In the Fog of War Capital Doesn't Wait for Winners

As U.S. carrier groups steam toward the Middle East and oil prices edge higher, investors are being forced to recalibrate—fast. In this episode of The Money Runner, David Nelson breaks down the high-stakes standoff with Iran, the Fed’s tightrope act under political pressure, and why capital doesn’t wait for geopolitical clarity. From rising risk premiums to AI bidding wars and Apple’s existential crossroads, it’s all happening in the fog of war. 

🎧 In the Fog of War, Capital Doesn’t Wait for a Winner

Disclosure: "At the time of this article I currently hold shares in some of the companies mentioned as part of investment portfolios in funds I manage for Belpointe. Additionally, I may discuss other securities that are under consideration for future investment; however, discussing these securities is not a recommendation to buy, sell, or hold. My mention of these securities reflects my personal opinion and analysis at this moment and may change without notice. Please remember that all investments involve risks, including the possible loss of principal."

Transcript

0:03

Before I get into the meat of today's podcast, understand, I'm recording this on a holiday, Juneteenth. And while offices and deaths are empty, traders are on high alert. The press is reporting the president has made up his mind on Iran, but hasn't given the final order. It may not come. It could come in the next few minutes, or it could be the art of the deal. Forcing the Ayatollah to rethink the disastrous course he has put his country on. One way or another, Iran's nuclear threat is likely to be dismantled. The data is all around us, but you're not going to find it in charts. U.S. military assets are streaming toward the Middle East. Carrier strike groups, fighter squadron, strategic bombers all forward deployed within range of Iran. Now, Washington says this is a defensive posture and maybe that's true, but history tells us moves like this aren't just about deterrence. They're leverage. And if the triggers pulled, markets will react fast and violent. Oil is key because a spike higher has real economic consequences. Energy touches every line item of the income statement. This isn't just geopolitics, people. It's capital flows. The market is recalibrating as risk premium shift from inflation to escalation. Welcome to the Money Runner. I'm David Nelson. I want to talk about the Fed and Wednesday's release and the press conference that followed. I promise we'll get to it. But the news cycle is fluid and we can't ignore the elephant in the room in the short run. If we don't have resolution on what's taking place half a world away, stocks are going to have a tough time making any progress, especially with valuations pushing the edge of the envelope. Trump has demanded unconditional surrender, but the history of Iran leadership is that they hate Israel and the United States more than they want to stay alive. So there is a very real possibility we get an irrational set of actions. And while the collapse of Iran is a blessing for the world, the chaos that follows the collapse has its own set of dangers. My focus is the economic outcome. If this turns into a regional conflict disrupting capital flows or something worse, like the closing of the Straits of Hormuz, where much of the world's oil passes daily. Markets will react in kind. Let's hope we get resolution soon. Markets don't have a lot of patience, and the fog of war only adds to the list of challenges investors have been forced to navigate this year. All right. Let's shift back to this week's Fed meeting. What did we learn and do we have any sense of what monetary policy is going to look like in the back half of the year? The job of the Fed, even in the best of times, is difficult at best. I spend a lot of time beating up Jay Powell, but also know that even if he was doing his job in the same fashion, I would. The information you are working with is suspect. Survey data seems unreliable and of course backward looking geopolitical shocks can upend your game plan at any moment. And finally, the tools you have are blunt instruments with a significant leg effect. Add the fact that your boss, in this case, Donald J. Trump, president of the United States, can't wait to replace you and has even threatened to break historical precedent and fire you. Well, not exactly a confidence builder. War in the Middle East. Threat of stagflation and rising oil prices all forcing you to keep your foot on the economic brake. When are you no friends? And with the very real possibility that you are wrong, it's not just your legacy on the line. It's the economy, markets and every portfolio tied to them. Failure is not an option. That's the challenge in front of the Fed and Jay Powell. The war between President Trump. NJ It's real, but it isn't just personalities on the line. The president is looking for a window to refinance. Trillions in debt coming due. More than 9 trillion comes due over the over the course of the year, with more than half of it that has to be refinanced before July. Any easing of policy would save billions. Now, Jay insist he is in a political animal, but he lost the moral high ground in 2021, clearly holding on to a thesis put forth by the Biden administration that then rampant inflation was transitory. We can't know for sure, but it sure seems like he was telling the president what he wanted to hear in order to secure another term as Fed chair. Nevertheless, here we are. And what do Fed fund futures tell us now? Let's take a look. Well, it doesn't look like Trump is going to get the answer he wants. September looks like the earliest and at 60% probability hardly a lock. Conventional thinking right now is maybe one or two cuts before the year is out. JAY And most of the other members of the Fed want to see how the tariff picture plays out this summer. Inflation coming down is not going to be enough to get the Fed to move. Nothing less than soft economic data is going to get them to act sooner, forcing the Fed to defend the other side of their dual mandate. What's working, what isn't, and what's next are always front and center and at least for now, the air trade still dominates the investment positioning. I think everyone concedes that this is the biggest investment team in our lifetimes. I think our job is to decide if we are paying too much. Now, I wasn't sure where I heard this next phrase, but it came from Roy Marra, a scientist. A futurist. Was a marriage law. We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run. It's important we don't lose sight of the above when putting capital at risk. Now, for the moment, capital is still being deployed, and as long as it is, it means we are in the middle of an AI arms race. Think I'm wrong? Sam Altman, chairman, founder of Open Air Chat GPT, has told the press that Metters Mark Zuckerberg has been offering his employees 100 million. I'm going to repeat that $100 million signing bonuses to jump ship. That's serious money. I'm going to close today's podcast with the state of U.S. markets and what we can expect in the back half of the year. It's hard for me to make a case for a big push higher at the index level. Markets are rich, especially in the context of higher for longer rates. But underneath the surface, the spread between haves and have nots. It's massive. Performance this year. Not about the M&G seven. Not about small caps either. Let's make that clear. But in the middle, some pretty big moves. Take a look at this table. Despite a market that's up only a couple of percent this year, you have 125 stocks up over 20% in the Russell 1000 and none are in the MAG 718 up over 50%. On the other side, you have 131 stocks down more than 20% and two hour mag seven stocks, Tesla and Apple. What the tape is telling us is that we have to dig down and like I said before, find out what's working, what isn't and what's next at the sector level. Leadership surprising despite concerns about the economy. Industrials lead the pack. Communications and utilities close behind technologies there on the leadership board and doing better the market as a whole. But remember, these are market cap weighted indices. And despite being down more than 20% year to date, Apple is still one of the biggest companies on the planet. It puts a lot of pressure on the index. Apple, what can you say? Best is still waiting for the iPhone supercycle that never comes. Yada, yada, yada. We're going to get folding phones, liquid displays, and who knows what else. But unless there's some super secret project taking place on the ground in Cupertino. Apple has all but missed the A-Train. My prediction, tim cook will announce his retirement this year. It's time. He's been a phenomenal successor to Steve Jobs, a world class operator who took Steve's roadmap, his product roadmap to the Max. But Tim doesn't have the vision. Apple needs new leadership to take it to the next level, wherever that may be. A real visionary who can capitalize on the infrastructure that Tim has built out. If Tim doesn't pull the trigger, you can bet shareholders will. All right. That's it for this week. Don't forget, if you want to learn more about yours truly or the money, run or go to my substack site dcnelson123@substack.com. I'm David Nelson and this is the money runner.