I see politics. It's everywhere.

>> Hello listeners, welcome to another

episode of Geopolitical Cousins. Marco

and I dive into some questions about

Iran, about the AI economy. We close

with predictions on the NBA finals, lots

of other interesting things in here.

Take care of the people that you love.

Cheers. We'll see you out there.

>> [music]

>> All right, your cousin's recording for

you on the weekend, Saturday, May 30th,

9:30 a.m. US Central Time. Cousin, I

played basketball yesterday for the

first time in like 3 to 4 weeks.

>> Nice.

>> Uh I am sore, man.

>> Yeah, man. Like

I Wait, are you

>> I'm getting old.

>> Are you in your 40s?

>> I am I am not yet in my 40s. No, I

should probably not complain.

>> You're so much younger than me. Cuz I am

definitely well into my 40s and so I

played a Saturday morning game which I'm

going to go to after this.

And it's like 4 5 hours, you know,

outdoor.

>> And basically it takes me now like

>> Outdoor?

>> Oh, it's outdoor, yeah.

>> Oh, dude.

>> And it's, you know, Southern California,

so the weather's always like amenable to

that other than like maybe during the

one month you have the rain season. So

So it's outdoor, it's 4 to 5 hours, you

know, you get to sit cuz, you know, you

lose on occasion. Uh yes, your cousin

does lose on occasion. And then 48-hour

recovery. It's It's a 48-hour recovery.

>> Yeah, no, I I I

I assume it's a concrete court. You're

playing outside on concrete. Oh man,

that My my knees and hips are are I

mean, I'm I'm inside at the J here

playing indoors. I went hard for an hour

yesterday. I wear this Garmin watch that

tracks me and after I got off the floor,

it recommended 62 hours of recovery

time. So that's where I

That's where I am right now.

>> Well, I

>> Um

>> On occasion when it's really hot

I mean this is obviously water weight,

but like I'll come back like 5 lb

lighter.

>> Yeah. This is it.

>> Uh but anyway anyways it's awesome. I

mean it's this is this is the life,

right? Ball is life. So, I'm up right

now. Let me tell you. Um I don't feel

great.

I had to do a crazy week

like this week where I did one of those

in and out.

I went and I spoke at a an event uh for

my buddy's company.

So, I had to fly Tuesday night, land

morning Wednesday, do the talk, do a

video shoot,

do a client call, fly to Austin.

All in like that basically, you know?

And then obviously you get sick. Like,

"Oh, how did I get sick?" Oh well, maybe

cuz you didn't sleep for two nights, but

So, check this out. This morning I had

an alarm. So, by the way, this is also

for all our listeners. Just a glimpse

behind the curtain.

Uh life of the glamorous sell-side

strategist, but also

what it takes to do these pods. So, I've

got an alarm on a Saturday morning. I'm

sick. I've had a really long week.

And it's, you know, to wake me up so we

can do this pod on a Saturday morning

when I could be using some recovery. And

I press the snooze button.

And the mo- the moment I did that I I

had a dream.

And in this dream

you and I had a pod scheduled back in my

hometown of Belgrade with my great aunt

in her little Soviet and I had to get

there.

You know? So, I'm hustling to get to

Novi Belgrade Novi Belgrade which is

across the river so I can do the pod

live with like a 97-year-old because

you're you're demanding it.

And then you pick up the call and you

you call me

and you tell me, "Don't worry about it,

buddy. Let's do it another time." And

I'm thinking to myself, "This I'm

halfway." And I'm like, "Fine." So, I go

back to sleep and I oversleep for our

pod. I literally And that's why I texted

you. I don't know if you noticed, like,

are we still on? Cuz it was such a vivid

dream and your soothing voice was so

vivid, I thought we weren't going to

record.

>> Wow. Well, don't don't hold Cousin

Margaret to anything he's going to say

in this podcast, right now. For all we

know, he still thinks he's lucid

dreaming and hallucinating in an in an

apartment somewhere.

>> Yeah.

So, anyways, that's that's why we're

going to have to truncate this a little

bit cuz I know you got to go in an hour.

So, we're going to have to make this

tight. So, let's just get right into it.

What do you got for us, Jacob?

>> Yeah, well well, first of all, you know,

Russillo does Tales from the Couch when

he's like talking about his analysis of

NBA games from sitting on his couch. So,

we got to do something like that for us.

Like cuz the Tales from the from the

plane of the sell-side street cuz we

can't do it on a plane. I don't know.

We'll have to We'll have to work

something out.

>> think about that. That's a really good

idea. That's a really good idea. Cuz you

know, you get a lot of interesting tales

on the road.

>> You do. And there's also there's also

something to it of like, you know,

you're like it'd be funny to see your

and my initial reaction to a new story

and then how what that reaction becomes

like once you sit down and actually read

things cuz I'm like like we're like any

other humans. Like if there's a headline

or something, we look at it and you have

an initial reaction and the discipline

of analysis is to be, okay, I'm going to

put that reaction in a bento box and go

read like 10 things about this and then

I'll I'll like develop a take on this or

something like that. But it'd be funny

if we like, what's your initial take

with no other uh information anyway. But

uh we're we're going off the rails here.

Okay, we have plenty of things to talk

about.

Um Saturday, May 30th. Uh

I know we probably don't want to start

with it, but let's give the listeners a

little bit of what they want. Let's talk

about Deal No Deal, uh the new reality

TV show brought to you by Donald Trump.

Is there a deal with Iran? Is there not

a deal with Iran? Um our Cousin Rory has

been I mean, there's not going to be

much left of him at this point. He's

he's got the lighter dangerously close

to himself. It's not Not him, though. I

don't know if you saw the CEO of um

Chevron went on Bloomberg TV just

yesterday and I mean he was very wearing

a nice suit by the way. Very nice.

Very calm, very collected but was

basically saying, "Yeah, we're like

weeks away from shortages here in the

United States. Uh prices are rising,

demand is up, refineries are at max

capacity so it's super tight. We've been

exporting to the rest of the world like

not going to go so well here in the next

couple of weeks." So that's CEO of

Chevron not like you know our our

friends on Twitter who are lighting

themselves on fire. That that made me

sit up in my chair a little bit too.

Where are you at with the ceasefire

reports? I'm not really taking them

seriously but

I don't know. Maybe you feel different.

>> Well, I think I just think that uh you

know time's up.

The CEO of Chevron is now sounds like

Rory, our cousin.

Uh you know, so like time's up. This is

it. We've got a month.

And so the reason I say that is because

if if President Trump was going to do

something

you want to do it while you got

inventory covered.

So it it's it's so interesting in this

particular conflict between the US and

Iran, global inventories are ammunition

with which you bomb Iran.

>> Mhm. You know?

Right? Like the more inventory you have,

the more you can pulverize Iran because

you don't care about their ability to

close the Straits of Hormuz.

And so time's up. You know, time to time

to make that deal, you know? And

that's that's kind of where I'm at. Uh

and I think I think what's interesting

though

is that I think on the last podcast I

said that both sides were trying to

figure out how to sell this

domestically. That seems to be the hold

up.

The hold up right? I mean like

how do you sell this? And and I would

just say that

um

it's interesting to me that President

Trump is hesitant like he seems to be

hesitating because of all the hate he's

getting. And as you pointed out last

time, well, that's the very

un-Trump-like.

Um, but that's that's it. He just has

to, unfortunately, you know, like man up

and take, yeah, a bad deal. A deal

that's not going to be great for, you

know, from a perspective of like

risk-reward, why did US risk a global

recession? What's the reward for it?

It's going to be pretty minimal. Uh, but

yeah, we're we're out of ammunition.

Effectively, like this

oil barrels stored in China,

in the United Kingdom,

in South Korea, in Japan, in the US

Strategic Petroleum Reserve, they are

the bullets with which you fight Iran.

It gives you time to have a conflict.

And for the last 2 months of this

ceasefire, the US has kind of not done

anything. You know what I mean? It

hasn't really prepared itself for a

longer war. It hasn't put

military equipment in the region with

which it could threaten Iran further.

It's just kind of

yelled from the other side of the bar.

>> Yeah, it's um

I mean, it's confusing. And I don't know

if you saw this, I mean, one of the

craziest things, this was 3 days ago

now. It's crazy that this was just 3

days ago when Trump was speaking to

reporters at the White House. Um, and he

he didn't talk about Iran. He started

talking about Oman. And like, literally,

I will quote the president here, "Oman

will behave just like everybody else or

we'll have to blow them up. They

understand that. They'll be fine." He's

talking about that in the context of

Iran discussing with partner discussing

a partnership with with Oman

and charging fees or environmental fees

for ships that are going through the

Strait of Hormuz. And Trump is, you

know, latching on to this, "There's not

going to be any toll through the Strait

of Hormuz."

Pretty clear there's going to be a toll

through the Strait of Hormuz. Or you can

call it an environmental tax, you can

call it whatever else. And it might be a

net positive if Iran is working with

other countries in the region to try and

actually set up a reliable tolling

mechanism that people can can actually

um deal with. I also like it's it's also

a case of like the left hand not knowing

what the right hand is doing. Like my

favorite Scott Bessent, and maybe we'll

get we'll queue the Scotty Doesn't Know

music here. You know, when he did an

interview yesterday the day before where

he was bragging about stealing a billion

dollars worth of Iranian crypto. And

say, "Oh, they don't These guys are

typing in their wallets. They don't even

know we have their wallets." First of

all, uh I don't I don't think you can do

that. Like I think that's like actually

impossible. Like you're just able to

hack into anybody's wallet. I'd like to

hear a little bit more about that.

Number two, you're talking about giving

them 8 billion to start with to extend

the ceasefire uh from Qatar in reserve.

So, good job stealing a billion dollars

of crypto, which is probably for some

Iranian coder underneath his mom's

basement who's a dissident against the

regime. You're probably not stealing

that from IRGC coffers, I would guess.

Um and and yeah, it's just this this

mismatch between trying to show

strength. Oh, like the United States has

really shown Iran what's up. Where it's

like, "No, Iran has actually you know,

stood stood the it stood the fight."

Like it took the punch, it's still here,

and it's it's still going. So,

I don't know. I mean, if if the if the

litmus test for all this is going to be

the President Trump does not want to be

called weak and doesn't want people to

point out that he didn't do well and got

an objectively worse deal than President

Obama did, like that narrative's not

going to be there. There There's no

PR maneuver that you're going to do to

make that particularly clear. And you

know, those folks who were in the MAGA

base who have a big bullhorn, like your

Tuckers and your Ted Cruzes, like

they're not cool with this. They're not

going to be cool with the deal. They're

going to be be out there banging the

table. And then I think the real kiss of

death is just I mean, just look at it

look at the last CPI print. Look at

energy prices up 17%. Even if the

straight opens tomorrow, the next CPI

print is going to be way worse. And the

one thing that Americans will trust more

than, you know, whatever nonsense is on

the television is when they go to the

gas pump and it's over five five at the

gas pump. And like I saw a 450 handle

here in New Orleans

just the other day. That's kind of

crazy.

>> Oh, poor you. I'm so sorry for you.

>> Hey, I I I live with the the threat of

hurricanes like completely destroying my

existence every other day. So, you know,

it's it's the the cheaper oil prices is

what I get.

>> Whatever. You you chose to be in Santa

Monica. Nobody said you had to be in

Santa Monica.

>> There there's fires here, you know?

>> Okay. Okay.

>> There's an earthquake

and $6 gasoline. Come on. Um Okay, so I

Yeah. You know, what am I going to say?

First of all, on Oman, I saw that when

it came out. I put [laughter] the most

hilarious part of that statement is you

can see his brain go like, "Whoa, whoa,

whoa, whoa, you went too far. Reign it

in. Reign it in, Donnie." And then he

goes like, "They'll be fine." You know,

like

We should We should put that statement

in the show notes somewhere, but it was

like

You know, like I mean, it's just like

it's "They'll be fine." You know, it's

just like I can see him doing that. Like

"They'll be fine. Jacob Jacob hates me.

You know, Jacob with his TDS, I'm going

to have IRS

audit him. He'll be fine." You know,

like I mean, it's just

>> You're correct, Mr. President. I will

refuse to use your $250 bill with your

face on it on principle cuz I just don't

want to have that in in my wallet.

>> buying so many of those bills. I got to

tell you right now. I mean, no, like the

posterity of your family has to remember

this time.

You know, like

>> Yeah.

>> Because you know why? This is either a

comedic interlude into the next 250

years of glorious American history,

in which case you definitely want to

have that $250 bill to show your

grandkids.

Or or this is the beginning of a new era

in which that's the only denomination

you'll be able to use

when $250

in 10 years buys you a chocolate bar.

>> Yeah.

>> You see what I'm saying? So like you

have to have it. Like

choosing not to have the $250 bill makes

no sense. I will send you some. You

know?

>> Well, that's great. That's why I have a

cousin who's going to rely on me not to

make bad financial decisions with my

past $250 bill.

>> It actually reminds me of something,

this conversation we're having right

now. I know we've just gone swerved uh

but the caffeine is kicking in, so you

know, this is just what's going to

happen. Um

So uh this is I'm like LeBron right now,

4 hours before the game stretching. This

is what I do. Like [clears throat] I'm

slowly stretching into my uh mental

capacity. So

I remember uh my mom

you know

she kept my little red scarf and my

little like battalion hat. So basically

uh

let me wind this back a little bit. When

you grow up in a communist country, you

glorify the World War obviously. Nazis

are evil. You know, uh we're going to

have a World Cup episode and you know,

one of the funny stories I'll tell then

again is that when I was a kid, I always

thought every soccer match was between

Yugoslavs and like the partisans and

your Germans. I was so indoctrinated as

a little kid

that the Germans are just always the

enemy, right?

So anyways, one of the things you have

is like little cub scouts.

But they're called pioneers.

And it's very militaristic and you have

like a literally like a battle hat.

Little tiny cute battle hat and a red

scarf.

And I had that. I was a pioneer,

obviously. You know, straight A student.

Let's go.

Um

And it then communism

and I no longer have that. You know,

like we throw it away.

And one day I was rummaging through my

closet and I find it in a plastic bag

buried deep

in the back of the closet, you know?

And I quickly run to my mom, you know,

holding this bag of this like communist

paraphernalia.

And I like run to my mother and I'm

like, "Mom!

Somebody kept this garbage."

I want to go burn it, you know, because

we were a very kind of bourgeois family

that always hated communism.

Um, and she goes she looks at me and she

says,

"I kept it.

You put that right back in the closet."

And I was like, "What?" I was like, my

whole image of my mom, who comes from a

very bourgeois family, you know, like

artists, painters, doctors, poets, you

know, that's like her background, very

anti-communist, obviously. I was just

like,

"Mom, like and I was just like, Mom,

what?" And she's like,

"You're going to be wearing that and

singing those patriotic songs when this

[ __ ] comes back. Put that thing in the

back and don't touch it again, you

know?" Like it was

So, my point, Jacob, is [ __ ] yeah,

you're going to keep some of those $250

bills in the back, you know? We're all

going to be very happy using them

at the at at the at the food bread

lines, you know?

>> Yeah, no, sounds great.

>> So, anyway,

>> Well, I I I will just say there's

there's one thing I wanted to say and

then there's one thing I wanted to throw

at you on this conversation to try and

extend it beyond Iran. The first is, you

know, at first it was folks like Rory

and Eric Nuttall. Now it's people like

Jeff Currie. So, Jeff Currie went on um

Squawk Box just I think it was yesterday

or day before yesterday and he had this

very pithy line. He said, "Five deal

announcements, zero closes, sell the

tweet, buy the molecule." And you've got

the CEO of Chevron saying pretty

concerning things. You've got, you know,

Exxon on an investment call saying

things are not looking particularly

good.

You balance that with like I was I was

reading another um I was reading a

Substack a Substack account called

Market Vibes. Guy is kind of anonymous,

doesn't have his name, but somebody who

claims to have been trading for a long

time. And does the math and says

actually there's like plenty more oil

out there that really this is more of a

story about the fact that we need oil

less in the economy and all of this doom

and gloom porn is just really not

warranted. Um which I which concerns me

because then we could be doing this for

like months more. Like what if Trump is

on like weird Substack?

>> What if he's reading that?

>> From that guy versus like but you know

the the doom and gloom hasn't been true

thus far. I I was I was writing a report

just before we got on.

Um and I I started the report by saying,

you know, when I started Stratfor as

just a little bitty intern, one of the

first projects I worked on was a red

team of our Strait of Hormuz analysis.

And we concluded that this wouldn't

happen because of the potential impact

of higher oil prices. And that was 2010.

It was a much different time.

Uh but still like we're still here, but

things have have fundamentally changed.

Anyway, what I wanted to ask you was I

was having lunch with a friend

yesterday. And um this is somebody who's

not in geopolitics, somebody who's not

in markets. And I feel like he's our

ideal listener. And sometimes I think we

lose track of of that ideal listener. So

somebody who's interested, but not super

fluent. And like in the middle of lunch

he was like, "Yo, you do a lot of this

politics analysis and things like that.

Like why are markets at all-time highs

right now?

Like that doesn't make any sense to me.

Uh he doesn't even follow markets that

much. But he was like, "I've noticed

that markets are at all-time highs, but

I hear all this stuff about the Strait

of Hormuz and I hear

um things that are that are blocking.

And I'm trying to develop my own thing

about this. But I wanted to ask you like

how would you explain to somebody right

now the fact that markets are at

all-time highs? Because if you had gone

back to 2010 intern Jacob Shapiro at

Stratfor and said, 'Hey, the Strait of

Hormuz is going to be closed for 3

months.'

I would have to turn to Mad Max. I would

have thought we were in Mad Max: Fury

Road. And not only are we not in Mad

Max: Fury Road, we are in literal record

highs for the Nasdaq and the S&P 500 as

of where they closed on Friday. So, like

if something here is not quite adding

up, and I have a theory, but I wonder if

you have a theory.

>> Well, um I wrote a report last year in

the midst of that um

um

you know,

liberation day, right? So, liberation

day comes, President Trump imposes 35 to

40% tariff on every country in the

world.

And the report that I wrote was titled

what politics taketh,

politics giveth back.

And that was early May. Why that title?

What I was trying to explain to

investors, and I guess your friend, is

you have to be very careful

not to equate political and geopolitical

events with material reality.

So, there is no like,

you know, Moses did not come back from

the dead

and like drained the Strait of Hormuz

the way he did with the Red Sea.

Like that did not happen.

Ships can still go back and forth, and

they can both go back and forth in size

tomorrow.

And so, uh what happened during the uh

tariff

kind of hysteria is people thought that

the 45 40% tariffs were permanent.

You know, and that's why we sold off on

liberation day of April 2025.

And what I told my clients was hold on a

second, this isn't an actual

real event.

It can be modified because it's

political and geopolitical.

And I think that's what a lot of people

are uh uh like Jeff Currie will be

wrong. Rory will be wrong.

And Rory will be wrong because of how he

was right. So, he was bearish oil

because he had articulated in 2025 the

extraordinary oversupply.

And so he did he was bearish into the

largest increase in oil prices like in

human history.

And now he's bullish at the peak and it

and you know like he's going to be wrong

on both sides.

Um but but his barrel counting is

correct.

But what you know what if you watch

Rory's tweets though, he is dangerously

verving into the geopolitical analysis

territory now.

>> Mhm.

>> Like every one of Rory's tweets now is

about the deal.

And that's very dangerous because that's

not necessarily his skill set.

But he requires the current situation to

remain permanent in order for his

very bullish oil view to be articulated

correctly.

And this is the danger. Politics and

geopolitics can pivot 180°.

So we go from President Trump imposing

40% tariff on penguins on penguins. We

go from Peter Navarro saying to everyone

who wants to listen that the US is not

negotiating. Remember this?

Last year.

And then all of a sudden boom, done.

10 to 15% tariff deals on the rest of

the world. Market loves it. You know,

because the market reacts to us going

from 40 to 15 even though we went from

like 5 to 15 in truth.

Uh and then nothing happened. So the

question you're asking me right now,

Jacob, you could have asked in December

of last year. Like hey, wait a minute.

Did we not just increase our tariffs to

the highest level since 1930s? Why is

everyone okay with that?

And the answer is because the global

economy is more resilient, but the other

underlying answer that I'm emphasizing

is that too many people in the world

they are almost like children, right?

They hear President Trump say X and

they're like, "Oh [ __ ] it's X."

And it's like, "No, maybe it's X minus

100." Like, it's politics, it's

geopolitics, it's variable. And it's

variable in ways that like supply and

demand dynamics of real commodities,

the way that impact of interest rates,

the the way that the everything else is

not variable, you know, the way that

like the way that like if you're

schooled in macroeconomics, you're not

used to this, you know, someone just

dialing up and down with a lever

macroeconomic factors. But that's what

happens in Paul, and that's why I think

that you know, look, I think 85% of all

investors are cognitively And like when

I say investors, I mean like broad

swaths of humans who operate in the

epistemic community that is finance, I

think about 85% of them are just

cognitively

not ready for this [ __ ] And the reason

they're not ready for this [ __ ]

is because they're not used to dealing

with the gray, with the mushy. They

don't have a philosophy or anthropology

degree. But I honestly don't think you

need a STEM degree to be in finance

anymore. I mean, certainly I don't have

one, so I'm biased to say that. I have

three [ __ ] degrees in political

science, which makes me incredibly in

like I'm so overeducated in something

that's like moronic. You know what I

mean? Like

I'm clearly qualified to flip burgers,

but the the reality is that like I took

a philosophy class

where you sit down and you're like,

"Well, what is truth?

What is justice?"

You know, and you debate things like,

"Well, maybe murder is just. Maybe

walking around and just killing people

randomly is actually just." Those are

the debates you have in these philosophy

classes. What they do, like all of our

STEM colleagues obviously look at us and

laughed at us, like, "Bro, I'm learning

how to build a bridge using Newtonian

physics, and you're debating whether

murder is just."

Yeah, but like unfortunately, my friend,

Newtonian physics does not exist in

finance.

So, people who are very adept at using

Microsoft Excel, who are very adept at

mathematical modeling,

what they miss is that the world is not

that of levers that are like tightly

pulled and then you get a nice neat

model and then wow, oil is at 160 if

this happens. Yeah, but this what is

this? This is why I keep telling my

clients, what is the blockade of Hormuz

if ships go through?

If you get two VLCCs going through

Hormuz, you're extending the time that

the inventory will be helpful because

that's 4 million barrels, fine. It's not

a lot,

but it's a quarter of what we used to

get before. It's actually pretty

meaningful if two VLCCs go through.

You know, so that's why a lot of this

the world that's now happening, what I

would tell your friend, like the world

of finance and economics, which used to

be like Newtonian physics, it used to be

like like building a bridge, and whoever

was better at the elegance of

mathematics got the better forecast,

although that's not necessarily clear

because hundreds of PhDs working at

central banks miss every [ __ ]

recession ever. But but there was at

least at least an epistemic mystery that

we in finance somehow knew how to do

this cuz we could pivot an Excel table,

and then boom, we get the world of

Putins and Trumps. And what you have to

actually be comfortable with in order to

be in this industry, is you got to

understand

that there's this gray world, mushy

qualitative world,

you know, that you can only

unfortunately learn in a philosophy

class or anthropology class or all the

other degrees that, you know, most of us

kind of made fun of, including us in

political science cuz we in political

science steered heavily towards the

mathematical because we were insecure as

scholars. And so we basically pretended

to be economists and economists

pretended to be physicists.

You know, but now I'm steering into

academic debates that really

>> No one's going to No one's going to be

>> This is why This is why I didn't get a

poly sci degree because I took one class

in poly sci and it was basically a

statistics degree and I started doing I

started doing other things. Um

And not to, you know, yes, financial

analysts missing recessions. You know, I

think what, 95% of US analysts probably

missed the collapse of the Soviet Union,

so we can all throw shade at each other.

When you're too close to something, it's

hard to do that. But personal anecdote,

I was um There's a park right across

from the um

Well, it's not the port, but there's a

park where you can see the Mississippi

River where I take my daughter sometimes

to play. Uh and it's been really

interesting to watch the changing

composition of ships that are coming up

and down the Mississippi over the past

week or two. Like I saw a tanker

yesterday, like much bigger than I'm

used to seeing. Um and I I went and

looked it up and it was like previous

port of call, South Korea, flagged in

Singapore. Like very obviously coming

here um probably to get oil or other

refined products. Like Like watching

those supply chains move in real time.

And to your point with oil, like

Yeah, like where the market can get

really efficient about moving things

around, more efficient than maybe doom

and gloom uh folks talk about. But I

What I wanted to throw at you was it it

feels to me like there's a push and pull

in the global economy right now. And I

feel like on the one hand you have the

AI story

and it's it's driving up growth and it's

driving up markets and it's, you know,

it's it's giving people all the

glittering future that they want. And I

mean, if you look at the top performing

You probably What is the top performing

market this year in the world?

>> South Korea.

>> South Korea. All because of two

companies, Samsung, SK Hynix, because

they're part of the AI trade. TSMC, like

up over 100% year-on-year. My favorite

example of this, you know, Toto, the

bidet manufacturer, realized that some

of the ceramics they're using in their

products can be used in AI. So now

they're an AI story, too, and their

stock has exploded. Yeah, like just like

crazy stories like this. Even with

China, like I was just digging into

this. Like China, real estate sucks.

They're trying to boost consumption,

it's not working. You know what's

exploded in China? Demand for compute.

The Chinese are using AI and compute

power like crazy. They've increased

their compute demand by a thousand X

over the last 2 years. So, even the AI

economy in China is thriving even while

the rest of the economy is not thriving.

So, you have this story. And in the

United States, it's refracted not just

through the Magnificent Seven and all of

this spending. Like, you also if you go

on like FreightWaves, for example, or

follow folks who are in

the industrial economy or the shipping

economy, they will tell you, "This is

great. We're growing like gangbusters.

There's huge demand. Like, everything is

going wonderful."

You flip that over though, and even

before the war starts and even before

the tariffs, you've got this K-shaped

economy. So, you've got the top 10% of

US households are accounting for nearly

half of consumer spending. Um you've got

um real wages are not keeping pace with

inflation. And that's been true for over

a year and that's starting to accelerate

also. The personal savings rate has

collapsed now to its lowest since July

2007 and it's almost halved since

President Trump took office. So, that's

people spending savings and yoloing it

into stuff. And the yolo bill is up.

It's time to pay up just as you have

CPI increasing because of energy and

because the tariffs are starting to bite

a little bit. Even if oil stays where it

is today, we're recording May 30th,

Brent crude futures around hovering

around 90 a barrel. And okay, Jacob

intern from three, you know, three

months closure of the Strait of Hormuz,

"Oh my god, I thought we'd be at 150,

200." All you need oil at 90 a barrel to

have a an 18% year-on-year year-on-year

increase in energy for the CPI.

And to have real wages that are not

keeping pace with inflation. So, I think

I've even been guilty of thinking about

the doom and gloom porn and thinking

about oh, I once I see 200 Brent crude,

I'll know things are really bad. I'm

beginning to think that it doesn't it

doesn't matter. You don't need 200 Brent

crude. You don't need 150 Brent crude.

If it's 80 Brent crude and and real

wages are not keeping play keeping pace

with inflation and all this stuff is

happening, like we're already there.

And and the and the way I would close it

is it's it's this push and pull cuz the

market is taking the AI growth story. So

when I was the the answer that I gave

off the cuff to my friend at lunch and

which I'm now trying to put into a a

report is

it's this push and pull between the AI

growth story and then the K-shaped

economy and protectionism and

geopolitics and everything else. And

clearly, the clear winner so far this

year has been AI. Like you're the

Godfather of fading geopolitical risk.

Should have faded geopolitical risk.

Like things are great. They're great

across the world right now.

>> I've never turned bearish on equities

except for

one month over the last six that we've

been.

>> But the thing I would just raise is like

at what point does the pull start to go

>> let me yeah, look

>> Yeah, yeah. Just the last the last point

and then then cook. Because if it's the

top 10% that is driving consumption and

if it's the big corporates with lots of

money on their balance sheet that are

building things out, like confidence

doesn't go slowly. It doesn't drip.

Confidence goes like that.

And when it goes from them,

like you would think and I don't want to

I don't want to go into oh, I we were

wrong about doom and gloom porn about

oil. So let's go doom and gloom porn

about recession and the top 10%. I don't

really want to go there because the

right bet would have been to bet on AI.

But I think that's the push and pull and

the AI story is winning and the growth

story is winning so far despite the

tariffs and despite the war. So cook.

>> Yeah, so first of all,

you have to understand like the reason

the doom and gloom was wrong is because

the market

the market has to assess all

probabilities, not the ones that you are

most passionate about.

So if you think the Hormuz Strait is

going to be closed forever, that's cool

story, bro, but like the rest of the us

don't.

And that's where the Twitter doomers

have just had their [ __ ] faces

melted.

Cuz cuz you know, they thought Iran

would never acquiesce to a deal. Right

now, they acquiesce to a deal, by the

way. They were the ones that

they're the ones that have actually

cried uncle even before the US.

I mean, like why are why do we have this

deal on the table to extend the

ceasefire, let some more ships through?

Clearly, all the all the things we've

articulated that, you know, I've been

banging the drum on like China pressure,

they don't want to piss off the rest of

the world, is working.

And so,

that's the first answer to your friend.

The market

uh doesn't just operate on the reality

that it's in. It has to take into

account all the other scenarios.

And basically, the market has been in

violent agreement with me.

And my view has been sanguine throughout

all of this. Like, don't worry about it.

Like, the two sides will eventually

figure it out.

Now, and that makes me very

uncomfortable

because obviously, there's like some 20

30% probability it all goes sideways.

>> Yeah.

>> But like, look, $200 oil,

no, like Samsung's not going up in $200

oil. Right? Like, that is

everything goes down. And the market has

said, "Look, that is a risk out there.

Let's bid up energy and and and, you

know, services,

but that's not a risk that I'm going to

bet on as the most likely outcome." And

so, this is what it's very important to

understand. When something is political

or geopolitical, it's bound by the

reality of the doom and gloom.

Why why did President Trump go from 40%

tariffs to 10% tariffs in 2025? Why?

Because 40% tariffs are really onerous

and would have caused a complete global

collapse. Because bond yields in the US

went up despite the revenue associated

with 40% because you're not going to

collect any revenue at 40% because no

one's going to import [ __ ] at 40%.

Right? He needed to find a comfortable

level of tariffs that's good for the

market, for the economy, for the fiscal

picture, and he found it.

Similarly now, like market is not going

to lose its cool because it saw what

happened in 2025, it learned. Market is

a always learning mechanism, and so it's

it's progressed.

It now knows not to take these things

for face value, that they are

negotiating positions, that they were

going to we're going to land the plane

somewhere. Is there a risk in that?

Sure, there is a risk. You know what's a

bigger risk? You sitting on the

sidelines and posting [ __ ] on Twitter

about how Marco doesn't know how many

VLCCs have gone through. You know, so

like that's

that's the reality of the market. It's

it's constantly pricing in different

scenarios, and it's seen President Trump

operate in the past.

And so it knows not to take as given a

certain level of dangerous policies.

Now, your question is like, okay, cool,

but but

even this mushy middle that Marco you've

been talking about, you know, this idea

that the Hormuz Strait is a flexible

membrane.

Even that mushy middle actually has

pernicious outcomes.

And you're right.

Uh now,

what's interesting is that when you the

way you kind of like position the view

is that 10% of households are

responsible for like majority of

consumption in America.

>> Half. Half of consumers.

>> All right. So, in that world, we

actually don't give a [ __ ]

Everything is fine.

If the plebs don't want to buy anything,

that's fine.

The elites will.

But if you strip out auto purchases,

if you just strip out auto purchases,

and I think autos are like 17% of all

consumption, the second after house

after housing,

if you take out the auto purchases,

I don't know if you know this,

>> I don't.

>> but it's all the same.

Every single income level contributes

equally.

>> Hm.

>> Yeah, kind of weird, right?

Like

I'll send you a chart of that.

>> So so the So the top 10% are are just

buying cars?

>> That That is where

Yeah, basically. Yes.

Yeah. Well, it doesn't mean that they're

just buying cars. It They mean It means

that only they are buying new cars.

And that's so if you strip out auto

purchases,

the chart of I I have I I split

Americans into three different income

levels by income.

Actually, a client of mine uh schooled

me to this. This is why it's great to

talk to clients and have really smart

clients. So I can't take I can't take uh

credit for this chart, but a really

sophisticated Basically, what I think is

the most sophisticated hedge fund in the

world, my client uh one of my clients

obviously My clients, but this one I

love these guys. These guys are animals.

They're so good. And they showed me

this. Now, that's more That's actually

more bearish than your view because it's

just It's just patricians, you know,

like who cares? Like who cares about the

plebs?

But the plebs actually do matter, you

know? They kind of do matter because

if you take out the cars, they're just

as important. And that's where

This is the funny thing. And this is

Look,

Baron Rothschild

said what? You buy on the sound of

cannons. So [ __ ] yeah, I fade

geopolitical risks.

Because the smartest investors before me

have done that. My entire book is

basically just

you know, a a a a a modern take on what

Baron Rothschild did in the [ __ ] 18th

century, okay? And I use some

quantitative mumbo jumbo to prove that

the way to get alpha is to fade

geopolitical risk. But the fact is what

he said was you buy on the sound of

cannons, but don't forget the second

part

of that

phrase.

And you sell

right? On peace, on the sound of

trumpets.

Like you want to sell, so so here's the

thing Jacob that I do kind of I'm

starting to worry about.

All the doomers were wrong. I mean so

wrong. They're they're

I mean if if you're a commodity

strategist like Jeff Currie or our our

our buddy Rory like it no one's going to

hold you for like your S&P 500 view.

What whatever, it doesn't matter. But if

you if your job is to predict the S&P

500, the stock market and you've been

bearish during the last 3 months, like

you're updating your [ __ ] resume.

>> Mhm.

>> Okay. So that's the first thing. But now

when the war ends, there's going to be

this real real pressure for everyone to

turn mega bullish because of the AI

story, which is going to stay where it

is. But underneath this, we are now in a

world where that inflation is creeping

up.

It's going to change monetary policy.

So over the next 6 to 12 months, we

could have quite more completely

different regime

than we live in because what's what is

the Central Bank of the United States,

the Fed going to do?

If S&P 500 in 6 months is at 8,000

and CPI is at 4 and 1/2, 4.2%. Like

you're so far away from your mandate.

You know, like so far. And stocks are

up. Like Kevin Warsh, our new Fed chair,

is not going to sit there and be like,

well, I promised Trump. I mean after the

midterms even Trump might tell him like

the old brother, like inflation's hot.

Like let's go. Like we got to we got to

go the other way, right? I mean I just

got my ass kicked in the midterms. So I

completely agree with you. What's funny

about this is it's kind of what the

Rothschilds figured out in the 18th

century. You want to buy when everyone

is out there tweeting about how we're

going to like get to $200 oil. It

doesn't happen. But when the war ends,

the problem is you're dealing with some

of the consequences of that war.

And I think we are going to be there. I

think you're completely right. I think

that households in the US

are going to be under significant strain

over the next 6 to 8 to 12 months. But

the interesting thing is that everyone's

going to tell you who cares, the AI

story is great.

And that's where like I think you have

to kind of like look at the two and

weight them appropriately. You know,

CAPEX has been leading the economy.

It's been great.

But what's the second derivative of

of data center build out?

And this is what a lot of people

mistake. They They always think that

absolute numbers matter in finance in

the markets.

One of the things I learned at BCA

Research, and I mean this is a firm

that's existed for almost 80 [ __ ]

years.

You know, and so one of the things that

I learned is how second derivative is so

important. It's the rate at which change

occurs.

>> Mhm.

>> GDP GDP growth,

right? The GDP growth, the figure we all

obsess about in finance, is basically a

rate of change.

But what leads a rate of change is the

change in the rate of change.

And this is by the way, this is same in

your life. You want to lose weight?

You know, you're not going to stop

drinking. That would be unsustainable.

If you like to have a glass of wine

every day,

and then someone comes to you and says,

"Stop drinking." Like sure, you can do

that, but that's I think not

sustainable. You just want to get your

rate at which the change occurs to be

positive. So instead of having seven

glasses of wine a week, why don't you

start with having five?

Hey, that's positive. You know, that

like when I figured out what second

derivative means, I became healthier, I

became a better market strategist. The

second derivative is like the truth.

It's It's I I want to write a whole

philosophy book on the second

derivative.

It It is the most important mathematical

concept. Of course, when I was in high

school math, I was like, "What is this

[ __ ] This is so stupid." But it's

actually incredible. So here's why I say

this to you.

>> Mhm.

>> This is like when you and I had this

debate then you're like, "Bro,

deficit is 6%. Of course there's fiscal

spending." No, there isn't, Jacob

Shapiro, my dear cousin.

What is the second derivative of that

fiscal spending?

It's potentially negative because there

the rate of change

is either zero, it's either flat, or it

might be even negative. If we go if we

go from six to 5.8, oh my god, that's

austerity. Modest austerity, but it's

modest. And you're like, "Well, no, but

it's almost six. What are you talking

about?" So, that's the first example of

this.

But the same thing is with capex. So,

right now if you go to anyone in the

world and you tell them the plebs are

going to struggle to buy anything over

the next 12 months, they're going to

laugh at you.

And they're going to tell you, "Jacob

Shapiro, have you seen the capex

intentions of hyperscalers for 2027?

They are

$850 billion,

you fool."

And what you should say to them, "Yes,

but they were 800 billion in 2026. So,

the rate of change is decelerating.

It's because in 2024,

it was 400 billion."

So, we went from 400 billion in '24,

sorry,

in '25, to 800 billion in '26.

Now that capex spending for AI data

centers is about eight 800 900 billion.

So, the growth engine of the US economy

in absolute terms is enormous.

But in that rate of change, you know,

like

it's not that impressive. Whereas what

you're pointing out, very correctly,

we're in violent agreement on your

like increasing

doom, basically, and gloom.

The part of the economy you're concerned

about is actually 70% of our GDP, by the

way. Like don't tell that to the bulls.

But yeah, AI has been extraordinary, but

70% of this economy

not in terms of growth, but just of like

what makes America, it's people buying

homes, cars, Twinkie bars,

Nike shoes, and all that stuff.

>> Surgeries, like hospital services, and

>> All that Yeah, yeah, yeah. And that is

what you're talking about potentially

slowing down further. Now, that's been

neutral. It's been fine. You know, it

hasn't detracted from the capex story,

which is why capex story has been so

powerful. But if that 70% turns even a

little, because of its scale,

mathematically speaking, it doesn't have

to collapse.

You don't have to make a case, Jacob, in

your report

that like

households are going to starve to death.

You can just say, "Hey, they're going to

curtail some spending." And that's

enough because that is an aircraft

carrier, whereas the AI capex story is

like a Miami Vice yacht with some like

models on it. You know what I mean? It's

like it's awesome. We're all like

drinking champagne. We're loving it. You

know, but the reality is there's this

giant supertanker of household

consumption

that's been kind of chugging along like

pretty decently. If that even turns

slightly, the wake of that is just

enormous, right? And so I'm absolutely

in agreement with you. Remember, at the

beginning of this crisis,

the two most likely scenarios were this

is over quickly,

oil prices go back down.

Like I remember in early days of this

crisis, given that I had a sanguine

view, I was looking for a chance to

short oil.

It never It never came It never came.

It never came, so I didn't.

But the other one

was that we go to $200 oil, the roar

view, and then my view was like, "And

then you expect it to go to $20."

Because it causes a recession. So the

two outcomes were both disinflationary.

We had nothing but disinflationary

outcomes.

But, because this

world that we're in has been this

mushiness,

you know, we're like, "Eh, Rory's wrong,

Jeff Curry's wrong, you know, like

shorting oil's wrong, but it's kind of

like, meh, we can just live with it, you

know?"

And we're all like, "Sick." And it's

like, "No, but it's not sick." Because

that mushy also does have this corrosive

impact on household ability to consume

is just not something that's going to be

evident in like May of 2026. Although, I

do think 2 weeks ago we had a couple of

trading days

where the market did fall

because of the inflationary concerns,

right?

And so

>> Well, yeah, and and to your point, like

the mushiness that was in there also is

a result of you had lower oil prices

going into this. So, you had lots of,

you know, spare capacity that has been

used to keep oil prices down. And then

also

which will be rebuilt, so that's going

to like keep the price maybe I don't

know, I don't want to predict prices,

but it'll keep things elevated. But,

then also like when I when I was looking

at this, like that personal savings rate

having from the time that President

Trump was coming to office,

that that was disturbing cuz that's

folks spending what they have saved up,

the stimulus checks, everything that was

all the good times.

>> Yeah, please talk about it.

>> Please.

So, this is why like have your kids go

into philosophy.

Have your kids go into anthropology,

sociology, psychology.

I swear to god, if you're listening to

this podcast and you're like, "I want my

kids to learn math."

Why?

Claude will [ __ ] do math for you.

>> Well, and I mean also also funnily

enough, when you get to the really upper

echelons of philosophy, like math and

philosophy are actually sort of the same

thing.

>> They they they come together. Yes, they

fuse. No, but but also like look, I do

regret not knowing what the second

derivative is until I was 31 years old,

for example, right?

But,

it is what it is. Like a lot of these

mathematical concepts, the way we teach

kids

is stupid. We should be teaching them

through stories, actually. And I think

And by the way, a lot of other countries

adopt a more verbal approach to teaching

children mathematics.

I lived in the province of Quebec, which

has actually very, very good math

scores globally. And you know, my

daughter learned all her math verbally,

which was a real struggle for her cuz

she was doing it in a different

language, right? So, but But that was

very, very useful. Why am I Why am I

starting with this? Because I want to

double click on this issue you just

brought up.

Which was Wait, I just swerved. What was

it?

>> Personal savings rate having over the

course of Trump's presidency.

>> Yes, thank you. Sorry.

Uh way too much coffee. I should dial

back. All right.

Listen. Listen.

In 2023,

everyone who's a Newtonian investor, who

thinks that investing is like building a

bridge,

just basically took the savings rate in

2023

and said it's going to go up.

Because from 2010 to 2020, the savings

rate of Americans was X.

And so, we're going to go back to that.

And the reason that I never turned

bullish bearish, I never got negative on

the US economy since

2022, basically. I've been yoloing.

>> Mhm.

>> Is because I said, why do you think

American human beings are going to save

the way they did in the worst decade

since the Great Depression?

So, 2010 to 2020 was an era of secular

stagnation, of austerity,

jobless recovery. Remember all the stuff

Republicans said about Obama years?

>> Mhm.

>> Jobless, right? Like it's a recovery,

but jobs, it's terrible.

And the reason it was terrible is

because the savings rate was high.

Because Americans didn't dip into

savings and the government, which should

have offset it,

became enamored with austerity. We all

had austerity fetish at the time. Like,

"Oh, we must cut spending."

You know, even though interest rates

were low, we should have jacked up

spending.

As many smart

economists like Richard Koo

or Greek finance minister Yanis

Varoufakis, you know, they were right.

Mathematically, they were right. If

interest rates are low, that's God

telling you, "Spend some [ __ ] money."

Okay? And we didn't do that. For all

sorts of political reasons, but the

savings rate of Americans was very high.

But my argument was it was

psychologically high for psychological

reasons.

You almost like lost your job. You

almost lost your home. You saw your

friends and family like, you know,

default or have to be evicted. Like,

2008-2009 was terrible. And then the

2010s were just people holding on. And

so then COVID happens, a pandemic during

which we were all supposed to die. We

don't die.

And in fact, we get showered with cash.

Kiss cash.

You know?

And so what happens? What happens? Your

psychology shifts. Holy [ __ ] I'm alive.

Holy [ __ ] that wasn't that bad.

Holy [ __ ] I got all this cash. YOLO.

Also, homes are expensive. I can't save

for that. So, what's the [ __ ] point?

Let's open a Robinhood account

and learn what a butterfly OPTION IS.

LET'S GO, YOU KNOW? SO, THAT'S WHAT

HAPPENED. WE entered into a different

mindset that you cannot [ __ ] analyze

with a Microsoft Excel or a STEM degree.

This is psychology. It's sociology. And

so savings rate has been coming down,

which is why every bear who said that

excess saving was being depleted,

That was a fake

analysis. Excess of what? Well, excess

of what I think is the proper savings

rate. Well, what do you think is the

proper savings rate? What happened last

decade? Brother, last decade, you might

as well go into your Excel, highlight

everything from 2010 to 2020, and delete

those columns. They're taking you into a

wrong direction mentally for where the

American households are.

And so, what what we all needed was this

psychological adjustment that we're in a

YOLO world where where where young men

are buying GameStop because

like of vibes. GameStop's now like uh

like can you like ah

this corporation literally still exists

purely because of the degenerates on

Reddit. It's like

>> Yeah, or or or like like I had a I had a

cut like a I'm a cousin by marriage who

like

let's just say like not fooling around

in markets very much, who was

recommending I have two stories here.

First of all, he was recommending

Dogecoin to me cuz he'd made a couple

grand on Dogecoin, and had I looked into

that. I also remember

um I was checking out Where was I? I I

forget. It was some like it was a it was

a grocery store or something like that,

and I was checking out, and this guy was

like he had dreads, he smelled like

marijuana, which all good. Like I'm all

for marijuana. But anyway, I'm just

trying to give you a taste of the guy

that

>> Money Balis? What?

>> Uh no, like even like like made Balis

look straight edge by comparison. I

mean, this guy was definitely on it. And

um and you know, as he was checking me

out of of whatever I was buying, he was

like, "Yo, man, what do you do?" And I

told him. He was like, "Oh, man,

I just bought a bunch of Ali Baba stock

cuz I think it's a really good idea.

What do you think of that?" And I was

like, "Okay. Okay, friendly Rastafarian.

Thanks for telling me to buy Alibaba."

>> Dude, uh I had you know, my hairdresser

was buying like Rheinmetall.

>> Yeah. Well, that's

>> So,

>> That's a good one.

>> That's the type of the guy the guy

[ __ ] crushed it.

No, no, no. Like Jason knows what he's

doing, you know? Like by the way, if

you're in Santa Monica, you need a like

really good uh haircut, Jason in Looks

Lab

on Montana.

Uh yes, I cut my hair in Montana, which

just like if you know what that means,

you lost a lot of respect for me. Uh

all right, where was I? Okay, so

the bears get their faces melted because

they don't understand that the sociology

of finance has shifted

from 22 to 26. But now but now as you

articulated in intro

how much lower do you expect Americans

to take their savings?

Right, especially because right now

everyone

>> lower can they take their savings? Like

much lower and we're start I mean, not

that past performance means future or

whatever, but like, you know, the last

time we were this low was literally the

month before the 2008 financial crisis.

>> Well, you can you can take it People

were starting to like spend too much and

then you had the inevitable counter

reaction. So, you would think that

something is waiting in the wings if

we're going that direction.

>> Well, and one of the reasons for that is

that I do think I worry about the

psychology, right? So, again $80 to $100

oil

not a big deal, right?

It's something that

that the households can deal with. But,

it's slowly going to erode their

purchasing power, slowly in a like

almost a corrosive the way that rust

corrodes metal. It's not like, "Holy

[ __ ] sell everything." But, it's just

slowly. And then on top of that, every

single human being on the planet right

now is being told, "You're not going to

have a job

in 12 to 18 months." Everyone's being

told that by by you know, like these AI

punters.

And so, yeah, there's all sorts of

reasons why

I think a lot of

consumers might want to start

psychologically, sociologically, like

kind of pulling back on their

consumption and and that savings rate go

back up. And so, that would be extremely

pernicious because for them to continue

to to to spend at the same level, they

are going to have to drive their savings

rate lower. Which by the way, it can

happen. It absolutely can.

I mean, technically savings rate could

go negative. You could just start

selling your assets.

Right? I mean

>> this this also though goes into the

point that I thought in some ways was

the most important point that the CEO

from Chevron made because he was

actually fairly like I know he said that

thing about weeks to shortages, but that

was kind of put in there by the

Bloomberg reporter. He was very

straight-laced and he was giving a very

sophisticated answer. But the one thing

that he said that really stuck with me

well, there were two things. Number one,

he was like refineries are at maximum

capacity. So there's too much tightness

in the system to push this any further.

Also, it's about to be summertime.

People are about to go on vacation. This

is when demand increases because people

are going to go to the beach or they're

going to take a flight to Europe or

they're going to do this, that, or the

other thing and that might not be there.

And if that is there, it's going to be

like significantly more expensive. So if

you have the saving savings rate already

low, it's been a crazy year. People like

my friend are like, what is going on

with the straight-up FOMO and the

terrors of this, that, or the other

thing. Man, I want to go to the beach.

What if you can't go to the beach? Or

what if the the bill on going to the

beach is 3x what you were expecting? Are

you still going to go? Are you going to

stay home? So are you either you're

pissed off at home cuz you've cut back

your spending or you're going to do it

anyway and the savings rate to your

point is going to go down even lower.

Like going into summer in this kind of

in this kind of psychology doesn't feel

like a very good place to be. I don't

know.

>> Well, I mean, I just think that yeah,

that's that's going to be

when you put everything together, I

think that

you have

a lot of things that brought inflation

down flatlining.

You have a lot of like and one of them

going up.

So one of the things that brought

inflation down over the last 2 years was

cheap energy.

That's going back up, but you can argue

well, that's a smaller component of the

CPI basket. Like that that's less

relevant than it used to be. You know,

like as as many people have pointed out.

That's fine, but housing and rent

has also been falling for a long time.

I'm not sure it can fall further.

Now, some of you know, some of really

smart clients I talked to, they say,

"Yeah, it can because immigration has

been so soft in the US. It can still

provide a disinflationary impulse."

I don't know. I think the jury's out and

I think you're betting on a lot. Like

you're betting like on more supply to

come online.

Can demand really fall further? And the

problem with expecting supply of housing

to go up is that AI CAPEX is crowding

out all other spending and all other

supply.

So, I I just when you break down the

components that make up the CPI

you start struggling to see how, you

know, you you got to really

you got to and this is for those of you

who are listening to this, this is

important. Not so much because inflation

impacts the households we've been

talking about and their mentality and

their confidence, but it's also because

it's going to determine what the Central

Bank is going to do.

And and look, I'm I'm the most

methodologically biased human being on

the planet. And what I mean by that is I

see geopolitics and politics everywhere.

Like the kid from Sixth Sense who sees

dead people everywhere. Like I see

politics. It's everywhere. And so

obviously I believe the Central Bank of

the United States is massively

politicized.

But but, you know, so Kevin Warsh

obviously was appointed to cut. God

bless him.

The problem is that I do think that by

the end of this year even Donald Trump

may be on board with some hikes.

Because all of this is like going to be

a crescendo after the midterms. You

know, like the midterms Republicans are

going to get their asses handed to them.

It's like too late now. It's going to be

because

>> unless they gerrymander

>> I don't even care. I think

gerrymandering honestly is like a side

and they know they're going to get like

completely like wiped.

>> it's definitely a reason behind the

urgency. But I mean they're they're

they're trying to like cut into the

Democratic wave that is coming again.

>> They're going to lose It's going to be

so bad they're going to lose districts

they gerrymandered. That's what's going

to be Like that's going to be a headline

in November. Like Like put a pin right

here.

Like let's make a TikTok [ __ ] video

out of this.

In November

there's going to be a couple of

districts that's like, "Oh crap,

Democrats carried a Republican

like engineered district." That's how

bad it's going to be. And the number one

reason that that that that will have

happened is because of this

affordability thing.

Because of this sticky inflation that

you're basically describing. And then at

that point even Donald J. Trump might be

in the

let's tighten a little bit camp. Like

let's fight this through monetary

policy. And then I do think at that

point, you know, it's going to be game

over. Now here's the thing, markets are

forward-looking.

You know, so my question is when does

the market like sense this?

>> Mhm.

>> And

And that's where I go back to the Baron

de Rothschild quote, which is, you know,

buy on the sound of cannons, but sell on

the sound of trumpets.

>> Which is a lovely way to say that you

want the war to continue. As long as the

war is going on, as long as the cannons

are firing, we'll be good, you know.

>> Well, I don't I don't know if you do,

but like uh I just think it's such a

great It's such a great quote and

basically I've dedicated my whole career

to just articulating that quote.

Um the first part of the quote. The

first part of the quote. What's

interesting to me is that it's becoming

harder and harder.

When was the moment to sell on the sound

of cannons in this conflict?

The market has figured it out. Over the

last 5 years I do think that

my whole book, which is just fade this

fade this

um I think it's like kind of the

the norm now. Like there's not even a

moment to fade, you know?

>> Yeah. No, I mean, it's it's really and

you know, this is not over yet. So,

we're in the middle of this. We might

look back on this episode three or six

months from now and say very different

things. But, I'm thinking back to our

first episodes after the war started and

how you and I were both on team this is

going to be short

>> Yeah.

>> because of our Strait of Hormuz training

and I'm sitting here on May 30th and it

wasn't short and oil didn't go to 200

and things seem to be fine. So, and

maybe some of that is just like oil is

less important. Maybe that is to your

point markets have figured out

geopolitics a little bit. It begs to me

or raises the question to me like, what

has to happen geopolitically for

something to actually meaningfully do

things to markets or is it really just

something

>> This was always it. That's longer term.

>> By the way, my example of what would

happen

like when people would ask me, well, why

aren't you worried about Russia-Ukraine

thing? I would always say like, look,

the thing that that could is like

Hormuz. You know, this is the one

example I had.

But, but one thing to understand is that

reflexivity of markets is so important.

What does that word mean?

It means that policymakers adjust

behavior based on the material

constraints that they operate in.

So, both the IRGC and Donald Trump don't

want a calamitous recession. That was my

take that got a lot of heat from the

Twitterati.

You know, because they were all like,

no, no, no, Iran wants wants all the

smoke.

And I'm like, well, that's [ __ ] I

don't think they do.

You know, so basically what's happened

is that both Iran and the US have

calibrated both their kinetic activity

and the flow of shipping through Hormuz

so as to push off the moment of doom.

And so, if you are a Newtonian investor

steeped in Microsoft Excel operations

you don't understand this. The moving

The target is moving. You you keep

trying to use static variables in your

modeling such as flow of crude,

war, premium, and you can't find it's a

moving target.

This is why having a philosophy degree

is better than having an engineering

degree or or going for finance because

it allows you to understand that there

is no truth as Michel Foucault [ __ ]

argued. There is no truth. It's a moving

target and that's and and the people in

charge are calibrating their behavior so

as to ensure that Rory Johnston is never

[ __ ] right.

Let me say that again. The people in

charge

are actively reading Rory Johnston and

ensuring that he's going to be wrong the

entire time. They're colluding against

our cousin. The IRGC and Donald Trump

are colluding against Rory.

Every time he says oil will be 150

because of this, they adjust the this.

The this. There is no static independent

variable. The independent if if if

geopolitics or politics is your

independent variable, it's in a

reflexive relationship with the

dependent variable.

So the higher the oil price goes, the

more Trump starts sweet talking peace

deal, the more IRGC starts sending out

tweets about 30 ships have gone through

Hormuz. And then all these people who

are bearish on the economy and bullish

on oil price ARE LIKE, "THAT'S [ __ ]

THERE is no deal." And and it's like,

"Yeah, but the people you think are

static, people you have deemed with zero

geopolitical experience or analytical

prowess, by the way,

the people you have determined are dead

set at killing each other

are actually dead set at proving you

wrong. And so that is something that

people got to take from this. Be very

careful in putting in geopolitical

truths into your model as static

independent variables to determine a

dependent one because the dependent

variable, in this case, the price of

crude,

is

in its movements adjusting the

independent variables. And that is what

George Soros, whether you like him or

hate him, George Soros wrote the the

greatest book in finance called The

Alchemy of Finance.

And that's this concept of reflexivity

of the markets. You know, that only

truly like

like

level 74 wizard necromancers of finance

understand. That's the level they

understand. They don't trade based on

the objective reality you can put in an

Excel table. They trade off of the

second order effects. You know, that's

that's that second-order thinking is so

difficult to achieve.

But it's proven in this case to be the

case. There's a reflexive relationship

between the price of crude and the

behavior of the two actors you got to

predict, IRGC and Dollar Trump.

And they're actively trying to make

everyone look wrong.

And probably actively betting. Hashtag,

you know, like

>> Oh, they're definitely actively betting.

You can see that based on the number of

trades that Trump has done. We don't

have to go down that corruption rabbit

hole. By the way, I mean, maybe most

listeners will miss this. You often

describe yourself as a nihilist, I

think, to get away from folks who are