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Markets Whipsaw as Iran Headlines Trigger Massive Swing · The Financial Exchange Show

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Speaker 2: Chuck, Mike, and Tucker with you as we kick things
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Speaker 2: off on a Monday to the second to last Monday
1:20
Speaker 2: in March. Did you know that, Michael, It's a big
1:23
Speaker 2: one for me personally. Of course I did. It's a
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Speaker 2: big one for me personally. Right behind Flag Day.
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Speaker 3: Yeah, you know, yeah, yeah, right behind the third Tuesday
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Speaker 3: in April.
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Speaker 2: It's it's right up there. Third Tuesday does Okay, it
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Speaker 2: still still slaps. Let's talk a little bit about what
1:41
Speaker 2: happened this morning, because this is our top story. So
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Speaker 2: I woke up at around I don't know, four thirty
1:48
Speaker 2: or so. This is not the important part, but the
1:50
Speaker 2: futures market at that point in time sp futures were
1:53
Speaker 2: off around seventy points, and they kind of lingered between
1:58
Speaker 2: you know, forty seventy down throughout the morning until at
2:04
Speaker 2: seven twenty three am. President Trump put this out on
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Speaker 2: truth Social quote. I'm pleased to report that the United
2:12
Speaker 2: States of America and the country of Iran have had
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Speaker 2: over the last two days, very good and productive conversations
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Speaker 2: regarding a complete and total resolution of our hostilities in
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Speaker 2: the Middle East. Based on the tenor and tone of
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Speaker 2: these in depth detailed and constructive conversations which will continue
2:27
Speaker 2: throughout the week. I've instructed the Department of War to
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Speaker 2: postpone any and all military strikes against Iranian power plants
2:34
Speaker 2: and energy infrastructure for a five day period, subject to
2:38
Speaker 2: the subject to the success of the ongoing meetings and discussions.
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Speaker 2: Thank you for your attention to this matter, President Donald J. Trump.
2:46
Speaker 2: So this is basically the answer to On Saturday, he
2:50
Speaker 2: had posted that if the Strait of Horror Moves was
2:53
Speaker 2: not open within a forty eight hour period, the US
2:56
Speaker 2: was going to begin bombing Iranian power plants. The Iranians
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Speaker 2: responded and said, you're gonna do that. We're gonna attack
3:01
Speaker 2: desalinization plants that provide for US drinking water throughout the region,
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Speaker 2: as well as energy infrastructure as well. The forty eight.
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Speaker 3: Hours was expected to be up sometime around seven pm
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Speaker 3: Eastern correct.
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Speaker 2: So this happened and immediately S and P five hundred
3:15
Speaker 2: futures went from about fifty points down at the time
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Speaker 2: to about one hundred and eighty points up. It was
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Speaker 2: about a two hundred and thirty point swing in three minutes.
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Speaker 2: And of course everyone's like sitting there looking at their
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Speaker 2: screen going Okay, what happened, and of course, like you
3:31
Speaker 2: head over to true social like you, you figured it
3:33
Speaker 2: out pretty quickly. So the Iranian government, then the Iranian
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Speaker 2: Foreign Ministry about twenty minutes later, says, hey, we haven't
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Speaker 2: had any conversations with you, and you know, we don't
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Speaker 2: appreciate this psychological warfare as you're delaying you know, blah
3:51
Speaker 2: blah blahs, you try to get you know, troops into
3:53
Speaker 2: position for additional action. Yeah, it was very much that,
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Speaker 2: combined with.
4:00
Speaker 3: Rhetoric of the White House, has really taking the foot
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Speaker 3: off the pedal because they're nervous about Iran's capabilities that
4:08
Speaker 3: were displayed over the weekend. So that was the message
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Speaker 3: delivered from the state media of Iran.
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Speaker 2: We then got around maybe an hour or so later
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Speaker 2: from Axios reports that Egypt, Turkey, and I forget who
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Speaker 2: else had delivered some messages back and forth between Iran
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Speaker 2: and the United States over the past couple of days.
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Speaker 2: So here's what we do and don't know. We don't
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Speaker 2: really know anything, quite honestly, and that's fine. Like I'm
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Speaker 2: perfectly willing to look at this and say it's absolutely
4:45
Speaker 2: possible that substantive conversations have taken place. It's absolutely possible
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Speaker 2: that no conversations have taken place. I think both of
4:52
Speaker 2: those are realistic possibilities given the fog of war that
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Speaker 2: we still have going on right now, and they're for
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Speaker 2: both sides to be presenting exactly what they're presenting at
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Speaker 2: this moment in time. The President can absolutely be saying, yep,
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Speaker 2: I'm moving forward on trying to de escalate things because
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Speaker 2: he knows that ultimately what Iran is trying to do
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Speaker 2: is create as much economic pain as possible, and the
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Speaker 2: way to minimize that in the short term at least
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Speaker 2: is to create the appearance of progress. If there isn't
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Speaker 2: any happening. Again, I don't know that there is or isn't.
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Speaker 2: I'm just saying this is one possibility. Likewise, if you
5:29
Speaker 2: are the Iranian side, your view is to try to
5:33
Speaker 2: look like you are standing up as strongly as possible
5:37
Speaker 2: to America because that is going to give you the
5:40
Speaker 2: greatest leverage in trying to determine your fate and kind
5:45
Speaker 2: of what things look like after this. So these are
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Speaker 2: entirely like reasonable reasons why either side may not be
5:52
Speaker 2: giving you the accurate picture. The truth is probably somewhere
5:56
Speaker 2: in between. In terms of as axiosyndicated, there's probably been
6:00
Speaker 2: some messages going back and forth. The exact tenor and
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Speaker 2: the exact tone of those I don't know, But we
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Speaker 2: don't really know anything, and I don't I don't have
6:11
Speaker 2: any unique insight into this. There are very few people
6:15
Speaker 2: in the world that do. Other pieces that I will
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Speaker 2: note in the statement from President Trump, it does not
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Speaker 2: say that the United States is halting all military operations
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Speaker 2: right now. It says they're not going to target Iranian
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Speaker 2: power plants and energy infrastructure for a five day period.
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Speaker 2: They were not targeting that previously. It's it's not something
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Speaker 2: that the United States has targeted as part of this
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Speaker 2: this conflict Israel has in a couple occasions, and in
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Speaker 2: both occasions the United States is like, guys, what are
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Speaker 2: you doing? At least you know publicly sure, And so
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Speaker 2: it's unclear that this post represents any shift in the
6:51
Speaker 2: actual military actions that are being undertaken right now. It
6:55
Speaker 2: may it may not. We just don't know. Other things
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Speaker 2: that I think are of note here when we look
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Speaker 2: at this post. I do think it does indicate that,
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Speaker 2: in my opinion, the President is looking for options to
7:15
Speaker 2: de escalate the situation. I don't think that's wrong. I
7:18
Speaker 2: would imagine under the right conditions, Iran is as well.
7:22
Speaker 2: I don't know that those conditions have necessarily been met
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Speaker 2: for them because I think they probably view themselves as
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Speaker 2: having some leverage to try to cause as much pain
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Speaker 2: as possible and want to wring as many concessions out
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Speaker 2: during this as they as they possibly can. Because it's
7:39
Speaker 2: an asymmetric conflict. They know they're not going to beat
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Speaker 2: the United States and Israel in an actual armed conflict.
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Speaker 2: They have to use the tools that are available to
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Speaker 2: them to try to ensure their regimes survival, which is
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Speaker 2: still uncertain, like it might not survive through this again,
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Speaker 2: it's been three weeks like that, there still is a
7:59
Speaker 2: lot of develop and that can happen from here. So
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Speaker 2: S and P.
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Speaker 3: Five hundred at this price is back to where it
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Speaker 3: was on Thursday of last week.
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Speaker 2: Yeah, got back. We're not back to pre Iron crisis.
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Speaker 2: We're not back to anywhere. We erase Friday and we're
8:12
Speaker 2: kind of middle of the day Thursday. In my opinion, Yeah,
8:16
Speaker 2: I'm trying to get Are we better In my opinion,
8:19
Speaker 2: no one knows whether we're better off or not right now. Yeah,
8:21
Speaker 2: I have no idea, which is why my approach on
8:25
Speaker 2: this again just to looking at this from an economic
8:27
Speaker 2: perspective and in terms of like what's a meaningful signal
8:30
Speaker 2: about the actual conflict. It's really simple in my boat
8:34
Speaker 2: my mind. Sorry I jumped ahead there. If the boats
8:37
Speaker 2: start moving, good, like, that's the signal. Otherwise, like what
8:43
Speaker 2: either side is saying isn't particularly relevant because the only
8:49
Speaker 2: thing that really matters to the world economy is that
8:52
Speaker 2: the boats start moving again. Yep.
8:55
Speaker 3: I think the most optimistic thing I can say is
8:57
Speaker 3: that we seem better off.
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Speaker 2: Than we were on Sunday.
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Speaker 3: Well, yes, that's the most confident I feel saying, is
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Speaker 3: that we seem better off than when we had a
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Speaker 3: standing threat to strike Iran's power generation facilities on Sundays.
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Speaker 2: So there is your degree of improvement, I suppose, yes,
9:15
Speaker 2: as of right now. The fact that you will not
9:16
Speaker 2: have power plants and desalinization plants throughout the region wiped
9:21
Speaker 2: off the planet later tonight is a positive in terms
9:25
Speaker 2: of you know, kind of how I'm viewing this. Look,
9:28
Speaker 2: let's just watch for the next three to four days
9:29
Speaker 2: and say how things develop. I think that that's a
9:32
Speaker 2: reasonable approach to take. I am cautiously optimistic that this
9:37
Speaker 2: represents some real progress here, but we're gonna need to see,
9:41
Speaker 2: you know. Unfortunately, we've had multiple rounds of negotiations over
9:45
Speaker 2: the last two years that have ended in conflict both times.
9:49
Speaker 2: So it's unclear to me that negotiations here, if they're
9:52
Speaker 2: even happening, wouldn't necessarily resolve it right now. Like I
9:57
Speaker 2: don't really know. Maybe they will, maybe they won't. So
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Speaker 2: I'm remaining open to a various number of possibilities because
10:07
Speaker 2: I don't have any idea what's going on, to be honest.
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Speaker 2: So let's do this.
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Speaker 3: I'm not talking about from a stock market perspective, but
10:16
Speaker 3: let's go forward with a best case scenario and I'll
10:20
Speaker 3: paint it that we can think about it over the
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Speaker 3: break and talk about when we come back. But best
10:23
Speaker 3: case scenario, in my mind would be ceased hostility or
10:27
Speaker 3: lowered hostility temperature for the next week or so, and
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Speaker 3: within the next four weeks traffic through the straight slowly
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Speaker 3: beginning to operate again.
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Speaker 2: So let's paint that picture. I think there's a more
10:40
Speaker 2: optimistic scenario. I'm truly thinking best case you could have
10:44
Speaker 2: something announced in the next day or two when traffic
10:46
Speaker 2: starts to resume by the end of this week.
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Speaker 3: So let's run through what the world looks like in
10:52
Speaker 3: that type of environment.
10:54
Speaker 2: Next on the Financial Exchange.
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11:26
Speaker 2: So at the end of the previous segment, we laid out, Hey,
11:29
Speaker 2: what's the best case scenario in the Middle East at
11:32
Speaker 2: this point? And I think where I've gotten to is, look,
11:35
Speaker 2: you have some kind of ceasefire that's announced in the
11:38
Speaker 2: next couple days, and from there you start to see
11:42
Speaker 2: traffic resume through the strait of horm moves by the
11:46
Speaker 2: end of the week in a meaningful fashion. With again,
11:50
Speaker 2: most estimates that I've seen, it probably takes several weeks
11:54
Speaker 2: to get back up to full speed for a number
11:57
Speaker 2: of reasons just in terms of transits. That also does
12:01
Speaker 2: not necessarily get you back up to full speed in
12:04
Speaker 2: terms of oil and nat gas production coming out of
12:08
Speaker 2: the region, because a number of facilities have either been
12:10
Speaker 2: damaged or shut in. So if we do the math, now,
12:13
Speaker 2: let's just look at oil first, just because this is
12:16
Speaker 2: the thing that I think we're most familiar about and
12:19
Speaker 2: most concerned about, most acutely. At least at the beginning
12:24
Speaker 2: of this, you were looking at a situation in which
12:28
Speaker 2: there was somewhere in the ballpark of twenty million barrels
12:31
Speaker 2: of oil products flowing through the Straight of Hormuves in
12:34
Speaker 2: any given day. Where we stand right now, there's about
12:38
Speaker 2: a ten million barrel a day reduction because of mitigation
12:41
Speaker 2: measures that have been put in place, combination of the
12:43
Speaker 2: Saudi's pumping things across the country to export through the
12:46
Speaker 2: Red Sea, SPR releases, SPR releases, things like that. But
12:51
Speaker 2: you basically were looking at look through the first like
12:54
Speaker 2: two weeks of this, I think it's safe to say
12:56
Speaker 2: you probably had like a fourteen to fifteen million barrel
12:59
Speaker 2: a day gap that was there, and so that puts
13:03
Speaker 2: you in about two hundred and twenty million barrels. It's
13:05
Speaker 2: been another again, ten days since then, so you're somewhere
13:09
Speaker 2: in the ballpark of like a three hundred to three
13:11
Speaker 2: hundred and twenty million barrel gap right now that you
13:14
Speaker 2: have even if you know something happens like right now
13:18
Speaker 2: where it's like hey, like everything's fine, it's still is
13:20
Speaker 2: gonna take a couple of days to get tankers moving
13:23
Speaker 2: and you're not gonna have like full production. I think
13:25
Speaker 2: your best case is probably somewhere in the range of
13:29
Speaker 2: four hundred to four hundred and fifty million barrels lost.
13:33
Speaker 2: As far as production amounts, the SPR releases that have
13:37
Speaker 2: been announced are on the order of four hundred million barrels,
13:41
Speaker 2: but they're not lining up in terms of the timing.
13:43
Speaker 2: The Energy Secretary Chris right this morning was talking about
13:47
Speaker 2: this and he said, look, from the United States SPR,
13:50
Speaker 2: we're talking about somewhere in the range of like one
13:52
Speaker 2: point two to one point four million barrels a day
13:54
Speaker 2: is the max flow capacity. From the other ones around
13:58
Speaker 2: the world, you're talking about three million barrel so it's
14:00
Speaker 2: about a four and a half million barrel a day flow.
14:04
Speaker 2: That means that that oil. Let's again, let's say that
14:07
Speaker 2: things resolve today, You've lost call it four hundred million
14:11
Speaker 2: barrels of oil in a month, and it's gonna take
14:14
Speaker 2: you three months to get those SPR releases released. To
14:17
Speaker 2: clear that up. That's what you're looking at on there.
14:21
Speaker 2: So it's something. And remember then you also are gonna
14:24
Speaker 2: have to refill those because the USSPR is going to
14:27
Speaker 2: be effectively empty even though it still shows two hundred
14:30
Speaker 2: million barrels in it, because the bottom of it and
14:32
Speaker 2: these salt caverns, it's basically sludge and it's also needed
14:35
Speaker 2: for the structural integrity. You can't just empty them otherwise
14:37
Speaker 2: the caverns collapse, which is something I learned which is
14:40
Speaker 2: really interesting.
14:42
Speaker 3: If you have a pool, same effect, you can't drain
14:44
Speaker 3: your pool for prolonged period of time because it'll collapse
14:46
Speaker 3: in and on itself.
14:47
Speaker 2: Correct, it's the exact same thing. So ultimately, I think
14:51
Speaker 2: that when you look at this, it's something where no
14:55
Speaker 2: matter how you slice it, you are not going to
14:57
Speaker 2: get oil back down into the fifties or sixties this
15:01
Speaker 2: year most likely. There I was no scenario where that happened.
15:04
Speaker 2: I would think not Again. You talk about the US
15:07
Speaker 2: need to refill that Strategic Petroleum reserve, India needs to
15:10
Speaker 2: build one, China has been you know, utilizing it, so
15:14
Speaker 2: Jamand's going to need to refill THEIRS.
15:16
Speaker 3: It seems unlikely to me that these countries are going
15:18
Speaker 3: to do what the US has done over the last
15:20
Speaker 3: several years, which is just ignore it, which you know,
15:23
Speaker 3: we're seeing how that played out at this stage.
15:25
Speaker 2: Yes, so I think that that.
15:27
Speaker 3: New order of oh, this is a real necessity comes
15:30
Speaker 3: into play rather rapidly. How quickly energy infrastructure across the
15:35
Speaker 3: Middle East comes online? You know, how long does it
15:37
Speaker 3: take to get the Soudiast back up too full?
15:39
Speaker 2: I don't know.
15:40
Speaker 3: I have no real idea, you know what it's going
15:43
Speaker 3: to take for a rack and you know, other oil
15:45
Speaker 3: producing nations to come back fully online at this stage
15:47
Speaker 3: from the damage that's been done.
15:49
Speaker 2: But we're talking on the scale of months and quarters
15:52
Speaker 2: sure to kind of get back to some semblance of normalcy.
15:55
Speaker 2: It's not like you just go back to how it was,
15:59
Speaker 2: you know, later this week. It's something where it's in
16:02
Speaker 2: the latter half of this year when you start to
16:05
Speaker 2: see those markets potentially normalizing. And that's if we get
16:09
Speaker 2: to a resolution. Now, every single person that I follow
16:15
Speaker 2: in the energy space has basically said, look, if you
16:17
Speaker 2: don't get a resolution on this in the next three
16:19
Speaker 2: to four weeks, you start to see energy markets breaking
16:22
Speaker 2: because stuff just can't get from point A to point
16:25
Speaker 2: B even if you want to. So that's kind of
16:27
Speaker 2: the ticking clock that I have, and and I always
16:30
Speaker 2: I put out the the Sinco DeMaio date as like,
16:35
Speaker 2: I don't know any other holidays that are at the
16:37
Speaker 2: beginning of May. I guess you could do like Mother's
16:39
Speaker 2: Day as kind of the date, but you know, that's
16:43
Speaker 2: where I kind of was looking. Some of the chatter
16:45
Speaker 2: that I've heard is it's closer, you know, to like
16:49
Speaker 2: the Masters this year, like after Easter, but before again,
16:53
Speaker 2: like there's not many holidays like a male a date.
16:56
Speaker 2: Tax Day, tax Day sure, okay, yes, called tax day.
16:59
Speaker 2: Tax is kind of where things start to get really
17:02
Speaker 2: gnarly in energy markets potentially. So I think the best
17:07
Speaker 2: case scenario is one in which, hey, if this does
17:10
Speaker 2: resolve positively over the next week or so, then there's
17:13
Speaker 2: a path towards more normalization later this year. But it's
17:16
Speaker 2: still gonna be choppy and messy, and don't expect prices
17:20
Speaker 2: going right back down to where they were if we're
17:23
Speaker 2: still sitting here on tax Day. Yes, that's the one
17:27
Speaker 2: I was looking for. Then again, like I'm just parroting
17:33
Speaker 2: what I've heard from people in the energy space that
17:36
Speaker 2: know this better than I do, that generally are not
17:38
Speaker 2: the most alarmist. Then things start to get pretty gnarly.
17:41
Speaker 2: For in again, really you're talking about Southeast Asia. Yeah,
17:45
Speaker 2: and you're already starting to see it show up if
17:48
Speaker 2: you saw overnight, which most of you probably didn't because
17:52
Speaker 2: you don't follow this stuff. But Singapore, which is a
17:56
Speaker 2: main hub for shipping, they just announced rationing yesterday of
18:03
Speaker 2: bunker fuel which is used to actually like fuel ships
18:07
Speaker 2: because they just don't have enough refined product to be
18:11
Speaker 2: able to make full supplies right now. And this is
18:13
Speaker 2: the kind of stuff that you'll start seeing showing up
18:16
Speaker 2: more and more in the coming week. So again, ticking
18:19
Speaker 2: clock on this, maybe there's some progress being made. Let's
18:23
Speaker 2: see what this week brings. And if though that hope
18:27
Speaker 2: of progress, you know, turns into something tangible that you
18:31
Speaker 2: can actually see, which again, for me, ship's moving through
18:35
Speaker 2: horm moves. Yeah, anything else's window dressing. Quite honestly, yep, yeah,
18:38
Speaker 2: like that that is what you need in order to
18:41
Speaker 2: resolve the situation.
18:42
Speaker 3: And by the way, that's just a brief, you know,
18:45
Speaker 3: all else equal, best case scenario, inflation is a fair
18:48
Speaker 3: bit higher.
18:49
Speaker 2: There's still some disruptions.
18:52
Speaker 3: Nobody has been able to accurately paint a picture of
18:54
Speaker 3: what the Middle East looks like after this event.
18:57
Speaker 2: And you know, the cat is now out of the bag.
19:00
Speaker 2: There's always the threat that.
19:01
Speaker 3: Iran may strike at its neighbors, and now the kind
19:05
Speaker 3: of cat's out of the bag on that one, and
19:06
Speaker 3: I think completely reshaped geopolitics across the Middle East in
19:10
Speaker 3: terms of investibility and just reliability as a as a
19:16
Speaker 3: hub for economic activity.
19:19
Speaker 2: Let's take a quick break here when we come back.
19:22
Speaker 2: I want to talk about one more thing on this
19:24
Speaker 2: that I know sounds ridiculous, but just hear me out
19:28
Speaker 2: for one minute and we'll discuss that when we return.
19:31
Speaker 2: As well as Wall Street wats like.
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20:00
Speaker 4: Markets are staging a strong rally after President Trump said
20:03
Speaker 4: earlier this morning the US military will postpone further strikes
20:07
Speaker 4: on Iranian energy infrastructure for five days following productive talks,
20:11
Speaker 4: Oil and treasury yields are pulling back as a result.
20:15
Speaker 4: Right now, the dows up over two percent or nine
20:17
Speaker 4: hundred and twenty eight points, SMP five hundred up by
20:20
Speaker 4: two percent, NASDAC up two point two percent to four
20:24
Speaker 4: hundred and ninety three points, Russell two thousand up nearly
20:27
Speaker 4: three percent higher, Tenure, Treasureel down five basis points at
20:31
Speaker 4: four point three three six percent, and Oil down ten percent,
20:35
Speaker 4: now trading at eighty eight dollars a barrel. Several airline
20:38
Speaker 4: stocks are seeing gains following the news from earlier this morning.
20:43
Speaker 4: Delta United airlines in Southwest are up anywhere between three
20:47
Speaker 4: and five percent. Cruise lines including Carnival and Royal Caribbean
20:51
Speaker 4: are also rallying by seven percent. Meanwhile, the Wall Street
20:55
Speaker 4: Journal is reporting that Elliott Investment Management has a multi
20:58
Speaker 4: billion dollar investment in sign where Elliott plans to engage
21:02
Speaker 4: with the chip design software maker to push the business
21:05
Speaker 4: to make more money from its software and services. Synopsis
21:09
Speaker 4: is up over four percent on that news and efforts
21:13
Speaker 4: thirty percent plunge on Fridays. Shares in super micro Computer
21:17
Speaker 4: are modestly rebounding by three percent today Friday's plunge came
21:21
Speaker 4: after the US charged the co founder of the company
21:24
Speaker 4: into others in connection with an alleged scheme to smuggle
21:28
Speaker 4: and Vidio chips into China. I'm Tucker Silva in that
21:33
Speaker 4: is Wall Street Watch.
21:35
Speaker 2: I uh again, I had a crazy thought over the weekend,
21:41
Speaker 2: which is which is not abnormal. I mean, it's when
21:45
Speaker 2: you give when you give me forty eight hours to myself,
21:49
Speaker 2: you know, alone with the thoughts in my head, like
21:52
Speaker 2: you get some stuff that pops up. Okay, But I
21:55
Speaker 2: had a crazy thought that popped into my head in
21:57
Speaker 2: terms of like just what's a possible resolution to this,
22:00
Speaker 2: like as you you get down to it, and I
22:03
Speaker 2: was like, look, ultimately Iran wants something for this, and
22:08
Speaker 2: the US just wants to have Hormuz open and Iran
22:12
Speaker 2: diminished militarily. Okay, fair, Yeah, the US might want other things,
22:17
Speaker 2: but in terms of like what's realistic at this particular
22:19
Speaker 2: point in.
22:20
Speaker 3: Time, Yeah, I think that's what the US wants. I'll
22:23
Speaker 3: be clear, I'm not sure that's what Israeli wants.
22:26
Speaker 2: I'm forget them for a second. Sure, And I had
22:30
Speaker 2: this crazy thought and I went to myself. I said
22:32
Speaker 2: imagine a world in which, like the deal that ends
22:36
Speaker 2: up being worked out is okay. Iran reportedly is collecting
22:40
Speaker 2: fees right now of up to two million dollars per
22:43
Speaker 2: ship that is safely passing through Hormuz, like basically right
22:47
Speaker 2: next to the Iranian coastline. They're taking a weird route
22:51
Speaker 2: that is far further north and kind of loops around
22:54
Speaker 2: a couple of Iranian islands. And reportedly it's so that
22:57
Speaker 2: they can undergo visual inspection by Iranian force is like
23:00
Speaker 2: from the shore line and make sure it's the ship
23:02
Speaker 2: that it's supposed to be. YadA, YadA, so on and
23:04
Speaker 2: so forth. Are they taking payment? What do you mean?
23:07
Speaker 2: How are they Have you heard of cryptocurrency? Like the
23:10
Speaker 2: same way they've been taking payment for years. Awesome, Like
23:13
Speaker 2: it's not particularly hard so plus like again it's they
23:19
Speaker 2: can figure they can figure out how to make money,
23:22
Speaker 2: like they've they've done this for a while now. I
23:24
Speaker 2: think they have some ways. So imagine a world in
23:28
Speaker 2: which they're collecting a couple of million dollars a ship. Now,
23:30
Speaker 2: one of the terms they may say is, hey, you
23:33
Speaker 2: know what, we want to take a toll of everything
23:34
Speaker 2: coming out of horror Moves. Okay, I could see how
23:38
Speaker 2: that would be objectionable to the United States. Untheless, the
23:42
Speaker 2: United States says, hey, we want to take a cut
23:45
Speaker 2: of everything coming into Horror Moves. You know, we'll secure
23:49
Speaker 2: the area on the outside. And look, this was a
23:51
Speaker 2: crazy thought. This was a dumb thought, I know, but
23:53
Speaker 2: I just want to put this out there that this morning,
23:55
Speaker 2: in front of Air Force one, President Trump says that
23:59
Speaker 2: the state the straight of Horror Moves maybe jointly controlled
24:01
Speaker 2: by him and the Ayatola. Yeah, I was, which could
24:04
Speaker 2: be just pure like nonsense. But I'd also like to
24:09
Speaker 2: point out that I had this thought over the weekend
24:10
Speaker 2: and just we didn't do a show over the weekend
24:12
Speaker 2: because we don't. But if we had, I would have
24:15
Speaker 2: said it then because it came into my mind as
24:19
Speaker 2: something that's not completely crazy given where we are right now.
24:23
Speaker 3: Yeah, and frankly, given the President's history of trying to
24:28
Speaker 3: negotiate deals that's his he sees everything through that business
24:33
Speaker 3: economic lens, yes, and and wants to go that way.
24:36
Speaker 2: The you want us to control, you want us to
24:38
Speaker 2: you know, help police hor moves. Fine, pay us for
24:41
Speaker 2: the privilege of doing so. Iran, Okay, like you fought
24:45
Speaker 2: a good fight, fine, you can you know control. I'm
24:48
Speaker 2: not saying that this will or won't happen. I can
24:50
Speaker 2: just see like I had the thought over the weekend
24:53
Speaker 2: and then he said it this morning. Is the only
24:54
Speaker 2: thing I'm saying. So again I'm not saying it will
24:59
Speaker 2: or what's happened, but he said it now, not me. Yeah,
25:05
Speaker 2: So I'm just pointing that out.
25:08
Speaker 3: Where does that leave the rest of the Middle East,
25:10
Speaker 3: end Israel? I can't imagine terribly happy.
25:12
Speaker 2: The so here's all of the Gulf States would not.
25:16
Speaker 3: Be happy with this arrangement, very unhappy unless the US
25:19
Speaker 3: just supplied them with a boatload of Patriot missiles over
25:23
Speaker 3: the next decade.
25:23
Speaker 2: Correct. And I would also imagine that at least a
25:26
Speaker 2: couple of those countries probably start calling the Saudis again,
25:30
Speaker 2: even though like not everyone's like best friends there, but
25:33
Speaker 2: like I could see at least a couple of these
25:34
Speaker 2: countries being like, hey about those pipelines to the Red Sea.
25:38
Speaker 2: What do you think? Yeah, chop chop, you know, can
25:41
Speaker 2: we build some more of those? Maybe? And you know,
25:43
Speaker 2: from us. But this is all just you know, speculation.
25:46
Speaker 2: But again he mentioned it, which is just why I
25:49
Speaker 2: had to bring it up, yeah, is because I thought
25:52
Speaker 2: of it over the weekend and I'm like, nah, like
25:54
Speaker 2: that that and then he said it this morning and
25:56
Speaker 2: I go, oh, oh, that's the that's out in the
26:01
Speaker 2: universe now. It's it's a maybe, is what you're saying.
26:05
Speaker 2: Let's see anything else on horror moones that we want
26:07
Speaker 2: to cover. Can we hop over to the Fed? And
26:09
Speaker 2: why I think this piece from the Wall Street Journal
26:11
Speaker 2: is not accurate. Okay, let's go Fed piece in the
26:14
Speaker 2: Wall Street Journal why the Fed's next rate move could
26:16
Speaker 2: be a hike. I find it really hard to believe
26:20
Speaker 2: that the Fed's next move is going to be a hike.
26:22
Speaker 3: And the reason, let's talk about the circumstances you would
26:24
Speaker 3: need to get to. You would need to see employment
26:27
Speaker 3: take off again or just not fall apart. You would
26:30
Speaker 3: need to see inflation approach five. I think I think
26:35
Speaker 3: you need to see it again.
26:37
Speaker 2: If you just look at that. Okay, let's have core inflation.
26:39
Speaker 2: Then core inflation at four would do it.
26:44
Speaker 3: And to get there, I think you would need a
26:46
Speaker 3: massive increase in government spending. It could come from defense, yeah,
26:49
Speaker 3: it could come from a number of different areas. But
26:51
Speaker 3: I I don't think you can get all those things
26:55
Speaker 3: without a big US government spending increase.
26:59
Speaker 2: And here's the is. Remember this is the order of
27:03
Speaker 2: operations matters here, because this piece says why the Fed's
27:06
Speaker 2: next rate move could be a hike. And here's why
27:09
Speaker 2: I think it's a tough putt to get there. Look
27:12
Speaker 2: at where we are right now. Inflation by any measure,
27:15
Speaker 2: before this, this whole thing was running somewhere high twos,
27:20
Speaker 2: low threes. Yep, you're gonna get the March inflation data
27:24
Speaker 2: in about three weeks, and it's likely gonna show that
27:27
Speaker 2: that is moved from high twos to low threes, probably
27:30
Speaker 2: in the mid to high threes. Like, that's where your
27:32
Speaker 2: bump is going to be, just based on energy prices.
27:34
Speaker 2: It'll be largely confined to there at the moment. It'll
27:39
Speaker 2: seep into core as you go through the year, but
27:41
Speaker 2: it's gonna take time to seep into core because the
27:44
Speaker 2: stuff that's in core doesn't move instantly. It takes a
27:47
Speaker 2: little bit longer for it.
27:49
Speaker 3: All I'm trying to think of there to move. Probably, yeah,
27:52
Speaker 3: airline tickets.
27:53
Speaker 2: And airline tickets are gonna move, but like you're not
27:55
Speaker 2: gonna see like insurance pricing move right away and stuff
27:58
Speaker 2: like that, you're not going to see like housing is
28:02
Speaker 2: completely uncorrelated to what's going on here. So again it's
28:05
Speaker 2: gonna take time there. The problem is that, let's say
28:09
Speaker 2: that you do see a real like inflationary spike to
28:11
Speaker 2: the point where you start getting demand destruction because prices
28:14
Speaker 2: have just gone up too much. That usually ends up
28:17
Speaker 2: resulting in some kind of negative feedback on the employment side, yeah,
28:23
Speaker 2: before it prints in core inflation. And so the path
28:27
Speaker 2: that like I could see as a hypothetical is, hey,
28:30
Speaker 2: the FED gets nervous about the labor market and you know,
28:34
Speaker 2: does a cut or two, realizes it's been headfaked, or
28:38
Speaker 2: maybe you know, Congress comes back and says, hey, we
28:41
Speaker 2: need like some kind of reconciliation bill to throw a
28:43
Speaker 2: bunch of money at people to help support them, and
28:46
Speaker 2: that triggers you know, a wave of spending that then
28:49
Speaker 2: results in the FED needing to hike later this year
28:51
Speaker 2: and next year. It's really hard to see a hike
28:56
Speaker 2: as the next move. There's a really really hard there's
28:58
Speaker 2: a reason why we have head in core inflation. And
29:02
Speaker 2: it's like as like separated categories and it's specifically so
29:06
Speaker 2: the FED can look through short term energy fluctuations if
29:09
Speaker 2: they want to. I'm not saying that they should or shouldn't.
29:14
Speaker 2: I don't know. This is one time. You know, who's
29:17
Speaker 2: the happiest man in the world right now that he's
29:18
Speaker 2: not confirmed to be the next FED chair Kevin Walsh.
29:23
Speaker 2: Kevin worsh does not want to be dealing with this crap.
29:26
Speaker 2: Like if it weren't ja deal, if it were up
29:30
Speaker 2: to Worsh, Orsh would be like, Hey, if you guys
29:32
Speaker 2: want to hold off on my confirmation for like six
29:34
Speaker 2: months or so, that'd be great. Like he's happy to
29:38
Speaker 2: take a delay on it because you don't want to
29:41
Speaker 2: deal with this. But the idea that the Fed's gonna
29:44
Speaker 2: you know, hike at their next meetings, you know, coming up,
29:51
Speaker 2: I mean, like, just just play out the timeline here.
29:53
Speaker 2: The next one's in thirty seven days. It's gonna be
29:56
Speaker 2: in April twenty ninth. You'll have had one inflation reading
30:00
Speaker 2: since the conflict started.
30:01
Speaker 3: It's tough to envision a scenario where you're getting a
30:03
Speaker 3: hike before the end of the year. And if that's
30:06
Speaker 3: the case, and I'm not sure this piece about this
30:09
Speaker 3: is relevant, Like, the only way it comes is if
30:11
Speaker 3: the FED genuinely pauses for the next six or seven
30:14
Speaker 3: months and does nothing, and then there's an inflationary impulse
30:17
Speaker 3: sometime later this year.
30:18
Speaker 2: In my view, I want to know what's interesting though.
30:21
Speaker 2: This piece was written on March twenty first by Greg
30:23
Speaker 2: Yip on March twentieth, which was Friday, and the futures
30:26
Speaker 2: markets don't trade over the weekend. On March twentieth, FED
30:30
Speaker 2: Fund's futures were predicting a twelve point four percent chance
30:33
Speaker 2: of a hike at the upcoming April meeting zero percent
30:37
Speaker 2: chance of a cut, which is interesting to me and
30:41
Speaker 2: I think kind of misguided because again, the FED is
30:45
Speaker 2: not going to have enough information in their informational analysis models. Yes,
30:55
Speaker 2: that's the one in their models to be able to
30:57
Speaker 2: say yes we should hike or not. The soonest I
31:01
Speaker 2: think they could get there is the July meeting, which
31:04
Speaker 2: is end of July, this year's July twenty ninth. That's
31:07
Speaker 2: the soonest. Other than that, I think talking about like
31:11
Speaker 2: either the April or June meeting is being live for
31:14
Speaker 2: a hike is pretty misguided in my opinion, And even July,
31:20
Speaker 2: I think is a real stretch. So let's take a
31:23
Speaker 2: quick break and when we come back, let's talk about
31:25
Speaker 2: what we are seeing in the bond market. Right after this,
31:28
Speaker 2: markets move fast.
31:30
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32:26
Speaker 2: Mike, we got a piece here in Bloomberg. Bonds lose
32:29
Speaker 2: two point five trillion in Iran war wipeout that mirrors
32:33
Speaker 2: twenty twenty two. So here is what has happened. If
32:38
Speaker 2: we take a look at the tenure treasury at the
32:43
Speaker 2: lowest to got this year, which was admittedly like the
32:46
Speaker 2: day before hostilities kicked off. This was on February twenty seventh,
32:51
Speaker 2: the tenure got down to three point nine six two percent.
32:55
Speaker 2: That was the close on that Friday. Subsequently, last Friday,
33:00
Speaker 2: ten year treasury had rallied, not rally, but sold off
33:04
Speaker 2: to the point where it was at four point thirty
33:06
Speaker 2: nine to one percent, so almost a it's about a
33:10
Speaker 2: point four percent move in a span of a few weeks,
33:12
Speaker 2: and a lot of that coming last week where it
33:15
Speaker 2: moved up twenty basis points over the course of the
33:17
Speaker 2: week today. On some of the optimism that markets have.
33:22
Speaker 2: We've got the ten year. Oh man, the screen got
33:26
Speaker 2: sorry a new computer, and man that that's not readable.
33:28
Speaker 2: We got to make that bigger somehow. The ten year
33:31
Speaker 2: right now is coming in about four point seven basis points.
33:35
Speaker 2: On some of this optimism that maybe you get oil
33:39
Speaker 2: prices you know, kind of moving in the right direction
33:41
Speaker 2: and things like that. But ultimately, when you look at
33:46
Speaker 2: the state of the bond market right now, it's been
33:50
Speaker 2: racked by volatility for the last few weeks, and bonds
33:54
Speaker 2: are going to need a little bit more time to
33:56
Speaker 2: sort through what the full impact is here.
33:58
Speaker 3: It has and they do, but I'm not sure I'm
34:02
Speaker 3: willing to say that it mirrors twenty twenty two. If
34:04
Speaker 3: it does, it's an awfully small mirror because the magnitude
34:10
Speaker 3: of the change that we are talking about, So the
34:13
Speaker 3: twenty twenty two losses for bonds were the worst that
34:15
Speaker 3: we saw since nineteen seventy six. You had the yield
34:19
Speaker 3: on the ten year treasury going from let's see beginning
34:24
Speaker 3: of twenty twenty two at one in three quarters by
34:27
Speaker 3: the end of twenty twenty two, or the high in
34:29
Speaker 3: twenty twenty two it was at four and a quarter.
34:33
Speaker 3: The magnitude of the change here that we're talking about
34:35
Speaker 3: is a fraction of that, And so talking about how
34:39
Speaker 3: it's mirroring, like, I don't want to get people into
34:43
Speaker 3: scared off mode here, right, we are not seeing the
34:46
Speaker 3: magnitude of inflation increases that we saw back in twenty
34:50
Speaker 3: twenty two. I personally doubt we will get there, and
34:53
Speaker 3: even if we did, it is extraordinarily unlikely to me
34:57
Speaker 3: that I think we see the magnitude of bond moves
35:00
Speaker 3: or interest rate moves that we saw back in twenty
35:02
Speaker 3: twenty two. Again, that type of move where you effectively
35:06
Speaker 3: see the ten year triple pretty obscenely rare to ever happen. Yeah,
35:15
Speaker 3: I mean, look, it's lost.
35:17
Speaker 2: What fifteen percent in bonds in twenty twenty two, I
35:20
Speaker 2: don't know, the almost twenty I think at one point.
35:22
Speaker 2: So I think the big thing is, look that the
35:26
Speaker 2: path of bonds typically follows. There's two things that matter
35:31
Speaker 2: for bonds. Number one is the nominal growth rate. Number
35:35
Speaker 2: two is the real growth rates. So what are you
35:38
Speaker 2: seeing in terms of growth versus inflation? And in twenty
35:43
Speaker 2: twenty two, the problem was that the nominal growth rate
35:47
Speaker 2: was very high in the United States, and then almost
35:50
Speaker 2: all of that got eaten up by inflation. Not much
35:52
Speaker 2: of it turned into real growth because the inflation piece
35:55
Speaker 2: was so high. And so this was coming off a
35:57
Speaker 2: period where growth was very low and so was inflation,
36:01
Speaker 2: and so that's why you saw this huge move in
36:04
Speaker 2: bonds with that scale of sell off. Today, nominal growth
36:10
Speaker 2: is much tighter, and inflation has still been higher than
36:14
Speaker 2: kind of the pre pandemic baseline. So I think unless
36:19
Speaker 2: you get a similar move on the inflation side of things,
36:22
Speaker 2: which is unlikely in my opinion. I don't think you're
36:25
Speaker 2: getting anywhere close to nine percent inflation right now based
36:29
Speaker 2: on what we know. Obviously, look, if this takes a
36:31
Speaker 2: different turn over the next few months, things can happen.
36:36
Speaker 2: But I think for now you kind of look at
36:39
Speaker 2: and you go, yeah, there's probably still some room for
36:41
Speaker 2: yields to move up if you know, as the market
36:45
Speaker 2: sorts this out. But it's not gonna be yields moving
36:48
Speaker 2: from you know, one and a half on the ten
36:50
Speaker 2: year to five. It might be moving from four to
36:55
Speaker 2: four and three quarters or four to five and a quarter.
36:58
Speaker 2: Even you know, you can make a case where, in
37:00
Speaker 2: a really bad scenario, maybe the ten year gets to
37:02
Speaker 2: five and a half and I could buy that. I'm
37:05
Speaker 2: not saying that would be fun for anyone, but it
37:08
Speaker 2: still wouldn't be the magnitude of what we saw in
37:11
Speaker 2: twenty twenty two. I think that's kind of where I
37:14
Speaker 2: land there. Let's see what else do I want to
37:18
Speaker 2: get to? Here? Ads are popping up all over the
37:20
Speaker 2: fridge and it isn't going well. Yeah, here's the thing.
37:24
Speaker 2: Got to tell you don't need a smart fridge. Smart
37:28
Speaker 2: fridges are dumb. I don't even want a smart fridge.
37:30
Speaker 2: Don't I want a smart washing washing machine. I don't
37:33
Speaker 2: want any of these things smart. They're more connections to
37:36
Speaker 2: the internet. It's like, we can tell you when you're
37:38
Speaker 2: out of the stuff inside your fridge, or I could
37:40
Speaker 2: use my hands and open the door. Gosh, imagine, hey, honey,
37:45
Speaker 2: we out of sour cream. Let me look. Instead of
37:49
Speaker 2: being like fridge or we out of sour cream. What
37:52
Speaker 2: if it's just hiding behind something? What if it's wrong?
37:54
Speaker 3: Long story short, there's a like fourteen hundred dollars Samsung
37:58
Speaker 3: fridge that some people bought in years past. They are
38:01
Speaker 3: now screen on the front of it, which was supposed
38:04
Speaker 3: to be for what Chuck mentioned. Now they're testing out
38:06
Speaker 3: advertising to people in their homes with audio and visual
38:10
Speaker 3: advertisements just playing randomly in the home.
38:12
Speaker 2: So enjoy just trying to get a snack. Welcome to
38:15
Speaker 2: the future. Lay off me, LG. Don't worry about it.
38:20
Speaker 2: Let's take a quick break and we'll be back with
38:22
Speaker 2: that UR two in a bit.