Positively Sloped
Positively Sloped is where markets, culture, and momentum collide — because the most interesting things in the world are the ones trending up and to the right. Jake and Scott break down what’s moving — in the markets, in the headlines, and in your group chat — with sharp insights, real opinions, and just enough irreverence to make finance actually fun. These are the conversations we’ve been having for years — debates, hot takes, and deep dives — just now with a mic in front of us.
Positively Sloped
20. Iran Blockade Market Impact, Hot Inflation Data, & Q2 Earnings Kickoff
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Are the markets finally shrugging off the chaos? In this episode of Positively Sloped, we break down the latest U.S. blockade efforts in the Strait of Hormuz and what the WTI/Brent crude inversion actually tells us about global supply shocks. We also dive into the hot March CPI print and discuss what Q1’s earnings season has in store for the markets.
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On today's Positively Sloped, Neil and I are back in the studio to discuss the most recent updates out of Iran, how that's affecting the inflation curve from Friday, as well as what to expect from the upcoming earnings season. Before we wrap up by giving Neil his flowers for the Michigan March Madness win and talking about Rory's masters performance. All right, let's talk shop. Today is Tuesday, April 14th. Neil, welcome back to the studio. It feels a little bit like Groundhog Day where we're going to cover some of the same topics we've been talking about for the last month.
SPEAKER_01I mean, the headlines kind of have the same topics going, so makes sense.
SPEAKER_00That's true. That's true. We got a big inflation report on Friday, um, bigger inflation report over the weekend with Rory McElroy winning the masters. Uh oil is back in the news. The geopolitical conflict in Iran has got some new news to cover. So we're gonna get through it all today. All right. But let's uh let's start by reviewing the fades or trades that you and I did a few weeks ago. All right. Uh we've got some resolution on these, some that aren't. But uh so the first fader trade we did on our last episode was that the March Jobs report with surprise to the downside. You traded that. I faded that. I'm there's there's a theme coming up.
SPEAKER_01Same thing as trading. Like I went short. Yeah. I made money. Is that what we're talking about? No, you didn't make it. I didn't make money. Okay.
SPEAKER_00You said it would be surprised to the downside. Where there's a theme on this show where I'm kind of hitting on the fades or trades really well. Okay. But uh, I mean, the the numbers that we had, we had a huge gain in in March, uh upwards of 175,000 jobs. A lot of that coming from the healthcare sector. What did you see in that uh report?
SPEAKER_01Um, so obviously it was a big, it was a it was a positive number, looked big relatively speaking. I think if you look at the kind of the trend of the jobs number, it still wasn't really out of place. So it was a positive number that was good. We got a lot of it back from the the healthcare strike that happened earlier in the year. Um, to me, it doesn't get me super giddy about the labor market yet, but yeah, I lost the bet.
SPEAKER_00So you know, it's a it's an interesting number coming off of the February number, which like you've got kind of this double-sided edge of February was was brought down by the labor strike, and then March was brought up by the labor strike. So you kind of need to balance those two out.
SPEAKER_01Yeah, so I mean, I think when we do that, you still see a net positive for March, even if you kind of take March and February together. Yeah. Um, but again, I think if you look at it an overall trend, you look back over the last couple of years, uh, we still see kind of a cooling off in the labor market. So I think the upcoming numbers as the year plays out will be ones to watch.
SPEAKER_00Yeah. The second fader trade that we had was that the Fed uh trader fade with the with the Fed cut rates in the next two meetings. I think we both faded that. Uh March, we had we had nothing. April uh next week is tapped up to be a two percent hike, if anything. I think there's nothing.
SPEAKER_01There's nothing happening next week. So I I'm taking an early win on that, even if we have to wait till next week.
SPEAKER_00Yep, I would agree with you there. Third one, and if if it's loud down there, we've got a ton of action in uh down in the uh open cry pit today, um, which is interesting. Market was up you know 50, 60 basis points this morning. It's only up 70 now. I don't know what all the volatility is out there.
SPEAKER_01But uh, you know, they're probably uh sports are kind of quiet right now. I don't know, maybe they're best there is launch. That's true. Pits are always crazy inactive.
SPEAKER_00Yeah. And the third one we had was uh the Tigers win projection for the year. Yeah over 80, 85 and a half. They're seven to nine to open the season. Trust me, that's a great record. That's what the Cubs are. So it must be in a good position.
SPEAKER_01I mean, look, uh, these games don't, I mean, it's too early in the season. Games don't really mean it. Can't even start really counting games until June or July, and they don't really matter till September. So that's early. I'm I'm uh my confidence has gone down a little bit, but still okay.
SPEAKER_00Be all right. And then the last one that we discussed that you know we didn't have you on last week, so I gotta give you your flowers for. But uh national championship from the Michigan Wolverines shocked the world, boys. One seed, best team all year. They shocked the world.
SPEAKER_01It was uh that was awesome. It was awesome. It was it was uh wasn't quite the you know the final that we were hoping for. Um not a ton of drama for them. I mean, you know, yeah, we'll I we'll talk about them more when we talk about some sports stuff, but like uh I'm very happy with the win, of course, because of Michigan fan.
SPEAKER_00So yeah, let's dive into the to the current news. So uh the news out of out of Iran the last couple days, yesterday, uh the US initiated or uh imposed to initiate a blockade of the Straight of Hormuz um and and the ports in Iran essentially trying to you know stop any Iranian exports. Um we've got reports already this morning that though that blockade is not really in effect, there have been trades cut or boats coming in and out, China's getting.
SPEAKER_01I think if you look at that, yes. I mean, uh I think you look at it if you just did a quick snapshot of the headlines, yeah, there's still traffic moving in. I mean, I think if you break it down further, uh I feel like a more majority of the ships are probably entering the Persian Gulf, so they're probably not as concerned about those. I think one, what I saw from my headline read this morning, one uh Iranian uh sanctioned ship made it out. But yeah, a little clear. So whether it's working or not, yeah.
SPEAKER_00We'll see. Yeah. I mean, I saw I saw a Chinese ship got in on its second try. So we originally rejected it and somehow uh got in on the second time. But that that brings me to China. And and I I felt like this, and we were discussing this briefly uh yesterday, but I felt like this was the initiation of China into these negotiations, where finally, you know, China's been pretty much unscathed by uh what's been going on so far. We saw Chinese imports were relatively unharmed in March. So this I thought was the first thing to bring them to the table because now we're actually threatening them getting their oil exports. Uh so you think that the blockade is what's bringing China into the talks? I think the blockade and threatening, I mean, we we you know, there's about 35% of Chinese oil that comes through the Strait of Hormuz from various countries there. So if you're blocking it and they can't get a third of their oil, I think that that all of a sudden perks up Xi's ears a little bit.
SPEAKER_01Yeah, but they weren't getting a third of their oil. Like, I mean, yes, they were getting some of their Iranian ships through. I mean, obviously China's a big uh huge purchaser of Iranian oil. Uh so that relationship held and they were still getting flow there, um, but still only like what was that, 10% of China's oil needs. And a majority was still already blocked. So, you know, I think back, like if you think about the blockade, if you take a step, okay, why are we even in Iran? Like, why are we at war with Iran right now?
SPEAKER_00I mean, I think it depends on on if you if you take Trump's motive at face value that they were pursuing a nuclear weapon and they were close, or if you look for some ulterior motives that were trying to be uh strategic and this is an extension of tariff talks.
SPEAKER_01So to me, the whole thing looks very disorganized and reactionary. Right. I think if if you think about we've we've we've we've heard a lot of reasons of why we're at war, uh certainly the nuclear capability, which technically we obliterated last June. And epic fury. I looked up uh what obliterated means. Yeah. So I don't feel like it should be a threat right now. Or should not have been a threat in February, but apparently it that's that's been an excuse. We often talked about a regime change, which uh all we've managed to do there is kind of upgrade the regime to a newer version, younger version, yep, same ideology, same family. Yeah, same family exactly. Uh then it was are we gonna we're gonna try to make it easier for the Iranian people to topple their government and uh move more towards a democracy? But I feel like all we've done is uh really rallied the country around the anti-Western sentiment. And you know, especially when you have a president come out and talk about annihilating a civilization, which by the way, I don't think is really a Jesus move. So it's a doctor. That was him as a doctor. Okay, I mean I must have I had my fake news goggles on. I'll have to go back and look at the the picture, take my goggles off and see. But the whole thing obviously seems very reactionary. So I have my theory is that uh, and when I say reactionary, the blockade seems to be just another step of that reaction, which I'll talk about in a second. But my theory is uh, and see if you buy into this. So Netanyahu calls up Trump and says, I'm going to go on an excursion in the Middle East, and I want you to come along. Trump's like, excursions sound fun, you can use a distraction from the Epstein files I'm in. You get the uh the guys from the Pentagon in the room starting war planning. Somebody brings a discombobulator in for show and tell, and it accidentally goes off. And now we have a completely discombobulated plan on how we're gonna be tackling this in the least. And the while I actually think the blockade uh is probably one of the more useful steps is what we're gonna see, because it'll tell us now whether or not uh we we hear Heg Seth talking all the time about how we've depleted Iran of all their resources. Um and so this will be a challenge. Like if it comes down to if it's just heavy-handed talk in both directions, that's fine. We have the ships there. Um but if our Iran starts firing stuff, you know, we're we're gonna have to reevaluate. So I think we got a couple weeks here where we're gonna know if this is if if there truly has been some depleting of the resources in Iran, which case hopefully this thing would you know get onto a pathway for yes.
SPEAKER_00We we agree on on the blockade being, I I mean, I would say it's the most real step that we've taken. There was the threat of of the deadline last week that you know, if you're if you buy into Taco Tuesday, you knew it was gonna happen. Um it would have been uh, in my opinion, a bad move just for the world stage, obviously. Um and a pretty scary escalation. So we're at the point now where we're just trying to maybe control the economic standpoint of of this war. One thing's for sure that you just said, you know, this is not over in the next couple weeks. I talked about it with my dad last week. We talked about it a few weeks ago. I think when this all started, I was a little short-sighted, and you know, as many people were, that we were just gonna, you know, cut off their nuclear capability if they had it and be done.
SPEAKER_01Right. And I think there's a telling sign here too, like um, not everybody's on the same page yet. Not I mean for sure US and Iran, but even like, is Lebanon in the ceasefire or is it not in the ceasefire? And when the two allies that started the war can't agree on that point, I feel like there's still some friction that needs to be overcome in trying to come up with any kind of off-ramp to get to something that's that's peaceful. I think you know the blockade, we're gonna see if it causes some additional economic damage to Iran at some point. Uh the probably yield, but like I think it's risky. But I think for starters, US and Israel feel like I feel like I'm getting on the same page. Yeah.
SPEAKER_00It's been interesting. Uh we talked about this, but the impact that this is having on oil prices. And if you're an oil trader, you know, I my theory is, and this is this is 20, this is hindsight's 2020, but if there were people that lost their ass in the first week of this trying to trade directionally, it's become very telegraphed. You know, if you get if you get this big move down in oil, the the storyline has been you can bet that it's gonna bounce back because we're gonna escalate, there's gonna be another bombing, there's gonna be another attack, and okay, all of a sudden these these escalations are reinvigorated. And then if we get some sort of peace talk, you know, oil's gonna come down. I mean we so you can almost time this based off of a truth social tweet.
SPEAKER_01We I mean social. Certainly if you know 10 minutes ahead of time that the tweet's coming out, but we I think we talked about this on the last time I was on the podcast. It's just it's really a volatility play, right? Yeah, and these moves are big. Um, yes, again, if you know the tweet or if you can react the second you see it, you might be able to catch some of that wave. I mean, the markets are very fast. Uh, so you know, it's hard to like sit, read the article, absorb it, you know, check your watch, go to your Charles Schwab account and try to trade it. That doesn't work. But if you do some volatility plays, because it's volatile and it's gonna stay volatile, um, I think for a while.
SPEAKER_00Yeah. And one thing I talked about last week when my dad was on, but was the WTI and Brent relationship. You know, we talked so much about how we we are a big producer of WTI oil and how maybe we would be more insulated from a shock. That was a lot of that was a common take. Well, we saw last week WTI trading above Brent, and this uh what my dad talked about is this uh oil inversion, almost like a yield curve inversion where you've got this opposite effect. And he did say it tends to reinvert quickly, and now we've got both trading below 100 again. Brent trading a couple bucks above WTI. So back to normal standpoint, but you can almost bet this is going back up to 115.
SPEAKER_01Yeah, I mean, I think it's gonna, yeah, the$100 mark is the psychological point. I think it will it will cross back above. I think, you know, I mean, WTI is interesting. I think one thing, you know, uh WTI is available. So it's like when you have a supply shock, even though like I think a lot of people are questioning why are our gas prices going up when we're technically a net exporter of energy, uh maybe a net importer of crude, but but the idea being like we're okay, why are our gas prices above four bucks a gallon? Well, you have there's a global supply, and if you're a supplier and there's a supply shock that that doesn't cut your supply off, you're still gonna the price is still gonna elevate because people are gonna buy your oil. And so uh I think the WTI crew uh Brent inversion could just be a reflection of of easy access. And then and then when things settle back down, if this you know, straight certainly the straight hook opens back up, you see that put back around.
SPEAKER_00Yeah, I mean, I was in Trenton, New Jersey, uh, and my buddy played paid 440 for gas this weekend and was like beside himself. Yeah. Um we're seeing that come down. There's yeah, I talked about this at the start, I think, I think uh when it when you were on with me originally, but that uh there's a there's a week to 10 day delay between like oil prices and what comes through to the pump, just because you know, gas uh um distributors have their stock already in their inventory and they're getting it in every few days or so. So we'll see now that we're back up to 95 from where we were, back down to 95, how those prices reflect at the pump.
SPEAKER_01And to at the pump, too. I mean, I haven't checked this, but it feels like it rises faster than it falls. So, like even if you have the same crude price spike and then crude price decline, uh gas prices elevate quickly and subside a little. That seems like solid capitalism. I mean, if you're a gas station, probably got a good excuse to keep the price out.
SPEAKER_00Yeah, so we've got, I mean, gas prices are up, jet fuel obviously is up almost 100% this year. I mean, it's come down in the last week or so, diesel's up. Um, and now something that you spoke about originally, where oil is not just about gas and and um you know heating oil. It's it goes, it flows through the groceries, it flows through the plastics and fertilizers. We're starting to see that extended effect of this war on those prices. And and we'll talk about grocery prices that came out in in last week's report when we talk about CPI in a minute, but um, groceries are certainly at risk now for these increased prices.
SPEAKER_01I mean, it's it's a link, right? Oil prices go up, eventually, then fertilizer prices go up, and then you you got to have fertilizer to grow the world's food supply. So eventually the food supply, food, food costs go up. It's uh, you know, it's this indirect effect. So uh if if the stress lasts long enough, you can expect it to hit that third pillar.
SPEAKER_00So let's talk about the first signal that the stress is affecting prices. You know, we had February CPI. It wasn't the this escalation started at the end of February. So when we got the the Fed print in March, um, wasn't really contributing this to that number. March, we had CPI come in at 3.3%, which was hotter, the the biggest jump in the last three years or four years, but not out of uh analyst expectations. The number I was more interested in was the core CPI number coming in at 2.6%, which again, slightly up, but still below expectations. That that number excludes um food and oil prices.
SPEAKER_01And so things we care about the most, but understood.
SPEAKER_00But that showed that there, that this this inflationary um trend has not filtered through to the rest of economy and goods and services yet. It's really, really I mean, this is very sure short-term dependent right now, based on what's going on in Iran. And again, we we talk over and over and over again as this goes longer, that's gonna filter through more. But for now, pretty much just has to do with oil.
SPEAKER_01Yeah, I mean, that's right. Like when you think about inflation, there's a lot of flavors to inflation. And you know, you like kind of the the one everybody is really, really most concerned about is when you've got uh an economy that's heating up and you've got a ton of demand, so it's all that demand-driven inflation. That's not what's happening right. We have it's completely a supply shock. Now, uh historically, supply shocks shocks are relatively quick. Um, but you know, you never know. And and and we always like to think this time's gonna be different. Um, this is a case where we might not want it to be different. We might actually want it to be just a quick supply shock, but it's setting up to be a little bit of a haul here. And I don't know where that point is for like how long does this energy shock have to exist before things like like transportation costs and freight costs really start to play into not only you know the food and energy, again, it gets typically excluded when say the Fed's looking at an inflation number, but it matters to us because we still have to buy gas and food. It's one of the biggest expenditures or the biggest expenditure for households. So now it's really a matter of like how long does it take before it starts to hit those other and and those other elements, like and and when that happens, um, when we start to see any evidence of that, um that's it's gonna be difficult to because now you think about like how would you even address that? Right. And it's not you're not trying to cool the economy in that scenario. So it's gonna put Fed the Fed in a very awkward position, and you're gonna start hearing things like stagflation and so we've we've got the Fed meeting next week, Jerome Powell's last Fed meeting as we've been leading up for I feel like for years.
SPEAKER_00I think he is sticking out.
SPEAKER_01That would be awesome. I think he is sticking out to stick around for sure. I know it's not traditional, but who cares? Nothing about what we're going through right now uh is traditional, so hopefully he sticks around.
SPEAKER_00Agreed with that. And so we've got uh a Fed meeting next week on the 26th, I believe. Um, and like you said, the the nightmare scenario or or the difficult scenario for the Fed is if you've got high inflation and and low growth and that stagflation uh situation. So far, labor numbers and corporate earnings and consumer expenditures have really stalled any thoughts of that because we are still growing as an economy and we're kicking off earning seasons right now, and we'll see what that looks like. I know you're you know, speaking of national champion, the University of Michigan um consumer sentiment survey came out last week. Another basically all-time low in terms of how people are feeling about the economy. But as I've talked about, as as everybody kind of that's been weathered in this industry has talked about, that's really a good sign.
SPEAKER_01At least I'm definitely a contrarian when it comes to consumer sentiment, generally speaking. But um, but what you don't know is where the bottom is. And so it's like a a low can go lower, it can go lower, it can go lower. And so does that mean just because we're at historic lows, we're at at or near a turning point? Not at not at all. Uh, we could, you know, we could be weather this one for quite a while. So it's kind of that phase where it's like uh I think the consumer is right to feel a little bit on edge right now. Uh so that you're you're seeing that reflected in the confidence numbers. Uh it's when they when they really capitulate. That's when I would become contrarian. Right now, I'm kind of still on their side.
SPEAKER_00Okay. We talked about what we alluded to at uh in the open when we were reviewing our last phaser trades, uh, the Fed meeting next week and what they're likely to do. Right now, um, analyst pricing and just a 2% chance of a hike, yeah. Almost no chance of anything happening. And that is because of that conflicting data. I mean, um, but that's actually a good thing, I think, for the Fed is that they can remain patient. They don't have to make any decisions. Because it tends to be at least the last couple years that when they make a decision, it's been the wrong one. Yeah. Or at least, you know, the the open uh bond markets haven't seen it as the right one. So they will like all more than likely in it and next week do nothing again and continue to see how this plays out.
SPEAKER_01The Fed, you know, it's like a difficult, they have a difficult job, obviously. Um, I think when you look at the labor market, um, nothing really compelling for them there yet. Again, I do think there's some weakness creeping in, some softness into the to the uh labor market. We're obviously not losing jobs yet, but uh things are flattening out. Unemployment's kind of where I think a lot of economists and and analysts would expect it to be for uh an economy that's you know at or near full employment. So uh so nothing really there. I think it's I think they're probably a little more focused on inflation. And again, that's gotta shift to more either uh more demand-driven or broader for them to take, take, you know, take any action. Um raising rates right now probably doesn't do anything for that. Lowering rates, you know, they could probably lower rates, frankly, and not have a necessarily a big impact either way. But I think they sit still. Why not? You got to build an excuse. They're historically late because they have this such this tough job that um, and and it's it's it's easy, like you want to know what you you want to do what you should have done, right? And you don't know you should have done it until it's already. So it's like you got to deal with that. Yeah, there's gonna be a delay.
SPEAKER_00They're reactive, they're data dependent. I mean, what they're you know, they do obviously have forecasting, but a lot of the times they're taking in the last month or two months or three months and the trends of that data. So, yeah, more than likely they will sit safely, which um coincidentally is what I always tell people. You know, people like to say fly safely when you when you fly. You're not doing anything. So I say sit safely. I've gotten my dad on board with that, my whole family. Um, which you know, you and I are both very frequent flyers, but we do have we have that in common. We've got one crucial difference. Uh, I am a diehard United loyalist. You are a diehard American loyalist. I am a normal person, so I will fly American if I have to. I don't think you will fly United if you have to. I mean, what was the one experience you had that you always send me a picture of?
SPEAKER_01So I did fly United once. You were actually supposed to be with me on that flight. Um, that was the only reason I booked it, is because I wanted to complain in your ear the entire flight.
SPEAKER_00And then you I don't think you could have done that from first class when I'm in like 36th D or something.
SPEAKER_01I'm able to walk back a couple times during the flight, but obviously uh you ended up not being able to make that trip. So I had to experience uh United on my own. Of course, I went to the United Club. Espresso machine was broken. Can't believe that. It's like so that's pretty much sets my flavor right now. I can't believe that. Um I will okay, I will say the flights, those two flights uh were on time. Uh and I actually changed my flight coming back. It was relatively painless to make that flight change. Wow. Uh but yeah, I'm on I'm an Americanist.
SPEAKER_00So there's there's uh talks the last couple days that have sparked um from the White House and from United CEO about a potential merger between United and America. And I I hear that and I immediately Think antitrust lawsuit. There's no chance that goes to the world. You know, right now American is the largest airline in the country. They have about 22% of uh travelers every year. United is close behind at 18%. So you're talking 40% of the domestic airline market merging into one.
SPEAKER_01Yeah, obviously it depends like it's how you measure it, but even if you just want a market share alone, I mean if you look at United, American, uh Delta, and Southwest, I mean they're all around 17-ish percent market share. Um, I think I think maybe uh America's just over 17 and and United's maybe just under 17, but you you add those two together and you're looking at 35%. I mean, this seems hard that this gets to any kind of antitrust.
SPEAKER_00So I saw that I saw this.
SPEAKER_01Uh I will say, yeah, like who's gonna approve that? The DOJ is gonna be the first one to look at that, probably with some help from the Department of Transportation. And I gotta tell you, um, my confidence in the DOJ right now is not real high. So uh, and by that I mean doing what's right versus doing what maybe they're getting influenced to do. So um, so to be curious, I I think it goes nowhere, but we'll see.
SPEAKER_00We will definitely see. I mean, the the airline industry obviously was rocked by COVID. We're now five years out of that, but um, airlines, at least from a stock perspective, took a little longer to bounce back than most other industries. I mean, you know, I don't want to, I don't want you said you said purposely Americans a little over 17, United's a little under 17. That was obviously framed uh for that reason. So I will just say American Airlines stock, AAL, down 50% still since COVID. Uh and so this has been, you know, obviously we've got the increased jet fuel prices, but that's really a short-term, as you said, supply shock.
SPEAKER_01We can hedge that out pretty quickly. Uh so I I think that'll be a I mean, it'll mean higher ticket prices, but uh like for us, so that'll hurt. But yeah, uh it won't necessarily like it shouldn't be uh uh uh damaging to the business model.
SPEAKER_00And then there's there's also the last year we had a bill pass that uh airlines are now they cannot offer you travel credit. They have to offer you a refund if your flight is canceled or your flight is delayed over six hours or whatever it is. I think that's put more financial burden on the airlines to not just be able to say, oh, so sorry. Here's a$15 food uh meal voucher. Right. Um so you know it's interesting that they're even talking about this. I know. Uh and I don't know, you know, what United has to gain for it. I have an interesting quote here. I'm not sure if you saw this, but uh Captain Dennis Tasier, the spokesman for the Allied Pilots Association, which is the union that represents over 16,000 American Airlines pilots. If you didn't know that, um, he was quoted saying, We've been very open about our concerns regarding American Airlines financial, operational, and customer service underperformance under the current management team. I mean, that is just how I feel about this airline. I think I think if you fly American, you're asking to get canceled, you don't get any snacks on the plane, it's it's a bad experience. Hang on. And I don't always fly business like you do.
SPEAKER_01Right. But hang on. So uh, I mean, okay, we're gonna we're gonna take a slight uh you know divergence here, talk about first classes versus first class. American wins all day long. Yes, agreed. Right. Now, behind you know, timing, uh, you know, are you like uh are your flights getting canceled? Um I haven't seen the statistics, but um Yes, you did. I mean we've talked about this in previously. I haven't memorized the statistics. I must have intentionally uh blanked those out. Um, but yeah, I mean, you know, again, maybe I should spend some time flying United so I would have an informed opinion. Right. Uh and you know, quite frankly, United flies. I I do a lot of like regional travel, uh, not a ton of like long distance hauls. Uh so and United flies to a lot of my destinations.
SPEAKER_00So maybe I'll I mean that is that is the bread and butter of why I'm a United loyalist, is just the Chicago hub and then a lot of the locations I fly to. Otherwise, I'd love to be Delta, but they don't have anything in the Midwest.
SPEAKER_01Um I mean, you know, what like they these loyalty programs work, by the way, because one of the reasons I'm a big slave to American is because I I've I've been an American Advantage member for most of my adult life. And so the the establishment is there. Now I know some of the airlines you know let you do a one-time transfer, but you know, it's risky. Yeah. So I haven't done it.
SPEAKER_00Yeah, me neither. Um, and and so we'll see, we'll see what those earnings look like. I mean, I I'd expect the further we get from COVID, the better those those numbers are gonna look. You know, you've got people traveling. You go to an airport. I was at the airport for for like spring break week, and it was my McDonald's, took 50 minutes. It was the morning after a wedding, so I needed something greasy. Um, but it's it's jam-packed. Champagne, too much champagne. Champagne, yeah, too way too much. Uh it's uh it's it's hopping there. And so we've got we've got the start of earnings season kicking off this week with big banks. Um, we saw Goldman Sachs yesterday, Wells Fargo yesterday. Um, you know, interesting numbers coming from them. Goldman beat on the top line and bottom line, had a record uh equity quarter for trades, um, good solid investment banking quarter as well. Uh, but the number that I saw that would point to the downside was the increased credit provisions that they're accounting for. And up 10% year over year. Wells Fargo yesterday was up 21% year over year. That kind of goes hand in hand with the theme of this credit shock and the credit scare that we've been talking about lately with just retail investors and and private credit. But what does what do you know bank stocks usually tell us about the market for earnings season at least?
SPEAKER_01I don't know that they tell us anything. Okay. I mean, uh, I think they tell us how banks are doing. Um, but like I don't know that they're a good necessarily a good precursor for just the earnings season in general. I've not studied this in detail, but that'd be my thought. Like, there's no reason Goldman coming out with good earnings or or Wells coming out with good earnings would necessarily translate to tech coming out with good earnings.
SPEAKER_00Yeah, I would think it would relate to like the economic standpoint and the consumer a little bit.
SPEAKER_01Yeah, yeah, sure. But uh maybe, maybe I don't know. Like, um, you know, I think you talk about the credit provisions. Um, is that a bad sign? Is that a good sign? That's something to watch. I mean, obviously, I don't know. Uh, you know, a private credit has historically been kind of isolated from the consumer. I know that there's certainly vehicles, it's easier for them to access that, which by the way, that tends to be a bad sign. Yeah. When you have something, uh, uh, a market sector that's segregated from the consumer, uh, from the general consumer, and then suddenly there's these interesting vehicles and they get access, easier access to this asset class. Uh, that historically doesn't end well. But I don't know if there's a huge amount of like uh broad consumer exposure to private credit. Private credit, I think, is still gonna be more on the private side. Uh what do you make of the provision? I think it's just uh good planning at this point. Um, you don't know, like you can read, you can find certainly we've seen some some banking crises, right? Some private credit even just last uh was it a year ago? 23. 23. Wow, 23. Holy cow. It feels like it was just yesterday. That's in the rearview mirror then. We don't care about that anymore. So I think uh I think some of this is just kind of prepping. Yeah, and there will be some private credit stories and losses. Will it be uh systemic? It's I don't expect it to be anything like the housing crisis we saw in 2008. I mean, that was that was where you had everybody and their brother and sister and cousin and dog, actually, in some cases, had easy access to to that space and it blew up. Yeah, I don't I don't see I don't see private credit going that direction.
SPEAKER_00Okay. So the expectations for earnings season uh strong again. I mean, analysts expecting 13.2% year over year growth coming off of last quarter's 13.5% year over year growth expectation that exceeded. Um we've had six straight double-digit growth quarters um in the past four quarters, so the past calendar year, uh, according to facts at 80% of companies reporting surprise to the upside. So a ton of strength in in corporate earnings across the board. This isn't just tech heavy, it's not just mag 7 heavy or semiconductors, but uh what do you make? I mean, you you seem a little nervous about like I mean were you gonna say the word the B word?
SPEAKER_01The B word.
SPEAKER_00The bubble word?
SPEAKER_01No, no, no. No, but I don't uh not because I wasn't, but now I got in my head. But no. Um, so I think when you think about that, that that double digit growth, and 13 is probably one of the higher estimates that I've actually not seen 13, I've seen somewhere between 10 and 12. But um, I think it's not very well-known company. Uh the growth expectations are broad, but not every company is expected to grow 10 or 12 percent. What you see is that you know, the top five or six companies that they're gonna be that tech tech. You talk about is is this gonna be tech driven? I can tell you if it's not tech driven, it's not gonna be 10 or 12% growth. It's gonna be four or five or six percent growth. When you look at when you peel away those top uh you know, top five names, I think you're gonna see a growth expectation that's more like four to six percent. That's solid. That's not bad. Like we're they're not like so so even when you peel away the drivers, you still see some solid economic strength in those companies, but that headline number, that 10 to 12 percent, is still being driven by the 20 to 30 percent growth expectations of those top five.
SPEAKER_00Yeah, interesting. So interestingly enough, we talked about this last quarter uh on the show, and and just you know, Scott and I peeled away the Mag 7 from earnings to say basically what would be the over-under on earnings growth for the rest of uh the 493 or the 492. Did you do that exercise here? Uh I did not do it here. Okay, I'd be curious. So you've got so last quarter though, we had uh close to 10% growth across the rest of the 493. So the Mag 7 was uh I think 19 or 18%. Um, and the rest of the SP, obviously lower, it's cap weighted, but um held its own pretty well. Like we're still seeing double-digit growth across the board in specific sectors. Um it'll be interesting to see because you'll probably have oil and gas companies this quarter uh with some pretty exceptional earnings reports that'll pick up some slack.
SPEAKER_01Yeah, maybe.
SPEAKER_00Um so we'll see. I I think the the key thing though for me is is always guidance and not the actual headline numbers. And in the last year, year and a half, all we've heard the keyword of all earnings reports from CEOs and CFOs, tariffs, tariffs, tariffs. Yeah. I think this one it'll be Iran, war, uncertainty, Middle East, oil, um, whatever keyword you want to pin on. But I mean, we've kind of forgotten about tariffs.
SPEAKER_01Yes, we don't we shouldn't unless you buy into Trump's master plan. I mean, even before them, like so. I actually bought a uh, you know, as we highlighted, I think on the last podcast, I like to make wine. Um, and I actually recently bought a piece of equipment for the vineyard for the winery. Um, they explicitly line item like$200 charge for tariffs.
SPEAKER_00Was this the uh Croatian oak barrel?
SPEAKER_01No, it's Hungarian is preferred. But this no, this was uh piece of lab equipment. But the idea being that there's the tariffs are still out there and they're still being line itemed, and it's it's like it's still contributing to that inflation number, or will it like yeah, I I guess hard to assess what the impact is now, but you definitely see companies starting to open up and pass that cost on. But we forgot about it, like they were struck down. There was a lot of talk about refunds, which and that seems like it's gone nowhere, or it's certainly gone.
SPEAKER_00Well, that's what the war is for.
SPEAKER_01Okay, it's certainly gone quiet. And then, you know, we have obviously he still has that two threat tool in his bag with the with the you know the short-term tariffs that he can put in place. Uh, so it's kind of funny, like how we've forgotten, and and I think um they're still there. And if we can if we can get back on it and fix it, then uh that probably helps. Yeah. Even if it's not a headline.
SPEAKER_00Yeah, and I I think it's just something to keep an eye on for the next few weeks. I tariffs are still, I agree with you. Tariffs are still there, whether they're under the surface or on the surface, um, and whether you believe this war is in in uh regards to tariffs and negotiations or not, uh, still a big factor for these companies. And and I'd be remiss if I didn't add today, is the first day um since we we started drawing down on the markets in late February, all three indices are up for the year.
SPEAKER_01So Yeah, to cover the last uh seven, ten years.
SPEAKER_00To that point, if you something we talk about, my dad talked about as a even a trader in not day to day, but in the long term, but as investors as traders, if you just don't listen to the noise, right? If you're not if you're not using this money or drawing from this money today, right, and you're just investing for the long term, if you just checked your account on January 1st and you checked your account today, so you'd be even the number one proven, this is a fact.
SPEAKER_01I mean, this is not even this is 100% fact. The best way to lower the volatility in your account is to look at it less often. 100%. And and and if that tongue in cheek or that's not tongue in cheek, that's real. Like, and you'll see that because uh, you know, you you if you're if you're looking at it every day, you're seeing every daily, you just see that daily fluctuation. If you wait, you know, check it once or twice a year. Um, you know, obviously in our profession, we can't do that. We gotta look at it a little more often, but that's the number one way to reduce your volatility. And I think we talked about this in the last podcast, like sit tight. If you if you because if you don't have a plan, you get burned in scenarios like this. And and it's very hard for investors to have a plan to deal with stress like this. Better thing, go play golf, uh, go to masters, actually, you know, or whatever you want to do. But uh, but just don't look at your account for a while.
SPEAKER_00Yeah, and we I mean, this is the same discussion that we have with our financial advisors, too. It's like when you're making portfolio moves, don't base it off of a war in Iran, don't base it off of a short-term uh constraint or or escalation that's going on, right? It's about having the long-term plan, it's about seeing the long-term investment cycle. Um, and and it gets difficult. There's a lot of noise. There's so much noise. Um, but you have to be able to tune it out if you want to successfully invest.
SPEAKER_01Sometimes advisors can't help themselves, sometimes uh clients want to see it. So, like in even in that scenario, you can do it, just make sure it's in a small proportion where it doesn't have an it doesn't have uh uh a devastating impact if you get it wrong. Right. So, you know, another way of saying stay diversified and play in a corner, but that's so it works. Yeah, so why wouldn't you do it?
SPEAKER_00I mean it's proven, it's it's got a hundred years or so of of proven one one thing I wanted to get to that's a little off topic from our agenda, but um is is Bitcoin action. So I don't know if you've been following Bitcoin price over the last two months. It goes up and down a lot, but I you know I I kind of look at Bitcoin, I I I kind of think of it as the currency of chaos. Um, and surprisingly though, you know, Bitcoin's even over the last month, it's up to 75,000, it had dropped to about 60. So you've got a nice uh 25% recovery since the bottom there. But you would think with this, like when we saw Russia and Ukraine in 22, Bitcoin was going crazy because Bitcoin was all of a sudden going to be the world currency and the reserve currency, and every oligarch in Russia had to, you know, no more petrol dollars, liquidate right and go to Bitcoin. So I've been surprised that it hasn't spiked harder than it than it has.
SPEAKER_01I mean, look, as a uh as a as a fiat currency, I mean it I feel like we're we're still struggling to identify the use of for sure, crypto in general, but certainly Bitcoin. And so uh I just don't see it like yet. And I actually think when we do find out, it's probably not gonna be Bitcoin, it's probably gonna be some nuanced uh improvement of blockchain and to a different vehicle that uh assuages a lot of people's concerns about it. So it's not, I think the volatility you see now is going to be the players that are already in the market and they're they're playing their whims that they would play uh in any other stressful market environment.
SPEAKER_00XRP or Ripple gets all the hype as what would be the the leading candidate for a currency for reasons I can't explain. I just know that. Yeah. Um, but you you mentioned uh uh you mentioned going to the masters. Yeah. You catch you catch a lot of it this weekend? Any of it? I caught yeah, a fair amount of it, yeah.
SPEAKER_01It was uh oh yeah, we're moving into the sports section. We're moving into the sports section. Hold on, I gotta I gotta I gotta pay tribute. I gotta give you your flowers. Gotta pay tribute to uh to the masters. There we go. Basketballs yeah, baby. All right. I won't put the shirt on.
SPEAKER_00You you get to uh a Michigan playoff game?
SPEAKER_01So I actually uh so if you look at this hat, actually, I don't know if you can see it's a 2024. Ah that's a football hat. I spent all my money.
SPEAKER_00That was before they had the real tournament, though, right?
SPEAKER_01Well, hold on. No, uh let's not go there. But uh I spent all my money on tickets to the championship game. I took my went there with my brother, had an awesome time, it was great, but I didn't have enough money to buy a new hat. Okay. So I had to go with this hat. Yeah, but still says the same thing. Champions, baby. Champions. Yeah, it was a great, it was awesome. You know, I mean, to talk about the game for a second, statistically, probably the worst basketball I've seen Michigan play all season. Yeah, I mean, close to it. But um, but they that's their way, like they find a way to win every game. And you look at it, uh, I mean, what were they? They were two for a million in three or threes. I mean, it wasn't until the second half. Cadeau hits the like banger and barely went in, and then you know, McKinney is solid always. But uh just you could have built a stadium with the bricks that they were throwing up, but and and and yukon controlled the game. Um, they got in foul trouble, UConn did, and that that would that Michigan ended up with like 12 or 14 more free throws uh and made a good portion of them. And when you win a game by six, that's the difference. And it was it was a blast to be there, though. Great energy, awesome. I loved it.
SPEAKER_00I mean, at one point, um, and I and I'm gonna take credit for this. And in January, I said I thought the key to Michigan winning the national championship was they had big guys that could shoot free throws. At one point, they had made 17 straight free throws. That does not happen in college. I mean, that barely happened to the college. Yeah, that's Steph Curry numbers right there. They were, and then the deep on the defensive side of Day Mara and and Mo John uh Mo Johnson were, I mean, I I felt like they had 12 blocks. I looked the next day, it was six. Yeah, I thought they had to be a little bit more than a lot of making them in the T.
SPEAKER_01Like you know, you get these because Yukon is not a they want to slow the game down, right? But every time they get a couple breakaways, they you think it's a wide open and then and then it gets blocked and goes down. The other one gets blocked, and then like this chaos ensues for there were guys on the ground the whole time, I mean, diving around. Kudeau looking at like Kudeau. Uh he I was like um always a little bit skeptical of him early in the season. Uh I liked him, but uh, you know, I was glad that they picked him up from uh where's North Carolina. But uh he just seemed like he could get at times careless with the ball. Yeah, uh, but have him come back and be the point leader and making it was maybe only five or six assists, but still the guy like he was a game changer. That was just fun. He's back for a senior year. They just signed him already. All right, awesome. I didn't hear that.
SPEAKER_00Yeah, that's cool. On to the Masters.
SPEAKER_01Right.
SPEAKER_00Uh ended up being a pretty entertaining final round. Um, you know, Rory had had the biggest 36-hole lead uh of all time at the Masters. And thankfully. Six strokes, blew it on Friday uh on Saturday. You had to give us a little Cam Young catch up, Justin Rose caught up, Scotty was lurking as always. Right. Um, and then Sunday, Rory was three back within three holes.
SPEAKER_01Yeah, and it was like, oh, you know, I think for me, what I think the uh defining one of the defining moments of the tournament was actually when Justin Rose missed his eagle putt on 13 and then ended up three putting a par. Yep. Like because he was he puts that in, he's back by one, you know, pressure's on. Like I think that I think that miss kind of deflated, almost deflated the rest of the field. It seems like, even though they didn't know about it, it just seemed like uh that miss, and then Rory guts out a couple of great shots, uh great putts, and you know, ends up with uh two strokely injury.
SPEAKER_00That that that defined the the last round of the tournament. I mean, Rory was 12 under through Friday, ended 12 under to win it. Um, but on Sunday, like you just said, you know, Rose was burning edges. Cam Young couldn't make a putt to save his life. The only guys that were making putts were the guys six, seven strokes back, like Tyrrell Hatton, Kal Morikawa, Scotty, and ultimately, you know, it comes down to Scotty on on 17, misses a birdie putt by literally an inch and a half, and then he ends at 11. Rory ends at 12. I mean, that would have been like the most epic ending ever. If you get world number one, world number two, winners of the last four of the last or four of the last five masters now, so three of the last four at the time, right at it in a playoff, that would have been epic.
SPEAKER_01Yeah, yeah. That was still uh you know, great finish. I mean, they're always more fun to watch when they're excited like that. Unless you got you know a bet on the winner, then you want maybe small engine, but yeah. But yeah.
SPEAKER_00Yeah, it was it was uh a great tournament. Golf's in a in a great spot. I love talking about golf.
SPEAKER_01I feel like on a Rory, like I was happy Rory won. I mean, obviously puts him in a league company now as one of what four guys, three, four guys that one back to the guy. Um, and and you know, like a lot of people, it's weird because you feel like a lot of people don't like him. But then at the events, everybody's cheering for him. Everybody in the locker room likes him. I mean, he he seems I think you know, I like him. I like him actually. I liked when he was uh anti-live. I mean, he might have been a little bit aggressive with that stance, but I liked it. I feel like I'm a traditionalist. I like like to see you pay homage to the to the way the game was played, um, and you know, the and and and the meritocracy of it, um, you know, versus just getting a big paycheck to go play. So I was behind him on that. And I, you know, I know he's he's he's uh can be can be polarizing, but uh I'm I'm a fan.
SPEAKER_00I never understood the hate. I mean, I personally I felt the same way about the live thing. I was like, whatever, dude. I mean, you guys already have generational wealth. I who am I to knock somebody for going to take$400 million to go uh work less? But uh I love that he stood his ground. I love that he was the face of the opposition there. And then you could just see, like over the course of the three years since then, him sort of chill out a little bit, probably because he got that big payday from the framework of the merger from Livid and uh the PGA. But um, he's a great, a great face, a great ambassador for golf. Like it's great to have him playing well again. Um, but I felt like there were so many guys, there's so much good, there's so many good players right now. Um, what did you make of did you see the story that he had done like 10 practice rounds leading up in the two weeks leading up? So he would flip so he would drop his daughter Poppy off at school, right? Take his private jet from Jupiter, Florida to Augusta, play golf, and then come back for dinner. And he said that on Friday, and I was like, that people hated that. I mean A win the masters. That's that's the that's the argument you could make, but win the masters, and you have the same advantage, right? Like, yeah, you know, it's not unfair.
SPEAKER_01Yeah, no, I mean that's uh that's a hell of a travel schedule. Uh yeah. Well, I don't know what the flight time is from Ireland to lives in Jupiter, Florida. Oh. Well, he showed me in Ireland. Probably fifth. Everybody in Ireland loves him too. Yeah.
SPEAKER_00Well, they kept showing that shot of his home golf course, yeah, and these like 18. Old's drinking Guinness looked awesome.
SPEAKER_01Yeah.
SPEAKER_00Yeah. So Cooper Floor is a little closer.
SPEAKER_01A little closer. Probably 50 minutes about it. Yeah.
SPEAKER_00Yeah. So Rory goes back to back at the Masters. Um, we'll be back to back with another episode next week. That's it for today. Thanks for joining me. All right.