Speaker 1: And hello, welcome to the Big Podcast on this Tuesday.
Today is the tenth day of March, year of Our Lord,
twenty twenty six. My name is Tom Sullivan, and I
mean the war with Iran is underway. We'll give you
a little synopsis on that. There is a debate, however,
going on in the financial markets because since yesterday, oil prices,
which normally we're trading before the war, somewhere in the
high fifty to six little sixty.
Speaker 2: Dollars barrel of per barrel price, so.
Speaker 1: Fifty eight sixty two somewhere around in there for a
barrel of oil, and yesterday it went up, actually Sunday
night went up to one hundred and nineteen dollars a barrel.
And the reason for it, obviously, is the Strait of Hormuz,
through which twenty percent of the world's oil passes through
that narrow, little twenty mile wide body of water off
the coast of Iran. So concern was they're not going
to be able to get through, and there's a whole
bunch of oil tankers out there that are just sitting
idling waiting and they can't get through or they won't
go through, and so that is causing the massive volatility
not only in the oil markets but at the gas
pump where you and I do business, but also the
stock market if you have stocks, or you have a
pension plan or something in a four oh one K
so all that has an impact on your pocket so
I want to go over that. I also we got
a report that comes out every I think it's quarterly
from Bank of America and what they do, without using
anybody's name, they go through all the customers of Bank
of America to see how they're doing as far as
spending and income. What are they depositing as far as
paychecks or any kind of income, and then what are
they spending their money on. So we have that as well,
and if you're going to the airport today, good luck.
I talked to a lady in Houston earlier today. She
said the local news in Houston yesterday Hobby Airport in
Houston had a five hour TSA line and that apparently
is much improved today. I think a lot of people
just heard about that and bagged it. But still, if
you have to travel, it's not just Houston. There's a
bunch of reports where there's there's problems. She told me
she said that they were they bust a bunch of
TSA agents over from Dallas. So does that leave Dallas
Fort Worth without enough TSA? So anyway, it's yeah, whack
them all out there. Let's start with General Cain, the
Chairman of the Joint Chiefs of Staff. This was his
report on the status of the war effort this morning.
Speaker 3: We'll look at the range of options to set the
military conditions to be able to do that, and then,
like we always do with every potential mission, come to
the Secretary and the President with both what are the
resources required, what is the command and control required? And
what are the risks and how do we mitigate those risks?
So we're looking at a range of options there.
Speaker 1: I wanted to start with him because I just don't
I'm sorry, the politicians you have to have you have
to have incredible honesty and integrity when it comes to
telling the American people how a war in our name
is going. So I thought, well, we'll start with General
Kain and go from there. Let's talk oil. Oil equals
a couple of things. That equals eventually the gas you
buy at the gas station, and it also equals inflation.
And that's before the war. So just a week, a
little over a week ago, that was the big thing,
was about the cost of things, affordability.
Speaker 2: Man, that's disappeared.
Speaker 1: Also, the Epstein story has disappeared, not completely disappeared. But
let's get back to this whole oil business. Phil Flynn,
I'm known Phil for a long time. He's an oil
and energy gas trater at the CME in Chicago. See
what Phil has to say about this crazy mark.
Speaker 4: They've been We've never seen anything like it, with this volatility.
But the futures market agrees with President Trump. They've been
betting on a win for this war from the very beginning,
and a very quick one at that. It's been the
front end of the curve where we've seen all the
panic and the movement. But I think right now, with
the biggest reversal in oil price history, I think the
market's already seeing signs that this could be coming to them.
You know that report today by the Energy Secretary about
the navy presence, you know, getting that through the straits
of hormones, it was removed. Whether or not that's true,
A lot of the private tanker tracking companies are suggesting
that the tankers are moving. We did see one tanker
from Iran get through with ten two million barres. So
it is happening, you know, whether or not the Navy's
helping them or they're doing it on their own. There
is traffic starting to move.
Speaker 1: There's a trickle, and we don't know if they're oil tankers.
And again if they have an Iranian flag, of course
the Iranians are going to let them through. But even
if they are carrying oil and gas, the supply needs
to be ramped up a lot. We are really short
and a lot of the oil producing countries are cutting
back on their production because I told you yesterday they
don't have storage for what are they going to do
with it when it comes out of the ground. So
even if the war was halted today, it would take well,
I'll play for you a number of oil and analysts
talking about how long it'll take for oil prices to
come back down.
Speaker 4: It always is going to take longer to come back down.
Speaker 2: You know.
Speaker 4: Gasoline stations and buyers are like wimpley, I'll gladly pay
you tomorrow for gasoline today. So they're already running behind,
and so when prices take off, they usually lose money
at the tank, and they have to make that up
on the way down. But they have to make sure
they secure supply, so they pay up through the NILS
just to make sure they have it, and then when
they don't need it, they need to make some money
out of the way down. But I'll tell you this, looking
at the future's prices, I think you're going to see
a correction much faster than people than you normally see.
At first, prices will go up because they're still playing ketchup,
but you could see prices actually plummet to lower than
where they were before the war. If things keep going
the way they're going.
Speaker 1: That's Phil Flynn. He says the futures markets are pointing
towards these prices coming back. He didn't say to where
coming back down and quicker than a lot of people thought. Well,
today is a big day about the strategic petroleum reserve.
We have one and a bunch of other countries have
them as well. So the G seven ministers were supposed
to meet this morning to decide what to do about
are they going to release oil from the various strategic
patrol reserves in Europe and here in the United States?
And well, Chuck Schumer is all for that. That should
give you some cash caution.
Speaker 5: Already, strategic petroleum reserve exists precisely for moments like this.
If President Trump cared about easing pain at the pump,
he would act to release these reserves.
Speaker 1: Now, well, let's go back to the oil trader, the
cmme Phil Flynn. See what he thinks about the oil
trader Chuck Schumer and his oil advice. Does Phil Flynn
agree with Chuck Schumer?
Speaker 4: No, I don't, And I'll tell you what. Senator Schumer
would be one of the worst oil traders in history.
Speaker 1: Right.
Speaker 4: You know when President Trump wanted to buy oil at
twenty dollars, he said, oh, oh, this is just a
handout to save the big oil companies. Now he's like, hey,
we should you know be you know, the big oil
companies need to bail us out, so you can. I
guess he can have it both ways.
Speaker 2: I tried some other oil traders.
Speaker 1: This guy isn't an oil trader specifically, he's a financial genius.
He really is Muhammad el Arian And he was asked
about the oil markets and what his take is on it.
Speaker 2: It is wild.
Speaker 6: So I don't think I've ever seen anything like this.
We went from seventy dollars a barrel a week ago
to almost one hundred and twenty, and now, like you said,
we bagged below eighty. We've come back for three reasons.
One is President Trump saying that the war will be
over soon. Second, we've had a tanker a company through
the Strait of Homus today, which is a very important
psychological message. And then third we have a coordinated agreement
to release strategic reserves and that has brought all all
the way down from one hundred and twenty, which would
have really hurt the economy.
Speaker 1: So we're not sure if tanker escorted through, but if
there was one that were thinking it was an Iranian
flag tanker that they said, sure, go ahead. We're getting
into more of that as we go through the podcast
here today. The other item about this is whether you
rely upon the fact that President Trump said that this
will be over sooner than later. He was very optimistic.
But that's Donald Trump. He's optimistic about everything that he does.
So back to the G seven ministers, as I'm recording
this podcast, they met this morning and the word came
out from the meeting that they said, no, they do
not want to release any oil from the strategic petroleum
reserves in the various countries of the G seven. Then
they came out of the meeting and said, well, we
never really made a decision, so we're going to meet
again this afternoon or this evening. So at this point
we don't know, and it doesn't appear that they know
what they want to do. But at this point there's
no official release of the strategic Petroleum reserves, the SPR
as it's called now. Chuck Schumer said that when Joe
Biden released all that oil for political reasons back a
few years ago, that it made a huge difference in
the oil price. And the answer is it doesn't. David
Goldman is also a truth checker on oil and gas
statements like that. Here's David Goldman.
Speaker 7: Well, it would it just wouldn't make that much of
a dent. And we know that because in twenty twenty two,
President Biden released one hundred and eighty million barrels of
oil from a strategic petroleum reserve, and by the Biden
administration's own calculations, gas prices only fell by around seventeen cents.
Speaker 2: So that's not a huge dent.
Speaker 7: And that, by the way, it took four months to accomplish,
and so that would get us back down to the
mid threes, but not nearly we're we were before, which
was below three dollars. The other thing is that once
you release all of that oil from the Strategic Petroleum Reserve,
it's like pulling a trigger that you can only pull once.
You don't get to do it again until new supply
comes on. So it's maybe helpful, but not a catchall.
Speaker 1: So if it is able to help a little bit,
if they do the release from the SPRS, how fast
will it come down, because it certainly prices have gone well,
let me give you the average gas price across the
country today is three dollars and fifty four cents three
point fifty four. It was two eighty five just a
little over a week ago, so it's gone up a
sixty five cents a gallon something along those lines. I'm
looking at the triple A map, and yes, the winner
of how who has the most expensive oil is gasoline,
I should say, is the state of California. And if
you look at California, if you go way up to
northern California, Humboldt County is five dollars and eighty cents.
The average for the entire state of California is now
five dollars in twenty nine cents. So prices have gone
way up, and the poor people in California have already
been paying an excessive amount. But will releasing some from
the strategic Petroleum Reserve? Will that actually drop prices immediately?
Speaker 7: Yeah, this such a common occurrence that the industry actually
has its own term for it. They call it rockets
and feathers. When oil goes up, gas prices shoot up
like a rocket and they come down like a feather.
And you know, gas stations make very little profit, surprisingly
little profit on gasoline sales. Also, if you bought a
tanker of gas and filled your station at three fifty
four today and oil starts to come down, that doesn't
necessarily mean that you can sell it for cheaper. You
got to sell all of that gas before you start
to make a little bit more profit on that. You
also don't want to be the first neighborhood gas station
to sell cheaper. You're looking for other folks to do that. So,
you know, we saw this also in twenty twenty two
when oil fell about twenty dollars in just a matter
of weeks. It took several months for oil to come
back below four dollars a gallon.
Speaker 2: Well, yeah, you heard that right.
Speaker 1: If we ended the war today and the straight up
our moves opened this afternoon, it would take months for
the price of oil to go back down. And well,
Clayton Siegel, he's an award winning economist who specializes on
this topic of oil and gas.
Speaker 2: Let's see what he has to say about.
Speaker 8: Well, it depends by region and by fuel type. The
major economies of the world have about one point two
billion barrels of oil and products on and in their reserves.
It sounds like a big number, but we're missing. We're
digging a hole of twenty million barrels per day. So
do the math. That's I mean total, that's total sixty
days of cover at this rate of deficit. But I
think that what would happen is if we can, if
we consider the possibility of drawing down these reserves, it's
going to be very judicious. It's not going to be
all at once. We're going to look at which countries
and regions are missing, which types of oil products, Certain
types of liquid petroleum gases are used for cooking in
certain parts of the world like India and Southern Asia.
In other parts of the world like Europe, it's about
middle distillates like jet fuel and diesel fuel, and so
I think that we would consider a smart strategic drawdown
of those reserves to get the right types of fuels
to the right countries on time.
Speaker 1: Again, we're still waiting to find out exactly what the
G seven ministers are going to do about any sort
of release of strategic petroleum reserve oil. As far as
our economy goes back to Clayton Siegel.
Speaker 8: Yeah, it's very simple. To have a prosperous economy. We
have to restore that twenty million barrels per day of
oil supply that comes out of the Mid East Gulf region.
There really are no substitutes. I think that markets do
know this, and they are purely trading on what President
Trump says he will or will not do with regard
to the war in Iran. So when he last week,
when he was talking about things like unconditional surrender being
a war objective, prices surge. When he makes a different
declaration yesterday like the war maybe winding up soon, obviously,
prices recede. And we saw that yesterday. But here's the problem.
And you know, as we say, the enemy gets a vote.
And just to read from the headline that was crossing
my wire, markets bet that Trump will end war soon.
Traders are assuming that when he does that normal export
flows will resume because the Iranians also need the export revenue.
But what if they don't. What if Iran continues to
disrupt shipping or the offshore infrastructure that's used to load
those ships and enable those exports even after President Trump
cause it quits announces the end of major combat operations.
That is an underappreciated risk in the market in my opinion.
Speaker 1: But what about using our navy to escort oil tankers
through the straight up hormoes.
Speaker 8: First of all, a lot of the measures that are
being considered in Washington this week are simply bridges to
buy us more time to get the frozen exports moving again.
We need those in addition to not instead of the
resumption of exports. When it comes to lifting the sanctions, look,
I mean there's no way around it. Putin is the
big winner on two fronts from this. When it comes
to lifting the sanctions, this was a time when the
sanctions that President Trump smartly initiated last November on two
big Russian oil companies, Luke Oil and Rossneft. They're just
starting to bite in the Russian economy and maybe constrict
Kutin's ability to carry on this war on Ukraine. And
now to lift those sanctions and allow Russian oil prices
to rise again is just going to improve the Kremlin's
war chest to confront Ukraine and NATO. And also, we're
running through a lot of stocks of our best weapons systems, munitions,
and there's going to be less to go around to
defend Ukraine and support NATO.
Speaker 2: So it's a.
Speaker 8: Double win in Moscow, I'm afraid.
Speaker 1: I think you heard them right. Is that by reducing
the sanctions on Russia, that means that they will be
able to take advantage of the high prices of oil
and that will fund their ability to continue the war
against Ukraine. And meantime, the sanctions on the oil were
as as Clayton said, We're just starting to bite pretty
strongly on the Russian economy and now those sanctions have
been done away with. Meanwhile, back here in the United States,
prices are not going to come down fast.
Speaker 8: The adage in our market is up like a rocket
and down like a feather. So the entire market, including
the refining and distribution system, is preparing for higher prices
for longer.
Speaker 2: All right.
Speaker 1: So there's another oil expert who's talking about oil prices
are going to stay higher rather than lower for quite
some time. All right, one more oil analysts. This guy
can get pretty heavy because of the fact that he
is one of the top oil craters on Wall Street.
Speaker 2: His name is Jeff Curry. He's with Carlisle.
Speaker 9: It tells you that this market's entirely driven by a sentiment.
Right now, I think the bottom line is the market
is not recognizing the severity of this situation. It can
make the following observation polymarket. After all, this is pricing
above a ninety percent probability this the straits remain closed
till the end of March. That's thirty one days. And
you look at let's say, you know, netting out Saudi redirection,
you're around eighteen million barrels per day that's likely lost.
Then you can add another let's say, two to three
million barrels per day of hoarding on.
Speaker 3: So that's you'll get you.
Speaker 9: Twenty one twenty two million barrels per day over thirty
one days, that's close to, you know, well over six
hundred million barrels. It's not only being mispriced in oil,
but the rest of the financial complex. And I think
part of it there's a level of complacency. They won't
something's going to happen between now in the end of
March to actually open it, because we know how catastrophic
it is. And I think that's the play that the
financial markets are betting on. But every single expert out
there is going to tell you two to four weeks
in they're going to agree with poly market. So something's
misaligned here.
Speaker 1: So he's talking about the straight up our moves not
being back to normal for till the end of the month.
And like you said, he used the word catastrophic. That
truly would be catastrophic, and that's why he disagrees with
the market all of a sudden pushing oil prices down.
He thinks they're going to go right back up again.
And about those ships going through, a couple of them
crickling through here's what he said.
Speaker 9: We don't know if those are ships carrying food or
something of that nature. But I think when we look
at the volume from our standing from insurance the cruise.
The crews don't even want to get on the ships.
It's a very dangerous strait to go through right now.
And if it's a trickle, it's not going to it's
a drop in the bucket relative to how large of
a disruption. And this whole you know, i EA coordinated
response is still it's not going to be enough to
actually dent anything here. I like to point out there
is no policy response that can stop crude of sense
until you open the strait. I think by released in
the SPR, it's a signal to the market that they
don't believe this thing is going to resolve itself in
the next couple of days. And also you got to
ask that SPR in the US is meant for US refineries.
There's not a problem in the US. The problem is
in Asia. It's in places like Singapore where jet fuels
that two hundred and eighty one dollars are two hundred
and thirty one dollars a barrel. So how is releasing
European G seven SPR resolve the situation halfway across the planet.
When you get the size of the magnitude of this
shock means you're going to see extreme volatility, extremely volatile,
and you know, in terms of one hundred dollars a barrel,
you got there and the equity market didn't care. The
bottom line is, if this goes on for another week,
you got a really serious problem. And if it goes
as long as any exports or publy markets suggest. You know,
I'm not not going to use the term that you know,
the CEO of RAMPCO used because I don't want to
be quoted for it. But that's probably how severe the
situation is. Every time of these happened with a geopolitical event,
we're not going back to the world that existed on February.
The morning of February twenty eighth, you're going to see
sustainably higher oil prices. Whether it's from hoarding, You're gonna
lose production in the Middle East, whether if it's on
the LNGC side oil side. You're not going to restart
seven million barrels per day without any hiccups.
Speaker 4: It's going to take months.
Speaker 1: Let's review you a little bit of what he said.
He said that the SPR. So what if the G
seven says, let's release oil from the SPR the strategic
patrolling reserves in the various G seven countries. Even if
we release them from our country, we don't need it.
Our strategic petroleum reserve is for our oil refineries.
Speaker 2: We have enough oil. There's no shortage here.
Speaker 1: The eighty percent of the oil that goes through this
strate of horror moves, eighty percent of it goes to Asia.
Another twenty percent of it goes around and up the
Red Sea and into Europe. I mean there may be
a drop or two that winds up in the US,
but I don't see it. So the exporting from and
the problem with the Strategic Patrol Reserve isn't the quantity
of oil. The problem is the price of oil, and
oil is priced globally. Even though we've got lots of oil,
and even if we release some from URSPR, it won't
affect the supply, it will affect the price. And the
price of oil in Italy is the same price roughly
that we get in the United States, that we get
in Japan, that we get and you name it. So
that is one the other things you heard him say
is we're not going back. We're not going to go
back to that fifty eight dollars sixty two dollars barrel
of oil any time soon. He's thinking that this is
going to last for quite some time, even if hostilities
ended this afternoon. So let's get off oil and talk
about just everything else regarding your pocketbook. Very financial, very
oil markets today. I realize that, but this is the
time to try and put this kind of information out.
Liz chris Burg runs the project at Bank of America
where they go through the Bank of America customers. They
don't pay attention to the names. They're looking at the
at the metrics of how much money people are depositing,
how much are they earning versus how much are they spending,
And the question comes down to our consumers doing Okay,
here's Liz Kreeberg from Bank of America.
Speaker 10: What I would say is that that spending just you know,
moved up sharply. If you looked at you talked about
three point two percent, biggest number year over year in
three years seasonally adjusted was up a whopping nine tenths.
That's the biggest in you know, three plus years. Two
What's interesting is if you dig down and look at
it categorically, we saw strength across the board. It was
very broad retail services everywhere, but where you didn't see
the strength be uniform or universal was in terms of
how the consumer the different types of consumers higher income,
lower income. It's an uneven resilience. And so I think
the takeaway for me is that the K shape is continuing.
Speaker 2: Yeah, the K shape economy.
Speaker 1: So that top arm of the K is the higher
income people and the lower part of the K that
goes down to the bottom is obviously the lower income.
Speaker 10: And I think there's two ways that you can look
at the K. One is on the spending side, one
is on the wage growth side. Now, the good news
on the spending K is that that actually narrowed a
little bit, so everyone higher, middle, lower increased their spending,
but lower income spending, which was zero point three percent
in January almost quadrupled to up one point one. So
they were really able to narrow the gap with higher
income spending, and in fact, that's probably now the narrows
we've seen in about six months. The same is not
true though, on the flip side with wage growth, and
what we saw on wage growth is higher income wages
continuing to accelerate north of four percent, that's the strongest
level in almost four years. Whereas what we saw for
middle and lower income households. Is their wage growth actually
cooled by about thirty basis points. So now you've got
the widest gap between higher and lower income wage growth
in at least ten years, going back to the start
of our series in twenty fifteen.
Speaker 1: So last Friday, we had the jobs report for you,
and it was a surprise, but there were ninety some
thousand payrolls lost in the month of February. Is that
what Bank of America.
Speaker 10: Saw and didn't see the same thing what we saw
in terms of payrolls and the way that we look
at it. I think it's important to understand. The methodology
is we look at the number of households that are
receiving income right and just purely are you receiving income,
not higher or lower. We actually saw an increase of
one point three percent looking at that data, so a
little bit of a disconnect there. It could have something
to do with people receiving income from multiple sources. So
if someone were supplementing their job by being a gig worker, right,
that would still count as income for us, but it's
not certainly the same type of income. And that may
also explain why we're seeing some of the weakness in
lower income, but our numbers would tell you that it
wasn't as bad as what the BLS said, Right, So
that's it. But where I do think that we want
to come back to is that the strength really is
in the higher income consumer, the higher income wages. Those
are the ones that are going up. And you're seeing
this cooling in middle and lower income households, and that's where,
you know, that's where we're starting to get a little concerned.
Speaker 1: Yeah, And that's the problem with that is that leads
to all kinds of social problems where we have a
division that's growing wider and wider between the haves and
the have nots, or the higher income and the middle
and lower income. So congratulations to the higher income people,
but we've got to figure out how to solve the
income for everybody else. So, if you have income, are
you spending it on travel? Are you going places? Because
the airports are a total mess. Congress will not, well,
the Democrats in Congress will not fund a Department of
Homeland Security.
Speaker 2: And that's the.
Speaker 1: Coast Guard, and that's TSA, and that's Cyber Command, and
it's a secret serve. It's a number of things Chad Woll,
former director of DHS, weight in.
Speaker 11: Well, I think it's a real concern. Again, these are
the same folks that went without paychecks for forty three
days last year during the last government shutdown, and so
this is a real concern. As you indicated, they are
frontline workers. They left paycheck to paycheck, and as they
miss paychecks, they've got to figure out where does the
rent come from, where does the few come from? And
so what you're seeing today is isolated at several airports.
It's very airport specific, but you see call out rates.
So screeners start to call out, sick, they start to
call out because they need to take other jobs to
put food on the table for their families. And so, look,
this is all entirely preventable. You know, DHS should be
fully funded, particularly now to time when we have a
conflict with Iran and we have certain threats, a heightened
threat environment here in the homeland. You want to make
sure that you have all of your DHS employees, including
airport workers, airport screeners, but others as well, fully focused
on the job at hand in protecting the American public.
So as this as the shutdown continues to drag on. Unfortunately,
for TSA and for the airport, you're likely going to
see continued lines, particularly as we get into the heart
of spring break here in March.
Speaker 1: Well, as I mentioned at the beginning of the podcast,
today I talked to a lady in Houston. Houston Hobby
Airport was the one that got all the bad publicity.
Yesd today five hour lines to go through TSA. Apparently
they've done a much better job of getting people from
other airports to come in and staff the TSA in Houston.
Speaker 11: Well, when it comes to TSA, they have a lot
of I mean, they think about this scenario and so
what they're trying to do now is obviously get these
shift covered by other transportation security officers pulled from other
airports that aren't having these lines and this impact. But
you can only do that so much, right, every airport
needs the complement of security screeners that they have to
do their job, so you can patch the issue, but
only so long, and then it becomes a real concern.
Speaker 2: Now.
Speaker 11: I don't think security is going to be sacrificed. Unfortunately,
what will be sacrificed will be traveler convenient. So the
lines that maybe took ten minutes fifteen minutes will now
take an hour an hour and a half because TSA
can't compromise the security there at that checkpoint.
Speaker 2: So when all of a sudden done today, how was
the market. Let's look at the Dow.
Speaker 1: Uh it was at ten o'clock this morning, half an
hour into the treading session, it was down two hundred
and sixty nine points. Then at one thirty in the
afternoon it was up seven hundred and forty eight so
that's almost a thousand point swing. And when all was
said and done, it finished down thirty four points. The
Dow at forty seven thousand and seven six, SMP down fourteen.
The Nasdaq when all was said and done, was up
one point.
Speaker 2: That's it.
Speaker 1: Price of gold up ninety eight dollars to five thousand
and two oh two. And that dastardly oil price, when
down eight dollars today, finished at eighty six dollars. That
sounds much better, doesn't it. But remember we were trading
in the high fifties, low sixties, so eighty six still
is very very high from where we were prior to
the hostilities breaking out in Iran. So that's it for today.
Thank you for coming by. We will be back again
tomorrow and we hope to see you then.