Stephanie Pomboy: Did Things Just Get A Whole Lot Worse?

And we should be live. Welcome to Thoughtful Money. I'm Thoughtful Money founder and your host, Adam Taggart, welcoming you for one of our monthly gatherings with the macro maven herself, Ms. Stephanie Pomboy. Hi, Steph, how are you? I'm great, Adam, how are you? I am great. Couple of things, Stephanie, speaking of great, it was better than great to get a chance to spend a little bit of time with you in the real world together at your and Grant and Dave Ivins' wonderful conference out there in St. Petersburg, Florida. Congratulations on such a great event and just thank you so much for inviting me along with you. Oh my gosh, I mean, it was so much fun and it was great to have you. You really added so much to it. So I'm glad we could have you there. And it was fun for me to get to meet Ashley finally. I didn't realize that I was, I mean, I know I'm short most of the time, but I felt like a Lilliputian next to all of you people. Well, I mean, I gotta say, I felt a little short. And so what's funny, Steph, first is we filmed that little chat we had in the bar there, which I posted the next day and people really liked your commentary, but I think the audience was just super fixated on two things. One, the height differential between you and I, and they were like, oh my God, Adam, you look like some hulking giant next to Stephanie. But also, I mean, people were kind saying we both looked fit, but honestly, most of the comments were talking about the Stephanie Pomboy gun show, chiseled arms that you were showing there. So anyways, yes. So folks, Stephanie is very fit. I learned a little bit about your athleticism in your younger days, Steph. Let's end that conversation right here, shall we? I will. It'd be fun to talk about it someday. Let me just say, folks, you don't ever wanna get Stephanie mad and be in a back alley with her, whatever. She'll deliver the beat down. But also, I did feel pretty small. I'm kind of a tallish guy, around 6'2", but I would say everybody else there was kind of minimum my height. Tom Mahanig, Luke. But then Mike Green comes in, he's taller than me. Tom McClellan comes in, he's taller than me. Then Dave Ivan comes in, and he's taller than everybody, right? So I don't know what they feed these macro people, but it sure makes them grow. All right, Steph, as you know, I have to name these things before we go online. I named this a couple days ago, right as oil, I think, was hitting like $120 a barrel in the overnight market. So I named it, did everything just get a whole lot worse? Because it's a bit of a leading question, and I'm sure we can debate some of this, but there's a lot of people who are saying, okay, Adam and Steph, since the last time you guys talked, we're now at war with Iran. Oil prices are an awful lot higher, and who knows how high they're gonna go and how long they're gonna stay there. Private credit is all over the headlines these days. We're seeing multiple funds slam the door on people being able to take their capital out. I think I just saw a headline this morning that JP Morgan is stopping lending to a number of PE firms, if not all the PE firms that it deals with. So all of a sudden, the PE risk, which you and I have been talking about for a long time, really seems to be headline news now. And then we got the payrolls number last week, and it was pretty bad. I think it was like minus 92,000 jobs. It was like a six sigma missed expectations on the downside. So you can look at that litany of things I just mentioned and say, oh my gosh, it looks like everything is just heading into the toilet here. Obviously, it's a bit of a leading question, but what do you think, Steph? All right, folks, looks like Steph is frozen there. And she had mentioned as we were getting on here that she might be having a few issues with her internet. So I will keep tap dancing until she comes on here. So on the things that I just mentioned here, we can, I'm gonna go through these with Stephanie when she comes back on, but obviously the war, I mean, who knows what's gonna happen there. And if you're talking to, if you're listening to the administration, they're saying that basically everything's way ahead of schedule, and we're doing better than they could have possibly imagined when they started this. Obviously, there's people who take a certain amount or a different side of that coin, and I'm not gonna argue one way or the other. We're in the middle of the fog of war and all that. That'll be TBD. Oil prices obviously have come down a lot since the $120 panic spike that they hit on Sunday night. They're kind of bouncing around on a daily, kind of on an hourly basis. On some news cycles about, well, maybe a ship or two has transited the Gulf, or I think this morning, Lloyds of London started putting, started allowing ships to buy insurance again. But obviously the thing that drives it the most is the president saying, hey, I think we're wrapping up the war to, oh, wait, no, we're gonna be in it for as long as it takes. So that is bouncing around the price of oil just from the news cycle alone. And on that, folks, I would say, just be careful trading here. There's so much sentiment that's pushing the oil price around that really, it's anybody's guess what's gonna happen here. Private credit, hopefully Stephanie can come back soon. So I'll move on to the payrolls first just because she knows a lot more about that market than I. But I think my kind of underscore on that one is just, hey, this is something that not just Stephanie and I, but many of the folks on this channel and I have been talking about. Even Lance, who's generally a fan of bonds, has been increasingly saying, there's definitely some legit smoke in the private credit space. It seems like Wall Street is finally waking up to that. Now, of course, the huge question on this is how much rot is there, or in Jamie Dimon's parlance, how many cockroaches are out there? And we just don't know yet, but I think we're finding, you turn the light on, you see a cockroach, you start looking around, you're gonna start finding more. And we definitely, just in the past couple of weeks, have been seeing a number more and momentum, looking at the momentum, I think that story is only gonna get worse. And then on the payrolls, this is a really interesting one. We've been talking for, I mean, honestly, the past two plus years on this channel about how hard to believe the BLS jobs data is in general. But it's what we got coming out of the government. And you mix that with this sort of no hire, no fire economy, where in general, I think we felt that the BLS payrolls data has been overly rosy, and that things are worse than what the payrolls show. But if you look at other data, like continuing claims and things like that, they're not that bad either. So there's a real, I think, open-ended question to how bad or good is the jobs market right now. Hey, Steph, so glad to have you back. No worries. I rebooted everything, and now it tells me my internet is much faster. I don't know what happened. And the crazy thing is, I work fine all the time, but it's one Wednesday a month, all of a sudden, it's like we're jinxed. But anyway, I'm so sorry. I think, knock on wood, we're good, so. It's Murphy's law, and everyone here, someone just said, Adam's treading water like a champ. All right, so thank you, Peter, for that. I think this is all just a conspiracy to get my heart rate up, because it works. Oh my God. Don't worry, we're good. And let me just finish this one little note I was saying in my diatribe, and then we'll go back over it all we do. So with payrolls, I was mentioning, Stephanie, this is kind of a leading question, because yes, the payroll numbers was pretty bad. But then we just had the ADP jobs number, which is actually pretty good. And one of the questions that I've been asking you of late, Stephanie, is, you know, for all the things that the administration has been putting in place, are the odds arising that GDP growth might surprise to the upside this year? And I still think it might, and obviously you can think differently if you want to. But again, the jobs story is a really interesting one, because you can find whatever story in the jobs data you want to find, depending upon which data you look at. But Steph, with you back, why don't we, why don't I ask you the question I did right as you froze, which is, I think you heard my full litany of reasons why a reasonable person could be reading the financial headlines and ask themselves, oh my gosh, did everything just get a lot worse, right? The outbreak of war, the price of oil, private credit concerns, and then bad payroll numbers. Are things as dire as they look, or is it more nuanced as most things in life are? Well, I think that, you know, it's important in times like this to take a step back and think about what the longterm picture is the bigger picture, because trying to navigate the chop from day to day is just kind of a fool's errand right now. It does make me feel good that I have some exposure to volatility because you and I talked about that as, you know, just the easiest trade to make this year. It was so cheap to buy volatility, it still is. Yeah, and that was a smart choice on your end. Congratulations. Well, and you did the same too, so congratulations to you too. But I feel like, you know, in the near term, that's kind of the most comfortable and probably true discourse of action rather than trying to time what's gonna happen and game out how the war is going to unfold and how long it's gonna last, et cetera. But longer term, you know, if I step back and I think about what was the backdrop that I saw before the war started, and there were two major things that I thought would define 2026, and that was going to be higher commodity prices and higher bond yields. And there were a variety of reasons why I expected those two major forces to continue throughout the year, most of them secular, you know, the Cold War for resources, the demands for energy from AI, the dollar diversification, which found countries diversifying out of treasuries into hard assets, blah, blah, blah. And then obviously related to that is the implications for our bond market, which was less global deficit financing for the US, which would put upward pressure on bond yields, blah, blah, blah. So as I look at this Iran situation, I ask myself, does it dramatically change those two things that I thought would be the sort of major forces driving markets in 2026? And the answer is no, it only accelerates them. You know, I would say that the pressure on US treasury yields is increasing because this action we're already talking about now increasing the defense budget. And to the extent there is a risk, I agreed with you at the beginning of the year that policy would run hot and growth would probably err on the stronger side, but now we have a risk that if the oil prices stay this high for an extended period, it could tip the economy into recession, or worse yet, it could trigger a risk off in the markets, which would then create a devastating recession through the reverse wealth effect and the asset deflation. So I see that as another factor out there. So my sense is that both of those things would further compound our deficit financing problems. If the economy went into recession, our deficit would explode, and then we'd be back to this business of QE infinity, which we're already kind of doing behind the curtain. It's, you know, whatever you call it, don't call it QE right now. So I guess my simple analysis right now is that my view when I came in to the year hasn't really been rattled one way or the other. It's kind of amplified what I already expected would take place. It has certainly heightened my concerns about the credit market to the extent that we are seeing this upward pressure on bond yields at the same time that you're already seeing these write-downs in the private credit space. And as you know, I've talked about, this has been a hot topic of mine for so long, it's ridiculous. But the reason why is that when the Fed started tightening in 2022, and I was looking at the balance sheets of these companies, the average company in America, not the top 10, you know, or the mag seven, I could see how vulnerable they were to higher interest rates when the Fed started ratcheting up rates. I was sitting there dapping, you remember me saying, you know, this is going to be a problem, it's going to be a problem, it's going to be a problem. And nothing happened in theory, although we did have the worst bankruptcy cycle since the global financial crisis, but it didn't seem to catch any major names. I mean, we had a slew of restaurant chains, you know, Hooters, TGI Fridays, Red Lobster, et cetera. And then we had some high profile retailers like Saks, et cetera. But it wasn't anything that got the markets really freaked out. Right, it wasn't that mass lag effect that you and I were expecting. Right, and I think what happened is that the bankruptcies, there were a few notable examples like I just rattled off, but a lot of them were probably, you know, in smaller to mid-sized companies or the mid-sized companies that many of which were probably sitting on the books of these private equity and private credit firms. But they had the benefit of opacity, you know, so I'm looking at the bankruptcy data and it's telling me the corporate situation is a nightmare. And yet if you looked at junk spreads or credit spreads on your Bloomberg, everything looked fine because there was a public market wasn't really seeing that. It was all taking place behind the curtain. So I think what I'm getting to is that since 2022, they've been kind of trying to do these extended pretend games to kind of keep things, keep it together long enough to get to the point where we got some interest rate relief. So we're going on four years now and they've launched continuation funds and they've done secondaries and, you know, they've rolled out everything. They're launching ETFs and packaging all their toxic stuff into ETFs to unload on the unsuspecting retail public. So we're in the final innings of that and you're starting to see it in these markdowns. But it would be a huge mistake in my view to assume that these issues are strictly private credit related, that they don't obtain to the broader credit market itself in the publicly traded securities. Because while you may not be marking down, you know, those assets are being in theory priced every day, they're being priced based on, and you and I've talked about this a little bit, ratings that may be highly suspect, as they were, you know, back when we had the global- Back before 408, yeah. Yeah, so, you know, if you wait long enough, people repeat the sins of the past. You know, if you encourage reckless behavior long enough, as the Fed did with 0% interest rates, you know, you get to a point where people start to go back to those same games that they got burnt with the first time around. And as you know, as relates to private credit specifically, Egan Jones is under investigation by the SEC for its credit ratings. I think they had a staff of like, I wanna say 13 people who rated 3,000 companies or something like that. I mean, it just strains credulity that they could do any hard and fast analytics. Yeah, so my point is that it would be foolish to think that this will just stay contained in the private credit space. And you are seeing a little bit of an increase in spreads in the junk and investment grade area. An area that I think will catch people by surprise is investment grade, because more than half of the investment grade market is BBB, which is one downgrade to junk. So if we got into a situation where those companies actually did get downgraded, it would be a fire sale, because investment grade funds would have to dump all of that paper. That would create the spiral. So that's really what I'm looking at, is that BBB investment grade. And there's some major companies in there. Amgen, I think Oracle is a BBB. So there are some big name companies that you wanna keep an eye on if they were to get downgraded. Pretty impressive that Oracle is one above junk now. I mean, it's about as blue chip as you can get in the software space. Or was. I was. I know Amgen 100%, but I need to double check on the Oracle thing. But yeah, I mean, there are a lot of very well-known companies that are in that BBB slug that definitely would rattle the markets were they to be downgraded. Okay. So Steph, as you're explaining all this, which totally makes sense to me, I have the analogy in my head of the kid whose mom tells him to clean his room. And so what he does is he just gathers up everything and he just chucks it into his closet and then he shoves the closet door, right? And over time, he keeps doing that. Closet door gets harder and harder to shut. And eventually the door bursts open and everything spills back into the room. So it sounds like you feel like the past couple of years, the reason why we haven't seen that lag effect that you expected to see kind of across the corporate credit fleet was because we were, the companies were shoving more and more of their bad stuff into the private credit space, which was sort of opaque. It's out of sight, out of mind. It's like that closet in your bedroom. But at some point, there's going to be enough bad loans go bad there that that closet door is going to burst open. And it's not just going to be a problem for the private credit world anymore. It's going to be a problem for everything. Is that an applicable analogy here? Yeah, I think that's a great analogy. Absolutely. I mean, these problems always devolve. And frankly, you know, if you just got a little bit of a return of risk aversion at these extreme valuations, it wouldn't take much to really feed on itself. You and I have talked about it. Not only are equities sitting at the highest valuations, you know, by virtually any measure, but these credit spreads are the tightest they've been as well. So if you were to have even a modicum of risk aversion, it could easily accelerate. I just wanted to say that while you were teeing that one up for me, I checked. And BBB rated corporate bonds include Oracle, Verizon, AT&T, T-Mobile, CVX, Amgen, HCA, Boeing, General Motors. So there's some big name companies there that could easily, you know, fall into that junk bucket and that would precipitate quite a sell off in that. Right. And I think a lot of those names are names that people kind of treat as, you know, almost as safe as the U.S. government, right? AT&T, Verizon, just big cash cow players out there. Yeah, so that obviously would create a lot of worry if any of those drop down below or into the junk space. And that's why I would encourage people, and you're always so good about this, like if you have an investment in an investment grade mutual fund, go back and look through it and make sure, you know, odds are very high that it's got some exposure to these issues. Now, given what's going on in Iran, I mean, presumably any of the BBB rated energy companies probably would be okay. But, you know, these other companies that are struggling, you might wanna take a look at. Yeah, no, absolutely know what you own. And in most cases, people on mutual funds, they generally don't know what they own. All right, so let me ask you about credit spreads. And real quick, request for you, Steph, and a request for the audience. Steph, if you have a moment to go hit that live thing on your X, go do that if you can, if easy. And folks, I don't know if I've seen anybody do it yet, but in past live streams, I've seen people kind of repost this live stream. If you're able to do that, please do. It's really helpful to us. And right now there's this issue with StreamYard, which is what we're using. And when it goes live, it normally automatically posts to Stephanie's and my X account to kind of get everybody aware that this is out there in the world live. For some reason, StreamYard is having issues with that. They've been having it for a couple of weeks. So in addition to the manual step, I'm asking Stephanie to do, so if any of you guys can repost this too, that would be fantastic. All right, so on credit spreads, Steph, I was interviewing Lance Roberts, as I do every Saturday. And the last time he was on, we went through credit spreads, talking about private credit. And if I remember correctly, Lance was saying, maybe we're seeing a little bit of movement, but I don't think too much movement on credit spreads when comparing different treasury durations to each other. But what he likes to look at, especially around whether there's gonna be an issue in the credit space, the non-government credit space, he likes to look at credit spreads within corporate debt. So if you start seeing the difference between AAA and high yield start to move, that's starting to show that investors are getting worried. And he said, we are starting to see some movement there. It's nothing to like ring a fire alarm about yet, but he was beginning to see that. And I think he then also was comparing corporate to treasury yields. And there was a little bit of life being shown in there as well. Are you seeing same or are credit spreads kind of still as flat as a pancake? You're on mute, Steph, just FYI. I had a great answer that I just thought. I actually look at HYG, which is the high yields ETF and LQD, which is the investment grade liquid ETF sort of as proxies for high yields versus investment grade. And post Iran, what I had scribbled down here was that the HYG was down 0.6% and the LQD was down 1.2%. So twice as much. So I'm not sure, it may be that it's not the same apples for apples, but broadly speaking, I think you've seen a modest amount of risk aversion post Iran, but I wouldn't say, when I talk about the widening in credit spreads, it's the same kind of thing that we've seen a million times before only to be faked out and see them probably move lower. We're not breaking out to a point that's the highest in two years, even. It's just kind of back to, let's say, last year at this time. It's not anything super, super dramatic in that regard. But there does appear to be some discernment. I frankly am more concerned about the fact that rather than looking at spreads, looking at yield levels, because interestingly, the 10-year has risen in yields despite after this Iran action. Normally you'd think you'd see a flight to safety, right? Right, a flight to safety. So we're up, the last I checked, and it's on the move again this morning, the 10-year was up 22 basis points post Iran. Normally you'd expect a minus sign in front of that number, not a plus sign. So when you're talking about junk spreads, even if junk spreads go nowhere, the nominal yield is rising and that's a problem for these companies. So I'd kind of focus more on the yields than the spread necessarily, because spreads reflect different attitudes around risk, but don't necessarily tell you much about what's actually happening on the ground with the company. If a company needs to refinance, and you know this, and your audience knows it, because I go through these numbers every time, 1.2 trillion in debt this year, and suddenly junk bond yields are seven where they were six a year ago, that's a problem. Okay, so this debt maturity wall that you've been ringing the bell about for a good while, it seems like it's getting a little bit steeper here even, given with yields going higher. Yeah, and you have to bear in mind too that the oil prices don't just affect consumers, they affect these businesses as well. Another cost to their business. On the upside, and I use that in air quotes, the timing of this is very interesting because it's coming precisely as this wave of tax refunds is going up. That gives consumers a cushion with which to absorb the increase in gasoline prices. Now, obviously it wouldn't be their preference or the administration's preference, presumably, to see that tax refund windfall spent filling up the gas tank. But what it does do is effectively create the possibility that the increase in oil prices is monetized and therefore flows totally through the system through to the CPI, whereas normally you would think higher oil prices would be a tax on spending, and to the extent people are spending more filling up their gas tank, they're cutting back on something else. And that kind of serves to dampen out the overall inflation effect. So this is problematic. It's problematic in that it could put further upward pressure on CPI inflation that then makes the Fed say, all right, we're okay on the employment mandate, we probably have some room to cut there, but on the inflation mandate, this could be ugly. Do we wanna step in front of this and be lowering rates at the same time we've got tax refunds going out and the spike in oil prices? That would be quite a lot of tender for inflation to pick up. Yeah, got so much to talk about. And there's a question that just got asked here that I'm gonna pull up here in just a second. What is funny though, and not haha funny, but strange funny is I was talking to my wife about this. So tons of headlines the other day about the move in the price of oil and how the price of gas has increased by 50 cents a gallon or whatever, and how that's gonna put a ton of pressure on the president and he's gonna taco out and he's gonna get out of this war because people are angry that gas prices have moved up by 50 cents, let's say a dollar even. And I get it, nobody likes their gas bill going up and I'm like, if your country is at war and the price that you're having to pay is that gas has gone up by 75 cents a gallon, just relative to previous wars, I was like, oh my God, we're acting like the world is ending on this. And look folks, I'm not saying the war is good or the war is bad, I'm just comparing it to like World War II where we had rationing, right? And the British had to spend a lot of their time hunkering down in the underground shelter from the German blitzkrieg bombings and Americans were pushed to grow victory gardens because we needed to ship food to the troops overseas or sacrifices that had been made in previous wars here. And it is a little, there's just something about the fragility of society today that like, that's like an existential threat for us that like, oh my God, we got to stop this because gas prices are almost up a dollar, right? Yeah. I just felt I had to editorialize on that briefly, but anything to say about that before we get to it? Yeah, absolutely, I mean, it does feel like a snowflake generation, but also we're what? Seven days into this, so it's a little premature to wax hysterical about this stuff and by no means, my hair is on fire about inflation. I'm just saying, the timing is a little interesting from the refund standpoint, but obviously in a long-term sweep of things, if it costs us three weeks of higher oil prices to eradicate a potential nuclear bad actor, it seems to me like a pretty good trade-off, like that was one you'd take all day. And then, but the thing is, as you and I think agree, please tell me otherwise if you don't, when I came into the year, in addition to the two things I talked about earlier, the main operating framework for me was that the administration would do whatever it took to win the midterms, or at least not even just win, but just prevent the bloodshed that normally comes in these midterm elections. So to do that requires that oil prices be lower before October. The good news for the administration is they don't have to come down tomorrow. In fact, and I think, again, you and I have talked about this before, I look at that University of Michigan sentiment index very closely, and if you look at retail gasoline prices and consumer sentiment in the post-COVID era, those two lines are almost indistinguishable. And so when we saw retail gasoline prices go back up over $3 a gallon, which happened just before we went into a run, you saw that same week, you, Mesh, sentiment tailed lower. It was like, surprisingly, people had expected it to be up and it was actually down. And I ascribe that to the increase in gasoline prices over $3. So the good news is it's that immediate, which means on the other side, if they can get oil for gasoline prices down, even by September, it'll happen immediately, will immediately flow through to confidence. It won't flow through to their pocketbooks, but at least they'll be anticipating, okay, things are going to start to calm down now. So they have actual, a little bit of runway here. Most people seem to think if they don't wrap this thing up in the next two weeks, it's the end of this administration. I think they have more time on the oil front. The problem is what we just talked about. If oil triggers a collapse or a crisis in credit, then it's game over because the destructive consequences of that will not be resolved by October and they will be far worse than paying a little extra at the gas tank. So I'm glad you brought that up because I've been wanting to talk about this on this channel, the point you made, which I agree with you, not just around oil prices, but I think around almost everything. I hear a lot of feedback of like, okay, this administration just guaranteed it's losing the administration, losing the midterms, either because of oil prices or just the war in general or what happened with ICE or whatnot. And I'm not a political analyst, but I've been around a lot to know that the public's memory is short and what's going to matter is whatever's going to be top of their minds in September and October. And so to your point, Steph, if a lot of this stuff that we're freaked out about now ameliorates by then, I don't think it's really going to make much of a difference. I think whatever's going to make the difference is what's in the headlines in that last month or two. So, okay, there's just so much to talk about here and I know we've got a bit of a hard stop here. So I'm going to try to bang through a lot of this quickly. Let me just pull up this question that a user asked here because it gets to the, I think the core question that most people watching this video have. Hey, Steph and Adam, what do you recommend buying today? Companies that have no skin in the game but are getting hurt by the war. So let me toss out one thing that I've been looking at. And I think my answer largely does depend on how this war goes, right? So if oil prices continue to go higher and stay there for too long, to Stephanie's point, that's going to have a ripple effect through the economy and that's going to pull a lot of things down with it, right? But if it's a short war, as the administration is saying, I think there's probably going to be a fair amount of a relief rally in the markets. And I think what'll happen is some of the sectors that have really gotten beaten up pre-war that are now getting depressed with everything else, they could have a pretty substantial relief rally. And specifically, I'm sort of thinking of the software space. We've seen a lot of software companies that got beat up since the turn of the year because the narrative has been, look, AI is going to just totally eat their moats. And these companies have been kind of getting priced like they're going out of business. And sure, some of them will, but there's a lot of really big players in there. Oracle being a great example, highly unlikely that thing's going out of business anytime soon. And I think in many ways, and I've talked about this with a few players on this channel, the AI threat's been overblown, at least in the short to midterm. So in other words, if you're an enterprise company and you're going to run your, whatever, your CRM system or your sales process, what are you going to use? Are you going to use software that's been around for a couple of decades that has millions of lines of code that have iteratively improved the software through gazillions of hours of real use cases and human testing? Or are you going to go with software that some AI models spit out yesterday, right? And in most cases, you're going to go with the tried and true bulletproof solutions that are out there. So anyways, long story short, I just think that the demise of the software space has probably been dramatically over-exaggerated. And I do think that that's one place where, again, if the war proves to be at least not too protracted, you can see a pretty big recovery in there this year. Any other thing that comes to your mind, Steph? And you don't even have to agree with what I said. No, well, I wish I could get my Bloomberg up, but that would interfere with our internet connection because I was going to say airlines probably have been shellacked because of the impact of the gasoline crisis. So that might be an area. But, you know, I have a broken record. I mean, I will stick to my commodities. I think to the extent that gold and the miners have sold off, you know, gold has recovered a lot of what it sold off with the miners. Also, you know, I think that I would continue to look at that space. And other than that, I mean, domestically, I'm not super, nothing really blows my skirt up that isn't tied to hard assets in some way, shape or form. So that's my view. All right. And, you know, I mean, I hate to say this, but, you know, nothing like a war to remind the world of the importance of resources, right? I mean, you know, hopefully the Straits of Hormuz thing gets diminished relatively quickly. And to be honest, you know, I follow the war coverage pretty closely. And yeah, there's massive fog of war so we don't really know what's going on there. But it does seem like we have basically pretty much destroyed Iran's Navy. And we have dramatically reduced their ballistic capability. And so, you know, Iran's ability to really choke the Straits of Hormuz has been really seriously degraded. I'm not gonna make the claim that it doesn't exist or it's not an issue. I know the latest risk has been, you know, Iran might start mining the Straits. That's A, a really serious step for them because, I mean, that's pretty much how the regime makes its income. And if you cut that off, you're done. Like a competency mission, basically. Yeah, but to mine the Straits, you need ships, right? And we've pretty much destroyed their ships and we have air superiority. So if they start bringing ships out there, we can sink them pretty quickly. Again, folks, take this with a big grain of salt. I'm not a military analyst, but I just see it as a pretty low probability that that Strait gets choked off for a prolonged period of time here. So anyways, you know. What I think is interesting around that, Adam, is this headline this morning that we woke up to that the IEA is preparing to release 400 million barrels for the reserve. I'm glad you mentioned that, yeah. And oil prices are up. So, you know, that's a pretty, it's just a statement, I guess. You mentioned this idea that we're in a war, but people forget, we've been in a war for resources, for, well, we haven't been. China has been waging a war for resources since 2011 with the Belt and Road. We're just now realizing that this war has been raging in the background. So, you know, this is a, what do they call it, a hot war as opposed to a cold war. But nevertheless, the stakes are just as high. I mean, without the, obviously you have troops and lives, and hopefully we never put troops anywhere near there. And, you know, the threat to our military is extremely small. But this cold war for resources that has been ravaging has massive implications. And this hot war now is interesting to think about in that global, in that bigger context. And what are the implications? And might that be another layer of rationale for our engagement here? You know, I'm trying to think big picture about this, the BRICS plus countries and their aggressive de-dollarization. And one of the biggest threats that I think a lot of us who have been concerned about the future of the dollar have had was the prospect that we might see an end to the petrodollar standard, which has really been the glue that has held the dollar together as a reserve currency. And when you think about this, and again, I'm just kind of throwing stuff on the wall here, but it's kind of interesting to contemplate this larger chess game going on. The idea that maybe, perversely, when Iran started attacking its neighbors and they all felt unified alongside the U.S. rather than Iran, to really- And Israel, crazily enough, yeah. Yes. So might that actually act as a little bit of a harness on this movement by the BRICS in their de-dollarization? Might it reduce the odds of an end to the petrodollar, I guess is what I'm speculating, if you have Saudi and UAE and these other countries now thinking, hey, our interests are more aligned with the U.S. than they are with Iran. So do we necessarily wanna rush to start pricing our oil in a basket of currencies or do any other radical thing? I don't know, I'm just speculating, but I think it's interesting that that might be one of the positive, long-term payoffs of this engagement is that it kind of has consolidated the Gulf states around the U.S. rather than anti. I think that's actually a great line of thinking there. And being honest, it's not been a great couple of years for the BRICS, right? Russia's been mired in the Ukraine war. Iran is getting potentially toppled, the regime there. And China, of late, has had some pretty serious setbacks, largely at the hands of the U.S. U.S. taking over Venezuela's oil surprise. Now China's not getting oil from Iran. It may in the future when this all dies down, but China buys 90% of Iran's oil. It's not getting any of that right now, right? So it very well may be diminishing the ability of the whole BRICS coalition to do anything right now because they're so distracted by their own individual issues. But to your point, Steph, the guys that control the oil now might be saying, well, look, America's been a friend and now they're actually protecting my people from rockets. Now they could say America caused these rockets to get shot to me in the first place by attacking Iran, but it does seem, to your point, to be strengthening those bonds. So super interesting. Sorry, go ahead. A side note on that. I don't think it changes the existential issue for the U.S., which is the deficit financing. Those countries aren't gonna start to buy U.S. treasuries. I'm just saying they may not rush to pull the plug on the dollar as the pricing mechanism for oil, but we're still seeing, and it's reflected in the increase in treasury yields post-engagement, that the global appetite for U.S. treasuries is pretty close to non-existent. Yeah, which is, again, that's a real head-scratcher right now. What's interesting, too, and there's all sorts of unintended consequences that come out of most things, but certainly a war, and one of the issues here is because they have been getting the Gulf states have been getting hit with missiles and they're now having to kind of rebuild, it sounds like a number of them are saying, hey, Trump, yeah, I did promise I was gonna put a trillion into your economy, but it's not gonna happen soon, right? But that's another thing that you could describe this increase in yields to in treasuries is that they can use the dollars that they're coming in over the trade transom to rebuild. They could buy the lumber and the other dollar-priced commodities rather than treasuries. So it could be not that they're selling treasuries because they hate treasuries, but that the dollars at the margin are being siphoned away by the increase in oil prices, et cetera. Sure, no, absolutely. And I think in general, this kind of coming not that long after COVID is just a reminder to nations about the fragility and importance of supply chains for real things, right? So again, to your hard asset proclivity, your general thesis that they're actually gonna do well from here, this really does, I think, just give an additional appreciation to the sovereign nations that they're like, yeah, you know what? There's a lot of things that can disrupt this stuff. We've got to really figure out how to have more dependable access to this stuff, whether we're gonna be mining more at home, whether we're gonna be French or whatever. I think it just adds more overall demand to the hard assets thesis, which obviously you've been a big proponent of. I also wanna note for folks too, I recorded a really fascinating interview that's gonna come out, I think, this weekend with Peter Alexander. And Peter Alexander is a longtime China analyst. He's actually lived in China for the past 30 years. He's an American. And Steph, after I met Luke at your conference, he just proactively reached out to me and said, hey, Adam, China's big on my radar. He talks about it a lot. He talked about it a lot at your conference. He said, the guy I talked to to get smart on it is this guy, Peter Alexander. You should really interview him. And Peter hasn't, to my knowledge, really done any public interviews before. So this is his first really in-depth one. And it was really fascinating. And it's gonna be the first of several because we'd spent like an hour and a half and I still had a whole bunch of questions. We hadn't gotten to. And there's some interesting stuff there. I won't ruin the surprises, but like you, Steph, Peter, after all the calculations he does, comes back to gold as one of the best things that you can own. And it's definitely a strategic priority of China to not only continue to accumulate gold, but it's in its national interest for the price of gold to go up. And he thinks that's something that has been putting and will continue to put an additional tailwind against the price of gold going forward. Interesting. When is this interview going to be watchable? I believe it's this Sunday and I'll send you the link, but everybody, you can find it on his channel this Sunday. Awesome. All right, Steph. So we don't have a ton of time left and I hate to ask you big questions like this without much time. It's my fault because I gobbled up most of our time trying to get my internet connection working. No worries at all. It's hung in here so far, so it's all good. But let's do just a little bit of best case, worst case scenario with the war here. So let's start with the depressing side. Like how bad could this get, do you think? And what would the implications be to the investment market? Yeah, I mean, the bad case scenario, I think is the one where oil prices remain elevated, putting upward pressure on bond yields and that you precipitate, you effectively prick the bubble in financial assets. And then you have a repeat of like a 2008-9 style market correction, market meltdown that throws the economy into recession. That would probably be the worst case scenario. Hard to envision anything a whole lot worse than that other than the war turning really ugly and us putting troops on the ground and all of that stuff. I don't even, I'm trying not to even go to that place because I think that's a fairly remote, looks like a fairly remote knock on wood prospect right now. But from the economic standpoint, that would be the worst case scenario in my view. Okay, let's go to the best case scenario. And actually, let me set a little bit of this for you. Let's say not even just best case scenario with Iran, but let's look at a future, I've asked this question to a few other guests, so I'd love to hear your thoughts. So let's say there is material regime shifting in Iran. If not a full regime change, Iran just becomes, they get to a point where we're like, look, let's start welcoming you back into the global economy, right? Sanctions go off, you get to become part of the global club again. At the same time, let's assume that Venezuela goes as best as we hope it can go there. Let's assume that Cuba, as the administration's now saying, that regime ends and Cuba becomes an America-friendly country yet again. Let's assume Trump gets whatever he feels he needs from Greenland, right? And that we make nice with our friends in Canada, as I'm sure we will. And as a cherry on top of that, let's say that there's some negotiated peace at some point in time in Ukraine between Russia and Ukraine that then leads to Russia perhaps being able to reengage with the global economy. How big a deal is all that? Is that a brand new world? Is that a new golden age for the global economy? Or will the Game of Thrones just somehow continue? Gosh, I mean, I'd love to imagine that it would set the table for a whole new world where we have a peace dividend that sort of replaces this globalization dividend that we've had for the last four decades that provided the tailwind for the markets and lowered inflation and interest rates. Because if you had that kind of a peace dividend, then you could go back to an era where you had low interest rates and inflation. Hard for me to imagine the world coming together and singing Kumbaya in that manner. I don't see China ever giving up on its aspiration to replace the U.S. as the most dominant world superpower. And I don't know that I believe Russia would ever really, you know, they may feign some kind of niceties with the U.S., but ultimately I think there will always be that channel between Russia and China. So I don't know. I mean, I do think that that's, I wouldn't entirely rule it out as a possibility and it would be tremendous and it would certainly help, you know, reset the globalization order, as it were. But, you know, I guess ultimately, I keep coming back to this thing, it doesn't solve our major problem, which is that we have these massive deficits that we still need to finance and how low would rates go in that environment? Would they come down enough to really, I don't know. I mean, maybe that's an environment where with enough time, we could grow our way out of it, perhaps. But, you know, that's a, there's so many issues right now because we're sitting at sky high valuations and we've got this massive debt burden and we're very vulnerable to any little hiccup. So that idea is wonderful in the abstract, but practically, I don't know that we'd be able to navigate all those twists and turns with the amount of leverage that we're toting, not just us, but the other developed world economies. But, I mean, hey, I would love it. Yeah. Okay, but I think it's a fair point. I'd have to rethink my asset allocation rather materially, but yeah. Well, let's hope that you have to. Yeah, I know. By the way, I forgot to mention there too, potentially, you know, lasting peace between Israel and Palestinians as well. So, you know, we can wish for all that, but what I hear you saying is, I'd be wonderful, it certainly would help a lot of things, but the kind of forth turning risk that a lot of these nations themselves are just existentially facing because of the fact they've been living beyond their means and borrowing beyond their means, it doesn't solve that. Okay, last question for you. I'll take a short answer, which is unfair, because it's a big question, and then I'll close things. But to the question of the title of this video, the person that sort of woke up to all the headlines that I listed at the beginning and said, oh my God, did everything just get a whole lot worse? What would your answer be to that person? No, my answer would be no, we're just seeing our vulnerabilities exposed. The vulnerabilities have always been there. Been there. Yeah, and the markets have been flying blind like Icarus toward the sun for a long time, and their wings are now starting to melt a little bit under that heat. But I don't think there's anything new that has changed. It has just amplified the pressures that were already there in terms of the rising commodity prices and interest rates. And so, yeah, things got worse insofar as people are now waking up to it, and they shift in sentiment as the potential to feed upon itself, especially in the financial markets and credit especially. But I don't think fundamentally we've seen some kind of new, you know, it's not like an exogenous shock, this higher oil prices or what we're seeing. This is just more of the same. Okay. And speaking of oil prices, so we haven't talked about investment allocations. You know, you're well known on this channel, Steph, for holding a lot of precious metals in your portfolio, but a fair amount of cash. You've been taking some of that cash, I believe, and nibbling into the energy space, which, you know, has, you know, sorry to say, done well given the outbreak of war and the higher oil prices. And you added some volatility to your portfolio a month or two back, which again has been performing really well. Have you made any other material changes to that, or is that still mostly your allocation? That's still it. Yep. Okay. Boring. I agree. Well, look, that's, you know, it's important for folks to know when you're consistent and when you change, but you're staying the course. All right. So in wrapping up here, Steph, I want to thank you in advance for your participation in Thoughtful Money's upcoming spring online conference. This is, I feel like I say this every year, but it's the best faculty we've ever had. I won't list it all here because it's a long list, but you can find it at this URL, folks, thoughtfulmoney.com slash conference. That's also where you can buy your tickets. And you've now missed the window, despite my best attempts to get everybody to buy at the lowest early bird price. But the price doesn't go up to full price until the end of this weekend. So you can still buy at the last chance to save discount price. You haven't bought your ticket, go buy it right now at this URL. Steph's going to be on the faculty. She's going to be doing a super terrific, happy half hour with her colleague in crime, Grant Williams. So that's going to be wonderful. But thanks again for doing that, Steph. And again, your conference was amazing and everybody should go to that next year when you guys do it. Steph, for folks that want to follow you and your work, can you remind them where they should go? Okay, at macromavens.com, you can find out how to subscribe and read some old reports and some of my major calls. And then on Twitter, the occasional tweet or whatever we're calling it these days, at SPOMBOY. And of course, every month, with you. All right, well, thank you. And thank you so much again. This was a wonderful conversation and I can't wait to, I'm a little bit nervous to see what's going to happen in the world between now and your next appearance. Oh gosh, I know. But we'll see what happens. And again, folks, if you ever want to get some help from a good professional financial advisor about how to navigate your wealth through all this, feel free to talk to one of the ones that Thoughtful Money endorses. To do that, just fill out the very short form at thoughtfulmoney.com. And as a reminder, these consultations are totally free. There's no commitments involved. It's just a service they offer to be as helpful to as many people as possible. And then lastly, again, don't forget to run, not walk right now. If you haven't already bought your ticket, go to thoughtfulmoney.com slash conference and lock your ticket in while you still can at the last chance to save price. Steph, it's always wonderful. I think I'm getting you out with 30 seconds to spare. I love it. You're the best. Thank you. And sorry about the internet thing. Hopefully the next Wednesday we get together, it won't be a problem. We'll be fine. Even if it's still there, Steph, I'll soldier through this stuff with you any day of the week. You're the best. Thanks so much. And everybody watching again, please thank Steph in the live chat, in the comments below, but definitely thank her by hitting that like button and then clicking on the subscribe button below, as well as that little bell icon right next to it. Steph, again, wish you all the best. Give Wilhelmina a big scratch from me. I will. Everybody else, thanks so much for watching. Thank you.