WEAPONIZE THE PERIODIC TABLE (Guest: Tony Greer)

Tony Greer's central thesis entering the year is that commodity strength, particularly in natural resources and energy, will eventually topple the semiconductor bubble as money rotates out of semis, repeating the structure of his 2022 trade where he simultaneously shorted tech and went long natural resources. He entered the year long industrial miners and gold miners, then added energy stocks as a hedge. He argues physical commodity markets are small relative to bond and equity markets, so even a modest inflow from semis could reignite commodity trades. Silver breaking above 20 dollars and copper rising 1,000 dollars were early signals he read as traders positioning for headline inflation. He acknowledges these trades work best with headline inflation and will not perform well without it.

Greer is baffled that oil is trading around 97 dollars despite a relevant waterway, likely the Strait of Hormuz, having been closed for approximately 80 days at the time of recording. He assigns roughly 25 to 30 percent probability to an extreme scenario where continued closure produces a short squeeze pushing Brent toward 200 dollars on some contract month, which he compares to COVID in reverse. He does not believe a US-Iran peace deal would reliably reopen the strait and expects oil prices to grind higher, sustaining headline inflation. He warns that a peace deal announcement could cause stocks to gap up 4 to 5 percent and that gap could mark the high of the move. Patrick cites Morgan Downey's argument that even if a peace deal were announced today, oil flows would take a very long time to recover. Patrick identifies oil rising to 150 dollars as the scenario most capable of converting sector rotation into a genuine market drop by stressing bonds through their existing correlation with interest rates. Greer adds that an oil shortage is a physical constraint that cannot be solved with financial engineering or monetary policy.

Greer watches the 10-year yield, which has ranged between 3.75 and 4.75 percent for three years, and says a move above 4.75 percent and especially above 5 percent would represent a fast rate of change that damages equities. He notes the December 2027 futures contract has pulled all rate cuts out entirely, pricing in 100 percent no cuts, and that Christopher Waller, historically the most dovish FOMC member, has put rate hikes back on the table. Greer raises the possibility that incoming Fed chair Kevin Warsh could surprise by being more hawkish in order to control the bond market, characterizing Warsh as someone who chases markets more than most central bankers. He is explicit he is not predicting this but says it is not being forecast by anyone and would shock the market.

On the AI narrative, Greer says there is still no clear monetization path. He predicts a SpaceX IPO could mark the top of the AI and semiconductor bubble, analogous to the AOL-Time Warner deal, noting SpaceX, OpenAI, and Anthropic are all discussing coming to market, which would represent a surge in net equity issuance reversing the recent trend of buybacks exceeding option issuance. He also points to Nvidia falling on earnings while the SMH semiconductor ETF surged to a 52-week high as a possible signal the semi bubble is beginning to pop. Greer argues money managers face genuine career risk for underperforming if they avoid semiconductors, making non-participation functionally equivalent to being short.

Greer predicts rare earth metals will be the sector that wins the race by end of year, attributing the trade to resource nationalism and supply chain uncertainty given China's more antagonistic posture, referencing Jeff Curry's description of China having weaponized the periodic table. He is bullish on gold, citing central bank buying as the key underpinning trade, and uses gold as a store of value and as a bank, selling it to fund purchases of other assets rather than holding large cash positions. He cautions that gold is currently experiencing a soft bleed following a parabolic blowoff and expects the consolidation to persist through the second quarter and possibly into the third quarter.

The University of Michigan consumer sentiment reading released on the day of recording came in at an all-time low by the survey's historical record, worse than the Global Financial Crisis and worse than the 1970s. Greer distinguishes today's supply shock inflation from the monetary inflation of 2021, arguing rising oil prices act as a tax on consumers and corporations. He points to Walmart suffering its first significant selloff in a multi-year bull phase as a signal of possible consumer stress and argues participants in the upper portion of the K-shaped economy are not appreciating how badly the lower portion is suffering. During the tariff war selloff, European institutions declared the US uninvestable while retail buyers aggressively bought the dip and ended up 15 to 20 percent in the money, with pod shops and institutional multi-manager funds now acting as the forced sellers previously associated with retail.