The Great Simplification with Nate Hagens - The Real Global Macro | Frankly #28

Episode Date: April 6, 2023

Recorded April 4, 2023   Description   In this Frankly, Nate shares his early Wall Street experience of 'squawkboxes' summarizing the daily financial Global Macro events and compares it to present day, where we find ourselves faced with the real Global Macro news - the systemic nexus of economic, environmental, and geopolitical risks and realities. From sea surface temperatures at all-time recorded highs, to the threat of nuclear war, to failing nation-states - how does a single person make sense of and cope with a 24 hour news flow reporting our increasingly chaotic world? Our cultural challenges are now far greater than stock markets and currency movements. We need people paying attention, understanding, and engaging with the 'real' Global Macro. To Watch on Youtube: https://youtu.be/TtYpW2GQGHc For Show Notes and More: https://www.thegreatsimplification.com/frankly-original/28-the-real-global-macro

When I worked on Wall Street back in the day, I had to leave my apartment in Chicago, take a cab to the Sears Tower at 5.15 in the morning to be there at 6 and for a while memorize Intel, Apple, Home Depot, stock symbols. But then we had to be there for the morning macro call. We had these little squawk boxes, these little four-inch by four-inch speakers. where the experts on interest rates and the economy and earnings would broadcast to the Solomon Brothers Network around the world, what happened overnight? So there is something called Global Macro, which is every morning now and today, people read summaries of the news that happened in currency markets or interest rate or stock market or the economic data that happened in Europe or the United States or China. This can be a full-time job for those people in the hunting and gathering by amassing

digital claims on reality space in Wall Street and finance around the world. There's a lot of news. We saw that the Federal Reserve is kind of having to pivot from a tightening cycle to an easing cycle because of the economy slowing rapidly because of the duration risk in the banking system and the payroll employment numbers coming in showing a weaker economy. Inflation is still high but is moderating versus where it was before. Personally, I don't know how much control the Fed has on some of these things. But today we saw stocks down and gold up $40.

We saw recently that OPEC cut a million barrels of production, which boosted oil $4 a barrel. This is simultaneous with some other things going on that China has brokered somewhat of a piece between Saudi Arabia and Iran. We see that the U.S. still has not replenished the strategic petroleum reserve, which again is kind of like, let's save American consumers a little bit at the gas pump so that politically that looks good when that entire thing was meant to be a reserve for an emergency situation. We also saw probably the most environmentally climate-aware president of our history a couple weeks ago approved the Willow Project, a big drilling project,

in Alaska for more hydrocarbons. We see Malaysia in the news coupling with China to de-dollarize. There's been a lot of momentum this year in de-dollarization, which if that were to occur, if the U.S. was not the reserve currency of the world that commodities, especially oil are priced in, that would have massive implications for our economy. All kinds of financial things in the news. followers of this podcast know that although finance is one of the four horsemen of the 2020s, there is a much broader global macro. I saw today or yesterday that ocean temps are the highest ever measured. The oceans are now 21C and that is following a La Nina period. We're about to head into an El

Niño period, which means they're even going to warm further. We saw the train derailment in Palestine, Ohio. There's been massive research and risk warnings on PVC since one of the train cars was filled with vinyl chloride. My friends in the plastic space are just flat out working 60-hour weeks trying to look at the implications of plastic supply chains globally in the United States. Also on the climate front, we're seeing that the reduced sulfur content in marine vessels has caused a band, a swath around the northern latitudes of much warmer temperatures because the dimming effect has been reduced. We see in the news that South Africa is having over 200 days of blackouts this year forecast by the central bank because of their electricity, coal. mismanagement and other problems. We see Israel bombing the airport in Damascus in Syria. The ongoing way higher than the average person perceives to be nuclear risk,

either a tactical strike in case Russia wins or Russia loses in Ukraine, leading to a potential strategic release, which by my research would show an immediate effect on a six mass extinction with, you know, billion plus people dying, all kinds of negative impacts to supply chains, I mean, food supply chains in the ocean, phytoplankton, everything else. And we see our former president was indicted in court today, and the larger political political backdrop is it looks like we will have two octogenarians running again, Trump versus Biden, to be president of this country. So there's all this news that comes every day, this global sapiens macro that we pay attention

to. And it becomes overwhelming. How do these pieces fit together? How are they relevant to our lives? How do we mitigate and adapt to the craziness? And I didn't mention all the chat GPT 3.5 and chat GPT 4 and 5 are in training. And people with deep fakes, they don't even know what's real in the news anymore. And I think six months from now that will even accelerate.

So in my work, I try to make sense of all this by prioritizing three main pillars. One, energy and resources, energy is the currency of life and it underpins human systems. But there's a metabolism, a power of how this energy gets used and that links to dollars and trade and economic growth. Number two is human behavior. As individuals and as aggregation of individuals, we can kind of predict how humans respond in certain situations. And number three is the ecology and the environment of the only known planet in the universe

to host complex life. That is increasingly getting known by people, the fragility of Earth's systems. There's even a word for the million species that are at danger of extinction. It's called Endlings, which is once there are too many of a species gone, to continue that species' existence, even though they still are alive and exist, those last remaining members of that species are called endlings, and humans can relate to them and study them, et cetera. This all brings me to say, we didn't evolve to handle this amount of complexity and toxicity and anxiety and worry and tragedy.

Not only in our daily lives reading the news, but our sense of dread about what's coming. The neuroscience of dread shows that if people know they have to have a root canal that is expected pain of nine out of ten, I don't remember the exact numbers, that if they could get in two weeks, If they could get the root canal over with tomorrow, they would be willing to take a higher amount of pain just to get it over with.

So we're all living with this anxiety and worry about the future. And it's not normal to carry this much with us. Our ancestral times would be kind of happy, go lucky, hunting, gathering, singing, storytelling, sleeping. And then a lion would attack or something like that. And we would all galvanize and respond to the threat and the threat was passed. And we would go back to our normal lives.

This is a steady, ongoing diet of conisgary existential systemic stuff. So I'm sure many of you have found ways to cope. I cope by hanging out with my dogs. My dogs are instant fire extinguishers of the cortisol and dopamine that I have on these daily calls and learning about the global sapiens macro condition. I try to spend a lot of time in nature. I'm learning how to meditate.

Being surrounded by friends in oxytocin is a little bit of an antidote. But again, my day job, which is this podcast and intervening on these things, makes it difficult for me to move away from these topics because I have to stay on top of these topics to to talk articulately about them. But it's impossible to stay on top of these topics, right? There's just the few little things I mentioned. There are people who are expert on climate and on oceans and on finance and on geopolitics and on US politics and on community and on species extinctions.

It's really hard to be buffeted by these facts every day. So I'm just calling that out to say that a lot of people in the world are rewarded for playing the game that results in more digits in the bank account and shifting around the largesse of the peak of the carbon pulse to garner monetary power, which results in social power. But these broader concepts, the oceans, other species, the ecosystems of Earth, the plastic, the longer-term pollutant impact on our culture, a lot of these people don't even have salaries, or if they do, they're low salaries. Society doesn't champion people working on these risks, and yet we still have to learn about

them and engage with them. So this is just a shout-out to all of you that are working on things other than the financial macro. And my conclusion in all this, in addition to hoping you all have coping mechanisms, and one thing I'd like to do in the future here is create the coping mechanism of building community where people that are fluent and paying attention to these risks and choose to swim in this pool can fight each other

and get the solace and camaraderie and, you know, metaphorical pat on the back to work together on these issues. And there may be a way to expand that. So again, I really just sat down here. I didn't know what I wanted to say. But today's been one of those days where I get these emails with information on so many different things. And I expect this is going to get crazier. I think we're at the calmest time of the next 10 years. There's going to be so much news and chaos and things.

And try not to get super pulled in to each different item. You can kind of squint and take a look back at how these things fit together and play a role in your life and in your small area on this planet Earth. But I will see you next week. Thank you.