Today's number, $150. That's how much New Jersey Transit is considering charging for a roundtrip train ticket to the World Cup this year. Ed, what do a 12-volt battery and an [__] have in common?
Well, you know, you're not supposed to put your tongue on it, but you do anyways.
Are we going to get to the World Cup this summer? What are we going to do about this? I'm very upset because this is like the big moment. I should obviously be going to the World Cup. Huge football fan. Never gone to the World Cup in my life. And it finally arrives in America. But I can't get a ticket. It's just insane.
Well, I don't know if you heard, but an alcoholic, a priest, and a pedophile are going to the World Cup. And that's just the first person.
What is the joke? Who are you making fun of?
I'm saying they're the same person. Alcoholic, pedophile, priest. Anyways, um maybe I didn't deliver that well. It's time to bring in our producer.
Okay, wait. Hold on. I've got a better one. I was interviewing for a job and uh the interviewer said, "What is this four-year gap in your resume?" And I said, "Well, I went to Yale." And she said, "Wow, that's impressive. You're hired." And I said, "Oh god, that's such good news. I really need this job. Think about it."
I got it. I got it. Again, the silence is not an indication of confusion. Hey guys, if you haven't already, please be sure to subscribe to our channel for all things markets. Hit the bell icon as well to get our latest episodes. Thank you.
Anyways, how are you Ed?
I'm doing well. I again present you the question, what are we going to do about this World Cup thing? Are you going to be able to figure it out? Like I don't know what to do about it. I'm just going to regret it the rest of my life.
Is it really that hard to get tickets right now?
Uh it is. Unless you're willing, I think, to spend like a lot. Not just a lot, but like a fortune.
Better start wearing more Quint [__]. So I've been the last two times. Um look, I don't know how to I get a brand takes me. So I don't But I would bet if you want to figure it out, I would bet tickets start to free up towards America's never been that into football. So, I don't I would bet a lot of tickets will free up, but I don't Do you want to go to the big games or do you want to follow team England?
I mean, England would be incredible, but I mean that's I think that's uh that's high hopes to go see England. I'd go to anything. I'd go to anything in New York. What I'm just to get curious, what is your plan here? Are you waiting for a brand to tell you, "Hey, we have some tickets. Come along."
Yeah, that's exactly my plan. You just literally outlined my plan. I don't I don't think about I mean it's not till when is it? Oh, it's coming up.
That's what I'm saying. I got to get my act together.
I get the sense, Ed. You're going to figure this out. We're going to figure this out for you. I get the sense that someone's going to
Well, that's kind of why I bring it up. I was hoping that maybe you'd give me sort of the inside baseball.
This is you fishing for invites to the World Cup.
Yeah, exactly. Maybe you get offered tickets and then you kind of forward me the email like maybe you have a conflict or something.
Yeah, I think the answer is Paramount Plus. Um, we'll see. We'll figure it out.
Paramount Plus, that's very exciting. And in other good news, they uh or I'm now going to get dragged for saying good news. It's not good news. Warner Brothers has officially decided that they are going to get sold to Paramount, which is something we could discuss, but that's not on the docket today. We have other stuff to discuss. Before we get to that though, uh I want to promote our tour again. We are hitting San Francisco, LA, Miami, Chicago, New York. We're going to be on the road May 27th to June 2nd. If you haven't gotten your tickets, do it now. Go to profgmarketsour.com. Scott and I are going to be live in conversation. We're going to be doing Q&A. We're going to have some very, very special guests.
It was just interesting. We were worried. We knew we would do well in New York. We're almost sold out in New York, but we're almost sold out in the city we thought we were going to do least well in. You know what city that is?
San Francisco. That's right. I think they're coming to throw [__] at us. But yeah, we're doing well in San Francisco. Um, but it's going to be great. It's going to be a chance for us to spend a lot of time together. Um, which will be nice. But anyways, there I don't know how to promote it other than saying they're a great time. And Ed likes to drink. Uh, unlike Cara Swisser, he likes to drink. So, we'll try and do an afterparty at all of them, which will be fun.
I'm going on the road with Scott. I'm excited about that part. We're gonna take a big bus. We're driving across this great nation.
Are we gonna get groupies?
Let's hope so. Yeah. I don't know. All right. In other news, let's talk about Iran. Oh god. Let's move to something more light.
Yeah. Okay. Let's do it. The war with Iran reaches its two-month mark tomorrow. That's well beyond the four-week timeline the Trump administration had initially suggested. So with the conflict stretching into its third month, we thought it was a good moment to step back and assess how it's impacting prices and also the broader market. But the bigger question still looms. How and when does this actually end? Scott, let's just look at what's happened with the markets here. Um we're now at month two. We started this war on February 28th. Tomorrow it will be April 29th. So we're essentially two months into this thing. Oil prices are rising still. Uh Brent crude is above $103 a barrel. So I think a lot of people expected that maybe oil prices would kind of calm down that the markets would sort of temper. That hasn't really happened. It's still very volatile and it's still pretty significantly elevated compared to where we were before uh the start of the war. But what has been interesting is how well the stock market has performed. So since the ceasefire was announced, the Dow has risen 6%, the S&P has risen 8% and the NASDAQ has risen 12%. And actually, it's not just US markets that are rallying. It's markets everywhere around the world. So again, since the ceasefire, since Trump announced that ceasefire, and we can debate whether it actually was a ceasefire, but since that announcement, Europe's stock market up 3%, Germany's up 4%, China's up 5%, India's up 5%, Japan up 10%. So it does seem that investors are either breathing a sigh of relief or deciding that things don't matter perhaps as much as they originally thought when it comes to uh the war and its impact on the larger economy or they're just looking at the earnings that we're seeing and the earnings have been pretty phenomenal that which we've seen uh since the start of this war. The point being markets, stock markets are doing pretty well right now. Uh, and they continue to do quite well. Um, there's some nuance that we can dive into, but let's just start with your reactions to that fact. S&P up 8% since the ceasefire.
The markets seem to believe that the war is going to come to an end. Also, I think it's a bit of a recognition or belief that we have fully transitioned to a tech and services economy and the Strait of Hormuz doesn't stop that. And at the center for tech and services is the United States. And distinct of the fraying of our alliances. I mean, I think long term there just impossible to believe this is not going to have some sort of a pretty serious economic impact. But when the majority of the S&P is fueled by companies and services and tech, whether it's JP Morgan or Microsoft, those companies don't seem to be I mean, in many ways, those companies kind of benefit from this. I mean, there was talk of data centers being bombed, but not really. The tariffs don't affect them. Energy prices, I guess, arguably might affect them, but they have the capital to try and I mean, the really good ones kind of secured the energy supply um before this nonsense, right? So, it has been and if you look at the markets that have performed the best, the two markets that performed the best are one, Taiwan of 15%. And I wonder how much of that is like, okay, AI is the place to be. They are the number one producer of chips, right? And so their market's up 15%. As the chips market goes, so does the Taiwanese market. And the interesting one is Israel's market is up uh 9%. And I think what people have uh I think if you try and read into it, the market has basically decided that Israel is the new superpower, is the superpower, the definitive superpower in the Middle East and its tech sector. I mean I think the market is betting that their technological excellence as demonstrated during the war. If you look at many of the a lot of people would argue who argue for military spending that the spillover effect is actually a creative that whether it was you know radar which gave rise to GPS uh you know jet technology which ended up transforming jet transportation that there's a lot of spillover DARPA was basically a backbone communications network for post-apocalyptic America that gave rise to the internet and I think a lot of investors are looking at Israel and saying The technology has demonstrated during this what feels like a permanent conflict the last better part of the last three years is going to spill into their tech sector which is now I think the third largest tech sector in the world and has really registered incredible growth. They have more unicorns per capita than any nation in the world. So I think the world or the markets have come to the conclusion one rich people drive the markets and they don't care about energy prices and two the world has become we're no longer a fossil fuels economy. It makes a difference but this is a technology and a services economy now and these companies are doing really well and also to be fair the earnings have been really strong across these companies. So consumer sentiment, it's there's some dissonance. While consumer sentiment claims, studies say consumer sentiment is its lowest level, it doesn't seem to be translating to a decline in consumer spending. I mean, I guess the first thing to address, why are my markets rising? And it could be that one, investors think that the war is about to end. In which case, I fundamentally disagree with them. I don't think this war is coming to an end. I don't think we had any indication that this war is even close to coming to an end. I think it's actually going to keep going for a long time. Or two, they've decided that this doesn't matter that much in terms of the markets because the markets care about earnings. And so far, as you say, earnings have been extremely strong. Every sector's earnings estimates have risen since the war began. Especially the tech sector, which is the most important one, which the market is pretty much dependent on at this point. Their earnings estimates have seen the largest increase in recorded history. Uh so I think that that is the correct reading or at least if you're going to justify why the markets should go up, why right now is a buying opportunity. I think the correct reasoning is you would say not that the war is going to end, but regardless of what happens with the war, earnings in corporate America are fundamentally very very strong right now and they are increasingly driven by one sector that isn't going to be hamstrung by the fact that there is traffic uh and blockades in the Strait of Hormuz. It isn't going to be fundamentally affected by rising gas prices. um that's not going to be really a problem. And to your point, when we look at the backward-looking data, so that meaning the data that we already know, the evidence that we have, yeah, consumer spending is actually not going down. Um we've seen that consumer spending is pretty stable. We saw that in most of the earnings from the banks. We also saw it from Capital One in their earnings last week. They said that quote, "So far, we've not seen any adverse effects on our portfolio, even in our credit or in our spend metrics. Consumer spending is pretty much fine. At the same time, as you say, you've got consumer sentiment, which has literally reached a record low. So, how people feel about the economy right now is not good at all." And then the question then becomes, how much of a metric is that really? Um the question then becomes what happens next though because we haven't really seen what elevated and durable gas prices will do to this economy yet. And while yes, we have electrified our economy more so than we have in the past. And while yes, the top 10% of consumers make up half of all consumer spending and they are not very sensitive to gas prices, the reality is we haven't seen what a long and durable period of elevated gas prices, which are up 35% in America since the war began. And they're up even higher in basically every other market around the world. And so the question then becomes is it going to have a real impact next quarter or the following quarter or the following quarter after that? And that is a question of how long are we going to remain uh in Iran. It's a very complicated and unclear question right now. And it does all go back to this point that we've said a lot of the time which is that the economy is so fundamentally dependent on both a handful of tech companies at the top and also a handful of uh earners and thus spenders at the top as well which means that it's very hard to even understand how the economy is even doing. And so the stock market is just as we've said a pretty shitty indicator of general economic health. But that's what we're here to talk about. And so far, investors believe, and they're probably right, that oil prices are not going to have that much of an impact uh on earnings, especially when we're in this AI boom and AI spending and revenue continues to rise.
I mean, it's a couple things in terms of markets. Your proximity to AI coupled with the uh trade surplus of oil. So, are you an oil exporter, importer and your proximity to AI? So, and the security around it. So, Israel markets up, tremendous um proximity to AI. Taiwan, tremendous proximity to AI, but they're both oil. My understanding is oil importers. And what that says to me is the proximity to AI bests your need for energy. And then you look at the US, it is both got it not only has proximity to AI, it's ground zero for it. And we're an oil exporter. And despite the fact, okay, so think about the costs of production for oil have not gone up in the United States, they can still extract a barrel of oil for about the same price as they could 5 weeks ago. The difference is they're now getting what you know 40% more per barrel. That is money that goes into the pockets of shareholders of US companies. So it's not le to a certain extent the increase in energy costs here aren't leaving our shores. They're just being redistributed maybe inefficiently, but you have a lot of companies, you have oil companies, big companies in the S&P 500 in the United States who are benefiting from this. So, while it'll cost consumers money and at some point you'd think that squeeze out other purchases, but you're not seeing a decline in the purchases of site licenses for Anthropic because people are spending more on gas this week and that's what drives the market. Now, in terms of moving forward, also it just appears, I mean, there's just no getting around it. The market has just become this incredibly resilient organism.
Yeah. It's just a dip buying machine. Yeah.
It seems to be surviving wars, pandemics, and a friend of mine, Jason Mudri, who started Mudrick Capital, he's a distressed credit investor, said something that is so simple, but it struck me as really insightful. He's like, "As long as there's demographic growth, as long as there's population growth and innovation through technology, markets will over the medium and long term go up and to the right." And he just struck me. He's right. The market has decided that these dips are opportunities that they're not structural, they're cyclical, and then immediately capital weighs in to benefit from the upcycle again. Now, having said that, in 2022, I didn't see any cause for the markets to throw up, and they did. I don't know if it was people taking we should ask Josh Brown what happened money off the table but I still think it's more likely that an announcement from a large corporation who is been a big purchaser of site licenses of AI comes out and says we're not get we're scaling back on our AI efforts because we're not getting the ROI we had initially anticipated. I think that is going to be more likely to be responsible for a draw down in stocks in 2026 than Iran or um the oil or energy crisis. But we're just we've been saying this forever. We transitioned from an agricultural society to a manufacturing to a services and a lot of people said it's always been about energy. I get it. You know, Indonesia is a bit screwed here. India big oil importer but it does feel like uh oil and and I can't imagine the investment in renewables isn't going to have such a huge uptick that fossil fuels are going to are going to play an even less significant role uh moving forward.
You mentioned like if there were a drawback in AI spending then that would be the thing that kills the markets not this 100% agree that's definitely true the thing that is striking to me and I made this point in our previous Monday episode and I also said it on the Daily Show last week. It also to me shows that investors just don't really care about Iran anymore or at least they have their interest and their concern for the matter is waning. Mhm.
And when you're in that mindset, as we've discussed, you start to go big, zoom out, zoom out, out, zoom out, and you go big picture, and you say, you know what, fundamentals are strong, earnings are strong in the medium, the long term. Markets go up, population growth, you know, all the things which are true, and you revert to those things. But at the same time I believe that there is a fundamental dis as you said dissociating from what is happening on the ground uh in Iran. And I think where they might mess up is mistaking their lack of caring for convincing themselves that the situation is fine and sorting itself out in Iran. That to me is just wrong. And I just look at what happened in terms of developments in the past week where we had I mean I told you how the markets have responded since the ceasefire began. They've gone up. But the fact is we didn't have a ceasefire really. We still had Iran shooting at ships uh in the Strait of Hormuz. We still had a US Navy destroyer shooting at an Iranian container ship. We still had multiple violations of the ceasefire as expressed by both parties, by the US and Iran. And then we had an extension of the ceasefire which didn't mean anything because the ceasefire wasn't a ceasefire to begin with. They were still firing at each other. But Trump says, "Oh, we extended it. It's good. Things are we're moving in the right direction." Meanwhile, Iran says that the ceasefire extension means nothing. And they're right because the original ceasefire meant nothing. So you're extending essentially nothing. We're still in the same situation that we were a week ago, 2 weeks ago, 3 weeks ago. We're getting into seven, eight weeks. We're still in a very, very precarious situation on the ground there to the point where it's like, okay, I take the argument that maybe it doesn't matter. That I think is fair. But I think where we're going to run into trouble is if we start confusing ourselves by saying it doesn't matter by saying, "Oh, it's getting better and oil prices are going to go back up again." No. So I think that is going to be the thing that investors have to keep in mind at this point and that we all have to keep in mind because the more this goes on like to be frank the more desensitized we become to the situation and you see these headlines and then you see things blowing up and you go oh yeah it's just another day just that's what happens this there's a war in the Middle East. Yeah. Okay. And we become the whole situation becomes normalized. And what I would just again just emphasize there's a difference between believing that it doesn't affect the global market system because we are such a tech heavy and top 10% to 1% heavy economy versus believing that the thing is going to resolve itself. To your point, it is a little scary that the markets have totally dissociated from war. And I wonder, okay, does that mean future presidents decide that have more of just a hair trigger? And that is, I mean, the problem is I think we go to war too easily. And to be blunt, and this will piss off the people on us, I think we leave too easily. And that is we have a glass jaw. And that is okay, things don't go well. 14 people die, tragedy for them and their families. Russia's losing a thousand people a day. And effectively, the way you win a war if you're a foe of the US is the following. You just survive. I don't care if it's the Taliban. I don't care if it's al Qaeda. I don't care if it's the IRGC. They don't need to win. All they need to do is survive. It's just hold on. Now, as it relates to energy prices, to a certain extent, the war in Iran, the impact it's having on the US, that economic impact has been registered by Europe for the last 30 or 40 years. What do I mean by that? Everyone's saying, "Oh, the elevated gas prices will have a huge impact on the US economy." Maybe those same the gas prices we're paying now, European nations have been paying for decades. So
The gas prices everywhere else apart from America is just unbelievable how they've increased. So these economies in Europe and this I went on this podcast called trigonometry and this really intelligent guy Constantine Kissen who I find really interesting uh has basically said that Europe has just [__] itself with all this taxation around energy that access to low-cost energy is kind of the grist or is the mother's milk for a strong economy and the which is sort of interesting is basically for the last 30 years European energy prices have been where our greatest fear is around our own energy prices which leads to the fact that well okay what does that say about taxation of energy what does it say about renewables his whole point was just stupid this massive move to renewable at the trade-off of economic growth I don't fully agree with that framing I saying that taxation is the reason that energy prices are high in Europe is just the wrong focus to me it's like you need to invest more in your own energy and become energy independent. That is definitely a good thing especially if you're relying on these nations like Russia who you're now at war with. So I just disagree with his framing.
We should talk about the nations that have had the worst performance. Indonesia, you know, they're an oil importer. Dollar denominated debt which has become harder to service and also the global risk aversion leads to capital outflows from riskier emerging markets like Indonesia itself. The one that surprises me is India which I thought would have had a lot of proximity to AI. I'm their market is down about 5%. Again, they're a major oil importer and um they're worried that they're exposed to price spikes which could lead to inflation. But it definitely I feel like we're in uncharted territory. I just wonder I just think my guess is and I don't have a rational for this. The war ends and the markets collapse. I just something this is just such a strange market right now. I don't know. I don't know how to play it. And again, it goes back to our major theme on this show. You don't try and play it. You know, if you're worried about the world, then diversify. But my view is you're always in the market and you don't try to time it. And the key is just diversification and low-cost index funds because if you it would have been very easy to make an emotional decision in March. Well, of course, the market is down 10%. This war is not going well. It's going to be a forever war. We've lost all this credibility. They're sending they've fired more missiles into the UAE than they have into Israel. Uh I'm selling and then the market's ripped back.
Yeah. And I think just on top of that, like if you're going to play the market, if you're going to play games, if you're going to trade, don't do it on war. Don't think that you understand geopolitics and military strategy more than other people. I'm sort of down with making these more specific sector specific bets. Maybe you have some insight in the tech sector or you have some insight in some supply chain thing uh in some very specific industry and you want to kind of get involved in that and make some trades and pick some stocks. I'm not actually for that. I think that it means that you get a better understanding of how markets work and how flows and volumes work. But the idea of like, oh, I know what's going to happen here. Um that is certainly not something that you should be trading on. totally fair to have an opinion on it and you can have a belief about what's going to happen in the future. But the idea of like and now I'm going to bet on that belief. Now I'm going to bet on the outcome uh of our military engagement with Iran that is just such a bad idea. And we have started seeing that there's some hedge funds, I forget exactly what the hedge fund is called, but there's this hedge fund that just lost like 50% of its portfolio just this week cuz they were betting again on what was going to happen to oil prices as a result of what happened in Iran and in the Strait of Hormuz and it was just such a terrible bet. So it is a reminder like yeah, you definitely if you're going to play games, you certainly don't want to play games on this subject. This is one of those things that you literally just cannot predict, especially when it's all in the hands of this one guy who not even his cabinet can understand or predict his thoughts and his actions.
The people making the majority of the money here are the ones on the inside who know what he's about to announce the next day.
