly the future is being built over there.”

When the US dollar weakens structurally, emerging markets outperform; China is in a structural bull market due to government fiscal stimulus, the easiest monetary policy ever, and was the best-performing major stock market in the prior year; financials outperform globally during weak-dollar periods as firms expand balance sheets.

“now dollar down typically helps emerging markets uh more than more than most asset classes. And sure enough emerging markets do seem to be in in a bull market. Um, China is definitely in a bull market and you know that that bull market makes sense. You have a government that is doing more fiscal stimulus than it ever has done in the past. You have the easiest monetary policy in China that uh that you've ever seen. Um, and China was actually the best performing major stock market last year.”

$100 billion per month in trade surpluses provides a large fiscal cushion that 'pays for a lot of mistakes' and 'papers over a lot of cracks' in the Chinese economy.

“100 billion a month coming into your economy pays for a lot of mistakes. It papers over a lot of cracks. Um so it is not an economy that uh that is in shambles quite far from it.”

When analyzing trend-following opportunities, evaluate across five prisms: fundamentals (does it make sense?), valuations (are they attractive?), momentum (is direction positive?), investor positioning (is it crowded?), and policy support (does government back it?).

“when I see a trend developing in the market such as the the the recent outperformance over the past 18 months of of Chinese equity markets. I look at it through five prisms. First, you know, fundamentals... there's no point in buying things that make no sense... then you move to valuations... You look at the momentum... then you move to investor positioning... and finally, you get to policy support”

The Fed will cut rates in September 2024 because political pressure is relentless and job numbers were weak; absent massive CPI surprises to the upside, a rate cut is assured.

“I think they'll cut. I think they'll cut. the political pressure is is is pretty relentless. The jobs numbers just weren't that great. Um I think there's actually two CPI numbers between now and then unless those CPI numbers massively surprise to the upside. Um and I'm not trying to hedge myself here. Like I think they cut between us. I think they cut.”

Entrepreneurs are naturally bipolar paranoids who become very excited but also fear things will turn terrible; they primarily crave certainty, predictability, and clear rules to decide whether to invest.

“I think entrepreneurs are by nature u sort of almost bipolar paranoids. On the one hand they get very very excited and on the other it's like oh my god you know things are going to turn terrible etc. So the the the main thing entrepreneurs crave is certainty is predictability is you know they want to know what the rules of the game are and then they can decide okay I'm going to invest I'm not going to invest and I can get on with it.”

Trump could respond to $120/barrel oil by deploying strategic petroleum reserves like Biden did in 2022 (temporary fix lasting 4-5 months), or he could ban US natural gas and oil exports to ensure domestic manufacturing gets cheap energy, creating global price fragmentation.

“imagine that tomorrow either because of what's going on in the Middle East or what goes on in Russia or whatever that all goes back to 120 bucks. Um and then the question become how does Trump respond to this oil at 120 bucks? Does he do what Biden said did and say okay let's unleash the strategic petroleum reserve or alternatively does he say you know what if you want cheap energy you move here to the US I'm going to ban the export of US natural gas I'm going to ban the export of oil you want you know cheap energy for your procham plant you want cheap energy for your manufacturing plant make America great again American industrial renaissance build it here and we I'll guarantee that you get cheap energy in the US and we're not exporting our energy anymore.”

China's government has shifted from focusing on return-of-capital concerns (capital controls, Taiwan invasion fears) to return-on-capital discussions, indicating a sentiment shift from existential worry to economic analysis.

“a year ago when I was having conversations with with people on China, the debate was always about the return of capital. People didn't want to invest in China because they they told you, 'Look, uh, my money is going to get frozen like the money was in Russia.'... now fast forward to today and every conversation I have around China with with clients with investors has shifted to the return on capital”

Ford CEO Jim Farley visited China in September, toured the factories, bought a Xiaomi SU7 car, and brought it back to the US where he drives it to work; this is equivalent to the Pepsi CEO saying he drinks Coke and signals Western competitiveness crisis.

“Forzio came to China in September and he toured for a couple weeks. Um, and he ended up buying a Xiaomi SU7 and brought it back to the US. And this is what he drives to work. And and he had a two-page interview at the Wall Street Journal where he said that it was now incumbent for US companies to try to produce to the same levels as the Chinese.”

Data reliability is a critical concern for foreign investors; having the US President question the truthfulness of official economic data sends a 'harrowing message' to international investors because it mirrors the argument Westerners use to avoid Chinese investment due to data untrustworthiness, except now applied to the US.

“when you deploy capital you can never have full certainty when you deploy capital but you can certainly go out and seek it so to hear the top authorities in the land say oh don't trust this data this data is just BS um sends out I think a a pretty harrowing message for to a lot of foreign investors at the very least”

Economic processes depend on five factors: cost of land, cost of capital, cost of energy, cost of labor, and cost of government; China today has cheaper cost of energy than almost any other country following investments in nuclear, alternative energy, LNG, and coal plants; this is a huge comparative advantage that the US held for 10-15 years via the shale revolution.

“If you think of the economic processes you know essentially it's the combination of five factors you take the cost of land the cost of capital the cost of energy the cost of labor and the cost of government. Um, and I would argue that on all these five things, you know, China today, for the first time in 20 years, or probably for the first time in history, actually, what am I saying? Has a cheaper cost of energy than pretty much anybody else on Earth following all the investments they made in nuclear in in alternative energy, uh, in in LG plants, in coal plants. They have the cheapest cost of electricity. Now, that is a huge comparative advantage that the US has had for the past 10-15 years thanks to the Shell revolution. that advantage is now shifting to to the US.”

The primary reason for weak US job numbers is increased uncertainty among entrepreneurs, who require predictability and clear rules to commit to investment; tariffs creating changing price uncertainty at suppliers like Home Depot are causing businesses to pause projects rather than capital costs or energy costs, which remain cheap.

“is it because of high cost of capital? No. Is it because of high cost of energy? No. Uh is it because of um uh uncertainty? U and I think here the answer has to be yes. You know imagine you're running a construction business. Uh maybe you're a home builder. All of a sudden, you're told that everything at the Home Depot is going to cost 30% more, 50% more, 70% more, maybe it won't be there. Oh no, maybe it's only 20% more, and it changes every week. Your natural reaction is going to be, you know what, I'm going to put on hold some projects here, and I'll see where it goes.”

Unemployment is at 4.0-4.1%, crypto is at all-time highs, equities are at all-time highs, with signs of animal spirits running rampant including Bitcoin treasury companies, IPOs like FIG up 150% on day one, indicating financial conditions are loose and don't warrant rate cuts.

“the unemployment rate is what 4% 4.1% which is really their their second uh thing if you're the Fed is uh your second mandate is employment... Now today crypto is at all-time high, equities are at all-time highs. Um, I think there's plenty of signs of animal spirits running rampant. Whether you look at, you know, Bitcoin treasury companies being listed left and right, whether you look at um, you know, IPOs, uh, such as FIG that just happened going up, you know, 150% on the first day.”

China's investments span rare earths, turbines, trains, humanoid robots, self-driving cars, and amphibious vehicles—demonstrating systematic competitiveness across multiple domains rather than isolated success in one sector.

“you could say the same for trains...When you look at the humanoid robots...When you look uh indeed at, you know, some of the self-drive cars, when you look at the in amphibious cars that that uh Xpang and BYD are producing”

Gavelson identifies as an 'inflationista' and believes inflation is an ongoing problem; official US inflation of 2.5-3% understates true inflation because medical insurance is reported as cheapest in 20+ years, auto insurance is rising due to car prices increasing from tariffs, property taxes are up 25% in Toronto over 5 years with 6.9% increases in 2025, and food inflation is perpetually high.

“I think uh probably all your listeners yourself we all feel like it's higher than the 2 and a half 3% than than we're being told. Um, and yes, partly it's because of the things you highlighted like insurance cost. You know, my favorite data point is that in the US, if you look at medical insurance, supposedly officially medical insurance is in nominal terms, not in real terms, in nominal terms, it's the cheapest it's been since 1999.”

Some costs have declined to zero (like international phone calls via WhatsApp), but these zero-cost categories cannot fall further; meanwhile, costs that continue rising (insurance, taxes, food) cannot offset the historical benefit of categories that fell to zero, causing real inflation to exceed measured inflation.

“there's there's some of our costs that have essentially gone to zero like you know telecoms is is a great example. Who still pays for international phone calls when you can call on WhatsApp or FaceTime or whatever else. So some of our costs have gone to zero. But this is where it gets interesting is you know these costs that have gone to zero, they're now at zero. So they can't fall anymore. Um, and meanwhile, to your point, insurance keeps going up. Um, local taxes keep going up, food just goes up.”

Powell will likely serve out his remaining term as Fed chair (another 12 months) because it gives Trump a perfect scapegoat if the economy slows due to tariffs, whereas replacing Powell immediately would make any subsequent slowdown Trump's responsibility.

“Powell will see out his term if only because it gives Trump uh a perfect scapegoat should the economy slow down. um you know if he replaces Powell tomorrow then uh if the economy falls apart in 6 months time that that'll be all on him. If the economy slows down because of all these tariffs and all this the protectionism that he's unleashed on the United States. If that happens tomorrow then... he can point the finger at Trump at Powell... So, in that respect, Powell serves a good role for for Trump for the next 12 months.”

In 2022, Biden released strategic petroleum reserves to bring energy prices back down from a spike, preventing prolonged inflation; Trump's response to a future oil spike at $120/barrel is uncertain—he could either release reserves like Biden did, or restrict US energy exports and implement energy protectionism, potentially creating a world with structurally higher global energy prices.

“Let's imagine that tomorrow either because of what's going on in the Middle East or what goes on in Russia or whatever that all goes back to 120 bucks. Um and then the question become how does Trump respond to this oil at 120 bucks? Does he do what Biden said did and say okay let's unleash the strategic petroleum reserve or alternatively does he say you know what if you want cheap energy you move here to the US I'm going to ban the export of US natural gas I'm going to ban the export of oil you want you know cheap energy for your procham plant you want cheap energy for your manufacturing plant make America great again American industrial renaissance build it here and we I'll guarantee that you get cheap energy in the US and we're not exporting our energy anymore.”

If energy prices spike to $120/barrel due to Middle East or Russia developments, inflation could quickly rise to 3.5-4%, ending rate-cut expectations, causing bond market selloffs, and driving severe equity corrections in stretched stocks trading at negative cash flow or 10x+ sales and 40x+ earnings.

“The biggest risk to financial markets today. The biggest risk to people's portfolios um is that energy prices spike. And I want to be very clear. I'm not saying energy prices are going to spike. But if energy prices spike for whatever reason, you could be very quickly an inflation rate at three and a half 4%. At which point nobody's talking rate cuts anymore. At which point the bond markets sell off. And then very quickly equities and especially stretched equities, equities that are either in negative cash flow or that are trading at like over 10 times sales, over 40 times earnings, all those kinds of equities start to to really sell off.”

Cost of government includes taxes and regulation/uncertainty; five years ago, the Chinese government's higher regulations (Jack Ma/Alibaba incident) suggested higher cost of government, but today the cost of government may be higher in the US than China because US regulatory and tariff uncertainty is now greater than Chinese uncertainty.

“Then you come to the cost of government and and this is where um things get interesting because five years ago you could have argued ah the Chinese the government you know they increase regulations and like you know they snag Jack Maw and Alibaba goes down and it's like because the cost of government isn't just your taxes it's the cost of regulation it's the cost of uncertainty surrounding your government. Um now arguably today perhaps the cost of government is now higher in the United States than it is in China because the level of uncertainty in the United States is uh is higher than it is in China.”

When Canadian pension funds transition from being natural sellers of the Canadian dollar to buyers, the looney will appreciate significantly because there will be no marginal seller against the demand; being short the looney has been a hedge fund favorite trade but is 'very dangerous' because the odds favor Carney executing infrastructure deals.

“if instead of being sellers of the Canadian dollar, they turn into buyers. There is no marginal seller against that. So, the looney will go up a lot. So, I think, you know, being short the looney has been a hedge fund favorite trade, I think it's a very dangerous trade. Um, because you're essentially betting that Carney isn't going to turn into a Goldman. Uh, and I think the odds are probably higher than 50/50 that that he he does turn out to be a Goldman.”

The debate about China has shifted from 'return of capital' (risk of frozen/confiscated money) to 'return on capital' (profitability); this represents a shift from tail-risk focus to fundamental valuation, indicating China has turned the page on geopolitical risks and investors now focus on business returns.

“you know my go-to line is that a year ago when I was having conversations with with people on China, the debate was always about the return of capital. People didn't want to invest in China because they they told you, "Look, uh, my money is going to get frozen like the money was in Russia." um or you know China's going to invade Taiwan and it's going to be World War III and the whole place will be turned into rubble and et you could find lots of reasons and people were essentially the debate was all about the return of capital and and some you know some very very smart guys much smarter than me would write pieces saying oh the return of capital in China it's it's can't invest there too dangerous um now fast forward to today and every conversation I have around China with with clients with investors has shifted to the return on capital”

Western governments do not realize how far ahead China is in technology; this gap is not because China stole technology, but because China has moved beyond imitation and is now producing original technology (humanoid robots, self-driving cars, amphibious vehicles) that competitors cannot replicate.

“When you say this, you have this more often than not this push back, which is like, yeah, but they just they're just stealing our technology, which was undeniably true 20 years ago, was probably true 10 years ago, and it's simply not true today. When you look at the humanoid robots they're they're producing, nobody else is producing those. When you look uh indeed at, you know, some of the self-drive cars, when you look at the in amphibious cars that that uh Xpang and BYD are producing”

If the US dollar weakens and China moderates its investment pace, US industrials, energy stocks, and materials would benefit from improved margins and reduced competitive pressure.

“imagine what happens if we move to a world where the US dollar is weak where perhaps the pressure from China on a lot of these industrial businesses uh instead of accelerating abates a little bit. Um so I would I all I guess I'm saying is don't throw babies out with bathwaters there. there's probably some some tremendous opportunities uh in in the United States amongst industrials uh amongst obviously energy stocks materials a lot of the sectors that would benefit from a weaker dollar and from a China that where you see some level of consolidation”

Carney is a former Goldman Sachs banker; the old adage 'you can take the guy out of Goldman but you can't take Goldman out of the guy' applies, suggesting he has deal-making incentives and capability.

“Connie, if nothing else, he's he's a former Goldman banker, right? And if like me, you believe that you can get the guy out of Goldman, but you're never going to really get Goldman out of the guy, then you now have all the pension funds coming up to Carney and saying, 'Hey, give us assets to buy in Canada.'”

Firing the Bureau of Labor Statistics Commissioner is concerning because it signals to foreign investors that the government only wants good news and yesmen, which separates the White House from reality and undermines confidence in data integrity.

“Shooting a me shooting a messenger is never a great look. Um, you know, it's uh it's it's the the problem when you start shooting messengers is you send out the signal that you only want good news. You send out the signal that you only want yesmen around you... you have to wonder the extent to which a White House that says don't give us bad news uh or you'll get shot um ends up being completely uh sort of um you know sort of separated from from realities out there.”

Mark Carney's success as Canadian PM will be measured by one binary metric: does he build the BC pipelines and Maritime LNG terminals? If yes, he's successful; if no, he leaves Canada unchanged and is a failure.

“Carney's premiership will uh his success or failure will depend on the answer to that question. If he gets that done, then I think he can go down as a successful prime minister. If he doesn't get that done, then he'll be a failure. I I think it's extremely extremely binary because if he doesn't get that done, he leaves Canada exactly the way that he found it.”

Canadian pension funds have significant capital not deployed in Canada; they want to fund BC pipelines and LNG terminals but lack investable opportunities, so they deploy capital in US stocks instead.

“there is a lot of money in Canada. Well, there's a lot of money in Canadian pension funds. it's just not invested in Canada. And when you talk to these pension funds, they say, 'Look, we'd love to buy a track. We'd love to fund the the BC pipelines. We'd love to fund them the the NG terminals. Um, you know, today all we do is buy US stocks. If you give us something else to do, we'll sell our US stocks and we'll bring our money home and and we'll fund this.'”

Toronto property taxes have risen 25% over the past 5 years (6.9% increase in January 2025 alone), representing substantial and persistent cost growth that economists dismiss as 'one-time,' yet these property tax increases are structural and recurring.

“The property taxes in Toronto, they just went up by in January of this year 6.9%. In the last 5 years, they're up 25%.”

President Trump firing the Bureau of Labor Statistics Commissioner for calling the jobs numbers 'rigged' and 'concocted' is concerning because it sends a signal that the White House only wants good news and yesmen, risking the administration becoming separated from economic reality—a pattern seen in Argentina and Greece during crises.

“Shooting a me shooting a messenger is never a great look. Um, you know, it's uh it's it's the the problem when you start shooting messengers is you send out the signal that you only want good news. You send out the signal that you only want yesmen around you. you send out the signal that um uh yeah basically uh you just wantence around you. So, so that's the first concerning thing is you have to wonder the extent to which a White House that says don't give us bad news uh or you'll get shot um ends up being completely uh sort of um you know sort of separated from from realities out there.”

In emerging markets, when sentiment shifts from 'really really bad' (return of capital concerns) to 'mediocre' (return on capital focus), significant money can be made; this is sufficient to justify investment positioning even if absolute returns are uncertain.

“a good buddy of mine who you might follow on Twitter, a guy called CPY um always says that you know in emerging markets when things go from really really bad to just plain mediocre you can make a lot of money. So the fact that we've now debating from return of capital to return on capital tells me that we're exactly in that kind of scenario where you're you've gone from really really bad where you're worried about your money disappearing to mediocre to where you're debating how much money you're going to be making if any. So maybe that's enough, you know, maybe that's enough to make money.”

Western investors harbor ideological preconceptions that communist systems are doomed to fail by definition, which prevents objective assessment of China's actual economic capabilities and leads to dismissal of evidence as propaganda.

“there's there's a sort of ideological blinkers that that we've put on ourselves as westerners. Um, and I think we've put these ideological blinkers because China is nominally a communist country. And so we therefore assume that since it's communist, it's bound to fail because it's in the name. Communism fails. We all know that. History's shown it. Um and so most so many people in the west start off their sort of take on China with essentially the preconceived notion that of course it is doomed to failure because again it's communist so how else could it be?”

The Fed's hawkish tone despite holding rates unchanged, two FOMC dissenters for the first time in 30+ years, and the resignation of a governor indicate that political pressure on the Fed to cut rates is opening doors for different opinions than historically seen when FOMC tended to agree uniformly.

“the Fed is being foolish for not cutting. So there seems to be an element of you know as Boris Johnson would say you know wanting having your cake and eating it too. Um now uh when it comes to the two dissenters I think um you know an open question would be whether uh these directors would have felt as comfortable dissenting if the political pressure on the Fed to cut wasn't so high. you know, historically the Fed is tends to come to indeed very um uh you know, sort of meetings where everybody agrees together, right?”

Powell will likely serve out his term as Fed Chair because Trump will use him as a 'perfect scapegoat' for economic slowdown from tariffs and protectionism; if Trump replaced Powell immediately and the economy fell apart in 6 months, responsibility would fall on Trump, so keeping Powell allows Trump to blame the Fed for any recession.

“I think I actually tend to believe that Powell will see out his term if only because it gives Trump uh a perfect scapegoat should the economy slow down. um you know if he replaces Powell tomorrow then uh if the economy falls apart in 6 months time that that'll be all on him. If the economy slows down because of all these tariffs and all this the protectionism that he's unleashed on the United States. If that happens tomorrow then um I'm sorry I don't know if you can hear the geese in the background. U the uh if that happens tomorrow then he can point the finger at Trump at Powell. Sorry. you can put Trump can point the finger at Pal and say, "Oh, look, that's all his fault." So, in that respect, Powell serves a good role for for Trump for the next 12 months.”

Ford CEO Jim Farley visited China in September, toured factories for weeks, purchased a Xiaomi SU7 and now drives it to work in the US, and gave a two-page Wall Street Journal interview stating US companies must match Chinese production levels (not prices), signaling that Western auto makers view China as having overtaken them.

“the Ford CEO said it best. you know, Forzio came to China in September and he toured for a couple weeks. Um, and he ended up buying a Xiaomi SU7 and brought it back to the US. And this is what he drives to work. And and he had a two-page interview at the Wall Street Journal where he said that it was now incumbent for US companies to try to produce to the same levels as the Chinese. And he didn't say to the same prices, etc., to the same levels.”

China's government is shifting its narrative from promoting capital investment to cracking down on excess investment in EVs, batteries, and other industries because unlimited spending destroys margins for everyone, domestically harmful and causing international pushback; this creates potential for margin recovery in Chinese and global industrials.

“one of the more interesting developments in China of the recent few few months is the extent to which the government narrative around capital investment has really completely shifted. Um and essentially the government is now really trying to crack down on excess investment. uh whether it be in electric vehicles, whether it be in batteries, whether it be um they cracked down before on excess um investment in real estate, but now they're like looking at industry and saying, "Look, we can't just keep throwing good money after bad and doing excess capital spending and crushing everybody's margins." Um first, it's no good for us, but we're also getting push back from from everybody else around the world.”

Being short the Canadian dollar has been a hedge fund favorite trade, but it is very dangerous because it bets that Carney won't succeed in building infrastructure, which Vaudan estimates has odds greater than 50/50 in Carney's favor.

“So, I think, you know, being short the looney has been a hedge fund favorite trade, I think it's a very dangerous trade. Um, because you're essentially betting that Carney isn't going to turn into a Goldman. Uh, and I think the odds are probably higher than 50/50 that that he he does turn out to be a Goldman.”

The dollar weakness cycle breaks only if the Fed becomes super hawkish (unlikely) or if a major crisis in Europe or China forces foreigners to retreat from those markets and return to the US.

“I think we've entered this cycle, a cycle that probably doesn't get broken unless uh you get like a super hawkish Fed, which seems really unlikely, or unless you get a big crisis somewhere else around the world, maybe crisis in Europe or a crisis in China where foreigners where foreign investors decide, 'Oh my god, I knew I shouldn't have left the US. I got to get back there. Rest of the world's a total mess.'”

The US jobs numbers came in at 73,000 versus expectations of 110,000, with May revised down from 144,000 to 19,000 and June revised down from 147,000 to 14,000, representing massive downward revisions indicating economic weakness.

“We recently saw the jobs numbers for July. They came in lower than expected at 73,000 jobs versus expectations of 110,000 jobs. The big surprise though were revisions for the month of May and June. May numbers were revised from 144,000 down to 19,000. The June numbers were revised from 147,000 down to 14.”

Canada's national unemployment is 7%, Ontario (15 million people) is 8%, Toronto is approaching 10%, and youth unemployment is 14%—these are staggering numbers that most Canadians are unaware of.

“The nationwide unemployment rate is at 7%. In the province of Ontario, which is the largest province with 15 million people, it's 8%. In the city of Toronto, it's approaching 10%. Youth unemployment across the country is at 14%.”

US job numbers came in at 73,000 for July versus expectations of 110,000, with massive downward revisions of May jobs from 144,000 to 19,000 and June jobs from 147,000 to 14,000, indicating a significant deterioration in labor market data.

“We recently saw the jobs numbers for July. They came in lower than expected at 73,000 jobs versus expectations of 110,000 jobs. The big surprise though were revisions for the month of May and June. May numbers were revised from 144,000 down to 19,000. The June numbers were revised from 147,000 down to 14.”

Canadian unemployment is at 7% nationally, 8% in Ontario, approaching 10% in Toronto, and 14% for youth across the country; these staggering numbers indicate a serious economic crisis that many Canadians are unaware of.

“The nationwide unemployment rate is at 7%. In the province of Ontario, which is the largest province with 15 million people, it's 8%. In the city of Toronto, it's approaching 10%. Youth unemployment across the country is at 14%. So these numbers are staggering, but I think a lot of Canadians have their head buried in the sand. and they really have no idea what is going on.”

The host (based in Toronto) is long S&P 500 stocks (up ~5% YTD) but short USD as a hedge, resulting in a net loss of ~10% due to the currency decline, exemplifying the problem foreign investors face.

“I'm long spiders and I think the S&P is up 5% on the year, give or take, but along US dollars at the same time, I'm I'm down 10%. So, I'm going through this situation right now where I got to decide, do I keep my money in the US or do I take it out and put it someplace else?”

Political pressure on the Fed from the Trump administration has emboldened dissenters and created space for Fed governors to express different opinions than they would have before, suggesting that political pressure is fracturing the Fed consensus in ways that were historically rare.

“when it comes to the two dissenters I think um you know an open question would be whether uh these directors would have felt as comfortable dissenting if the political pressure on the Fed to cut wasn't so high. you know, historically the Fed is tends to come to indeed very um uh you know, sort of meetings where everybody agrees together, right? And and everybody points in the same direction. You know, today with the political pressure, maybe that gives openings for for different Fed governors to to express different opinions in a way that you wouldn't have had before.”

Valuations in China are much more attractive than the US, momentum over the past 18 months has been solid, investor positioning is light (not crowded), and government support is active (stepping in at every 10% dip).

“valuations in China are very attractive. They're much more attractive than the United States... the momentum used to be horrible. Uh and for the past 18 months it's been it's been very solid... when it comes to China there there isn't there. And then finally, you get to policy support because... the Chinese government has interveneed a couple times to prop up stock markets. Uh, every 10% dip, they kind of step in.”

Canada's economic past involved casually selling oil at discounts to the US and natural gas at discounts to the US because building infrastructure for other markets was 'too complicated'; these days are now over due to geopolitical shifts.

“the days where you just you know fall back and just do business casually with the US and you know sell your oil at a discount to the US and sell your natural gas at a discount to the US. Um because building the infrastructure to do anything else is a little too complicated and uh it's easy to sell to the US so let's just do that. I think those days are over.”

Mark Carney's success as Canadian Prime Minister depends almost entirely on one binary question: will he build pipelines through BC and LNG terminals in the Maritimes? If yes, he'll be successful; if no, he'll be a failure who leaves Canada as he found it.

“Is this going to happen? Yes or no? And and to me, Carney's premiership will uh his success or failure will depend on the answer to that question. If he gets that done, then I think he can go down as a successful prime minister. If he doesn't get that done, then he'll be a failure. I I think it's extremely extremely binary because if he doesn't get that done, he leaves Canada exactly the way that he found it. Um, which is in not a great shape today.”

Mark Carney's background as a Goldman Sachs banker is relevant to his ability to execute infrastructure deals; the principle that 'you can get the guy out of Goldman, but you can never get Goldman out of the guy' suggests Carney has embedded deal-making skills that will activate when he recognizes the opportunity to monetize Canadian infrastructure assets.

“if nothing else, he's he's a former Goldman banker, right? And if like me, you believe that you can get the guy out of Goldman, but you're never going to really get Goldman out of the guy, then you now have all the pension funds coming up to Carney and saying, "Hey, give us assets to buy in Canada." Now, that's got to awaken something in the old Goldman. He's got to be thinking, "Okay, I have to do this. There's a deal that can be done. I'm gonna get it done."”

The US market is disjointed like the late 1990s, with very expensive growth stocks and cheap value stocks; value stocks are priced for a strong dollar and China's margin compression, both assumptions that are changing.

“the the US is is has been a bit of a I think it's a bit of a disjointed market just like it was in the late 90s between very expensive growth stocks and value stocks that uh you know that are essentially priced for you know a US dollar that stays strong which is already rolling over um for a China that keeps crushing everybody's margins.”

Gavelson evaluates trends through five prisms: fundamentals (does this make sense?), valuations (are they attractive?), momentum (positive or negative?), investor positioning (crowded or light?), and policy support (is government backing it?); Chinese equities tick all five boxes, making them an obvious investment choice.

“when I see a trend developing in the market such as the the the recent outperformance over the past 18 months of of Chinese equity markets. I look at it through five prisms. First, you know, fundamentals. You know, does this make sense? There's no point in buying things that make no sense. Uh there's no point in buying sewing machines or or horse buggies. Um now, the reality is the outperformance of China does make sense to me... Then you move to valuations... Then you move to momentum... Then you move to investor positioning... and finally, you get to policy support”

Medical insurance costs are officially at their lowest nominal terms since 1999, and auto insurance is similarly understated in official inflation figures, making true inflation feel significantly higher than reported 2.5-3%.

“in the US, if you look at medical insurance, supposedly officially medical insurance is in nominal terms, not in real terms, in nominal terms, it's the cheapest it's been since 1999. It's like the lowest in in 20 plus years. Now, you know, how many people for who does that like who is that true for? Um, and you know, to a large extent, the same is true for auto insurance.”

China's stock market was the best-performing major market last year and is doing very well in 2025, yet nobody cares—this paradox supports the bull market narrative because skepticism means positioning is light.

“China was actually the best performing major stock market last year. Uh, it's again doing very very well this year. Uh, and nobody cares.”

Powell is not being political in maintaining a hawkish stance; rather, he is making a rational assessment that inflation has been above the Fed's 2% target for over 39 months, unemployment is low at 4-4.1%, and financial conditions are loose with crypto and equities at all-time highs, so rate cuts are not justified.

“the the US inflation rate. So, the the Fed has a 2% inflation target, right? Um, it's been above that 2% inflation target for what? I'm I'm gonna I I can't is it what 39 or 40 months in a row now that it's been above that 2% target? I'll have to double check for you. I can double check, but it's in that ballpark. Um, that it's it's over three years that it's been above that 2% target.”

Within 12 months, a new dovish Fed chairman will take power with a mandate to cut interest rates, and other FOMC members will be willing to support rate cuts, meaning the Fed will become significantly more dovish whether Powell is replaced tomorrow or in a year.

“the reality remains that in a year's time, we'll have another Fed governor. Uh, and that Fed governor will be a big dove and will have a mandate to cut interest rates. And we now know that others on the board will be happy to go along with it. Um and this points to I think you know the important direction today is whether it's tomorrow or in 12 months time you are going to have a much more dovish Fed.”

Chinese government has intervened to support stock markets multiple times, stepping in at every 10% dip, providing policy support that makes China equities attractive for investors.

“and finally, you get to policy support because, you know, it's very hard to make money if you're fighting governments. Um, and the the reality today, you know, the Chinese government has interveneed a couple times to prop up stock markets. Uh, every 10% dip, they kind of step in.”

Canadian pension funds have significant capital available but it is deployed into US stocks; these funds have expressed willingness to repatriate capital and fund Canadian infrastructure (pipelines, LNG terminals) if political/regulatory support exists, unlocking domestic investment opportunities.

“there is a lot of money in Canada. Well, there's a lot of money in Canadian pension funds. it's just not invested in Canada. And when you talk to these pension funds, they say, "Look, we'd love to buy a track. We'd love to fund the the BC pipelines. We'd love to fund them the the NG terminals. Um, you know, today all we do is buy US stocks. If you give us something else to do, we'll sell our US stocks and we'll bring our money home and and we'll fund this."”

Trudeau was too incompetent to build the necessary infrastructure, being merely 'a pretty pretty face uh and and a name put in place,' whereas Carney has actual financial/operational capability.

“I think Trudeau was way too incompetent to get that done because he was just a pretty pretty face uh and and a name put in place.”