4/23/26: Navy Sec Fired, WH Freaks Over Intel On Iran Military, Food Inflation Spikes

Summary

Breaking Points with Krystal and Saagar - April 23, 2026 Episode: Navy Sec Fired, WH Freaks Over Intel On Iran Military, Food Inflation Spikes

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Episode Overview

This episode dives into the dramatic firing of the U.S. Navy Secretary amid ongoing military conflict with Iran, analyzes the chaos and infighting within both the U.S. and Iranian leadership, unpacks the realities of U.S. and Iranian military capacity, and tracks the spiraling consequences for the global economy—especially inflation in food and fuel. The show leans into its signature anti-establishment tone, holding those in power to account with sharp commentary, skepticism, and accessible breakdowns of complex developments.

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1. Key Topics and Timings

• [02:31] Navy Secretary Fired During War with Iran
• [13:17] Hung Kao: The New Secretary, and "Witchcraft in California"
• [15:32] Trump, Propaganda, and Fake Iran Concessions
• [23:12] Mixed Signals: Are Iran and U.S. Governments Any Different?
• [36:36] U.S. and Iranian Military Strength—What the Government Isn’t Saying
• [49:18] Strait of Hormuz Crisis and Trump’s Escalation
• [56:14] Economic Fallout: Food, Fuel, Air Travel, and Inflation

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2. Detailed Breakdown

Navy Secretary Fired in Midst of War ([02:31]–[16:16])

• Trump's Acting Secretary of Defense, Pete Hegseth, fires Navy Secretary John Phelan.
  • John Phelan, described as a Trump donor without true military credentials, was sacked as the U.S. is enforcing a massive naval blockade of Iran.
  • The timing—amidst the most significant U.S. naval action in decades—signals deep Pentagon turmoil.
• Sagar Enjeti: “Imagine we were seeing these types of firings on the Iranian side…this is a complete disaster. You know, there’s huge divisions, et cetera, et cetera.” ([09:06])
• Reason for Firing: Less about war strategy, more about personal loyalty to Hegseth and his desire to purge non-loyalists.
  • Parallel firings in Army leadership indicate chaos not directly caused by leaked war info or the Iran conflict but by Hegseth's insecurity and drive for control.
• Hung Kao named as replacement.
  • Failed Senate candidate, known for controversial statements about “witchcraft” in California, now tapped for a key wartime role. ([13:17])
• Quote - Hung Kao: “Monterey is a very dark place now...a lot of witchcraft and the Wiccan community has really taken over…” ([13:17])

Memorable Moment:

• Krystal Ball, on perspective: “If you’re an adversary looking at this, you just go, wow, they’re in total chaos. Like, this is a mess. And you are right to think that. No doubt.” ([11:34])

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Trump’s Narrative Versus Reality ([16:16]–[23:12])

• Trump claims fake diplomatic wins and overstates military success.
  • Example: Publicly claimed credit for saving eight Iranian women from execution, despite human rights groups noting at least some were never at risk or had already been released. ([16:16])
  • Krystal Ball: “He’s desperate to appear as if the Iranians are giving him concessions. And I think that is the big picture story out of this one.” ([18:54])
• U.S. and Iran both experiencing internal chaos and factional disputes.
  • Trump administration pushes the narrative of Iranian dysfunction to mask U.S. government conflicts and reversals.
  • Sagar Enjeti: “We have this cartoonish view of Iran that it’s just all the Ayatollah and that’s it. And so...if we take him out...the whole thing’s gonna collapse? No, they have institutions built up over decades.” ([30:23])

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The State of U.S. & Iranian Military Capability ([36:36]–[49:18])

• Defense Intelligence Agency says Iran remains far more capable than White House admits.
  • DIA to Congress: Iran retains thousands of missiles and drones that can “threaten US and partner forces throughout the region.” ([36:36])
• White House reaction is denial and bravado.
  • The White House repeats that Iran’s military is “annihilated”—contradicted by on-record intelligence.
• U.S. weapons stockpiles are severely depleted:
  • 50% of THAAD and Patriot interceptors, 45% of precision strike missiles, and other munitions expended; full production replenishment will take years.
  • Crystal Ball: "This 38 day war, set the United States back probably a minimum of five years." ([40:02])
• Iranian military “not destroyed”—official estimates:
  • Half of their ballistic missile force remains; 60% of their naval assets; 2/3 of the air force still operational. ([41:39]–[44:57])
  • Use of Chinese decoys allegedly exaggerated perceived U.S. destruction.
• Pentagon “cover up”: U.S. troop casualties undercounted—wounded service members scrubbed from reports.
  • Crystal Ball: “The government altered its tally of American casualties, inexplicably scrubbing some 15 wounded in action troops from the count…” ([46:59])
  • Sagar Enjeti: “The American public is not willing to take much pain over this at all...Everything...is about when does Trump have to actually acknowledge the reality and put forward a deal that reflects the fact that we lost this war.” ([47:16])

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Straits of Hormuz Escalation: Trump’s Orders & Fallout ([49:18]–[53:37])

• Trump, responding to mounting military and political pressure, orders the Navy to "shoot and kill" any Iranian boat placing mines in the Strait of Hormuz.
  • Direct, public escalation is likely to provoke a matching Iranian response; region already unstable.
  • Pentagon admits it could take six months to clear all mines—meaning energy shocks are set to last. ([49:18])
• Krystal Ball: “The actual stockpiles, there’s like a few more weeks, maybe a few more months left, depending ... But eventually, you know, the price is gonna catch up to reality...this is a full-fledged disaster.” ([50:28])
• Sagar Enjeti: “This is an announcement of escalation. That’s what this is. And what we’ve seen from this war up to this point is that the Iranians escalate in kind. They’re able to do it and they’re willing to do it.” ([52:35])

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Food, Fuel, and Economic Crisis ([56:14]–[70:29])

• Food costs jump almost 8% YoY in March; airlines and other industries begin to feel the shock.
  • Input costs from fuel already being passed on to consumers; fertilizer, plastics impacts yet to hit.
  • Sagar Enjeti: “Costs for food companies jumped almost 8% year over year in March…This is just the beginning.” ([56:14])
• Travel costs surging; airlines cutting routes and seeking bailouts.
  • United Airlines, Lufthansa announce price hikes and flight cuts. Spirit Airlines faces bankruptcy; Trump administration considers bailout with government taking a stake. ([62:35], [64:48])
  • Krystal Ball: “[W]hat they say. Spirit Airlines would be on firmer financial footing had the Biden administration not blocked the airlines merger with JetBlue.” ([66:41])
• Aluminum and other strategic resources hit by supply chain shocks.
  • Middle East produces roughly 9% of global aluminum—disruptions now spreading beyond energy.
  • "[This] supply shock...will lead to major shortages this year." ([68:10])
• Long-term economic pain predicted:
  • The hosts warn the market may stay strong even as most Americans struggle with rising costs and declining quality of life.
  • Political ramifications: prior bouts of inflation have led to a sweeping loss for incumbents globally.
  • Sagar Enjeti: “Almost every incumbent party…got tossed out…[because of] this massive reckoning politically.” ([70:29])
  • Krystal Ball: "It’s everybody else that will suffer...I just think it’ll be like a continued long, slow grind for everybody’s pocketbook, which is disastrous." ([69:19])

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3. Memorable Quotes & Moments

• Chaos in U.S. leadership during wartime:
  • “If you looked at another country like Russia, in the middle of a war...they fire the Naval Secretary. Everyone would be like, something crazy is going on here.” — Krystal Ball ([08:52])
• Government double standards:
  • "We have this cartoonish view of Iran that it’s just all Ayatollah and that's it...No, they have institutions built up over decades..." — Sagar Enjeti ([30:23])
• Fake political wins:
  • “He’s desperate to appear as if the Iranians are giving him concessions.” — Krystal Ball ([18:54])
• Military realities ignored:
  • “We did everything we could do to collapse that regime and to defeat it militarily. Absent nukes, no, we did not hold back.” — Crystal Ball recounting sources ([44:57])
• On food/energy crisis:
  • “It’s the worst energy crisis literally in modern history...I don't see a way where we are not going to have rampant and persistent high supply inflation.” — Krystal Ball ([69:19])
• Political fallout:
  • “Almost every incumbent party...got tossed out...It was this massive, massive reckoning politically.” — Sagar Enjeti ([70:29])

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4. Tone and Style

The analysis is trenchant and skeptical, critical of both Trump administration actions and the wider Pentagon/establishment’s failures on war, transparency, and economic management. The show uses vivid analogies (comparing U.S. firing sprees to Russian or Iranian purges) and maintains an irreverent, sharp style that emphasizes hypocrisy, unintended consequences, and the disconnect between official narratives and harsh realities.

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5. Summary Table: Important Segments & Timestamps

| Segment | Key Topics | Timestamp | |---------------------------------------------|----------------------------------------------------------------|--------------| | Navy Secretary Fired | Pentagon chaos, personal power struggles | 02:31–16:16 | | New Secretary: Hung Kao/Witchcraft Comments | Political cronyism, unseriousness | 13:17 | | Trump’s Iran Negotiation Theater | Propaganda, fake concessions | 16:16–23:12 | | Iranian & U.S. Factions | Both governments’ internal confusion | 23:12–36:36 | | U.S./Iran Military Capacity Assessment | Stockpile depletion, White House denial, Pentagon’s real data | 36:36–49:18 | | Strait of Hormuz Escalation | Trump escalation, energy markets in crisis | 49:18–53:37 | | Economic Fallout: Food/Fuel Inflation | Inflation, airline meltdown and bailouts, resource shocks | 56:14–70:29 |

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6. Conclusion

This episode underscores the gravity and far-reaching impact of the U.S.-Iran conflict, asking hard questions about the competence and motives of American leadership, the genuine state of military strength, and the incoming wave of global economic pain. The hosts are scathingly honest about just how bad things could get, matching their analysis with dark humor and a call to see through both propaganda and complacency.

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For listeners looking for clear-eyed insights and a reality check on the intersection of war, power politics, and everyday economic consequences, this episode is a must.

Transcript

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[Crystal Ball]

That's innerbalance.com hey guys, Sagar and Crystal here.

[Sagar Enjeti]

Independent media just played a truly massive role in this election and we are so excited about what that means for the future of this show.

[Crystal Ball]

This is the only place where you can find honest perspectives from the left and the right that simply does not exist anywhere else.

[Sagar Enjeti]

So if that is something that's important to you, Please go to BreakingPoints.com, become a member today and you'll get access to our full shows unedited ad, free and all put together for you every morning in your inbox.

[Crystal Ball]

We need your help to build the future of independent news media and we hope to see [e-mail] Good morning, everybody. Happy Thursday. Have an amazing show for everybody today. What do we have, Crystal?

[Sagar Enjeti]

Indeed we do. Secretary of the Navy has been fired. But it's not like the Navy's doing anything important right now, so I'm sure everything is fine there. We also have Trump inventing new fake concessions from Iran. We'll dig into that and what it says about where the war is today. We also have new details about our the US Military's remaining capacity and the Iranian military's remaining capacity. So dig into the numbers there. Food inflation coming in hot. Not a good sign. We've got an update here on Mythos. I don't know if you guys have been following this story, but basically it's this product that Anthropic deemed too dangerous. They sent it out to a handful of entities to try to get their act together to figure out what software vulnerabilities existed that Mythos could exploit before they release it to the public. But there has now been a group that was unauthorized that gained access to it. So very scary situation playing out there. We're also excited to have in studio a representative of the new TMZ dc. They've already got some good stuff that they were able to gather with regards to Randy Fine and Tucker Carlson. Also just want to talk to them about their approach in general. Zagara and Emily are going to talk to Ann Coulter about whatever Ann Coulter thoughts she has. It's not that I didn't want to be part of the interview. It's just we don't have enough time for me to get into all the things I would want to get into with Anne. So I'm gonna let you and Emily,

[Crystal Ball]

we all go way back. My very first day at the Daily Caller, I met Ann Coulter at the coffee machine. I was like starstruck. I was like, oh, my God.

[Sagar Enjeti]

Well, I probably go back even further. Cause I remember seeing her at Fox news back in 2011 when I was there.

[Crystal Ball]

She was like the first famous political person I ever met. I was like 22 years old. So it's a real full circle moment. Thank you to everybody who has been subscribing to the breakingpoints.com really excited you got that exclusive look into my views on marijuana at the ama. Worth paying for, of course.

[Sagar Enjeti]

You're very secretive views on how you feel.

[Crystal Ball]

I usually keep it very on the down low. And actually President Trump is set to reclassify weed sometime this week probably so maybe next week.

[Sagar Enjeti]

Sagar, you voted too.

[Crystal Ball]

You know, many people have been reminding me of that and perhaps like Tucker, I will have to spend the rest of my life apologizing for it. And where was I at the pitch? Oh, right, YouTube. If you're still here after this, go ahead and hit subscribe to our YouTube channel if you are willing. And then if you're listening to the podcast, please share an episode with a friend. Really helps other people find the show.

[Sagar Enjeti]

Wait, did you tell people top 15 YouTube.

[Crystal Ball]

Oh, right, top 15. Yeah. So I was looking at those YouTube podcast charts I don't usually check, and that's July, I check every week. And we were number 15, which is, I believe, the highest we've ever charted on the YouTube podcast charts. Not number 15 in politics, number 15 in the whole nation, which is pretty crazy for YouTube podcasts. Some of the other people that we were up against include like self help gurus who I'd never heard about. So, like, that's how, you know, whenever, you know, one of the people that you're up against are those who are like two women who drink wine and talk about crime. You're like, oh, wow, we're in the big leagues now. So thank you, thank you to everybody who helps us. And yeah, hit subscribe. That's what helps other people find the show. All right, Navy Secretary, let's start with. Let's put it up here on the screen. Pete Hegseth has fired the Navy Secretary, Johnson Phelan. The shakeup comes as the US Military is enforcing a massive naval blockade of Iranian ports in the Middle East. John Phelan was officially fired and it was revealed in a social media post by the Pentagon's Pentagon spokesperson, Sean Parnell. I think the reason obviously why this is so significant is that Phelan was fired at the exact same time of probably one of the most significant United States Navy actions in modern history, which is a massive naval blockade of the country of Iran, which now extends, remember, not just over the Straits moves, but is including the interdicting, firing and capturing on ships all across the Blue water ocean. So, for example, we've had Asian waters where we've had an interdiction of Iranian ships, multiple different ships that happened just yesterday. So massively significant. Now, you know, it's not like John Phelan is a career Navy man. He's like a Trump donor. So, like, it's not exactly like he was Mr. Uber Professional. But I think what it does highlight to everyone is the level of consternation and turmoil inside of the Pentagon. And this is a very consistent story from my own sources. So basically, Pete Hegseth is an Egomaniac. And he is completely paranoid. He is paranoid that everybody. Deeply insecure, Deeply insecure. And he believes that anybody who is not personally loyal to him, as in appointed by him, is disloyal. And so he's had now a months long campaign against John Phelan and also The Army Secretary, Mr. Dan Driscoll, who is a longtime classmate of J.D. vance and a protege really of the Vice President. He's also been trying to get him fired. Well, the Navy Secretary has also been somebody who he's been targeting pretty consistently. And you could put it together with the list of some 34 now top officials. Remember the army chief of staff, Chief of staff was just forced out as well. Some of these, almost none of this actually has to do with the Iran war or with leaking. Almost all of it is really about the personal power of Pete Hegseth. But the reason why I is a national story is not about the turmoil in the Pentagon, but it is the extent to which Pete Hegseth has almost the complete ear of Donald Trump. And Pete Hegseth is one of the most belligerent members of the cabinet. He's the person who really views the Iran war as kind of the rah Rah propaganda effort, which is rehabilitating his image more importantly inside of Trump's Washington. And the fact is is that Trump is allowing him to fire his donors and his friends like any of these other people who previously he himself had appointed. So it shows actually the power dynamic shifting very in Hegseth's favor. And all of that ties back to the Iran war. Hegseth was one of the most belligerent voices in the room pushing the war with Iran. He said it would be easy. He's one of those people in his ear talking about Cuba. You know, he's the one who's curating this daily videos for Donald Trump about how we're blowing this up and blowing that up. So he, I mean by I don't know whether it's genius or stupidity, is like become a very savvy actor in Washington. He has read the Trump playbook, which is tell him exactly what he wants to hear, give him the video highlight reel that he wants to see. And in tandem, he is basically being allowed to run the Pentagon in whatever way he sees fit. So this is a real power story. More than anything. It's very impactful for the war. A friend of mine put it to me this way. He goes, look, sometimes we have US bias. Let's say you looked at another country like Russia in The middle of a war, massive naval blockade, and they fire the Naval Secretary. Everyone would be like, something crazy is going on here. So, yeah, you should look at it that way, too.

[Sagar Enjeti]

That's exactly what I was thinking about this morning. Imagine we were seeing these types of firings on the Iranian side. You already have. We're gonna play in a minute. Jesse Watters inventing that there's some coup internally in Iran, blah, blah, blah. If you literally had some of the top officials in the military being pushed out in the middle of this war, you know, everybody would look at this and go, they are in complete chaos. This is a complete disaster. You know, there's huge divisions, et cetera, et cetera. And so I don't quite agree with your characterization that it doesn't have anything to do with the Iran war. I think what you point to is the fact that since Pete is a psychopath and also have zero principles and is willing to just completely back Trump 100% and be all in on whatever insanity Trump is interested in that day, that has given him the hand that he has wanted to push out some of the people who make him insecure. Now, why does this particular guy, who has no military background, make him insecure? Well, he was a Trump buddy, and he was able to text directly with Trump. And so that gave him an inside line that was threatening to Pete. And so I don't know if you guys remember previously, this is the guy that did this weird press conference with Trump announcing the, like, new line of Trump warships. And so he's been able to push some of these ideas directly to Trump and have his ear and not have to go through Pete or anyone else to be able to have that relationship. And so according to the reporting, that is why Pete found him to be threatening. We could put a 2 up on the screen. This is the reporting from Axios. Axios on Secretary of Navy departure Phelan didn't understand he wasn't the boss. His job is to follow orders given, not follow the orders he thinks should be given. A person familiar with the situation told Axios he didn't get along with Defense Secretary Pete Hegseth. They added. And so, yeah, I mean, Pete felt like, oh, this guy has some autonomy, so that can't be allowed. And the second that I'm gonna have a chance, I'm going to get him out of here. But when you think about the Army Chief of Staff being pushed out right at the beginning of this war and now at a critical moment specifically for the Navy, when we are doing not Just this blockade of the Strait of Hormuz, but trying to intercept Iranian ship vessels wherever they are in the entire world. Not that, you know, the operational capacity of the Navy's gonna be impacted by this really at all, but if you are an adversary looking at this, you just go, wow, they're in total chaos. Like, this is a mess. And you are right to think that. No doubt.

[Crystal Ball]

Absolutely. No question. Yeah. I mean, I didn't. When I said Iran war, I didn't mean, like, it has to do with the prosecution of the war itself.

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I will say.

[Crystal Ball]

I mean, in terms of the leaks, you should not undercount that it was Hegseth and Dan Cain. And Kane really is one of these figures who is not nearly enough of a villain, in my opinion, in Washington, because he's the person who's slower. I mean, listen to Joe Kent. And then also read the exact TikTok of all this went down in the New York Times. Like, he didn't present the full amount of information, which is literally his job. He was appointed by Congress. And they remember that former Navy admiral who worked on his staff, who probably did leak, from what I know, the actual warnings about munitions. He obviously was not only completely correct, he was fired or he was demoted. Basically. He's still in the Navy, but he's no longer on the Joint staff. So these people are not heroes, but many of them probably tried in their own way to get some of the information out. In case you're wondering who the actual person who will replace Phelan is, it's Hung Kao. If you don't know who that is, Crystal and I are familiar. He ran what? He ran for Senate.

[Sagar Enjeti]

He ran for Senate against Tim Kaine.

[Crystal Ball]

Blown out, like a disastrous performance in Virginia.

[Sagar Enjeti]

Embarrassed himself, like, on the debate stage.

[Crystal Ball]

Oh, yeah, it was a disaster.

[Sagar Enjeti]

Not really credible. But Trump was enthusiastic about him, did some events for him, whatever. And just as a. So just as a, you know, to get a sense of who this guy is. Yeah. We pulled this. This clip that went viral at the time of him talking about how California has been taken over by witchcraft, and we can't let that happen in Virginia. This was part of his. His campaign pledge, I guess, to not allow witchcraft to take over Virginia. Let's go ahead and take a listen to that.

[Hung Kao]

There's a place in Monterey, California, called Lovers Point.

[Crystal Ball]

Yeah.

[Hung Kao]

The original name was Lovers of Christ Point, but now it's become. They took out the Christ. It's Lovers Point. And it's really. Monterey is a very dark place now.

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Yeah.

[Hung Kao]

A lot of witchcraft and the Wiccan community has really taken over there and we can't let that happen in Virginia. Virginia is, I mean, especially down, down in Roanoke. They're God loving people. Richmond too, and Virginia beach. And we just need to mobilize Christians across nations.

[Crystal Ball]

So yeah, witchcraft and Wiccans, that's definitely the biggest problem that we have in the state of Virginia.

[Sagar Enjeti]

And Wiccan series is amazing. Yeah, Jimmy, voters definitely felt that way.

[Crystal Ball]

Come on. No, exactly like this guy. Look, I mean, everyone be honest here. He got absolutely blown out in the election. And this was even with Donald Trump, who was running 54 to 45. There's no question about who he is. However, like many other failed candidates, he was able to get himself a job in the Trump administration. Okay, fine, but being the Secretary of the Navy. Secretary of the Navy's a real job. That's a serious business. And I mean, maybe it wasn't cuz we had a Trump person who was in charge, but nonetheless, again, if you were to analyze this in the Iranian context or the Russian context, I mean, when Russia fired its generals, we covered it here extensively. We were like, hey, this is a big deal. Shows that things aren't going on. I don't know if it's connected to the ground war, but at the very least it is definitely about internal division. And this level of chaos in the Pentagon at this time is very ominous for what? The future of the war. You have the most belligerent voice in the Pentagon, the Secretary of Defense who has been the most empowered and has been the most, who has the ability now to control the building in what way that he sees fit. And clearly he's winning. Trump is not checking him. And I think that is, that's, I mean, what. Probably the biggest story about the ascendant power dynamics the very same time that we have these quasi talks potentially happening. This is an entire sidetrack. Right. Of Pete just constantly telling Trump about how much easier it will be if he just lets him go on. You know, one of the most revealing comments Trump made. We didn't play it here on the show. Was him being like, I would have won the Vietnam War. Oh my God. Look, you know, not to get totally sidetracked, but there is an entire Vietnam dead end school.

[Sagar Enjeti]

Yes.

[Crystal Ball]

That a lot of the veterans unfortunately ended up embracing after the war, which was if we had just fought the war to one, then we would have won.

[Sagar Enjeti]

Yeah, they didn't. And it's like, well, what does that straights off and let us go and fight the way we know how to. And they gave up on us. And that's very much Pete's ideology. He always talks about we gotta take the handcuffs off of our warriors and let them go out in the field and I guess, you know, have the ability to bomb little girls at school, et cetera. So yeah, I mean his way of thinking is very consistent with that. Vietnam, dead enders.

[Crystal Ball]

But yeah. And then when it came out of Trump's mouth, I was like, oh my God. I actually total friend. I was like, oh. So Trump absolutely would have used a nuke at Dien Bien Phu. That's when the French begged the United States.

[Sagar Enjeti]

Only on half those bone spurs that have gotten in there.

[Crystal Ball]

No, this was in the 50s. I don't even know if he was born actually. This is nice. 1956. Yeah. Right. Later on, if only, if only he had been able to be on the ground. I mean it's not as if we didn't drop more bombs, I think what was in a several week period than all of World War II combined. So it's not like we didn't fight to win. Okay. It's just that it wasn't really winnable anyways. In terms of Donald Trump again, coming back to some of his mindset, let's put an A3 up on the screen. This was Murtaza Hussein who is pointing, even trying to explain this is so preposterous. So basically there's this Zionist activist, Eyal Yacobi, he tweeted out breaking the Islamic Republic is preparing to hang eight women. Not a word from the international community or the so called human rights organizations. Trump screenshots this and says to the Iranian leaders who will soon be in negotiations with my representatives, I would greatly appreciate the release of these women. I'm sure that they will respect the fact that you did so please do no harm. Would be a great start to our negotiations. Thank you for your attention to this matter. Trump then says, very good news. I have been informed that the, the eight women protesters who are going to be executed tonight in Iran will no longer be killed. Four will be released immediately. Four will be sentenced to one month in prison. I very much appreciate that from Iran and its leaders respected my request as President of the United States and terminated the planned execution. As Mortaza points out, Trump seems to be inventing fake concessions given to him by the Iranians to make it appear that he is building leverage and goodwill from negotiations that he is still trying to engineer. Whatever the outcome is, it's very low IQ and mentally ill behavior. Now, we dug a little bit into this also. Even that original claim that no human rights person had spoken out is completely not true. In fact, all the details that we have from this are from human rights organizations based in Oslo. From what we do know is that some of the women had actually already been released and had been released some one month before. It doesn't appear that any had been sentenced to execution. The status of four out of the eight women is actually remains unknown. However, any sort of imminent execution plan or something was not known to this human rights organization who it appears is in touch with the families actually has the identity of many of the women who were listed here. So nonetheless, at a very basic level, we know for sure that two of them were definitely not having planned executions and were already released at the time that that was made. It was just complete nonsense. It was basically made up. And again, the information is coming from a human rights organization who may be wrong. I'm very willing to concede that that's where we're getting all of our data, but it's very unclear. The point remains. He's desperate to appear as if the Iranians are giving him concessions. And I think that is the big picture story out of this one.

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[Sagar Enjeti]

That's right. Yeah, he's inventing fake concessions, as Murtaza put it, to make it appear like he has any sort of real leverage at this point, which he really doesn't. You know, they fail to achieve their goals militarily through airstrikes. They don't want to do a ground invasion because that would also be a disaster and unlikely to achieve the goals where we've got the Navy deployed now for this blockade. That is probably going to be as bad for us at least as it is for the Iranians. It's also not going to cause them to capitulate. So what else do you have left? I mean, hopefully nuclear weapons are off the table, you never know. But that would be the only final resort that he could get to. So in order to project a false reality, he is inventing this. Oh, I got these eight women. Freedom. Some of whom were already free, none of whom were facing execution. And the other thing about this is it's just preposterous to even imagine Donald Trump cares about the fate of these women when this is the same guy who threatened to genocide the entire civilization. When was that? A week ago that he was doing that? And routinely, basically every day threatens to bomb all the civilian infrastructure et Cetera. So spare me the concern for Iranian human rights, please. No one is buying that at this point.

[Crystal Ball]

I mean, yeah, that's pretty ridiculous on its face. Let's put a four up on the screen. As usual, drop side doing the best. This was their Tuesday night roundup of where U.S. iran negotiations stand. On Tuesday night, senior Iranian officials who have direct access to Tehran's deliberations told Dropside Iran would move forward with the second round only if Trump extended the ceasefire and ended the naval blockade. The Pakistani side indicated they expect Trump to lift the naval blockade of Iraq. If that happens, a new round of talks would be held on Thursday. Today is Thursday, so that's definitely not really what's happening now. Number two, President Trump on Tuesday morning had told CNBC he would not extend the cease fire, only to flip flop some hours later. As they covered yesterday on the show, the Iranian Foreign Ministry spokesperson said diplomacy is a tool to secure national interests of security. In a briefing in Tehran, quote, whenever we conclude that the necessary and logical grounds for using this tool to realize national interests and consolidate the achievements is thwarting the enemies from reaching their evil goals, are prepared, we will act. 4. A senior Iranian official told Dropsite that Iran continues to prepare for what they see as a likely resumption of US Israeli attacks on the country and expressed confidence that Iran's continued control of the strait and its capacity to conduct strikes in the Persian Gulf would create a crisis for Trump. Five, Iranian officials have said they would not engage in preemptive strikes, but will respond militarily to any attacks. And six, any comprehensive deal. The senior Iranian official believes a more likely scenario would involve the US through Pakistani mediation, shaping a de facto end to the war without any formal declaration. Maybe some sort of Korean armistice situation. But obviously that would be still kind of a disaster for Iran because Iran still would need sanctions relief of some kind. You know, that's still. Wouldn't say existential per se, but it's. But it's definitely gonna be a hit. Last thing I do wanna note is there is this magical belief here in Washington about destroying Iran's economy, not just in sanctions, but with the Straits of Hormuz. If you take Trump's math on its face, they have said that it would destroy 10% of Iranian GDP. A good friend of mine pointed out that Ukraine's GDP has gone down by 20% and they continue to be able to fight in a total war situation. Total GDP doesn't matter. Like, like really what it becomes is an existential fight to the death. I Think John Maynard Keynes once famously said, like, no war is gonna stop because of money. Cause there was a theory in the first World War it would stop. Cause everyone would go broke. And it was like. He's like, that's ridiculous and naive. It will just change the conditions. And that's exactly what happened. So anyway, I just wanna make sure that we flag that. This idea that you're gonna be able to economically crush Iran or any country in a total war scenario, if it's truly existential for them, has never proven out in human history.

[Sagar Enjeti]

All right, so one of the things that the Trump administration is also trying to do, which Ryan and Emily talked about yesterday, is their new cope, is like, well, the Iranians, they're just such a mess, they can't even come up with their negotiating lines. They don't know who to talk to. So we're giving them a little time so they can get their act together. Meanwhile, you've got military officials being pushed down here and, and total Trump contradicting himself hour to hour. We couldn't even get a straight answer about whether or not the Vice President was gonna be involved in the negotiations or not. But in any case, let's take a listen to Caroline Levitt talking about this on Fox News and claiming, pushing forward this line that like, oh, the Iranians are so divided they can't even put together a unified proposal.

[Caroline Levitt]

The fact that they cannot send a unified message yet, which is why the President decided to extend the ceasefire, just shows how effective Operation Epic Fury truly was. Because there's of a lot, lot of internal division over there. The president understands that. And so we await their response. Yeah, they had one leader, one ayatollah for 37 years who seemed to be able to keep a bit of a lid on all of these disparate groups. But that is sort of an open can of worms after his death in that. In that operation on February 28th. So we'll see if they can get their act together.

[Sagar Enjeti]

I mean, what was that last part? So much to say. But yeah, after his death. Oh, how did he die? Yeah. Cuz I mean, if, hey, maybe it would have been good to have someone in place who would have been easier to work with, or some of the other people who were more moderate, who were more interested in diplomacy, that were also murdered by us and the Israelis. So they are no longer possible to participate in the negotiations. But I'm not to say that there isn't division within the Iranian government. I think Jeremy's reporting indicates that there is. But the idea that that has created this deep dive, deep dysfunction that makes it impossible for them to put a negotiation proposal together. We know that's not true. They have had their red lines from the beginning. I mean, from the onset of this war, they've said, this is what we need in order to come to a ceasefire. And they've been very consistent and they really haven't wavered from that. So, yes, I'm sure there are very vehement differences of opinion between different factions within the Iranian government. That doesn't mean that they've collapsed and they can't come up with a proposal. And they're so divided that they can't even figure out how to get to the negotiation.

[Crystal Ball]

I would say that Iran's government right now is probably very similar to our own. Let's take a look at. Roll back every comment I made about the Navy Secretary. Well, you have a Defense Secretary who is ascendant and who is more pro war. And then you have a faction in the government which wants to seek peace on Islamabad. And I mean, again, take the United States out of it and be like, well, the President's business partner and son in law are conducting diplomacy and are in an alliance with the number two official while the Defense Minister, like, I'm changing the language here a little bit. It sounds like Iran, doesn't it? You know, well, oh, the Secretary of Defense and an outside group of influential apparatchiks on state television like Fox News are also influencing the leader to pursue a different course. While there's a different track inside the government. I don't think it's all that dissimilar, honestly, from ours. I really don't. Yes, there are multiple factions. I mean, we literally had a situation where, where the President of the United States on multiple occasions said JD Was going to Islamabad and then not going, and then going again. So it's not like that. There isn't a lot of confusion. Everything is basically rolled up into Trump himself. I do think Iran has a ton of factions, has long had lots of factions. One of the reasons it was so foolish to kill the Ayatollah is, you know, for all the talk about how maniacal he was, he clearly was a deeply cautious, doddering old man who would never choose war and would never choose peace. He would always try to do this middle track. Well, now there are a bunch of people who are in power who are like, no, no, no, we're not gonna make the same mistake he did. We're gonna choose war. Now there are a lot of people. The Prime Minister, or, sorry, the president, the Speaker, Golubov. They have a lot more to lose. Remember, you know, we talk about oligarchs. They're filthy rich, too, over there. Well, destruction of their country is not good for them. So they also want to pursue peace. But it may not be the same for a lot of the IRG or many of the other people who are currently in charge. We should understand our government in the same way theirs. I'm not saying they're morally equivalent or whatever, but, like, you should always definitely take a look.

[Sagar Enjeti]

They have real institutions. I mean, we have this cartoonish view of Iran that it's just like all the Ayatollah and that's it. And so, I mean, this was Trump's view, this cartoonish view. Oh, so if we take him out, then that's it? The whole thing's gonna collapse? No, they have institutions built up over decades that have been intentionally built to be resilient, because they have been planning for this very conflict for years and years, if not again, decades, because we've been trying to topple them the whole time since the revolution. So, yeah, to think that they don't have processes in place. They don't have an understanding of, okay, who has this file? Who is in control? Who has the final say? What sort of authorities does this need to go through? I mean, again, it's just very arrogant and hubristic and also just does not reflect the reality of how their government functions.

[Crystal Ball]

And again, in the same way that you would try to point to the United States, it's very similar. They have a supreme National Security Council who was headed by that guy Larjani. Israel killed him. He was apparently the only person who could credibly talk to the IRGC and to the moderate factions. He's dead now. So there's no real broker. So that was part of the reason that we had that scenario where the foreign minister said the strait is open, and the IRGC was like, no, it's not. Well, there used to be a convening body. Same with the Ayatollah. Remember, they have an assembly of experts. They have a National Security Council. You could point that out. Like, we have a Pentagon who's openly feuding with Marco Rubio, who is the National Security Council chair and also the Secretary of State. So it's a similar system. It's Byzantine, But, I mean, is ours all that simple and easy to understand, especially in terms of function and not the way that it's laid out? I wouldn't say that they're all that dissimilarized.

[Sagar Enjeti]

Well, and they're meant to be competing power centers. You know, that's part of the structure of our government, part of the structure of their government as well. But, I mean, imagine if they assassinated Trump. Right? That would be a blow to the country in certain ways. But it's not like we would collapse. I mean, then J.D. vance is in charge, and you've got a whole line of succession. And you know how this would all go. There's a process and procedure in place. It's the same for them.

[Crystal Ball]

Exactly right. So let's continue. A7. Can we put that on the screen? This is from the president of Iran. He says the Islamic Republic has welcomed dialogue and agreement, continues to do so. Breach of commitments, blockade and threats are a main obstacle to genuine negotiations. World sees your endless hypocritical rhetoric and contradiction between claims and actions. Let's put the next one. This is Speaker Golubov in a translation of something he put out. A complete ceasefire only makes sense if it is not violated by the maritime blockade and the hostage taking of the world's economy. If the Zionist warmongering across all fronts is halted, reopening the Strait of Hormuz is impossible with such flagrant breach of ceasefire. They did not achieve their goals through military aggression, nor will they through bullying. The only way forward is to recognize the rights of the Iranian nation. So you could see that they're not really budging. And then the final thing here, you could take it with whatever grain of salt that you want. The Israelis are reporting in Israel. Let's put that one up on the screen. Is that they say in Israel, it was updated the deadline set by Trump for the Iranians until this coming Sunday. So according to them, the deadline is now Sunday. Is that true? Is it not true? I have no idea. You could take it for what you will. The press secretary did push back on it, saying that there's no such thing as a deadline on the cease virus, extended until such time that the president deems that it's not. But that's where things are as of right now. It's a crazy system. And so, yeah, when we're criticizing the Iranians for a crazy system, let's also remember to look inward. That's all I have. All right, let's move on to the military.

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[Crystal Ball]

Let's go to the military section now. This one is very interesting and the response of the Trump administration is really what makes it very critical that we all pay attention. Let's put this up here on the screen from cbs. Iran's military is more capable than Trump administration is publicly acknowledging. Sources say the head of the Defense Intelligence Agency submitted a written statement ahead of a House Armed Services Committee hearing that says Iran can still inflict damage. Quote, Iran retains thousands of missiles and one way attack UAVs that can threaten US and partner forces throughout the region despite degradations to its capabilities from both attrition and expenditure. So for those of you who don't know, the DIA is kind of a, it's like a private CIA, but for the Pentagon. So it's a very reductive way of putting it. Basically they do military assessments on foreign governments for intelligence purposes. All of that gets rolled up to the odni. Now as part of their statutory authority, they must submit written updates to Congress by law. Remember when the course of the war was happening, we often would get updates about troops and about the damage and about how many weapons have been expended, how many people have been wounded. From updates of the Pentagon to Congress now, not to us, but Congress would leak it on our behalf. So I take this very, very seriously because of course for them it's also a crime to lie under oath. They have to produce these reports accurately to the best of their ability and submit them to Congress which is an independent body which is supposed to be able to review. So that is the official statement of the Defense Intelligence Agency. And that's not even based on, oh, some anonymous source says this is a written on the record statement from the DIA to Congress. Here's how the White House reacted. Let's put this up here on the screen. The legacy media is doing PR for the Iranian regime again. The truth is under President Trump's leadership, the US military decimated Iran's capabilities. In 38 days. Their defense industrial base was destroyed. Iran's ability to cabin and stockpile ballistic missiles and long range drones has been set back by years. The vast majority of Iran's ballistic missiles, launcher vehicles, long range attack drones were destroyed. The Iranian navy was annihilated with more than 150 of their ships sunk. And Iran's air forces are functionally and operationally irrelevant. Now, now again, this is. And she again says that the media is doing PR for the regime by directly quoting the Defense intelligence Agencies assessment. And then you should partner that with some of the more recent updates about munitions. We talked a lot about that during the war. Now it's been over for a week or two or at least we're in a ceasefire. So we have some numbers. Shall we? Let's go through the numbers. Let's put it up here. This is from CSIS and cnn. CSIS again to set the table is basically an arm of the Pentagon. They do quote independent analysis but you know, it's basically like a, it's a defense industrial based think tank and they do independent, quasi independent analysis in the open source in order to basically lobby for more weapons, whatever their agenda is. So I take their stuff actually very seriously. Most people do in Washington. Here's what they say. The approximate estimate of percentage of U.S. munitions that have been expended in the Iran war. 50% of THAAD interceptors, 50% of Patriot interceptors, 45% of precision strike missiles, 30% of Tomahawk missiles, 20% of joint air to surface standoff missiles and 20% of standard missiles. The single most troubling one right there is 50% of THAAD. Remember how much we talked about Thaad, how important that system is for any potential war in Asia. And remember I'm not just talking about something preemptive war or whatever. I'm talking about Japan and South Korea, the countries which we stripped some of these Thaad interceptors out of. Remember also that we fired hundreds of them just in the 12 day war and we only acquired a few dozen or so over the last two years. The production timeline is a disaster. Same on the Tomahawk missiles is we expended hundreds, we've only produced a few dozen. There's only one facility in the United States that even makes them. There's some problems with rare earth minerals to even manufacture them. Even if we wanted to rapidly increase production, you basically can't for a significant period of time to make sure that you were to build out more facilities. So this has set us back, this 38 day war, set the United States back probably a minimum of five years. And that's if we got our act together for some sort of potential future conflict. And that does not even touch the cost with that alone. Back of the napkin math. Hundreds of billions, hundreds of billions in what it was cost. Not even mentioning the opportunity cost of all the actual allies that it would have been used to defend. Or what if we got hit again? 9, 11. Now what? I mean that's the whole point to have munitions like this. It's bad. It's really bad.

[Sagar Enjeti]

And that's why the Iranians feel so confident and they should, because they can see this report, they can see this reporting that's out there in the public of how much US stockpiles have been diminished and how much that has made not the US so much but our allies in the region and ultimately Israel, which of course has their stockpiles of These interceptors, even more diminished, have been really dependent on us. But it means that all of those Gulf Arab countries are really sitting ducks. And, you know, they were complaining during the hot war portion about how they were not getting protected the way that Israel was being protected. That dynamic would only shift more towards Iran being able to do damage. And just to go back to that CBS News report about the Iranian capabilities that remain, I mean, it's just completely different than what Trump has been selling from the first day of this war. He claimed that we had basically defeated them and victory was ours, et cetera. But they say that about half. And again, this is CBS News, right? This is like Trump regime propaganda outlet, CBS News, that is writing this stuff. They say about half. Half of Iran's stockpiled ballistic missiles and its associated launch systems are still intact. 60% of the naval arm of the Islamic Revolutionary Guard Corps still in existence. That is totally. I mean, how many times has Trump said that the navy is basically completely destroyed, barely exists anymore, et cetera? They say Iranian air power has been significantly degraded, but not erased. About two thirds of Iran's air force still believed to be operational, the official said, after an intensive US And Israeli campaign that struck thousands of targets, including storage and production facilities. Trump, on the other hand, says, quote, we've taken out their navy, we've taken out their air force, we've taken out their leaders, so square that with the fact that in reality, two thirds of Iran's air force still believed to be operational and 60% of the naval arm. And here's the thing, because of their position, they don't need that much capacity. You know, it doesn't take a lot to be able to keep the Strait of Hormuz closed, for example. It doesn't take a lot to serve as a deterrence against the US Doing any sort of ground invasion, et cetera, which would be sure to be a complete catastrophe. And I think Trump knows this at this point, which is why he's effectively pinned. You know, you could have known from the beginning that just bombing alone was not gonna be sufficient. And this is what he continues to threaten of like, oh, we'll go back to bombing this and bombing, et cetera. If that was going to work, they would have already done the thing that they needed to do to make that work. It's not going to work. Can you inflict more damage and cause more pain and suffering and kill more civilians? Yes, you can do that. Is it going to work? No. You still haven't taken out the air force. You still haven't taken out their navy. You are not going to be able to accomplish this either with a ground invasion or with this blockade. And the Iranians claim that they used a lot of these decoys that they got from China. And I do think that there was some of that. So that as the US Was hitting targets, some of what they thought they were destroying was actually just these Chinese made decoys. And then you couple that with the fact that Trump just lies, and also people lie to Trump about how effective things have been, and you end up in a situation where probably the president himself is somewhat delusional about the amount of damage that has gone down.

[Crystal Ball]

Almost certainly. Exactly. And let's even just look at what we destroyed versus what they destroyed in terms of how many munitions we expended, how unsafe now the United States actually is to some sort of peer competitive conflict. You know, I had two sources I spoke to very. And I said, I asked them very clearly, I go, did we hold back anything on Iran? And they said, absent nukes, no. Wow. We did not. And obviously ground troops as well, it goes without saying. But I said, did the United States military ever really hold back? And they said no. In the first three weeks of the war, we did everything we could do to collapse that regime and to defeat it militarily. Again, you could, I challenge you to find another person, but outside of ground troops and nuclear weapons, the answer was no. And that was a direct ask that I made here, really, because I was trying to assess the actual power of our military. You should be terrified by that. You really should. And also, I mean, let's take my own report out of that and let's just look at it logically. It was in their interest to go all out because they needed to defeat them very rapidly and it didn't work. So clearly that's why we are where we are today with some fake JCPOA deal and blockade and all that. So you should really, really. People should be panicking about this. Like in the past, when you have a emperor has no clothes moment, it really should lead. Like, yeah, the Navy Secretary should be fired. But like, for very different reasons. The Pentagon people should all be fired. The procurement folks, everybody in Congress, people should be walking around with their hair on fire. They go, oh, my God, how are we ever going to win a war in the future? No, instead, you know, oh, we're going to have more contracts for the same, same weapon systems. I mean, you've got, you know, the Gerald Ford, the aircraft carrier, it arrives in two days in the Middle East. What's the one that's damaged? I forget which one it is. Apparently that one, you know, it's going to have to be retrofitted, but it's staying in the area potentially to have to support operations. We basically learn nothing from any of this. And in fact we're, we're actually erasing some of the casualties. Let's go to the next one. Just put it up there on the screen. This is from the intercept. They're saying that the Pentagon has now erased wounded US Troops from the Iran war casualty list. A quote, definition of a cover up. The government altered its tally of American casualties, inexplicably scrubbing some 15 wounded in action troops from the count again in a document that was provided to Congress. And then the last thing here, let

[Sagar Enjeti]

me say one thing about this because I think this is indicative of something. Another important dynamic in this war is like, okay, well why are they scrubbing the casualties? Cuz they don't want people to really know the true cost in terms of, you know, service member lives and obviously those who have been wounded. And it points to the, the American public is not willing to take much pain over this at all. And this was a point that I was listening to Mearsheimer's latest interview with Glenn Deason and he made a great point, which is, listen, if you accept the official narrative about the airmen who were downed and all of the extraordinary resources that we put in to retrieving this one airman, and we know we have the reporting about how Trump was freaking out and screaming at his aides for hours about this to the point that he had to be removed from the room so they could actually focus and come up with a plan of what to do. That was for one guy. And you think we have the stomach as a nation. We didn't want this war. The vast majority of the American public is like, let us get out of this. What are we thinking? This is a disaster. We do not have the stomach to take anything approaching the type of pain and loss and suffering that it will take to create a different ending to this thing other than the ending we're at now, which is that we live lost. That is the ending we're at now. And everything between where we are now and when this thing actually wraps up, however it gets tied up in a bow or left with loose ends. It's all about when does Trump have to actually acknowledge the reality and put forward a deal that reflects the fact that we lost this war. That is the truth of the matter and it is possible that he can't bring himself to that place and we leave it sort of open ended and then the Israelis pull us back in. That is certainly a possibility because, you know, for them it is unacceptable. They see it as existential to allow things to remain the way that they are. And so long as Iran keeps control of the Strait of Hormuz, yeah, there are other places in the world that will be hurt more, but the entire global economy, us included, are really going to suffer over that.

[Crystal Ball]

Here's some breaking news literally about what you're talking about. I quote from Donald Trump, I have ordered the United States Navy to shoot and kill any boat, small boats though they may be. Their naval ships are all 159 at the bottom of the state that is putting mines in the waters of the Straits of Hormuz. There is to be no hesitation. Additionally, our minesweepers are clearing the Strait right now. I am hereby ordering that activity to continue at a tripled up level. Thank you for your attention to this matter, Donald Trump. So look, the reason why that's so significant and I almost certain this is a reaction to this story which I was about to throw to be five. Let's put it up there on the screen and let's make sure that we look at these both in context is from the Washington Post, Dan Lamoth. An internal Pentagon assessment to Congress reports that clearing the Straits of Hormuz mines could take up to six months. Now remember, originally the Pentagon was telling people that they didn't even mine the Straits of Hormuz. And then Trump was like, no, they didn't mine it. And if they did, there were maybe eight, maybe 13 mines. Now they are going and telling Congress it would take, it takes six months to fully clear the Straits of Hormuz of mine. And I mean, okay, let's do some basic like math here. No resumption of the Straits of Hormuz traffic for six months, that's oil to 250, 300. I mean, let's go further. It may be that the price is fake because it doesn't even really matter in terms of the amount of oil that's even getting out. That is a full fledged disaster. And already, as we showed you all on Tuesday, this is already the worst energy crisis in global history. Six months of closure or even abnormal traffic through the Straits of Hormuz is, I mean, energy catastrophe. Yes, we will all drive, but gas will be $6 a gallon. Like it will just be. I'm just trying to think through the ramifications of all this, in my head, it's insanity. I mean Asia, Japan, they're. I mean, blackouts like rationing. Australia, New Zealand, 12, $15 a liter or something crazy like that. Africa, starvation and. Or blackouts. Bangladesh, Pakistan, all those places. Nope, they will have nothing. The actual stockpiles, there's like a few more weeks, maybe a few more months left, depending on where you look at things. But eventually, you know, the price is gonna catch up to reality. Six months of closure, I think, think. And this is the danger of what Trump just said is a resumption of firing on Iranian boats would almost certainly lead to what like cuz right now we haven't fired anything. There hasn't been a resumption of actual firing in the Straits of Hormuz. Firing leads to horizontal explanation, more attacks. Remember, Iran fired on a few of those ships that were transiting through the strait. Maybe they'll fire at even more. So that just means more destruction, less oil that's moving through and more global catastrophe. So if I put those two things together and why is he doing. He's panicking. And then, even then, minesweeper moving through the Strait. I mean, they didn't get shot at, by the way. Even in terms of our minesweepers, I think we only had three and they were all decommissioned like a month before the war, something like that. So I'm told that there's some other technology that we could use, but the drone threat and all that makes it very difficult. This is really scary.

[Sagar Enjeti]

Yeah, no, bottom line is this isn't. This is an announcement of escalation. That's what this is. And what we've seen from this war up to this point is that the Iranians escalate in kind. They're able to do it and they're willing to do it. And right now with the fact that they feel they were burned by both, probably the Pakistanis and the Americans, with this attempt to dial things back at the end of last week, where Rachi comes out and says, okay, the strait is open because of the, you know, the ceasefire that was put in place in Lebanon. And then Trump has to go out and humiliate them and say, well, we're keeping our blockade on. Which is apparently, according to Jeremy's reporting, that is apparently violation of what the expectation was from the Iranian side. And so they feel burned not only by us, but also there have some serious questions about the, you know, Pakistani mediators and whether they're operating in good faith, in an honest manner. And now you have this announcement of further escalation from the American side. The Iranians are not likely to just sit back and take that.

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[Sagar Enjeti]

This is A good transition to talk about what we already see in terms of the economic impacts of this war. Let's put C1 up on the screen. This is from Tracey Alloway of the Odd Lots podcast. Fantastic podcast, great reporters. And she's got information here about food inflation. Costs for food companies jumped almost 8% year over year in March. That's versus 4.2% in February. This is basically just from higher fuel costs. We're still waiting for the impact of higher fertilizer, plastics, et cetera. So what she's saying there is this is just the beginning. This is just when you're considering, okay, gas prices and diesel prices have gone up. That's now being reflected in costs for food companies. And of course they're not going to just take that, they're going to pass it on to consumers. But what she's saying is that doesn't even deal with these longer term impacts like fertilizer. The higher price of fertilizer is something that farmers are shouldering right now during planting season. That is going to mean that down the road when those costs also get incorporated into food prices, prices are going to continue to go up. I don't feel that I even need to really explain this because we all basically lived through all of this through Covid. We saw the way that inflation built and built and built and that this was not something that just happens when you flip a switch. There are follow on effects that continue even after the worst parts of the crisis are finished that take a long time to work their way through the system. So what she's saying here is we are now just starting to really see the impacts and that this is just the beginning.

[Crystal Ball]

Yeah, I hate there was a lot of accusations of doomerism in the beginning, but it's because, and I think anybody who's been watching been watching the show for a long enough period. We all lived through Russia, Ukraine together. And just because things seem to be fine, they're really not. You know, the entire global economy completely shifted. The energy markets dramatically changed. The amount of LNG reliance on Qatar became dramatic. And then we've got into a war with Iran and now the Strait of Hormuz is closed. That's why we talk about, I mean everybody seems to believe, let's say with COVID 19 we had the lockdowns that came in March. When did we really start to feel the supply shock? July, maybe August. It took a while, right, because we had just in time delivery. So there was this decent amount of stuff that was on hand. And then with Closure and with this straight or with the shipping containers and all of those supply chain problems, we began to see shortages and problems in July and August. But the real time inflation hit when, when the things started to reopen, demand was high and the supply there was. It took I would say over a year, probably from the lockdown for everything to show up. But because we lived through all of that, plus Russia, Ukraine, we have now seen this story play out multiple times. Like you are not going to have things end overnight. However, there is a dramatic under appreciation. Gas is still $4 a gallon. Gas was 296 weeks ago. Diesel's like 5:20 something a gallon. Like am I taking crazy pills? Like when have we ever seen gas go by over a dollar in a single month and then stay there with no real end in sight? To the point where the President is bemoaning his energy secretary for saying maybe gas will have a three in front of it next year sometime from now. I mean again, just looking at the straight, I could be wrong. I'm not a total energy, I'm not an energy expert or analyst. I read some people who we trust a lot here on the show all have basically said if the strait remains closed for, for this X amount period of time, gas will hit $6 a gallon. Gas will hit $5 a gallon. That seems very likely absent some extreme intervention on behalf of the United States. I also just look to big corporations where this stuff, same thing. It's not gonna immediately affect your life but sometime in the future you're gonna be checking then the way that I went to McDonald's recently and paid 450 for the medium fry. You're gonna be like wait, what? Whenever you try to to check out. Let's go to the next one. Put this on the screen. The United Airlines CEO has now come out and say fares may need to rise by 20% to offset the fuel charge. Jet fuel costs quote signaling a significant test of consumer willingness to absorb higher fare as the industry grapples with volatile oil prices. This was on their earnings calls. He said United is aiming to recover the full increase in fuel costs as quickly as possible and expects to move toward a 100% passive. God, don't you love corporate speak? A 100% pass through as it targets double digit pre tax margins next year. What does that mean? So again corporate speak, yields need to increase by 15 to 20% whenever it comes to court. That means what? That means your ticket price is going

[Sagar Enjeti]

to go up by 1/5 every cost increase for them directly to you and potentially an increase above and beyond that. I mean, that's what we saw the last time. There's huge inflationary spikes. Is it corporations? Oh, I can get away with raising my prices even beyond the cost of the increase inputs. Of course I'm going to do that. And so that's why you have corporate profits as a share of the economy that continue to be at all time highs even as costs go up, because they've taken advantage of that dynamic. And of course they'll do the same thing again.

[Crystal Ball]

Totally. And yeah, let's just do like back of the napkin stuff. Most people take some small vacation in the summer statistically. And let's even put aside Europe. You're already upper middle class. If you can afford to do that. Let's just say here in the US you want to go to Disney. Oh, by the way, Disney prices are very high. But let's say you got to get to Disney. So let's say family of four, it was going to cost you $600 a person if you're flying from California, whatever, Midwest, $500, something like that. Now it's 750 per person. And you're like, oh, okay, well, that's a lot of money. Right. And so then you have the increased jet fuel cost. Oh, and then you need to do a rental car. Oh, well, the rental car cost has gone up too, because of gas and because of increased insurance. And then, oh, the Disney cost has also gone up because they have all this energy input and stuff that they have. I mean, this is craziness. And that's just vacation. That's the easiest thing.

[Sagar Enjeti]

And you're already been stretched at home because of increased gas prices and increased food prices. So things are tighter to begin with. Yeah, you're just going to say we can't do it this year. We'll go somewhere long. We'll drive to the lake here instead. Instead of.

[Crystal Ball]

Even when you do drive, it's going to cost more. All right, so then let's put the next one up here. Lufthansa. Lufthansa has now cut 20,000 flights to save fuel from the Iran war fallout. Quote, Global jet fuel prices have now jumped 70% since the start, pressuring airlines in Europe, the largest consumer of jet fuel now shipped through the Strait of Hormuz. Lufthansa says it will cut 20,000 flights over the next six months to save jet fuel as the pressure builds on the company to address surging prices. The airline said Tuesday it had already announced which flights it had trimmed through May. So this is just in the next month or two of the 20,000 that they're cutting. And overall that the cuts would save 40,000 metric tons of jet fuel through the end of October. So basically what that means is that they're going to have to cut any of the lesser demand routes. It's over. So, yeah, if you're flying to Smolensk or something, you better drive, I guess. And the head of the International Energy Agency had already said last week, Europe has exactly six weeks of jet fuel supplies left and they're already meeting on Tuesday to discuss the energy crisis. So likely, I mean, I could be wrong, I'm guessing. You know, just thinking about the intersection of business and government in Europe is it's almost certain that the German government was like, look, guys, this is all going to get cut. They're like, this is a national, national crisis. X amount of. You need to save 40,000 metric tons to give us some Runway. Any flight which is even remotely unprofitable, it's gotta go, like, immediately. And then all the fare prices, they have to go up. Another thing we really haven't grappled with is the Gulf. If hostilities resume, I mean, that is a massive amount of air traffic that can no longer move. Dubai was one of the busiest airports in the world. Like, millions of people flew through there. So that means almost every, especially here in America. A lot of the way that people were going to Asia. Asian destinations was via Doha, via Dubai and via Abu Dhabi. Now they would have to fly via Europe, which is already strained and has to cut flights. You could just see an escalation here where unless you gotta go for business purposes and, like, you really gotta go, you're just not gonna go, period.

[Sagar Enjeti]

Yeah, well. And here at home, the weakest players are already collapsing. We could put C4 up on the screen and it looks like our government is going to bail out Spirit Airlines by buying a stake in it. So this is the latest company that the Trump administration is considering taking a stake in. And so here the headline is, Trump administration nearing rescue deal for Spirit Airlines signaled this week the government could help the discount carrier which has struggled with surging jet fuel prices. Trump administration nearing a rescue deal. Struggling. They're struggling to survive during a run up in jet fuel prices. Now, they had some issues that predated this, but this is like the thing that is really pushing them over the edge. Under the agreement being discussed. Discussed, US Government would loan the embattled discount carrier as much as $500 million receiving and return warrants to take a Potential significant stake in Spirit. People familiar with the matter said the investment could help keep Spirit afloat as it seeks to emerge from its second recent bankruptcy filing. So now our government is basically creating distressed assets because of our insane policy and decision to get into this war and then buying up parts of those distressed assets. So congratulations, American people, you're about to be proud owner of a portion of Spirit Airline. Very possibly.

[Crystal Ball]

I don't hate it. Is that a bad thing to say? I like it.

[Sagar Enjeti]

Well, here's a. Here's the thing is Spirit is a very.

[Crystal Ball]

Look, I would. I hate Spirit, I hate flying. It. It still is a very important part of US air travel, which is the extreme budget airlines for the hyper infrequent traveler.

[Sagar Enjeti]

Yeah.

[Crystal Ball]

Who just needs to look.

[Sagar Enjeti]

I like the fly once a year of government owning key assets.

[Crystal Ball]

Yeah, me too.

[Sagar Enjeti]

I like the ceasing the means of the product of production. So if it's, you know, the Trump administration is going to pay the. I mean, the part of it that's preposterous, that's like preposterous and not good is the fact that it is the Trump administration policy itself that has in large part created these problems for Spirit Airlines. And obviously just another sign of like how dire things are for the airline industry in particular.

[Crystal Ball]

It's a little complicated. Basically what they say. Spirit Airlines would be on firmer financial footing had the Biden administration not blocked the airlines merger with JetBlue. Remember they were supposed to merge with JetBlue was blocked by antitrust because of worries about budget consolidation. Now that. Yeah, it really look like. Do I trust Trump and all these people to fix it? No, not really. But I don't think it's the worst thing in the world to keep a critical airline which it serves those budget customers.

[Sagar Enjeti]

And it's better than letting it go fares down.

[Crystal Ball]

Yeah.

[Sagar Enjeti]

I mean, what would be even better is to not have done the war.

[Crystal Ball]

Yeah, of course. Again, let's all be fair. Like they've been in chapter 11 for like, like years. Airlines itself, I don't even really know how they make money. Actually, I do. It's from credit cards. But in terms of actually flying, I've never. I still don't really.

[Sagar Enjeti]

Well, and not just from credit cards. It's from like financial speculation, like a lot larger. In particular, as much like, you know, financial entities like, you know, trading as they are hedge funds as they are actually airlines.

[Crystal Ball]

I remember reading once it was like half of the profits or something from American come from freaks like me who are always gaming Airlines miles from all the swipe fees from people who use their credit cards for frequent flyer mile like, like a significant portion of their profit only comes from credit card swipe fees. Which is kind of crazy.

[Sagar Enjeti]

Why they push it so hard.

[Crystal Ball]

That's why every time you're on a plane they're like, you get 25,000 more miles if you sign up right now. I always want to be like who's doing that? You're signing up for a credit card on an airplane. That's kind of crazy. No, maybe it's just me that's somebody's doing it. Yeah, it works.

[Sagar Enjeti]

Continuing. Let's go and put C6 up on the screen here. One more impact that we're facing now. Aluminum faces a black swan supply shock. According to this analysis, this is of course due to the war in Iran's triggered a supply shock that will lead to major shortages this year. The Middle east accounts apparently for about 7 million metric tons of annual aluminum smelting capacity. Roughly 9% of the estimated global supply this year. It's a key material for transport, construction and packaging industries. So you're talking aircraft actually is one of the things that needs aluminum, significant amounts of aluminum. You're talking about automobiles. US has some domestic capacity so we're probably somewhat sheltered from this particular impact. But obviously it's going to push up the prices and then that flows through to consumers in all sorts of ways. I think China is the biggest producer of aluminum, but the Middle Eastern region, again you learn new things in war about where things are made and what they go into and how critical they are to day to day life and how much people suffer when the flow of those goods stops.

[Crystal Ball]

Well, we will continue to track it. It's the worst energy crisis literally in modern history. And coupled with the strait of Hormuz news that we just went through, I don't see a way where we are not going to have rampant and persistent high supply supply inflation. Now as you said that in no way. And this is why when we look at stock markets, people are like how could this be possible? We live through 2021 and 2022. They make a shitload of money. Whenever people are have to pay more, it's everybody else that suffers. That's how you have the s and P500 up 60, 70% under Biden and people saying this is the worst economy that I've ever lived through. So do not look to the market to validate like your personal balance, if anything thing that's a direct reflection of why they're doing so well. So I think the companies will all be fine. I think the airlines will be fine. There are enough business travelers and other rich people who will pay top 10% of the United States, pays 50% of all consumer spending. They can actually, they can absorb all of this in their bottom line. It's everybody else that will suffer. So I don't think that many of this will show up in the market data or some sort of a crash. I just think it'll be like a continued long, slow grind for everybody's pocketbook, which is disastrous.

[Sagar Enjeti]

And remember, it's your point about the way that the impacts may not show up all at once. Basically because of the Ukraine, Russia, slash, Covid, inflation, Almost every incumbent party and president or leader, almost all of them got tossed out, like globally. I mean, it was this massive, massive reckoning politically. Political reckoning. Obviously. Obviously we experienced it here in the US with Biden and then Kamala Harris being rejected in favor of going back to Trump. But the outliers were places like Mexico where they stuck with the same party. That was very unusual. Almost everywhere else the incumbent party got tossed down if there were elections during that time period. So it just shows you how much turmoil can be caused by these changes in prices. So that's what we're looking at.

[Crystal Ball]

Of course, in housing. I mean, if you, you. Let's think about, you know, there are a lot of young guys who voted for Trump, right. I would say the economy is probably number one, number one in culture. Those are the two things, right? Where a lot of young dudes who voted for Trump. Well, let's say we're like 26. Well after Trump is gone, you're gonna be 30. It's actually like a different phase in life and you're still facing the same economic condition. That's gonna make people real angry. I think they should be angry. And that is something where, if you look at his approval rating, the main reason that let's even say economically, why did Trump get reelected? It's actually if you think from a normal voters perspective, well, gas was X price when he was president, inflation was low, Biden came in and it was high. That's all they really had to think about. So I vote for Trump and it goes back.

[Sagar Enjeti]

My life was easier during Trump won. Very logical than it was during Biden.

[Crystal Ball]

Right? Extremely logical actually in terms of a vote. Well now this time around, it's not going to be that way. So it makes a change election not only more likely, but it makes it so that the solution will be a lot more radical, I think.

[Sagar Enjeti]

Very possible.

[Crystal Ball]

There you go.

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