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TRADE ROUTE CONTROL - BUILD WEEKLY ROUNDUP - 2025 WEEK #50
TL;DR: Trade route control and naval power are the key differentiators in a fracturing world order.
📄 SUMMARY
Fed Reserve Management Purchases (RMP)
Matt Dines explains the Fed's newly announced Reserve Management Purchases program starting December 12th, which involves $60 billion in monthly T-bill purchases similar to 2019's repo market intervention. This effectively ends QT and begins balance sheet expansion at the short end of the yield curve.
- The program brings down discount rates on bills, working out the last bit of inversion in the yield curve (2:00-3:30).
- With the fed funds rate now at 3.5-3.75%, a positively sloped yield curve incentivizes banks to borrow short and lend long, enabling credit expansion: "from here on out, we're looking for credit expansion to pull the plane up" (9:00-9:30).
Russian Oil: Lukoil Divestiture Saga
OFAC mandated Lukoil sell approximately $22 billion in international oil assets with a deadline extended to January 17th. Xtellus Capital Partners has emerged as the preferred bidder with a cashless asset swap proposal.
- Xtellus is a New York-based broker dealer with historical ties to Russian entity VTB, now severed, positioning them as a middleman for cross-border capital transactions (20:00-21:30).
- The deal structure works around sanctions since the transaction cannot operate through the US dollar financial system (22:00-22:30).
Venezuela and Trade Route Control
The US Navy commandeered a Venezuelan oil tanker, signaling the importance of naval power over physical possession of resources. Matt draws a historical parallel to Napoleon's defeat.
- Napoleon's quote: "If it had not been for you English I would have been emperor of the east...but wherever there is water to float a ship, we are sure to find you in our way" (34:00-34:30).
- Matt emphasizes: "if you don't have control of the shipping lanes, it's basically impossible to win this game" (35:30-36:00).
- This connects to broader commodity flows and their value as collateral in fiat-based credit systems during this era of monetary transition.
JP Morgan Rising Cost Outlook
JPM announced rising costs of approximately $105 billion (up from ~$101 billion), driven by technology and headcount expenses. They issued year-end bonuses to lower-level employees feeling inflation's pinch.
- Matt references Warren Buffett's 1970s shareholder letters: "It is difficult for business and enterprise to basically preserve value in an environment where their denominated unit of activity for transacting in an economy is debasing" (46:50-47:15).
- Jamie Dimon stated at a conference: "A weak Europe is a risk for the United States" - highlighting the interconnected nature of sovereign debt concerns and geopolitical risk (48:00-49:00).
🔑 KEY TAKEAWAYS
- The Fed's RMP signals a shift from QT to balance sheet expansion, creating conditions for credit expansion over the next 3-12 months as the yield curve normalizes.
- Russian oil asset divestiture requires creative deal structures (cashless asset swaps) to navigate sanctions while preserving property rights perceptions.
- Control of trade routes and naval power, not resource ownership, is the decisive competitive advantage in the fracturing world order.
- Rising costs at major financial institutions like JPM reflect the broader challenge of operating in an inflationary environment with a debasing currency.
- Europe's weakness presents systemic risk to the US as the unipolar world order fractures into regional spheres
🔗 LINKS
- 🎧 Subscribe to the Build Weekly Roundup: https://open.spotify.com/show/7bvfjkPjQ67Eugg8EYdoe5
- 🌎 Build Asset Management: https://getbuilding.com
- ⚓ Build Bond Innovation ETF: https://bfix.fund
- 📈 Build Secured Income Fund I: https://buildbitcoin.com
📱 SOCIAL MEDIA
- Build Asset Management: https://twitter.com/BuildMarkets
- Matt Dines: https://twitter.com/LeveredUSTs
- Cameron Otsuka: https://twitter.com/CameronOtsuka
- Dave Martin: https://twitter.com/DaveMSocial
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit mineprinthash.substack.com
View all episodes
By Matt Dines & Cameron OtsukaTL;DR: Trade route control and naval power are the key differentiators in a fracturing world order.
📄 SUMMARY
Fed Reserve Management Purchases (RMP)
Matt Dines explains the Fed's newly announced Reserve Management Purchases program starting December 12th, which involves $60 billion in monthly T-bill purchases similar to 2019's repo market intervention. This effectively ends QT and begins balance sheet expansion at the short end of the yield curve.
- The program brings down discount rates on bills, working out the last bit of inversion in the yield curve (2:00-3:30).
- With the fed funds rate now at 3.5-3.75%, a positively sloped yield curve incentivizes banks to borrow short and lend long, enabling credit expansion: "from here on out, we're looking for credit expansion to pull the plane up" (9:00-9:30).
Russian Oil: Lukoil Divestiture Saga
OFAC mandated Lukoil sell approximately $22 billion in international oil assets with a deadline extended to January 17th. Xtellus Capital Partners has emerged as the preferred bidder with a cashless asset swap proposal.
- Xtellus is a New York-based broker dealer with historical ties to Russian entity VTB, now severed, positioning them as a middleman for cross-border capital transactions (20:00-21:30).
- The deal structure works around sanctions since the transaction cannot operate through the US dollar financial system (22:00-22:30).
Venezuela and Trade Route Control
The US Navy commandeered a Venezuelan oil tanker, signaling the importance of naval power over physical possession of resources. Matt draws a historical parallel to Napoleon's defeat.
- Napoleon's quote: "If it had not been for you English I would have been emperor of the east...but wherever there is water to float a ship, we are sure to find you in our way" (34:00-34:30).
- Matt emphasizes: "if you don't have control of the shipping lanes, it's basically impossible to win this game" (35:30-36:00).
- This connects to broader commodity flows and their value as collateral in fiat-based credit systems during this era of monetary transition.
JP Morgan Rising Cost Outlook
JPM announced rising costs of approximately $105 billion (up from ~$101 billion), driven by technology and headcount expenses. They issued year-end bonuses to lower-level employees feeling inflation's pinch.
- Matt references Warren Buffett's 1970s shareholder letters: "It is difficult for business and enterprise to basically preserve value in an environment where their denominated unit of activity for transacting in an economy is debasing" (46:50-47:15).
- Jamie Dimon stated at a conference: "A weak Europe is a risk for the United States" - highlighting the interconnected nature of sovereign debt concerns and geopolitical risk (48:00-49:00).
🔑 KEY TAKEAWAYS
- The Fed's RMP signals a shift from QT to balance sheet expansion, creating conditions for credit expansion over the next 3-12 months as the yield curve normalizes.
- Russian oil asset divestiture requires creative deal structures (cashless asset swaps) to navigate sanctions while preserving property rights perceptions.
- Control of trade routes and naval power, not resource ownership, is the decisive competitive advantage in the fracturing world order.
- Rising costs at major financial institutions like JPM reflect the broader challenge of operating in an inflationary environment with a debasing currency.
- Europe's weakness presents systemic risk to the US as the unipolar world order fractures into regional spheres
🔗 LINKS
- 🎧 Subscribe to the Build Weekly Roundup: https://open.spotify.com/show/7bvfjkPjQ67Eugg8EYdoe5
- 🌎 Build Asset Management: https://getbuilding.com
- ⚓ Build Bond Innovation ETF: https://bfix.fund
- 📈 Build Secured Income Fund I: https://buildbitcoin.com
📱 SOCIAL MEDIA
- Build Asset Management: https://twitter.com/BuildMarkets
- Matt Dines: https://twitter.com/LeveredUSTs
- Cameron Otsuka: https://twitter.com/CameronOtsuka
- Dave Martin: https://twitter.com/DaveMSocial
This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit mineprinthash.substack.com