00:00Let me just ask first your take on the markets having hit all-time highs again on Friday,
00:06and it's been an incredible rally this April, even though we're in a war that feels like
00:12it's starting to turn into a quagmire, right? It could be a ceasefire where we just shoot at each
00:18other for the next, hopefully not, you know, 10 years. But what does it mean to you in terms of
00:24markets? I mean, there's a huge disconnect between the foreign policy and military types
00:29and the investors. When I get on Council on Foreign Relations calls with my colleagues there,
00:34it's pretty dark, right? The Strait of Hormuz, even if there's an agreement tomorrow,
00:39it's going to take weeks and weeks to open it up, another few weeks to normalize shipping,
00:44and it could be years before all the damage, especially in places like Qatar, are fixed.
00:49So there's that time lag. But then when you look at the investment community,
00:54they're looking at an economy in the United States that's still growing around 2%,
00:58so maybe a little bit below potential, but decent. Unemployment rate is still relatively low.
01:03The labor market's stalled, but it's not deteriorating. Consumers, especially at the
01:07upper end, is still spending. And there's buffers, right? So we have a buffer in the form of tax
01:13refunds helping consumers. We have buffers with all the strategic reserves being used to keep the
01:18oil prices from rising further. As long as that's all in place, and of course, you just mentioned the
01:23structural technology story, people feel okay about continuing to have their money to work.
01:28And the question is, which one of these things wins? It depends on how long the Strait is closed,
01:34right? The buffers will be pushed down. The tax refunds are finite. The inventories being run
01:39down on oil are finite. So it's a matter of time. If we can reopen the Strait quickly,
01:45we can get through this with relatively small hits to global growth. The longer it lasts,
01:50the greater the risk. But we're seeing it already. Germany just cut its GDP forecast by half.
01:55Asia is already rolling out emergency fiscal measures, rationing. Thousands of flights around
02:01the world are getting canceled because of jet fuel. So it's coming. It's just not here yet.
02:06So I wonder how much the AI CapEx story, which seems to be driving these markets, is going to drive
02:14our
02:14economy? Because we talked about the numbers. They're absolutely massive. You've got the one
02:20big, beautiful bill that's, I imagine, helping to drive that, right? Are we set up for not just a
02:28data center build out, but also a manufacturing resurgence?
02:33I mean, we are seeing manufacturing surveys improving, and it's all the data center and AI
02:39adjacent businesses, small and large cap benefiting. The question I'm asking is, let's get to the next
02:45leg of this, adoption, right? So we have the development of AI, and that's supporting growth. But at a
02:51certain point, investors are going to want to see revenue. They're going to want to see data showing
02:55that more companies are adopting AI and starting to get that productivity benefit. Those numbers are still
03:00really low in the United States. And to me, the most concerning piece is that if you look at surveys
03:06of people around the world, advanced economies, including the United States, are much more negative
03:12about how they view AI affecting their own personal financial fortunes. So they're worried about losing
03:19something, losing their job, having lower wages maybe because of AI. Emerging markets are much more
03:24positive. They see this as a way to leapfrog and have better growth. But if you have a population that's
03:29overall cautious about AI, how quickly will that adoption roll out? And if that goes longer than
03:36expected, that alone could be a hit to some of these companies. I mean, the real question that I
03:41keep asking, I guess since this war started, and the way that the circle has to get squared is,
03:48we still see on the financial side earnings expectations so strong. I mean, double-digit earnings
03:55growth throughout this year, right? I'm looking at expectations for S&P earnings at $328 over the
04:03next 12 months. On the other hand, I would imagine oil is a huge input in terms of cost, right?
04:09So
04:09when those buffers get drawn down, how much is that going to hit earnings expectations in the U.S.? And
04:17also, I mean, worldwide matters because S&P 500 companies count on foreign purchasers for like
04:2440 percent of their revenue or something massive like that. Yeah, right. No, we are exposed to the
04:28rest of the world to a degree. So it will matter. And again, I think the clock is ticking and
04:33we
04:33probably have a few weeks. I do think it's hopeful, the news we heard overnight, that Iran is considering
04:39opening the strait. If they can, you know, start moving away from uranium in the short term,
04:44I'm not sure if the administration would go for that. But if we don't see that happen, I agree
04:50with you. I think you're going to see earnings expectations, especially for sectors that rely on
04:56energy, food, fertilizer, any of those derivative products. I think those earning expectations will
05:01start going down very quickly. Remember, we both lived through Brexit. Go back a decade. The market was
05:07fine, fine, fine, fine, fine until the day before the vote. The day after the vote, things collapsed. I think
05:13sometimes investors say, OK, I know there's a probability out there, but I don't know how to
05:18price it. But then when the event is confirmed or you see more evidence of that risk, then you get
05:23these sharp corrections. I'm not saying it will happen, but I think that's the risk. Well, you
05:28perfectly guessed my next question. I was going to ask why strategists are still so bullish, given that,
05:33you know, it could happen that the Strait of Hormuz remains closed. Remember, we're not the only ones
05:38who get to decide, right? The Iranians also have a vote here. So even if President Trump says,
05:42all right, I'm done with this, let's open the Strait of Hormuz again, the Iranians could say no.
05:48Right. And they have realized now what powerful leverage this is for them. Originally, they thought
05:53uranium was their leverage. I think this is as powerful or maybe more so in terms of getting what
05:58they want out of this. And it's not clear that they're going to be able to strike a deal quickly.
06:03And again, reopening the Strait isn't the matter of a handshake or a tweet. It's also removing
06:08mines. It's normalizing processes. It's going to take a while.
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