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The Moment Common Knowledge Changed | Last Call - With Andy Constan, Ben Hunt, Brent Kochuba and Eric Pachman
01:09:42
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Get in the game with the College Branded Venmo Debit Card. Wreck your team with every tap and earn up to 5% cash back with Venmo Stash, a new rewards program from Venmo. No monthly fee, no minimum balance, just school pride and spending power. Get in the game and sign up for the Venmo debit card@venmo.com collegecard the Venmo MasterCard is issued by the Bancorp Bank N.A. select schools available. Venmo Stash terms and exclusions apply at Venmo me stash terms max $100 cash back per month this episode is brought to you by Palmolive. Family time isn't just the big moments.
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And the new convenient pump makes cleaning even easier so you can spend less time tackling dishes and more time together. Shop now@palmolive.com we are excited to announce the launch of a new podcast, Last Call. While many market rap shows can repeat the same information, we wanted to try something different. We wanted to get away from what the market did in the past month and instead bring in some of our friends who offer truly unique perspectives and data. And we wanted to have some fun along the way. Our latest episode takes a look at the current Iran crisis and oil shock through three unique lenses. We talked to Andy Conston about the macro impact, Ben Hunt about the changing narrative, and Brent Kachuba about the flows behind the scenes. And we also get a very unique take on the employment data from Eric Pakman. You can subscribe to Last Call on all major podcast platforms using the links in this episode. Description thank you for listening. We hope you enjoy the new show.
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C
Three quarters of a percent of GDP is spending is being spent on extra payments for oil that really have to get paid because it's essentially a necessity. And so the real question is where does that come from?
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What this war has revealed, what the market is yelling out at us as the little girl is the missionary, is that oh my God, the straight of four moons means everything for the global economy.
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B
The reason I care about 100 in oil because I think if crude breaks 100 I think Vix goes to 50 and then I think the equity market probably has some very, very ugly days.
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E
You're watching Excess Returns, the channel that makes complex investing ideas simple enough to actually use where better questions lead to better decision divisions. This is Last Call. This is our monthly show where we talk about the stuff that actually mattered in the last month. Not the performance of stocks, bonds, commodities, all the other stuff. You can look that up yourselves on your cloudbot, reinvented terminal or whatever you
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kids are using these days.
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E
Well, what we're doing is we're tapping some of the smartest people from our network. We're pulling them back onto the show with us and getting just like what was the most important thing this month so they talk about it with us. Jack Forehand, how's it going?
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A
It's going good, Matt and I can't think of two better people to analyze the straight of Hormuz than you and me. Right.
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E
I mean, I've been googling this thing
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A
for at least a week. So I mean, I pretty much, I've got incredible knowledge now.
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E
I've got at least a week and a half of straight of Hormuz knowledge in my brain right now. So I feel qualified. But what's crazy is for all the market events, A, how quick all this stuff is going down and like B, for all this stuff is we're going to get into with these guests, like all, all the different layers of this onion, because I we're talking about the consumer, we're talking about commodity prices, we're talking about economic shocks, what it means in the US versus in the rest of the world, what it means for options and dealer flows. Like there are so many layers of this onion, nobody knows anything. So we're going to try to learn something, right?
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A
Yeah. And I can't think of three better people to talk this about. I mean, if you wanted to take this whole situation going on, the oil shock, the war in Iran, and you want to analyze, Mark, how it's impacting markets and you want to do it through a macro lens, a narrative lens, and then look at the flows behind the scenes. We've got brand new interviews with three people who are the exact people I'd want to talk to. We've got Andy Constant on the macro side. We've got Ben Hunt on narrative. We've got Brent Kachuba on the flows. So we just for this thing and then we've obviously got Eric Pakman with a really, really interesting thing at the end. So we've got a great collection of people, brand new interviews and lots of stuff to get through.
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E
Lots of stuff to get through. You want to tell us what Andy was talking about first? And let's let's dive right in.
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A
Yeah, let's dive right in. I mean, usually you and I do a little thing where we break everything down that. But I think given the quality of the guests this time, it probably wouldn't make sense because whatever we said would probably be quickly refuted by the people who actually know what's going on.
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E
Can't argue with that. What did. What did Andy talk about? You guys?
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A
Yeah, so, Andy, I want to talk to Andy about an oil shock in general, like, how it works. And then Andy has a really interesting chart in here. He's looking at the different scenarios that could play out. Because one of the things you have to be really careful about with a situation like this is anybody who's telling you this is the way it's going to play out, like, no matter how knowledgeable they are, I mean, think about what's. This is all being driven by one tweet at a time here. Like, nobody has any idea this is going to play out. So Andy did a really good job of looking at the different scenarios and looking at what might happen. So here's my interview with Andy. Andy, welcome to Last Call.
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C
Hey, how are you, Jack?
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A
I'm good. I'm really excited to have you on because like many investors, I'm trying to make sense of this whole Iran war and the oil spike and everything that's going on. And you always provide such a balanced take on this. So I want to start by talking about oil shocks in general, because I know you've studied a lot of them historically. Like, what should investors like me take from how to think about the impact of an oil shock?
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C
Well, I mean, oil goes up for lots of different reasons. It goes up for real demand, and that tends to be extremely inelastic. Like, demand doesn't really change very much over time, no matter what the price does. So what tends to happen is that oil price changes have a lot to do with marginal supply. And so when you have a price, when you have a supply shock like we're seeing today, oil prices rise rapidly, but demand doesn't typically get curtailed much because it's inelastic. And if you look over the 60 years since oil's been sort of volatile and subject to supply shocks, the only time you've even seen any sort of demand decline is in supply shocks that were 5x the sort of supply shock we're experiencing today, meaning prices went up 500%, not 30%. And that was in the 70s. And then you've had a couple of demand shocks. Well, we have the supply shock today and we had a supply shock a little bit in the Ukraine but you've had a couple of demand shocks that caused some consumption to fall and that was the GFC which honestly consumption, if you look at the chart with any sort of longer term perspective, consumption really didn't change. Only Covid really caused a real consumption drop off. And that was because we didn't need the energy, weren't driving our, we weren't driving and doing other things. So demand shocks are extremely unusual. Supply shocks are very episodic and we've had five, five or so of them. And so what typically happens is that consumption remains strong and that's pretty straightforward in terms of what has to happen if, if you're paying 35% more for oil which you know, we consume, I don't know, call it 300, 100 million per day globally and or just let's use the US 20 million per day in the US 77,07 billion barrels. You know the math, times 365, times 30 extra dollars per barrel. You get a number like three quarters of a percent of GDP is spending is being spent on extra payments for oil that really have to get paid because it's essentially a necessity. And so the real question is where does that come from? Where's that GDP come from? And it most likely comes from reduced consumption of other things. So that tends to be where the negative real growth impact of higher of supply shock driven oil price changes flows through in terms of a linkage. Now of course inflation itself is, and particularly the calculation of what inflation has been is dramatically impacted by an increase in oil. You know, roughly a 30% increase in oil with a 5% ish. And you know the numbers can be 2%, they could be 7%. What flows through to headline is going to be a fairly 1 ish percent increase in headline inflation. But that stops inflating when you have oil stop going up. And so that is by definition a transitory impact. But because of that, and I think more importantly, if you step back, we've had 60 months of above target inflation. So we were having an inflationary environment with $60 oil. And so it's very difficult for the central banks to offset the negative growth impact that I just mentioned while inflation was really not under control to begin with. And again these are backward looking prints, they're going to be high in the next year, but they are by definition transitory. Once the supply shock ceases, we get disinflation from oil prices, but they're just not gonna, they're just not gonna be able to. They're just not gonna be will as willing to ease. And if the thing escalates and we get significantly higher oil for much longer, not only are they gonna be unwilling to ease, but they're gonna really be unable to ease. And so that's sort of how I look through the supply shock. And the supply shock could end randomly or it could persist depending on how much productive capacity is destroyed. Those are sort of unknowns.
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A
I think the word transitory you use is one that's important to think about right now. And I want to put up this chart you had. You were nice enough to give us a chart from one of your premium products here@damspring.com and you're talking about different scenarios for the oil price. And you know, can you just talk through this and how you think through a scenario like this and how it might impact the price of oil and other things depending on the scenario we get.
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C
Yeah, and I just don't. I just want to start by saying I have no idea how it's going to go. You know, I mean, I don't know. The war could persist, the war could escalate and damage a lot of productive capacity and the war could end peacefully either in a sort of ceasefire, ongoing risk way or a resolution way. Now, I'm not a particular believer in the war ending in a resolution.
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A
So it seems like we had Bob Elliott on earlier this week and he was talking about this idea that I used the title nothing is priced in for my YouTube video because he had said something like that. It seems like is there, do you agree with that? I mean, is it not, not much of these scenarios like it seems like your $100 greater scenario is definitely not priced in and probably the $80 one's not either. Do you feel like the market hasn't really discounted much of this yet?
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C
Well, I think it's getting close to be honest. You know, I'm, I'm a, I, I try to be as neutral as possible. I'm not a doomer, I'm not a, you know, a super optimistic. I like to be long way more than I like to be short. But going into the war, the situation for growth and inflation was not great. There were a lot of positives for the last the six months ahead of the war. Expectation of Fed rate cuts, low energy prices, consumption that had been held up by dis saving and modest wage growth, but relatively full employment and supported by A stimulative OBBB which is providing consumption ability for the largest part of the economy, the consumer and high asset prices. And that had been held up by, but also by significant AI spend which had supported gdp. You know, that was, that kept asset prices elevated. I didn't think that was a particularly good thing to bet on going forward that we would continue to see that because the OBBB impact turns into a, not a fiscal cliff, but it certainly isn't expansionary anymore. You know, in a few months, by the way, also in before all this, the market was being supported by the Fed ending cut and beginning to buy T bills. The, the treasury was. Keeping tariffs reasonable. The only positives I see right now, I don't see OBBB turning into a big, you know, once again passing and being expansionary. I don't see the, the tariffs are likely to come down. That's probably a tailwind for growth. And Trump could say he's now at 10% tariffs. He promised to go to 15% before the war and never did. He could say, you know what, enough with the tariffs, we're going to end the tariffs and that's going to be expansionary. So there are levers for the Trump administration to offset some of the. But they're nothing like the sort of levers that had been in place up until the war. And so if we were to have $60 oil again, I think we go back to where we were, which is a market that depends entirely, which no longer has fiscal support, which no longer has central bank support and now is challenged with whether the AI investment will continue and be able to get financed in the market and the consumption, the savings to continue to support consumption. And I think that's a, it was a tough bet for me to make before the war. It's even tougher today because time has happened and the OBB impact is fading and turning into a headwind. So I don't love the upside at $60 oil, but we would see a pretty meaningful recovery if the tensions in the Middle east ended. So I guess my point is the upside for assets is okay, but oil, if it were to fall from 80 to 60, would make somebody 33% on a short. You can be short oil at 80 if you think, and I think that's a much better trade than being long assets. So I think that's the essence of the mispricing, that assets will rise less than oil will fall. Similarly, if oil, if we are in active war for a while, there's going to be significant hits to growth. There's going to be a much lower stock market. There's going to be 10 year yields that you know, may, may touch 5%. They're 4 and 34 4.35, 4.4. Now volatility risk will remain elevated and that's a, that's, that's kryptonite for assets and the central bank won't be able to do anything about it. So in that case, huh. Okay. So oil could go from 80 to 100. I think asset prices would well underperform, meaning fall more then oil rises. So once again not priced like the price of oil in December is too high to own assets. Similarly, if we just are here, I think the overall asset market is down year over year down from here if oil remains here. So I think if you look at oil relative to assets, oil says assets are going to perform much worse than assets say so to long answer short. Yeah, it's probably not priced in. Now at the same time I got to tell you, I'm a buyer of all assets. I just want to get a nice entry point. I have bids in for two year notes above 4%. I have bids in for stocks to go to, you know, to go to from, from a modest short to quite long below the market, but not far below the market. Like I wouldn't be selling here. I'd be looking to buy. And the same goes for long term bonds, the same goes for gold. I'm a buyer of everything. I just like to see a washout.
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A
Well, this has been great, Andy. Thank you so much for taking the time. We appreciate you coming back on Last call.
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C
Sure Jack.
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E
On the heels of that, we want to talk macro. We want to talk about narratives. We want to talk about the way policymakers are telling the story. We've got Ben Hunt, he explains in this clip this common knowledge moment that he thinks we're having right now. So Jack, we were with Ben after the Biden debate when he said the cat's out of the bag. Everybody knew there were issues with Biden in the presidential campaign. But once everybody knows that everybody else knows it changes the dynamic. Ben thinks the same thing just happened with Iran with the Strait of Hormuz. He talks us through what the implications are, why he thinks this is a common knowledge moment. And then even the paper portfolio that they, they use over on Perant Pro, he explains what some of those trades look like.
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A
And it's been, it's been really shocking how right Ben has been about a lot of this stuff. Like you know, I'm the tendency to be the optimist about everything all the time. And, like, so when. When Ben will say, like, this is the way this thing's going to play out, I'll be like, yeah, you know, that's probably not going to be that way. But, I mean, he's been spot on. I mean, not just about what, obviously that Biden common knowledge moment back when we were doing breaking news, but, like, about this whole thing. I mean, he saw a lot of how this was going to play out, like, before a lot of other people did.
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E
It's. It's interesting because he tends to see this stuff in advance. There's a real Cassandra thing going on with some of this. But then on top of it, to understand how he's watching it in real time, I think is. Is really, really useful. And whenever Ben comes out and says there's a common knowledge moment, that's where part of my brain starts firing, going like, oh, you've been paying attention to this, but now you really need to dig into what he's seeing. Ben, you've got a new note out for Epsilon Theory that's live on PanOptica.com, the new merge site. Congratulations. And I want to talk to you. I want to talk to you about this note and the portfolio changes I saw come through for the Persian Pro subscribers. So where do you want to start? This. This piece is wild.
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D
Well, so we've written a lot about what's known as the common knowledge game in the past. And I think the best way to describe what the common knowledge game is is. Is an example that we're all familiar with, which is the. The emperor who has no clothes, right? So we're all very familiar with that story. And there's a logic to how that story works, right? So the emperor is walking down the street naked as a jaybird, as we used to say down in Alabama. And because he's been bamboozled by his advisors and courtiers, right, that he's wearing this beautiful set of clothes that's just, you know, invisible. It's so fine. And so he's walking down, and
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what
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happens, of course, is that the townspeople, you know, the people there on the street watching him, they all have private knowledge that he's naked. They all see with their own eyes he's naked. But it waits. You know, where the story goes, of course, is that there's the young girl who yells, and this is important, she yells loud enough so that everybody hears her. He's got no clothes. So in game theory terms, we call the little girl A missionary. And what a missionary does is it transforms private knowledge or even public knowledge. We're all seeing the guy's naked. But it transforms it into something that we all know that we all know. That's what common knowledge is. It's not that we know something, it's that we all know that we all know. And that changes everything. So some examples I've given that in the past were with Weinstein, right? So, you know, everybody knew he was a serial rapist. I mean, everyone knew. They made jokes about it on. On what was the show, the 30 Rock. 30 Rock. The show, right. Who made jokes about it. But it wasn't common knowledge until a missionary, a famous person, a person who, when they speak, everybody hears it. In this case, it was Rose McGowan said, He's a rapist. And once she said something so loudly that everyone heard, everyone changes on a dime. They're all, oh, I'm shocked, shocked. And nothing changed. In reality, he was a rapist before, he was a rapist afterwards. People knew about it. But the world changes when everyone knows that everyone knows. Another great example, we wrote about Joe Biden's debate performance, right? So there were people talking about, oh, he's not all there mentally, and certainly the people around him knew about this. And like I say, kind of publicly, people would talk about it, but it wasn't until he's at a nationally televised debate performance when we could all see, and more importantly, we all knew that we all were watching. That's what changes things. It's an interesting twist. It's not what you know is what we all know that we all know. And it's driven by something that happens very publicly, so publicly that we all see that we all saw it. And that's what's happened with this Iran war. So I call it Trump's war in Iran Strait, because it's Trump's war. It's a war of choice. It's Iran Strait. It's the revelation what this, what this war has revealed, what the market is yelling out at us as the little girl, as the missionary, is that, oh, my God, the Strait of Four Moons means everything for the global economy. That if you're an oil importer, if you're Europe, if you're Japan, if you're any emerging market, you're screwed, right? If the Straits are shut down and this has been out there for a while, people always talk, oh, well, what happens if the Straits of Fort Moser shut down is a very important thing. But this is a common knowledge moment. We all know that we all know what happens when the Strait is shut down. And that changes everything. In particular, it means that now we all know that the world runs. The fulcrum point for the global economy is the supply of energy through the Persian Gulf period, full stop. And so it matters so much. It's always mattered, but now it's. The only thing that matters is whether you're an oil exporter or an oil importer. United States an exporter. Why is the dollar strong? Why is gold not working with this war? You would think gold would work here for all the right reasons. It doesn't work because that's not important right now. What's important right now is are you an oil exporter like the United States or an oil importer like most of the rest of the developed world? It just reveals what people knew privately. But now we all know that we all know and the world will never be the same once that happens. That's the impact of this Iran War.
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mejores, Caminos cafes, escondidos paradas estenicas, maneja mejor exploramas descarga tik toka aura. Comment on the common knowledge around it, the awareness now that this really is Iran Strait. There's this has far reaching implications that we're admitting Iran basically owns, operates, runs, dominates this space.
- [30:03]
D
Exactly right. So that's always been true privately, but now it's been revealed. And because it's been revealed, Iran can a use this to get the war to stop like they're doing to preserve their nuclear, you know, enriched uranium to keep their regime from being bombed out of existence. That's the card they play. And it's going to be incredibly difficult, I think impossible for any outside force to hold the Strait against the asymmetrical warfare, the cheap warfare of drones and the occasional missile shot down from the highlands. You know, they're just a few miles from the critical shipping paths, shipping lanes, so there's no way to dislodge them from this fact of geography that they control it all. That's possible now is to work out some modus vivendi, right. Some way of living with this where yeah, they're saying we want to charge ships for transit in the same way that Egypt charges ships for transit through the Suez Canal. I, you know, that's that, that's what's happening right now. I don't see how that stops. And so. But the broader point is that now it's just been revealed and we all know that, we all know that straight that Iran owns this and it protects them in a regime sense, but it also reveals the weakness of the entire world for an energy dependence that the rest of the world has. The United States doesn't. So why is the dollar working? Why is gold not working? This is it. And from a portfolio perspective for me it means you gotta own energy companies. I don't know what's going to happen with the commodity itself. I'm interested in owning the commodity itself, but the volatility that goes up or down. What I know works in this situation is to be long energy companies because that's what matters in the world today.
- [32:17]
E
So explain this. You have model portfolios or a model portfolio that you run. So as a Sunday mid month I see the email come through from you for the model portfolio update that's basically going big news weekend. Here are changes that we're making in this portfolio that we're tracking. Explain what those moves are. Explain what pushed you to the place that it pushed you to from into.
- [32:41]
D
Sure. So model portfolios are something we publish for our subscribers, for our professional service. So that's it. Some people run their. And then what you do with that is up to you. It's a long, short, go anywhere, do anything. We'll Express it in ETFs and single stocks, very plain vanilla stuff. And what we had there was a significant long position around de dollarization. So long positions in non US equities, Japan, Germany, China, stuff that's been working really well up until the invasion. Once the invasion happened and it came clear to me at least that the story has changed. The story has changed. The common knowledge of how the world works has changed. Sold all of our long exposure to the oil importers, Germany, Japan, China. And what we also put on was a new long position just in, just in the energy sector, just in the xle. That's it. Don't need to be too cute about this, but it's a recognition that when the world's common knowledge shifts, this is an investment theme that lasts for a long time, long time. So Getting out of being long ex us the oil importers and being starting a long position in just the energy companies again don't have to be cute about it. It's a big long term theme that reflects the way that the world's common knowledge changed with the invasion or the attacks on Iran.
- [34:35]
E
So if you haven't seen it yet at Epsilon Theory on Twitter epsilon theory online panoptica.com online connecting the supply chain to the kill chain, that's one piece. You've got more coming out on this topic very near future. Anywhere else you want to send people to buggy on the Internet and read this stuff.
- [34:55]
D
So I'm Epsilon Theory all over the place. That's the easiest place to find me. Our company name is Perseant so you can look there and our professional offering, it's pretty cool.
- [35:08]
E
Great. Ben Hunt, thanks for joining us.
- [35:10]
D
Thank you, Matt.
- [35:11]
A
So the third lens we're going to look at this through is flows and you know, Brent Kachuba, I love talking to Brent. I get to talk to Brent every month on the OPEX effect. But Brent sees what people are actually doing in terms of like what options or what options people are actually buying where they're putting their money, not just what they're saying. And there's a really interesting trade coming up. This JP Morgan collar, which he'll explain it but at the end of every month there's this JP Morgan collar trade and when we get near the prices of that trade, it can actually impact how the market acts. So here's my. We'll talk about that and a bunch of other stuff. So here's my interview with Brent. Brent, welcome to the last call.
- [35:43]
B
Thanks. I'm excited to be back. Surprised you asked me to come back. Thought you'd have a little too much Brent, but here we are.
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A
Yeah, well, I was. I always want to get your insights on what's going on behind the scenes. And as you know, I've become one of the world's leading experts in the street of Hormuz now. So you know, I want to take my, my macro knowledge of that area and translate it to what you're seeing in the, in the oil market behind the scenes with the flows. So we, we can bring these two expertises together.
- [36:04]
B
That's right. I'm still thinking about the str A so I clearly don't know what's going on.
- [36:12]
A
Yeah, well, I actually didn't even know I before this thing happened I was like I didn't know which countries bordered the Strait of Horboos. But I did look that up online. So now I've. Yeah, so now I think I'm qualified to write a book. So I've got chatgpt working on the book right now. It'll be out shortly with my analysis of how to handle the situation in the future of the straight of Hormuz. Yeah.
- [36:30]
B
You know, on this topic, it's actually an interesting one because I'm old enough to know. You know, they say, Jack, at some point you get old enough to know that nobody knows anything. And that's kind of where I've landed on. It's like there's a lot of experts out there who are very knowledgeable and smart people, but nobody could possibly have any idea what is going to happen, you know, in a day, much less, you know, two months from now. It's. It's so impossible to parse through here.
- [36:54]
A
So it's funny.
- [36:55]
B
So we're gonna forecast stock prices today?
- [36:57]
A
Yeah, yeah, exactly. It's funny. Andy constant talks about this idea that like he wants to follow people who have domains, specific knowledge and low confidence.
- [37:04]
C
Yeah.
- [37:04]
A
And like those people are basically don't exist anymore.
- [37:07]
D
Yeah.
- [37:07]
A
Like even, even the people that are, well, you know, know everything about the street of Four movies. Like they're. They're telling you all these different things, like they know what's gonna happen and nobody really knows what's gonna happen. But what I'm excited to talk about is, you know, what you do see is what's happening behind the scenes with oil. And I think you had some interesting stuff you were seeing that you want to talk about.
- [37:22]
B
Yeah. And I don't strictly cover the oil market is usually something that I don't pay any attention to. And I don't have any hot macro takes for everybody here, but I do have levels. And the levels are interesting because they tie directly into the equity space. And the way they do that obviously is because as everybody now talks about. We talked about this on the OPEX effect and I think it was an interesting topic of conversation. And now it seems like common knowledge. But obviously higher oil means higher rates, which basically just destroys the. The stock market. Right. Because of inflation and credit problems and everything else. We also had a nice conspiracy corner Jack about this in the 2008 comparison. So go check that out.
- [38:01]
A
But anyway, last effect, we had a really good one. I made a nice cover for you too, if you remember. I did some. I did some good work with Chat GPT there.
- [38:08]
B
That's right. You can make my face look even dumber than it does now, so I'm appreciative of that. But on your screen here is oil and you can see here's the march, excuse me, the Iran situation happened and the level that we're watching here is a hundred. And the reason I watch a hundred is obviously the crude oil has rejected and I'm just looking at CL here a couple times from that level and you know, roughly speaking, what I believe is over 100 is the sign that you know, we are all in a lot of trouble here in terms of asset prices. Basically what's happening is as oil goes up, all other assets go down. And the other thing that is really catching my here is the link to volume. So in the magic of presentation I just added on here the VIX and what you see here is that normally these two are not very correlated, right? VIX trades as it does, oil does its own thing, the two aren't linked. And then you have these conflicts or these situations like we have today where they're really very closely correlated. And so as you can see here, the VIX which is currently at 28, it really started to wake up today. And my founders note this morning was all about the weird move in Vol. Relative to how much oil is mo is moving. Oil is up today and the two again are highly correlated. But Vol. VIX suddenly seems to be really at the ready which is interesting. And the reason I care about 100 in oil because I think if crude breaks 100 I think Vix goes to 50 and then I think the equity market probably has some very, very ugly days. And in this respect we've not really had a bad day in S and P. Right? We've had down days and a string of them, but we've not had that like 3%, you know, just makes Wikipedia kind of move, right? And I think if oil breaks a hundred we're going to see that. And that's one of the things that I'm that I'm really quite worried about and it's why I'm watching $100 oil so closely here to the other side. If we get under 90 in crude then I think that's a sign that people believe that there's an end to this conflict and then volume gets smashed and that makes equities rally, you know, somewhere in the order of 2 or 3% within a day.
- [40:14]
A
Yeah, it's interesting when you see like a crisis, how VIX becomes correlated with the driver of the crisis. Like I would bet like long term the correlation between VIX and oil is not that Much. But like, because oil is driving this crisis, like Vixen oil become very much tied together.
- [40:27]
E
Yeah.
- [40:27]
B
And we actually posted a chart like this this morning in Twitter. And so you can go and see this if you want. But what I did was I just showed the change in USO because it was kind of the most liquid thing I had related to oil. So a rough proxy of oil and then versus the VIX and one day changes. So you could see that scatter plot here. And you know, the smart guys on Twitter of course will put on it too that there's not really much of a correlation here. It's just a blob. And that makes sense why? Because on, on a normal day no one's talking about oil. Right. No one in the equity market cares about oil at all. The oil traders have their own thing going on, the equity traders have their thing going on and they don't really like overlap. Now we're, we're obviously brothers in arms here and you can see over the last five days which are the black dots. Oil up, volume up. Right. That's how this is working. Equity volume up. And today, this morning pre market, you saw this red dot which was the excess move in VIX relative to crude. The reason this matters to me is because if anything, the equity volatility market's kind of been a little sleepy or a little sluggish and you're kind of going, hey, like shouldn't there be more concern here? And other people are saying, well there's a pretty big premium in let's say the VIX relative to how much the market's actually been moving. And we've talked about this a lot over the last couple of discussions we had. So the weird thing that I flagged and I wrote a lot about this was equity volume is moving a lot all of a sudden. And what is going on with that? Right. I honestly don't exactly know. The first thing you'd point to is oil. And oil is up, but it's not up as much relative to the volume. And so something is shaken here and it's a little bit nerve wracking, especially when you see, okay now today the S and p is down 1.5%, which is a bigger move than we've had. You know, is something really brewing here that some smarter people have figured out?
- [42:09]
A
Yeah, it's this idea of investors have this idea that like it's going to always come back down because that's kind of like the type of market we've been in. Like whatever it is if the market goes down, it's going to come back up. If oil goes up, it's going to come back down. Maybe the part of this is tied to the idea that if it doesn't come back down, you know, you start to see a little more worry reflected in the vix. But I also have no idea what I'm talking about. So that's just.
- [42:29]
B
We've been taught since the great financial crisis to buy the dip and buy every dip and it always mean reverts. And so, you know, we're three, three weeks into this situation and you know, let's hope that this is an ultimate buy the dip because I don't want the world to end this way for sure. But something is, something's baking. Now this is, this is a challenging period for me to sort of watch the navigation, right. My headline here is if oil goes over 100, I think Vix is going to 50. Everything I say after this doesn't matter if oil goes over 100, right? Oil goes under 90, then I think Vol gets smashed and, and we, and we really ramp. If you're going to say, Brent, what scenario to bet on? I think that oil probably stays in this 90 to 100 range roughly and we stay weak in the equity market. But what I'm want to point attention to is the J.P. morgan College that expires on 331 because most people probably don't know this position exists. Now when you go to look at our system here, we call this trace. And the reason I bring this up is because we have this thing called NET OI and NETOI tracks buy side options positions in real time. And there's two big bars in here, Jack. As you can see, there is one here at 6500 and there's another one here at 6475. Now that net put position there is 24,000 contracts roughly. And then you can see just above it there's about 45,000 puts at 6,500. So this zone, 6,500 to 6,475 is a big one. And the reason we're watching that is because on 331 this big fund called the JP Morgan Hedged Equity Fund has a put position that is expiring and that position itself is about 35,000 contracts. There's some offsetting positions. Why it's, why it's a little bit less showing in that screen. But we know these positions expire on 331, which is Tuesday, right? The market tends to respond. And if we're near that strike, call it within half a percent to a percent into early next week. That strike is really going to dominate the equity flows. And that is true unless oil goes over a hundred.
- [44:31]
E
Right?
- [44:31]
B
If oil goes over 100, forget everything I'm saying here. But if it stays under there, watch for the market to pin or really use that level, 6,500 to 6,475, as a major area of support into that date because of this big position. Now if we look at this in gamma terms, which I know is another step in complication, I just want to show you this. Right now, the gamut at that strike is about $20 million. As you can see, Jack, it could get as big as a couple hundred million dollars if we're near 64.75 as we get closer to that. So what does that mean? That means there's a couple hundred million dollars constantly hedging just to that strike into 331, which is likely enough to keep the equity market pinned or contained in that level. Again, assuming oil in the Iran situation doesn't get materially worse.
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yeah, so the idea is we're, we're likely to pin in that area unless, unless something wild happens on one side or the other with oil. Between now and then we're likely to pin and then after that, that Won't matter anymore and we'll move on to whatever the next tweet is.
- [46:47]
B
That's right, barring a, barring oil over 100 which would come with whatever escalations come or a deep. We actually have a legitimate deal and everyone agrees. I guess it's a tri party thing now we have to have Israel, US and Iran agree to a deal then we know it's a deal right then, then obviously we could have a very, very very violent bounce, 3% in a day kind of thing. But if you're barring that, watch that strike. Now some of you may be saying hey Brent, this doesn't make any sense. That one strike could hold the market up in this type of environment. And we talked about this in the OPEX effect. If you remember last year Jack, we were having a pretty tough market in, in March into April, right, because of the tariff situation. I paused in the tariff situation because that was another one that some seemed somewhat self inflicted and I guess that's what this feels like in some ways too. But at any rate the black line is the JP Morgan collar position for put position for March 31st that was at 55.65. And what do you see here Jack? We see after February S P sold off hit that level into March opex we got a little bit of a bounce off of that strike. We rallied and then lo and behold we come back, we test that strike on 331 expiration again. Right. Which is when the position expires. Now once the position goes away there's no reason to think that the market's going to use that as support anymore, right? So the rhetoric around tariffs etc got much worse into April and then we absolutely plunged, right. And we were looking into the abyss of the end of the financial system I suppose in mid April. So that was quite ugly. But you can see hey, it kind of looks like that strike served as market support. And there's a lot of reasons or a lot of times we see the market pin to or hold to either the call side of this JP Morgan position or the put side. There's both on every quarter and this is a position that systematically rolls every quarter like clockwork and has been doing it that way for years. So it's very easy to track this position. But it's evidence that the market is supported by that strike. Now again on 331 that strike is going to go away. So does volatility then wake up distinct possibility and something to think about as we move towards the middle to late Part of next week. But for now into Tuesday, this is the level that we're watching.
- [49:00]
A
Yeah. And this is why I always like talking about this option stuff, because these levels, you know, I would have no way, no way of knowing this. And you see the market respond to certain levels and it's good to just understand whether you're doing anything with it or not. It's good to understand behind the scenes like what's going on when that type of thing happens.
- [49:15]
B
Yeah. And if you just think about it, you know, the dealers have about 30,000 short puts on related to this position. They're incentivized, you know, and with millions and sometimes billions worth of dollars to get the market to close above that JP Morgan strike, to get it to be worthless at expiration. Right. So from a kind of a maximum pain perspective, it makes sense. And you know, there's a lot of offsetting positions and things like that around the strike. So there's just a lot of traffic in that zone, which makes it this sort of support region. Now if you want to look quickly at the history, this is not a beautiful spreadsheet, but what I highlighted here is this is the history of the positions twice. In the last, in 2022, we tested this strike, the downside strike, and that's what you could see here. So the put, in this case, the long put position for the fund, 4510, we closed at 4530 on the day of expiration. 2022 is a pretty nasty market. Same thing in September of 2022. The strike was at 3580. We closed at 3585. So you know, non random seeming that we seem to close at those levels. As far as last year, 331, the put was at 55 65, market closed at 65 11. But as we saw on that chart, you know, we were really in a very wild time right on that strike. So other than Covid 2020, March of 2020, you know, we really blew through that strike in a major way. You can make an argument that was a pretty exceptional period. Right. And that position may have been smaller. I don't have the data on that. But the point is, is that the put side has not been tested that much throughout these last five years. But when it has, it has held the market up. So again, as long as oil stays under 100, I think 6475 will be the floor for the next couple of days. And then the other critical thing is after 331, I'm looking for volatility to really start to increase and swing a little bit more. I would argue that we haven't been moving all that much on an intraday basis, and that could change mid to late next week.
- [51:09]
D
Yeah.
- [51:10]
A
And we're probably in for some more excitement here between now and the next time I talk to you. I'm sure we're gonna have all kinds of events and tweets and all kinds of stuff going on, so.
- [51:17]
B
That's right. You know, they say, may you live in interesting times. And Jack, quite frankly, I don't know that I want to live in these interesting times anymore.
- [51:22]
A
No, I don't either, but. But we will keep talking about it, though.
- [51:26]
B
That'll be nice.
- [51:27]
A
Thank you, Brent. I appreciate you doing this.
- [51:28]
E
So Andy Conston walked us through the oil shock. Ben walked us through the narrative situation as it stands with straight of Hormuz, this common knowledge moment. And then Brent gave us some insight in what's about to happen as we go into the end of the month here on these. On these option flows. This whole tail is wagging the dog. Dog is wagging the tail. It does. It feels confusing to you as it feels to me in the sense of just like how, how much uncertainty is actually baked into this market.
- [51:57]
A
Yeah, yeah, no, definitely. You know, one of the things that it was interesting about a lot of the different guests we talked to here is this idea that. And it's starting to reflect it now. But we had this situation where we had like, this negative news that wasn't necessarily reflecting in the market. And it's interesting to hear about that. Like, as we've talked to all these guys, like, Brent will talk about it from the perspective of, well, there was an OPEX that just needed to clear and, you know, then maybe some of this negative stuff will be reflected. You know, other people are saying, well, we've been buying the dip for the last however many years and it works every single time. So that creates like a dynamic in the market. So I have no idea where the market's going to go. But that was just an interesting thing for me to think about. Like, we're not seeing the negative news reflected in the market. And there's probably a lot of dynamics across the different people we talked to that are. That are maybe the reason that's happening.
- [52:36]
E
What do you think about. Because this evolves, right? It evolves until all the negative news eventually gets priced in. And I'm not saying at all that we're necessarily there yet and hence why we're talking to smart people to try to understand this stuff in advance. But what's interesting is like, how much of this stuff is already in the market and trying to get a sense for this.
- [52:56]
A
Any.
- [52:57]
E
Anybody you're listening to or watching on that front?
- [53:00]
A
No. You know, I mean, I did call our, our episode with Bob Elliott this week. Nothing is priced in because he said that in the, he said that in the episode. So it's hard to tell. I mean, and again, I don't know, like, I think Andy was a little more conservative in terms of maybe some more stuff is priced in than Bob thought. But that's the problem is no one knows what's priced in. It's impossible to know that. And it makes it very challenging, like to, to navigate these markets when you have, when you have no idea. But it also, and this, this is something we talked about with Bob Elliott this week is like, you have to have some humility because of that. Like, if, if you're the person that's saying, oh, I know for sure this isn't priced in, or I know for sure this is exactly what is priced in, that's a bad place to be in because you're probably way, way overconfident. And, you know, one of the things I was remembering, someone pointed out to me the other day is like, after the tariff situation, we had a, we had like a 9 plus percent update on the S&P 500 in a day, I believe, which is insane. So it's just to think about like all this negative, negative, negative, but on the other side of this thing, and this is going to be a much harder thing to Taco, I think, than the other stuff was to Taco. But if there is some way that they find a path to that, like you could get ripped, you know, if you're negative on this, you could have a ripping rally that could come off the backside of this. So that's why it's so hard to figure it out.
- [54:04]
E
Yeah, All I can, all I keep thinking of and keep feeling fortunate about is this is why you have a diversified portfolio. Like, this is where. And I keep going back in my mind to the Vitaly interview that we did where Vitaly was like, the more my uncertainty, like, goes up or the less confidence I have in things in the portfolio, the more things I hold. And he's mostly talking about stocks and those allocations here. But it's like, I feel that on a portfolio construction level, you have to spread those things out because you have to now bake in your ability. Well, you should have already. But if you're not, you should be thinking through how you're going to be able to press rebalance through this thing for the assets that you've saved. Like, you need flexibility here to handle this stuff. And that means you need a bunch of hopefully at least somewhat uncorrelated assets.
- [54:54]
A
And I know this is why you and I are both four quadrant type guys in terms of the different economic outcomes that could happen is like, who knows what's going to happen? But like, I'm a big believer, you know, stocks and bonds were exposed to certain, you know, quadrants where they didn't do well. So it's, it's just a matter of like trying to find things that have positive returns over time and then trying to protect yourself across all that. And that doesn't mean you're not going to go down during a certain situation like this, but it at least means you're not going to be as, as concerned about it. You're going to know you have something that probably will do okay, you know, in all these different situations. And I think to me that's the best way to handle something like this, rather than trying to predict it.
- [55:23]
E
That's why you stockpile Beanie Babies, right?
- [55:25]
A
You can imagine the Beanie Babies are everywhere, Matt. When, when that day comes or those things go up, it's more like these neatos and like the stuff the kids are buying these days. Like my kids are buying all this stuff. I just hope someday Jelly Cats, like the most expensive stuffed animals of all time. Like, I'm hoping someday like all that stuff is going to be like some sort of collector's item that I'm going to profit from. But probably not.
- [55:46]
E
If the base rates are right, surely it's.
- [55:49]
A
I'm in huge trouble, basically. I think the base rates are against me on this one. I would say.
- [55:54]
E
All right, I want to take us to Eric Pakman. He's our last stop. Eric Packman, A data for the people he did some amazing work. We've had him on the show multiple times when he was with Ban Creek Advisors talking about inflation and the unemployment data. He's put up some new stuff. It's been on PanOptica 2 and really looking at the trend in both how we think about the unemployment rate versus the labor force, how the same numbers can tell wildly different stories. And he's created this interactive tool to basically show over the last 10, 20 years we've seen a shift inside of the U.S. this helps explain the K shaped economy. This helps explain a lot of both the lived experience of us in the United States right now, but also the health of the economy going forward. Have you gotten a chance to play around with that with Eric's tool yet?
- [56:43]
A
I haven't yet, but I know you're, you're have rave reviews for it, so I do need to do it.
- [56:47]
E
I'm telling you. You want to go to Data for the People. Look at the labor force tool and look up the place either where you live or where you from or you're from. Look at it over a period of time and see if it matches the way you think about that area. It's eye opening. I want you to hear Eric and how he explains this and compares these two counties to each other. I think this is just, this is profoundly insightful to where we are right now in the US Economy. Eric Pakman is with us next. He writes for Data for the People. That's his site. Make sure you put the number for for in that name. So, Eric, you wrote this piece. We shared it. It was on Panoptica and on your site. It was basically the systemic hemorrhage. You've been obsessed with the employment numbers and all this stuff. First off, why are you obsessed with this? Where does this come from? Why should we care?
- [57:39]
F
Well, I'm gonna have to rewind back about like two years. And I started looking at both inflation and jobs data. And I was like, so I'm a data analyst, data visualizer, narrative storyteller. And so I was like, you know, these two numbers, or really three numbers, right? Inflation, cpi, pce, non farm payrolls, and then also the unemployment rate, they move billions, if not trillions of dollars in market, market cap when they come out. And so when you actually look at the data sets, there are very granular data sets where you can drill all the way down on the inflation side to the item level, so eggs or whatever, and then on the job side all the way down to what's called the NAICS hierarchy, so North American industry classification system. And so I was like, well, where are the free interactive data visualizations so I can see what happened? Like, I mean, I don't really necessarily care if the job number is 130,000, if it like say all came from health care. I wanted to know. And by the way, health care and education are like grouped together. So it's like, why would anyone have done that? And so I put together, I took the Bureau of Labor Statistics data and I put together these data visualizations and I just was dumbfounded staring at them. And I wrote about them month after month after month because we were seeing like basically a jobs recession forming in the middle of 2024 outside of health care. And then we're just waiting for that health care shoe to drop, which it finally did last month.
- [59:07]
E
So this is part of why we wanted you on this recap because suddenly people are aware of, oh no, look like jobs have been lost. You've been saying, no, we've been losing jobs everywhere but healthcare up to this point. And you've also been pointing at what a larger structural issue that is. So maybe break down the number, break down nfp, break down, break down the space a little bit more. And why right now is just indicative of a bigger problem.
- [59:32]
F
Yeah, so with non farm payroll, first, you know it, you have numbers that, you know, we're coming in in the, you know, I don't know, anywhere from 50,000 to 150,000. But if you look directly at our free tool, which is on my prior employer, bancreek.com, you can go back and look and see how many healthcare and social assistance jobs comprised that. And all the way up till the end of last year, if you looked at the total number of payrolls added versus the healthcare jobs, it was like over 100% of all the jobs added were in healthcare. I think it was like 150%. I mean, you can go pull the number yourself. But so, so we were seeing that we were losing jobs everywhere else. There was, you know, there were dynamics within like management services, like where we had never seen in the history of the data, a decline in professional management services. So this is where all like you lawyers and accountants and all of them live. And we have been seeing, seeing a decline in that since like before I even started. So like since the middle of 2024, that's been in decline. It's the first time out of recession that, that, that, that has happened. So we were flagging all of these kind of really interesting things and then also talking about how health care, like, look, it can't go up, you know, 80,000 jobs every single month, but yet it did. I mean, it was wild how like, you know, we were looking at it going all the way back and we're like, okay, one of these months has to take a breather. But it just kept coming after month and making the high level aggregated number look artificially kind of great or okay, like the economy was still adding jobs, whereas like, you know, at some point in time we knew that was just going to kind of back off and Then not, not to mention, like when we wrote about this at the end of last year, there's Medicaid regulation that's coming right now where the Medicaid programs, the funding is going to be cut by 10%, which is really going to be taking an ax to health care jobs. And I think that's going to kind of cascade through the whole system. What we really wrote about was like, look, these can keep going up and up and up, but when you get to 2027 and this regulation kicks in, I mean, you're gonna have elderly daycare centers, home healthcare aides, like all of these things, millions of jobs, taking care of our seniors, they won't be funded anymore. And so it was just a matter of time. It just happened that, you know, for a prognosticator like me, Christmas came early last month and healthcare just declined. So I don't know if that's the start of a trend, but I do know that I'm very concerned. In 2027, Zootopia 2 has come home to Disney Plus.
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What I do think is start of a really interesting trend because you can map it back to the roots is in this piece. So let's just talk for a minute about, because we know what the headline stories are, we know what the national stories are. You looked at Clark counties, plural. Talk to me about what was going on in those two places. Sort of summarize what you found. Yeah, the same numbers can tell such different stories when you get into the details.
- [63:50]
F
Yeah. So this is where it gets into how. And by the way, the first one was Perry County, Alabama and the second one is Clark County, Nevada. So this gets into, you know, we talked about non farm payroll and why that can be misleading especially when you're looking at high level numbers. The unemployment rate. Unemployment rate may have been a good indicator, but I think we vastly overweight it as far as how much we pay attention to it because it doesn't include in the denominator, it doesn't include people that are not actively looking for work for the last four weeks. So those people are just dropped out altogether. We have a baby boomer retirement kind of thing going on right now, you know. And so, and you can see this in the piece, like the, the 65 plus demographic is just booming. And so you have communities where 65 plus, like they only have an 18% labor force, labor participation rate. And so they're not working very much at all. And so when you get this, this wave of retirement, you're just going to have less workers available to work and you're not going to see that in the unemployment rate. And so what I did at the start of this is I just kind of put like, you know, it has to pass the sniff test at the end of the day. Right. Like we have to be able to put a story to this. And so I'm like, let me find two places that have pretty much the exact unemployment rate. Perry County, Alabama, which if you actually go on Google Maps or Google Earth or whatever, I mean it's, it's a crumbling town, you know, for lack of a better word. Like if I live in Ohio and I drive all over rural Ohio and like the downtowns are boarded up and everything, I've been, you know, in and out of many of these towns before, so I know what they're like, that's 5% unemployment in that town. It's not 10, it's not 20 people. There's so little work there that people have just stopped looking for jobs altogether. So it's 5%, which we're like, that looks good, or at least not that bad. Las Vegas, Nevada, Clark County, Nevada, that is also 5%. And so that number, especially when you get down to a granular level, a county level, which is where I think we need to go to be able to understand each other's different experiences of this country, not an aggregate number, unemployment rate just doesn't help at all. So I was like, well, what does help? And that's where I came across the labor force. And that's what this entire piece is about. It's about taking a number that's very tangible, the labor force. And I put multiple kind of, you know, esteemed white papers in here to basically say, like lots of economists who know what they're talking about, unlike me, you know, they are telling us that, like, look, and this makes sense, like if the labor force is growing, there will be more tax revenue in the city, they'll have more money for services. They'll have. And you can basically attract more people. Employers like it, especially manufacturing plants. They really like it. When you have a growing labor force, more supply, lower rates, like, it just makes sense based on just kind of Econ 101. Right now, if you have a labor force going in the opposite direction, you can start what is what I call the cycle of structural decline. And what I found is that if we looked at this, the data through the end of 2010, I defined structural decline as a county that lost 10% or more of its labor force over a 20 year period. There were only, I think it was 8% of counties that fell in that bucket. And it was like isolated areas, the black belt. There were parts of like, you know, northern North Dakota and stuff, but it was very sparse. As far as looking at like this very large 10% of decline in labor force. Fast forward to 2025, the end of 2025. And if you look at the prior 20 year period, so 2005 to 2025, 32% of all counties are in structural decline right now. And when you look at rural America, so the smaller the county is, the more likely that they're in structural decline. And so this is just basically a way to visualize and understand what has happened to America. People have left rural towns, manufacturing is leaving rural towns, the working population, or what's called the prime age. Workers are thereby fleeing, going to the cities, trying to find jobs there, trying to find gig economy jobs, whatever it may be. And then all of a sudden you end up with like Nashville and Austin where there's such a boom that the wastewater treatment can't keep up with it and they're worried about crap being in their water. Like, I was just there and heard about this story. So like it's, it's crazy. It's like, you know, you either have towns that are dying or towns that are booming so much that they, they can't even, they don't even have the infrastructure to, to support it. So it's, it's this wild dynamic that I hope I really brought to life with this visualization.
- [68:37]
E
I want to emphasize again, this isn't to make a specific like macro caller forecast and what happens in the next six months, but say again one more stat because I just want to go out on this, that difference again between the 2010, 20 year look back in the 2025, 20 year look back in those structural decline stats. Repeat it one more time.
- [68:56]
F
Yeah, 8%. There are only 8% of all counties in structural decline in 2010 and now there's 32% of all counties in structural decline as of the end of 2025. And it's, you can see it right on the map. The visualization makes it really easy for you to only look at, you know, only the rural counties and so on, so forth. So if you want to look just at metro like the largest metropolitan areas with more than one people, they actually don't look that different as far as their growth. They've had like a nice upward trajectory. The rural is a completely different story.
- [69:30]
E
If you want to see the tool, check it out on dataforthepeople.com Eric where else should people find you, bug you on the Internet if they want to stay on top of the story?
- [69:38]
F
Yeah. Email me ericataforthepeople.com, number four again. You can get me on Twitter just Eric Pakman, LinkedIn. Eric Pakman, my personal blog, Reclaiming Soulfulness. If you want to learn a lot more about me, maybe more than you want. And I think that covers it.
- [69:57]
E
Eric, thanks for joining us.
- [69:59]
D
Thank you.
- [70:01]
A
So, Matt, I can't, I can't think it'd be any harder probably to do a looking forward segment right now because we're probably, by the time this comes out, there's probably going to be eight tweets that are going to change what the looking forward is. But I Mean, I guess the word's uncertainty, right? As I think, as I move forward,
- [70:15]
E
eight tweets and apparently politicians and administrative people explain things with like Lego videos. Like AI Lego videos.
- [70:22]
A
I didn't even see that.
- [70:22]
B
What was that?
- [70:24]
E
There's a new one from like the Iranian government explaining like, it's, it's terrifying. It's like the worst.
- [70:29]
A
They broke out the Legos.
- [70:31]
E
They're breaking out the Legos. I don't even know. Maybe it's not them. I could be reporting fake news right now on this thing. I just know I'm seeing it everywhere. It's got like 2 million views. I click on it. I'm like, well, this is terrifying. We're trolling each other with memes at the highest level right now. I, I'm with you. I don't think anybody knows what's going to happen next. It certainly feels bleak. We know from experience the bleaker things feel, the more that presumption gets baked into market prices. I'm scared, per the Bob Elliott interview that's going up that not enough of that's priced in yet. But I'm intrigued by when I listen to Andy talk about the different scenarios when I talk about Ben. And I know, like with Ben's work, the pre and post common knowledge moments, it's like that's actually the thing that's the catalyst to the new understanding. Until you cross that moment, there is an experience where like that is just embedded and unpriceable. Once you cross that moment now actual change starts to happen. I think the question here is like, how fast is this, like get worse or ease off? Because if it gets worse, a couple of things like what print highlighted or some settling into the K shaped economy and the way that Eric paints out what like the situation is in 30, whatever percent of the counties across America like this, I don't feel good about a lot of these outcomes on the table right now. I don't like that feeling.
- [71:47]
A
Yeah. But you know, one of the things that I always go back to with Andy Constant is, and he didn't say it in this interview, but he said in our previous one is he always likes to talk to people who have a high level of knowledge and a low level of confidence, like during a time like this, like, because anything other than that, even if you have a high level of knowledge, like how are you possibly predicting what's going to happen right now? Like there's, there's a way. It's, it's the, the decisions of individual people. There's all Kinds of moving parts. Like, nobody has any idea. So I think that's probably the biggest takeaway is let's think about, like. And again, people like you and me don't do anything with our portfolios anyway. We try to learn from this and we try to, you know, gain experience from it, but we're not actually making any changes. But I think if you are listening to anybody in a situation like this, like, that's probably like, high level, high level of knowledge, low level of competence, or the second group, Andy said, is people who are just really, really smart at analyzing anything. And they may not have a high level of knowledge of this, but they're really, really good at analyzing anything. And I think if you think about those two things, I mean, how much of Twitter would we throw out? Probably like 95% of Twitter would get tossed down the garbage, Right?
- [72:41]
B
Maybe.
- [72:42]
A
Maybe that's too low.
- [72:43]
E
That is where I saw the Lego video.
- [72:45]
A
Yeah. Which may or may not be a
- [72:47]
E
real video, which may or may not even be real. But that's part of the problem. Like, I'm watching this going like, there's a 98% chance that this is, like, nothing. And, you know, some kid made it in his basement in Boise. But this, like, this, this is why we have these guests on. This is why we collect these really smart people. That's why we check in with them in environments like this. And that's why we want to share it with all of you at home. Do you have any other brilliant insights you want to stack on top of this one?
- [73:15]
A
No.
- [73:15]
B
I will just say, to add on
- [73:16]
A
to that, though, I do like the. At Grok is this true thing on Twitter now? And I'm like, seeing people do that, and I love that because, like, all these ridiculous takes come up and then like, Croc will be like, that is completely wrong on every level. So I do like that. I do like the, like, the real time fact check. It's kind of fun.
- [73:31]
E
I'm waiting. Somebody else was doing, like, I was like, at Grok with the fact check. And then like, at Grok do something completely stupid. And it was in the same thread next to each other. I was just like, this is. This is it. This is the de evolution. It's just if I sell it all and just go go into a quiet room and listen to Devo for the next, like, two weeks or something, that'll
- [73:52]
A
be why I don't know who I'll do clip shows with. Matt.
- [73:54]
E
Well, another one in the bag. This is our market rap show. We hope you learned something from Andy, Ben, Brent and Eric. Check out their stuff. You want to look below in the comments. We'll have some details. We'll have the clips. We just want this to help you. And now you're thinking through the situation and thinking forward into the month ahead. We're going to be back in a month with another round of this show. You're watching Excess Returns. That's Jack Forehand. Oh, check out our Excess Return substack too. We're summarizing and putting a bunch of this stuff there. Really cool, really useful. If you're an allocator or an investor of any, any type, you can learn something here. We're putting the best lessons in writing. Train your A by AI bots to come crawl it all that good stuff.
- [74:35]
A
I'll take the views ever and get them Matt, you know bots, whatever. Bring it all.
- [74:39]
E
Bring them all. Bring all your bot friends to this party. This is a good time right here. So thanks for watching. This is Excess Returns. Like subscribe, comment, all the things below and we are out.
- [74:48]
A
Thank you for tuning in to this episode. If you found this discussion interesting and valuable, please subscribe on your favorite audio platform or on YouTube. You can also follow all the podcasts in the Excess returns network@excessreturnspod.com if you have any feedback or questions, you can contact us@excessreturnspodmail.com no information on this podcast should be construed as investment advice. Securities discussed in the podcast may be
- [75:13]
E
holdings of the firms of the hosts or their clients.