2025 Will Be a Turning Point for Global Trade & GOLD (Uncut) 04-20-2025

Why 2025 Will Be a Turning Point for Global Trade & GOLD I Michael Harbisch

Trade more or less is more and more grinding to a halt. If you look at container bookings in U.S. ports, how basically ship movements are, we had a lot of front loading before tariffs got announced. This is all now basically going to stop a lot of trading and a lot of the order process.

We’re going to see that a lot of companies are going to be very reluctant going forward to make any kind of forward looking statement. Hello, and welcome to Soar Financially, a channel where we discuss the macro to understand the micro. My name is Kai Hoffman.

I’m the ad JR mining guy over on X and of course, your host of this channel. And I’m looking forward to bringing on a first time guest. He’s based in Frankfurt, and his name is Michael Habisch.

He’s a 30 year veteran of the investment banking industry. And we’ve been getting I wouldn’t say complaints, but maybe suggestions in the comments below our videos to talk a little more about the position of the EU. What’s the EU financial system look like? How strong is the economy in the European Union right now? And a lot of those questions.

That’s why I’ve invited Michael on to the program to discuss those things. And of course, we’ll look at it holistically, we have to discuss what the Fed is doing. But we’ve also seen an ECB rate cut today.

So I want to talk with him about how competitive is the EU right now. And we’ve seen quite a bit of capital rotation back to the European Union. Curious how sticky that money is.

Is it just there for for a quick gain? Or is it going to be here for the for or is it going to be in Europe to stay? Lots to discuss very little time to do so. Before I switch over to my guest, hit that like and subscribe button. It helps us out tremendously.

And we really, really appreciate it. Thank you so much for doing that. Now, Michael, Michel, thank you for coming on.

Really appreciate it. Okay, thank you. Thanks for having me on.

Yeah, I’m excited to be on the show. Absolutely. Yeah, it’s time to talk more Europe, as well, because a lot of money is coming towards the European Union flowing out of the US tariff driven to a degree.

But before we dive into some of the granular details here, Michael, what is your general assessment of the European and global economy? I think, yeah, we’re struggling where we look right now. A lot of it is due to all basically the tariff implementations, the uncertainty around it. But as we all know, Europe has been in the doldrums for quite some time even before that.

And from my perspective, basically looks a bit like a wake up call for Europe that we’ve been receiving. Obviously, it started with basically election in the US, then the visit of JD Vance in Munich for the World Security Forum, where he basically gave out the message, it’s, you’re on your own in Europe, make sure that you spend adequately on defense. And with that, basically, step by step, we went forward and it resulted ultimately, then in the in the big, basically spending package that we got in Germany.

In the basically, in the wake of the German elections, where it’s now clear that we’re going to spend massively on defense and infrastructure. And since then, we’ve kind of seen that there is a flow of funds out of the US again, back into European markets. There’s been charts floating around the last couple of days of how much money has been repatriated into Swedish market.

Same applies to Germany. Obviously, we’ve seen a lot of money coming back into infrastructure place and all those defense stocks. And I’m sure it’s not yet done from what we’re seeing and what we’re hearing.

And there’s been some analysis that basically given that every hundred dollars or euros that went into the US over the last couple of days, so far, roughly four or five dollars have returned. Maybe it’s a bit more by now, but I think there’s more to come. And so it looks like things from here can only get better.

And it’s all a little bit brushed up and shaken up by Donald Trump and his policy. And from that end, we can be happy about it. Yeah, absolutely.

I think that wake-up call was much, much needed, speaking from a German perspective, because we were quite sleepy, to use that term. But Michael, what is the general state of the economy, though? Yes, we’ve gotten a bit of a wake-up call, but we’re scared to use the word recession in Europe or globally in general. Has Europe or is Europe in a recession right now? And do you see us coming out of that anytime soon? From a German perspective, yeah, for sure.

It kind of feels like we’re in a recession. If you look at macro numbers, whether it’s industrial production, whatever you look at, it’s not great and hasn’t been great. And a lot is down to obviously what is self-inflicted, comes from higher energy prices, especially here in Germany, where we have to deal with highest electricity prices.

And obviously, that feeds down into the industry. You see companies, even before Trump came on, you saw companies like the chemical industry that very much depend on low energy prices, starting to have a look abroad or trying to relocate businesses. And that kind of feeds through the whole system.

Then obviously, the biggest block and the biggest employer, especially in Germany, is the automotive industry. We’ve been struggling there. The transition to electric vehicles hasn’t been great.

We’re struggling. The adoption rate is not getting any better, quite the opposite. It’s kind of falling off a little bit.

It’s all down to not really well-administered political measures and a lack of infrastructure spending that is very, very necessarily needed. Hopefully, this is now going to change. It looks to me a little bit like every European country has a little bit of a different problem.

But all in all, it feels like now we’re shelling things together a little bit better. And I hope that trend continues. Trust me, I hope so as well.

Although I don’t think the new government has really woken up yet either. When I hear that energy deals are off the table, talking about bringing back the nuclear power, it seems like, and that’s personal commentary, that they’re still fast asleep. Yeah, it looks that way.

I’ve been very hopeful before the coalition talks ended that maybe an end to the phase-out of nuclear energy would come inside here in Germany. As you know, Kai, we still have these six nuclear power plants that are being dismantled right now. So I was hoping for a kind of moratorium that we stop that and we could bring it on.

It’s not going to happen. It’s the same of the old, more renewable power generation. And the new government kind of promised what we call the Aufbruch in Germany.

It’s hard to see nevertheless, apart from the infrastructure package and what we’re going to spend on defense, there’s a lot of work to be done. And we’re all a little bit more grounded or feeling more grounded than we were like four, six weeks ago, where it felt like we would really push forward a little bit more. But it can still be.

There is no word on nuclear power in the coalition paper. So that could still be a flip. And we all know that the wealth of a country and economy very much depends on lower energy costs and input costs.

And hopefully, we’ll get that. Yeah. One can only hope, right? That’s a Hoffnung stirbt zuletzt, right? So we’ll see.

We’ll keep that up. But Michael, it’s pretty opportune that we’re speaking today, because the ECB cut rates for the sixth time in a row, down to 2.25%. What do you make of that? What’s the ECB telling us that we should be listening to? What does that say about the state of the economy? I know we’re sort of repeating what we just said as well. But what’s the ECB trying to achieve here with the lower rates? Yeah, I think the ECB is in a different boot than Powell and the Fed.

And I think we’re going to talk about that later as well. So the ECB has some room to go that way. Inflation is more subdued here.

It looks like we’re on the way to 2%. As I said, the way the economy looks, it’s definitely extremely clouded here in Europe. At the same time, we had that huge run up in the euro.

That gives a little bit of opportunity or provides a little bit of opportunity as well. So I think it’s kind of a sensible move. We saw that move well reflected today and how basically German bonds and European bonds behaved and moved.

And let’s see how that medicine now basically is being taken by the market. But overall, I personally feel that the ECB cannot really move the needle that much by what they’re doing here right now. Yeah, I think they’re just following what the Fed is doing or supposed to do as well.

We don’t have much choice here. Yeah. Right.

Which brings me to the US. We got to talk about tariff impacts. And you mentioned tariffs being one of the leading economic move markers in general.

What do you expect the tariffs impact to be in the US and globally in general? By the look of it right now, it looks like trade more or less is more and more grinding to a halt. If you look at container bookings in US ports, how basically ship movements are. We had a lot of front loading before tariffs got announced.

This is all now basically going to stop a lot of trading and a lot of the order process. On the other hand, we’re going to see that a lot of companies are going to be very reluctant going forward to make any kind of forward looking statement. A lot of investment decisions cannot be taken.

Makes it very difficult to come up with any sensible guidance. And that also will harm basically economic activity. We’ll have to see how long basically China and the US will be able to keep up that standoff.

It looks to me like the Chinese are very determined to carry on, but so is the Trump administration. And when we see what the Fed is doing right now, Powell last night, today’s Thursday. So last night he was on and he’s kind of sitting on his hands.

And to be honest, it looks fair from his perspective to do it. Financial conditions have tightened. It’s basically markets have done a lot of work for him.

So there is in the US in comparison to Europe, it looks to me there is more inflation risk on the horizon given what the administration does. So for him, the wait and see approach is totally right. But then we have Donald Trump coming out with tweets saying that he wants to rather terminate Jay Powell for that.

Feels a little bit like he’s looking for maybe for some scapegoat and wants to prepare for that. I don’t think it would go really well if that were to happen, but it also looks like it’s a long runway. But overall, it more and more comes across that the Fed is more passive and the Treasury gets more active.

Tariffs and inflation are a dividing topic, meaning how are tariffs going to impact inflation? Is it deflationary or inflationary? I think that’s a big debate we’ve also had here on the channel. What is your stance? I’m sensing you’re leaning towards the inflation camp here, Michael. I’m curious what you’re thinking.

Who’s going to pay for it in the end? In the end, it’s going to the US consumer. And the one basically who consumes the good that’s been imported is ultimately paying for that. Or companies are going to absorb the cost one way or the other.

And then it’s going to be detrimental to margins. But there is going to be some inflationary impact if we keep that up for too long. And I can’t see how we get away from that in the short term.

It’s going to last a bit longer. There’s been a lot of talk the last couple of days or even last night when Powell spoke that and he acknowledged there is stagflation coming our way. And he clearly identified the stag interflation, that’s for sure.

But I think we’re at the point where we’re not yet there, but everything looks like we’re threatened by stagflation at some point. Did he actually use the word stagflation? No, not really. He never used that.

And I believe he will never use that, even if it’s right in front of his face. I kept the Financial Times Weekend Edition here just as a prop for this conversation. But Trump terrorists poised to drive US inflation to 4%, lower growth.

Because we had a couple of Fed members speak over the weekend or give speeches over the weekend. And there were warning about slowing growth and higher inflation. What is that? Stagflation.

But nobody dares to use that term. I’m not sure why they’re so scared of it. Yeah, that word is, I think it’s a very bad no word within the Fed.

So yeah, we can use it. Nobody there uses it. I haven’t seen the Powell speech yesterday.

Has he made any indication of what the Fed might do if the inflation actually takes higher? What is he going to do with the Fed funds rate moving forward? We have about three weeks until the next decision. Any indication there? I don’t see them acting anymore in the short term. It looks to me that we’re basically kind of on hold right now.

If they have to make a decision and choose between the stack and deflation, they’re definitely going to fight the stack at some point. That’s my view. It’s like economic growth.

That’s the question. Big question mark. And of course, political pressure is looming as well.

You hinted at it, but I understand Trump is trying to investigate whether the Supreme Court has any pull on replacing Fed Chair Powell. Well, the question is, what does he want? Maybe we can elaborate on that. I know the US has to refinance, but why would he can Fed Chair Powell right now? Yeah, I believe that this is a bit of, as I hinted earlier, that this is a bit of finding a scapegoat.

If the economy really tanks because of the tariffs, we all know that Donald Trump is not going to be the one who is going to admit that he did it. He’s going to look for someone who’s probably been asleep at the wheel, and he’s already starting to point with a finger at Jerome Powell, whether he likes it or not. Getting rid of the Fed Governor is going to be a really difficult task, and we’ll have some very negative repercussions in the market, I would believe.

Not really helpful. We’re not yet at the point, I think, where this is an option he’s going to execute on, but we have to keep it in the back of the mind, and it’s definitely not going to help markets. No, definitely not.

Uncertainty never helps. It’s good for gold, and we’ll get to gold here in a second, right? Michael, I know you’re an avid reader of the news, and you do your own analysis that you share with me on a daily basis, but when you wake up in the morning or when you open the newspaper in the morning, the proverbial newspaper, what do you look for when you start reading the news? Is there any indicators that you’re looking for? When I read the news or when I read the papers, and I have a habit of going through all the major, the Financial Times, Worcester Journal, and at least flipping through it, I just tend to read stories that interest me from an educational perspective. Most of the stuff I read through the day or get an idea on through the day, there’s nothing really, from a news perspective, that is going to make me curious.

I just have a couple of things I look for. I’m a bit of a technically driven guy, and I basically spent, you know Kai, I spent my passion is technology and metals and mining to a certain degree, and now also I’ve spent a little bit more time on pharma, healthcare, and biotech recently, and that is something on a micro level I’m spending time on. But overall, I think right now when it comes to what’s happening in Europe, we need to keep an eye on what’s happening in Brussels going forward in terms of policy changes.

The thing that keeps my eyes glued on is obviously what’s going to happen with the ICE, Internal Combustion Engine ban, which is coming up, or the law is it will be banned from 2035. This is now up for review this year. It’s been dragged forward, that review, so I’m very hopeful that we’re going to get a push out for that, because that is going to help the European automotive OEMs and the industry and even the tier 1s, if we get a push out, because it will allow the consumer to make a decision on which car to drive next and not being forced onto technology maybe that for them it’s hard to adopt.

So that I find rather interesting, and obviously the energy and resources landscape in Europe is also paramount, and it starts with that. Oh, absolutely. No, I agree, and I’m glad you didn’t answer with a, first I’ll read the cartoons, you know, so.

Still looking for those. Dilbert, I love the Dilbert cartoons, personally. But Michael, you mentioned tech, and I think we quickly need to talk about tech, because it has been the leading sector in the US over the last few years, and now it’s sold off.

Could we say that DeepSeek probably was that black swan moment that nobody really saw coming, that everybody was waiting for actually to happen? Because everybody knew the stocks were overvalued, let’s be honest here, but everybody was looking for a trigger or something to sell off potentially. Would you agree with that, and how are tech stocks going to behave moving forward? Yeah, I think that it was a kind of a black swan moment for the tech sector. We’re all expecting China to make some inroads and come up with something.

That obviously was bigger and faster than everyone anticipated, but it’s not necessarily going to change a lot. Demand is still solid. This morning, we saw numbers from TSMC, which were rock solid, which kind of imply that on the data center and AI side, things are still healthy from a demand perspective, and the outlook is fine.

So there’s a positive read across into US semis as well. So in general, I think the AI story is not over. Obviously, there were some high evaluations that have now come down to a more sensible level, obviously.

Demand’s situation still looks okay. So from that end, it’s something to keep an eye on. On the other hand, we’re seeing more or hearing more stories here in Europe that we’re going to decouple from the US in several ways, apart from defense, but also on the technology side.

So it will be a lot of hands-on here in Europe, building our own infrastructure, data center, and so forth, hosting sensible data, not overseas, hosting that in Europe, in our own cloud, away from maybe US providers. So there is still a lot of movement, and I don’t think it’s done yet. Yeah, no, it’s true.

The S&P is holding in. NASDAQ is down 14% here to date, actually, so there’s been quite a bit of capital destruction. We talked about this, and I know you’ve been following our channel a little bit over time as well, but it seemed like people were still very, very surprised by the selloff.

What do you make of that? Because we’ve seen it coming at some point. It was obvious that it would happen, even if you were just to follow Warren Buffett. He’s been cash for the last 18 months.

Were you surprised that the market suddenly sold off, maybe on the 100% tariffs on everybody here? But it seemed like it was just the last drop in the bucket. Yeah, it was just a drop in the bucket. It’s not really something that should surprise people.

It was in the making. It even started before all that came up. So it’s just an excuse to start taking profits.

I think everybody has been waiting for that. Retail has been buying relentlessly, especially in the US, even when we had the dips of the last week. But this reflexive buying and the rip after the dip is not happening in the same force and magnitude like we had in the past.

And now I think that is the shocking moment for a lot of people, that we have a little bit of a regime change when it comes to that. Yeah, BTFD is done, I think, in the main markets. Fortunately, it was a bit extreme.

A lot of global financial deleveraging happening. We touched on it, like a lot of capital leaving the US, a lot of capital being redistributed around the globe. And it’s fleeing to one asset class in particular, gold.

It’s not really flowing into the dollar. It’s not flowing into US bonds. It’s flowing overseas and into other asset classes, primarily gold.

We have to talk about that. What’s the role of gold going forward here? And why is gold being such an attractive investment here for central banks and others? What’s the background here, Michael? I think it all started with what happened after Russia invaded Ukraine and what happened to Russian assets overseas. I think that was a wake up call for a lot of people and central banks that they have to diversify and that buying and holding gold is something that could basically help in diversification and securing their assets.

And this is now going on. And we see that most of the buying comes from Asian countries. The Chinese are very active, but also countries like India, ongoing buyers, and the same applies for countries like Turkey.

It’s been a bit of a stealth move, I think, for a lot of people that haven’t got a close look at metals markets or commodities or gold. And now, north of $3,000, it’s a bit more prominent. It features everywhere now, even in the newspapers.

And I kind of get a little bit alerted when I get calls and chats from people that haven’t been involved in it, all of a sudden ask me, should I buy silver or should I buy gold? So then you get a sense that it’s finally arrived with people. And I don’t think it’s over yet. I think that trend is going to continue for a bit longer.

We have a situation where people believe that holding U.S. assets is probably not the smartest move in the world any longer. And those people are using that to diversify away from that. I personally wouldn’t go that far and be so extreme in our view.

I think the U.S. is still perfectly fine. And we’re going probably get more input or let’s put it away, a positive push at some point that is going to make the move or the needle swing a little bit back to the middle again, and maybe a little bit more positive towards the dollar. But I can’t see that this money is going to flee the metals market or gold.

And we also see that copper and other metals, a day like yesterday, basically, where you saw that late sell-off, you had oil and copper in positive territory, which doesn’t really fit into the equation. So I think there’s a bit of a general trend in this environment where you have basically people staring inflation in the face that they want to invest in something which, like somebody famously said, hurts when it falls on your foot. Absolutely.

I keep coming up with props here, but that’s the Financial Times of today. And one thing that makes me really happy is it’s just gold at record high. It actually made the Financial Times front page.

I’m not sure if that’s a good or bad thing yet, but it’s good. It feels good to my, what do you call it, hurt and scarred soul a little bit. It’s good to see my little sector show up on the front page, finally.

Although we’re not talking about mining yet on the front page. Unfortunately, we’re not there yet. So there’s some room to go.

Kai, we all know that gold miners in the past, basically, whenever the gold prices got to a higher level, they started to do extremely silly things, engaged in crazy M&A, massive capex ramp ups and splurged with money. So far, we haven’t seen it yet. I think we’re now coming to the second quarter results where hopefully we’re going to see that with all price lower, that input costs have come off.

On the other side, you have higher gold prices to sell into. So on the margin side, we may see some very positive numbers. And if big if managements at gold mining companies come to census and say, look, we’re going to rather going to spend some money on maybe buying a bit of our share, buying back some shares or distributing higher dividends.

It could be the moment where generalists all of a sudden become a bit more engaged and interested in that. And that could lift the sector. No, absolutely.

Like GDX is outperforming gold roughly two to one already. And I mentioned NASDAQ performance year to date down 14 percent, while the GDX is up about 40, 45 percent. At some point, people will have to realize like, oh, I’m not getting my 20 percent this year.

Right. It hasn’t happened yet, but it’ll be a very tight space or it’s a small space that will get overrun with money at some point and we will all benefit from it. Michael, you touched on general commodities.

We need to briefly talk about silver as well, because the gold silver ratio is at one hundred and three right now. Why is silver lagging so much and what are your expectations for silver here, Michael? I yeah, silver is being much talked about like it’s an industrial commodity as well. And in addition to being a precious metal used in or even more used in renewable energy production.

But it’s been struggling. It has always been held back. At some point, it’s going to have its moment in the sun.

But in all honesty, Kai, I don’t really have a have a big view on that. For me, it’s like gold is the bellwether. And I kind of look into that because that is where where people are going to diversify into in the first place and less so into silver.

It will have some catch up moment, I’m sure. But it’s hard to figure out right now. Michael, I know you’re an investment banker, not a capital allocator.

So I’ll take it as it be. And it’s not definitely investment advice I’m asking for. But it’s maybe a nice summary of our conversation.

If I were to come to you or if you were to deploy a million dollars, a million euros right now, since you’re in Frankfurt, how would you allocate that money today? European dividend stocks, something I would I would look to. And then I definitely have the metal space on my on my screen. I think they’re what we’ve seen from the Chinese, what we’ve seen from Donald Trump with his push into into Greenland, onto the Ukraine to secure resources there, or even lately, deep sea mining, opening the door for that.

I think we’re going to see an ongoing lasting rush for resources. We’ve underinvested in that space for a very long time, especially in Europe. Nobody has really bothered because of ESG.

Nobody wants to have it in its backyard. But we’re seeing that the European Union is waking up to the fact, Germany’s waking up to the fact there are exploration projects ongoing in Scandinavia, on the Balkans, in the south of Spain. I think we’re going to see more of that.

That is the theme that’s going to be with us for a very long time. So that’s one European dividend. And obviously don’t miss out on the on the tech train because it’s going to continue.

No, fantastic. Michael, what a wonderful conversation. It’s great to have you on getting a bit of a European perspective here.

We’ll have to do this next time, maybe in person. In Frankfurt, you’re only about 15 minutes away from me. That is right, Kai.

Anytime. Exactly. Short walk.

Absolutely. No, Michael, where can we send our audience? How can they best follow you if they wanted to reach out? I’m not really that visible on social media. I’m not really a social media guy.

I’m more a consumer, not someone who posts a lot. So it’s very, very hard. You can find me on LinkedIn.

I have my profile there. Other than that, basically, yeah, tap me on the shoulder when you see me on the streets of Frankfurt. Fantastic.

We’ll definitely tell everybody to do that. Michael, thank you so much for coming on. Everybody, thank you so much for tuning in.

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Take care out there.