as a symptom of income inequality. Like,

does it really matter to you? I mean,

you may not feel rich, but you are

relative to your peer group. You're

already in the top two, if not 1% in

terms of income earnner. Do you give a

[ __ ] that gas is at $6 a gallon?

>> No.

>> The people driving the Dow are

unaffected by uh oil prices. And you

know, again, everything gets outsourced

in our country. Basically, we're

becoming a country where the whole the

bottom 99% are we optimize the bottom

99% and treat them as nutrition for the

top 1%. And the reason the bottom 99 put

up with it is that in America the bottom

99 all thinks at some point they'll be

in the top 1%.

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It was a turbulent week geopolitically

and economically. Peace talks with Iran

collapsed. The US blockaded the straight

of Hormuz and surging oil and gas prices

are feeding into higher inflation and

also weakening consumer confidence even

more. The International Monetary Fund

warned that further disruptions in oil

markets could raise the risk of a global

recession. They also uh reduced their

forecast for global GDP growth. And yet,

despite all of that, the S&P hit an

all-time high and the NASDAQ hit an

all-time high. And the question for

investors now is why are markets so

bullish? Why do markets continue to go

up? Why do stocks continue to go up? I

have a lot of thoughts here. Uh this

stuff is fascinating. It is kind of the

biggest question on every investor's

mind right now. But I will start here,

Scott, with your reactions. What do you

make of the fact that all of this is

happening uh all of this conflict, all

of this war, gas prices surging, and yet

the stocks uh continue to go up?

>> Yeah, people often refer to this economy

as the K economy, meaning some people

doing really well, other people doing

not so well. I'm I like the term or I

just made this up, the ketamine economy,

and that is ketamine is a dis

disassociative drug. You literally kind

of leave your body and see your life for

what it is, and it's can be very

helpful. That's probably a bad

description of the effects

academyetamine, but um it's

disassociative. And I've said for a long

time, I think the NASDAQ and the Dow are

two of the worst metrics or most

unhealthy metrics ever invented because

they give the illusion that people are

doing well. And really is it's a proxy

for earnings and a proxy for the wealth

of the top 10%.

So what do you have? All right, so I

mean think about it. If the majority of

our markets now are being run by 10

companies that are in the business of AI

or online or software, do they care that

do they care that the gas prices are up?

In addition, there's this phenomena of

buying the dip and that is if you look

at the last three exogenous events in

America, you would say the Gulf War, the

Iraq war, and then um 9/11 and maybe CO,

let's go four, I guess. I guess the Iraq

wars linked to linked to 9/11.

Basically, there was a dip and then the

markets ripped back the following year.

The markets had above market returns the

following year. And we did have a draw

down here. We had a 10% decline in the

Dow in March at the outset of the war

and it's ripped back. And I think what's

happening is the cycle time between fear

and uncertainty around a war and the

opportunity to buy is is compressing.

And now people are like, let's move to

the part of the program where we make

money. I also think there's a bit of a

in my view overly optimistic viewpoint

that the war is going to settle down and

the straits are going to be unblocked if

you will. But mostly what I think this

is about is that the markets have

disassociated from the majority of

people's well-being and their

prosperity.

>> I mean just to look at how stocks have

performed so far this year. So, we are,

as we said, we're at record highs for

the S&P. I mean, it hasn't been a

tremendous increase in the stock market,

but it's gone up. And the stock market

was already very high at the beginning

of the year. It's gone up, so now we're

at a record high. And so, you think

about, okay, what what has what are the

reasons why that's happened? So year to

date when you look at the sectors that

have outperformed the biggest winners

have been industrials up 11%, materials

up 12% and energy up 24%.

Uh and the lagards at least leading up

to the war were things like uh tech uh

communication services and financials.

Um, since we hit the bottom from the

Iran war, so that was March 30th. That

was the market bottom. Thus far, it's

been a very different story. It's

actually reversed. Energy has fallen.

It's down 9% since the bottom. And the

winners have been financials up 11%,

communication services up 18%, and tech

up 17%.

So it's really I mean the big trouble

here is trying to understand and this is

always an impossible question but it's

trying to understand like what are what

are the markets actually thinking here

like why I mean we had this steady

steady decline where the markets weren't

taking an elevator down but they were

taking the stairs down as the Iran war

unfolded. It kept we kept on getting

this kind of scary news where things

weren't really resolved and then we kept

dropping more bombs and then there was

more conflict. markets went down and

down and down and then on March 30th

something happened. We hit the bottom

and then since then we've basically been

shooting up and a lot of people have

been saying well the markets must think

that the Iran war is over or they're

they're too optimistic that this thing

is going to be resolved. And I think

that that's possible but again we should

sort of remind ourselves like why are

they up? It's basically because

everyone's piling into tech again. I

mean, we had this massive draw down in

the tech sector. Everyone was very very

bearish on on the sector. And now we're

seeing that actually people are fine

again. And so I I think the question is

trying to identify why what exactly

happened here? What are investors

thinking about this? And I think it's a

few things. I think that one investors

are recognizing some of your points

which is that I mean the the the stock

market is not the economy. If gas prices

go up, yes, it might have some impact on

lower income consumers and we can get to

that because it is very interesting. But

ultimately high earners are are

completely price insensitive. Doesn't

matter to them. They drive consumer

spending. Same thing with big companies.

Same thing with tech companies. They're

going to be fine. But then the other

side of it that I do think is quite

interesting and you mentioned the word

dissociative there. You call this the

ketamine market which I think is

interesting. I wonder if there's also

been a little bit of what I would call

timeline fatigue where we thought we

understood what the story of this war

was. And there were all of these

different plot points. We strike Iran.

Uh we kill the supreme leader. But then

the son is appointed. Uh, then Trump

says that we've had productive talks and

we think that maybe the negotiations are

going to go somewhere. Then they don't.

Then he says, "Open the [ __ ]

straight, you crazy bastards." Then he

says, "A whole civilization will die

tonight." We think that the climax is

going to happen, that there's going to

be perhaps some event that ties a bow on

this whole situation. And then since

then, it's just been a mirage of

confusion. I mean, they say there's a

ceasefire, then they say there's not a

ceasefire. Uh then they there's a

blockade then they blockade the blockade

and I wonder if this is investors

basically saying you know what we don't

really understand this so let's just go

back to the basics here big tech is

extremely good at what they do they are

crushing it on the AI front earnings are

ripping so let's just go back to what we

know and let's just go in and buy tech

again and that's the only thing that we

know we know to be true so it's I mean

I'd like to hear a response

because there are se so many different

reasons that you could give as to why

markets are behaving the way they are.

But that is the closest thing that I can

draw um to what I believe is the truth

about what investors are really thinking

right now.

>> I buy all of that, but I see it just

again as a symptom of income inequality.

Like

does it really matter to you? I mean,

you may not feel rich, but you are

relative to your peer group. You're

already in the top two, if not 1% in

terms of income earnner. Do you give a

[ __ ] that gas is at $6 a gallon?

>> No.

>> The people driving the Dow are

unaffected by uh oil prices. And you

know, again, everything gets outsourced

in our country. Basically, we're

becoming a country where the whole the

bottom 99% are we optimize the bottom

99% and treat them as nutrition for the

top 1%. And the reason the bottom 99 put

up with it is that in America, the

bottom 99 all thinks at some point

they'll be in the top 1%.

So, but all of this pain is is

outsourced to lower middle- inome

households. Lower income households

spend 22% of their their income on

energy costs. So, this really I mean

this really whacks them, right? So, but

the people responsible for 50% of

consumer spending, the top 10% AI, like

what the [ __ ] does AI care unless they

start bombing the data centers in the

Gulf, but they have redundant um

infrastructure. And also in the US, it's

a bit I don't want to say it's a wash,

but we have we're net exporters. We have

a lot of energy companies that I can't

imagine what's happened to the stocks of

the companies that build the materials

for pipelines. We have Exxon and

Chevron. I mean, you know, those

companies are making a lot of money.

Those companies are actually doing

pretty well. So, and then when there's

it's almost, you know, it's unfair, but

it's true. When this type of insecurity

hits the world markets, there's a flight

to safety or the least unsafe place, and

that's the US and tech stocks and the

dollar. It's sort of like, well, where

do we go? We don't know. Okay, let's go

back into tech. Also after the draw down

after the kind of SAS apocalypse

there is as a multiply on cash flow some

of the tech stocks right now look to be

decent you know when when you can invest

in invidia at 24 times forward earnings

or something it's like it's just not a

bad store of value when Microsoft is

trading at its lowest multiples and

you're going to talk about this in a

decade you think well maybe that's not a

bad value so I it's sort of the sum of

all fears of what it means to have a bit

of a h he h he h he h he h he h he h he

h he h he h he hijgemony at least from a

financial standpoint and that is the US

and that is okay let's outsource all the

pain to the rest of the world and within

the US let's outsource all of the pain

to lower and middle- inome households

>> but what's interesting is that investors

for a brief period in time did away with

that notion I mean the reason that we

hit the bottom is because investors were

worried about what this war would do to

oil prices, how would it how it would

affect gas prices, how those gas prices

would trickle into the rest of the

economy. And as I said, we went down and

down and down and down, and things did

not look very good. And so, I mean, I'm

in total agreement with you, and we've

talked about it a lot on this podcast

before. What is the economy? It is

increasingly reflective of the the

spending habits of the top 10% of

earners. It literally that their

spending literally accounts for a third

of GDP. And so when you think about it

logically in your head, like what would

what would rising oil prices do to the

economy, the the only real systemic

impact that it will have is on the

consumer spending habits of lower income

households who as you said in the lowest

income spend nearly 20% of their total

uh expenditures on on gas. But other

than that, it's not going to hurt the

top uh the the the top quentile very

much at all. It's also not really going

to hurt tech companies that much. I

mean, there was some concern at the

beginning that some of the materials

that go through the straight of Hmuz are

used for chips, but eventually people

started to be a little bit less worried

about that. Perhaps they're not pricing

that in enough. But ultimately Nvidia is

still creating a ton of chips and Nvidia

is still just fine. So I it's it's an

interesting dynamic where these are sort

of the fundamental truths of this market

now that it seemed that most investors

were pretty much on the same page page

about the things that you're saying

right now. And yet there was a moment of

actually no maybe maybe those things

aren't true anymore. Maybe this thing is

going to shake things up in a really big

way. But then I think as you say, you

look at the multiples, you look at the

general confusion in the headlines, the

fact that you can't pass out whether you

you you don't know if we're going to

stay in Iran or if we're going to leave

or if we're going to uh make any

decisions there. You can't you can't

figure out anything from this market.

And I think that what you see then is

then you go, okay, let me just go back

to the just the very very basic

fundamentals of investing. Let's look at

the earnings. S&P just posted fifth

consecutive quarter of double-digit

earnings growth. That hasn't happened in

almost a decade. Earnings grew more than

12%. Earnings guidance is extremely

strong. Multiples have contracted.

Microsoft, Nvidia, a lot of these

companies are trading at at some of

their lowest uh multiples and a forward

earnings basis in literally years. I

mean, there was a point there where

Microsoft was where it was post

liberation day. And that feeling when

you suddenly look at all that data and

you realize what what actually matters

most to markets which is literally just

earnings. It seems like basically every

investor woke up basically last week and

looked at the fundamentals at the same

time and decided you know what this is

fine I'm buying. Corporate America is

doing doing just fine. And it's

fascinating how quickly that happened,

especially considering how long the trek

downward was uh until we hit that bottom

basically just a couple of weeks ago.

>> The only caveat here is you know the

story isn't over, right? Markets don't

go straight up or straight down and you

know all it takes is one inst or or one

geopolitical incident or just the

markets decide it's it's time to sell it

in 2022.

So yeah, the markets are back. We'll see

how the end of 26, you know, we'll see

what happens in the end of 26.

>> Yeah, I mean that that's worth talking

about. Like what do you think that would

look like? People seem pretty confident

right now, at least just from a purely

sentiment basis. Like people are just

like, you know what, this war I don't I

mean it's odd to even understand what

investors think, but what do you think?

What would it take to go back down again

to to approach what was getting close to

a bare market?