# The Global Economic Fallout: Week 5 Iran War | EYES ON GEOPOLITICS

An episode of [The Team House](https://invisiblenetwork.ai/podcast/1492797340), 1 Apr 2026, 55 min.

Audio: https://dts.podtrac.com/redirect.mp3/pscrb.fm/rss/p/clrtpod.com/m/api.spreaker.com/download/episode/71029790/damage_to_the_global_economy.mp3

In this episode, Nick Trickett, an energy market expert, discusses the current geopolitical and economic impacts of the ongoing energy crisis, including oil, natural gas, and renewable energy trends, and their implications for global markets and US policy. Find Nick here: https://sictransitiongloria.substack.com/ https://uk.linkedin.com/in/nicholas-trickett-54b41634 https://x.com/ntrickett16 Support the show on Patreon:⬇️ https://www.patreon.com/TheTeamHouse Subscribe to our new newsletter!!!! https://teamhousepodcast.kit.com/join Find Jon Hackett here:⬇️ Jon's books: https://www.amazon.com/stores/author/B0C5L659N5?ccs_id=e11a2062-f8d3-498e-bfd7-7d2f3869caf6 Linkedin: https://www.linkedin.com/in/thejonathanhackett Twitter: https://x.com/jonathanhackett Check out Mick's new podcast here:⬇️ Apple Podcasts: https://podcasts.apple.com/at/podcast/pub-and-porch-applied-stoicism/id1836955475 Spotify: https://open.spotify.com/show/1k3QPmkAMwnGJxMLDwUSSd?si=n6piIu8XRcag1Z0K43A3bQ Youtube: https://www.youtube.com/@UCd0Hq6QFk8CoTu5j-VU0Ong Find Mick Mulroy here: Fogbow ⬇️ https://fogbow.com/ Lobo Institute ⬇️ https://www.loboinstitute.org/ Twitter ⬇️ https://x.com/mickmulroy?s=21&t=-Ze3F_Ix2vlJ18KFvORTCA LinkedIn ⬇️ https://www.linkedin.com/in/michael-patrick-mulroy-31198b52/ Bluesky ⬇️ https://bsky.app/profile/mickmulroy.bsky.social Mick’s publications ⬇️ https://www.loboinstitute.org/publications/publications-of-michael-mick-patrick-mulroy/ Find Marc P here: https://x.com/Mpolymer Find Andy Milburn here: Twitter ⬇️ https://twitter.com/i/flow/login?redirect_after_login=%2Fandymilburn8 LinkedIn ⬇️ https://www.linkedin.com/in/andrewmilburn2023 Substack ⬇️ https://amilburn.substack.com/ Andy’s book ⬇️ https://www.amazon.com/When-Tempest-Gathers-Mogadishu-Operations Bluesky ⬇️ https://bsky.app/profile/andy-milburn.bsky.social Find Jason Lyons here: LinkedIn ⬇️ https://www.linkedin.com/in/jason-lyons-666873316?u Bluesky ⬇️ https://bsky.app/profile/bgsilverback73.bsky.social "Karl Casey @ White Bat Audio" 00:00 Start 01:24 Current State of the S&P 500 and Market Resilience 02:51 Oil Supply Chain Vulnerabilities and Global Impact 09:36 Shifts in Energy Demand and the Rise of EVs 14:55 Maritime Security and Insurance Implications 17:21 Peak Oil Demand vs. Peak Oil Supply 20:48 Impact on the U.S. Economy and Energy Prices 25:16 Potential Effects of Iran's Economic Reopening 28:41 Long-term Economic Damage and Energy Security 31:12 Strategic Energy Politics and China's Position 34:02 Strategic Partnerships and Global Dynamics 36:10 Impact of Economic Policies on Bond Markets 38:28 The State of the Iranian Economy and Global Oil Supply 39:56 Tracking Economic Indicators and Commodity Markets 42:08 The Future of Russia's Economy and Military Production 48:14 Navigating Economic Uncertainty and Investment Strategies Become a supporter of this podcast: https://www.spreaker.com/podcast/the-team-house--5960890/support.

## Transcript

[0:00] Speaker 1: Everybody, Welcome to another episode of Eyes on Geopolitics. I'm
[0:03] Speaker 1: Dimiticon Tacos. I'm here with Jonathan Hackett, Jack Murphy and
[0:06] Speaker 1: Nick Tricket are very special guest. He's the an associate
[0:10] Speaker 1: director at S and P Global Energy.
[0:13] Speaker 2: Uh.
[0:13] Speaker 1: He knows his stuff basically when it comes to this,
[0:15] Speaker 1: and we always talk. All of our shows, we talk
[0:17] Speaker 1: about you know, the bullets and the bombs, and like
[0:21] Speaker 1: John said before we started, we gotta start talking about
[0:23] Speaker 1: the beans too, because it all, you know, you can't
[0:26] Speaker 1: talk about one without talking about the other. So I
[0:29] Speaker 1: figured let's have a smart I come on and like
[0:31] Speaker 1: teach then teach the troglodytes what you know, what's going on.
[0:35] Speaker 1: Besides it's me and Jack are the trogolites. John's actually
[0:38] Speaker 1: pretty pretty intelligent, so I'll keep him out of this.
[0:43] Speaker 1: That's true too. Yeah, he was a marine for a
[0:45] Speaker 1: long time, so don't hold that against him.
[0:49] Speaker 2: Yeah, Nick, thanks for coming on. Really appreciate it.
[0:52] Speaker 3: Thank you for having me.
[0:53] Speaker 1: Of course, my first thing as I was like, we've
[0:56] Speaker 1: seen you know, the s m P for one, like,
[0:59] Speaker 1: because there's so many fast actors that we you know,
[1:00] Speaker 1: we try and judge like what's going on in the economy.
[1:03] Speaker 1: The S and P really hasn't taken a huge hit.
[1:06] Speaker 1: I think it's down like six percent ish since the
[1:09] Speaker 1: war started, which is like it's at an all time high,
[1:11] Speaker 1: so you know, the six percent can.
[1:13] Speaker 2: Be gained quickly.
[1:14] Speaker 1: Back, I want to give us kind of a lay
[1:17] Speaker 1: of a land of what we should kind of expect
[1:21] Speaker 1: in the next coming few weeks.
[1:23] Speaker 3: Oh god, that's tough.
[1:24] Speaker 2: Okay, so it's pretty broad.
[1:26] Speaker 3: Sorry, no, no, that's fine.
[1:27] Speaker 4: It's so I mean, just to start off, just to
[1:29] Speaker 4: be clear, like I think I'm saying, it's kind of
[1:30] Speaker 4: a personal capacity, So I'm not gonna try to represent
[1:32] Speaker 4: like my company's used and all that. But you started by,
[1:36] Speaker 4: you know, mentioned the S and P five hundred is
[1:37] Speaker 4: kind of this way that we think about assessing the
[1:40] Speaker 4: relative effect of the crisis.
[1:41] Speaker 3: It's incredibly unhelpful. There are a couple of reasons for that.
[1:45] Speaker 4: One is, equity markets aren't always you know, the real
[1:47] Speaker 4: world right like there, there's that that's disconnect. But I
[1:49] Speaker 4: think the bigger thing to think about here is that
[1:52] Speaker 4: a huge portion of the market's concentrated in tech, and
[1:55] Speaker 4: that story for now is still still relatively resilient. I mean,
[1:58] Speaker 4: obviously different cell and people are finally cooling on it,
[2:01] Speaker 4: but in general that a lot of those gains and
[2:03] Speaker 4: the hope that this is going to be short term
[2:05] Speaker 4: is sustaining that kind of relatively like surprisingly okay performance
[2:10] Speaker 4: given how scared people are. So first I started by
[2:13] Speaker 4: just saying the equity market doesn't understand what they're in
[2:16] Speaker 4: for fully because people can't accept it because it's just really,
[2:19] Speaker 4: really really bad. So I think the easiest way to
[2:23] Speaker 4: think of, like the scale. You know, we're talking about
[2:26] Speaker 4: losing in the range of ten million barrels a day
[2:29] Speaker 4: of oil supply in a market that's kind of consuming
[2:32] Speaker 4: somewhere in the range of one hundred and two million
[2:33] Speaker 4: barrels a day. And you know, there's enough inventory on
[2:39] Speaker 4: the water or in storage for crude oil specifically that
[2:41] Speaker 4: you can manage that for like a bit, you know
[2:43] Speaker 4: what I mean. But every single day that that supply
[2:46] Speaker 4: is not reaching the market, that's ten billion more billion barrels.
[2:48] Speaker 4: You got a mind to source somehow, right, And it's
[2:52] Speaker 4: not just the loss of the physical supply that matters.
[2:55] Speaker 4: And I'm in mental analysis, so I'm gonna speak in
[2:57] Speaker 4: generality as opposed to specific You know, refineries are not universal, right,
[3:03] Speaker 4: They're designed for specific blends of crude oil. Like any
[3:05] Speaker 4: given crue oil that you see created like a benchmark.
[3:08] Speaker 4: It's kind of like a way of maintaining quality control.
[3:10] Speaker 4: You have a specific brand that blends like specific crude
[3:14] Speaker 4: oils from specific oil fields, right, that then gets packaged
[3:16] Speaker 4: into this kind of benchmark price. When you start getting
[3:18] Speaker 4: interruptions of the kind of delivery of the crude oils
[3:21] Speaker 4: that your refineries are optimized for, you know, when you
[3:25] Speaker 4: if you buy alternatives that aren't quite what you need,
[3:28] Speaker 4: the products that you yield from refining them aren't quite
[3:30] Speaker 4: the same in terms of like the balance. So that's
[3:33] Speaker 4: one thing, right, So so that that's so. The point
[3:35] Speaker 4: is that like the kind of oil supply chain, for
[3:38] Speaker 4: lack of a better word, is a bit more fragile
[3:39] Speaker 4: and complex than than you know, we might think over
[3:41] Speaker 4: the last five years, given how many shocks you've gone
[3:43] Speaker 4: through where it seems to have been resilient.
[3:45] Speaker 2: Right.
[3:47] Speaker 4: The second point is that unlike say the seventies, you know,
[3:50] Speaker 4: there's also a lot a lot of natural gas that's
[3:53] Speaker 4: been disrupted from liquified national gas in particular from Cutter,
[3:56] Speaker 4: but just that's that that's a hugely important market because
[3:59] Speaker 4: that's that provides you know, mostly power this case for
[4:02] Speaker 4: location specific but also like you know, the heating needs
[4:05] Speaker 4: and you know goes to both the europe Nationia Pacific
[4:07] Speaker 4: because the Middle East kind of is this ideal swing
[4:08] Speaker 4: supplier in between the two, right And you know, in
[4:13] Speaker 4: the seventies when we had the last oil shocks, yes,
[4:16] Speaker 4: the world technically speaking was more dependent on oil because
[4:18] Speaker 4: we were less efficient at using it, but you know,
[4:21] Speaker 4: we didn't use gas the same way. Other other commodities
[4:23] Speaker 4: weren't affected. So for instance, about ten somewhere in the
[4:26] Speaker 4: range of ten percent of the world's aluminum supply right
[4:28] Speaker 4: now is effective by what's happening in this trade of
[4:29] Speaker 4: four moves. So you know, the longer this goes on,
[4:32] Speaker 4: you know, the likely it is that like Arizona iced
[4:33] Speaker 4: t is gonna cost like four bucks a can.
[4:37] Speaker 2: Unacceptable, It's like that kind of a and like.
[4:39] Speaker 4: And then there's already problems there because US tariffs and
[4:42] Speaker 4: stupidity with Canada means that we have are having harder
[4:44] Speaker 4: time sourcing aluminum than for imports and all that suff
[4:47] Speaker 4: long story short, you know, it's not just the gasoline
[4:51] Speaker 4: the price of the pump that it's a broader energy
[4:53] Speaker 4: complex that's affected and that power complex that's affected. And
[4:56] Speaker 4: so what's happening first is, you know, what we're seeing
[5:00] Speaker 4: in Asia already is the market's basically preparing for just
[5:03] Speaker 4: real scarcity. And we already have governments imposing rationing to
[5:06] Speaker 4: some extent. You know, we have governments moving to four
[5:09] Speaker 4: day work weeks where they can. The EU is telling
[5:11] Speaker 4: people now and for example, not to travel as much,
[5:14] Speaker 4: and like that's gonna get worse and worse. I mean
[5:16] Speaker 4: the UK where I know where I'm living basically, I
[5:19] Speaker 4: think today yesterday today accepted the last kind of cargo
[5:22] Speaker 4: of jat field from the Middle East that's going to
[5:24] Speaker 4: get And if so, when people talk about the oil price,
[5:29] Speaker 4: especially online in like American finance Twitter and like in
[5:32] Speaker 4: like kind of the New York tech bros And Wall
[5:34] Speaker 4: Street bros. Who think that it's kind of be okay,
[5:37] Speaker 4: they're referring to Brent typically, and Brent is the kind
[5:40] Speaker 4: of global benchmark crude price because Brent oil crude oil
[5:44] Speaker 4: is like it's a blend from the North Sea in Europe.
[5:46] Speaker 4: It's like your ideal, like platonic ideal of a barrel
[5:49] Speaker 4: of oil in terms of the products that you get out.
[5:50] Speaker 3: Of it because of its qualities.
[5:53] Speaker 4: That's a physical market, right like like like that that
[5:55] Speaker 4: benchmark is referring to physical barrels that are being delivered
[5:58] Speaker 4: in price.
[5:58] Speaker 3: And there's there's some other stuff from the US now
[6:00] Speaker 3: involved in that.
[6:01] Speaker 4: But like bottom line, that physical market has not been
[6:04] Speaker 4: disrupted yet, so that price is not actually accurate to
[6:08] Speaker 4: the physical markets elsewhere. If you look in Singapore, the
[6:11] Speaker 4: price of oil is basically somewhere besin one hundred and
[6:13] Speaker 4: sixty hundred andyar dollars a barrel ready. You know, the
[6:16] Speaker 4: price for jet fuel is still going vertical in Singapore.
[6:19] Speaker 4: I think it's higher than two hundred and thirty dollars
[6:21] Speaker 4: a barrel right now. And like and this is but
[6:25] Speaker 4: so so, I mean, we're gonna be flying a lot
[6:27] Speaker 4: less the second half of the year if if we
[6:29] Speaker 4: don't sport this quickly, right, And that's before you factor
[6:32] Speaker 4: at LNG. You have governments across the Asia Pacific strampling
[6:37] Speaker 4: to get coll back up, you know, restarting nuclear reactors.
[6:40] Speaker 4: So you have that conversations with kind of time in Taiwan,
[6:42] Speaker 4: South Korea and Japan, you know, because they've relied on
[6:47] Speaker 4: LNG so with the look quite natural gas to kind
[6:49] Speaker 4: of keep their you know, the lights on right, and
[6:52] Speaker 4: that's disrupted. And then all these things are being felt
[6:54] Speaker 4: first in the Asia Pacific, then they'll be felt in
[6:56] Speaker 4: Europe and kind of emerging markets in Africa in tandem,
[7:00] Speaker 4: and then and then it.
[7:01] Speaker 3: Spreads to the US and the Americas.
[7:02] Speaker 4: So it's like a slow rolling wave where we don't
[7:04] Speaker 4: really fully see the effects in the US yet, but
[7:06] Speaker 4: we will eventually. But I mean, if this goes on
[7:10] Speaker 4: for a couple more weeks, I mean we're already in
[7:12] Speaker 4: a world where rationing is now a thing that governments
[7:14] Speaker 4: have to do. I mean, it's not the scale of
[7:16] Speaker 4: it could be reversed if this was to suddenly open tomorrow.
[7:19] Speaker 4: But the reality is, if you know, even if the
[7:22] Speaker 4: US somehow manages to reach a situation where Iran agrees
[7:25] Speaker 4: that it lets stuff pass freely, there's gonna be a
[7:28] Speaker 4: new premium for all those prices baked in that people
[7:30] Speaker 4: will have to pay because they don't know what's gonna happen.
[7:32] Speaker 4: And the market's gonna also kind of create a premium
[7:35] Speaker 4: for people to just like buy security, you know what
[7:38] Speaker 4: I mean, Like anything you can get your hands on
[7:40] Speaker 4: you want to stockpile right now. And so yes, I
[7:44] Speaker 4: think like we're heading towards like the worst energy crisis
[7:47] Speaker 4: the last sixty years. It's kind of we're already kind
[7:49] Speaker 4: of in it, but it's still regional in terms of
[7:51] Speaker 4: the most obvious effects, but it's kind of spreading. Australia
[7:55] Speaker 4: has only got about three weeks of fuel left, you know,
[7:59] Speaker 4: like New Zealand. It's got similar concerns. China's been. China
[8:04] Speaker 4: has you know, xcess capacity to refine oil and also
[8:06] Speaker 4: massive reserves like like STRATEGI reserve of oil.
[8:09] Speaker 3: And they've been banning exports.
[8:11] Speaker 4: So that's kind of crimping some of the supply, not
[8:13] Speaker 4: all of it that they're still sending a little bit out,
[8:16] Speaker 4: but all the all that's you know, already happening and
[8:18] Speaker 4: we just haven't realized it yet. And so to take
[8:21] Speaker 4: take this back to where you open with the S
[8:23] Speaker 4: and P five hundred, you know, if if you run
[8:27] Speaker 4: out of elgin and you run out of power long enough,
[8:29] Speaker 4: you're gonna have a lot of semiconductor fabs in the
[8:31] Speaker 4: Asia Pacific that have to you know, get power somehow,
[8:34] Speaker 4: and the government has to decide do we keep making
[8:35] Speaker 4: ships and holding the global economy up or do we
[8:38] Speaker 4: keep people's lights on?
[8:41] Speaker 3: And that's and then on top of.
[8:42] Speaker 4: That, Cutter provides about a third of the world's helium,
[8:47] Speaker 4: and you need helium to make chips, and it's not
[8:50] Speaker 4: the gas kind, I mean, you need liquid helium. And
[8:52] Speaker 4: basically that's that boils off when it's in storage, so
[8:55] Speaker 4: you can't really store it from usually like more six
[8:57] Speaker 4: and eight six eight weeks is my understanding.
[8:58] Speaker 3: That's kind of the inventory you're working with.
[9:01] Speaker 4: And so yeah, this is all stuff that like the
[9:03] Speaker 4: market just isn't pricing because everybody's convinced Trump passed the
[9:06] Speaker 4: back down somehow and nobody, nobody knows how to price
[9:10] Speaker 4: assets in a world where like that level of a
[9:12] Speaker 4: shock is happening.
[9:14] Speaker 5: Nick, I'm curious, like we have these shocks that we're
[9:17] Speaker 5: currently inside of. Now, what do you think, Like, look,
[9:20] Speaker 5: I'm thinking back to COVID, you know, the shift from
[9:22] Speaker 5: in person work to remote work as an example, what
[9:25] Speaker 5: do you think economically will persist after this conflict changes?
[9:28] Speaker 5: I see some talk about evs. Perhaps demand might increase,
[9:31] Speaker 5: but it's not really increasing. What do you think might
[9:33] Speaker 5: be the residue that kind of comes out of this?
[9:35] Speaker 4: Oh do EV debanda is absolutely increasing a lot, It's
[9:38] Speaker 4: it's not slow. The reason why people don't think it's
[9:41] Speaker 4: increasing is because the US is basically an increasingly insular
[9:44] Speaker 4: market where people think that the US is the world
[9:46] Speaker 4: and don't really pay attention to what's happening elsewhere. I mean,
[9:48] Speaker 4: if you look globally, like we're basically a tipping point,
[9:55] Speaker 4: right if you include hybrids and plug in electrics and
[9:58] Speaker 4: looking at the kind of range of non pure combustion
[10:00] Speaker 4: engine vehicles, this year is probably the year where a
[10:04] Speaker 4: majority of global light vehicle production is already not just
[10:06] Speaker 4: purely combustion engine, you know what I mean. And like
[10:09] Speaker 4: a country like Indonesia, for example, like like the market
[10:12] Speaker 4: penetration rate for like battery electrics, not even plucking hybrids
[10:14] Speaker 4: is going to hit like one hundred percent sometime in
[10:16] Speaker 4: like twenty twenty seven at the current rate. Vietnam is
[10:20] Speaker 4: you know, already is already probably it is already a
[10:23] Speaker 4: majority EV market.
[10:24] Speaker 3: China isn't a majority EV market.
[10:26] Speaker 4: Uh, and that's the biggest auto market in the world, right,
[10:29] Speaker 4: I mean, Japan's been kind of further behind, but I
[10:31] Speaker 4: think we'll probably pick up the pace. Like, like the
[10:33] Speaker 4: the ev story is there. So this shock is, in
[10:36] Speaker 4: my opinion, is probably going to accelerate peak oil oil demand.
[10:40] Speaker 4: The exact timeline is up up in you know, up
[10:42] Speaker 4: for debate, but like I think, I think significantly faster
[10:45] Speaker 4: than than we were probably assuming, even though I'm also
[10:47] Speaker 4: kind of barished on demand, so I'm probably not the
[10:49] Speaker 4: best representative from my industry, so that's locked in.
[10:53] Speaker 3: You know.
[10:53] Speaker 4: I think renewables are are skyrocketing right now, Like even
[10:57] Speaker 4: in the UK, like demand for solar panel in the
[10:59] Speaker 4: last month is up something like or fifty percent because
[11:02] Speaker 4: people are just like, look, I need to make sure
[11:04] Speaker 4: that that I have some kind of power, right, so
[11:06] Speaker 4: like they're just they're just reacting to the shock that
[11:08] Speaker 4: they can afford it, they'll do it.
[11:09] Speaker 3: And with solar specifically.
[11:11] Speaker 4: Also, it's important I think people have kind of missed
[11:14] Speaker 4: this that like in the last fifteen eighteen months, two years,
[11:18] Speaker 4: you know, it's it's increased significantly and there's a real
[11:21] Speaker 4: up take. And in the last kind of half of
[11:22] Speaker 4: last year. But like people living in emerging markets and
[11:25] Speaker 4: kind of developing countries in general, they're just going for
[11:28] Speaker 4: solar off grid. It's it's cheap enough that it is
[11:31] Speaker 4: the best option they have and if they if they
[11:33] Speaker 4: don't have access to reliable power, they'll do it at home.
[11:35] Speaker 4: If they can afford it. In the more middle class,
[11:37] Speaker 4: they'll buy a battery as well. But that's locked in,
[11:40] Speaker 4: you know what I mean, Like obviously that doesn't solve
[11:42] Speaker 4: all the problems like you might have, Like if you
[11:44] Speaker 4: want to build heavy industry, you still need reliable power,
[11:46] Speaker 4: so that's probably still probably natural gas or coal or
[11:48] Speaker 4: something else like that. When nuclear if you can manage it.
[11:51] Speaker 4: But I mean that's I think that's a given. So
[11:54] Speaker 4: that's probably only can accelerate because people are going to
[11:56] Speaker 4: be so afraid of not having power and it's just cheap,
[11:59] Speaker 4: right and trying to produce and China has also slack
[12:01] Speaker 4: capacity to produce these things. Isn't a better position to
[12:04] Speaker 4: whether the shock that we're undergoing at the moment than
[12:07] Speaker 4: most And on top of that, you know, even though
[12:11] Speaker 4: clean tech is affected by what's happening in these markets,
[12:13] Speaker 4: So for example, aluminum goes into solar panels, right, So,
[12:15] Speaker 4: but it's a relatively small share of aluminum demands so,
[12:19] Speaker 4: and that market is flexible enough you can probably work
[12:21] Speaker 4: around these disruptions to keep making stuff as long as
[12:24] Speaker 4: you keep the lights on, you know, and the power
[12:26] Speaker 4: you need to obviously for evening. So I think that's
[12:29] Speaker 4: a given. Work from home is certainly a possibility. But
[12:31] Speaker 4: I don't, I don't. I don't think it's going to
[12:32] Speaker 4: be that affected. I think people will see it more
[12:33] Speaker 4: as an emergency measure, and you see government's already using
[12:36] Speaker 4: it actually as a way to try to save fuel.
[12:38] Speaker 4: But I don't, I don't, I don't see. I think
[12:40] Speaker 4: that's less relevant. I think the bigger thing is simply
[12:42] Speaker 4: that we're entering a period of no longer living in
[12:45] Speaker 4: a world where we really rely on the US to
[12:47] Speaker 4: preserve freedom and navigation, and in that world for energy.
[12:52] Speaker 4: Because of how interconnected all these markets are, everybody's going
[12:55] Speaker 4: to want to make their power at home, and it's
[12:56] Speaker 4: it's much more rational to want to have to import
[13:00] Speaker 4: like a clean technology from trying to pay for it
[13:02] Speaker 4: once then have to pay for a molecule that you
[13:05] Speaker 4: have to burn every single time you have to burn it.
[13:07] Speaker 4: And so that's just the basic economic rationale. It doesn't
[13:10] Speaker 4: mean that people are just gonna drop fossil fuels like coal.
[13:12] Speaker 4: I think it's going to have a longer lifetime life
[13:14] Speaker 4: kind of span it for peak demand than we expected
[13:17] Speaker 4: because of this, just because they hit to gas. But
[13:19] Speaker 4: I don't think oil and gas are ever quite going
[13:21] Speaker 4: to recover. They're kind of expected demand in the future
[13:23] Speaker 4: because everybody's gonna want to basically make power on shore,
[13:27] Speaker 4: diversify their options for it, for for where they get
[13:29] Speaker 4: their energy from and where they can accelerate processes that
[13:34] Speaker 4: use electricity, especially clean tech to basically make replacement molecules.
[13:38] Speaker 4: So you know, you use hydrogen in a process that
[13:41] Speaker 4: a natural gas where you can, or you'll try to
[13:42] Speaker 4: make fertilizer, you know, without without the input. So for example,
[13:46] Speaker 4: over forty percent of the sulfur that that's exported globally
[13:49] Speaker 4: transits the strait of hormos and without that sulfur, making
[13:54] Speaker 4: fertilizer is a lot more expensive. It actually also affects metals,
[13:57] Speaker 4: so because for for some metal production techniques you basically
[14:02] Speaker 4: use sulfuric acid to extract a metal from from like
[14:05] Speaker 4: a body of ore, and so all these things are
[14:08] Speaker 4: are compounding right now. No one only quite knows how
[14:10] Speaker 4: they're gonna settle, but it's it's in a world where
[14:14] Speaker 4: you have where you no longer can really like people
[14:16] Speaker 4: keep I think in the US at least often talk
[14:18] Speaker 4: about fossil fuels. It's like a pragmatic solution, you know,
[14:21] Speaker 4: like we have to be pragmatic and not really too
[14:22] Speaker 4: much renewables because it's woke, Like, look, I live in Europe,
[14:28] Speaker 4: Like obviously there there's an ideological component to what's gone
[14:31] Speaker 4: wrong with European energy policy, but I don't. But the
[14:32] Speaker 4: reality is that it was just really cheap to install
[14:34] Speaker 4: clean tech, and renewables got really cheap people people installed,
[14:36] Speaker 4: I mean, and then the batteries got cheap where and
[14:39] Speaker 4: people started putting batteries on stuff. The problem is that
[14:42] Speaker 4: this this narrative about the reliability of fossil fuels hint
[14:45] Speaker 4: is you know, reliant upon just having like reliable trade,
[14:48] Speaker 4: and like we don't live in that world anymore. So
[14:50] Speaker 4: I think that that's kind of dying in real time
[14:52] Speaker 4: as an assumption people have.
[14:55] Speaker 5: I wondered to you talking about maritime security, you know,
[14:57] Speaker 5: we talked on the show a few times about insurance
[14:59] Speaker 5: how these vessels, even if it was actually safe from
[15:02] Speaker 5: the straits of war moves, the insurance companies might still
[15:04] Speaker 5: hesitate despite the assurances that they're safe. And I'm curious
[15:07] Speaker 5: what you see as the effect of this conflict on
[15:09] Speaker 5: insurance long term, especially maritime insurance.
[15:12] Speaker 4: See I mean, I'm not like a specialist Matty Stretch,
[15:15] Speaker 4: but it's safe to say it's going to bake in
[15:16] Speaker 4: a larger premium and it's gonna it's going to sigifically
[15:18] Speaker 4: raise the cost of ensuring these vessels. You know, you know,
[15:22] Speaker 4: this will go from like like a tiny tail risk
[15:24] Speaker 4: event that people you know, had to insure for but
[15:26] Speaker 4: didn't really affect your overhead to like you know, in insurance,
[15:30] Speaker 4: like like a payment equal with like five percent the
[15:32] Speaker 4: value of what you're shipping, you know what I mean.
[15:33] Speaker 4: Like it's like that level of shock from like a
[15:36] Speaker 4: marginal like point however much percent to that and at
[15:40] Speaker 4: that point that that that passes through to consumers. So
[15:42] Speaker 4: so commodities are gonna be more expensive, that's just I
[15:44] Speaker 4: think going to be But I don't think that's a
[15:46] Speaker 4: for everything. I think actually that people are over exaggerating
[15:49] Speaker 4: the kind of the inflation side of that of that problem.
[15:52] Speaker 3: But I do think that structurally there's.
[15:53] Speaker 4: Going to be an increase in prices at least for
[15:54] Speaker 4: a while, because the market just has to accommodate risks
[15:57] Speaker 4: it never had to before. I think of it is
[16:00] Speaker 4: kind of whiplash from last year, Like the trumpdministration already
[16:04] Speaker 4: kind of showed us how crazy they could be, and
[16:07] Speaker 4: we just took it at face value that it was
[16:09] Speaker 4: mostly talk. But like I mean, living in Europe, it's
[16:12] Speaker 4: like once Greenland was on the menu, it wasn't like
[16:14] Speaker 4: anyone could think, oh, he's just saying that. Like we
[16:15] Speaker 4: had to plan as if that was a possibility, you
[16:17] Speaker 4: know what I mean, Like we had you had to
[16:18] Speaker 4: assume that it was possible. And once you have to
[16:20] Speaker 4: assume it's possible, even if it's like less than one
[16:23] Speaker 4: percent chance it happens, it just radically changes the way
[16:25] Speaker 4: you think about risk.
[16:26] Speaker 6: I think it's fascinating. You know, when we used to
[16:28] Speaker 6: talk about peak oil, people were talking about us running
[16:31] Speaker 6: out of oil, like the world was just going to
[16:33] Speaker 6: run out of oil, and that obviously hasn't happened. But
[16:36] Speaker 6: now we're having this conversation. I've never I mean, I
[16:39] Speaker 6: guess I have heard it, but you know, it's interesting
[16:41] Speaker 6: to hear you talk about it, the concept of peak
[16:43] Speaker 6: oil demand, that it's not that we're running out of
[16:45] Speaker 6: fossil fuels, it's just that the dynamics of energy politics
[16:49] Speaker 6: are changing so dramatically and the technology.
[16:53] Speaker 3: Yeah, yeah, I mean people debated.
[16:55] Speaker 4: I think realistically, pre war, most assumptions probably had demand
[17:01] Speaker 4: peaking around twenty thirty to twenty thirty two as kind
[17:04] Speaker 4: of like a safe, cautious.
[17:05] Speaker 3: You know, like like.
[17:07] Speaker 4: Not nodding towards the transition while not while also making
[17:09] Speaker 4: sure the fossil field people are happy.
[17:12] Speaker 3: That's probably been blown up.
[17:13] Speaker 4: And we don't exactly know, but that's probably been blown
[17:15] Speaker 4: up because if one of the I think the most
[17:17] Speaker 4: difficult parts of the forecasting is for a very long
[17:21] Speaker 4: time it was assumed that developing countries had to kind
[17:23] Speaker 4: of pick up the slack for demand because China really
[17:26] Speaker 4: drove a lot of the marginal demand the last quarter
[17:28] Speaker 4: century in terms of the growth of imports, you know,
[17:30] Speaker 4: and it's China.
[17:31] Speaker 3: Obviously that's going electric fastest.
[17:32] Speaker 4: They're the ones building evs, they're they're exporting them, they're
[17:35] Speaker 4: you know, they're putting out on the market. And that
[17:39] Speaker 4: kind of assumption collapsed in the last three years because
[17:42] Speaker 4: it got so cheap for an emerging market to buy
[17:44] Speaker 4: imported EV's. I mean, you can buy like a decent
[17:46] Speaker 4: Chinese EV model for ten thousand dollars. They're never going
[17:51] Speaker 4: to sell that price to you if you live in
[17:52] Speaker 4: the US or in Euree. Ever, Yeah, because they can
[17:55] Speaker 4: you know what I mean, they can obviously ask they
[17:56] Speaker 4: can ask for more, but but you can. And so
[17:59] Speaker 4: like like these cars are just better tech, they're better
[18:01] Speaker 4: experiences to drive and are cheap. And I think that
[18:04] Speaker 4: that that really disrupted a lot of assumptions about where
[18:07] Speaker 4: demand growth would come from. Because the hope is that
[18:09] Speaker 4: like once China peaks or but sures, whatever the phrase
[18:12] Speaker 4: you want to use is, you know, India will pick
[18:13] Speaker 4: up the slack, and then we know Africa, over time,
[18:15] Speaker 4: even though it's from a very very low base, will
[18:17] Speaker 4: pick up the slack. You know, Latin America might have
[18:19] Speaker 4: some more and add least will have more. And that's
[18:20] Speaker 4: just like not visibly the case over time.
[18:23] Speaker 6: Yeah, So the Industrial revolution happened unevenly in some countries
[18:28] Speaker 6: just skipped right over it and got it right into
[18:30] Speaker 6: the digital age, and they didn't have the same evolution
[18:33] Speaker 6: as other countries did.
[18:35] Speaker 3: Yeah, for sure.
[18:36] Speaker 4: And on top of that, I mean like like they're
[18:39] Speaker 4: their massive problems with what China is not economically for
[18:41] Speaker 4: it's kind of global, the global side effects that has
[18:44] Speaker 4: for other countries trying to industrialize or you know, you know,
[18:47] Speaker 4: manufacture things.
[18:47] Speaker 3: I mean, look at the US.
[18:49] Speaker 4: But but that said, like, you know, if you think
[18:53] Speaker 4: about the way that the current shock is changing the
[18:58] Speaker 4: energy market, you know, a lot of the narrative the
[19:00] Speaker 4: US has leaned on the last five years was basically like, well, okay, Russia,
[19:03] Speaker 4: he wants to weaponize gas, will sell you gas, you know,
[19:05] Speaker 4: like iron wants to close the street.
[19:07] Speaker 3: We can sell you.
[19:07] Speaker 4: We can sell you hydrocarbons, right, we can sell you oil, gas, whatever.
[19:10] Speaker 4: And it's like, why would anyone go for that now
[19:12] Speaker 4: when the price could be so wild? Because because a
[19:15] Speaker 4: guy wakes up tweets and then suddenly we're bombing targets. Like,
[19:17] Speaker 4: it's just not that's not like a rational strategy. You
[19:22] Speaker 4: might you might rely on it in the short term,
[19:23] Speaker 4: but you wouldn't plan for that long term. And so
[19:25] Speaker 4: the irony is that like China is at now for
[19:28] Speaker 4: like developing countries that are really really sensitive to price
[19:30] Speaker 4: and the cost of imports because they basically have to
[19:33] Speaker 4: spend their harder and kind of foreign currency on imports,
[19:36] Speaker 4: right like, and so they have to they have to
[19:37] Speaker 4: export something to be able to earn dollars wherever it
[19:39] Speaker 4: is to buy that import. You know, for them, it's
[19:42] Speaker 4: more rational to use evs or to use clean tech
[19:45] Speaker 4: because it minimizes the money that's outgoing towards towards buying energy.
[19:49] Speaker 4: And so China is like an ideal energy security partner
[19:52] Speaker 4: for these countries, not the US. That's that's just the reality.
[19:54] Speaker 4: The US can definitely do stuff that try to can't
[19:56] Speaker 4: when it comes to like a lot of financing and specific,
[19:59] Speaker 4: specific instruments that Chinese companies can can do, but it's
[20:01] Speaker 4: not like the way that they typically go about developing.
[20:05] Speaker 4: But the reality is that like like we we basically
[20:08] Speaker 4: seeded the field to try to unclean tech, and then
[20:11] Speaker 4: we and then we decided to do something so disastrously
[20:14] Speaker 4: shortsighted that it makes it makes them like the ideal
[20:17] Speaker 4: partner coming out of this conflict for anybody who wants
[20:20] Speaker 4: to kind of improve throw energy security.
[20:23] Speaker 1: Hey, what's up, guys, This is d uh. Do us
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[21:00] Speaker 2: Thanks a bunch.
[21:04] Speaker 6: I think the question that a lot of people who
[21:06] Speaker 6: watch this are going to have, of course, is what
[21:09] Speaker 6: is the effect this is going to have on America?
[21:11] Speaker 6: And I mean I think he touched on it a bit,
[21:13] Speaker 6: but if you could go a little bit more in depth,
[21:15] Speaker 6: I mean my understanding is most of the oil coming
[21:18] Speaker 6: from the Persian golf ends up in Europe and Asia
[21:21] Speaker 6: and not so much of the United States. But how
[21:24] Speaker 6: is it affecting us and what do you foresee the
[21:26] Speaker 6: effects being in the coming weeks and months.
[21:29] Speaker 4: Sure, so, first off, the idea that, like, because the
[21:33] Speaker 4: US is an exporter now of crude oil, that it's
[21:36] Speaker 4: kind of insulated is just not true.
[21:39] Speaker 3: It's comforting. It's true that the scale, obviously of the
[21:42] Speaker 3: price shock might be different because we have a bit
[21:43] Speaker 3: more of a buffer and we produce more than we consume,
[21:48] Speaker 3: you know, just because the crude oil from the Middle
[21:50] Speaker 3: East typically goes to the Asia, Pacific or Europe doesn't
[21:52] Speaker 3: really It's still a global market, right, Like products still
[21:54] Speaker 3: have to flow globally. And it's important to also remember
[21:58] Speaker 3: that nobody actually consumes crude oil as a consumer. They
[22:00] Speaker 3: consume something that's been refined from crude oil, you know.
[22:05] Speaker 3: So the issue is not so much the barrels are crude,
[22:07] Speaker 3: even even though they're obviously the key like supply choke point.
[22:10] Speaker 3: It's like, once you run out of jet fuel in Asia,
[22:12] Speaker 3: you gotta go somewhere else to buy it, so you're
[22:14] Speaker 3: gonna start buying it from Europe, and then Europe short
[22:16] Speaker 3: then Europe has to buy it from the US, so
[22:18] Speaker 3: like our our airfareks, you know, like kind of takes
[22:20] Speaker 3: up massively because obviously a jet fuel that they I
[22:22] Speaker 3: think is like a quarter of the cost of any
[22:24] Speaker 3: given flight, you know, the same thing for gasoline and diesel, right,
[22:29] Speaker 3: I mean gasoline. Americans actually are uniquely sensitive to gasoline
[22:32] Speaker 3: prices because the Europeans don't drive as much or as far, so,
[22:34] Speaker 3: like you know that that has an impact, but it's
[22:36] Speaker 3: not felt the same way I think psychologically for the
[22:39] Speaker 3: Americans when they see, like you know, gas prices go
[22:42] Speaker 3: above like four to fifty a gallon, like it's just
[22:44] Speaker 3: like a break glass kind of a moment. We're going
[22:47] Speaker 3: that that's the world we're living in.
[22:49] Speaker 4: I think, I think, you know, it's going to go
[22:50] Speaker 4: signficantly high in that at least during the kind of
[22:52] Speaker 4: initial phase of the shock, like as as it's more
[22:55] Speaker 4: deeply felt, but like it just takes weeks for that
[22:59] Speaker 4: stuff to kind of clear through the system, you know
[23:01] Speaker 4: what I mean. So I think right now you're already
[23:03] Speaker 4: seeing a take up in like California, for example, because
[23:05] Speaker 4: California basically imports as products from major Pacific so that
[23:09] Speaker 4: specific market is like totally screwed, like they they are.
[23:12] Speaker 4: They are effectively in Asia, an Asian market in terms
[23:15] Speaker 4: of how they get their their they're like you know,
[23:17] Speaker 4: oil products, you know, it's it's it'll it's different in
[23:20] Speaker 4: the Gulf, it'll be different in the Northeast.
[23:22] Speaker 3: You know, it varies a bit regionally in the US.
[23:24] Speaker 4: But but like we are all heading for a world
[23:26] Speaker 4: where like this stuff's really expensive. And the flip side
[23:30] Speaker 4: is that, you know, the irony is that when when
[23:32] Speaker 4: you're a major exporter of a good, your economy is
[23:34] Speaker 4: actually more exposed to a price shock than if you're
[23:36] Speaker 4: just an importer, because also the people producing it are
[23:39] Speaker 4: affected by that shock and that changes their own economics.
[23:42] Speaker 4: You know, think of it this way, Like diesel is
[23:44] Speaker 4: a great it is probably is probably the most important
[23:46] Speaker 4: lever for how to think about like how the inflation
[23:48] Speaker 4: filters filters into what you buy every day, because like
[23:51] Speaker 4: diesel's used for trucking, you know, it's used for trucking,
[23:53] Speaker 4: it's used for power generators at mines and kind of
[23:56] Speaker 4: like in other industrial sites, et cetera. And that's going
[23:58] Speaker 4: to get well significally more expensive and in the next
[24:00] Speaker 4: kind of a couple of weeks to month, maybe a
[24:02] Speaker 4: little bit longer in the US. But like that, that
[24:05] Speaker 4: will it'll take you it'll take time for companies to
[24:07] Speaker 4: raise prices to reflect that. But that's immediately going to happen.
[24:12] Speaker 4: So you're gonna see this kind of price increase be
[24:13] Speaker 4: slightly delayed because companies will want to delay as long
[24:15] Speaker 4: as possible how much they're passing on to their customers,
[24:17] Speaker 4: right because they'll they always want to hope for better
[24:19] Speaker 4: and they want to kind of not piss people off
[24:21] Speaker 4: too much. But like by the time we get to
[24:23] Speaker 4: like May, I mean a April is when it's a
[24:24] Speaker 4: lot of us gonna onfold but one. But the time
[24:25] Speaker 4: we get to May, I mean, it's gonna be felt.
[24:27] Speaker 4: You know, you're gonna you're gonna visibly see it. It's
[24:29] Speaker 4: gonna be really expensive to fill up, you know, your
[24:30] Speaker 4: gas tank. Prices for goods will start going up. So
[24:36] Speaker 4: I would not I think the US isn't much better shape,
[24:38] Speaker 4: but it comes to gas. So the gas price for
[24:41] Speaker 4: heating or power in the US will stay relatively low
[24:42] Speaker 4: compared to global prices. You know, it's still can increase
[24:46] Speaker 4: because we just we do export a lot of gas, right,
[24:48] Speaker 4: So it's that still will actually filter into the system some.
[24:51] Speaker 3: So like.
[24:53] Speaker 4: I I would I would probably say, we're not gonna
[24:56] Speaker 4: see the same kind of level of shortages. You're not
[24:58] Speaker 4: You're not gonna see people like being forced to rash
[25:00] Speaker 4: and then rioting as if it's COVID lockdowns again. But
[25:04] Speaker 4: you are going to see like the kind of scale
[25:07] Speaker 4: of price increases that like are are like really really
[25:10] Speaker 4: like bleak politically in the US, but also just socially,
[25:13] Speaker 4: people really really feel it. I can't put like a
[25:16] Speaker 4: hard number on it, but like I would not be
[25:17] Speaker 4: shocked if like national gas prices break five dollars to
[25:20] Speaker 4: six dollars to six dollars a gallon. It's you know,
[25:25] Speaker 4: depending on how bad the shortages get elsewhere.
[25:27] Speaker 5: So Nick, my question on kind of price efficiencies, like
[25:31] Speaker 5: looking at Iran, Let's say we solve the Iran problem today,
[25:34] Speaker 5: suddenly Iran is on our side, all the sanctions are removed.
[25:38] Speaker 5: What do you think are kind of the global macroeconomic
[25:40] Speaker 5: effects of something like that happening, where all the things
[25:43] Speaker 5: that Iran has had as true in the economy for
[25:45] Speaker 5: the past forty seven years are suddenly dissolved, and I'm
[25:48] Speaker 5: sure there would be efficiencies gained obviously, but do you
[25:51] Speaker 5: think there would also be inefficiencies anywhere within the market
[25:53] Speaker 5: now that Iran is allowed to play basically unrestrained.
[25:57] Speaker 3: That's a great question.
[25:59] Speaker 4: And I'm unfortun not really in a iron specialists, but
[26:01] Speaker 4: like you know, in general, in general terms. So first off,
[26:05] Speaker 4: it'll still take a couple of months for like the
[26:07] Speaker 4: current shock to filter through the system, you know what
[26:10] Speaker 4: I mean. So like, even if it opened tomorrow, we're
[26:11] Speaker 4: still talking about two months of pain, may maybe even
[26:13] Speaker 4: three months of pain. You know, it might not be
[26:16] Speaker 4: as extreme, but it's still kind of bit that's baked in.
[26:21] Speaker 3: But if if.
[26:21] Speaker 4: Iran was suddenly allowed to basically freely trade and freely
[26:25] Speaker 4: produce and could attract foreign investment and so on, I mean,
[26:29] Speaker 4: I mean you're talking about lower oil prices materially, I mean,
[26:31] Speaker 4: expectations are going to costantly come down, so you probably
[26:33] Speaker 4: talk about lower interest rates in terms of people's expectations
[26:36] Speaker 4: of central banks don't feels much pressure on on oil
[26:38] Speaker 4: and gas, which is the net positive globally, right, that's
[26:41] Speaker 4: probably positive for growth. I mean, Iran makes a lot
[26:44] Speaker 4: of steel it could probably export some of that, but
[26:46] Speaker 4: steals oversupplied globally because of China. They'd probably some other
[26:50] Speaker 4: metals I could export. I mean, I think it would
[26:52] Speaker 4: mostly be like an iron story, right, I mean, the
[26:54] Speaker 4: commodities side would matter. But the thing is, if you
[26:56] Speaker 4: think of this way, like we were really oversupplied coming
[26:59] Speaker 4: into this year without the conflict, and so you know,
[27:03] Speaker 4: if that's supply all returns to market, then it's a
[27:05] Speaker 4: crowded market and Iran can't just necessarily ramp up as easily.
[27:08] Speaker 4: I mean he could, but you know, something tells me
[27:11] Speaker 4: that Opek, we really pissed it it because there's still
[27:14] Speaker 4: a level of which you need some price stability, right
[27:17] Speaker 4: like you and and in real terms, because of how
[27:20] Speaker 4: high inflation has been in dollar terms in the US,
[27:23] Speaker 4: you know, oil is worth like a third lesson nominal terms,
[27:26] Speaker 4: you know, or we're saying real terms, and it wasn't
[27:28] Speaker 4: like in twenty twenty, you know what I mean, Like
[27:30] Speaker 4: it's it's a mass. So sixty bucks to day for
[27:33] Speaker 4: a barrel is way different than it was in twenty twenty.
[27:37] Speaker 4: And I mean that's said the American producers have gotten
[27:39] Speaker 4: way more efficient, So you know it's not all doom
[27:41] Speaker 4: and gloom, but I just think that like it would
[27:45] Speaker 4: more be like a neuron specific story as to how
[27:47] Speaker 4: that that change goes. I also I'm very skeptical of
[27:50] Speaker 4: Sant's really fundamentally changing things because countries, I mean Russia's
[27:53] Speaker 4: got example, economies that are sanctioned that heavily for that long,
[27:56] Speaker 4: they tend to become more atarcic and they have to
[27:58] Speaker 4: kind of develop an economic model that is just not
[28:01] Speaker 4: necessarily concordance with like exploiting free trade, right, and you
[28:07] Speaker 4: have domestic lobbies you have to make you can keep happy.
[28:09] Speaker 4: You probably want to protect your domestic industries where you can.
[28:14] Speaker 4: And and also typically experiencing sanctions is a lot like
[28:18] Speaker 4: experiencing a big financial shock, like if if if there's
[28:20] Speaker 4: a running your currency, for instance, the response typically is
[28:23] Speaker 4: to just stockpile foreign currency, so you have to export
[28:26] Speaker 4: more than you import. You have to have a relatively
[28:30] Speaker 4: you know, conservative kind of fiscal policy for your budget
[28:32] Speaker 4: to make sure you're not spending too much, not you're
[28:34] Speaker 4: borrowing too much, because you just want to maintain confidence
[28:37] Speaker 4: in your currency at all times. And sanctions have a
[28:39] Speaker 4: similar effect. You know what, I mean, and that and that,
[28:40] Speaker 4: and that redundancy itself actually leads to lower growth rates
[28:43] Speaker 4: and has its own kind of knock on effects that
[28:45] Speaker 4: I don't I don't. I can't speak to Ron really mean,
[28:48] Speaker 4: I'm a Russier specialist, but ultimately by training, but I
[28:51] Speaker 4: imagine that that those structures can't really be undone very quickly,
[28:55] Speaker 4: and there's a lot of political kind of pressure to
[28:57] Speaker 4: maintain that system, even if you have sanctions.
[28:59] Speaker 6: Really, when do we get to the point where this
[29:04] Speaker 6: is going to do permanent damage to the economy? I mean,
[29:07] Speaker 6: you kind of made reference to you know, this is
[29:10] Speaker 6: going to change or speed up some of the existing dynamics.
[29:13] Speaker 6: But will there come a point where if we reopened
[29:16] Speaker 6: the straits, even by military force down the line that
[29:19] Speaker 6: it's just too late, it's not really going to matter,
[29:21] Speaker 6: or it won't matter.
[29:22] Speaker 3: I think.
[29:22] Speaker 4: I think the damage is actually done structurally because the
[29:26] Speaker 4: market will start to price in a premium. Obviously the
[29:28] Speaker 4: scale that premium is up for debate, but it's going
[29:30] Speaker 4: to be pretty high for a while. Some mean oil
[29:32] Speaker 4: prices won't be like so so destructive that the entire
[29:34] Speaker 4: global economy goes into recession, which is like the flight
[29:37] Speaker 4: path we're on right now, you know, in terms of energy.
[29:39] Speaker 2: Right.
[29:40] Speaker 4: But but that said, you know, once you've lived through
[29:45] Speaker 4: the shock, this extreme that no one can make sense of,
[29:48] Speaker 4: Like no, no American ally right now is like, oh
[29:49] Speaker 4: we were consulted. If this makes sense, right, you really
[29:54] Speaker 4: have to basically adopt an economic approach, an energy security
[29:57] Speaker 4: approach that's built on resilience, and resilience is expensive. Resilience
[30:02] Speaker 4: requires redundancy, and it requires a lot a lot of
[30:06] Speaker 4: investment into capacity that isn't actually going to be used necessarily.
[30:09] Speaker 4: So you basically you're talking about like a net increase
[30:12] Speaker 4: of the share of GDP that energy takes up by
[30:16] Speaker 4: necessity to basically protect yourself from like a future shock
[30:18] Speaker 4: like this. And that world is one where thinking we
[30:23] Speaker 4: grow more slowly, things are less efficient from like a
[30:26] Speaker 4: pure like market perspective, Not that I think that's necessarily
[30:28] Speaker 4: always bad. You know, there's a lot more policy intervention
[30:32] Speaker 4: to shape markets. And you have kind of what was
[30:35] Speaker 4: already happening really since less twenty sixteen, but like last
[30:38] Speaker 4: year on trade they kind of got super charge. You
[30:40] Speaker 4: have that applied to energy, you know what I mean,
[30:41] Speaker 4: You just have a very very different like working model
[30:45] Speaker 4: going forward for how much money you're going to spend
[30:46] Speaker 4: to make sure you feel safe, and so in that sense,
[30:50] Speaker 4: I think the damage is done. I think that that
[30:52] Speaker 4: imposes its own costs that like they're not maybe not
[30:54] Speaker 4: as bad or as extreme as like just running out
[30:56] Speaker 4: of jet fuel and diesel, but still add up and
[31:00] Speaker 4: ultimately are kind of a net negative. I do think
[31:02] Speaker 4: that that will end up having a more negative impact
[31:05] Speaker 4: in the US actually over time than even Europe. Not
[31:09] Speaker 4: that I'm super super bullish in Europe. I think people
[31:11] Speaker 4: are kind of unnecessarily negative about it. But like the US,
[31:15] Speaker 4: a lot of the US growth stories also benefited from
[31:16] Speaker 4: being an energy exporter, and that's going to come to
[31:18] Speaker 4: a threat over time because of this kind of shift
[31:20] Speaker 4: in people's behavior as consumers of energy.
[31:26] Speaker 6: You know, another question that I wanted to ask you
[31:28] Speaker 6: since we have you here, I have heard from certain
[31:32] Speaker 6: people in the you know, national security space who have
[31:38] Speaker 6: told me that they see that what's going on right now,
[31:41] Speaker 6: that going after Venezuela, then going after Iran is a
[31:45] Speaker 6: way of strategically choking off China's access to energy. That
[31:50] Speaker 6: it's the sort of part of a larger strategy arraying
[31:54] Speaker 6: against China. And I was wondering, if you know, from
[31:58] Speaker 6: your perspective, someone who studies the economics of global energy trade,
[32:03] Speaker 6: does this make sense strategically to you?
[32:05] Speaker 2: I mean it does?
[32:07] Speaker 6: Does that pan out at all?
[32:08] Speaker 3: I mean, does the pope shit in the woods? Like
[32:12] Speaker 3: I don't like us?
[32:13] Speaker 4: Like on, well, it's from Chicago now, so I should
[32:15] Speaker 4: probably have no but like no, like I think that, Like,
[32:20] Speaker 4: it's it's absurd to me that people think that and
[32:23] Speaker 4: say that it is so irrational and hard. It's it's
[32:26] Speaker 4: like the forty chess argument is we've already seen so
[32:31] Speaker 4: many other things that have happened, you know, from from
[32:32] Speaker 4: US policy in the last fifteen months that just prove
[32:34] Speaker 4: that we have no idea what's what we're doing, what's
[32:36] Speaker 4: going on anymore? That I just don't understand how someone
[32:38] Speaker 4: can concredibly claim this. But setting that aside, now, first off,
[32:42] Speaker 4: the energy shock does hit China, but it hits everybody,
[32:46] Speaker 4: and the US caused it, so like who are people
[32:49] Speaker 4: gonna blame?
[32:50] Speaker 3: Like the US?
[32:53] Speaker 4: And there's obviously these really component but but ultimately the
[32:56] Speaker 4: US is kind of like backstopping it, right, So this
[32:57] Speaker 4: is the US gets the blame for it. The US
[32:59] Speaker 4: doesn't escape damage. Ultimately, even though the US is a
[33:01] Speaker 4: net exporter of oil gas, it's it doesn't fix the
[33:04] Speaker 4: problem that you're still exposed to these global markets.
[33:08] Speaker 3: And you know, China.
[33:10] Speaker 4: Has like the world's largest UH strategic inventories of oil.
[33:14] Speaker 4: It's it's not like kind of totally bail them out.
[33:16] Speaker 4: But like, for example, you know, to talk to you know,
[33:19] Speaker 4: I was in Houston for the work conference right last week,
[33:21] Speaker 4: and like you talk to people like colleagues who are
[33:23] Speaker 4: based in China, and like they'll say, people feel calm
[33:25] Speaker 4: in Beijing or in Shanghai, you know what I mean,
[33:27] Speaker 4: People are not panicking. And if there's any country that
[33:32] Speaker 4: exists right now that can find a way to engineer
[33:35] Speaker 4: its way around this problem, it is literally China. And
[33:38] Speaker 4: then they're doing it right, like they I mean, the
[33:40] Speaker 4: entire basis of their energy security approach has been to
[33:43] Speaker 4: try to reduce their exposure to you know, the Strait
[33:46] Speaker 4: of Malacca, and they've done it successfully, right, And I
[33:49] Speaker 4: mean evs like have taken off. You know, they are
[33:52] Speaker 4: electrifying trucks faster than everybody else. So the trucks obviously
[33:54] Speaker 4: consume diesel. They've built high speed rail that is actually
[33:59] Speaker 4: you know, like a five, so people don't fly all
[34:02] Speaker 4: the same trips. Like, there are so many ways in
[34:04] Speaker 4: which they are still well positioned. And on top of that,
[34:07] Speaker 4: because they have these you know, inventories of oil and
[34:10] Speaker 4: so on, and they have the capacity to refine lots
[34:12] Speaker 4: of oil, they can also do things at least in
[34:15] Speaker 4: the near term to kind of i'll say medium term,
[34:18] Speaker 4: like in terms of months, not like years, that allow
[34:21] Speaker 4: them to like offer not bailouts, but help to cut
[34:25] Speaker 4: people to countries that are struggling right or in trouble
[34:27] Speaker 4: if it benefits them politically and it puts pressure on
[34:31] Speaker 4: people to cut deals with them, you know what I mean. Like,
[34:33] Speaker 4: if there's one thing that could push the US out
[34:35] Speaker 4: of the Asia Pacific, it's literally doing this where we
[34:37] Speaker 4: basically incentivize everybody to turn around and try to partner
[34:39] Speaker 4: with them because they have to make sure that that
[34:41] Speaker 4: like people's homes are lit and heeded, you know, partner Yeah,
[34:47] Speaker 4: so like you know so so I the the kind
[34:50] Speaker 4: of strategicy argument about the forty chests with China to
[34:54] Speaker 4: me is just dumb. It's it's like trying to reverse
[34:58] Speaker 4: engineer some sort of cause for this insanity when you
[35:05] Speaker 4: literally cannot find like a single win, especially when even
[35:08] Speaker 4: the administration's own stated goals which change every day anyway,
[35:11] Speaker 4: Have you know when they were to reopen the Straight
[35:13] Speaker 4: of four Moves, It's like the strait was only closed
[35:14] Speaker 4: because of what we did. So, like, in what world
[35:17] Speaker 4: does this makes sense as a rational endgame that benefits us?
[35:19] Speaker 2: Right?
[35:20] Speaker 4: So like like yeah, like I mean fair enough that
[35:23] Speaker 4: it is a problem for China, but like I wouldn't
[35:28] Speaker 4: really bet against their ability to like build other stuff
[35:30] Speaker 4: to get the power they need and also to act
[35:31] Speaker 4: ruthlessly to make sure they get what they need, and
[35:34] Speaker 4: obviously iron as a relatively small share of their actual
[35:38] Speaker 4: net imports, or at least the manageable share, they'll also
[35:41] Speaker 4: forget this.
[35:42] Speaker 3: There's still like oil going.
[35:43] Speaker 4: To China, because if they can can control who's transcending
[35:47] Speaker 4: the Straight, they can also let stuff through, right, And
[35:50] Speaker 4: there are limits to that, But like, if they're gonna
[35:53] Speaker 4: let any ships anywhere through, it's gonna be to China, right,
[35:55] Speaker 4: I mean, China's helping them defend themselves right.
[35:56] Speaker 5: Now, they're actually earning more at x sports currently to
[36:00] Speaker 5: China since the war started then before the war started.
[36:03] Speaker 4: Yep, yeah, exactly, So like if so, the other thing
[36:07] Speaker 4: is that, like if the argument that this forty chess
[36:09] Speaker 4: is that the strait is closed, the irony is that
[36:11] Speaker 4: that argument would have to assume that the US Navy
[36:13] Speaker 4: is the one closing the strait and we're actually not,
[36:15] Speaker 4: And we can't even reopen it with the US Navy
[36:17] Speaker 4: based off our own assumptions. I mean, you know, if
[36:20] Speaker 4: they can fire like a missile at a ship off
[36:22] Speaker 4: a technical within one hundred miles of the coast, in
[36:24] Speaker 4: what universe is a US Navy going to expose itself
[36:27] Speaker 4: to fire from three sides from mountain range and like
[36:30] Speaker 4: and actually hold that thing open like it's not going
[36:32] Speaker 4: to happen.
[36:33] Speaker 5: So but Pete Hexa this morning said that their navy
[36:37] Speaker 5: is completely obliterated and they're like ninety percent destroyed.
[36:42] Speaker 4: Yeah, and Ukraine ran the Russi Navy out of the
[36:44] Speaker 4: Black Seat without a navy. So like, I don't think
[36:46] Speaker 4: that that argument like makes sense anymore.
[36:48] Speaker 2: You know, Like.
[36:51] Speaker 1: Nick, talk to me a little bit about bond markets.
[36:53] Speaker 1: How does this affect bond Like the bond markets?
[36:57] Speaker 3: You a fan of bonds, is that at like I
[37:00] Speaker 3: dabble rates at least this voling market guys.
[37:07] Speaker 4: Yeah, well I'm a US national, so the stuff I
[37:09] Speaker 4: can actually like buy without massive IRS liabilities in the
[37:12] Speaker 4: US or in the nightmare so like I end up
[37:14] Speaker 4: getting shafted on the stuff over there. But anyway, I mean,
[37:17] Speaker 4: rates go up, Rates go up initially obviously, it's I
[37:20] Speaker 4: actually don't think it's a given that that's true later
[37:22] Speaker 4: in the year. I think the US the irony is
[37:25] Speaker 4: that because the US has more energy that it can produce,
[37:29] Speaker 4: but also is like letting its own labor market on
[37:31] Speaker 4: fire over time by deporting you know, like like people
[37:33] Speaker 4: who aren't here legally, unnecessarily and so on. You know,
[37:38] Speaker 4: you're gonna see like a higher kind of inflation effect
[37:43] Speaker 4: in the US than you would in Europe, where the
[37:44] Speaker 4: initial effect is incredibly inflationary because the price of skyrocket.
[37:47] Speaker 4: But then like nobody has a job, so that obviously
[37:49] Speaker 4: the central banks have to cut rates. So so the
[37:51] Speaker 4: irony is that, like if the damage is more acutely
[37:53] Speaker 4: felt faster in the US, rates would actually probably go
[37:55] Speaker 4: lower faster, but because it's not, the rates actually stick
[37:59] Speaker 4: higher for longer, whereas in like other parts of the world,
[38:02] Speaker 4: you know, what might start with a rate hike might
[38:05] Speaker 4: end up actually leading to rate cuts late in the
[38:07] Speaker 4: year because people realize the scale of the shock is
[38:09] Speaker 4: so immense that they just need to do it to
[38:11] Speaker 4: be able to finance and a pay for keeping things alive,
[38:14] Speaker 4: you know what I mean, just like like keeping companies
[38:16] Speaker 4: afloat and so on in the in a crisis situation.
[38:21] Speaker 2: Good god, Nick, is there any silver lining in this
[38:24] Speaker 2: at all?
[38:25] Speaker 4: No, dude, but this, this is this is the end
[38:28] Speaker 4: of burn. After reading like that's that's that's this is
[38:31] Speaker 4: what we're experiencing right now.
[38:33] Speaker 6: What do we learn from all of this?
[38:37] Speaker 4: Yeah, that's literally it like like it's from an economic perspective,
[38:40] Speaker 4: there is there's basically internationale and it's all it's all downside,
[38:44] Speaker 4: you know, So like I I you know, I'm sure
[38:48] Speaker 4: there's literally a world in which we could see some
[38:50] Speaker 4: kind of more positive outcome, if you know, a flowering
[38:54] Speaker 4: democratic iron was a reality, But I don't really see
[38:57] Speaker 4: that happening, right And I don't think that even if
[38:59] Speaker 4: even if that is happening, we're still talking about what
[39:01] Speaker 4: months of issues before this stuff gets uncorked and kind
[39:04] Speaker 4: of resolved, assuming that it ends like tomorrow.
[39:09] Speaker 1: And like the latest out of the White House was
[39:12] Speaker 1: that we're thinking about just like declaring victory and leaving
[39:14] Speaker 1: even if the straight is closed. So leave it to
[39:18] Speaker 1: somebody else's, you know, somebody else's problem, even though.
[39:21] Speaker 3: We've destroyed it.
[39:22] Speaker 4: And that could obviously, I mean that that could theoretically
[39:25] Speaker 4: three a free up some supply. But like, if you're
[39:28] Speaker 4: if you're Tehran, you just won, so you're gonna keep pressing.
[39:32] Speaker 3: So why wouldn't.
[39:32] Speaker 2: You Yeah, I'm sorry.
[39:35] Speaker 4: No, Like, like, why why wouldn't you just be like
[39:37] Speaker 4: all right, all right, dude, you want to cut a
[39:39] Speaker 4: deal over harmost, fine, you better leap our rain too.
[39:41] Speaker 1: Yeah, like we want our two million dollars toll for
[39:44] Speaker 1: every ship that comes to But.
[39:46] Speaker 3: Like but but like at that point, like like why
[39:48] Speaker 3: why would you stop?
[39:49] Speaker 4: I mean, and I know I know that we had
[39:50] Speaker 4: the speaker whatever recently just earlier today say that you
[39:53] Speaker 4: know they're open to negotiating, but like he hasn't led
[39:55] Speaker 4: negotiations at any point in the process.
[39:57] Speaker 3: So like.
[40:00] Speaker 4: So yeah, I mean, if i'd them, like I would
[40:02] Speaker 4: just keep I would I would I would see this
[40:04] Speaker 4: indication that they're winning, and then you just keep pressing
[40:06] Speaker 4: your advantage when you're winning in a situation because ultimately
[40:09] Speaker 4: their goal is to kick the US out of the golf,
[40:10] Speaker 4: like that's the that's the ball game, right, Thanks?
[40:16] Speaker 2: Uh? Good god man. Yeah, I'm all right, I'm fine.
[40:22] Speaker 2: I'll love making that portfolios. Fucked. No, just kidding, Jack,
[40:28] Speaker 2: Do you have anything else my stunt?
[40:30] Speaker 6: I mean, I think that's about it. What else haven't
[40:33] Speaker 6: we covered that's important to this to the Persian golf?
[40:37] Speaker 2: I mean, Nick, what do you track?
[40:38] Speaker 1: And in terms of economics, you know, I did just
[40:40] Speaker 1: for the record for everybody to know. I had helium
[40:43] Speaker 1: and aluminum and other commodities on my notes to talk
[40:46] Speaker 1: to you about, but you brought it up. So I
[40:48] Speaker 1: just want to make sure everybody knows that.
[40:50] Speaker 3: I mean, it's not as directly affected, but I do
[40:52] Speaker 3: keep an eye on copper. I've say cover that for work.
[40:55] Speaker 4: But basically, the short version of it is basically that
[40:57] Speaker 4: a lot of production in the DRC, which is kind
[40:59] Speaker 4: of one of the main kind of trees that's driven
[41:00] Speaker 4: supply growth the last five years, relies on sulfuric acid.
[41:05] Speaker 4: So if that market gets tight that that can affect
[41:07] Speaker 4: production negatively, so it can it can take off hopper supply,
[41:10] Speaker 4: but also copper is like historically the best commodity to
[41:13] Speaker 4: kind of give you a sense of how healthy the
[41:15] Speaker 4: economy is doing and compared to oil for instance. Actually,
[41:17] Speaker 4: I think it's actually little bit down prepared to when
[41:19] Speaker 4: when the conflict started. And I actually think the market
[41:22] Speaker 4: that doesn't really know how to price it right now,
[41:24] Speaker 4: but it's kind of it's assuming that the demand destruction
[41:26] Speaker 4: is coming. So like there's there's there's already a signal there, right,
[41:29] Speaker 4: it might be a strong one, but it's there. But yeah,
[41:33] Speaker 4: I mean, the most important stuff right now is to
[41:35] Speaker 4: focus on like the physical markets for oil. So don't
[41:38] Speaker 4: just look at at brands, look at like what's clearing
[41:40] Speaker 4: in Singapore and like like you know, from different blends,
[41:42] Speaker 4: you know what I mean, Like you have to kind
[41:44] Speaker 4: of look market by market. Henry Hub is the name
[41:49] Speaker 4: of the US kind of natural gas benchmark. Look at
[41:51] Speaker 4: the non US benchmarks for national gas, so like TTF
[41:53] Speaker 4: in Europe, AKM for the lergy contracts going to like
[41:57] Speaker 4: Japan and the Asia Pacific track. That helium isn't really
[42:01] Speaker 4: transparent it's a small market, but yeah, aluminum for sure.
[42:07] Speaker 4: But I mean the other thing too, to keep an
[42:09] Speaker 4: eye on, to get a sense of like the scale
[42:12] Speaker 4: of the if not the damage, the expected damage is
[42:17] Speaker 4: like like look at like the announcements about like eb
[42:19] Speaker 4: sales and you know, solar installations, battery installations, not even
[42:23] Speaker 4: in the US, but like in Europe, in across Africa,
[42:27] Speaker 4: you know, in poor countries in Nasia Pacific. Like, that's
[42:29] Speaker 4: actually a really useful indicator for how much stress people
[42:32] Speaker 4: are feeling. And I think that actually is a better
[42:35] Speaker 4: way of understanding how structurally significant significant of the current shock
[42:39] Speaker 4: is that Like people in the US can take for
[42:41] Speaker 4: granted the reliability of fossil fuel power and so on,
[42:44] Speaker 4: but that's not going to be the case for a
[42:45] Speaker 4: lot of people in a lot of the world.
[42:49] Speaker 6: Nick, are you still writing on substack?
[42:53] Speaker 4: I'm starting it up again slowly. It's just like the
[42:55] Speaker 4: last like month was the worst possible time to restart.
[42:58] Speaker 4: So I had one piece out and I was like
[42:59] Speaker 4: I was like, oh this and then because we're on
[43:00] Speaker 4: it's like this is not happening.
[43:01] Speaker 6: But right now you had some of the primly good,
[43:04] Speaker 6: really good Russia centered stuff on there as I recall
[43:07] Speaker 6: tell people where they can go to find that.
[43:09] Speaker 3: Yeah, so the the new substect name is Sick Transition Gloria,
[43:15] Speaker 3: so you know, like like playing off the Latin phrase.
[43:18] Speaker 3: But it's just it's upstack dot com. It's going to
[43:21] Speaker 3: be a bit more open, so it's going to be
[43:23] Speaker 3: some personal stuff. It'll have some stuff on just like metals,
[43:25] Speaker 3: but it's you know, I'm going to make sure that
[43:27] Speaker 3: there's Russia content in there and that it kind of
[43:29] Speaker 3: comes back to Russia because I am.
[43:31] Speaker 6: But we're all going to also going to get some nightlife.
[43:34] Speaker 4: Well, I got to promote the book that I'm still
[43:36] Speaker 4: finishing hopefully for late summer on the Russian economy.
[43:40] Speaker 2: So it's just nice.
[43:43] Speaker 4: That's called Empire of Austerity. That's with Herst Publishers. And yeah,
[43:48] Speaker 4: I mean, but we'll see exactly when it comes out.
[43:50] Speaker 4: I have to go through the kind of last rounds
[43:51] Speaker 4: of the editing process of the moment. But it covers
[43:55] Speaker 4: the evolution of the kind of political economy of the
[43:57] Speaker 4: regime from the nineties up to last year through the
[44:01] Speaker 4: lens of fiscal policy as like the main character of
[44:03] Speaker 4: like the kind of the original sin for lack of
[44:06] Speaker 4: a better phrase of like how everything came together.
[44:09] Speaker 6: You want to hit that real quick before we get
[44:11] Speaker 6: going just the Russia stuff.
[44:12] Speaker 2: I was gonna ask.
[44:13] Speaker 1: I was gonna ask a specific question about Russia, Like
[44:16] Speaker 1: I've seen that due to the war, like parts of
[44:19] Speaker 1: the segments of the economy have like sparked up again, right,
[44:22] Speaker 1: Like they're manufacturing and building weapons and stuff like that
[44:25] Speaker 1: in shells? Is there have they built up to the
[44:28] Speaker 1: point where there are lobbying like the government to keep
[44:32] Speaker 1: it going because we're making a ton of money and
[44:34] Speaker 1: like money's being you know, injected into certain areas that
[44:38] Speaker 1: didn't have it for a long time.
[44:41] Speaker 3: So the unfortunate answer is yes and no.
[44:44] Speaker 4: It's big enough that if you are a military manufacturer,
[44:46] Speaker 4: you're obviously saying, give a key, keep giving us money,
[44:49] Speaker 4: but your costs are increasing so quickly that you're not
[44:50] Speaker 4: actually seeing a higher profit necessarily. Okay, The reality is
[44:55] Speaker 4: the Russian economy right now is probably already in recession.
[44:57] Speaker 4: I mean it was officially officially contract do you an
[45:00] Speaker 4: your resid January? But the civilian economy has been in
[45:04] Speaker 4: recession basically since late twenty twenty four, and it Initially
[45:07] Speaker 4: it was very mild, you know, I mean it was
[45:08] Speaker 4: more extagnation, kind of a tiny stick down, but it's
[45:11] Speaker 4: speeding up over time and there's no like relief inside.
[45:17] Speaker 4: I mean, the higher oil price isn't really helping them.
[45:19] Speaker 4: First off, they've lost forty percent of their export capacity
[45:21] Speaker 4: for crue oil because Ukrainian strikes some Baltic ports, whereas
[45:26] Speaker 4: you know Ukraine, Twitter will say, you know, Ukrainian sanctions
[45:32] Speaker 4: like you know the but like now that Ukraine has
[45:34] Speaker 4: its own ballistic missiles, they can do a lot more
[45:36] Speaker 4: damage to refineries into these targets, and Russia is also
[45:38] Speaker 4: just running out of a d like like the irony
[45:42] Speaker 4: is that in Russia's size is its biggest liability when
[45:45] Speaker 4: it comes to stuff, right, Ukraine can have a much
[45:46] Speaker 4: denser air defense network than Russia can, and so I
[45:50] Speaker 4: think that's finally having a bit more of an impact.
[45:54] Speaker 2: But like.
[45:56] Speaker 4: The wartime boom is because people kind of thought of it,
[45:58] Speaker 4: it was mostly a myth, and it was it was
[46:01] Speaker 4: really the first half of twenty twenty three that people
[46:02] Speaker 4: saw their wages grow in real terms because of some
[46:05] Speaker 4: kind of quarks of the Russian economy, like the way
[46:07] Speaker 4: the way labor market structured, and so the short version
[46:10] Speaker 4: of it, to be nerdy is that, like in the
[46:14] Speaker 4: way that the budget system works, when you have a
[46:16] Speaker 4: procurement contract for like a federal project or with like
[46:19] Speaker 4: a kind of a state owned company, typically you're limited
[46:23] Speaker 4: to pay thirty to fifty percent of that contract upfront
[46:26] Speaker 4: and the rest is paid on delivery. But in the
[46:29] Speaker 4: beginning of twenty three, because they really had to get
[46:31] Speaker 4: mobilization going and getting more more stuff to the front,
[46:34] Speaker 4: they allowed people to pay ninety percent up front. So
[46:36] Speaker 4: you just had this flood of money hit the market
[46:39] Speaker 4: all at once, which created this kind of catalytic effect
[46:41] Speaker 4: for suddenly all these you know, all these factory workers
[46:43] Speaker 4: either wages aren't rising because there's like a lot of
[46:45] Speaker 4: demand for their labor, and that spills over right. And
[46:48] Speaker 4: then on top of that, you have the wartime bonuses.
[46:49] Speaker 4: So guys get I mean literally, if you if you
[46:52] Speaker 4: sign up and serve the front and die the front,
[46:56] Speaker 4: your family gets the equivalent of like thirty five years
[46:58] Speaker 4: of like the average salary pay. So you're you're literally
[47:02] Speaker 4: worth more dead than alive in a lot of parts
[47:04] Speaker 4: of the country, to like your loved ones in terms
[47:07] Speaker 4: of how like like the way the economy structured so
[47:10] Speaker 4: that they didn't they didn't use like mass conscription. They're
[47:13] Speaker 4: they're bribbing people to die. That's basically the way that
[47:15] Speaker 4: the regime is doing it right, and and that has
[47:19] Speaker 4: some positive effect because obviously that the money goes into
[47:21] Speaker 4: people's pockets and they do spend it. But like you can't,
[47:24] Speaker 4: like you can't escape the fact that like virtually all
[47:26] Speaker 4: the production increases in the economy or military since the
[47:28] Speaker 4: war began, and you know, you you have high inflation
[47:33] Speaker 4: domestically from a lack of a lack of labor and
[47:36] Speaker 4: also sanctions, but like increasing like lack of labor because
[47:38] Speaker 4: every single day more working age men are dying and
[47:40] Speaker 4: you're not replacing them. And like it's not like massive,
[47:43] Speaker 4: but they are cracking down a bit on like immigrant labor,
[47:46] Speaker 4: so they're squeezing that more because you know, the regime
[47:48] Speaker 4: has become a lot more like kind of native as
[47:50] Speaker 4: populous in the way that it approaches the rhetoric of
[47:52] Speaker 4: these things, even if it acknowledges that it needs them.
[47:57] Speaker 4: So yeah, I mean I would else I also wouldn't
[47:59] Speaker 4: trust official inflation data at this point because if you
[48:01] Speaker 4: look at what people actually consume and pay for, food
[48:05] Speaker 4: and staples account for about forty percent of the average
[48:08] Speaker 4: household budget. The price that for food and staples has
[48:13] Speaker 4: grown at like twice three times sometimes five times the
[48:16] Speaker 4: rated like official inflation an a given year since the
[48:18] Speaker 4: war began, you know what I mean, So clearly something's
[48:21] Speaker 4: going on there. You know, services for like tourism got
[48:25] Speaker 4: really expensive because people coudn't fly abroad as easily, so
[48:27] Speaker 4: like all the Russian domestic tourism got a lot price here,
[48:30] Speaker 4: like it just you name it. Basically, there's there's a
[48:32] Speaker 4: price issue of some kind, even if like officially inflation's
[48:36] Speaker 4: not too high because interest rates are really high and
[48:38] Speaker 4: they've come down some, but like not enough to meaningfully
[48:40] Speaker 4: change the game. I mean, if you're still talking about
[48:42] Speaker 4: an interest rate a like between twelve and fifteen percent
[48:45] Speaker 4: as low, yeah, you know that's not good. So so yeah,
[48:51] Speaker 4: I mean, I think if you were to lift Sanctious tomorrow,
[48:52] Speaker 4: Russia would probably still contract economically for several years.
[48:55] Speaker 1: Yeah, I mean, I want everyone to check out Nick's
[48:58] Speaker 1: substack on and put a link in the description as well,
[49:01] Speaker 1: and when your book comes out, we'd love to have
[49:03] Speaker 1: you back on to deep Dive and give it a
[49:05] Speaker 1: good push, especially.
[49:09] Speaker 2: Of course Jack, do you have anything No, No, I
[49:12] Speaker 2: think this was great.
[49:13] Speaker 6: Thank you.
[49:14] Speaker 1: I mean, there's every time you do a show like this,
[49:17] Speaker 1: it's like never good news. It's like never good news.
[49:20] Speaker 1: I need, I need like a good news show or
[49:22] Speaker 1: something like that, or just give me some tips or something.
[49:24] Speaker 3: Nick, you know, I think you got a crowdfund a bunker.
[49:29] Speaker 2: That's it. Yeah, I mean, on.
[49:31] Speaker 4: The look, I mean, right now, cash is king, like
[49:36] Speaker 4: your stocks are probably gonna lose values, sokay, you want
[49:38] Speaker 4: to have cash to deploy once things kind of settle
[49:40] Speaker 4: bit more. The commodities are obviously a safe to hold
[49:44] Speaker 4: in the sense that they're a hedge. So like if
[49:46] Speaker 4: you if you know what you're what you're buying. But
[49:47] Speaker 4: the problem is that like the scale of demand destruction
[49:50] Speaker 4: will be so big late in the year that that's
[49:52] Speaker 4: you can't always you can't timing. That's gonna be a
[49:54] Speaker 4: bit of a mess, you know what I mean. So
[49:55] Speaker 4: you can buy buy an ETF, go ahead, but like
[49:58] Speaker 4: it's gonna be a bumpy ride.
[50:00] Speaker 2: So we're short and stuff, is what you're saying.
[50:03] Speaker 3: Yeah, I mean I would.
[50:03] Speaker 4: I would definitely I go long on food. I mean
[50:06] Speaker 4: think if you if you, if you like, if you
[50:08] Speaker 4: prepare for food, prices go up, and that's that that
[50:10] Speaker 4: takes longer to feed into the system, because fertilizer obviously
[50:13] Speaker 4: is a planting season, right, so it takes months, but
[50:14] Speaker 4: it shows up. Get ready for that. You know, that's
[50:18] Speaker 4: probably safe. You know if if you, if you have
[50:21] Speaker 4: an exposure, maybe a timber read no ship as people
[50:27] Speaker 4: start burning more of the.
[50:27] Speaker 3: Stuff at home.
[50:28] Speaker 4: I mean I'm obviously kind of exaggerated, but like the point,
[50:31] Speaker 4: really weird stuff that is like a safe haven in
[50:34] Speaker 4: the kind of current truck.
[50:36] Speaker 2: Good god man, all right.
[50:39] Speaker 1: And so the end of the days is coming. What
[50:40] Speaker 1: happens if the AI bottom falls out while this is going.
[50:43] Speaker 3: On, Well, I mean, when do you want to retire?
[50:49] Speaker 2: I don't know. I mean that's all I mean.
[50:50] Speaker 1: I just want Team House revenues to continue to grow,
[50:53] Speaker 1: That's what I want.
[50:54] Speaker 4: Yeah, I mean, the AI was already a bubble. Everybody
[50:58] Speaker 4: knew it, so scale the bubble up is debatable. And
[51:01] Speaker 4: I want to say bubble, I don't necessarily mean catastrophic
[51:04] Speaker 4: because obviously there could be a breakthrough of like sudden
[51:06] Speaker 4: productivity gains or whatever that leads to a search of revenue.
[51:09] Speaker 4: But physically it's really clear that the scale the data
[51:14] Speaker 4: center build the people are assuming is on shaky ground.
[51:18] Speaker 4: It can still literally materialize, but like getting that much
[51:21] Speaker 4: power to grid that fast in the US is really
[51:23] Speaker 4: hard and not really happening. There's definitely people like over
[51:27] Speaker 4: egging the kind of the assumptions about need because there's
[51:32] Speaker 4: still gonna efficiency gains, there's STI gonna be other stuff.
[51:34] Speaker 3: It kind of shows up.
[51:37] Speaker 4: But if that bottom falls out and the S and
[51:38] Speaker 4: P five hundred is gonna take a massive dive, and
[51:43] Speaker 4: you know, I think that it would really be a
[51:47] Speaker 4: reset and the narrative maybe maybe not in the reality,
[51:50] Speaker 4: but at least but on the narrative around power and
[51:53] Speaker 4: then and energy stuff, because a lot of the energy
[51:54] Speaker 4: conversation the last two years has been like how do
[51:56] Speaker 4: we physically build like the grid and like the power
[51:59] Speaker 4: we need to power these data centers? And you know,
[52:04] Speaker 4: if Taiwan, South Korea and Japan, et cetera, maybe even
[52:08] Speaker 4: trying to I don't try, it would be different. Are
[52:10] Speaker 4: making fewer chips later in the year or art making
[52:12] Speaker 4: trips because they're running out of like energy or like
[52:14] Speaker 4: healium or whatever. That also is going to be an
[52:16] Speaker 4: issue because like these data centers burn through chips very quickly,
[52:19] Speaker 4: right like the high end ones, Like if you're talk
[52:21] Speaker 4: about the highest end part of the market, it's like
[52:22] Speaker 4: a couple of years or whatever that they'd appreciate. So
[52:27] Speaker 4: so like it totally changes the way we'd have to
[52:29] Speaker 4: think about the next couple of years for the investment plans.
[52:31] Speaker 4: And I think that like ironically, that might actually be healthier,
[52:35] Speaker 4: you know what I mean. It might actually be a
[52:36] Speaker 4: better market in that sense. Yeah, but but it would
[52:39] Speaker 4: definitely take big chunk out of the SEP five hundred
[52:41] Speaker 4: and people's kind of I think expectations for growth.
[52:45] Speaker 1: All right, you heard it here for short everything, guys,
[52:49] Speaker 1: just about everything. Nick again, really appreciate.
[52:53] Speaker 2: It, man, Yeah, thank you.
[52:55] Speaker 1: The linked your soft stack is down in the description,
[52:57] Speaker 1: so please everybody check it out. Everything else, all our
[53:01] Speaker 1: stuff is down in the description. Check it out there
[53:03] Speaker 1: and we'll see you next time.
[53:05] Speaker 3: Great, thank you so much for having me.
[53:11] Speaker 6: Hey, guys, I want to take a moment to tell
[53:12] Speaker 6: you about the Teamhouse podcast newsletter. If you go and subscribe.
[53:17] Speaker 6: It's totally free, and what it will do is aggregate
[53:20] Speaker 6: all of our data, all of our content that we
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[53:27] Speaker 6: our geopolitics podcast, Eyes On, things that I write journalistically
[53:32] Speaker 6: with Sean Naylor on the high Side, anything else that
[53:36] Speaker 6: we have going on, books, we recommend upcoming guests that
[53:40] Speaker 6: we have coming on the show, and also you know,
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[53:50] Speaker 6: It's just a kind of roll up of all of
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[54:02] Speaker 6: The website for that is Teamhouse Podcast dot kit dot com,
[54:06] Speaker 6: slash join So we hope to see you there.
[54:09] Speaker 2: The link will be down the description

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