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IS THE BEAR MARKET DONE? | STOCK MARKET TALK
Recorded: April 2, 2026 Duration: 2:41:03Space Recording
Full Transcription
Thank you. Hello, hello.
What is up?
What is up, everybody?
How are we doing?
Hope you guys are all doing well.
Another intriguing day in the stock market as always. Started off pretty red.
We had an intraday reversal off of a headline around the Strait of Hormuz possibly being reopened.
This was a conversation from the Iranian side, maybe it, it was an interesting headline, it kind
of felt like basically the headline was Iran is talking with Oman and they're going to
have terms to reopen the straight of her moves.
It felt like they were trying to come at this from a point of strength.
But we are talking about the straight being opened and I don't think the market really
cared much deeper into those conversations.
They just kind of saw some relief there so it's something
to watch going forward that was probably the well that was the biggest story of the day if you were
looking around 10 10 30 a.m eastern and what that headline was that's that's what moved us higher
there a couple other headlines going on but it was an interesting day across the edge. I appreciate everyone for hanging out with us to start here.
67 people.
Should be a fantastic conversation.
Let me get some of the invites sent out here, and we will get started.
What is up, Mr. Options Mike?
How you doing?
Kevin, man.
How are you, bud?
I'm doing well. S slightly green day in the market
not so bad kind of a weird day right you know overall we'll talk about it but yeah kind of a
very strange little day here overall it was a holiday day pretty red yeah the stock market
is closed tomorrow we do have nfp tomorrow morning interesting to start off pretty red
that i thought oh here we go again but
this is actually not so bad for the bulls honestly i mean it's maybe not what not what you wanted to
seen but it's definitely not a breakdown here yeah i don't know how we'd much buy it i mean
we'll talk about as we go here i don't know what to believe in this market i think um stock talk
summed it up the other day when he said, you know,
it's sad that the market trusts Iran
more than it trusts our president at this point,
which is pretty much a good summary.
It's just a weird market,
but we'll talk about it when we get everybody in here.
Yeah, it has been an interesting market.
There was a couple of news headlines that we had today tesla
came out and gave out their quarterly delivery numbers is a pretty low number 358 but again
market doesn't necessarily care too much about that one tesla has shown some relative under
performance today down 5.6 i saw rivian right off the bat started to rip a little bit. How did that end up holding on?
Rivian.
I mean, I think the problem with Tesla is everybody was expecting them to have better numbers.
You know, the street numbers were they were going to be better that they had a good quarter.
I mean, obviously it came in below the street numbers much below
yeah yeah much below
but that was a miss there
there was a little more stories around the SpaceX
conversations around Saudi Arabia
maybe being an anchor investment 5 billion in it
we'll see Amazon offering
a starting out with a surcharge
Amazon will
start charging sellers who use its shipping services
a 3.5% fuel and logistics surcharge starting later this month.
That was a story out of Bloomberg today.
Open AI has agreed to acquire TVPN.
I thought that was a very interesting deal that came out today.
TVPN is a media-type company.
They focus in specifically more in the tech world and the VC world.
I'm sure a lot of you guys have seen their clips and heard of them.
It's a very interesting acquisition, but OpenAI has agreed to acquire TVPN.
It was a little random.
Sam Altman and OpenAI are also reportedly still in talks with Disney
about a collaboration despite the Sora shutdown
so a lot of people were quick to jump
on the graves there of what was happening
of a partnership saying it's dead but
maybe it's a little bit more of a reorganization
of a partnership and we shall see on that one
Google came out with a new
Gemma 4 model
some open model
Nvidia came out saying that they partnered with Google on it
I don't exactly know, but that did happen.
That came out today.
I'm not the expert in the area.
This Iran headline around the Strait of Hormuz
possibly being opened up.
We had Blue Owl, another private credit thing.
They capped fund redemption
to some of their funds at 5%.
Apparently, like 22% of the shares
of their assets under management, 22% of the shares uh in the of their assets under management 22
percent of the owners in those shares wanted to sell during the quarter and they only allowed
five or percent of them to get out we did have initial jobless claims this morning came in
slightly below expectations but still nothing crazy there and yeah that was a majority of the
headlines obviously president trump came out last night and he had his talk, his conversation,
whatever it was,
basically saying we're close to victory
in the Iran...
We've obliterated them, Evan.
They're done.
We've obliterated them.
There's nothing left of the country.
I can do whatever I want.
I can go over there and do a hula dance
if I want to in the middle of their city.
Nobody can do anything about it.
That's what it was.
Yeah, it was an interesting one.
It wasn't anything new.
Everything that was said on that one was stuff we've heard and talked about.
Basically, he has said himself over the last 48 hours.
So it was a little bit of an interesting one.
The market was on edge.
People were on edge watching it.
But nothing really too much came out of it other than stuff that we already knew uh this is not something that
is done quite yet seems to think it's close i guess the market's also reacting today because
there have been a lot of headlines in the direction of iran saying this isn't true blah blah blah
but we are getting headlines around uh now that the straight might be open. So I don't know.
It feels like...
Except oil is saying it's not.
Oil is saying this is not real.
So you can look at the index as all you want here,
but crude is over 110, right at a 111.
Oil is saying they don't believe...
They don't really believe this.
We'll see.
We'll see which one of the books first
what's up stock talk prime leo walking time we'll get a paddle and everything up here going but
oh no he's yeah i'm about i'm about to take him out in a little bit um but i'm just doing a
portfolio update for the Discord right now.
Nice.
We sell anything?
We make any changes?
Nope.
This was a weird day.
It was a day that I feel like it looked like they had us in the first half.
It seemed like that rejection was coming.
Obviously, we were talking yesterday.
We wanted the bulls to recapture a certain level.
But I think if you're a bull, this day today is not one that you're like,
okay, all right, it didn't break it down.
There was no news last night.
Monday it is.
This feels like a Monday, really.
Yeah, it's sort of a nothing day.
I think people are indecisive going into the weekend,
not sure if there's going to be escalation or de-escalation, obviously. And so that's, I think, what's keeping both buyers and sellers hesitant today.
It's also a holiday weekend, my friend. And it's not a lot of volume. It's Passover. We're going to Easter, right? There's just not a lot of people. Look at the market this afternoon. There's no volume at all. People are gone. I'm 100% with you on that.
I mean, people probably
walked off their desk today around lunchtime
considering the market's closed tomorrow.
Yeah, I mean, there's stuff I want to buy.
I'm,
for better or worse, being patient.
It's been a shop fest for me, even in my personal portfolio for
like the last month and a half. I'm still sitting at a great performance here today, in my opinion,
things considered. I'm sitting at closer to 48% into the close. I posted the performance earlier
as 47, but closer to 48 into the close on the year. And, you know, in three months, I'm not mad at that.
You know, in bull markets where things are trending up,
I want to do hundreds of percent because I'm a stock picker
and I'm active every day and I need to be rewarded for that time input, right?
So I want to dramatically outperform the market
when we're in a trending bull market.
When we're in a choppy market, I just want to outperform.
I just want to protect capital.
And I'm doing that this year.
So is it annoying to not be able to sort of get the breakouts that I want
on positions that I think deserve them?
Yeah, it's kind of annoying.
There's two positions that I have that I'm sitting on that are red for my entry.
It's been a long time for that to happen for me.
Not that I never lose, but usually when a position goes red for my entry, I end up cutting them because the market conditions are favorable and I can rotate the capital.
You know, I take losses like everyone else, but I usually move on from those drawdowns.
I've made exceptions to that this year because of the market environment, you know.
So names like Synaptics, ITRI, which I bought higher
are a little bit lower for my entry.
That's okay.
I can live with that.
All my other positions are bright green.
I did a little post earlier today about what are the biggest factors this year
that are holding up my portfolio and allowing me to outperform
even on a difficult year.
I just went through my P&L list by ticker
and sort of just looked at what the biggest factors were. Obviously, VIAV has been the
biggest factor for me this year. That's my largest position. It's more than doubled.
The second and third largest positions, ENS and Amcor have held up really well. ENS is up like 18% on the year.
Amcor is flat.
Two of the stocks we bought really early in the year, GLDD and THR,
they both got bought out.
The first options trade I took this year was AVAV calls way before it tanked.
Those around 1,000%.
IRDM, which has been amazing lately.
We got a really timely entry on that. Those contracts are
up over 200%. So there's opportunity here and there's trades to be made, you know, um, and on
a year where I'm a tech focused mid cap investor, this is not a great year for tech focused mid cap
investors. So being up almost 50% in three months, I'll take that, you know, that's certainly relative
outperformance versus my cohort and
versus the types of stocks that I operate in. So I know my lane. I know where I operate. I'm not
going to aggressively regime change my entire portfolio just because there's chop in the market
and extended energy prices. Instead, what I do is I just manage the positions
appropriately, according to my risk profile, according to my cost basis, according to how
much leverage I have on them. And that's really what saved my ass this year and allowed me to sort
of survive through the chop. Well, more than survive, but allowed me to produce a healthy
return through the chop. And there've been a lot of obviously lucky entries and some snipes that we've taken that have helped with that as well.
But today, big day for IRDM.
That's like one of the only, no, not one of the only,
that's the only options only position I have in my portfolio.
And that's up 13% today.
And it's basically been going up every day during this chop.
I mean, it's one of the very few sort of tech stocks.
I mean, the space stocks are doing well in general, but it's one of the very few tech stocks that I have
that's been trending up during this market correction, right? I mean, it's gone from
20 to 32 now in very short order. So yeah, that's a nice one for us today. I mean, NetBias is up
again today. Obviously, it's been very strong relative to the data center peers lately. I think rightfully so. I mean, they signed a 20-plus billion dollar
contract very recently, and then they already have a $19 billion contract with Microsoft. So
I think they're executing well. VIAVI has been my play on photonics. It's not a direct photonics
OEM or anything like some of these other stocks,
but it's more than doubled year to date, right? And it's my largest position. So that's been a
huge contributor, but that's a stock I'm still holding in a tremendous amount of size. It's
actually the largest weighting I've had in my portfolio in any stock in a long time. And it
served me well this year, but I still want more from that one. So
I continue to consider them sort of a toll booth on the photonics industry. So I've seen no reason
to sell that kind of winter agnostic exposure. So yeah, I mean, look, the market's choppy. It's
kind of annoying. There's lack of follow through. There are some stocks I wish were breaking out
more aggressively. But I mean,
if you think if you pick your spots and you're in the right names and you're diligent towards
the chart, you can still make money in this environment. It's just not going to come as
quickly. And you're not going to be able to hit the targets as quickly. Like in a raging bull
market like last year or the year before, where everything's just vertical, it's pretty easy to just like nail an entry and get insane follow through like within a matter of months.
These aren't necessarily the conditions where that's going to happen.
So yeah, just some comments I wanted to make.
But anyway, I got to do this portfolio update first and then I'll come back in.
I see Josh is up here though i'm
excited probably i'm excited for josh to get up here this is josh there has never been a time
where oil and gas has been this much in in the rage and the conversation going on here
i'm sure you're getting a bunch of calls in 22 and 22 we were running the show in 22
it was when there's also a time where it went negative.
That was an interesting point there.
I'm sure it's been a few years, but come on.
We're getting close to the peak.
Maybe the peak is in a month from now. I don't know. We'll see.
Josh, do we have you?
Yeah, hey. How's it going?
How are you doing, sir? I appreciate you for joining us.
Tell me, peak interest in the oil and gas conversation, how far off of it are we right now?
Is there a time that you think was a little more, or are we about there?
I think we're still pretty far off, because in 2022, I go on, I don't know if you guys were doing these,
but I go on a Twitter space, and it would be crypto guys who were trying to figure out what oil stocks to own.
And I haven't actually seen almost any of that.
I've just seen everyone decide that oil stocks you can't own because oil is going to go down.
And so I don't know.
I mean, from my perspective, I guess people are paying attention.
They're sort of speculating on oil options or something,
but there just doesn't seem to be much interest,
much real interest in the stock.
So this seems like way lower interest so far
than what I saw in 2022 so far.
So we'll see.
It doesn't mean that the oil price
will necessarily go up more
just based on that sentiment or whatever,
but I don't know.
I don't see people talking about how they are finding XYZ oil stock or whatever.
It's sort of weird to see oil up this much and people care this little,
but that's my take on it.
Interesting. Okay.
Where do you think – I can just ask you the general take on this market, but where do you think in the oil gas market people should be looking? Where are you kind of interested in in this area? Where's a lot of your mind process and thought process and I'm sure investment research and all that time? What part of this market is being spent on right now?
being spent on right now? Yeah, sure. So I think there's parts of the oil and gas space that are
really overvalued and not very interesting to me. And so early in the year, Exxon and Chevron and
Schlumberger and Halbert and some of the very biggest and best known oil companies,
their stock prices went up a whole lot. And so they ran a lot.
And maybe they're cheap if oil is going to stay at 111 or wherever it is right now.
But if you think it might not, then they actually look quite expensive.
Some of the small caps have gone up a lot, which is different from what you've seen for the last few years,
where almost none outperformed.
But there's a whole bunch that haven't yet.
So I think that sort of two areas
that are most interesting to me are the special situation.
So the companies that had too much debt at lower oil prices
and are able to rapidly delever or refinance
or whatever here, because there's more credit availability
to them because of higher prices.
And because of their, also just their cash flows are a lot higher, even if they have hedges. In many cases, they make a little
more money from higher prices. And then oilfield services, the companies that have exposure to the
Persian Gulf area have not done so well because there's been a big slowdown in drilling activity
and related services there, as you'd expect, because they can't get the whale out.
So there's less of an incentive to go drill wells.
And there's some concern around the physical safety of the offshore rigs and other equipment that's in the Persian Gulf.
But the onshore drillers in the U.S. and some of the other services, those haven't really gone up much,
I think partly because everyone does these just ETFs. And so the OIH ETF, it did well again before the war,
but the big companies in it are very exposed to the Persian Gulf, which is seeing a slowdown in
activity. And so there's a sort of weird passive versus active tug of war going on where the
rig companies, a lot of them haven't gotten a lot of orders yet, but it looks
like it's coming. And the other, so the stocks should, like if it was a normal cycle, they would
be up a lot, but because they're in the mean ETF, they're in OIH, which is the oil services ETF,
isn't up that much because the big components have negative exposure because of the war.
There's sort of this like growing mispricing.
So I think that's probably,
other than the sort of very obvious refi
or just too cheap small caps,
that services sector where the smalls
are sort of getting weighed down
by the bigs exposure to the Middle East
is the most interesting to me.
Okay.
What is happening to like the,
the U S like Permian base and all these people,
who really don't have exposure to the straight up for moves.
Isn't it just businesses prices are up,
they're making more money and there was really no disruption.
Yeah.
Yeah.
I mean,
there's no disruption.
those guys,
some of them are starting to drill more,
mostly the smaller private companies. The bigger companies for now are saying that they're not going to, but you can just see
over time that historically there's a very high correlation between higher oil prices and higher
drilling activity. And I was looking back, there's actually also a high correlation between how
quickly the prices move and how much the companies insist that they're not going to add rigs.
And then just magically two months later, every other time this has happened, they have a bunch more rigs running.
So I would expect that there will be much more activity in the Permian and elsewhere in the next few months.
But we haven't seen the only the only folks that have added to their activity levels are privately held
and they don't have to publicly report.
You can't buy those stocks, but the companies that service them, in many cases, are public.
But in terms of those companies' fundamentals, yeah, the local price for oil here in the
U.S., the WTI price, which is delivered at, I think it's at Cushing, Oklahoma,
but the price in West Texas is only a dollar or two off from that. And the price at the Gulf
Coast is also only a few dollars off from that. It's the price you see on your screen. So it's
close to that 111 or whatever I haven't looked in the last 20 minutes or so, but it could be awful lot from that.
But yeah, 111, it looks like. So those companies are making a lot more money right now. I think
the reason that those stocks aren't up a lot more, in many cases, one, the valuations were pretty high.
And then two, a lot of them have a lot of their oil hedged. So they've essentially pre-sold their oil at, let's say, 60 or 65 or
70 or something. And so even though the price that you see and I see is 111, the price they're
actually getting in many cases for a large portion of the oil they produce is the price they
contracted at, which was 60 or so. Hey, Josh. It's Mike, man. How are you?
Hey, good. I have a little different theory on it. I think that energy names and oil are
detachment because energy companies tend to do well when crude's around $70 a barrel. That's
their sweet spot. When it gets up this high, we start worrying about recessions and using less
oil and problems.
And I think that's why we're seeing the collapse.
I mean, I agree that they got extended, especially names like Exxon Mobil and Chevron.
But I think part of it is that they generally and historically just don't do well when oil is extremely expensive.
You have any thoughts on that?
Yeah, I mean, that's not true.
not true. Like if you look at the price history, it's just not, there's, there's a very, there's a
Like, if you look at the price history, it's just not.
high medium term correlation between oil prices and oil stock performance broadly. And so that
there are sometimes there are temporary dislocations in both directions, but yeah,
I'd be careful to read too much into one day or two day or whatever disconnects because historically there's very strong catch-ups
and you don't know whether it's going to be that the price of oil is going to be down $10 tomorrow
or that XLE or whatever is going to be up a little bit.
But over time...
That I 100% agree with.
I have no idea where we're going here.
The fact that oil is still 111 today tells me they're not really buying this story that I ran throughout there today.
Yeah. Yeah. And again, like there's a lot of speculation.
Like I can share what I think might happen from an oil price perspective.
I was just trying to share the question is, hey, what do you find interesting?
And I think I agree with you. I don't think that Exxon and that sort of cohort, not about Exxon specifically, but just using it as an indicator of a cohort.
That cohort is just not that interesting to me because they already moved so much. And you had all these people in February and January saying, how can
Exxon be up this much and oil's flat? And then now you see oil moved up a lot. So Exxon was just
sort of pricing it in. And again, those large caps, super majors, they were sort of pricing
in what's happened already a couple months ago. It's sort of amazing when you look at it.
And they start to get cheap at current prices, but not nearly as cheap as some of the smaller
companies. And then the forward curve isn't pricing that in. So it doesn't mean it won't
happen, but they can't lock in $111 oil for the next year. They can lock in $85 oil or something
for the next year. So there's not really a price that they can enjoy for beyond the current month
unless the next month trades up to the current level,
which is certainly not guaranteed.
Thanks, Josh.
Yeah, and again, I just think my world is sort of a few things.
One, I'm trying to figure out, hey, are like oil and or natural gas prices and sort
of related commodities going to crash or skyrocket anytime soon? So I've been like pretty bullish on
oil for a while because I thought that geopolitical risk was mispriced. And like, this was a joke on
Twitter for a few years where everyone's like, oh, like, you know, nothing ever happens. And so,
I mean, which was crazy to me, but there was active pricing as if there
would never be something that would happen. And this is a very extreme event, but there's a long
history of there being supply disruptions intermittently for oil. And so that to me was
interesting, but I think that edge is sort of gone, right? Like people are now pricing in event risk
and so on. The other thing I spend a lot of time on is trying to figure out among these different companies, which, if any, are mispriced in either direction and trying
to find the ones that are sort of most mispriced that are most likely to become less mispriced.
And of those, I think the ones that are really interesting here are the refi candidates, the
laggards that have big oil price upside, where these higher oil
prices really sort of make a big difference to their business model. And then also the companies
that I think are going to benefit. I think we're going to see a bunch of rigs pick up in the next
six months or so. And I've spent some time talking to some of the services companies and
the drilling rig companies and the pressure pumpers, they've been very careful in their guidance not to guide to additional activity because their customers haven't publicly guided to additional activity.
But I went further down the value chain, and there's folks that are pivotal.
If you're going to drill a well, you need a rig, right?
But you also need a drill bit, and you need pipe, you need some other stuff. And so if you go find those people, they have to do what I have to do, which is figure out, hey, how much activity is there likely to be over time? Because they want to make sure, and they're not always right, but they're paid to be right.
on their assembly lines and on their, in their factories.
And they want to have enough product ready to process,
to supply whatever is needed.
And those guys are ramping up because it's not just one,
like one after another,
like I put out some stuff publicly to try to like induce some
conversation.
And a number of folks have come in and, you know,
and those companies have been a little more public about expecting more
activity publicly. And so,
so it's not sort of off size or whatever to see it, but, but they're,
they're gearing up. So I think,
I think there's going to be more drilling activity.
And I think this matters a lot when you think about what employment's going to
look like, when you think about what the economy is going to look like,
these operations employ hundreds of people per rig,
and they're enormously capital intensive. Each rig is something like, it might be something like
$2 billion a year in capital expenditure across drilling completions, pipelines,
catering, the man camps, just the whole sort of that whole set of things. And so,
the man camps, the, just the whole sort of that whole set of things. And so, you know, if you
add a hundred rigs, you can add, it's not, it's almost as big as this whole sort of data center
boom that we've seen in terms of economic impact. So it could end up being very, very material.
And I think, I don't know, but I think that might be one of the things that the Trump administration
is like guiding towards in terms of, Hey, like this, this oil price move might be less catastrophic for the economy. But it's possible that I don't know, like, that's a
sort of maybe political thought, but just, it can't be lost on them that these things have this
much economic impact. And it's in the data, like Bernanke wrote papers on this in 2016, and various
other Federal Reserve folks have studied this historically.
So it is worth sort of noting, and again, it's not going to help you so much for like
high tech names, but it could be good for, you know, food providers.
It could be good for trucking companies.
It could be, there's this whole sort of like real economy world that's not experienced
a lot of growth in a long time.
And in many cases, it actually experienced sort of moderate declines and a lot of those
companies could actually do quite well some of them are private but a lot of
them are public too
I am curious your your thought process on obviously we're in a geopolitical situation.
No one knows what's going to happen here.
I think a lot of people are starting to digest
what higher oil prices could mean.
We've had a lot of talks on this space this year
that if you get a sustained oil over $100 a barrel,
that's the type of thing that leads to a global recession
or at least global struggles for sure, at least on that one.
But I don't know.
I'm just curious your thoughts here on when we're talking more from a price
perspective on, and if we stay higher for longer, how you might react.
And if we start to creep down, you know,
how you might start to change your portfolio a little bit there.
your portfolio a little bit there yeah for sure so um i think the problem from a price perspective
Yeah, for sure.
isn't necessarily the absolute price like oil prices averaged a hundred dollars without
including the impact of inflation from 2010 to 2014 and the world grew it wasn't the best
2014. And the world grew, it wasn't the best, most robust global growth period, but you saw
global growth in what was it sort of like a two or 3% sort of global GDP growth in that timeframe.
So it's not catastrophic to have the price be even higher than it is right now, at least for WTI.
Brent is a little at the high end of that. The problem is the rapid
move in price impacting activity. And part of the reason prices move so much is that there is
insufficient supply right now. And there's a risk of physical shortages, which means that you need
the prices of the physical products, so the diesel and gasoline or whatever, at the demand points to be high enough to induce temporary demand destruction.
So that's obviously negative for economic activity because that's a truck that's not
driving products to a store or it's someone not driving on a vacation or flying somewhere
for a discretionary trip. And you actually need a lot fewer flights,
a lot fewer tickets discretionary
to reduce the actual flight count.
So you end up with an economic,
a physical economic impact
just by the forced reduction in activity.
So that's very obviously negative
for the places that will experience that
the flip side is that you end up using a lot more let's say coal or nuclear or various other
sort of energy inputs so there's some pickup on on that side and then you have a bunch more
oil and gas drilling and sort of other activities that pick up that make up for some of it i think the bigger
problem is is less on the pure economic perspective because again i think you can have
i think you can have at least current prices and global economic growth i think that the bigger
the bigger problem is what happens to the tilt in the stock market. So from a financial perspective, it's a much bigger problem than from
a economic perspective. And the stock market, it's sort of the economy, but it's sort of not,
right? A lot of consumption has been from the K-shaped economy, whatever has been from
stock market profits and stock-based loans and compensation and so on. But stepping away from
that for a second, the stock market
is something like if you include the technology component in various sectors where they're really
tech companies, but classified in other sectors, tech is something like 40% of the stock market
in the US. And it's a smaller percentage internationally, but it's still
disproportionate relative to the contribution to global GDP and to local country GDP. I know
that sounds wonky, but the reason it matters is, so you have, let's say energy was at 4%
of, um, of the stock market right now, but if energy was already 10% of the GDP and now oil
has doubled, so let's say maybe it becomes 20%, I don't know, you'd have to have energy
stocks go up by a stupid amount, 5X, 10X, whatever. And then what happens to all these
other stocks if that happens? And I'm not saying that they will, right? That's a little extreme,
and there's not a lot of, and maybe the largest ones would go up in that scenario, 2X or 3X or
something like that to sort of get you back to normal levels or to start moving towards extremes.
But when you've seen those sort of big movements, it's very, very ugly for sort of the prior market leaders.
And it also hurts the earnings for a lot of companies.
So, like, gold miners make less money because their diesel costs go up.
Tech companies, especially these days
where a lot of their operations are actually weirdly
capital intensive and energy intensive,
make a lot less money,
but also their customers have less money
to spend on their products.
So it ends up sort of,
we'll see how long this lasts,
but if this does last for, let's say, if you have
persistently higher oil prices in that scenario, you could see significant changes in composition
in the market, which would be very, very unpleasant. Maybe for passive investors that
own sort of the broader market, but especially for high valuation, previously high
growth companies that are forced into a lower growth mode and much lower valuations and less
access to public capital through that sort of scenario. So it's not exactly a global economy
question as much as a sort of what happens to the stock market if this thing continues. And so
they are sort of different questions. And that's also, I think, if you think a sort of what happens to the stock market if this thing continues. And so they are sort of different questions.
And that's also, I think, if you think about sort of the viability of this, I think a lot
of financial market participants have looked at this differently than how the politicians
are.
And again, this isn't about whether I'm pro or anti or the war or whatever, any politicians,
or anti-war or whatever, any politicians, but it's just helpful to understand this.
but it's just helpful to understand this.
They do think that they want the stock market up, but they really care about people having jobs
and being happy and feeling fulfilled or whatever. And so if you end up with a bunch more jobs in
the Midwest and the Southwest, whatever, from an oil boom and from an energy boom and a mining
boom and whatever, especially if that was your voter base already, you might actually view
that as superior for your odds for a midterm outcome than just higher stock market and the
coastal states and coastal elite sort of winning again for another couple of years. So I think
it's worth keeping that in mind because I just see on like CNBC and this other stuff, people sort
of complaining about this stuff, but not really understanding the difference between their
market exposures and the economy, which again, is just easily measurable.
You can just see the GDP contribution by sector and then you can see the market capitalization
by sector.
And there's been this sort of disconnect and there's been reasons for the disconnect, but
if it reconnects, it could be be very very painful for a lot of sectors
I was even just seeing today like Amazon came out and they were issuing like a
three and a half percent surcharge or announcing that that's going to be
coming later this month I also saw JetBlue they came in something with just
their bags that bags are gonna be just to have a higher fee for stuff like that. So,
you know, cruises, I'm sure are doing stuff. There are a lot of these sectors that are very
directly hit. But I was even just thinking like, for me to buy something from the store,
you know, my gas to get to the store is more expensive, but then the gas to get
whatever that thing to the store is more expensive and all across the uh the lane there is just added cost to it yeah but it's not it's not huge
right like if you think about that the just the the offset to it is it's not um on any individual
activity or any individual purchase the the flow through is actually modest and the one the one
part that's that's so i've do me, I'll just say one more
thing and then I frankly should probably go. But the inflation flow through from this is way less
bad today than it was in the 1970s. Each point of GDP in terms of oil contribution is, I think it's
somewhere between either a quarter or a fifth as much as it was in the 1970s. We're
way more fuel efficient. We're way less dependent on oil. So none of what I was trying, none of what
I was saying should be interpreted as, oh, I think everything's going to collapse or anything like
that. It's just, I was trying to share sort of what could happen in a certain scenario. But even
then, using the example you used, just your fuel efficiency getting to the store, your car probably is at least 30 miles to the gallon, maybe 40.
Your actual cost to get to the store, from a fuel perspective, maybe it goes from 50 cents to a dollar.
So the round trip, and that's in a double of a gas price scenario.
So that's, you know, $150 oil or something versus $75 oil. So it's just not,
and people are a lot wealthier than they were in the 1970s. So the actual economic impact to people
and the actual inflation impact is way more muted. So I did a lot of studies on this,
trying to figure out what's actually, what could happen and what is likely to happen and that's that's the part i think is also worth noting is just yeah there's this flow through
on inflation but it's not that much because we're really well positioned i think after because of
the changes after the 1970s a lot of the policy changes and stuff uh to be able to not have too
much negative impact economically from it.
I appreciate you, Josh.
Thank you for coming on here,
just randomly accepting the invite and just doing the questions.
Like I said, I know you're busy right now.
If you guys are not following Josh,
you got to be, especially in this time,
you're missing out.
Oil, gas, energy expert comes on the show
every once in a while,
shares his thoughts, gives his expertise,
dips into the ether for a couple
months, and we'll get him back. I always appreciate you.
Always welcome him up here. Is there anything you want to leave
the people with on this one? Anything that you
maybe think
people should take away from it? I don't know.
Sure. Yeah, well, two things. So one,
I'll plug my newsletter. So I launched a newsletter eight
months ago and shared a bunch of random small
cap oil and gas stock ideas. So it's
bisoninsights.info. And then, um, I, uh, DM to you,
I have an Android phone and somehow I'm not able to put stuff up in the nest,
but I DM do the, uh, um, we have an updated, um,
energy stock as percent of S and P 500, uh, chart. And, uh,
I sent it to you if you want to stick it up in the nest so people can see it.
Um, but yeah, I should run. I appreciate you having me up. Yeah. It's nice to, nice to chat with you guys to stick it up in the nest so people can see it. But yeah, I should run.
I appreciate you having me up.
Yeah, it's nice to chat with you guys.
Sorry, I haven't been so available.
But I'm busy.
And thanks for having me up.
I appreciate you for the time you do give us.
A little oil and gas conversation there.
Thank you, Mr. Josh.
Hey, Monitif.
How you doing, sir?
Doing well, thank you.
What did you think of that conversation there? I saw you listening.
Look, I'm a big fan of Josh. I've been following him for a while, and I do listen to him very carefully.
He was obviously talking U.S.-centric, right? Outside U.S., the impacts are far well.
right outside us the impacts are for a lot of different reasons but you know there will be
some knock-on effects from that and those are things that since i have wide international
exposure in my portfolio those are things that are important to me so that's what i'm working on
uh to figure out you know what i should keep and what i should cut and what i should add
um on the international side so so that's that's just one thing but but there's almost
nothing that i heard that you know i would i would even you know question you know even even
for niggling it but it but it's just uh josh is just great i mean mean, this is one of those times where we just don't know, you know, where this is going to go.
And I think it's going to take time.
It's not these crazy moves as much as they have moved.
You know, it might be nothing if we get bigger problems, right?
nothing if we get bigger problems, right?
We've still not figured out the, you know,
the impact of what, you know, the actions to date.
Once we figure out how much capacity is lost
more than temporarily, then there may be a, you know,
a new reset that needs to happen
that the base is much higher than our previous base.
So I'm pretty confident that we might not go back to 60s in any real period of time
here, but more than likely we are going to peak much, much higher than here.
So put it simply, my thought is there's greater chance of 150s before 60s.
And that is pretty worrisome, certainly for countries like Japan, Korea, India, where i have a lot of exposure so so that's that's why i
watch what's happening in the markets very carefully obviously my oil exposure itself
i'm very happy you know it's done well but i just don't have enough unfortunately it's one of those
things sound like you're almost yeah are you doing a workout right now or something
sound like you're almost yeah are you doing a workout right now or something
just walking no i was just walking around sorry no no you're good nothing nothing uh options
mike you get your hand up yeah i gotta get running him i wanted to leave you guys with
some quick thoughts when you have a chance go for it um i just shot my video and i'm gonna post that
out there on twitter for free but you know this market's hanging in better than I believe it should.
I believe we should be down a lot more.
There's a lot of talk that the market's heavily hedged, which is probably true.
We're going to see what happens this weekend.
I think this is a big weekend.
If things stay relatively quiet, maybe we start to rally.
If the SPY can get above the 21-day day which it hit today it maybe it can rally more the one thing that is a caution to me is oil today is still at a 111 it
did not really come in with all this news keep an eye on the smh specifically keep an eye on
non-memory names nvidia amd intel marvel these names are rallying these are more your traditional
semi so we're starting to see a rotation back there.
I think that's a good thing.
And, you know, we'll see what we get over the weekend.
And I hope everybody's been safe and doing well.
And do not lose track of Netflix.
Netflix just looks really, really good here.
So just wanted to leave you guys with some thoughts before I ran
and wish you guys a happy Easter and Passover.
Appreciate you, Mr. Options, Mike.
Have a good one, guys.
Yeah, have a great one.
I am looking, I am hearing a little report now.
TBPN reportedly acquired for low hundreds of millions of dollars.
TBPN, again, there's the headline for Financial Times is OpenAI reportedly
paid in the low
hundreds of millions of dollars to me that it's i'm seeing someone talking about a spacex
two trillion dollar valuation what's this uh that's pretty crazy
if hey i don't know what this makes stock market news worth, but I feel like it makes it more than it was yesterday.
SpaceX is said to target valuation of more than $2 trillion in IPO.
Maybe someone's saying it just from Polymarket.
I don't know.
Weird headline.
But what's up, Wolfie?
Would you have paid $150 million for TBPN?
What is that?
You don't know what TBPN is?
No, teach me.
It's like a give or take Wolf.
If Wolf was for the VC world, but like we were industry.
I don't want to say industry plant is in a bad way.
But if like Wolf, if it was like this, the guys are from the VC world, they left like the
all like the big ace, whatever they 16 v or Y Combinator, and they started their own show.
And it's basically a media company.
Oh, okay, cool. So it got bought 150 million?
Low hundreds of millions of dollars by OpenAI.
Good for them, I guess.
I don't think I'd sell anything to OpenAI.
It's just me.
I don't trust them.
Well, if you give me low hundreds of millions of dollars,
that might change the conversation.
I would take that offer and I would shop it.
That's what I would do.
Don't trust them.
Don't trust Sam Altman.
Guy's weird.
But yeah.
Good for them.
I was just working on a little post there in the background.
How are you doing, sir?
We had an interesting talk today.
We had Josh Young.
You might have missed that one.
So we got some oil, some gas conversation.
I really am excited to hear more from Monitive as we talk missed that one. So we got some oil, some gas conversation. I really am excited to hear more from Monitiv as we talk throughout this one,
talking some tech, talking some other stuff there.
But yeah, how you doing, sir?
I'm good. Speaking of oil, we talked about it yesterday. I said going into the Trump speech, whatever it was, whatever the hell that was,
going into it, if you wanted to
hedge or take a gamble, you could like, you know, just like headline risk, you could have taken
stuff like ExxonMobil. It's given up the entire move during the session. But on the open, it
basically, you know, if you bought anything short, short term, that thing that stuff compounded like
five, six X depending on strike, if you bought anything a week to a week out you got up to like a three or four x you bought you know anything
april or anything may excuse me you probably got like a double so like there are ways um and then
you know i i've been not great personally so i've just kind of been checked out for the last few hours. So I'm not really sure where things stand as I speak.
I'm guessing like slightly red.
But if you do get, I think what turned things earlier was like some sort of headline where like they'll charge a toll to go through the Strait of Hormuz.
a toll to go through the Strait of Hormuz.
And if you do get something like that
and you get, you know, some sort of free flow,
a lot of the short-term bottleneck stuff
that kind of like dislocated some of the names,
you know, I see Jeffrey down there,
his phosphates, his fertilizer stuff.
Shout out, Jeffrey.
But a lot of that kind of stuff
should like loosen up in
the short term and so there's like derivative names to take a look at something like uh wing
stop wings that stock's been uh destroyed in part first of all in part because of like fast casual
dining and stuff like that so there's that but then you juice it with you know input costs and
um on the back of some of this fertilizer and feed stuff
and uh that's that's a big part of why that name it's like a name that no one really thinks of when they think of like straight of horn moves or wrong conflict but it's been impacted so
like you know zoom out on that chart you basically would have a double bottom of this level like 150
level where to hold i don't know if it will but i'm just giving like an like a like an idea around
but I'm just giving like an idea around, you know, that sort of thought.
But outside of that, I don't think, you know, I think in some respects,
there's a lot of hedging already in place.
If you take a look, I think there's like 10 Thursdays in a row that have been red.
We closed red today. It'll probably be 11.
I'm pretty sure that's the number I might be off.
I'm in my car, so I'm not at my desk. But if you pay attention, though, a lot of what's happening is, you know, at the end
of the week, Thursday, Friday, and then the beginning of the week, you get a lot of like
this hedging and a lot of this like, you know, pin action. And it gets getting a little bit more difficult to have like these high velocity moves in
the market to the downside, you get these like shocks and then effectively like the zero DTEs
come in and they just like sweep the floor and then you get this like compression back. And so,
you know, unless you get something in my opinion, unless you get something that's just like really disastrous or something really unexpected, there's a lot of hedging in place.
And so I think we're going to have this situation where basically the administration walks and talks between certain goalposts.
Once we get certain spots, as we get like softer they can beat it with a stick and
then once it gets too hot they can walk it back and i think um you know as long as that that
reflexivity and feedback loop exists where people are like hedging it on end of week into weekend
type of thing it'll be it'll be more difficult to get some of these moves especially since like a
lot of stuff um as to some extent i'm not saying it's all pricing, but to some extent we've been priced
in on some of this stuff.
So, you know, that's kind of like where I'm at.
Outside of that, I do.
I don't know what Josh had to say, but my two cents on oil and on commodities in general
is I think we were in for like a structurally higher situation.
It might not be like, you know, $100 oil higher,
but like we're not, I don't think we're going close back
to $60 oil anytime soon.
There's a lot of stuff that's been damaged,
stuff that needs to be rebuilt.
And then there's like, you know,
follow through on the back of that.
The interesting part for me is going to be like,
you know, how does this play out, you know,
four, five, six months from now
when we get like a new Fed chairman? And if we were to have like, you know, how does this play out, you know, four or five, six months from now when we get like a new Fed chairman. And if we were to have like, you know, some stickier inflation, I'm
not calling for like acceleration of inflation where it's like four or five, 10%. But like,
let's say we have something stickier. You know, how does that play out? That's kind of like the
next logic. But, you know, outside of that, I i think mike's right some of there's there's some you know some of these uh you know chip names uh he mentioned a couple amd
i think he mentioned briefly but like if you take a look at amd amd is basically holding its 200 day
uh gives you like a really clear setup you know even like uh yesterday i think monitive was
talking about qualcomm briefly if you zoom out Qualcomm, it's like 125 levels really important.
It's basically like a double bottom from a few years ago.
So like, you know, we're getting in certain situations with some of these names where,
you know, even your beloved Apple, for example, like flirting with that 200-day,
undercut it, reclaimed it, kind of thing.
It's not, again, like I I told you yesterday it's not anything I
want to like tread into it's just not my my flavor currently but those are those are like kind of
like uh uh important inflection points for those names and and for those stocks so as long as they
hold there there is an opportunity for like you know some sort of like uh I don't want to say
flattening like I don't want to say flattening.
Like, I don't expect the VIX to go back to the teens anytime soon.
But like, it'd be a situation where you get like a 22 VIX,
basically like a 20-25 range VIX.
And then some of these names ahead of earnings season kind of like catch up.
But that's basically it.
The last point is, before we broke down, I put out a post
and I talked on MySpaces and some other spaces that like,
I think I mentioned, I might have mentioned on yours, I'm not sure.
But like the 6550 level on the S&P was basically like the inflection point.
And then there was like a short gamma wall at 6475.
uh wall at 64.75 um you know last i checked that 65.50 65.60 range on the s p basically we kind of
like we're bumping up against it and uh and and then revisiting it this morning so like i think
maybe as long as we hold that range let's call it 65.40 to 65.60 as long as we hold that range
you could set up for some sort of like, you know,
feedback loop a little bit higher for like a bounce.
But then it's just, you know, if something crazy happens
or something exogenous happens, all bets are off.
But, you know, that's what options are for.
You can take your shots.
The last part, I'll say, is as long as you get like
the VIX hovering between 25 and 35,
especially with like how much hedging has been put in place
in the last few weeks. It's the pain trade, in my opinion, gets to a point where like,
you know, the trying to hedge with options to the downside, you know, unless you're doing like
intraday or like one to two days out, like it'll be difficult
in my opinion, because a lot of stuff's kind of like, you know, priced in with the implied
volatility.
That's pretty much it for me.
I appreciate the rundown, Mr. Wolfie.
As always.
I do see Jeffrey down below.
I hear a good bit.
You shouldn't feel free to come up
I'd love to have you on the on the spaces. I think it'd be a good addition. Yeah, Jeffrey come on up. Give everybody your take
Feel like
He may not like me that much, but it's okay. We get accepted. I also see paper. Yeah, he like he likes he likes everybody up here
Thanks everybody up here even stalks off
Yeah, no, I was I think stock talking Jeffrey been in spaces. Oh, yeah, no He likes everybody up here. He likes everybody up here. Even Stock Talk? Yeah.
I think Stock Talk and Jeffrey have been in spaces together.
Oh, yeah, I know.
Me and Jeffrey have shocked.
We haven't always agreed, but that doesn't mean anything.
I don't care.
That's part of the fun.
Yeah, that's fun.
I like that, yeah.
A lot of people just assume that people that I don't agree with and everything,
they're like, you know, it's like, no, you have a good debate.
That's what markets are.
Who's your favorite person to disagree with?
No, I'm good.
We got Mr. DJ, special sister.
Good debates with Wolfie, with Jaguar, with Jay, with everybody.
I mean, debates are good for the mind.
You can get the smoke, dude.
Anyone.
You were a debate school guy, right?
You went to debate school.
I mean, not debate school, but I did debate in school, yeah.
I didn't go to a specialized school for debate.
You and Amit talked.
So how was your special ed school about you?
Yeah, my special education, yeah.
Yeah, it was all right, I guess.
What did you do, though?
You guys were bonding over some... I've been in school for a lot of stuff, man. I did my MBA. I was alright, I guess. What did you do, though? You guys were bonding over some...
I've been in school for a lot of stuff, man.
I did my MBA.
I dropped out of ed school.
I've done all sorts of stuff.
What's your thoughts on the American education system?
I'm kidding.
We don't need...
Terrible.
What can we do to improve it, sir?
I don't know.
That's a damn good question that I'd have to give some thought to,
but I don't think our public education system is very good anymore.
I think it used to be once upon a time, but I don't know.
Not really a stock market related topic.
What's up, paper?
China is.
They should teach that stuff.
They should teach people investing.
Oh, yeah.
No, I agree with that.
That's true. From that angle, it. Oh, yeah, no, I agree with that. That's true.
From that angle, it is a stock market-related topic, I guess.
Yeah, I mean, I was always surprised that, like, you have to, like, grow up to learn about that stuff.
That always kind of surprised me.
But, yeah.
I feel like AI should be a critical topic at this point in time.
Well, I mean, speaking of, I mean, we've been talking a lot about the dumb things that Trump has been doing.
But speaking of the good things he did, that was one of them.
I liked the move to the whatever, I mean, I guess they're called Trump accounts now, but I like the move to bring the American public automatically into investing at birth.
I think that's not a bad move.
A lot of those people will never, ever have $1,000 put into their account anyway. So I don't think it's a bad thing or investing in our youth in the future
of America. That I don't think was a bad thing. It's not a bad thing, but the issue is they're
taking away funds from education and from healthcare at a point in time where the youth are getting roughly 3,500 a year
in government support, but boomers are getting 4,500 in support. So purchasing power is so much
lower now that no one really under the age of 20, right, has the same type of advantage or head start or opportunity that we did
20 or 30 years ago. And it's really a travesty. And the main reason for it is because our current
government is 100% controlled by lobbyists, whether you're Democrat or Republican. It's big
pharma. It's defense. You know, it's everyone, you know, for the last hundred Republican, it's big pharma, it's defense, especially, you know,
it's everyone, you know, for the last hundred years, it's been big oil. It was big tobacco.
If you talk to everyone except for people like Massey or very, very, I would say unorthodox
Congress people, both in the Senate or in the House, No one is there to help the individual, right, to help
society at large, because they all need to raise money. It's part of their job. Two-thirds of their
time is raising money. One-third of their time is voting against the other party's bills. And it's
become the biggest clusterfuck where we've had two government shutdowns in four months,
fuck where we've had two government shutdowns in four months and our poor TSA workers who barely
make enough to pay rent and eat, right, miss two pay cycles. And they're just trying to, they're
still, they still haven't figured out how to pay them. So it's, it's really a fucking travesty that
this is the most powerful country on earth. And the reason why we're in such a rut is not because
we don't have enough money. It's not because we don't have industry or we don't have smart people just that the smartest
people don't want to work in politics and the ones that do are too dumb to make it in the real world
and they succeed by doing favors for other people and grifting and fraud like the current administration
not wrong not wrong not wrong now yeah i mean the political party problem is is the main problem i mean the the the dichotomy between um the way people think has become so severe i think i mean
i think if you go back to the like i mean. I mean, I think if you go back to the like, I mean, when I was growing up, you know, you go back to the late, like early 90s, mid 90s, late 90s, early 2000s. I mean, you don't even need to go for that by far back. I think political discourse was fine in the late 80s, early 90s. I don't I don't think there was. It was excellent. People were respectful to each other. They worked together.
Republicans and Democrats worked together.
If there was something really important that needed to get done, right, whether there was a new legislation that needed to be passed for us to succeed in tech or there's a new legislation that was needed to improve education, right, those bills were actually pressed forward. But what I learned in business school was that, and what they started to teach MBAs,
is that your highest ROI as a Fortune 500 company is lobbying.
For every $1 you spend, it can be up to $100,000 return, right?
Especially for like a pharmaceutical.
So just like CEO pay packages went parabolic, lobbying efforts went parabolic, right?
Zuckerberg and Meta never thought he had to lobby,
but now we go into the late two thousands, right?
And for him to get out of any type of,
of investigation by the DOJ investigation by any branch of the government,
he learned that he needs to spend money for lobbying.
So every single company now has a lobbyist,
and this is only going to get worse because it's all about money.
The government, even at the state level,
even at the state level, the government doesn't care as much about individual interests.
And when they do, it's right near the time of the vote,
where they need to sway the public.
And then after they get voted in, they fuck up.
And then they do the exact thing that the lobbyists want them to do.
Imagine all the promises that were given to us at the beginning of the term, right?
Where's our doge stimulus, right?
Where is our health care plan?
It's been 179 weeks. It's actually from the first Trump term that we were promised a health care plan that was more efficient, but still helped the poor. Instead, they take, you know, Medicaid away from 40 million people, SNAP benefits, a $200 billion war. And next year, they want to create a $1.5 trillion budget for defense, which is fine if we had the money to spend on it, but
we don't. And how are they going to get there? They're going to cut veterans benefits. There's
no single veteran that I've spoken to in my age group that approves in Florida. I'm in Palm Beach,
Florida. I live 30 minutes away from Trump's house.
There is no veteran that I've spoken with
that approves what he's doing
because all their friends are getting fucked
except for the ones that made it
or have a good retirement.
We did get the market closed there, by the way.
Reminder.
Yeah, reminder.
Market is closed tomorrow.
We do get anything.
That's like the most boring day I've seen in months.
It was an interesting turn.
I saw that fake headline come out a couple hours ago.
We've had three massive short covering rallies in a month.
Hedge funds getting caught off sides, people getting blown up.
It's amazing.
What do you mean it was boring?
I meant today, not in general, not the last month.
And the news person today didn't really have that much for me.
Where you went, look at the open.
The market was going to puke.
And all of a sudden, you get this headline that was, by the way, four hours delayed.
The news had been out like pre-market, right?
And then Walter's cousin posted it on Twitter.
People picked it up and the market did a U-turn in the morning.
It was extremely entertaining.
Yeah, I'm not much of a pre-market trader guy,
so it wasn't much for me.
But yeah, I mean, I don't know.
I mean, we're still tucked under the 200-day,
just sort of chilling here and just waiting.
I'm not 100% convinced we're out of the trees yet i didn't
like how sticky oil was today um brent oil north sea was at 141 in fact for europe that is the
highest price that brent oil has been since after lehman brothers collapsed and you had that mega
oil short squeeze in 2008 it's actually higher than when when Russia invaded Ukraine. And it's really, you know,
shows how tight physical is versus, you know, the long dated futures, right? So that's $40 higher
than the June future. And if you look at what that implies, it implies that the market is going to
essentially calm down over the next two months. But if you look at, you know, Polymarket or other
Kalshi or other probabilistic estimates of when the Strait of Hormuz will actually be open,
it is not very clear. Now, obviously, you had this rumor about Oman. You also have Pakistan
that got approval for 20 ships. In reality, the funniest part is Pakistan doesn't even have fucking 20 VLCCs so they tried to to
sell their right for 14 VLCCs because they only have six to other nations and essentially Iran
balked at that so now they've created a five-tier system where you can either pay in stable coins
or pay in petroyuan depending on the size of your vessel and
what it's carrying so you know there are 40,000 vessels that travel through the
strait per year okay about a third of those are these mega VLCC's and they can
afford to pay about two million per vessel which ends up being a dollar per
barrel which is actually not a lot but if you run the math on that and you
assume big ships can pay two million and small ships can pay 500k to a million, that actually increases Iran's revenue
by about 60 percent by about 50 billion. And then when you add the increase in the price of oil,
right, I'm not saying they can lock in futures, but if you just assume a $93 weighted average
price through December that doubles right their oil revenue from prior to
the February 28th attack so you're looking at their revenue up a hundred
and sixty percent making an extra hundred and seventy five million dollars
a day Russia making over two hundred million dollars a day, Russia making over 200 million dollars a day, at the same time sending
oil and refined products to Cuba, who Trump is actually looking to attack. And because all our
ships are on the other side of the world, the U.S. is not doing anything about it. So this is just an
absolute, absolute cluster. We're making two, by the way, Russia is giving
weapons and giving intelligence to Iran. So we're basically enriching both of our enemies
to the tune of $375 million a day, a billion dollars every three days.
It is one of the stupidest things I've ever seen in my life.
It is one of the stupidest things I've ever seen in my life.
I mean, and you better believe, I mean, what we're doing, that bombing of the bridge, I don't really know what it was meant to accomplish.
President of the most powerful nation in the world, showing on his true social that we bombed a civilian bridge and is threatening to destroy power plants that could result in hospitals not being able to treat the sick.
Civilians resulting in food spoilage and starvation resulting in lack of traffic signals and accidents.
I mean, I don't care how much you hate a country.
That's a fucking war crime.
This guy, it's going to be in the history books. Like this guy's a fucking bastard. Like I can't,
there's not a word in the dictionary that's harsh enough to describe what kind of a fuck job this guy is. All right. I will say we did get some news stories today i don't know if we switch the topic up a
little bit there were some interesting ones yeah let's do it uh spacex maybe going public at two
trillion dollars i thought 1.75 trillion was a little crazy two trillion pretty wild here we did
have on topic here amazon they are going to start charging sellers who use its shipping services
a 3.5% fuel and logistics surcharge
starting later this month.
Obviously, that is a part of this conflict here.
We also do have jobs coming out tomorrow morning,
which we did get initial jobless claims out this morning
that came in a little bit above,
or a little bit below the expectations, which was good here.
So, Jay, I'm curious, are you watching anything in jobs,
or are we fully just focused on the Middle East conflict, waiting for it to pass?
Jobs are extremely, extremely weak.
In fact, we were promised one of the strongest manufacturing
recoveries in the history since the industrial revolution according to nutlik and what we've
seen is actually job manufacturing jobs have fallen for 11 months in a row they've actually
fallen to three-year lows and you know a lot of that you could say, you know, for the last three or four years, job numbers have been manipulated.
There was probably overhiring by the government.
But even when you adjust for that in the 800,000 revision, you know, on a go forward basis, you know, we're looking at payrolls growing by about like 30,000 private payrolls by 30,000 a month.
And that was anemic.
And based on that and the fact that inflation was actually coming down very dramatically, like my estimates in our team, we have eight members, you know, on our econ and single single name team. CPI touching 1.5% next year. And the reason for that is that 35% of CPI is real estate related,
rent related. And rents across 24 of our 50 states are falling in the high single digits.
There are states, parts of Texas, parts of Arizona, where rents are down double digits.
I'm talking 12% plus. And that is actually deflationary, not even disinflationary. It is deflationary. So we were
actually going into a situation where Warsh, who's not yet actually been approved, once he got into
Powell after May, right now it looks like Powell will stay in office after May as a temporary Fed
chair. But if Warsh had gotten in, I was extremely confident that he would have cut
rates two times. In addition to that, Fannie Mae and Freddie Mac had actually promised,
you know, after being advised by Besant to buy 200 billion of mortgages each, okay, not singly,
each. That would have been 400 billion of mortgage purchases as the Fed continues to roll off mortgages, which would have tightened mortgage
spreads and brought mortgage rates down to 5.5%. With falling inflation, lower mortgage rates,
that would have created a reflationary boom for the housing market, which is currently frozen.
And what the administration did with this oil spike is they've taken inflation expectations back well above 4% for this year.
Mortgage rates are well above 6.25% and rising.
And they've basically frozen up not only the housing market, but because now SOFR is no longer falling, which is a one-to-one mirror with Fed funds.
You're going to see commercial real estate become an issue again.
And not only that, with private credit, which relies on SOFR as well,
they're all floating rate loans, $1.8 trillion market,
Fitch and Moody's are now,
after the increase in inflation in term premiums and rates,
they're now forecasting default rates in private credit to reach 9%,
which implies about $170 billion of defaults in private credit, which is the biggest default
wave we've had since the great financial crisis in 2008. Now, a lot of these companies,
they're not going to affect public markets because the high yield market is much cleaner
than it was in 2008, 2012, 2016. The average company in the high yield market has de-levered by about two turns, just like
in the S&P 500.
Most companies, because they're weighted towards tech, have very little debt.
I think the average leverage for the S&P 500 company is like under two times, so about
one and a half times.
So I don't think any company in the S&P 500 would default, even in a mild recession.
But looking at the private credit companies, which tend to be upper middle market,
think about $10 to $100 million in EBITDA,
you are going to have several hundred of those companies go bankrupt,
which will result in unemployment likely, to your point, going above 5% by the end of the year.
And the interesting thing about Powell's last meeting,
the most interesting
thing he said was, it's very difficult for us to hike into an exogenous shock, right? That was the
summary of his last meeting. That's why we got a bounce on the same day after Powell spoke.
And so what he assured us, and this is why the 10-year didn't continue to rally with oil,
and kind of stayed in that range, that four and a half percent range, four and a half to 4.7 is when Besson and Trump start to panic.
That's usually when you see the taco tweets come out.
The reason why I thought it was a very important speech was that it shows that Powell really doesn't want to be a voter.
He does not want to hike because of some temporary inflation prints for two or three quarters.
does not want to hike because of some temporary inflation prints for two or three quarters.
And so what I think will happen is by 2027, once oil does eventually normalize, because
I am of the view that China and Southeast Asia, which import most of their oil through
this strait from the Middle East,
they will work out some sort of a tolling solution with Iran. And when that happens and oil does come
down, we will have three or four months of higher inflation this year. But by next year, I think we
will start to see cuts again. I strongly disagree with the futures curve, which now says we won't
have any cuts until October 27 and that we will have a hike this year. I think the futures curve, which now says we won't have any cuts until October 27 and that
we will have a hike this year. I think the futures curve sometimes acts really nutty.
And so I hope that answers your employment question. I think employment will be anemic.
I think layoffs, if you look at the jolts numbers, they're the lowest they've been in four years.
They're at 6.8 million. I think that private private payrolls and public payrolls will both be weak.
And not only that, I think unemployment will rise due to bankruptcies in the private credit market.
Year to date, 85,000 people have also been fired by big tech, including over 30,000 by Oracle.
Not only in the U.S., they fired half their entire India team, which was surprising to many.
It's one of the things that will come out of AI. That's why Infosys stock is down so much in India.
It is that AI is more efficient than even outsourcing to the Philippines, India, Mexico,
Eastern Europe for tech companies. So we are going to see a paradigm shift in employment.
One thing that I found that was super interesting in the U.S. employment is that non-tech companies and certain parts of the market, like startups, are actually hiring more engineers than ever before because of Javon's paradox, which itself signifies that because the cost of coding is down 90 percent, because, you know, according to Claude Code, right, one coder can program a concept 18 times faster, right,
than he or she could have two years ago. With that power, the cost of coding is down. And so
when the cost of coding falls that much, and you look at supply and demand, the demand for coding
goes up parabolically. And because of that, in the near term, I think you will actually see an
increase in demand of coders, not dramatically, but you will see an increase of demand for engineers of the best engineers who can also act as product managers.
But overall, I think employment will be negatively impacted and this AI will become deflationary or deflationary and we will be cutting. And we will be doing probably the biggest QE
that we have ever seen. We will eventually become like Japan, and we will buy more and more of our
bonds because there's no one big enough to buy the amount of debt we have. You think about if
Japan owns 1.3 trillion of our debt, and our debt has almost doubled from 25 trillion pre-COVID to 40
trillion and it's you know it's going to increase to 50 trillion in three years. Who in God's name
can buy all that debt? There's no country with an economy big enough on the planet to move the
needle in buying our debt. We will be over 150 percent debt to GDP. We were making fun of Greece. We were calling them lazy when they
were at 120% of GDP during the pigs crisis in 2012. And so what will happen is Besant will
ease the capital requirements at the biggest banks in the United States, and he will stuff our banks
with massive amounts of treasuries. In fact, our own Fed has bought at the front end T-bills has bought
over 200 billion in T-bills over the last few months. Now, that's not considered QE because
it's at the front end of the curve. It was in the back end of the curve. That might be QE or even
yield curve manipulation. But the Fed is eating up a lot of these auctions and it will become more
and more apparent and Warsh won't be able to
control it. Warsh will have no choice but to do QE. And I don't think people have grasped it yet,
but we'll be monetizing our debt to an extent that no one ever imagined because, you know,
Doge never played out. And we've already spent three and a half trillion this year.
Our deficit with all the the war spending and the increase
in the defense budget next year of 1.5 trillion, you know, we will have a $3 trillion non-war
budget, seven, 8% of GDP, which is the highest it's ever been outside of World War II or a
pandemic. And so these are the things that, I mean, this is one of the reasons why gold had
such an unbelievable rally because people realize that
it seems like a gold or you seem like even a bitcoin you a bitcoin guy here i'm both i my
biggest allocation is gold and gold miners i mean they've doubled i mean i was in it 2023
because my view was that inflation was peaking you know know, and it actually did peak then.
In the first derivative inflation, you saw inflation fall, the rate of inflation fall.
And so I was long gold then, and I've kept gold.
And I haven't even really added a lot to gold, but because it's more than doubled,
my gold allocation is like 11%, 12%. And my gold, including gold miners and silver, you know, palladium, platinum,
were likely 13, 14%. I actually don't feel comfortable with that much. But, you know,
what else do you do? I mean, it's inevitable, it's going to happen. I've actually started to
add to Bitcoin as well, below 70,000. Not only have I started to add to Bitcoin, I've also added
to Ethereum because of tokenization. Every single company, Visa,
MasterCard, ING, Fidelity, even JP Morgan has its own fund that runs on Ethereum or is doing tokenization or payments. I mean, FIGURE just did 15 billion of tokenized HELOCs. So if you're in
New Zealand, right, imagine you can buy a US manufactured housing loan at 10% without going
through a bank.
It is fucking phenomenal, right?
That's the future.
It is so much more efficient, so much more secure, right?
And I don't care about all this quantum nonsense.
Most of these guys are just trying to spell... What do you say to the people on Ethereum that say that more usage does not mean the
price going up?
It doesn't necessarily mean that unless your usage goes up tenfold. I
mean, usage going up 50%, 100% won't, right? Because the gas fees have come down. I mean,
they've made Ethereum so efficient, you don't even need layer twos anymore. And so that's actually a
really good thing. You don't need the layer twos and you can just use Ethereum as it is. It
simplifies everything. But my view is that you actually will see transactions go up tenfold because it will
be a lot cheaper.
I mean, the gas fees are so much lower than they were even one year ago.
And the risk is always, maybe they come up with a better technology, but I personally
think that the network effects are so great across the three, you know, three biggest coins that you will continue to see.
For example, JP Morgan has its own coin, but Citigroup doesn't want to use JP Morgan's coin.
Bank of America doesn't. Morgan Stanley doesn't.
And so you need something that can work across multiple banks that is, you know, people view as being unbiased.
And you can use in Europe, US, Asia, Africa, and South America,
where people are not worried that someone like our government
can just shut off access to the US dollar and then they're absolutely fucked.
And so that's one of the reasons why, you know, cryptocurrency started in the first place.
And I do think that there's probably a two thirds chance that the Clarity Act passes.
If this Brian Armstrong nutjob at Coinbase gets past his greed, the entire industry could double within double or triple in two years because all these big institutions are just waiting for a framework.
double or triple in two years because all these big institutions are just waiting for a framework,
right? The biggest thing they're worried about is that, you know, these guys lose the midterms,
which is now almost guaranteed in November, which actually didn't want to happen. They lose the
midterms. And all of a sudden, Democrats, because Trump hurt a lot of people with Melania coin and
Trump coin, right, they're inherently against crypto and they don't allow legislation to pass. But if it does pass, you could see the entire industry double
or triple within a year. Every single large institution in the world, including Spanish
banks like Santander, including British banks like Barclays and HSBC, or every single U.S.
bank, every single large asset manager, including even Vanguard, who was staying away from crypto, want to do something in the form of tokenization.
And I'll just give you an example of how it's so efficient.
So, like, let's say you wanted to get a mortgage.
You would go to a bank.
Let's say you went to your local bank, PNC, and you found a two bedroom for you and your wife, starter home, you know, 500,000.
You had to put, you know, X500,000. You had to put,
you know, X down. Let's say you put $100,000 down and you borrowed $400,000, right?
And let's just assume it's a conventional mortgage. And in that scenario, it would take
you about two weeks, more than two weeks to close. You put in your paperwork, they do your credit
check, right? You go to your closing, and then, you know, a few weeks later,
you're done. Figure can do all that in a single day. They can basically do all of that verification
within a couple hours and they can basically record everything on the blockchain, get everything
signed and dotted electronically, right? You can have your closing in two days. That cuts out a lot of fat.
You don't need that many bankers.
You don't need, you know, these bloated middle offices at financial services companies.
And more people would be able to, you know, leave these dead end jobs and go do other
things in the economy.
Right.
And so I think that it is one of the most promising technologies
in financial services that we have seen.
I'm just a little bit dismayed that it's become so bipartisan.
Go ahead, Monitiv.
Jay, I wanted to ask you yesterday itself,
but since you're here and we're talking about those things,
so AI and what you talking about those things.
So AI and what you talked about with crypto, not meeting so many bankers, what is the likelihood at this point in time when we do come out on the other side with a recovery, it's going
to be a pretty completely jobless recovery?
You know, it's a good question. You know, during the Industrial
Revolution, people also said, you know, when the Model T came out, people were like, well,
what's going to happen to all the horse carriages, right? The human beings are incredibly,
incredibly malleable and innovative. And I think this will create big challenges for society just because of the speed of it.
But I do think new jobs will be created.
The work week might be shortened.
And I don't know if you heard Jamie Devon's speech this week.
He's actually volunteering to keep all of his employees and retrain them to higher value tasks if there's some government
incentive for all banks to do the same thing. I don't think it's in the incentive for all the
big institutions in the United States to let there be riots because of a lack of employment.
I think there will be some combined effort, some tax
incentives or some way for companies to keep and retrain workers. And there will also be a demand
for other types of employment. There'll be very large scale demand for electricians to a scale
you've never seen before. I'm talking about like 300,000 electricians. That's not a massive number,
but it's a very important number.
There are also a lot of areas where we have labor shortages right now, whether it's plumbing,
you know, as an example, or nursing, where we have a shortage of hundreds of thousands of nurses,
especially as we are exporting a lot of immigrants. We don't have hotel workers. We don't have farm
workers. And it won't be the
traditional farm worker. It will be, you know, a farm worker that is aiding, you know, a robot or,
you know, a robot arm to do work a lot faster on a farm. And all those machines and everything
need to be built. You know, in the meantime, we have an aluminum shortage. We have rare earth
shortages. So it'll take time to build all this.
You know, the funniest thing is we have a massive aluminum shortage because we put massive
tariffs on Canada and we started buying from the UAE.
Well, guess what?
The UAE in the Middle East produces 9% of the world's aluminum because they have cheap
energy and they just got bombed.
So now there's no aluminum coming out of the Middle East, and now the U.S. doesn't have enough aluminum to make.
So now there's no aluminum coming out of the Middle East.
And now the U.S. doesn't have enough aluminum to make.
At the same time, we're fighting a trade war with China, and we can't get enough rare earths to replenish our tomahawks and all of our artillery.
One of the reasons why I don't think this war can even last long is we actually don't have the war stocks.
everything you read online is a lie we we simply are we're running out if you just look at the
Everything you read online is a lie.
We simply are running out.
numbers because of half of our stores we give you Ukraine and then we're rapidly depleting
our missiles right now we simply do not have the artillery to fight a prolonged war and so
there have been a lot of missteps but I am optimistic about the future as long as we plan
and we leave it to, you know,
corporations do a great job of planning better than our government.
I am not as pessimistic as others are.
I don't foresee mass unemployment.
In the far future, I think we will have things like UBI.
But I don't even want to get into that topic right now.
Maybe we can change the topic.
But everything you said takes time, right?
I mean, I'll give you, you know, since you talk defense, I'll give you another example, right?
Two million people directly or indirectly in the defense are connected to the defense industry in the U.S.
It's one of the largest, you know, industrial employers in the US.
That number, of course, includes commercial side of the aerospace business,
but it is a very large number.
And foreign military sales constitutes about $30, $40, $50 billion a year.
And we are putting every, I mean, it might be a small thing, but it's just an example of
how we are adding to our own problems by putting at risk the entire FMS, you know, backlog that we
have by bashing all the, you know, all of our traditional allies, right? And they're just going to go and look elsewhere
by telling them, you know,
that, you know, we have the ability
to turn off their systems
if we don't like what they're doing,
you know, by holding back supplies
when they need it the most.
All of these things, my point is this.
I think as much as we can,
you know, get it, get the policy right-sized at some point in time, we seem to be taking,
you know, one step forward and three steps back. And I just don't see how we get out of,
you know, a problem at least short term. Maybe, you know, when we get out of a problem at least short term.
Maybe when we come out of it, we'll be stronger. But the immediate term, the next couple of years, don't really look all that enticing to me.
Jay, you there?
Jay, you there?
Oh, no, he got kicked off.
Okay.
I would have thought there was going to be a response coming.
Anything I would say would come in and switch the topics here.
He'll probably join back.
But there was another interesting thing i mean
that news probably got discounted or probably got uh you know uh uh it probably was fake news and
people got updates but there was a news that that one of aws's data centers in in gcc had been
destroyed that was a weird one there was one today that one of Oracle
had something that was targeted.
Oh, okay.
Yeah, so that's the other problem now, right?
We really have significant infrastructure there.
Nothing like what we do as
or even countries like Singapore, but there's still, you know, quite a few of these around and they are easy targets.
So I think, I think it's going to be some revelation, right? Like if, for example, we do have something destroyed, it'll have to come out in, in, in earnings, right? They'll have to, you know, they'll have to qualify it
and call it out
because it's a problem,
impairment of a major asset, right?
Even if it's only a few billion dollars,
even assuming it's an old data center,
you know, that's more traditional
and not one of these newer,
you know, GPU clusters
could still be a few billion dollars
if it's damaged significantly enough that it's non-functional,
then you not only have a capital loss,
but you also have an operating loss.
So that's another problem that we probably,
well, you know, we should know this month itself
because most of these companies are reporting,
you know, in the first couple of weeks.
Yeah, they're reporting imminently.
I actually think earnings will be pretty strong.
I mean, the reason why people keep asking me, why is the market so strong?
Well, we actually have the highest margins in the history of the stock market, right?
You know, I never thought we would get above, you know, 13% EBIT margins
before some sort of a cyclical downturn. And here we are, we're well above that. And so,
you know, if we're seeing earning double digit earnings growth this year, and the market is
actually, you know, at the lows last week, the market PE, forward PE actually had come down from 23 times to about 19 and a half.
So by our conventional means, and maybe earnings will come down by the end of this year,
but by conventional means, you know, the market wasn't expensive. And yeah, there are going to
be some short-term issues. You are going to see some inflation pass-throughs like Amazon just
added a 3% fuel additive, which sellers will pay, which obviously they're going to pass on to us.
Airline ticket prices are going to be up 20%. That's United, the CEO saying that himself.
Consumers are going to struggle with gas. But actually, if you look at an inflation-adjusted
basis over 20 years, oil hasn't actually gone up with inflation. So when you look at an inflation adjusted basis over 20 years, you know, oil hasn't actually gone up with
inflation. So, you know, when you look at 08, you know, oil's really like around 70 in 08 terms.
And I don't think people really give that a lot of thought. So from a consumer perspective,
it's not like oil is going to cripple people. It's going to hurt the very poor, which I hate,
obviously. But, you know, the average American and, you American and the top 50% are really not going to be
affected by oil. They're going to be pissed by it. It is going to affect their voting.
But I don't think we're going to see a recession in the United States because of oil averaging 100
through the end of the year. And I think earnings will still be positive for the next quarter and maybe even the quarter after that.
I mean, you just need to think, what sectors are actually going to see earnings down because of this, right? Outside of consumer cyclicals, which sectors are going to see sharp revisions down in earnings.
Right?
It's going to be like chemicals.
Chemicals have maybe some oil feedstock.
Right?
It's going to be airlines.
It's going to be a handful of sectors.
But those sectors don't make a large percentage of the S&P market capitalization.
I think the big one that's expected to have native growth is healthcare at this point
in time.
And we're adding to the mess by creating artificial shortages through tariffs.
So that's the only sector where I see a problem. Others, like you said, are still looking at, I'm looking at Q1 numbers here on
Refinitiv, 45% growth expectation for information technology, 21% for materials, 18% for financials,
negative 9% for healthcare.
This one is surprising to me,
a negative 2.5% for communication services.
That one's gonna be interesting.
That one's kind of silly.
And the tech one's probably a little bit too high.
You probably will see ad spend come down a little bit. Banking's likely a little bit too high, you probably will see ad spend come down a little bit. Banking's likely
a little bit too high. You'll likely see a lot of these credit origination fees come down with
the private credit issues. So you'll see banks earn a little bit less. But overall, overwhelmingly,
earnings will still be positive this year outside of a recession. The recessions will be seen in
places like Southeast Asia, right,
where they're actually cutting their work week. So imagine you cut your work week to three days a
week, and people are getting squeezed on electricity, oil, LNG. You have rolling
brownouts, right? That will slow down your economy. So I think Europe and Asia are a lot
more exposed to the energy shock in the U.S.
In the U.S., we still are exposed to the price because it's a global price.
And we still import five million barrels a day, majority of which is through Canada.
Thank God we didn't put tariffs on Canadian fuel.
But, you know, because our refineries only refine very hot, sour and complex crude,
only refine very hot, sour, and complex crude, we end up refining, you know, our refineries are set
up to take very low-grade, high-sulfur crude from Canada and Venezuela, and we export the very sweet
crude that, you know, these teapot refineries in northern China and Indian refineries can refine
very easily. And that's why even though
we make about 13 million barrels a day in the US, including natural gas liquids, etc.,
and we export a lot of that, we still import 5 million barrels a day. And that impacts gasoline
prices and crack spreads, which are determined by the refining companies, they also impact
gasoline prices. So
gasoline prices are up. And I think the smartest thing that states can do, which they've already
started to do, is temporarily suspend the gas tax. And that will make gas a little bit affordable,
more affordable for commuters who need to pay for it every day to go to work.
I mean, there are some buffers. I read today that, you know, we're no longer after this SPR
release, we're not releasing any more SPR. The world will really start feeling oil prices going
into driving season. I've been reading several sources that say by the end of April, if this
world were to last to the end of April, there's a reason why Trump said two weeks. If we get to
the end of April, there'll be parts of the world that just simply run out of fuel. And you look at Australia,
they didn't have enough buffers, 500 fuel stations are empty. There's UK, France,
there are a lot of petrol stations that are running very low. And some of that is because
humans panic and they're filling up these five gallon and five liter jugs with fuel and they're
hoarding, just like they did
toilet paper. I don't know why they picked toilet paper of all things during COVID to hoard,
but you know, now they're hoarding fuel and that's creating shortages. So, you know, if this thing,
I don't know how it will resolve, it'll probably be resolved by the Gulf nations and Asia actually
agreeing to some sort of toll. I actually just read about two minutes ago,
post this up here, that the Gulf countries, you know, the issue in the Gulf is, you know,
there's two religions, right? There's the Sunni and the Shias. And the Shias, Iran and Yemen,
are against the Sunnis, many of whom, like Saudi, UAE, are aligned with the U.S.
the Sunnis, many of whom like Saudi UAE are aligned with the U.S.
And so they have been bombing these nations that have U.S. bases.
And we thought that this was going to continue, but we're finally starting to see
that even the Sunni nations are bending the knee to Iran and trying to work out a GCC
compromise. The GCC general, the council has said today that he wishes to establish normal
relations with Iran and resolve all security issues transparently. And by the way, this is
also why no one in Europe is actually even letting US airplanes land, right? They're looking at,
okay, US relations, we want to exit NATO, we're putting on 20% tariffs against them,
we're forcing them to spend more on the military. And now they're getting tariffed again, you know, that we doubled their energy prices and
they don't produce any oil, right? The UK has been so stupid that they stopped producing in
the North Sea. They actually buy it from Norway, which is drilling in the same North Sea that they
are at a premium. It's absolutely moronic. Germany and France have cut their nuclear exposure by 70%.
And so they're very energy
sensitive. And so now they're getting tariffed by us. They're also getting taxed by us because
we started this war. And they're saying, why would we let an American plane land on our airspace and
then risk getting hit by a missile? Because Iran's missile ranges are now 4,000 miles,
which they proved last week. And so when you put all that together, the geopolitical picture starts to become a lot more clear. And what you will likely see happen is you will likely
see the Gulf nations, Asia, Europe, and China work out a deal with Iran outside of US and Israel's
interest where they pay them something to get ships through the strait. Because we had over
100 ships going through the strait, 40,000 a year, right? You can't have people starve because they
can't get access to fertilizer. I mean, China's low on helium, right? Africa's low on sulfur,
which they need to leach for copper mines. And so the world can't just stop because, you know,
we decided to bomb a bridge or a girl's school. And so I think it will resolve
on itself. But, you know, the bombing also needs to stop on both sides for insurance companies,
the seven large insurance companies to feel comfortable insuring these vessels, because
right now the insurance is a percentage of the ship value. It was about 0.25% or about 25 basis points before we dropped the first bomb
on February 28th. And it is now up between 1% and 10% of the entire vessel value, right? So it's up
between 4% and 40X. And those insurance premiums need to come down below 5%, at least,
and eventually below 1% for this traffic to go up. And not only that, I've talked to some
shipping companies. I'm invested in some tanker companies and I've talked to some CFOs.
And what they've said is that the ship captains are actually scared, right? They're not going to
risk their life to go through the straight. The only ones that have been stupid enough to do that are the Greek shippers because they're cowboys and they have a lot of debt and they need to get stuff done.
countries by how hostile they are and then charge them a toll based on that so they can rebuild their
infrastructure. And just like the Suisse Canal charges a toll, they'll probably charge a toll.
And then once that happens, you know, U.S. stock market will likely go up again. You know, the
world will likely be relieved as, you know, Indian restaurants can get LPG where there are LPG
shortages. Restaurants couldn't even make food
a couple weeks ago.
And things will likely be a little bit more normal
than they were before.
And the cost of that will be an extra dollar per barrel
or 2 million per large vessel.
It won't be the end of the world.
It won't be like $50 extra people are paying.
It'll be $1.
And that's probably,
unless we want the war to last for more, you know, unless we want the war to
last for more than two weeks, unless we want the war to last through the end of the year,
you know, and fight 1 million soldiers surrounded by mountains and 7 million reserves, which I don't
think the Americans have the appetite to do, and Congress would never pass that, that is likely
what's going to happen. Not that I want that to happen. It will likely be the
easiest path forward. I mean, if you look back at what happened to Iraq, Iraq was a third,
the military was a third the size. 1.2 million people died, 60,000 U.S. soldiers died,
$3 trillion was spent, $6 trillion in today's dollars. And guess what? There are no weapons
of mass destruction actually found there. And 9-11 wasn't even financed by them. It was financed by some Saudi guy in Afghanistan, financed by Pakistani. So it had really nothing to do with Iraq at all. But it is what it is.
that they knew that Iraq had nothing to do with the situation under George W. Bush,
we could have saved $6 trillion and 60,000 of our own lives. So, you know, this is something where
presidents seem to think that they can shake things up by starting a war. And almost every
single time that that has happened since Vietnam, it has backfired. And I think, you know, what we
did in Venezuela, I think just made us made
the administration just a little bit overconfident. You know, Venezuela and Chavez were nothing. I
mean, his people were starving, his soldiers were probably starving. You know, he'd siphoned off
hundreds of billions of dollars from infrastructure, his oil, his oil production was down 85%.
You know, he had like 40 guards in there that we took out in an hour.
It was very, very easy.
This is nothing like that.
This is nothing like that by a factor of 1,000.
So I hope it gets resolved soon.
I hope the U.S. can come out of it with some sort of a victory,
or at least they can say it's a victory so we can all move on and actually get to, you know, things that are
actually important, like improving the livelihoods of Americans, which is why we elect the government
not to mess around. So I frankly am still positive on earnings. I do think that we'll get interest
rate cuts in 27. I think we'll get a short inflation spike, which could result in a second sell-off after
a bear market rallies are the strongest, right?
So if we get the straight of our moves opened next month, we might see a pretty strong rally,
especially after everyone gets their tax refund.
We might see some sort of a bear market rally, and then we might get another sell-off when
inflation starts to pass through.
Not just fuel, but food.
You know, there's a study done that like for every half a percent increase in nitrogenous
fertilizer, which is up like 77 percent, because a third of it comes through the straight,
you know, that results in a one percent increase in corn, soybean, grain.
Right.
Which is like a third of our food supply,
right? And going into February, you know, US farmers had only bought like 75% of the fertilizer
they needed for the spring planting season. So it is going to impact. And I did see an interview
with a farmer last week who was basically saying that with the increase in diesel,
diesel prices have increased a lot more than gas prices. If you look at the increase in diesel, diesel prices have increased a lot more than gas prices. If you look at the increase in diesel plus the increase in fertilizer costs, it costs
him an extra $800 a day to run every single tractor that he has on his farm.
And at the same time, these tractors are getting fleeced.
They're getting fleeced by Caterpillar and all these guys.
They have to take really big loans.
They've had to take mortgages on their farms.
They've had some very bad years.
And this year was especially terrible last year because of the tariffs.
Their soybean revenues were down like 70%, 80% because China had stopped buying.
And it's only until this year.
And it's only until this year, it took us, you know, a year after a year of suffering from, you know, those voters who all voted for this guy to experience that type of pain.
Their farmer suicides were some of the highest we've seen in 50 years for him to go out and come out with a plan to help farmers.
And part of that plan is actually forcing tractor companies to cut prices, which I don't understand.
But we can talk about that another time.
So, you know, monotiv, I think in the short term, you know, obviously, there is going to be a little
bit of pain. But long term, you know, I'm still optimistic. You know, corrections are normal. In
fact, the average, you know, kind of wartime corrections around 15 percent we were pretty close to 10
percent so i do think that you know we might have a little bit more down especially if we do
it's very likely that over this long weekend happy easter everyone but going into this long weekend
we will likely see some very heavy artillery artillery bombing on both sides. It's going to be very unfortunate you're going to see headlines all throughout the weekend.
probably have more GCC countries saying we can't afford, you know, more drones going through our
prime real estate in Dubai. I mean, look at where MR real estate and all these Dubai, uh,
construction company bonds are trading, like they're down like 20 points. So these guys are
good, probably just going to give up and say, Hey, we'll work with you guys. And then the U S will
say, Hey, it's a victory. Uh, we bombed like, like, uh, you know, 20 power plants and, you know, a third of Iran is without power
and they've given up. And then we'll probably have some subsequent, a year now or for two years
from now, we'll have subsequent terror attacks, just like we saw in France today, in retaliation.
And this whole thing will likely start up again in a year or two. So it is, you
know, it is what it is. But I do think that the world doesn't have a choice for this to last more
than a few weeks, because you will see shortages. I mean, petrochemicals are in everything. I don't
know if you guys know, but the aspirin you guys swallow with water, the aspirin you take every day, that is coated with petrochemical. A third of the world's generic
drugs are actually manufactured in India. And they get APIs from the Middle East and from China.
And the APIs they get from the Middle East flow through the strait. And so I don't even think we
can fathom how many things oil is in,
right? If you, if you look at Nestle, if you look at Hershey's, you know, if you look at Procter
and Gamble, like the people that make peanut butter jars, they're running plastic prices are
up over a hundred percent, right? So you're going to see pass-throughs in the cheapest goods,
not even agricultural goods that you buy at the supermarket
because of plastic prices. And if this administration had kind of thought ahead,
what they should have done is put together a coalition, waited until after midterm elections,
and done it in a way where it just boggles my mind. Like literally two months after about 200 billion
on mortgage bonds,
they caused the tenure to spike 50 basis points.
I don't even understand the sequence of events.
And Besant has to basically defend
everything the administration is doing.
That's not even his job.
He's treasury secretary.
He should be focused on finances,
not talking about strikes over the weekend.
But it is what it is. I'm looking forward to earnings season. I also think that the tech
sell-off is very, very interesting. If you look at the average MAG7 multiple,
it's actually fallen about 30%. It's actually on top of the S&P. So for the first time in many, many years,
tech stocks are at similar valuations
with higher growth than the S&P 500.
And, you know, SaaS names, the IGV,
you know, is down.
There will be winners and losers,
but there will be companies
that actually use AI and implement it,
you know, that have reasons to exist, like the cybersecurity
names, that even those names are down like 30% now. Owners of record, right, companies that have
moats, companies that product, where their products are so cheap, it doesn't even make
sense to use AI. There are a number of categories within software where you will see multi-baggers
over the next three to five years, simply on cash flow. If they cut back
SBC, a lot of these companies have free cash flow yields like 7, 8, 9% already because their
multiples have compressed so much, right? Because their earnings are still growing.
The one thing that I'm worried about is when you do look at the PEs of the big tech companies like
Amazon, Meta, everyone except Microsoft, the EPS is a little bit of a lie.
And the reason I say that is because their CapEx is so much higher.
All of those companies, except for Microsoft,
now have basically negative free cash flow.
Collectively, the Mag7X Tesla were doing $200 billion of free cash flow.
Monster, monster cash flow.
We've never seen anything like it in the history of mankind, right?
For such a small number of companies to be doing that much cash flow, right? Outside of big railroads and big oil, right? If you look at,
you know, the Vanderbolts and the Rockefellers of the world 100 years ago, you've never seen that type of concentration of free cash flow generation. And what they've done is, you know, they've spent
a lot of that on GPUs and data center builds, half of which will likely be delayed this year
because of lack of power and engineers. But they've spent all this money and they've raised all this debt.
Okay. And I think they'll have to slow it down. And that worries me because a lot of these names
like SanDisk and Micron, they might have another year in them with these types of valuations.
And people say, well, Micron looks cheap on a forward basis. It looks like it's five times,
but you forget that memory is the most cyclical of all the semiconductors, right?
So something like SanDisk, you know, if memory prices fall like 10%, SanDisk can fall 50%
because there's so much bullishness priced in about shortages, et cetera, in there.
So I actually think, you know, as a contrarian, you might want to start buying some of the
best software names and start lightening up. I still think AI will do well. I still think demand will
be phenomenal for the short term. But you might want to start lightening up on some of the AI
names and start buying some of the very cheap, high quality software names as a contrarian trade,
because we are getting along the tooth. Maybe we're in the seventh inning. Seventh inning doesn't mean seventh inning of demand.
The demand may stay, but seventh inning when it comes to the speed of earnings growth in the AI sector, CapEx cannot sustain itself at this speed, especially with private credit collapsing on itself.
You saw 40% redemptions from the Blue Wall Tech Fund today.
You know, it's the private credit companies that are getting blown up right now.
I expect 30 to 50 billion
of Interful Fund redemption requests by next quarter.
Those are the same companies funding AI.
So it looks like stocks on space is unmuted.
So that's my signal to slow down.
You're good.
I just know we are going to have a transition period here
in about seven minutes from top of the hour.
We got some new people plan to come on.
So if there was any extra thoughts in there,
I want to make sure we didn't get a hard cut off,
anything like that,
but you're good.
Let's just leave it.
Let's leave it for questions.
You know,
I'm sure other people have very important things to say that I can learn
from.
And you know,
it is a,
it is a Thursday before a long weekend.
So I appreciate you guys need plans
for the weekend uh actually my brother is uh is visiting my brother and my mom are visiting uh i
will be in sunny sunny florida sitting on the dog beach doing some fishing on the pier um very
relaxed i'm gonna i'm gonna try not to look at the mark uh you much. And luckily, the market is closed.
I think everyone here is probably looking forward to a four-day weekend.
I'm sorry, crypto people.
Yeah, suck it, losers.
Although we are going to be talking a little bit here about debasement and crypto and stuff going on in the next conversation.
So we'll be a part of it.
I don't know.
As you're talking here i'm like this
this seems like a guy who who likes the debasement trade this seems like a guy i don't know if
bitcoin's the one sometimes sometimes nobody knows the future but but to pay debasement is here to
stay and it's all fiat currencies you know the dollar is down 10 guess what it's up uh it's up
a little bit this year because of the fear everyone has, right?
And they'd rather short emerging market currencies, rightfully so, and then short cover the dollar.
And that's what's happening this year. But in the future, all currencies will get debased.
Global debt to GDP is over 100% for developed nations. That will quickly go to 150%. I don't want to scare anyone,
but our interest payments as a percentage of GDP, a trillion is about 25% of our tax payments,
maybe closer to 20, 22% of our tax receipts. The Roman Empire collapsed when interest payments as
a percentage of tax receipts hit 50%. If we continue, continue based on my calculations with this deficit and we don't monetize the debt.
Okay. If we continue with this deficit to 2050, we will be at the same percentage that the Roman
empire was in terms of interest. The only way around that is either cutting interest rates to
zero or, or monetizing our debt by the fed buying it. And these are numbers. You can't,
what about, what about invading our way out of it?
What if AI takes over the world
and that UBI goes to the debt
and just pays it off and pays for us?
UBI won't go to the debt.
UBI will go to us.
So that will be a big problem, right?
UBI, we don't even have enough money for Medicare.
How are we going to have enough money for UBI?
Listen, the AI overlords are going to take over everything and we're going to talk to them.
If AI was running government, I know it sounds crazy because I was a kid that watched Terminator.
But if AI took government, we would be in a much better space today.
We wouldn't need Democrats and Republicans.
We wouldn't have all this pork belly spending.
We wouldn't have all these ridiculous bills where you have to, if you have to pass a bill for healthcare, it includes
something related to armaments, right? And it's all over the world, right? Even in India, right?
Modi said he would make a million toilets. It was the most ridiculous promise. You know,
obviously he never went through, but politicians lie.
Claude, make no mistakes. Do not hallucinate.inate run the country you are a perfect politician
you know if you had an ai check check and balance i know it sounds absolutely crazy
to the executive branch where they had to run things by before doing something
the market would have been 30 higher right, right? Because the whole tariff
debacle and the Supreme Court, you know, ruling it out, you know, basically us telling the Saudi
Arabian MBS, who has killed people for less, that he's an ass licker when he promised a trillion
dollars to US infrastructure development, and then cutting off fuel to Korea
and Japan, who've promised $1.2 trillion to the U.S. I mean, some of the decisions that we're
making are just absolutely unbelievable. And in the prior administration, right? Allowing
criminals into the country, allowing opioid deaths. I mean, government was really only in it
for themselves. And I think an AI would do a lot better.
But with that, let's move on to your crypto spaces.
I hope you all have a wonderful weekend, a blessed weekend with your families,
and a positive trading week next week.
I'm excited for a green trading week next week.
We'll see.
I see Ryan giving us the...
What's this up?
How we doing, sir?
Shout out to Jay, by the way.
Make sure you're following Jay.
A lot of great conversations going on here.
We got some more good stuff coming forward,
but always a great time here on Stocks on Spaces.
Hey, Ryan.
What's up?
We didn't get your moon shot,
but we orbited around the moon and came back.
Yeah, today was a very interesting day.
Today was a very interesting day.
It feels like the type of day that in a couple weeks,
it's one that really just won't really be remembered much.
We kind of did nothing for either side.
Bulls still waiting for a recapture of the 200-day.
Bears had an intraday reversal to the upside.
Still didn't close green, but wasn't a W.
Wasn't the W it looked like it was going to be
for the Bears in the morning.
So I don't know.
People don't want to have a decision going into a long weekend.
I guess that's fair.
I don't know if I would want to go three days into this.
Now we're going to talk a little crypto at some point.
They don't get that time.
There will be some crypto moves over the weekend.
But yeah.
Yeah, we mentioned it yesterday, right?
I think we're all kind of on the same page.
Last night, we would see some type of reaction to Trump's comments.
And then once the open happened this morning, we would get kind of the follow through reaction after everyone kind of thought it through.
So some hedging downside last night.
And then, yeah, we got a little bit of a headline this morning, which was the second positive headline out of Iran.
And, you know, they just bought it right back up.
And then you notice by after that move, by lunchtime, everyone was off the desk.
And that's kind of what we were predicting yesterday.
And I think, what do you do?
I mean, do you go long?
Do you go short?
Do you stay hedged?
What do you do?
I mean, I think you do nothing.
And I think by noon, anybody that was going to do anything had it done and walked away
from the desk and are about to enjoy a three and a half day weekend.
You know, one thing I will say, empirical, but like fives, I feel like everyone who's
come on the spaces has been outside walking around.
Normally these people are locked in at their desk and they're all out and about, so I guess
that's all we need to know.
Well, my internet went down. Oh yeah, Starbucks. I've been at Starbucks all day.
Starbucks. What's your Starbucks order? Um I had whatever pink looking drink thing that was,
it was pretty good. There you go, the classic.
The classic. Stock talk, what's your take on debasement trade here
I can't hear you it's not it's it's hitting him with the uh the slap down my read is he's gonna
say it makes sense,
but he's not interested in. Doesn't want
to bet against America.
Thinks Bitcoin
is too big to fail.
Owns a little gold.
Yeah, like there's going to be debasement,
but don't bet against america i don't know
yeah that feels about what we're about to hear there's a spot for it in your portfolio
you know a small part crypto still trades a little bit like a risk asset
gold's kind of the other side of it i don't know oh god what's up stock talk
they're trying to silence you can Can you hear me now? Yes, we got you
What were you asking about what's your thoughts on the concept of the you know debasements of
Currency in the US maybe it's not even the US dollar but fiat currencies in general and a lot of those conversations
tend to look lead towards Bitcoin and gold, but
What's your thoughts on the debasement trade?
I mean, the answer recently has certainly been gold over Bitcoin, right?
I mean, if you look at...
Depends what your time frame is.
Yeah, I guess it depends on your time frame.
But I mean, recently.
I mean, recently, I think that's indisputable.
I don't know.
I'm not negative on either of them as a way to avoid debasement if that's your goal I just think the market has expressed it more through the gold trade recently and I think that's because of what do you think of the goal geopolitical volatility largely what do you think of the thought of having your report like that being one of the things like the extremely the guiding forces
of your portfolio like or like i think bitcoin is active i don't mean i don't i own a decent
amount of physical gold but i don't own any in my like digital portfolio if you will um
like i don't own any in terms of my expression of gold through, I don't own any gold mining stocks or anything like that.
But I don't know.
If you take the last 10 years in a capsule,
I would say in moments of geopolitical volatility,
the market has preferred gold as a safe haven.
And in normalized environments,
by normalized environments,
I mean like bull market and normalized bull market environments, the market has preferred Bitcoin.
So I think when there is a risk on appetite, because keep in mind, the debasement trade, or not the debasement trade, debasement itself has been happening on a pretty consistent basis for quite some time.
It's not something that really ebbs and flows, at least from the government spending standpoint.
It's not something that really ebbs and flows with the appetite of the market
as much as a lot of other trades in the market.
So I think if your goal is to, I don't know, if you have some sort of longer term thesis of debasement becoming a bigger and bigger problem and you want to hedge your exposures over that period, it's really either gold or Bitcoin, I think, are the big two.
But I think it depends on what sort of risk environment you're in.
I think when you're on a risk, when you're in a risk on environment, I think Bitcoin is the better way to express that trait from a
return standpoint. And when you're in a risk-off environment, or when you're in a choppy environment,
or when you're in an especially geopolitically volatile environment, where you have more
uncertainties, not just about US debasement, but global currency markets, instability in general,
I think in those types of environments,
gold is probably a better loan. So I think it's conditional. I mean, obviously,
since inception, Bitcoin has far outperformed gold. I'm not disputing that.
But if you're talking about using it as a trade intra-cycle, I would say it depends on the risk
appetite that the market is at.
You know, if you're in an environment where risk on assets areations, and you see maybe a pause in momentum
or a sell-off even in momentum and risk on appetite, then I think in those environments,
you probably give the edge to gold. So yeah, I just think it depends on what you want from the
trade if you're looking at that as a trade, that's not something that I really have deliberate exposure to in my portfolio.
I mean, I think owning assets in general is sort of a trade on debasement.
But just broadly speaking, owning assets.
But I do think that if you're trying to be tactical about it,
that's a decent way to think about it.
What's up, David?
Did we got you?
I think we're having some Spaces problems.
I cannot hear him, though.
Classic. We will get...
That co-host spot
will get you every time.
It's the classic Spaces little error. We're going to talk. That co-host spot will get you every time.
It's the classic Spaces little error. Well, we're going to talk here a little bit more about this.
I got a couple tweets pinned up in the nest above,
and I'm excited for this conversation. I do want to
read out a quick disclosure
overread. You guys know
Stocks on Spaces live every single Monday
through Thursday, 3 to 5 p.m. Eastern at least.
After this, we like to bring on a
lot of different people
and have different conversations.
And we appreciate the Quantify Funds team, David,
for coming on the spaces, working with the team,
enjoying us, allowing us to enjoy the conversations
and learn some stuff here.
So we are going to be talking about a couple tickers here,
and I want to read off a quick compliance thing.
Investors should carefully consider funds and investment objectives, risks, charges, and expenses as we be talking about a couple of tickers here, and I want to read off a quick compliance thing. Investors should carefully consider funds and investment objectives,
risks, charges, and expenses as we were talking about them. A funds prospectus and summary
prospectus can contain this information and more. To obtain a funds prospectus and key information
documents, you should go to the quantifyfunds.com website, quantifyfunds.com. Funds prospectus and
key information documents should be read carefully before investing.
We're excited to be working with the Quantify Funds team.
Again, there's a tweet pinned up in the nest above with everything we're going to talk
about here.
But David, do we have you up here now?
Still see him as connecting.
They haven't shown up for me just yet.
They're trying to suppress the alpha. They're trying to suppress the alpha They're trying to suppress
The alpha
The one that I am excited to talk about here is
BTGD which is one that we've
Talked about for a little bit
David there we go I think we got you
There we go sorry Twitter is still
Twitter spaces
Sometimes it happens
Sometimes it's not the best.
You know, sorry about that, guys.
I also have our partners here at Convexitas, Devin Anderson.
He's already got a speaker spot here.
So thank you guys all for having us on today.
I listened in to the onset of that call.
And what I find most ironic is that actually Bitcoin is seemingly held up a little bit
better in this geopolitical environment than gold has. And I think that's caused some head-scratching
moments for allocators where I do fully believe what you said, where Bitcoin is going to be the
risk-on currency debasement hedge and gold is the risk-off. But the most famous words on Wall Street is this time is different.
And gold had this pretty mean pullback here. And I think if you think about in the context of
who was actually selling gold since the start of the war, we believe a lot of these sellers have
been central banks, especially emerging market central banks around the world, that have accumulated a whole lot of gold already.
And a lot of the ones that were sellers during this geopolitical event were ones that are importers of oil. prudent thing of trimming the asset class that it has done best in their portfolio, which is gold,
and using the proceeds to buy oil for their economies and members in their economy.
So I actually think this is one of the best times to consider this pair of Bitcoin and gold,
just because they've both kind of reset to a little bit of a lower level.
And if I were a betting man, I'd probably say both Bitcoin and gold have a
very good chance of outperforming the S&P over the next, you know, one to three year
basis, especially with this reset in gold prices that we've seen as of late.
And yeah, I think it's a really excited time for our products in this marketplace.
Obviously, you guys have heard us on this call before,
and our flagship first fund is BTGD,
which is about 15 months old now.
But our newest launches in January,
at the end of January, right around January 20th,
is our income-stacked offering.
So we have income-stacked, also Bitcoin and gold with ISBG,
and income-stacked stocks in Bitcoin, which is the S&P 500 in Bitcoin for ISSB.
And use the same concept of return stacking in BTGD, but do so in a derivative income format.
And what I am most proud of about these offerings is these are derivative income vehicles that you don't have to choose necessarily
between income and total return. We strive for outperformance on a total return basis just as
much as we do on a risk-adjusted basis, and that's because of the amazing work that Devin and his team
at Convexitas do. These are vehicles that, you know, candidly look and feel much more like a hedge fund than your traditional cover call ETF.
We rebalance twice a day to keep this 100% exposure target on both assets.
And I'm proud to say we've successfully been able to, even in just the few weeks we've been live here,
create some real alpha versus the underlying versus just a traditional 100 plus 100
portfolio and a lot of that's been to the amazing work that devon and his team do at convexitas
and um you know the the 100 target is the fixed like reference point in the portfolio but that's
where the everything beyond that is where the active mandate really comes in.
How that position is reflected, how we generate premium, when we generate premium, what vehicles we choose to generate premium.
That's where the real potential source of alpha is.
When we first launched these vehicles, a lot of our short options were much more traditional looking, three, six month out shorts that we were
generating premiums from. But we saw massive spikes in volatility in all these asset classes.
Even before the war, we saw spikes in volatility in Bitcoin and gold. And that's where the
flexibility of this mandate and this partnership with Convexitas really comes in. Sometimes we'll
have longer dated options in the short t comes in sometimes we'll have longer dated options
in the short side sometimes we'll have one week one day two day options on the short side uh in
some instances we might not even harvest a lot of volatility as was the case a couple weeks ago
and i think it's that prowess and that expertise that really allows these vehicles to shine and have a potential source of alpha here. And a lot of
people say all you really need to make money in selling options is high implied volatility. And
implied volatility is what is the volatility that's being priced into the options curve. But
that's really just half the equation. You really need implied volatility to be higher than realized volatility.
Realized volatility is the volatility we actually experience on a day-to-day basis.
And volatility risk premiums and harvesting of volatility is really the delta between future expected volatility and actual realized volatility.
And so there were moments in February where we weren't really
harvesting a lot of volatility because we didn't see it. Even though volatility was being priced
very high further on down the curve, volatility was equally as high in reality and what we were
experiencing on a day-to-day basis. And so it wasn't until we saw that true divergence that
we really leaned further into harvesting that volatility. So I would love to introduce Devin,
if you wouldn't mind, you know, you can unmute yourself and introduce yourself to the crowd.
Thanks. Yeah, my name is Devin Anderson. I'm the CEO of Convexitas. We sub-advise
the income stacked products and run all the investment management. I have, you know,
just by the way of background,
I spent 16 years at Deutsche Bank
in a variety of derivative-related roles
from just being on the flow sales desk
to head of structuring
and the fund structuring businesses.
So I have a really deep background
in derivatives markets,
quant theoretical pricing,
as well as fund structuring
and all the legal
and what's called an assembly pieces
that go into how you merge strategies and funds together.
Very interesting. I am curious of how these type of structures coming to the market, to the ETF structure,
to retail investors, to, I'm sure it's been available for private, you know, institutions
and family offices and that type of thing. But how have you seen these sort of structures
and these sort of kind of more advanced strategies here to kind of get income
and have you seen it grown?
And what is kind of different happening within these income stacked ETFs?
ISBG, maybe we can use as an example here, that maybe is different from kind of some
of the other names in the market.
Yeah, it's a good question.
So if you rewind the clock back to when the ETF world first launched, the notion of the
active ETF didn't even exist. And now there's like 5,000 of these things or something. So
the structures come a long way from just static stock portfolios to the initial
cohort of active strategies that may be only rebalanced
once a month and had pretty strict risk rules. And then the SEC came and passed Rule 18F4,
which allows you to do things like we do and run a, essentially generate all of the risk in the
fund from derivatives rather than the fund be subject
to derivative notional exposure rules.
So what that's done is before kind of these rule changes, even if you wanted to really
take an institutional approach and a hedge fund style approach to a strategy, you couldn't
put it in this wrapper even if you wanted to.
Versus post these rule changes and the proliferation of the active ETF space, now we can really
bring what I would call institutional level risk management and strategy design into these wrappers to make them available to retail and in the wealth channel.
So, you know, some of the ways we take advantage of that are, you know, are the goal of these income stack funds is to, 100% exposure to gold and 100% exposure to Bitcoin with the opportunity for weekly income distributions on top of that.
And interesting from an investment standpoint is we can synthesize all of that risk in the options market while taking advantage of the structural edge in the options market.
So what I mean by that is we essentially are working every day to look at where we think the relative value is and where the rich options are and where the less expensive options are.
And we can synthesize the long,
which ends up being about 80% of the funds exposure
through these long flex calls,
which are also can be very tax efficient.
But then we pick up the rest of the exposure
to Bitcoin and gold through short options.
Mainly when we sell puts,
we get longer, those underlying markets,
but we're also collecting some decay
when we sell those options.
So by balancing the short option portfolio,
which is also changing the amount of market risk
that the fund has with these long flex calls,
we're able to design an overall package
that is targeting
the headline goal of 100% exposure to two different assets, while also doing it in a
way that allows us to collect some income along the way.
You could only do that if the structure was entirely in options.
And not that long ago, these things just weren't allowed.
And not that long ago, these things just kind of weren't allowed.
So I think very quickly the ETF world has gone from what I would call really passive
allocation vehicles to the real opportunity for managers like us to bring, I think, hedge
fund quality and hedge fund strategies democratized to everybody and wrappers like this.
So, you know, the rule changes are what make all of this possible.
I'll also add, I think I talked on this a little bit of the onset of the call, but, you know, that's the legal aspect that allows us to do this in an ETF.
aspect that allows us to do this in an ETF, whereas years ago, this would be more of a
structured note or something that's offered in a hedge fund-like wrapper or on a quantitative
investment strategy desk, a QIS desk at a big bank. We can now do this all in an ETF here.
And what I find most fascinating and differentiating about our offering here is not only this one plus one concept, you have two assets in one vehicle, 100% exposure to both.
They're buy and hold leverage.
You remove a lot of the path dependency.
But also, you don't really have to choose between income or total return. You can see there's been some days where Bitcoin and gold
in combination ripped 12%, 13%.
And we caught, I think, over 100% of those upside days.
And that's just not something we're seeing
with a lot of our counterparts in the derivative income space.
And it's no discredit to some of the giants
that really
kicked off this category, such as JP Morgan and others. But if you're rebalancing once a month,
you kind of have a random walk of exposure, meaning one day you're 70% exposed to S&P,
next day you might be 40%. The next day you might be 20 percent exposed. And so often your ability to outperform
or underperform is a little bit of a random walk, whereas we really wanted to provide a vehicle
where you did not have to sacrifice total return in order to access a derivative income strategy
in both of these products at once. And we've done just that since we've launched and done so with
even a little bit of alpha beyond the benchmarks here um so very very proud of these offerings here
to really drive income for investors that still want that growth profile
do you guys have like a target uh a level of income here we're shooting for is there um and then you know i i did i pinned
up in the nest above is all the etfs you guys have and then down below uh in the comment section i'll
pin it up in the nest above in a second here is the link to the website as people are digging in
a lot of the information and questions i'm sure already asked on here but i'm also curious as
people are doing their research into into the
website respect this all that stuff as i was saying earlier is a good place to start but i'm curious
where else i think maybe should be uh doing some research into yes absolutely we have a really good
one pager on isbg and issb's uh individual fund pages that really goes through the ins and outs of
how we construct this all. We also have a nice
10-minute video just talking about what the unique aspects are of these vehicles. I'd say
both of those are really good places to start. But in terms of distribution, we set a range of
18% to 25% as a distribution range. And if you think about that, you know, these are 200% total exposure vehicles.
If you look at the unlevered distribution rates on that,
they're actually pretty reasonable and quite frankly, pretty low.
And that's done by design.
One of our mandates here and one of our messaging points here is
you really should only distribute what you can generate. And I think in the onset, especially for individual investors in the
derivative income space, I think a lot of people got enamored with vehicles that might distribute
60, 70, 80%. There's just no way over a long period of time that truly almost any asset is going to be able to generate enough to withstand that distribution rates,
and you're ultimately going to see your NAV decline over time.
And so in addition to this very reasonable distribution rate on this levered basket of 18-25%,
you'll also see when the underlying assets are down, when Bitcoin's down, when gold's down or stocks are down, we'll tend to stay towards the lower end of that range, maybe in the 18 to 20% range.
And that's by design because we want to create a good shareholder experience. If you choose not to
reinvest the dividends, we'll never be the firm that tells you if you wanted a good investment
experience in these vehicles that you should reinvest it.
We fully believe that these vehicles should be created such that you can do
what you want with those distributions,
whether it is rebalancing it to other parts of your portfolio
or actually depending on it and using that income stream
for liabilities that you have in your day-to-day lives.
So we'll stick to the lower end, maybe 18% to 20% when the underlying assets are down.
And that will allow us a little bit more cushion to allow the NAV to appreciate more off of a higher base,
such that when assets recover, we'll end up going a little bit closer to that higher end of that range,
we'll end up going a little bit closer to that higher end of that range,
call it like, you know, 22 to 24,
even 25 in certain instances on a distribution rate.
So both a healthy enough distribution rate that it's definitely interesting,
but also designed and engineered to create a really good shareholder experience
over the long run without ever having to,
if you don't want to reinvest dividends into the underlying product.
How do you view the type of person who is investing in this one versus BTGD being different?
In general, I'm sure I know you guys have seen you at all these in-person events,
and I'm sure you're having different conversations on who you're talking to. Is the person going into something like an ISBG different than someone going into a BTGD?
Or is it all a part of a portfolio?
I don't necessarily think it's a different investor profile.
I think it's different portions of your portfolio.
portions of your portfolio. You know, one, first off, a good rule of thumb is if you want and need
the income to use for liabilities in your day-to-day life, obviously that's where the
income stacked offering really shines. But we are seeing some people choose to, you know,
in their taxable account, they might do BTGD because they don't want the income and they don't
want any premiums coming through on that and maybe allocating to the income stack lineup
in retirement accounts. But I think it's, you know, you need to use stacking in general. You
need to be a little bit of a growth investor just because, you know, there's no need for
portfolio leverage at all if you are, you know are 30%, 40% invested in equity markets.
But once you hit that 65%, 70%, 75% equity range and higher, that's when I think people should consider the use of some form of leverage in their portfolio.
And I think leverage gets a bad rep because people generally think of just generally think of just traditional two times or three times leverage ETFs.
But when done with diversification, you know, BTGD has been around for quite some time now.
We have less than a one-to-one downside on IBIT.
That means on average for every 10% drawdown on IBIT, we might be down, call it like nine, nine and a half percent.
And on the upside for every 10% upside on the IBIT, we might be up 11, 11 and a half, 12%.
And so I think for anyone who is worried about geopolitical events and such,
you need to find some diversifiers in your portfolio.
And if you're a growth profile investor and you have over 65%, 75% of your assets in equities,
you have to figure out a way to make room for diversifiers in your portfolio without
costing you equity exposure. And that's where the concept of stacking comes in, where it's
truly addition without subtraction.
Take, you know, ISBG, Bitcoin and gold here.
You know, you might have you might consider the S&P 500 and I bet your benchmark.
You might like gold, especially after this pullback that we've seen here with some of the emerging market economies selling it, especially if they are oil importers.
selling it especially if they're oil importers but by stacking gold on top of bitcoin
it doesn't pull you away from your benchmark as much as making a just pure allocation to gold in
your portfolio and in that context gold doesn't have to outperform equities to outperform your
benchmark it just has to outperform the cost of financing so that's where that concept of addition
without subtraction comes in,
where you can slot something like gold into your portfolio
without giving its own allocation.
Did I lose you guys here?
I'm not sure if Twitter cut off.
No, it was me.
I was talking without unmuting.
That was my bad.
It just happens.
Sometimes I still just blame it on Twitter,
but that one was totally user error.
I want to double-click into BTGD a little bit more here.
I know we have talked through,
and I've heard you say different parts of it,
different points,
but a little bit more just in one point here, exactly what is happening with BTGD.
Now, this is not the income stacked one.
This is just stacked, no income on this.
It's 100% Bitcoin.
It's 100% gold.
I know we've talked about the rebalancing of it as well.
Can you tell me a little bit more about what is actually happening with BTGD?
Yeah, I mean, it's not magic. It's just, you know, with traditional leverage ETFs,
to get a 2x return on a 2x S&P 500 ETF, you need to be trimming it on the way up
and buying it on the way down. And so the whole concept of return
stacking, which is one of the fastest growing categories in the ETF space is, again, not magic.
You just embed some of that rebalancing responsibility into the ETF and you choose
two assets that have correlation benefits between the two of them.
And again, that rebalancing still needs to be done.
We just embed it into the ETF.
So on BTGD, we'll usually rebalance on like a 3% drift between the two underlying assets of Bitcoin and gold.
And that allows us to have this vehicle that is much more suitable for buy and hold investors
or advisors that want a little
bit of leverage on their overall portfolio but don't want to have to deal with margin.
I think one of the beauties of all of these vehicles, whether it's stacked or income stacked,
is it gives you a little bit of that leverage. You don't have to rebalance it three to four
times a week. It's applicable for buy and hold. And you won't be receiving a margin call in return for
holding this and having a little bit of leverage. And we won't be receiving a margin call because we
receive or get our leveraged exposure without actually using margin on our accounts.
So this is really, in our opinion, one of the safest ways to add a little bit of diversified leverage to
your portfolio. And again, whether it's income stacked or stacked, the closest thing we have
in this financial world to a free lunch is diversification. And everyone talks about
diversification, but oftentimes I find people don't actually do the necessary rebalances in
their portfolios to take advantage of that diversification.
Diversification isn't just having two assets that move independently of each other. It's
actually rebalancing between them. And I do find there's a lot of allocators who have Bitcoin and
gold in their portfolio, but they don't do those somewhat emotional and difficult trades of
rebalancing between them. And so you can think of BTGD as like the access point product into that world
where we'll simply just do the rebalancing for you,
and then the income stack lineup is kind of another iteration,
a little bit more of an advanced iteration of that where we'll do that,
but also try to generate by harvesting vaults at risk premium in different ways.
And that's really where the uniqueness and the talents of Devin and his team at Convexitas come in.
A lot of our counterparts have derivative income strategies that underperform total return and also only do one thing. And I think last year was a really good example as to why sometimes single offering derivative income strategies can give you a little bit of
a head fake. Last year, we had Liberation Day and post-Liberation Day, everyone expected there
to be volatility in the future. And what that means is that the implied volatility was really high. It was more costly further on down the curve in the options market because everyone
expected to be volatility in the future. Realized volatility, the volatility we actually experienced
that we actually got on a day-to-day basis was very, very low. And so last year was a perfect example where your traditional zero dte strategy would
outperform a longer dated option strategy and i unfortunately i see a lot of people like chase the
the best performers over the last six months and you know that leaves you in a world where
all of a sudden it's 2026 and the exact opposite happens.
We have this massive geopolitical event.
Volatility has spiked significantly in many periods, both realized and implied volatility has spiked significantly.
has actually underperformed traditional derivative income strategies because the embedded volatility
hedge you get in longer-dated options has actually benefited shareholders. And we have this amazing
opportunity here to offer this vehicle that is somewhat nimble between both of those.
When we started the year, we had longer-dated option strategies, which protects against the potential spikes in
volatilities. And then once we saw spikes in volatility, we chose to shorten a lot of our
offerings and looked a little bit more like shorter-dated or zero-DTE option strategies.
And then we had a geopolitical event, and we had a war with Iran kickoff, and volatility
spiked even further, you might say,
wow, this massive IV spike is going to be amazing to harvest volatility. In some cases, we didn't
actually harvest a lot of volatility in the middle of February because implied volatility is high
and also realized volatility was high. And so we actually decided to like sidestep some of that volatility harvesting. Fast forward till the end of February, beginning of, sorry, the end of March, beginning of April.
And we've actually seen a gap now between implied volatility, future volatility,
and realized volatility, the volatility we actually experienced today. And that's the
perfect market to really harvest a lot of volatility premium. So we went from traditional three to six month option strategies when we first
incepted this product to shorter data option strategies to not harvesting a lot of volatility
at all because realized volatility was just as high to now harvesting a lot of volatility again.
And it's that nimbleness that I think adds a lot of value in what we've created here.
And you can think of this as a combination of a number of different types of ETF offerings
and one that will make those difficult trades for you.
I think there's some people who choose to just hold a number of different derivative
income strategies, some shorter dated, some longer dated.
But similar to what we were talking about with BTGD, the onus is on you then to rebalance between the two or
choose which might be better for different market environments. And that's why we were so excited
to create this vehicle that that's where our active mandate is. Our fixed mandate is the exposures,
trying to offer 100% of asset A, 100% of asset B. And the active mandate is
how we express that portfolio and how we harvest volatility, which I don't know how many people on
this call are options traders, but this has been a very difficult period to be an options trader.
You really need to have a very deep, thorough understanding of this space to be able to do so and create some value.
It's been a wild market here over the last couple of months, a couple of weeks, whatever you want to call it.
Even a little bit before I run stuff.
But I definitely do appreciate Mr. David Giacci coming on here.
Two tweets pinned up in the nest above, a bunch of the ETFs, and then the
link over to the Quantify
Funds website, QuantifyFunds.com.
You should definitely go in and check them
out if any part of this conversation was
interesting for you.
There's a lot more places that you
can do the research. I know we already talked about this, but
David, I'd love to just kind of, is there
anything on the spaces that we didn't talk about
as we're kind of leaving people here and they're interested in this conversation and they're digging in on the website?
Where are some maybe they can send you guys as DMs or emails or whatever it is?
Or maybe we're just waiting for the next time we get you on the spaces here.
But I'd like to hear your thoughts on where people can kind of go as they're continuing to dig into their research.
But yeah, appreciate you for joining in as always.
I always love being on the show.
Thank you guys.
You guys have an amazing show here
and really dispel some good information to the universe.
So first off, thank you.
And please give us a follow, Quantify Funds on Twitter.
We definitely put out a lot of good information there.
You can find more information on our funds
at quantifyfunds.com.
And we're truly an open book.
My email is just david at quantifyfunds. Please, we're truly an open book my email is just david at quantify funds
please anyone with any questions that also ever shoot me an email happy to set up a call and talk
about these in greater details we do have a very good one pager on the income stacked
website for isbg and issb that kind of outline what we're trying to do here. And also a very nice 10-minute explainer video
that really talks about how these things are differentiated
from everything else in the marketplace.
So thank you all for your time here.
And I guess this is the official $2 trillion day for SpaceX, right?
That's the news that just came out.
That's what Twitter seems to be clamoring with now.
So I guess we're all waiting for this spacex ipo to come out and i guess spacex is going to be the sixth largest position in
in uh us equities which is just wild i think it's pretty crazy that spacex is going to have a higher
valuation than tesla and meta and a lot of these other really large companies so that'll be really
fascinating to see it is pretty crazy that's the rumors going around that they're targeting a two trillion dollar
ipo valuation i i thought 1.75 was pretty high but i guess it wasn't high enough it's just kind
of crazy that it's literally 33 more expensive than tesla itself which is like who could have
seen that coming oh Oh my gosh.
People have been talking about a Tesla-SpaceX merger, but I mean, at this point, it's a SpaceX Tesla merger, I guess. Yeah, right. It's pretty, pretty wild. But look, hopefully the IPO markets
open up and a lot of these amazing growth companies come to the marketplace. And I think,
honestly, tying back to what we're trying to do here, you know, addition without subtraction, it's really nice to get two asset classes you want to have exposure to in one because it frees up a lot of your portfolio to do more creative things and hunt for alpha.
STRC. And I think our vehicles are very good vehicles to sit next to STRC because, again,
we have a very cost-effective form of financing embedded into our ETFs, call it like 4%, 4.5%.
If you are a fan of Bitcoin and STRC and you want to figure out how to get gold and other assets in
your portfolio, you really start running out of room in your portfolio if you're a growth profile investor with a lot of equities.
And so that's really what we've designed here is a vehicle that allows you to hunt for alpha
elsewhere by getting a two-for-one offering in a stacked concept.
So thank you guys all for your time.
Always a pleasure.
And I'm looking forward to this SpaceX IPO coming soon.
I appreciate you, David.
Thank you, Devin, for also joining in.
Appreciate you for doing here.
Make sure you are following the speakers.
If you enjoy this type of live conversation, you can love this conversation as well.
We do this every single Monday through Thursday,
3 to 5 p.m. Eastern at least,
and then we have awesome, smart people come on here
and do some good conversations after,
just like David, just like the Quantified Funds team.
Devin, we appreciate everyone for hanging out with us here.
Follow the speakers.
We will catch you all on a Monday.
Have a great one, team.
