Latest / The Financial Exchange Show / Oil at $95, Strait Still Blocked & 4.4 Million Hours of Tariff Refunds

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Oil at $95, Strait Still Blocked & 4.4 Million Hours of Tariff Refunds · The Financial Exchange Show

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Speaker 1: a donation today. This is the Financial Exchange with Chuck
1:05
Speaker 1: Zadath and Mike Armstrov.
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Speaker 2: Chuck, Mike and Tucker with you as we kick things
1:14
Speaker 2: off on a Thursday. Here, we're now into the thirteenth
1:19
Speaker 2: day of the conflict with Iran. With this point basically
1:26
Speaker 2: no ships passing through the Strait of Horror moves on
1:30
Speaker 2: a daily basis. There's a very small handful anywhere from
1:33
Speaker 2: about one to four that look like they may be
1:36
Speaker 2: passing through, mostly either Iranian vessels or vessels aligned with China.
1:43
Speaker 2: In many cases, I say many again, there's been maybe
1:46
Speaker 2: like a dozen or so that have gone through in
1:48
Speaker 2: the last ten days now. So we're at the point where,
1:53
Speaker 2: you know, global institutions are starting to take note of
1:56
Speaker 2: this and respond here. But quite honestly, the message that's
2:01
Speaker 2: being sent by oil markets right now is that what's
2:05
Speaker 2: been done to this point is not sufficient. And that's
2:09
Speaker 2: not just the message being sent by oil markets. That
2:11
Speaker 2: is the reality at this point.
2:14
Speaker 3: Mike, I heard a good comparison just to kind of
2:17
Speaker 3: give people a sense for the volume. So you've heard
2:20
Speaker 3: the statistic quoted several times that around twenty million barrels
2:24
Speaker 3: per day normally would move through the Strait of Her Moves,
2:27
Speaker 3: right that's been a commonly quoted statistic during this period
2:30
Speaker 3: of time.
2:32
Speaker 4: Yeah, I think so.
2:34
Speaker 3: When we take a look at that volume and what
2:36
Speaker 3: we're talking about just being cut off from supply, and
2:41
Speaker 3: you know, it's not that that entirely disappears, but most
2:44
Speaker 3: of it does disappear from global supply. The comparison was
2:48
Speaker 3: made to COVID, and the point was made that during
2:50
Speaker 3: March and April of twenty twenty, global demand for oil
2:55
Speaker 3: dropped by about thirty million barrels per day. And so
2:59
Speaker 3: the point it was made with say, you know, we
3:01
Speaker 3: talk about the price hikes that are going to be
3:03
Speaker 3: necessary as part of this, we talk about the refineries
3:06
Speaker 3: that are slowing down production, and all of that's to
3:10
Speaker 3: say that you would need a pandemic sized drop in
3:14
Speaker 3: demand to keep this oil market balanced, giving the disruption
3:19
Speaker 3: in the Middle East, and that doesn't even take into
3:20
Speaker 3: account obvious you know, regional different aspects of this, where
3:23
Speaker 3: it's you know, even if you could cut the demand,
3:27
Speaker 3: the supply is mostly effected on you know, Asian countries
3:30
Speaker 3: and all sorts of other issues. But that comparison I
3:33
Speaker 3: thought was useful, which was there's a lot of difficulty
3:37
Speaker 3: in either increasing draws from the sprs that are out there,
3:42
Speaker 3: or you know, seeing demand drop because of pricing.
3:45
Speaker 4: Well, you know, even.
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Speaker 3: In the most dramatic slow down in oil demand in
3:51
Speaker 3: our modern history, it barely was able to cover the
3:56
Speaker 3: volume that goes through straight ufor MOOS.
3:58
Speaker 2: So remember, when we talk about the impact on the US,
4:03
Speaker 2: You're not going to see shortages of oil in the
4:05
Speaker 2: US in the vast, vast majority of scenarios. You know,
4:10
Speaker 2: it's not something that we'll be talking about. I know everyone,
4:13
Speaker 2: you know, not everyone, but a lot of you listening. Remember,
4:15
Speaker 2: you know, the late nineteen seventies and the gas lines
4:17
Speaker 2: and things like that. That is not something that is
4:21
Speaker 2: really in the cards here, simply because the United States
4:24
Speaker 2: produces a ton of energy and is able to on
4:29
Speaker 2: a net basis, satisfy its needs, not necessarily through producing
4:33
Speaker 2: everything that we need, but being able to trade some
4:36
Speaker 2: of the stuff that we don't force some of the
4:37
Speaker 2: stuff that we do. So the US is not going
4:41
Speaker 2: to have shortages. But when you start to see you know,
4:45
Speaker 2: countries like South Korea today instituting price caps, south Korea
4:49
Speaker 2: may end up having fuel shortages as part of this.
4:53
Speaker 2: Bangladesh is reporting all kinds of issues with getting enough
4:58
Speaker 2: diesel for powering factories. Again, like in other parts of
5:01
Speaker 2: the world, you still have diesel powered factories, So like,
5:05
Speaker 2: these are the things that are starting to pop up
5:08
Speaker 2: on a global basis and will continue to the longer
5:12
Speaker 2: this goes on. Now, the reason that I said at
5:15
Speaker 2: the outset that the oil market is saying that the
5:17
Speaker 2: measures that are being taken are not strong enough is
5:20
Speaker 2: very simple. What we have today is a very clear
5:24
Speaker 2: what we call a news failure, and by that it's okay,
5:27
Speaker 2: something that's expected to move markets one way and instead
5:31
Speaker 2: moves markets the other. In this case, it was the
5:34
Speaker 2: announcement of a four hundred million barrel release from global
5:37
Speaker 2: strategic petroleum reserves, including one hundred and seventy two million
5:41
Speaker 2: barrels from the US Strategic Reserve, which, when it's all
5:44
Speaker 2: said and done'll take the US down into the low
5:45
Speaker 2: two hundreds, which is basically as low as it can go.
5:48
Speaker 2: And I know that sounds like weird. You're like, no, chuck,
5:51
Speaker 2: there's like another couple hundred million barrels there. The answer
5:54
Speaker 2: is not really, because these the US Strategic Petroleum Reserve
6:00
Speaker 2: is a bunch of salt caverns throughout the southeastern part
6:03
Speaker 2: of the United States, that the bottom portion of these caverns,
6:08
Speaker 2: basically the oil kind of mixes with what's down there
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Speaker 2: and just becomes like really sludgy and not particularly useful.
6:14
Speaker 2: But you still need that cushion in there in order
6:16
Speaker 2: to keep you know, the rest of the oil usable.
6:19
Speaker 2: So the problem is that look back, during twenty twenty two,
6:23
Speaker 2: the Biden administration used a whole bunch of oil from
6:25
Speaker 2: the SPR, and in the subsequent three and a half years,
6:30
Speaker 2: neither the Biden administration, for you know, its final two years,
6:33
Speaker 2: nor the Trump administration in its first year did enough
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Speaker 2: to be able to fill it back to where it
6:38
Speaker 2: was not even close. So you were going into this
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Speaker 2: with instead of seven hundred million barrels in the SPR,
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Speaker 2: you're running at about four hundred million now, and this
6:46
Speaker 2: will take us down into the low two hundreds. But
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Speaker 2: the problem here is not one of size of the release,
6:53
Speaker 2: but the flow. And this is why, like again this
6:57
Speaker 2: this stuff matters, is because ultimately to this point in
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Speaker 2: the conflict against been going on thirteen days, the average
7:07
Speaker 2: drop that we've seen coming out is probably somewhere in
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Speaker 2: the ballpark of fifteen million barrels a day because the
7:12
Speaker 2: Saudis have been pumping some across a big East West
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Speaker 2: pipeline to get it to the Red Sea for export
7:17
Speaker 2: instead of needing to send it through the Persian Gulf.
7:20
Speaker 2: And so you do the math and you say, okay,
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Speaker 2: thirteen times, you know, fifteen, it's about one hundred and
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Speaker 2: ninety five million barrels that were probably missing at this point.
7:29
Speaker 2: So the SPR release, you say, great, like that covers that.
7:32
Speaker 2: Except here's the problem. The SPR it's max flow rate
7:35
Speaker 2: is about a million one point two million barrels a day.
7:39
Speaker 2: Like you can't just be like, hey, here's fifteen million
7:41
Speaker 2: barrels a day. It doesn't flow that fast out of it.
7:45
Speaker 2: And even when you look at the global SPR releases,
7:47
Speaker 2: the estimates that I've seen are that the max capacity
7:50
Speaker 2: that you can get to somewhere maybe between like four
7:54
Speaker 2: and six million barrels. I've seen earlier, so estimates at
7:57
Speaker 2: like three. I've seen summer high as eight. I kind
7:59
Speaker 2: of throw at the high and low and I'm like, okay,
8:00
Speaker 2: it's probably you know, in the middle. So the problem
8:03
Speaker 2: is that even once those get going at full speed,
8:06
Speaker 2: which they're not even going yet by the way, like
8:08
Speaker 2: the Japanese ones not starting until next week. I haven't
8:11
Speaker 2: seen the specific timetable on the US one yet. The
8:16
Speaker 2: issue that you run into is even if this is
8:18
Speaker 2: going on while Hormuz remains largely blocked, you're still probably running,
8:23
Speaker 2: even with the Saudi's moving capacity to the Red Sea,
8:26
Speaker 2: probably an eight to ten million barrel a day deficit,
8:31
Speaker 2: maybe it gets down to like five to six million.
8:33
Speaker 2: So that means that each you know, week that this
8:36
Speaker 2: goes on, you're back building further problems by anywhere from
8:40
Speaker 2: like forty to seventy million barrels of deficit, which is
8:44
Speaker 2: not as bad except for then again like this is
8:48
Speaker 2: this is where you have to go on these things.
8:50
Speaker 2: Remember that the countries that are going to use their
8:53
Speaker 2: sprs don't want to have them empty in perpetuity either.
8:56
Speaker 2: They're going to have to refill them at some point,
8:58
Speaker 2: which means that demand is going to be high as
9:00
Speaker 2: they try to. Now in the United States, we might say, okay,
9:04
Speaker 2: we can be more deliberate about refilling it because we can,
9:09
Speaker 2: you know, handle the energy situation better than a lot
9:11
Speaker 2: of other countries. Right because that was so successful over
9:13
Speaker 2: the last three years which which still is not like great.
9:16
Speaker 2: Like again, I'm not saying that like that's good, but
9:18
Speaker 2: like we can at least argue that Japan has no
9:21
Speaker 2: such argument. Japan is like, hey, we just exhausted x
9:24
Speaker 2: percent of the spr for us, we need to refill
9:27
Speaker 2: it because we don't have any oil, right we can't
9:30
Speaker 2: produce it. And so this is something where on the
9:33
Speaker 2: back end of this you potentially have excess demand that
9:36
Speaker 2: kicks in as countries try to either rebuild their sprs
9:39
Speaker 2: or as a result of this, say hey, we need
9:41
Speaker 2: to have one in the first place. You know, India's
9:44
Speaker 2: is forty million barrels for one point three billion people.
9:47
Speaker 2: Probably not sufficient. So this is why the oil market
9:52
Speaker 2: is telling you, hey, there's there's a real issue that's
9:56
Speaker 2: continuing to build. And I want to take a quick
9:58
Speaker 2: break here. When we come back, I want to talk
10:00
Speaker 2: specifically about what I'm seeing in oil trading markets that
10:04
Speaker 2: is indicating this issue here. So we'll do that when
10:09
Speaker 2: we return.
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Speaker 2: Mike, I want to talk a little bit about what
11:15
Speaker 2: I'm seeing in the oil market that has me, you know,
11:21
Speaker 2: suggesting that the oil market is not buying a quick
11:25
Speaker 2: resolution on this, and we're going to take a look
11:28
Speaker 2: at Brent oil futures. So Buckle up everything, yeah me,
11:34
Speaker 2: buckle up, ladies and gentlemen. So a futures contract is
11:37
Speaker 2: basically something that allows for, in the case of oil,
11:41
Speaker 2: you to either sell oil to someone at a specific
11:45
Speaker 2: date and price in the future or buy it from
11:47
Speaker 2: someone at a specific date and price in the future.
11:50
Speaker 2: So if you're looking at, you know, the May oil
11:53
Speaker 2: futures contract, if you're selling that, you're saying, I will
11:55
Speaker 2: deliver you x thousand barrels of oil on this day.
11:59
Speaker 2: If you're buying it, you're saying, I will buy x
12:01
Speaker 2: thousand barrels of oil from you on this day. So
12:04
Speaker 2: it gives producers and buyers a way to hedge their
12:08
Speaker 2: cost into the future. And let's look at where we
12:11
Speaker 2: were on last Friday. The May contract reached a high
12:16
Speaker 2: of about ninety four bucks a barrel. The I'm sorry,
12:20
Speaker 2: the September one was at about seventy eight dollars a barrel,
12:24
Speaker 2: and the December one was at seventy four. So in
12:27
Speaker 2: this case, May was twenty dollars higher than December. This
12:32
Speaker 2: is what's known in the business is backwardation of a curve,
12:34
Speaker 2: where it's more expensive to buy now than later. And
12:37
Speaker 2: the reason why this happens is it's effectively it's the
12:40
Speaker 2: mechanism for drawing barrels out of storage, because if you're
12:43
Speaker 2: storing a barrel, you say, well, maybe i'll hold this
12:45
Speaker 2: to later and get something, or I can sell it
12:48
Speaker 2: now and get ninety four. So it draws barrels out
12:51
Speaker 2: when a curve is backwardated. It's basically saying, hey, supply
12:54
Speaker 2: is tight now, so sell us your barrels now because
12:58
Speaker 2: we need them where we stand today, and this is
13:01
Speaker 2: the piece that is interesting. And I'll look at just
13:04
Speaker 2: you know, kind of where we were when when I
13:07
Speaker 2: woke up, just because it made the numbers more clear
13:09
Speaker 2: than where they are right now. We were back at
13:12
Speaker 2: around like ninety six a barrel on the May the
13:18
Speaker 2: May contract. So the May contract had gone up two dollars.
13:22
Speaker 2: It moved two dollars since last Friday. Okay, that suggests
13:26
Speaker 2: that the status quo for right now. And again, I
13:29
Speaker 2: know there's been a ton of wiggles, like it went
13:30
Speaker 2: up to one twenty and down to eighty. Ye, but
13:33
Speaker 2: at least right now with the information traders, no, because
13:35
Speaker 2: this is all minute to minute, the May contract had
13:37
Speaker 2: moved up two bucks, saying yeah, the problem's a little
13:40
Speaker 2: worse than we thought it was, but but nothing you know, huge,
13:44
Speaker 2: it's fine. The September contract had gone from seventy eight
13:50
Speaker 2: up to eighty four. It's a six dollar move, which
13:53
Speaker 2: is the market saying, hey, in May, we expect things
13:58
Speaker 2: to be a little worse than we thought they were
14:00
Speaker 2: for oil supply than on last Friday. But when we
14:04
Speaker 2: go out to September, we're thinking things are going to
14:07
Speaker 2: be meaningfully worse than, you know, relative to May. So
14:10
Speaker 2: the futures market is pricing in longer. Higher prices for
14:17
Speaker 2: longer is the message that it's sending. And that's the
14:21
Speaker 2: piece that I think is worth watching because ultimately, like
14:25
Speaker 2: if you just watch the price of oil on a
14:27
Speaker 2: daily basis, like with you know, whatever's on CNBC, that
14:30
Speaker 2: is typically it's the front month futures contract that they
14:33
Speaker 2: are showing you. That's that's just like what they what
14:36
Speaker 2: they do.
14:37
Speaker 4: What's oil costs as close to now as possible as.
14:40
Speaker 2: Well, They're not showing you for spot delivery today, They're
14:42
Speaker 2: showing you the front month futures contract, the first one
14:45
Speaker 2: out in the future. It's just how they do it.
14:48
Speaker 2: And so just watching the price of that tells you
14:52
Speaker 2: some things about what's going on in the market, but
14:54
Speaker 2: it's really, hey, how does the shape of the curve move?
14:57
Speaker 2: That's what tells you about what's being priced in is
15:00
Speaker 2: far as duration and lengthening impact. And the message that
15:03
Speaker 2: you're getting today is, hey, yes, things may be a
15:08
Speaker 2: little bit dodgier in May for you know, being able
15:10
Speaker 2: to get what we need, but they're looking you know,
15:14
Speaker 2: worse by a factor of three in September relative to
15:18
Speaker 2: you know, how things looked a week ago. Yeah, So
15:21
Speaker 2: I think ultimately what this gets to is the only
15:25
Speaker 2: way that this goes back to some semblance of normalcy
15:31
Speaker 2: is by getting traffic back to normal and horr moves
15:35
Speaker 2: that like that, there is no other option. Everyone on
15:38
Speaker 2: you know, social media now it's it's actually kind of
15:40
Speaker 2: funny if you've seen, you know, like the meme that's
15:42
Speaker 2: going around now is like, hey, how do we solve
15:44
Speaker 2: this wrong answers only, and people are like, oh, we
15:47
Speaker 2: could use like catapults, and you know, we could you know,
15:50
Speaker 2: we could just raise the sea level by one hundred
15:52
Speaker 2: feet and now would create like a second strait of
15:54
Speaker 2: horror moves like you know, so like you get all
15:57
Speaker 2: the funny ideas and everything, The fact is there is
16:00
Speaker 2: no replacement for this capacity. And by the way, we're
16:03
Speaker 2: still only talking about oil. Sure we haven't mentioned all
16:09
Speaker 2: the other stuff that goes through there, for which like
16:12
Speaker 2: there is no strategic urea reserve, there is no strategic
16:16
Speaker 2: aluminum reserve. Like there these things don't exist, and they
16:21
Speaker 2: are going to be problems whether or not. You know,
16:24
Speaker 2: like this is disagreea going to fertilizer. Yes, it's a
16:28
Speaker 2: like nitrogen based fertilizer. Yeah, So like this is the
16:32
Speaker 2: stuff that is going to you know, matter as.
16:35
Speaker 3: Well spring planting season, by the way, kind of need
16:37
Speaker 3: that fertilizer.
16:38
Speaker 2: I don't know if you've seen what's been going on
16:40
Speaker 2: in the Midwest right now. Fertilizer prices are up about
16:42
Speaker 2: thirty percent from where they were three weeks ago.
16:45
Speaker 3: So speaking of which, I think it's just useful to
16:48
Speaker 3: again ground us in terms of what has moved since Friday,
16:52
Speaker 3: February twenty seventh. Oil prices again this is the near
16:56
Speaker 3: term futures contract, went from sixty seven to ninety five.
16:58
Speaker 3: We're now up about forty one percent since the war
17:01
Speaker 3: broke out. Gasoline prices in the United States corning triple A,
17:05
Speaker 3: they're up about twenty percent since the war broke out.
17:08
Speaker 3: S and P five hundred bounced all around, but still
17:10
Speaker 3: only down about two and a half percent since the
17:12
Speaker 3: war broke out. The NIKE just you know, talking about
17:15
Speaker 3: Asian nations that are a little bit more economically sensitive
17:19
Speaker 3: to oil shortages, that's down seven and a half percent
17:22
Speaker 3: since the war broke out. The US dollar, you know,
17:24
Speaker 3: in spite of all those concerns about, oh, is the
17:26
Speaker 3: dollar still the global currency of choice? Dollar Index up
17:30
Speaker 3: about two percent ninety seven to ninety nine since the war.
17:35
Speaker 3: And then the ten year treasury yield, you know, taking
17:38
Speaker 3: a look there the move in the treasury so far,
17:43
Speaker 3: although day to day swings you know, have indicated different things,
17:47
Speaker 3: it's up about a quarter of a percent since the
17:50
Speaker 3: war broke out, insinuating seemingly more concerns about the inflationary
17:56
Speaker 3: impact of this than the recession impact of this in
18:00
Speaker 3: the United States at least, is my read there.
18:03
Speaker 2: Yeah, So this is why the the only viable option
18:07
Speaker 2: on this again remains you have to get hormones open,
18:10
Speaker 2: like you You can't patch this with spr releases forever.
18:14
Speaker 2: It's just you can't get the same flow. So ultimately
18:19
Speaker 2: it's gonna be a question of like when can you
18:20
Speaker 2: do that. If you can get things moving in the
18:22
Speaker 2: next week or two, okay, like you've got a path
18:25
Speaker 2: to normalcy probably twelve months from now. Yeah, the other
18:32
Speaker 2: still takes time. The other looming issues here.
18:34
Speaker 3: You know, we've talked a little bit about it, but
18:36
Speaker 3: the all the refineries across Asia, you know, the biggest
18:38
Speaker 3: one in the world is in India. These things, they've
18:42
Speaker 3: dropped their refining, you know, day to day quite a bit.
18:47
Speaker 3: Because if they have to shut these refineries down because
18:50
Speaker 3: they don't have products to refine, it is not a
18:54
Speaker 3: quick and cheap process to restart them. No, it is
18:58
Speaker 3: incredibly expensive to close and then reopen a refinery. So
19:02
Speaker 3: they are doing everything they can to just refine as
19:05
Speaker 3: little as possible right now and keep the machines running,
19:08
Speaker 3: keep the people on staff, because if they have to
19:10
Speaker 3: shut down and then restart, you're talking about a significant
19:13
Speaker 3: further delay. And I don't I don't have any expertise
19:15
Speaker 3: to know how much longer they can do.
19:17
Speaker 2: So I have another piece just that I want to
19:19
Speaker 2: talk about in terms of some developments that happened overnight
19:23
Speaker 2: that were interesting to me. So we're gonna take a
19:26
Speaker 2: quick break now. When we return, we've got Wall Street Watch,
19:29
Speaker 2: and then we're talking about something that beaked my interest overnight.
19:40
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19:43
Speaker 6: TFFE show.
19:44
Speaker 1: Breaking business news.
19:45
Speaker 6: Is always first right here on the Financial Exchange Radio Network.
19:51
Speaker 6: Turn out full Wall Street Watch tracking the stocks, the data,
19:55
Speaker 6: and the headlines driving markets so far today right here
19:58
Speaker 6: on the Financial Exchange A Network.
20:01
Speaker 5: We're nearly two weeks into the conflict in Iran, and
20:04
Speaker 5: markets are selling off today with oil still surging higher
20:07
Speaker 5: despite the IEA releasing four hundred million barrels of oil yesterday.
20:12
Speaker 5: Right now, the Dow is down nearly one and a
20:15
Speaker 5: half percent, or six hundred and eighty three points, SMP
20:18
Speaker 5: five hundred down one point three percent or eighty seven points,
20:21
Speaker 5: Nasdaq selling off one point six percenter, three hundred and
20:25
Speaker 5: seventy nine points, Rusted two thousand, down one and a
20:28
Speaker 5: half percent. Ten Your TREASUREELD is up two basis points
20:32
Speaker 5: at four point two three five percent, and oil jumping
20:36
Speaker 5: nine percent higher today, trading just right around ninety five
20:40
Speaker 5: dollars a barrel. Dick Sporting Goes reported stronger than expected
20:44
Speaker 5: quarterly results and said its turnaround of recently acquired foot
20:47
Speaker 5: Locker was progressing. Dick stock is up by two percent,
20:51
Speaker 5: sticking with the retail sector where Dollar General posted solid
20:54
Speaker 5: quarterly results, or with the discount retailer disappointed investors with
20:59
Speaker 5: it with its annual outlooks, sending shares down by seven percent. Meanwhile,
21:04
Speaker 5: automation and AI platform UiPath Are reported better than expected
21:09
Speaker 5: quarterly results. However, the company guided for slower annual revenue growth,
21:13
Speaker 5: sending shares down by nine percent. Elsewhere, software company at
21:17
Speaker 5: Lassian announced it would reduce its workforce by ten percent,
21:21
Speaker 5: allowing it to invest further in AI. Shares are mostly flat.
21:26
Speaker 5: Dating app Bumble said its turnaround strategies yielding results, which
21:29
Speaker 5: should help stem revenue declines this year. Bumble shares surging
21:33
Speaker 5: by thirty three percent, and pet retailer Petco guide it
21:37
Speaker 5: for a possible return to annual sales growth, sending the
21:41
Speaker 5: stock soaring by thirty four percent. I'm Tucker Silvan, that
21:45
Speaker 5: is Wall Street Watch Mike.
21:47
Speaker 2: So every morning now for the last two weeks, I
21:51
Speaker 2: wake up in a cold, sweated like three thirty am.
21:54
Speaker 2: And I'm like, okay, like what happened overnight and this
21:58
Speaker 2: war is healthy, it's it's it's fine, and look, it's
22:03
Speaker 2: it's something where when you're you know, focusing on this,
22:06
Speaker 2: you have to like again, like things move pretty quickly
22:10
Speaker 2: at this point, and so it's always interesting again just
22:14
Speaker 2: to see like what has developed overnight on this And
22:19
Speaker 2: you know, just before I had gone to bed was
22:23
Speaker 2: when the two tankers off the coast of Iraq were
22:26
Speaker 2: attacked by the drone ships yep, and so like that
22:30
Speaker 2: was kind of the last thing, and so I was like, okay,
22:32
Speaker 2: like what else are we going to see, you know,
22:34
Speaker 2: in the next twelve hours? That could be interesting. It's
22:37
Speaker 2: not a twelve hour sleep. I'm not a not a baby,
22:41
Speaker 2: but in any case, so I wake up this morning
22:43
Speaker 2: and a few things caught my eye. The first rumors,
22:47
Speaker 2: just because it's not official yet, that China is going
22:50
Speaker 2: to impose an export ban on any fuel for the
22:55
Speaker 2: rest of March. I haven't seen any confirmation yet, but
22:58
Speaker 2: if so, really problematic for the rest of Asia, because
23:01
Speaker 2: China does it doesn't produce all of its oil, but
23:04
Speaker 2: it produces more than most of its neighbors, and so
23:07
Speaker 2: This would be problematic because they do export some of
23:10
Speaker 2: that for refineries in the region in places like Singapore,
23:14
Speaker 2: and so this becomes problematic for producing diesel, jet fuel,
23:19
Speaker 2: bunker fuel and things that the region needs. And this
23:22
Speaker 2: is also then how other countries then say, fine, you're
23:25
Speaker 2: not gonna give us any of yours, We're not giving
23:27
Speaker 2: you any of ours, and everyone kind of hunkers down
23:29
Speaker 2: and global markets for energy kind of break. So that
23:33
Speaker 2: was one thing that was interesting. The other one that
23:36
Speaker 2: was really interesting to me, and this is it's two
23:40
Speaker 2: separate stories with varying degrees of confirmation. So like, I
23:46
Speaker 2: take this with a huge grain of salt and that
23:48
Speaker 2: it most likely isn't happening, but it's being talked about
23:52
Speaker 2: at least for different reasons. And again just thinking critically
23:54
Speaker 2: about why these stories are coming out. Reuter's had a
23:59
Speaker 2: report that came out originally at UH let's see one
24:03
Speaker 2: fifty four AM. It was updated two hours ago. I'll
24:07
Speaker 2: quote here. Iran will allow Indian flag tankers to transit
24:10
Speaker 2: the Straight of hor Moves, a conduit for nearly forty
24:13
Speaker 2: percent of the South Asian nation's crewed imports. An Indian
24:16
Speaker 2: government source set on Thursday, but an Iranian source outside
24:20
Speaker 2: the country denied any such deal was reached. And so
24:24
Speaker 2: a couple things. The first is like, think about the
24:26
Speaker 2: incentives for each side to, you know, say whatever they've said.
24:30
Speaker 2: If you are India, your population's sitting there going, hey,
24:34
Speaker 2: we get a lot of our stuff from from there.
24:36
Speaker 2: What gives? So the Indian government is incentive to be like, yes,
24:39
Speaker 2: everything's going to be fine, sure, even if they know
24:42
Speaker 2: it might not be true. So there's an incentive there.
24:46
Speaker 2: For Iran, the incentive is, hey, we need to make
24:49
Speaker 2: this look as hardline as possible, even if we're you know,
24:51
Speaker 2: starting to allow some things out, and so we want
24:55
Speaker 2: to deny it. So there's plausible cases why this is
24:58
Speaker 2: or isn't actually happening, Like, no one knows yet, and
25:02
Speaker 2: I want to make that clear. You also then had
25:06
Speaker 2: a report from Bangladesh that Iran issued a transit visa
25:12
Speaker 2: for Bangladeshi cargo to be able to transit the Straight Again,
25:18
Speaker 2: is it true, is it not? Don't know, but I
25:23
Speaker 2: think what this does do, in my opinion, is unfortunately,
25:29
Speaker 2: if Iran is trying to pursue this as a method
25:34
Speaker 2: of basically control over the Straight like, hey, we're going
25:37
Speaker 2: to attack stuff unless you pay the toll. Basically, it
25:42
Speaker 2: does like that would be the situation where unfortunately this
25:45
Speaker 2: becomes a longer and heavier conflict for everyone, because if
25:49
Speaker 2: there's one thing that the United States would not want,
25:53
Speaker 2: it is Iran becoming the gate gatekeeper of world you know,
25:57
Speaker 2: the marginal supply of world energy. Right. So, again we
26:01
Speaker 2: don't actually know what is or isn't happening on this,
26:04
Speaker 2: but like, these are things that just get you thinking
26:06
Speaker 2: as you see the chatter about them that comes out.
26:11
Speaker 2: So again we'll have to see how this continues to develop,
26:15
Speaker 2: but these are the types of stories that are being
26:17
Speaker 2: talked about now. And also remember, like as I just indicated,
26:21
Speaker 2: you have to take all of these with a grain
26:22
Speaker 2: of salt, because there are really big reasons for governments
26:27
Speaker 2: of different countries to be saying different things right now
26:30
Speaker 2: that aren't necessarily true.
26:31
Speaker 3: Frankly, even our own Right on Monday of this week,
26:35
Speaker 3: we talked about how the US military was going to
26:38
Speaker 3: help ships navigate this strait. We had the Energy who
26:43
Speaker 3: made the claim that we have already done.
26:45
Speaker 2: So it was Tuesday that the Energy Secretary said, oh,
26:47
Speaker 2: we've already done it, and then deleted the Twitter post
26:49
Speaker 2: twenty minutes later, and then this morning said I made
26:52
Speaker 2: a mistake. I take ownership of it. I won't do
26:54
Speaker 2: it again. Yeah.
26:55
Speaker 3: So there is plenty that is changing rapidly. Question I
27:00
Speaker 3: keep getting, and one that Wall Street Journal attempts to
27:04
Speaker 3: provide some answer to are there any real winners to
27:07
Speaker 3: all of this?
27:09
Speaker 4: Some clear losers.
27:10
Speaker 3: Economies all across Asia and Europe are struggling with access
27:15
Speaker 3: to energy, and that's problematic. I don't see any of
27:19
Speaker 3: the giant oil conglomerates their stock prices having benefited dramatically here.
27:24
Speaker 3: So are there any winners so far in these conflicts?
27:31
Speaker 3: Some appointed to Russia, like Russian oil is suddenly in
27:34
Speaker 3: demand again, But then again they're a fairly close ally
27:38
Speaker 3: of Iran and have coordinated a lot of military development
27:42
Speaker 3: over the last few years. So I can't sit there
27:44
Speaker 3: and say, oh, yeah, Russia is a huge winner.
27:46
Speaker 2: Here, Mike, in a war of any kind, you don't
27:51
Speaker 2: have like winners. Yeah, it's pretty awful for just about everyone. Yeah,
27:58
Speaker 2: and specifically, look in this the problem that is coming
28:03
Speaker 2: that no one wants to talk about is if this
28:07
Speaker 2: drags on for another few weeks, you're talking about famine
28:10
Speaker 2: in significant parts of the world. Like that's where you're heading,
28:16
Speaker 2: Like you're not going to have crop yields where they
28:18
Speaker 2: are in order to feed people in a lot of
28:20
Speaker 2: developing countries. Not talking to the US, but like that's
28:25
Speaker 2: where you're going is you know, planters in Southeast Asia
28:29
Speaker 2: aren't going to have fertilizer for their crops if this continues,
28:35
Speaker 2: Like it's not gonna be Oh the price went way up,
28:37
Speaker 2: it's gonna be No, it got shipped to the US
28:39
Speaker 2: or shipped to Europe, or shipped to you know, Japan,
28:43
Speaker 2: wealthier countries that can afford to pay the higher prices,
28:46
Speaker 2: and it's not going to show up in India and
28:50
Speaker 2: Bangladesh and Thailand and Vietnam. It just won't. Like that's
28:55
Speaker 2: where this is going if we're still here three weeks
29:00
Speaker 2: from now, four weeks from now. So it's yeah, it's
29:06
Speaker 2: kind of tough to talk about like winners in like oh,
29:09
Speaker 2: like this sector is like I don't know, I can't
29:14
Speaker 2: bring myself to get quite that cynical about it. You know,
29:19
Speaker 2: it's like it's it's just really bad, you know, Like
29:26
Speaker 2: that's that's where it is. And and in different ways
29:29
Speaker 2: than are going to impact the United States. So we
29:33
Speaker 2: will see where things go on this Again, it's we're
29:37
Speaker 2: minute to minute. I mean, this can change for the
29:41
Speaker 2: better at the snap of a finger. It can change
29:43
Speaker 2: for the worst the snap of a finger. We've seen
29:45
Speaker 2: all that in the last three days, Yes we have,
29:48
Speaker 2: you know, and I would be lying if I said
29:50
Speaker 2: I knew how this was going to resolve, But I
29:53
Speaker 2: do know that every day that it goes on, you
29:56
Speaker 2: start getting close to some very nasty scenario for the
30:01
Speaker 2: rest of the world, just in terms of the ability
30:04
Speaker 2: to actually like sustain life and stuff like that beyond
30:09
Speaker 2: pure economic scenarios. And so it gets, you know, kind
30:13
Speaker 2: of hard to talk about it, quite honestly, when you're
30:16
Speaker 2: discussing those kinds of things. Take a quick break. When
30:21
Speaker 2: we come back, let's see why investors aren't fleeing to
30:28
Speaker 2: safe haven stocks. Should we do that? Sure?
30:30
Speaker 4: After this, let's cover that next in the financial exchange.
30:33
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31:05
Speaker 2: Like, we got a piece in the Wall Street Journal
31:06
Speaker 2: why investors aren't fleeing to safe haven stocks? What is
31:10
Speaker 2: the case that it lays out.
31:13
Speaker 3: That the healthcare sector is one of these that typically
31:17
Speaker 3: is considered safe haven. It's down four percent, consumer staples
31:20
Speaker 3: has lost about five percent, whereas tech has kind of
31:24
Speaker 3: advanced modestly. And I think the answer is fairly simple.
31:29
Speaker 3: I don't think most investors are looking at this event
31:32
Speaker 3: right now as a likely recessionary force in the United States.
31:39
Speaker 2: I think the other piece is, and this gets it
31:43
Speaker 2: something we've talked about for the last like six to
31:44
Speaker 2: nine months in terms of kind of the dispersion between
31:47
Speaker 2: different parts of the market. Did you notice which stocks
31:51
Speaker 2: happened to be the best performing over the last five
31:53
Speaker 2: or six days, Mike, I did not tell me Max seven.
31:57
Speaker 2: So we had a rotation out and now a rotation
32:00
Speaker 2: back in. So and there's a couple possible reasons for this.
32:03
Speaker 2: The first is, Okay, things just got stretched too much
32:06
Speaker 2: one way, and so investors, you know, said Okay, we
32:08
Speaker 2: got to move back towards those names that have sold
32:10
Speaker 2: off a little bit the last you know, several months. Okay,
32:13
Speaker 2: I buy that. The other thing that's interesting to me
32:16
Speaker 2: is what if investors, particularly international investors. We know international
32:22
Speaker 2: investors aren't buying, aren't aren't flocking to US bonds right
32:26
Speaker 2: now because yields are up, Like, no investor is flocking
32:30
Speaker 2: to US bonds right now, yields to move up. The
32:32
Speaker 2: tenure has gone from four to four and a quarter percent.
32:35
Speaker 2: But what if investors, particularly international ones are like, you know,
32:39
Speaker 2: what if I want to go somewhere safe in the US,
32:43
Speaker 2: I'm gonna park myself in Apple and Microsoft nothing. I mean,
32:47
Speaker 2: it's like it's not the dumb, dumbest thing like you
32:49
Speaker 2: would think of, but you know, it's like I do
32:52
Speaker 2: kind of wonder if there's some of that that might
32:54
Speaker 2: be going on in terms of, Hey, if oil prices
32:57
Speaker 2: are gonna go up and it has potentially in zationary impacts, yeah,
33:01
Speaker 2: you might not want to own bonds anywhere. Like, this
33:03
Speaker 2: is not a US bond thing. I don't want to
33:05
Speaker 2: make it sound like US bonds are being like whacked.
33:08
Speaker 2: Take a look at German Buntons, which have gotten whacked
33:11
Speaker 2: twice in the last couple days, Like they had a
33:14
Speaker 2: bond sale failure yesterday where they only got four and
33:16
Speaker 2: a half billion dollars in bids for a five billion
33:18
Speaker 2: dollar issuance. So like this is globally you've got problems
33:23
Speaker 2: with investors not really believing that central banks are going
33:26
Speaker 2: to be able to keep rates where they are. So
33:28
Speaker 2: if that's your belief, you say, Okay, maybe I don't
33:30
Speaker 2: want to own US bonds. Maybe I want to own
33:32
Speaker 2: US stocks which ones seem the safest. Is it really
33:35
Speaker 2: Johnson and Johnson after a fifty percent run up? Or
33:39
Speaker 2: would I rather look at, you know, Microsoft after it's
33:41
Speaker 2: pulled back twenty five percent? Yeah, I guess maybe it's
33:44
Speaker 2: not going on.
33:44
Speaker 4: Maybe I guess you know.
33:46
Speaker 3: Important point to keep in mind, even with these pullbacks,
33:50
Speaker 3: these mag seven stocks remain about as pricey as they
33:53
Speaker 3: have ever been, or really any stocks have ever.
33:56
Speaker 4: Been on a on a relative basis.
33:59
Speaker 3: And so again to your point, I don't think it's
34:02
Speaker 3: completely illogical, but just some contacts for it is important.
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35:17
Speaker 2: Mike, should we talk a little bit about tariffs.
35:19
Speaker 3: Yeah, let let's talk about tariffs, because somebody in the
35:22
Speaker 3: government did some math.
35:23
Speaker 2: It looks like yes from the New York Times. As
35:27
Speaker 2: soon as the Supreme Court struck down President Trump's steep
35:29
Speaker 2: global tariffs last month, a flood of US businesses began
35:32
Speaker 2: to file lawsuits and hopes of getting their money back.
35:35
Speaker 2: But there was a problem, or so. The administration later said,
35:38
Speaker 2: it could take the government as many as four million,
35:40
Speaker 2: four hundred and thirty one thousand, one hundred and sixty
35:43
Speaker 2: one hours to manually process all the refund requests. By
35:47
Speaker 2: its own count, there are more than fifty three million
35:49
Speaker 2: entries for goods that were subject to duties during the
35:52
Speaker 2: most punishing phase of mister Trump's trade war. To return
35:54
Speaker 2: all the money, the government told a judge it would
35:57
Speaker 2: need more time.
35:59
Speaker 3: So that that's a very precise number of hours I
36:02
Speaker 3: was trying to look into.
36:04
Speaker 4: Presumably this is going to be done.
36:05
Speaker 3: By the folks at the US Customs and Border Protection Division.
36:10
Speaker 3: There are some sixty thousand plus people that work there,
36:14
Speaker 3: but they.
36:15
Speaker 2: Don't all handle no.
36:16
Speaker 3: Yes, thirty three thousand of them are inspectors at ports
36:19
Speaker 3: of entry. Twenty one thousand are border patrol agents. So
36:24
Speaker 3: I don't know some portion of the remainder, are you know,
36:28
Speaker 3: accountants somewhere?
36:29
Speaker 2: I suppose I did the math.
36:32
Speaker 3: Okay, how many people do you think are doing this
36:34
Speaker 3: sort of thing for US?
36:35
Speaker 2: I don't know, but I know that you need one
36:37
Speaker 2: hundred and ten thousand, forty hour weeks in order to
36:41
Speaker 2: get it done if it actually takes that long. Okay,
36:43
Speaker 2: So if you have ten thousand people that are doing this,
36:47
Speaker 2: it should take you about eleven weeks. If you have twenty,
36:50
Speaker 2: it should take you about five and a half weeks.
36:52
Speaker 2: If you only have one hundred people doing this, it's
36:54
Speaker 2: going to take you forty four thousand weeks. So somewhere
36:58
Speaker 2: in between there, somewhere between five and forty four weeks
37:01
Speaker 2: is probably where we are. I don't deny that this
37:03
Speaker 2: is incredibly complicated the basically, I mean, from from what
37:08
Speaker 2: I understand, there are all these goods that came in
37:11
Speaker 2: that were applied different tariff rates.
37:12
Speaker 4: Some of those tariffs were wiped out.
37:14
Speaker 3: And so you need to go and manly look and say,
37:16
Speaker 3: all right, well let's get here with as sixty percent
37:18
Speaker 3: what portion of that tariff was the illegal and then
37:21
Speaker 3: run back the calculation on every single good.
37:23
Speaker 2: So I do.
37:25
Speaker 4: Comprehend why it's complicated.
37:28
Speaker 2: Does AI solve this?
37:30
Speaker 3: It's finally getting pretty decent at maths. So about blockchain,
37:34
Speaker 3: not that I'm aware of. No, No, blockchain doesn't solve anything. No.
37:37
Speaker 2: Yeah, the.
37:40
Speaker 4: Good answer, Tucker.
37:42
Speaker 3: The other problem here just for all of us taxpayers,
37:45
Speaker 3: and are you know the treasury, we probably owe interest
37:49
Speaker 3: the longer this takes, so probably the said interest.
37:54
Speaker 4: The longer this takes.
37:55
Speaker 3: So I don't really want, you know, our taxpayer dollars
38:00
Speaker 3: going towards interest collected on the illegal tariffs.
38:03
Speaker 4: So let's get the ball roll in here.
38:06
Speaker 2: In any case, that's where things stand on that front.
38:09
Speaker 2: Let's take a quick break. But we've got hour two
38:11
Speaker 2: coming up in just a little bit.