Chris Whalen: The Markets Know There's A Problem, Trump Admin Doesn't, Rationing Ahead
Summary
AI Momentum: The conversation highlights AI as the primary market driver, with investors chasing returns in AI-exposed names and a momentum-driven, bubble-like backdrop.
Semiconductors & Data Centers: Multiple chip names were cited alongside a massive AI infrastructure buildout, but growing local opposition to data centers poses a material headwind.
Energy Shock: Damage to Persian Gulf refining capacity and rationing of refined products and high-end lubricants could trigger shortages, higher diesel prices, and a drag on global GDP.
Refined Products & Chemicals: Synthetic lubricant shortages and export pullbacks (e.g., from Korea) may force rationing, with knock-on effects for automakers, manufacturers, and supply chains.
Precious Metals: Gold’s pullback is linked to higher rates and crypto weakness; the guest remains constructive on gold and even more on silver due to compelling supply-demand dynamics.
Crypto Weakness: Bitcoin’s slump, reported institutional selling, and questions around corporate exposure (e.g., crypto-heavy strategies) suggest waning enthusiasm versus AI trades.
Macro & Rates: Higher yields, tight credit spreads, and inflation risks (3%+ concerns) frame a market driven by scarcity of quality assets and limited Fed policy efficacy.
Positioning: The guest took profits in AI winners and re-established exposure to energy majors, seeing markets already pricing in geopolitical energy risks.
Transcript
The world is changing and I think that in order for us to move through this period and help Americans, help consumers manage their way through this, we're going to have to organize ourselves and we're going to have to communicate in a way that this administration is incapable of doing. Hey everyone, welcome back to this week's episode of The Rap with Chris Whan where we break down what's happening on Wall Street, Washington DC, and everywhere in between. Chris, great to see you. >> Hello, Julia. >> Chris, there's a lot to get into today. The latest edition of the rap entitled Bessant Kicks ass, Bitcoin collapses, AI soarses or not? I think we need to start with the markets this week because wow um I feel like I've been out of pocket and then I just looked at today um especially after the jobs report and gosh we had the yields higher, treasury yields higher um sparking a pretty sharp selloff. We had tech get hit hard. I saw gold erase its gains for 2026. Bitcoin's just been getting crushed. So maybe let's just start with your overall reaction to this market reaction. I know you and I have talked about this kind of uh manic market that we've been in, but what are you seeing in all of this? What do you make of it? >> What's interesting is that if you look at the AI sector, they are really the only sector that's been up, but there are a lot of stocks that were identified with AI that have been trading lower. So it kind of it depends which ones you look at. The the flavor of the week is Google because they are reckoned to be one of the winners in all of this and somehow they're going to you know get a bigger slice of the pie than some of the others. You have Micron Technology which has gone just crazy 10x uh and you have other stocks as well that have traded off. So it it really depends where the crowd is headed as we said in the comment this week. Uh I think there's a momentum quality to what's going on here that you cannot mistake. Uh financials have also been doing okay. Nothing like the AI stocks, but they're the only other sector that's been up. We wrote about this earlier when we put out our quarterly for the banking industry. So you know it's it's a strange market, Julia, because interest rates are up. The housing market is clearly slowing this quarter. uh we're talking about 6 and 12 6 and 3/4% 30-year fixed rate mortgages which is not making anybody happy. Uh and the rest of the market is kind of all over the place. I think there is a growing awareness that there are problems for the economy coming from the uh Iran war. I just did an interview, by the way, with John Daisar, which we're going to run next week, which I think is frankly explosive, uh, when he talks about some of the things that are happening right now, but that nobody's talking about. So, I think everybody is looking at headlines, they're reacting to short-term factors, uh, what they hear in the news, that sort of thing, but there's very little thoughtful analysis about where we're headed, I guess, is the way I would put it. That's that's how I see these markets right now. >> Chris, I think that's why like so many folks tune in to listen to you every week because you're right. There there is a lot of noise out there. Um, >> it's all noise. No signal. >> Well, okay. They say they get signal listening to you, which I absolutely love. All right. You just said you talked to John Daizard. I know you've had a number of conversations with him, >> especially with what's happening in the Middle East. And you just said it was explosive interview. I know you're going to publish it next week, but give us a taste of like what are what did you guys talk about that was, you know, making you say that >> rationing of uh key high-end lubricants, especially synthetic lubricants that you need for more complex engines, turbines, things like that. Hybrid cars all need very, very high-end lubricants. Um, he sees rationing as a fact way before the midterm elections. And of course the Trump administration doesn't want to talk about this. They have a kind of a simplistic view of the world which is striking. Uh and I think uh you know what we talked about is a mobilization and an organization orchestrated by the US government that is akin to what we saw in World War II. uh we're talking about antirust waiverss so that companies can talk to one another and start to to work together to to manage supply when there is not enough. Uh so it's a very serious uh outlook I think that John brings to the table and he's he's so well uh informed on these matters and he's a very careful analyst as well. So I I always love talking to him. You know, I've known John for 20 years and he's he's one of my dearest friends. So, I think we're going to have fun with this one. Yeeha. Right. >> Yeeha. Cuz do do you think they're having this conversation even privately and just not maybe it's not palatable to discuss publicly because it's a midterm year. >> Uh no, I don't. Um you know, the secretary of energy is a very smart man. He should be leading the parade here. Uh but you know, the Trump people don't want bad news. Uh they particularly don't want to have to go on national television uh and have the president inform Americans that the fact that three of the most important uh factories, plants to produce high-end lubricants and other key uh byproducts from petroleum uh were destroyed in the Persian Gulf. As a result, the world is changing. And I think that in order for us to move through this period and help Americans, help consumers manage their way through this, we're going to have to organize ourselves, and we're going to have to communicate in a way that this administration is incapable of doing. You know, the biggest problem with Trump is that nobody knows what the man is going to say or do from one moment to the next. So, they can't staff him. They can't write copy. they can't work with the media to get the message out in an effective way because nobody knows what's happening and and the fact that you know obviously we don't have peace in the Middle East shot that in the head earlier this week uh there really is no incentive for either the Iranians or the other players in the Middle East to come to the table because they know that the clock is in their favor. They know that the major industrial nations around the world cannot operate without certain chemicals and certain byproducts that come from the petroleum sector. So, you know, I think the Iranians are very astute. I think they knew exactly what they were doing when they went after these plants in the Persian Gulf, Julia. And, you know, I think they're better prepared, frankly, than their American counterparts. >> You had another piece in the institutional risk analysts this week. Um, so not not referring to the rap which also publishes in the institutional risk analyst, but in this piece the AI debt and death of fear piece, you wrote that if Washington was populated by serious people, the federal government would already be making making plans for rationing key refined products. So, with nobody in the administration willing to discuss this privately or publicly, I guess how bad do you think an energy shock would have to be before they'd be forced to act? >> Well, it's happening now. You're you're already seeing suppliers of some of these key components uh rationing de facto. They're telling uh customers that they can't deliver supply. So what's happening is that industry and the private sector they're going into a kind of rationing allocation mode today and what John told me is that by let's figure July August time frame the shortages are going to be so pronounced that the automakers in the US other manufacturers who need these products in order to make the them go and also by the way diesel fuel Uh, one of John's predictions that we're going to publish next week is that diesel fuel prices are going to continue to rise. And you're already seeing prices in the grocery store. You know, I I do our grocery shopping, Julie. I'm sure you you see it as well. Prices are going up because the costs of transportation, the cost of manufacturer is going up. And one of the other interesting things that I spoke to John about was that a lot of nations have had to make a choice. Do you make lubricants or do you make diesel fuel? So, the Koreans, for example, have cut back on their production of high-end synthetic lubricants because they got to make sure that they have diesel fuel for their economy. They're not exporting anymore. So, a lot of nations are going to stop exporting these products and that's going to also hurt the economy. I I think it's interesting. You know, the economist had a piece talking about the impact of the war and how much it's going to impact GDP, but I don't think that these analyses, Julia, are at all complete. And I think it, you know, 3 or 4 months from now, people are going to be talking about the impact of the war in much more serious and much more, I think, uh, alarming terms because they are going to have a real impact. And that's something we don't hear about from our leaders right now. >> And diesel, gosh, that really does run pretty much the global economy. >> Yeah. >> And I see it cuz I told everybody I drive a diesel engine. So I'm definitely seeing that. >> You do? >> All right. Yes, I do. All right. The rap. In the rap, you also pointed out that even if peace happened tomorrow, the damage to the Persian Gulf refining will take years fix and it could already shave off I think the estimate was like 3/10en of a percent of global GDP um once those industrial shortages hit. So I guess does this also lock in as you and I have discussed your doubledigit inflation call like for certain categories for certain categories are we just locked in? You think >> I I think we are and the folks on the Federal Reserve Board, I think, are going to have to have a very serious conversation about what they can do and what they can't do. In other words, do I throttle the economy hoping to make prices fall? Do I put us into a recession in order to make demand for certain products go down so that prices fall? Even though I can't impact the market for petrochemicals and oil and gasoline and diesel, you know, the Fed is very limited in what they can do and interest rate policy tends to work best in an economy that is not being attacked and disrupted by a lot of externalities that you know as I say central bankers are powerless to deal with this. So I, you know, my hope is that people are going to realize that we have an inflationary wave that's going to run through the economy. And I think that's part of the the reason that the financial markets are in such a a bit of a muddle right now. There's very little direction other than this AI trade, which I think is almost done. I've been selling my tech stocks, by the way. I've been taking the cash up. >> Yeah. I got out of >> You had some real winners in the AI trade. >> Yeah. AMD, ARM. Yeah. And I I just took the money off the table because when you're staring at 150 or 200% gains in less than a year, I think you take it, Julia. >> Yeah. Acorn. I got back into Chevron. I had taken my position out uh before we bought our new house. And I got right back in because it's one of the best managed oil companies in the world. Um, but you know, I I I I think that the the markets are already processing what we're talking about here. They already know that there's a problem. People are, you know, we're not the only people sitting here talking about the fact that the damage done to the Persian Gulf is going to ripple through the global economy. There are a lot of people who understand that. And I think that we need to get our government organized and get them engaged in communicating with the American people because otherwise Americans are going to figure this out for themselves and uh Donald Trump and the Republicans are going to get annihilated in November. >> So you think the markets are already sniffing this out then? >> Oh yeah, definitely. Definitely. >> Do you think do you think the Fed does the Fed follow the financial markets? Because sometimes some folks will come on here and say that's kind of like a shadow mandate for them, a fed for the Fed. >> But whether they understand the financial markets is another matter. They put out a paper uh today on my favorite topic, mortgage servicing rights, which indicates to me that they clearly don't understand that. Um you know, the academic economists who populate the Fed are in another world, Julia. They like to model things versus GDP and they do all of these estimates, but they're detached from the real world. That's the biggest problem I see. And I I think Kevin Wars is going to change that, by the way. >> For the better, though, I take it. >> Oh, yeah. Yeah, very much. He's a man who likes to look at markets. He's uh someone who likes to look at the actual economy and talk to people who participate in it. He's not a model builder. So, you know, I think you'll see a lot of changes. Uh but it will take time. You you don't do rapid fire changes at the Fed. You've got to move deliberately and very carefully. >> Um I want to get your thoughts on what we've seen in the bond market, especially like the the tenure. It's been stuck around four or five. Uh I think you and I had talked about like gosh, we're glad we got our mortgages when we did. Um >> yeah, we were fortunate. We really were. >> Yeah. What do you make of what's happening in the bond market? What do you think that is signaling? >> Well, as as we've written, I I think that spreads uh you know, the difference between corporate bond prices and yields and government bonds is so tight. Uh what it tells me is that there's just an enormous scarcity of quality assets out there. um you have all sorts of large institutional investors roaming around uh looking at asset classes that they normally never would have looked at. And what it tells me is that the beast is hungry. And it tells me that inflation is really driving these markets more than anything else. You know, I I I can't get in the names, but uh I work with some uh players who are very involved in residential mortgages and a variety of different strategies around that. We see large institutional players that have never looked at this sector before showing up wanting to get involved. And I think I I just I I couldn't believe it. Uh I really it just it amazed me that they would take the time and the resources to look at an asset class like that. Gold has been one of the few standout assets of the last few years, reaching new record highs as investors respond to rising fiscal deficits, geopolitical uncertainties, and growing demand from central banks worldwide. But here's something most people still overlook. Price appreciation isn't the only way to benefit from owning gold. What if your gold didn't just sit in a vault, but actually generated a return? With monetary metals, you can earn a yield on gold paid in gold. without having to sell. Instead of earning in dollars that can be eroded by inflation or policy changes, you can earn more ounces of gold. That means your gold holdings are growing in real terms, not just nominal ones. Earning gold offers a fundamentally different approach. You're not just preserving wealth, you're increasing your exposure to a hard asset over time. So, you're earning additional ounces of gold while still benefiting from any potential price appreciation. It's a way to make gold a productive asset, not just a defensive one. As more investors turn to gold for wealth preservation and portfolio diversification, a natural question follows. If you're going to own gold, why not earn gold while you own it? Thousands of investors are already earning a yield in physical gold and silver through monetary medals. You can learn more at monetary-medals.com/julia. Now, back to the rest of the episode. All right, Chris, another topic I want to ask you about, Bill PTE as the acting director of national intelligence. Um, while he keeps his FHFA position, what did you make of that one? >> It was a a surprising and astonishing development. I think the real reason that he put PY into that position is that President Trump is still doing payback for January 6. He's still focused on attacking his enemies and particularly uh Democrats who, let's be fair, roasted the Republicans over a slow fire as a result of the January 6th protests on Capitol Hill. So, it's just tit fortat politics. Uh Bill Py is seen as a a loyal uh member of the Trump inner circle. As you know, he was very involved in attacking uh Powell, but there's absolutely no chance that he's going to be uh you know, nominated or confirmed for that position. You know, he's got 270ome days he can occupy that spot and then he's going to have to step down. Mhm. I thought the um in in the rap you mentioned the the Treasury Secretary Scott Besson's comments um before the Senate. >> Yeah, that was precious. >> Tom Tillis. >> What was it? It wasn't he wasn't going to punch him in the face. He was >> No. Senator Tillis said, "Did you say you were going to punch Boly in the face?" And Bessid smiled and said, "No, I said I was going to kick his ass." And then Senator Tillis, you know, agreed with him. So, >> it was very funny. But, you know, it just indicates Trump has alienated so many members of the Republicans uh both in the House and the Senate that it it's almost impossible for him to get anything done. He's indicated he's going to nominate his personal lawyer as attorney general. Uh I don't think that nomination is going to go anywhere. I I doubt there they could even get the votes to report it out of committee, much less vote on it on the floor of the Senate. So, you know, Trump has dug a lot of holes in Washington. This is typical. He he he's replaying his first term. If you go back and look at the timeline from Trump one, they were not particularly wellprepared. Not nearly as well prepared as this time around. But what we've seen is that he alienates people and he I think needlessly uh has just thrown a lot of uh you know sand in the gears in terms of policy in terms of getting legislation passed through the House and Senate and this is pissing people off because they got to go out and run for reelection. Uh and it's not helpful. So, you know, I think President Trump, despite his moments of brilliance, uh, is his own worst enemy is what it comes down to. >> Yeah. You mentioned like, yeah, that comparison to the first term, but also at the same time like the lack of fear and attention to the financial markets that might actually be more troubling. >> Oh, it is. Um, I mean, I'm sure Scott Besson is aware of some of these things, but it's uh it's just a part and parcel of an administration which is governed by the president who shoots from the hip. He doesn't plan anything. He just says and does whatever he wants and his uh his cabinet members of his regime have to follow him because if they disagree with him, they're going to get fired. So, that's the way it is. You know, Trump behaves as president the way he's behaved in business. If you followed his career over the last few decades, it's pretty much typical. Uh, and it's not I don't think it's particularly effective either. >> Okay, let me ask this because I actually almost missed this while reading this week's rap. At the very top of it, you quote Kevin Worsh from 2024 and the quote is central bankers around the world seem more comfortable with inflation closer to 3% than I wish there than I wish were the case. That is that's very dangerous stuff. We can have an economic boom in that scenario, but there'll be a high price to pay. Why did Why did you choose that to open the rap for this week? >> Uh great quote. Um, actually Kevin Hartnett at Merrill had that in his uh note this week and I think it's absolutely right. 3% inflation uh will destroy consumers and destroy economies if you compound it over a period of years. It's pretty high. 2% inflation will take half your value away in 20 years. So imagine >> That's right. I learned that infl inflated. You you did that math. Yeah. >> That's right. So 3% is a disaster. And I think Kevin Worsh understands that. The problem, of course, is that he doesn't have the tools to really uh attack inflation the way I'm sure he would like to. >> What happened with gold? Like why why did we see gold erase its gains for the year today? Like what what's that about? >> Well, two things. Higher interest rates, number one. Gold uh old metals always have to compete with the yield on fiat. Uh the collapse of Bitcoin is also I think causing people to run to safety. So stocks, treasury bonds, that sort of thing are a liquid haven for investors. You don't want to be in something that's illquid right now. And you know the other point is that you know metals had had a big run. Uh we've talked about that quite a bit and now it's it's come off a bit simply because the markets don't know what to do. you know, gold is competing with AI. Why wouldn't you jump into Micron Technologies and ride that one up? Uh, instead of sitting with gold earning a, you know, 10 15% a year, right? Uh, last year, year before, gold did very well. But stocks are providing an alternative to metals, a short-term alternative. And I think a lot of investors are willing to uh to move into that asset class. Mhm. But do you still you still like gold? I take it though as >> I I've been buying more as the price comes off. You know, I have a very disciplined approach. I like to, you know, keep a certain percentage of my portfolio in in gold. I've been more tending to get into silver because I think the the the supply demand dynamics in silver are even more compelling. >> Bitcoin, do you think Bitcoin's toast? I I think it's lost a lot of followers. You know, Black Rockck was selling their Bitcoin today. Uh I think most institutional investors, most public companies that have had a focus on crypto assets are going to really have to ask themselves some very hard questions. Why are we here? How does this add value? You know, Micro Strategy, Mike Sailor's company is clearly insolvent. uh and you know he was really the primary buyer of Bitcoin for much of this year. Uh so I I think that you know it's a speculative phenomenon that has kind of run its course. Most of the people I really know who were involved in crypto over the last few years have gotten out because they have more interesting things to trade like AI. You know, AI stocks have been going up so much, Julia. It's almost impossible to compete with them. >> I don't care what asset class you're talking about. >> Yeah, it's uh Yeah. Um man, I looked at my crypto before I got on here. It's not pretty. Um maybe I should have sold that for the down payment. Chris, um you and I have talked about this manic mood in the market. That's your description. You described it as a manic mood of the market. We're having like blockbuster IPOs come out like what are the signs that you're seeing that it's or maybe just can you describe why you call it a manic market or manic mood? >> Well, because it's not driven by value. What you have are people who are chasing uh relatively short-term gains in stock uh particularly the tech stocks that have been identified as benefiting from AI. But are we buying them because of earnings? Are we buying them because of any kind of fundamental factors? You know, Nvidia for example, if you look at that trade, if you look at the degree to which they've been financing uh some of their larger customers, is that really an attractive company? I would say no. But the amount of uh cash that's being thrown at the buildout of AI, I'm not talking about AI as a revenue generating technology, but simply building data centers is is mind-boggling. And what's interesting is that the politics of AI is getting worse and worse every day. You know, to in order to build the infrastructure you need to pursue AI, it's almost impossible now in the United States. one community after another is legislatively blocking these projects and saying, "Nope, not in our backyard." And that fact, I think, is going to be a very uh significant negative factor for AI as we get into the fall because where are you going to build these these facilities? Where are you going to put these data centers? Most communities in the United States don't want them. So, I I think that's really, you know, the politics of this are important as well. All right, let's take a viewer question. Um, this one comes from Ken. If we are really in a bubble, how does this one compare or contrast with the one at the turn of the century, Web 1.0? >> Well, we've had bubbles in this economy going back for decades, and you know, it's part and parcel of being in an inflated economy where inflation is assumed to be part of the mix. This bubble, particularly with AI, I think was driven fundamentally by what the Fed did during COVID. There's just so much cash looking for a home right now that it's bled into the markets in a really profound way. But, you know, more than that, it's just part and parcel, I think, of a a marketplace where value has been really diminished as a a criteria for investing and people are just chasing price. They're chasing the shiny object. I'm getting ready to go fishing next week, so shiny objects are first, you know, top of my mind right now as I start thinking about smallmouth bass. But that's really what's happening here. We see big institutional investors going from one stock to another, ramping these stocks up to the sky, and then they go chase something else. Uh there are an awful lot of stocks right now that aren't moving at all. >> Yeah. And um a lot of that money as you put it is going toward the AI trade right now. >> Oh yeah. >> Um yeah, but you rode that one. You took your acorns out. Yeeha. >> I like to take my acorns when it gets to be a certain percentage of my portfolio. >> Hey, 150%. Let's go. >> Let's go. Take it. >> Yeah, exactly. Chris, um before I let you go, parting thoughts to the audience. Fishing trip next week. That sounds awesome. >> Yeah, the fishing trip is something I've been look forward looking forward to. Uh we are going to publish our interview with John Daard next week and of course we will be doing an edition of the rap from Grand Lake Maine. Going to be sitting in in the dining room of Lean's Lodge. So you're going to get a a chance to have a look at that and by then I will have sorted out this camera. >> Love it. Um, well, Chris Whan, chairman of Whan Global Advisors, author of the institutional risk analyst blog, co-host of the rap. Really appreciate you and thank you so much. Have a wonderful weekend. Have a wonderful time fishing up in Maine. And everyone, uh, we will see you next week. And that's a
Chris Whalen: The Markets Know There's A Problem, Trump Admin Doesn't, Rationing Ahead
Summary
Transcript
The world is changing and I think that in order for us to move through this period and help Americans, help consumers manage their way through this, we're going to have to organize ourselves and we're going to have to communicate in a way that this administration is incapable of doing. Hey everyone, welcome back to this week's episode of The Rap with Chris Whan where we break down what's happening on Wall Street, Washington DC, and everywhere in between. Chris, great to see you. >> Hello, Julia. >> Chris, there's a lot to get into today. The latest edition of the rap entitled Bessant Kicks ass, Bitcoin collapses, AI soarses or not? I think we need to start with the markets this week because wow um I feel like I've been out of pocket and then I just looked at today um especially after the jobs report and gosh we had the yields higher, treasury yields higher um sparking a pretty sharp selloff. We had tech get hit hard. I saw gold erase its gains for 2026. Bitcoin's just been getting crushed. So maybe let's just start with your overall reaction to this market reaction. I know you and I have talked about this kind of uh manic market that we've been in, but what are you seeing in all of this? What do you make of it? >> What's interesting is that if you look at the AI sector, they are really the only sector that's been up, but there are a lot of stocks that were identified with AI that have been trading lower. So it kind of it depends which ones you look at. The the flavor of the week is Google because they are reckoned to be one of the winners in all of this and somehow they're going to you know get a bigger slice of the pie than some of the others. You have Micron Technology which has gone just crazy 10x uh and you have other stocks as well that have traded off. So it it really depends where the crowd is headed as we said in the comment this week. Uh I think there's a momentum quality to what's going on here that you cannot mistake. Uh financials have also been doing okay. Nothing like the AI stocks, but they're the only other sector that's been up. We wrote about this earlier when we put out our quarterly for the banking industry. So you know it's it's a strange market, Julia, because interest rates are up. The housing market is clearly slowing this quarter. uh we're talking about 6 and 12 6 and 3/4% 30-year fixed rate mortgages which is not making anybody happy. Uh and the rest of the market is kind of all over the place. I think there is a growing awareness that there are problems for the economy coming from the uh Iran war. I just did an interview, by the way, with John Daisar, which we're going to run next week, which I think is frankly explosive, uh, when he talks about some of the things that are happening right now, but that nobody's talking about. So, I think everybody is looking at headlines, they're reacting to short-term factors, uh, what they hear in the news, that sort of thing, but there's very little thoughtful analysis about where we're headed, I guess, is the way I would put it. That's that's how I see these markets right now. >> Chris, I think that's why like so many folks tune in to listen to you every week because you're right. There there is a lot of noise out there. Um, >> it's all noise. No signal. >> Well, okay. They say they get signal listening to you, which I absolutely love. All right. You just said you talked to John Daizard. I know you've had a number of conversations with him, >> especially with what's happening in the Middle East. And you just said it was explosive interview. I know you're going to publish it next week, but give us a taste of like what are what did you guys talk about that was, you know, making you say that >> rationing of uh key high-end lubricants, especially synthetic lubricants that you need for more complex engines, turbines, things like that. Hybrid cars all need very, very high-end lubricants. Um, he sees rationing as a fact way before the midterm elections. And of course the Trump administration doesn't want to talk about this. They have a kind of a simplistic view of the world which is striking. Uh and I think uh you know what we talked about is a mobilization and an organization orchestrated by the US government that is akin to what we saw in World War II. uh we're talking about antirust waiverss so that companies can talk to one another and start to to work together to to manage supply when there is not enough. Uh so it's a very serious uh outlook I think that John brings to the table and he's he's so well uh informed on these matters and he's a very careful analyst as well. So I I always love talking to him. You know, I've known John for 20 years and he's he's one of my dearest friends. So, I think we're going to have fun with this one. Yeeha. Right. >> Yeeha. Cuz do do you think they're having this conversation even privately and just not maybe it's not palatable to discuss publicly because it's a midterm year. >> Uh no, I don't. Um you know, the secretary of energy is a very smart man. He should be leading the parade here. Uh but you know, the Trump people don't want bad news. Uh they particularly don't want to have to go on national television uh and have the president inform Americans that the fact that three of the most important uh factories, plants to produce high-end lubricants and other key uh byproducts from petroleum uh were destroyed in the Persian Gulf. As a result, the world is changing. And I think that in order for us to move through this period and help Americans, help consumers manage their way through this, we're going to have to organize ourselves, and we're going to have to communicate in a way that this administration is incapable of doing. You know, the biggest problem with Trump is that nobody knows what the man is going to say or do from one moment to the next. So, they can't staff him. They can't write copy. they can't work with the media to get the message out in an effective way because nobody knows what's happening and and the fact that you know obviously we don't have peace in the Middle East shot that in the head earlier this week uh there really is no incentive for either the Iranians or the other players in the Middle East to come to the table because they know that the clock is in their favor. They know that the major industrial nations around the world cannot operate without certain chemicals and certain byproducts that come from the petroleum sector. So, you know, I think the Iranians are very astute. I think they knew exactly what they were doing when they went after these plants in the Persian Gulf, Julia. And, you know, I think they're better prepared, frankly, than their American counterparts. >> You had another piece in the institutional risk analysts this week. Um, so not not referring to the rap which also publishes in the institutional risk analyst, but in this piece the AI debt and death of fear piece, you wrote that if Washington was populated by serious people, the federal government would already be making making plans for rationing key refined products. So, with nobody in the administration willing to discuss this privately or publicly, I guess how bad do you think an energy shock would have to be before they'd be forced to act? >> Well, it's happening now. You're you're already seeing suppliers of some of these key components uh rationing de facto. They're telling uh customers that they can't deliver supply. So what's happening is that industry and the private sector they're going into a kind of rationing allocation mode today and what John told me is that by let's figure July August time frame the shortages are going to be so pronounced that the automakers in the US other manufacturers who need these products in order to make the them go and also by the way diesel fuel Uh, one of John's predictions that we're going to publish next week is that diesel fuel prices are going to continue to rise. And you're already seeing prices in the grocery store. You know, I I do our grocery shopping, Julie. I'm sure you you see it as well. Prices are going up because the costs of transportation, the cost of manufacturer is going up. And one of the other interesting things that I spoke to John about was that a lot of nations have had to make a choice. Do you make lubricants or do you make diesel fuel? So, the Koreans, for example, have cut back on their production of high-end synthetic lubricants because they got to make sure that they have diesel fuel for their economy. They're not exporting anymore. So, a lot of nations are going to stop exporting these products and that's going to also hurt the economy. I I think it's interesting. You know, the economist had a piece talking about the impact of the war and how much it's going to impact GDP, but I don't think that these analyses, Julia, are at all complete. And I think it, you know, 3 or 4 months from now, people are going to be talking about the impact of the war in much more serious and much more, I think, uh, alarming terms because they are going to have a real impact. And that's something we don't hear about from our leaders right now. >> And diesel, gosh, that really does run pretty much the global economy. >> Yeah. >> And I see it cuz I told everybody I drive a diesel engine. So I'm definitely seeing that. >> You do? >> All right. Yes, I do. All right. The rap. In the rap, you also pointed out that even if peace happened tomorrow, the damage to the Persian Gulf refining will take years fix and it could already shave off I think the estimate was like 3/10en of a percent of global GDP um once those industrial shortages hit. So I guess does this also lock in as you and I have discussed your doubledigit inflation call like for certain categories for certain categories are we just locked in? You think >> I I think we are and the folks on the Federal Reserve Board, I think, are going to have to have a very serious conversation about what they can do and what they can't do. In other words, do I throttle the economy hoping to make prices fall? Do I put us into a recession in order to make demand for certain products go down so that prices fall? Even though I can't impact the market for petrochemicals and oil and gasoline and diesel, you know, the Fed is very limited in what they can do and interest rate policy tends to work best in an economy that is not being attacked and disrupted by a lot of externalities that you know as I say central bankers are powerless to deal with this. So I, you know, my hope is that people are going to realize that we have an inflationary wave that's going to run through the economy. And I think that's part of the the reason that the financial markets are in such a a bit of a muddle right now. There's very little direction other than this AI trade, which I think is almost done. I've been selling my tech stocks, by the way. I've been taking the cash up. >> Yeah. I got out of >> You had some real winners in the AI trade. >> Yeah. AMD, ARM. Yeah. And I I just took the money off the table because when you're staring at 150 or 200% gains in less than a year, I think you take it, Julia. >> Yeah. Acorn. I got back into Chevron. I had taken my position out uh before we bought our new house. And I got right back in because it's one of the best managed oil companies in the world. Um, but you know, I I I I think that the the markets are already processing what we're talking about here. They already know that there's a problem. People are, you know, we're not the only people sitting here talking about the fact that the damage done to the Persian Gulf is going to ripple through the global economy. There are a lot of people who understand that. And I think that we need to get our government organized and get them engaged in communicating with the American people because otherwise Americans are going to figure this out for themselves and uh Donald Trump and the Republicans are going to get annihilated in November. >> So you think the markets are already sniffing this out then? >> Oh yeah, definitely. Definitely. >> Do you think do you think the Fed does the Fed follow the financial markets? Because sometimes some folks will come on here and say that's kind of like a shadow mandate for them, a fed for the Fed. >> But whether they understand the financial markets is another matter. They put out a paper uh today on my favorite topic, mortgage servicing rights, which indicates to me that they clearly don't understand that. Um you know, the academic economists who populate the Fed are in another world, Julia. They like to model things versus GDP and they do all of these estimates, but they're detached from the real world. That's the biggest problem I see. And I I think Kevin Wars is going to change that, by the way. >> For the better, though, I take it. >> Oh, yeah. Yeah, very much. He's a man who likes to look at markets. He's uh someone who likes to look at the actual economy and talk to people who participate in it. He's not a model builder. So, you know, I think you'll see a lot of changes. Uh but it will take time. You you don't do rapid fire changes at the Fed. You've got to move deliberately and very carefully. >> Um I want to get your thoughts on what we've seen in the bond market, especially like the the tenure. It's been stuck around four or five. Uh I think you and I had talked about like gosh, we're glad we got our mortgages when we did. Um >> yeah, we were fortunate. We really were. >> Yeah. What do you make of what's happening in the bond market? What do you think that is signaling? >> Well, as as we've written, I I think that spreads uh you know, the difference between corporate bond prices and yields and government bonds is so tight. Uh what it tells me is that there's just an enormous scarcity of quality assets out there. um you have all sorts of large institutional investors roaming around uh looking at asset classes that they normally never would have looked at. And what it tells me is that the beast is hungry. And it tells me that inflation is really driving these markets more than anything else. You know, I I I can't get in the names, but uh I work with some uh players who are very involved in residential mortgages and a variety of different strategies around that. We see large institutional players that have never looked at this sector before showing up wanting to get involved. And I think I I just I I couldn't believe it. Uh I really it just it amazed me that they would take the time and the resources to look at an asset class like that. Gold has been one of the few standout assets of the last few years, reaching new record highs as investors respond to rising fiscal deficits, geopolitical uncertainties, and growing demand from central banks worldwide. But here's something most people still overlook. Price appreciation isn't the only way to benefit from owning gold. What if your gold didn't just sit in a vault, but actually generated a return? With monetary metals, you can earn a yield on gold paid in gold. without having to sell. Instead of earning in dollars that can be eroded by inflation or policy changes, you can earn more ounces of gold. That means your gold holdings are growing in real terms, not just nominal ones. Earning gold offers a fundamentally different approach. You're not just preserving wealth, you're increasing your exposure to a hard asset over time. So, you're earning additional ounces of gold while still benefiting from any potential price appreciation. It's a way to make gold a productive asset, not just a defensive one. As more investors turn to gold for wealth preservation and portfolio diversification, a natural question follows. If you're going to own gold, why not earn gold while you own it? Thousands of investors are already earning a yield in physical gold and silver through monetary medals. You can learn more at monetary-medals.com/julia. Now, back to the rest of the episode. All right, Chris, another topic I want to ask you about, Bill PTE as the acting director of national intelligence. Um, while he keeps his FHFA position, what did you make of that one? >> It was a a surprising and astonishing development. I think the real reason that he put PY into that position is that President Trump is still doing payback for January 6. He's still focused on attacking his enemies and particularly uh Democrats who, let's be fair, roasted the Republicans over a slow fire as a result of the January 6th protests on Capitol Hill. So, it's just tit fortat politics. Uh Bill Py is seen as a a loyal uh member of the Trump inner circle. As you know, he was very involved in attacking uh Powell, but there's absolutely no chance that he's going to be uh you know, nominated or confirmed for that position. You know, he's got 270ome days he can occupy that spot and then he's going to have to step down. Mhm. I thought the um in in the rap you mentioned the the Treasury Secretary Scott Besson's comments um before the Senate. >> Yeah, that was precious. >> Tom Tillis. >> What was it? It wasn't he wasn't going to punch him in the face. He was >> No. Senator Tillis said, "Did you say you were going to punch Boly in the face?" And Bessid smiled and said, "No, I said I was going to kick his ass." And then Senator Tillis, you know, agreed with him. So, >> it was very funny. But, you know, it just indicates Trump has alienated so many members of the Republicans uh both in the House and the Senate that it it's almost impossible for him to get anything done. He's indicated he's going to nominate his personal lawyer as attorney general. Uh I don't think that nomination is going to go anywhere. I I doubt there they could even get the votes to report it out of committee, much less vote on it on the floor of the Senate. So, you know, Trump has dug a lot of holes in Washington. This is typical. He he he's replaying his first term. If you go back and look at the timeline from Trump one, they were not particularly wellprepared. Not nearly as well prepared as this time around. But what we've seen is that he alienates people and he I think needlessly uh has just thrown a lot of uh you know sand in the gears in terms of policy in terms of getting legislation passed through the House and Senate and this is pissing people off because they got to go out and run for reelection. Uh and it's not helpful. So, you know, I think President Trump, despite his moments of brilliance, uh, is his own worst enemy is what it comes down to. >> Yeah. You mentioned like, yeah, that comparison to the first term, but also at the same time like the lack of fear and attention to the financial markets that might actually be more troubling. >> Oh, it is. Um, I mean, I'm sure Scott Besson is aware of some of these things, but it's uh it's just a part and parcel of an administration which is governed by the president who shoots from the hip. He doesn't plan anything. He just says and does whatever he wants and his uh his cabinet members of his regime have to follow him because if they disagree with him, they're going to get fired. So, that's the way it is. You know, Trump behaves as president the way he's behaved in business. If you followed his career over the last few decades, it's pretty much typical. Uh, and it's not I don't think it's particularly effective either. >> Okay, let me ask this because I actually almost missed this while reading this week's rap. At the very top of it, you quote Kevin Worsh from 2024 and the quote is central bankers around the world seem more comfortable with inflation closer to 3% than I wish there than I wish were the case. That is that's very dangerous stuff. We can have an economic boom in that scenario, but there'll be a high price to pay. Why did Why did you choose that to open the rap for this week? >> Uh great quote. Um, actually Kevin Hartnett at Merrill had that in his uh note this week and I think it's absolutely right. 3% inflation uh will destroy consumers and destroy economies if you compound it over a period of years. It's pretty high. 2% inflation will take half your value away in 20 years. So imagine >> That's right. I learned that infl inflated. You you did that math. Yeah. >> That's right. So 3% is a disaster. And I think Kevin Worsh understands that. The problem, of course, is that he doesn't have the tools to really uh attack inflation the way I'm sure he would like to. >> What happened with gold? Like why why did we see gold erase its gains for the year today? Like what what's that about? >> Well, two things. Higher interest rates, number one. Gold uh old metals always have to compete with the yield on fiat. Uh the collapse of Bitcoin is also I think causing people to run to safety. So stocks, treasury bonds, that sort of thing are a liquid haven for investors. You don't want to be in something that's illquid right now. And you know the other point is that you know metals had had a big run. Uh we've talked about that quite a bit and now it's it's come off a bit simply because the markets don't know what to do. you know, gold is competing with AI. Why wouldn't you jump into Micron Technologies and ride that one up? Uh, instead of sitting with gold earning a, you know, 10 15% a year, right? Uh, last year, year before, gold did very well. But stocks are providing an alternative to metals, a short-term alternative. And I think a lot of investors are willing to uh to move into that asset class. Mhm. But do you still you still like gold? I take it though as >> I I've been buying more as the price comes off. You know, I have a very disciplined approach. I like to, you know, keep a certain percentage of my portfolio in in gold. I've been more tending to get into silver because I think the the the supply demand dynamics in silver are even more compelling. >> Bitcoin, do you think Bitcoin's toast? I I think it's lost a lot of followers. You know, Black Rockck was selling their Bitcoin today. Uh I think most institutional investors, most public companies that have had a focus on crypto assets are going to really have to ask themselves some very hard questions. Why are we here? How does this add value? You know, Micro Strategy, Mike Sailor's company is clearly insolvent. uh and you know he was really the primary buyer of Bitcoin for much of this year. Uh so I I think that you know it's a speculative phenomenon that has kind of run its course. Most of the people I really know who were involved in crypto over the last few years have gotten out because they have more interesting things to trade like AI. You know, AI stocks have been going up so much, Julia. It's almost impossible to compete with them. >> I don't care what asset class you're talking about. >> Yeah, it's uh Yeah. Um man, I looked at my crypto before I got on here. It's not pretty. Um maybe I should have sold that for the down payment. Chris, um you and I have talked about this manic mood in the market. That's your description. You described it as a manic mood of the market. We're having like blockbuster IPOs come out like what are the signs that you're seeing that it's or maybe just can you describe why you call it a manic market or manic mood? >> Well, because it's not driven by value. What you have are people who are chasing uh relatively short-term gains in stock uh particularly the tech stocks that have been identified as benefiting from AI. But are we buying them because of earnings? Are we buying them because of any kind of fundamental factors? You know, Nvidia for example, if you look at that trade, if you look at the degree to which they've been financing uh some of their larger customers, is that really an attractive company? I would say no. But the amount of uh cash that's being thrown at the buildout of AI, I'm not talking about AI as a revenue generating technology, but simply building data centers is is mind-boggling. And what's interesting is that the politics of AI is getting worse and worse every day. You know, to in order to build the infrastructure you need to pursue AI, it's almost impossible now in the United States. one community after another is legislatively blocking these projects and saying, "Nope, not in our backyard." And that fact, I think, is going to be a very uh significant negative factor for AI as we get into the fall because where are you going to build these these facilities? Where are you going to put these data centers? Most communities in the United States don't want them. So, I I think that's really, you know, the politics of this are important as well. All right, let's take a viewer question. Um, this one comes from Ken. If we are really in a bubble, how does this one compare or contrast with the one at the turn of the century, Web 1.0? >> Well, we've had bubbles in this economy going back for decades, and you know, it's part and parcel of being in an inflated economy where inflation is assumed to be part of the mix. This bubble, particularly with AI, I think was driven fundamentally by what the Fed did during COVID. There's just so much cash looking for a home right now that it's bled into the markets in a really profound way. But, you know, more than that, it's just part and parcel, I think, of a a marketplace where value has been really diminished as a a criteria for investing and people are just chasing price. They're chasing the shiny object. I'm getting ready to go fishing next week, so shiny objects are first, you know, top of my mind right now as I start thinking about smallmouth bass. But that's really what's happening here. We see big institutional investors going from one stock to another, ramping these stocks up to the sky, and then they go chase something else. Uh there are an awful lot of stocks right now that aren't moving at all. >> Yeah. And um a lot of that money as you put it is going toward the AI trade right now. >> Oh yeah. >> Um yeah, but you rode that one. You took your acorns out. Yeeha. >> I like to take my acorns when it gets to be a certain percentage of my portfolio. >> Hey, 150%. Let's go. >> Let's go. Take it. >> Yeah, exactly. Chris, um before I let you go, parting thoughts to the audience. Fishing trip next week. That sounds awesome. >> Yeah, the fishing trip is something I've been look forward looking forward to. Uh we are going to publish our interview with John Daard next week and of course we will be doing an edition of the rap from Grand Lake Maine. Going to be sitting in in the dining room of Lean's Lodge. So you're going to get a a chance to have a look at that and by then I will have sorted out this camera. >> Love it. Um, well, Chris Whan, chairman of Whan Global Advisors, author of the institutional risk analyst blog, co-host of the rap. Really appreciate you and thank you so much. Have a wonderful weekend. Have a wonderful time fishing up in Maine. And everyone, uh, we will see you next week. And that's a