The Global Economy Is Splitting Into Spheres | Eric Wallerstein

Bullish:

• $LATAM - Latin America positioned as major beneficiary of geopolitical tensions and spherification, with advantages in manufacturing, natural resources, fintech growth, and proximity to US.

  • “I think, like, the world is going into spheres, whether you like it or not. And, frankly, like, as an investor, LatAm has so many advantages”

    Eric·0:00

  • “It's positioned in on the in the Western Hemisphere. It's near abroad to The US. Educated populations, generally. They're not dealing with, like, mass mass immigration as an issue”

    Eric·28:53

  • “Power gen, power transmission, all looks good. Ton of natural resources. A lot of them can generate current account surpluses on their own and build FX reserves. It's just a great story”

    Eric·29:13

  • “it could be the next five, ten, fifteen years where, like, it's, like, a renaissance for this region, really”

    Eric·35:48

  • “Ultimately, I think they're one of the geographical winners of the Iran conflict. Like, The Middle East, Europe, Asia, all kind of hurt by this. Like, a lot more energy independency in Latin America”

    Eric·30:14
• $BRAZIL - Brazil specifically called out as beneficiary of oil shock and geopolitical tensions, with strong fundamentals for carry trades.

  • “Brazil and India are two different are com two dip like, completely different comp like, countries. So you have the long end selling off, yet, like, one's a complete beneficiary and one's totally gonna lose off this”

    Eric·19:02

  • “Brazil's obvious, and people have been doing carry trades with the Real for however long”

    Eric·30:42
• $FINTECH - Fintech in Latin America has unique opportunity to expand into US market with regulatory regime change, can accelerate middle income growth.

  • “neobanks and crypto used to be, like, personas on grata for policymakers in DC. Right? And now I think you have a huge flip, complete regime change”

    Eric·34:21

  • “I think what the what a really, really interesting opportunity for fintech and LATAM is you can actually expand into The US market. Like, there's just a natural overlap between, like, consumers in next like, you know, people you bank in Mexico and then people you bank across the border”

    Eric·34:53

  • “if you can accelerate from, like, a low income to, like, a middle to upper middle income country because you have this huge fintech impulse and, like, you can skip traditional banking services and deepen credit there, you know, you can actually not even just do the tradable sector stuff, but you can have actually consumption accelerate as well”

    Eric·29:48
• $BANKS - Bank deregulation under new Fed leadership will free up balance sheets, increase lending, and benefit from steeper yield curve.

  • “I think easing up on capital requirements is great. They'll start easing up on liquidity requirements. That's great”

    Eric·38:39

  • “if you do it by helping alleviate bank balance sheets, empowering the desk in New York to actually manage day to day swings and month to month month to month swings and reserves, you'll just allow more you won't get so much funding market stress and volatility all the time”

    Eric·39:37

  • “I think banks turned a corner a year and a half ago, and especially a year ago, like, from overregulation to moving in the right direction”

    Eric·40:14

  • “we might see a steepening of the yield curve, which makes it also accretive for banks to to lend out and and be more active with their loans”

    Felix·48:37
• $AIPRODUCTIVITY - AI productivity growth can solve US fiscal issues, improve debt-to-GDP, and extend US exceptionalism for decades.

  • “if you have that kind of productivity growth, like, you're improving this massive, massive fiscal issue that we have. Like, debt to GDP actually falls”

    Eric·50:33

  • “This is the kind of thing that solves that. We have, like our demographic picture, just like East Asia, is really bad and inverted. Same same with Europe. If you don't have immigration, like, you kind of need productivity to offset dependency ratios”

    Eric·51:18

  • “it's honestly the story of how US exceptionalism just continues for, like, forty more years. And we just, like, avoid the fiscal cliff, you know, for for longer”

    Eric·51:43

Bearish:

• $EUROPE - Europe faces negative growth shock from oil prices, deteriorating terms of trade, and ECB likely to make policy error if they hike rates.

  • “I don't really buy the ECB rate hiking story. And, frankly, if they do, like, you should just be short. Like, you should just be short European equities in the case that they don't hike or in the case that they do hike”

    Eric·18:16

  • “the euro's real effective exchange rate is super high right now. If you have an inflationary impulse that just boosts your your your real effective rate. So now their currency is even stronger”

    Eric·21:32

  • “Their terms of trade are decreasing because on one hand, you have higher import prices, like the German manufacturing sector now has higher inputs. But then their export prices are gonna be crimped”

    Eric·21:46

  • “who loses is European cyclicals, like autos, industrials. They're gonna get hit whether they hike, whether they don't hike, and this is, a growth shock”

    Eric·23:26
• $INDIA - India positioned as loser from oil shock unlike Brazil, despite both being emerging markets.

  • “Brazil and India are two different are com two dip like, completely different comp like, countries. So you have the long end selling off, yet, like, one's a complete beneficiary and one's totally gonna lose off this”

    Eric·19:02
• $EASTASIA - East Asia faces significant negative impact from Iran conflict and oil supply constraints, worse than US or Europe.

  • “This is 10 times worse for East Asia than it is for us. If anything, we might benefit on the margin, and it's, to a lesser extent, bad for Europe”

    Eric·26:13

  • “The Middle East, Europe, Asia, all kind of hurt by this”

    Eric·30:20