The TRUTH About The War In Iran: The Worst Crisis in 30 years

0:00 Did you know that every single American president since World War II has had a straight of Hormuz strategy? Ever since the Americans took the front seat as the world's dominant superpower, Republican, Democrat, it didn't matter. Every leader had a strategy for the straight of Hormuz. Because as we're seeing today, if you can control the straight of Hormuz, you have the ability to hold the entire world hostage. So I have one more question for you. If America is the most powerful country on the planet and has the most dominant military that the world has ever seen, how come they can't open that straight back up? My guests today are the crowd favorites, both Luke Groman and Grant Williams. And today we

0:45 go deep into all of the things that media and politicians are not saying. Now Luke and Grant are two of the most respected macro analysts and investment strategists in the business. And today we go deep. phenomenal conversation. I know you're going to enjoy this one. There is links to both gentlemen's newsletters beneath this episode. I strongly encourage you to check them out. But here is Luke Groman and Grant Williams on the J Martin show. Enjoy. >> This is J Martin. >> Well, here I am with Luke Groman and Grant Williams. Gentlemen, it's a pleasure to have you both on the show. I'm looking forward to this. >> Like I say, thanks for having us. >> Yeah, my my pleasure. So, uh, lots going on and lots to talk about. And, you know, the two of you, you both publish,

1:32 uh, with with consistency. Luke, you know, at least every week, grant every month. And whenever, and I get asked a lot, you know, from a new investor in the sector, where should I go? What resources should I turn to to get, you know, to to begin my journey in this industry? I always point to your two letters first, and I never miss them. And I was just sharing with Grant before we hit record here that I got into this industry, you know, metals and mining in 2011 when everybody else was leaving and all anybody did was leave for the next 10 years. And many times during that decade, I found myself wondering, am I just in the wrong industry? Maybe everybody else is right and this industry is done. And quite frankly, it was um it was research like yours, both of you, that maintained my conviction

2:18 that this was a cycle, that things would turn and allowed me to like remain steadfast in my business plan and my my portfolio. And obviously today, we're reaping the benefits of that. But it's really tough in years like 2014, 2017, 2018 when uh there was nobody covering our industry whatsoever. and you're wondering like, am I just spinning my tires and wasting a decade of my life building a platform that no one is ever going to care about? Anyway, so thank you for that. Thank you for your commitment to the sector um and the work that you do. So, I want to begin today by talking about uh staying a bit tactical, unpacking the geopolitical conflicts that we're watching. We'll focus on the Middle East and then get into some of the root causes, the true root causes, and then obviously the impacts that investors might feel and

3:04 how they should navigate. And I want to begin with you, Luke, and just ask you, you know, if I think about the main headlines that I'm reading and the statements from the American administration when it comes to covering the Iran conflict, there's a lot of consistent words, words like temporary and short-term. Um, short-term pain for long-term gain. Uh, we're winning. Uh, we've already won. We've heard all these statements from the administration. So, how do you interpret that? What are people misunderstanding? What's your take Luke? >> I think right now is both the easiest and hardest time for macro, maybe in my career, but certainly in a while. And that is because all you have to do, the only thing that

3:51 matters is, is the Straight of Hormuz open? Yes or no? And as long of that answer is no, we're not winning. All we can we can count up 10,000 targets we've hit in Iran. Counting targets is just geopolitical speak. It's a geopolitical equivalent of every kid gets a trophy. Doesn't matter because the world economy, if Hormuzis closed, the world economy is on the clock. And right now, we've probably got two or three week. We're already seeing supply chains start to really break down nonlinearly nonlinearly. Uh two to three weeks from now like it's over. The West loses the the world economy loses. And so to me, that's the really easy part. Every day I get up, I check my data feed, I've got

4:37 something that gives me a daily update on transits or moves. Is it still on the floor? Yes. Okay. We're one day closer to the worst possible crisis in my 30 years in investment research. Um, where it's also the hardest at the same time is exactly what you just said. It's so political, the fog of war, these pronouncements, but it's a really fascinating thing for investors, this sort of collective delusion. It reminds me a bit of co, right? It was like, we're just all going to get one shot and we'll be fine. We're all just going to get two shots, we'll be fine. We're all just going to get three shots, you know, and and no one ever was like the people were like, what are we doing here? same kind of of collective group think where there's something right out in the open of is

5:24 Hormuz open or not? If it's not open, we're not winning and we're moving closer to a really bad crisis. And it's there. It's observable for anyone who wants to see it. And there's oceans of ink being spilled sort of talking about everything other than that. And that's the only thing that matters right now in my opinion. Let me ask you a follow-up question then because another collection of statements we keep hearing from Marco Rubio and the president and and more is that United States has the most powerful most innovative um military in the world and that's probably true. Um so therefore why can't they get the straight back open again? Exactly. Right. like

6:10 we dropped more bombs on Vietnam than we dropped on Germany and and and Japan combined 20 years earlier. I think morbidly we killed more Vietnamese than we killed Germans and Japanese in 6 years of war. And yet we lost. And so exactly why why isn't the straight open yet if all of those other things are true? And on some level, I'm sure they are, but there are dynamics, you know, something I've been talking about all year with clients and even before is this is going to be a super important year to look for the dogs that don't bark, right? As the old uh sir uh uh um the old uh uh Sherlock Holmes,

6:56 right? Uh Sir Arthur Conan Doyle, you know, the dog that doesn't bark. Look for the dogs that don't bark. And as Charlie Mer said, invert. Always invert. So, I would ask you to invert and look at the dog that doesn't bark. We're the most powerful military in the world. We can do whatever we want whenever we want. Why isn't it open? And there's a number of different potential reasons for that, ranging from the uh relatively benign to the fairly serious to the potentially existential for the global economy. US dollar hegemony and other things. >> So, so Grant, I'll pass it over to you if you have any uh things to expand, any

7:42 statements to expand on there. And you know, one thing we are hearing from both sides is that the other side is almost out, right? And it seems to be a bit of a race. Uh are we going to run out of missiles from Iran or interceptors in the West? And both are making the claim that the other will run out first. Um what what's your take, Grant? Well, I think we're all trying to boil this down to the the simplest thing we can because there's just so much noise. And I think what Luke said is absolutely right. You know, the straights of hormuse is the most important thing to focus on now. Um, but I think for for for those of us in the west, what we're what we're getting here is a crash course in understanding that propaganda is something that every government uses. you know, we used to believe that it was a Russian thing or it was a it was an

8:28 Eastern European thing that propaganda was what these evil governments used to try and, you know, sell messages to the to their people. Um, and you know, today with with with the with the alternative media and social media and all the other things, stuff's getting called out in real time. And and I think the the struggle that I think a lot of people are having is this realization, this dawning awareness that, well, hang on a second. the things that we're being told from the White House now and from 10 Downing Street and from wherever else is actually in real time being debunked. You know, this thing Trump said we're having talks with the Iranians and the Iranians are out saying we're not talking to anyone now. The Iranians could be lying, right? But what I think we realize now is that we can't just go

9:14 ahead and believe everything we're told from the guys on our side, the good guys. And that's a really difficult realization to come to because it used to be that you felt like you could rely on one source of information and that source of information was the reality and everything else you could discount. Once you don't have that luxury once you can't discount anything it becomes a real problem. And and you know for me what I found helpful through this whole process which is not easy to do but that is to somehow keep a completely open mind about what's going on and not fall into the US is definitely winning camp or the Iran is definitely winning camp. It's okay to lean but you have to you

10:02 have to listen to the people who contradict that and you have to hear the other side of this these stories. to your point, you know, Jay, in the question about, you know, we're almost out, we're out of interceptors, we're out of missiles, both could be true, neither could be true. We will never ever know until, you know, the missiles stop and the incoming missiles keep going and the missiles don't go back the other way. That's the only way we'll know. So, um, it's a really difficult time. And so to to focus on the short-term fluctuations in prices in all kinds of things that are being moved around by this is the purview of a very experienced trader and nobody else. Like if you are not an experienced and highly competent trader, you should be anywhere near markets right now. You really

10:48 shouldn't. you should have your long-term investments or cash if you really don't feel like you can look through this because the one thing we know is this will be resolved because this one this fight is way too important to everybody and it does affect everybody. So that if you're going to shut the global economy down, everybody isn't a stakeholder in getting that sorted out. And yes, the Japanese have been saying how they've got 200 odd days of oil in their SPR, so they're okay if the straight doesn't get open for 9 months. I promise you, if it's closed for another two, the Japanese are going to start getting antsy, as will the Chinese, as will everybody. So, for me, it's a case of, okay, uh, oil's spiking, is it going to stay at 10 whatever for 6 months? It can't. You know, Duneberg's

11:35 written a lot about this and he's right, it can't because the world doesn't work like that. So, if you're a really good trader, this is this is heaven for you. If you're not, try and stay as far away from it as you possibly can and and be in things that you either have a very secure long-term uh uh roadmap for or cash. I I I mean, between the two of those lies an awful lot of pits full of crocodiles. >> Yeah. Right. That's that's interesting. And and let me I just have to ask then because yeah this conflict does hold the entire world hostage. So everybody has a dog in this fight right whether or not you're able to do much about it uh is another question but it impacts >> well Jay actually interestingly sorry to interrupt but interestingly the the the

12:22 only stakeholder who is probably least affected by this ironically is the US. I was talking to um Marvin Bath yesterday about this exact thing and and he was saying that you know it it used to be that we all understood what victory was in in a in a war like this. You go in regime change stable pro-western democracy you leave. That was always the goal. It hasn't worked out so well in many of these adventures but that was the goal. It was very clear. We all knew what we were aiming for. And Marvis Bath was this time around they go into Iran, they cut the head off the snake. If they leave chaos in their wake, it's not necessarily the US's problem. They are energy dependent, independent, they don't need to worry about the chaos they leave behind. They get rid of the the

13:07 regime that was so anti- them. Um, and it's somebody else's problem. And based on missile range and all kinds of other things, this is a major problem for Europe more than it is the United States. So whilst everybody does have a stake in it, that the one who can ironically walk away probably the cleanest is now America. >> Yeah. Energy independence, lots of fertilizer inputs coming down from Canada. Uh if you're going to be trapped on a continent, it's probably the best one to be trapped on, I suppose. You know, do either of you have a take on what the initial intention might have been? Was this? You know, there's a lot of hot takes in media. US was coming off a quick win in Venezuela and maybe made some assumptions about how fast a similar goal could have been

13:53 accomplished in Iran. Obviously, very different picture, bigger country, bigger population, different ideology. Most importantly, you've got kind of a cartel versus ide ideological government. But, you know, I I feel like I'm seeing some backpedaling from the American administration leading with the president and maybe looking for an escape route. I don't know if there is one at this point or any good ones, but Luke, maybe back to you. Do you think there was a misunderstanding when the first step was taken that this could be a short-term win, another celebration? What's your take? Or was there is there has there always been a bigger game at play here? And if so, what the heck is it? >> Yes, I think they absolutely miscalculated. And the reason I think that is I've been getting pinged by guys on the ground in the Middle East that are getting uh communicates from

14:41 the US military saying bear with us while we try to build the plane and repair the plane while it is flying as events unfold. So yeah is right. Um, when I hear widespread evacuations of US personnel two weeks ago from everywhere from Cairo to Jordan to Adana Turkey um, friends, families, loved ones of different personnel. When I hear evacuation of US security services across the Middle East, there is a

15:27 situation there. And and when I say, well, why is that happening if this is going to be over quickly? And the first question is, wait, you guys aren't hearing how bad we've been hit? And my reply is no. No. Like I hear the fifth fleet base at at Bahrain has been very heavily damaged. Very heavily damaged. Not a word about it here. That's just one example. And so when I hear these things on the ground from people that are there, I've got, you know, 30 years experience in investment research. And it's it reminds me so much of 4Q7 where we were doing survey work bottoms up from these, you know, any given one of these contact points. Wall

16:14 Street would have laughed at us who we were talking to. You know, you're talking bad debt collectors, you know, they just like and yet they were the ones who absolutely saw it first. And if you waited their pronouncements over Goldman, JP Morgan, Deutsche Bank, Fed Chair, Bernani, the president, everybody, they had it right first. And the S&P was still at an all-time high when they were saying these things. And yet, the banking system was collapsing within 3 to 6 months. It's very similar. guys on the ground, and there aren't that many of them. Guys on the ground in the war zones are going, "This ain't going as well as we're saying." The planning that they are now ascribing or trying to ascribe after the fact that, "Oh, yeah, this was

16:59 going to be 8 weeks, 6 months, 2 years. Yeah, we were always going to have boots on the ground. Yeah, we had all these." They No, they didn't. They didn't. And markets are completely um you know markets are completely uh um complacent to this. You know they're completely pl completely complacent to the fact that a vast amount of our strategic radars have been blinded have been destroyed. They're completely complacent to the fact that the Russians are in the fight that that apparently 3 days after we started hitting them, the Russians who had missiles lobbed at them by the Ukrainians that we were helping target uh in 2024, if you recall, we were we were bragging about how we were helping

17:44 the Ukrainians target Russian targets inside Russia. The Russians wouldn't take the bait. Instead, they essentially said we reserve the right to respond when and where and how we see fit. Well, once we and the Israelis attacked Iran, they started responding. And so you again between the lines, you can see these things. If you read the mainstream media, you've heard surprisingly accurate. The Iranians have been surprisingly accurate. Look at all the things around the Gulf the Iranians have hit. This has surprised analysts. Yeah, it surprised them. And you want to know what surprised them? The Iranians apparently only have two satellites, but the Russians have been using their satellites, which are very accurate to the point where they're flying drones into Western

18:30 um agency people's windows and killing them as we were doing to them. And so when I back up and I, you know, the question is, was it a miscalculation? Yeah, they thought we could go in, do a Venezuela, and away we go. And what markets don't seem to realize yet is the Russians are involved. Like Grant said before, this is too big for everybody to just walk away from. >> And so, look, the Russians have outproduced all of NATO 4 to1 in Ukraine on an absolute basis. Not not relative, absolute basis. So, every day this goes on and Hormuz stays closed, Japan gets weaker. That's one of our industrial base. Europe gets weaker, our

19:17 industrial base. We don't have an industrial base to replenish. We're going to run out. Meanwhile, the Iranians who are running out as well. The Russians are getting stronger. They're getting more money. Our Treasury Secretary has had to unsanction Russian oil as we are admittedly writing that >> jujitsu in them. Luke, he's too Yeah. He's Yeah. If If you want proof that this was not planned for, look at Scott Besson's interviews over the last three weeks. the Treasury Secretary of the United States unsanctioned Russian oil and then he unsanctioned Iranian oil in a war against Iran that is being backed by Russia and he's trying, you know, this is what I mean like they're they're pissing down our backs trying to tell us it's raining just like they've done with Doge, just like they did with

20:03 Liberation Day, just like they did with COVID. And so again, now look, if the S&P was down 50% and US 10-year Treasury yields were 5 a.5%. I'd be like, "Hey, this is all priced. Great. Let's let's start let's go shopping. Markets are in freaking la land for what I know relative to what they think is happening. And so yeah, no, they they absolutely did not plan for any of this to go the way it's going. >> There's a quote at the top of uh Grant's most recent newsletter that says, "A fanatic is one who redoubles his efforts when he has forgotten his aim." And I kept on coming back to that as you were speaking there. >> Kind of hits the nail on the head. So, you know, and as as I'm listening, Luke, and you mentioned that the biggest winner or the safest uh country, I

20:51 guess, in this conflict might be the US just given their resource abundance and geographic location. But the next two, could that be Russia and Iran? I think Russia's like doubled their oil revenue since this conflict began. They've gotten a lot of sanction relief. Iran as well, I believe, is exporting more oil than before the conflict from like 1.1 million barrels a day to 1.5 and selling it nearly double the price. Um, and those seem like number two and three in terms of like coming out on top in this conflict, which is kind of ironic. What's your take? >> I would say Russia absolutely, but I wouldn't say Iran. I would say China. >> Um, you know, again, another one of these dogs that doesn't bark. You know, how many times have we read in the last three, four weeks that, >> you know, this chest thumping, we now

21:36 control China's oil. We control the straight of Hormuz. We control China. Yeah. China's the only nation that's sailing boats in and out of there. And so, let me offer another dog that doesn't bark. If we're so powerful, why aren't we shooting at the Chinese? Why are we letting them through? You know, we shot in an Iranian ship as it was coming back from this Indian military exercise 3 weeks ago. sunk it. So presumably these these uh Chinese oil tankers are sailing right by. And I can't imagine I mean I've never been a a naval a sub a submariner, but I'm can't imagine hitting a a VLCC with a torpedo is very hard to do. And so if China's losing and we are the best,

22:21 we have all the power in this relationship. Why aren't we sinking Chinese ships that are that we're going number one and oh by the way in Chinese yuan so we're helping them set up a pro yuan which is really a petrol gold system which the petrol gold might be in our interest we can touch touch on that later but now I just saw today Costco the China China container shipping has reopened um uh shipping into the Persian Gulf. So now they're shipping stuff into every port in the Middle East. Now do you think there's any chance there could be weapons in those containers? any at all? >> I bet there would be. So again, why would the Americans let that happen? >> I I don't know. But the answers range from inconvenient to the narrative to

23:09 existential for a number of different things. >> Yeah. Okay. We've gone back to the benign to existential. I want to maybe push that question to you, Grant. My my knee-jerk reaction response would be like, if if I've got a gun pointed at you, you're not going to sell me the bullets. That's why the US can't get into a direct conflict with China. But Grant, what's your take? >> Well, look, we we we know that there is tension between the US and China. This is probably not the right place to to um to to let it manifest. I mean, Luke's right. The questions Luke asks are absolutely the right ones. But right, I mean, we're not going to we're not going to get the answers to those questions. I think I think the point about um the miscalculation is absolutely correct. I think Trump is a gambler and he's been on a real hot streak recently and I

23:56 think he's pushed his luck. I think he I think Venezuela went better than anybody could have thought. I mean, that was extraordinary the way that the way that went down. Um but you know, you just have to look at if you look at um a topographical map of Iran and you realize the impediments to to any kind of incursion into Iran, look at where the where the mountainous regions are, where the borders are, it it's basically an impossible place. How big it is compared to it's an impossible place. This idea of boots on the ground is a fast, frankly. That's not to say they won't do it, but it would be I mean, you know, the old thing about never invade Russia in the winter, never invade Ran Iran ever would be would be close behind that. But the the problem

24:41 with having a gambler at the helm, particularly one who has been on a lucky streak, um is he pushes it too far and hasn't had a loss for a while. And so, you know, I just need to double down to to your point about that quote. Uh so, you know, we're in a dangerous place here. And I think the big problem for Trump uh as I look at it is that if he is trying to find this offramp as he if he is floating all this stuff out well we're talking to them and there's a 15point peace plan that we put to them and the Iranians do turn around and say to hell with you in your peace plan you know what's your next move at that point what do what do you actually do how do you punish them for not coming to the table it's a tricky one because any

25:27 punishment you level at Iran Now given what you've done already, if you elevate that punishment, it is going to affect the rest of the world and realistically it plays into Iran's hands particularly across the region with the amount of damage being done to the UAE and and Saudi and these other places that are getting to getting punished. Um, you're going to start to get Europe, I suspect, are going to get very kind of squeaky at what's going on there because they've they've now seen after that attack on Diego Garcia that they are well within the range of of Iranian ballistic missiles and their defense is shot and they and Trump aren't on the same page at the moment. So, it's that's what as I see it, that's the biggest problem. If if Trump is looking for an off-ramp and

26:13 the Iranians decide, you know what, we're going to make him sweat a little bit longer, that's the point in this conflict that worries me the most is what happens if the Iranians don't come to the table and they decide to force Trump into into say showing how big and tough he is. That's the bit that scares me. you know, there is a there is a chance that um we do get negotiations, we do get a ceasefire, we do get this Pakistani moderated peace talks, which would be great for everybody, but um until we know that's going to take place, I I think we're in a very very dangerous part of the process. And and I'm certainly not expert enough to to call it. There are plenty of experts on on Twitter. Just Google hashtag Iran and you'll find them all. But um but it's I

27:00 think we're in a very dangerous moment right now, >> you know, and I I see that offramp is is tough when you look at the demands made from either side, the non-negotiable peace demands. I think from Iran, they want reparations, right, for the war thus far. And I can't imagine the US conceding that. But simultaneously, the US wants a full stop on arms production for 5 years. Now, if you attacked me and tried to overthrow me as the head of my household, and the only reason you hadn't was because I still have bullets in the chamber, and you say, "Okay, look, look, look, I'll back off. I'll leave you alone on one condition. You give me all of your bullets." Like, obviously, I'm not doing that, right? That's a terrible idea. So, they both seem like non-starters to me, which puts us in this weird situation where I

27:46 agree because every global economy has a dog in this race or fight. Everybody's impacted. Therefore, it will resolve yet the two main stakeholders are at this point of irreconcilable differences, you know. So, where are the biggest fractures right now? You mentioned a handful of economies that would be probably the quickest hit, right? Japan, Europe, maybe the the Gulf countries themselves. I think, you know, we look at the the strait being closed, they can't export oil. That also means they can't import food. They import about 80% of their food. The Gulf countries, Kuwait, UAE, Saudis, Oman, and treat 60% of their water. So, a very insecure location, but also uh a crazy high amount of foreign nationals. Like Dubai is 92% foreign nationals. And if you

28:33 look at all the Gulf countries combined, it's like 56% foreign nationals as the population. And that's not somebody in Oman who's from Kuwait. That that's outside of the GCC countries, which means more than half the population of the Gulf have somewhere else they can go. And if you're getting bombed, that's one thing. But if you're running out of food and water, that's a totally different situation. And you wonder about the population instability of that in that region as well. But when you look at the uh most vulnerable economies, the quickest to be hit, um Luke, I'll pass back to you. What's what's like front and center for you right now? >> Well, I think we're already starting to see it, right? I think you know, Australia's down to what 18 days of diesel. >> Um, you know, you're already seeing restrictions on Right. So you're in a

29:21 you know my understanding is Australia is a very big country with a very dry climate and you need diesel to move the the food and right now uh you're to replenish the stock piles. I think the nearest stores are Vladivosto I think I read which is a 10day sale. So the Australian government is roughly at 8 days until they start running out of diesel. And once they start running out of diesel, um, people who are starving don't go to work and export the iron ore and the copper and everything that they export into global markets, which by the way are already starting to be restricted by the collapse in sulfur coming out of the Gulf because you need sulfur to refined copper. So, you know, I would start

30:08 Australia. Yikes. I would totally agree GCC. Um, and that's if we don't get an escalation that hits desalination because the sort of dirty little secret is Iran has escalation dominance on uh desalination. You know, they only get 3% of their water from desalination. The rest of the Gulf, I believe, is north as 60 or 70%. So if Israel or the US push them too far and they follow through and they hit desalination, you're going to be having I don't know 100 million people in a part of the world is going to be hitting 100 100 degrees Fahrenheit during the day. Um you're talking about a humanitarian crisis. It'll be one of the worst in US in America in in world history. I mean you can go without water in those types of temperatures without dying I don't know a day and a half two.

30:56 >> Mhm. Um, so GCC, Australia, Southeast Asia, uh, I think I saw something earlier today. Taiwan's down to, uh, 17 days of LNG, something like that. Um, well, so guess what? You know, what's the market cap of Nvidia the day TSMC shuts down for lack of helium, >> for lack of LG? >> I don't know, but it's lower than it is today. What's the valuation of the NASDAQ? What's And so like we're in this moment in time that is very surreal. We're all we we can all look and see where Muz is closed. We can all look and see that our government is lying about their ability to reopen it. And there's different theories why that is. Some of them say there's some 40 play. Some of

31:42 it says they can't. The guys on the ground laugh when they talk about what reopening it would entail. um that it's that the reason there's no Navy destroyers there is because they would be sunk if they went in. But we we can see Hormuz is closed. We can see these shortages beginning to break out. Southeast Asia, um you know, fuel rationing Slovenia etc. And yet there is still this complacency that it's going to get resolved when number one, they're both very far apart on a negotiating standpoint. But I would point out we got into this war because I am told uniformly by everyone in the west that Iran is irrational, a suicide death cult. That death to America, death to Israel. There's no

32:29 negotiating with them. You have to kill them. And then they turn around and go, "Well, I'm buying stocks because they're going to negotiate. They're going to sit down. They, you know, it's not in their interest to, you know, lose a lot of money or lose their oil revenues." And you're like, "Wait, wait, wait, wait. You just got us into this war because you said they're completely irrational death cult blah blah blah. And now you're saying the irrational death cult that wants to kill us all is not going to kill us all because they're worried about losing oil revenues. >> One of those two is true. >> And so like I look at it as yeah there are some very clear immediate order of operations. Australia, Southeast Asia, GCC and really GCC Australia, Southeast Asia,

33:15 and then from there it's going to go like this. Shortages in Europe, bond markets collapse, stock markets collapse, bank runs. That's how fast it's going to go. And it two, three weeks, two, three weeks should do it. And if I'm the Iranians, because oh by the way, no one's looking. Everyone's like, you know, you talk about propaganda before the former head of commander-in-chief of the IRGC got on Iranian state TV two weeks ago and said they made a mistake. We can see their logistics. When we look at their logistics, we can see they planned on a short war. But now Trump and Netanyahu are stuck in a slaughter house in the Persian Gulf. His words, not mine. Our plan for this whole thing is we're going to collapse the global economy. We're going to send oil to 120 and we're going to wait and the whole

34:02 global economy will collapse and then we'll see how much everyone supports Trump the wararmonger. They're his again those are basically his words verbatim not mine. So you know for me I get a little worked up on it because yeah there are very clearly some yeah those guys are going to go down first and it's going to be like 72 hours before we go down. I don't you know it doesn't really matter. Um and like that's we are on the clock and people think well don't worry once Australia goes down it'll start being nonlinear. No the second they shut down Southeast Asia and no one goes to work or however they do it like they did in CO S&P goes no no bid right it goes limit down. NASDAQ goes limit down. Bond market goes you know limit down. Then then what do you do? You going to print

34:50 money to bail out the bus stock into a good shortage? And if I'm Iran, every day this goes longer, the better they're the best deal Trump's going to get is today. Tomorrow it'll be worse. The next day it'll be worse. The next day it'll be worse. I I just I'm I'm very very concerned. I want you to and and Grant um maybe I'll go to you next unpack that a bit more and so I understand the supply chain constraints that would occur, right? If Australia goes down, it's not Australia's problem because no one's getting any iron ore, right? Like every we're too interconnected for any major economy to go down and not have the next

35:35 one affected which affects the next one and the next one and the next one, etc., etc. um what simultaneously and and why does this matter so much would the impact be on the US financial market right when you look at these economies that'll strugg suddenly be struggling and need to raise cash to get another day out of their their energy their keep their lights on keep the food supply coming and um their wealth is stored in US financial assets bonds and equities and so that's probably a trigger moment that we could look for is this correct Well, I mean there are two components to this, right? There's the there's the domestic component and the import export component. You know, take your example of Australia. If Australia has to start

36:20 rationing fuel internally in Australia, that's a massive problem moment one. And and it changes the calculus inside Australia. That's before you get to the import export part. And every decision that's been made by that government is going to be driven by domestic issues. they are going to make export import decisions based on the anger that the public are feeling because they can't get gasoline for their cars. Suddenly it becomes a political crisis at home and domestic polic politics always trumps international politics at times like that. So you have to factor that in that all these countries are going to be forced to think internally outwards rather than what's our part as a good global citizen. How do we how do we which side do we need to be on in this to to to maintain our our

37:06 place in the global pecking order? That that changes overnight when you when people can't fill their cars up with gasoline. So, I think that's important um to understand. And um you know, as far as the rest of it goes, we've had a clue, Jay, the answer to your question in terms of financial markets, gold has given you a clue. Gold's the most liquid asset. Look what's happened to gold. Everyone's focusing on the gold price. Oh my god, the gold price. Look at what it's done. It's gone. worst worst month in history. It's down 10%. Blah blah blah blah blah blah blah. No, it's liquid. When you're looking to raise cash, you sell the gold first because it's a really easy thing to do. Despite all the, you know, people telling you that owning gold's a really tricky, complicated thing to do, it's it's been liquidated to to raise cash. And once the gold's gone, once the

37:53 loose gold has gone, and obviously there's a lot of loose gold in the that accumulates in a move from 2,00 to 5,500, there's an awful lot of loosely held gold there. But don't forget, a lot of that was bought by central banks who are going to have to find sources of revenue, sources of money to bail things out, to pay for things, who knows what. So gold has given you a very very good insight as to what will happen to financial markets at the point where people realize okay we need to go to cash now. Uh and Luke's right I mean the the complacency look nothing new and and that complacency has been uh reinforced over and over and over again by policy makers and regulators for 25 40 years. If you go back to Greenspan post87 crash

38:40 and look what he did in the in the aftermath of that this this buy the dip the Fed put whatever you want to call it it's been reinforced over and over and over again that the the government the Fed the central bank will come to the rescue but none of those previous issues have been in a a crisis like this when the last time this all happened US debt was 60% of GDP now it's double that um so you know what's going to happen. We've seen it. You've seen it in the gold markets, but everyone's looking at the price, not the the speed with which people needed to raise liquidity and the the degree to which they were happy to just hit the bid to access it. That is going to come to an asset market near you soon if this carries on. Yeah. And I

39:26 would add to that, just if you went back to Friday night when the bombing started, the 10-year US Treasury yield went out at 3.94%. There was all sort of dancing going on around, hey, we're we're back under four. The bond bears were wrong. And through that weekend, everyone was sure there was going to be a bid for for long-term treasuries, right? Risk off. We're going to buy duration. And that's been the case even over the last five, six, five, six, eight years is is initially in these crisis, you've had, yeah, yields drop. And then, you know, that's been the surprise the last five years, six years has been yields drop at the 10-year uh, you know, long term for a bit and then they take off in a crisis. But as gold got sold, which was it's been surprising relative to the amount, and I totally agree with everything Grant just said there. And the other

40:12 thing I think that would that doubles there is there was never even a bid for 10-year Treasury paper. It went from 394, it's now at 44. It's hit 44 twice. And each time it hits 44, Trump gives us some BS deal that he's that he has struck. It's happened twice in the last 5 days. 4.4% 4% on the 10 year overnight Sunday to Monday. Hey, we got a deal ceasefire and then comes back goes back to 4.4 Tuesday night. Hey, deal. Right. So, the bond market is also telling us it's a very sh warning. It never got a bid and risk off. It was straight selling. And yeah, I mean, gold is telling you there's no bottom for stocks

40:59 the longer once we get to a certain point. I mean this thing has to be resolved because you have to source you know commodities food are above stocks and bonds on Maslo's hierarchy of needs. Yeah, it wasn't >> the other the other part the other part of this obviously is is just the correlation issue, right? There's a correlation of one with everything in in this situation which if you go back to 0809 um you know your equity portfolio got crushed but your your duration worked very very well for you right if you if you'd had those bonds you were fine. So the days of 6040 working out okay are over and we've you know we've had hints of this. We've had you know the the the

41:45 Morgan Stanley reallocation to include 20% gold over the last 6 months. We've had these shifts in portfolios but you're seeing that now. You're seeing what that might look like in real time. You're seeing commodities get sold, bonds get sold, equities not getting sold yet, which is kind of the opposite of how these nor things normally happen. But people have to recognize that this idea that you always need to be long of something. And as long as you're long of something, uh it'll rotate and one thing will go down, but you'll be saved by the other thing. In a in a in a correlation one episode, uh you need hedges, right? You need to have you need to be long volatility. You need to be long puts. You need to be long all the things that people have been 100% unwilling to pay for because they've had it reinforced

42:30 over. Well, we don't really need the puts because equities go down, our bonds will bail us out. I don't think that's going to work out so well. And so, people are going to have to learn very quickly to to handle uh an environment that that goes against everything they've had reinforced for many people over their entire investment careers. That's not going to be an easy thing to do. >> You know, Trump probably more than any other president in my lifetime gets markets or it seems, you know, to a degree. and that and you know I always watch the timing of these these statements and it wasn't lost on me that the first we're in deep discussions we're close to a deal it was 7:00 a.m. Eastern time on Monday morning, right? It's like, okay, just look at that. Right? That's a a bit of a smoke signal right there. So, I I want to I want to

43:16 ask you guys a more specific question about a concept that you two have been speaking about for quite a while, but more recently, I'm now seeing more mainstream journalists begin to throw it out. Uh, and that's the parallel between what's happening in the Straight of Hormuz and what happened in 1956 in the Suez Canal. And people are now using the phrase, "Oh, this might be a Suez moment." And I think people kind of nod their heads like, "Oh, yeah, Suez moment." But they don't really, you know, it hasn't been explained. Uh, you two have been covering this for a lot longer than other people have been talking about it. So, could you bring this concept back to first principles? And maybe Grant, I'll kick it over to you first and then over to you, Luke. Um, why are people drawing that parallel? What is that parallel all about? And what do people need to understand about the Suez crisis in 1956

44:05 and how it may relate to today? >> Uh how do we give you the kind of the TLDDR on this thing? Look, it's a fascinating uh chapter of history and and people will enjoy going back and actually reading about it because it was a fascinating time. But the I guess the the the short way of outlining its importance was at the time, you know, Great Britain was still the global reserve currency. it was still a very important global power uh or at least on the surface beneath its finances were were under pressure. It wasn't in a great situation post World War II obviously with the with the damage done to the economy, damage done to the infrastructure etc. Um and at in 1956 the Egyptians decided that Britain was weak enough that they would try and take

44:51 the sewers canal and and between them France and uh the UK who had obviously colonized a great deal of North Africa kind of went in to try and um uh wrestle the canal control of the the canal back from the Egyptians and struggled to do so. And the Brits went to America at their, you know, the special relationship, their their partner across the Atlantic and said, "Hey, look, we need you to say that the pound is good and strong and you support the pound." And the Americans sensing opportunity said, "Hey, you know what? We're not going to do that and unless you pull out, uh, we're going to do the opposite and we're going to say that the pound, we don't trust the pound and we're not going to back the pound. We're not going to stand behind you." And that was it. That was all it took. The Brits had to pull out. uh sterling was kind of

45:37 exposed as the as a as a weak currency. It wasn't in a position that it had been before as as the global reserve currency and the dollar became the dominant currency. I won't say overnight, but that was the turning point that led to the dollar being the hegemonic reserve currency in the world. And it was it was it was a time where America as Britain's greatest ally saw an opportunity to to take advantage of weakness on the part of Britain, financial and fiscal weakness. I I should point out and they didn't think twice. They took that opportunity. They they uh they threw the Brits under the bus. And look, anybody would have done the same. This is not a criticism of what America did. If if any of us were in that situation, we probably did the same thing. It worked out pretty well for America in the 70 odd years that followed. So, you can't blame them. Um, but it was a really

46:23 important time mostly because it exposed a quote unquote superpower that had kind of eaten its foundations uh from a financial standpoint for what it was. And you know, you you can make the parallels with the United States are very easy to make. They're not the same, but they're very similar. And you can make the same parallels. and as an object lesson in in the things to be worried about for the United States. Let's put it that way. It's a really important chapter. >> So, you know, when we reflect on that period of history, people often make the assumption that World War II was the moment when the world shifted from pound sterling to US dollars. But if you look at percent of central bank treasuries, that wasn't really it, right? uh maybe

47:08 just precedent or patterns, but it was this moment in 1956 where Egypt made the assessment that the United Kingdom was too weak to hold on to the Suez Canal. And so they moved in and took it. And in response, the British Navy showed up and said, "We're going to take this back." But they couldn't do it without the help of the United States. Um and um the US response was effectively, "You don't need to be there. You don't need to do this." Right? what you know so those are some of the parallels that I think people are drawing today right Luke what would you what would you add to that >> yeah I think it's uh for me when this war first happened what I wrote to clients was I thought the worst case was a Suez 1956 moment I thought that was the the potential worst case

47:55 that this could go because I immediately was hearing it was going to last longer than what consensus was saying but it was a base case was like okay everything's whatever Now, my best case is that it was that it's going to be a Suez moment of 19 new Suez 1956 moment for the US of sorts. >> Um because of the things we've talked about before where there's just this I think recognition. Um and some of it depends on what we get in the next week or two. Um, if we if these if if we actually try to send ground troops into uh the Persian Gulf into Hormu, you know, through Hormuz, that's um, you know, I I I'm concerned

48:42 about that. I don't think that's going to go very well. You know, unless we've got some sort of, you know, super special weapon and we can just sort of, you know, discombobulate the entire country of Iran and waltz in there. Maybe that's how it'll go. And if that has happened, then absolutely. straight, you know, 1956 is not the right metaphor. Um, if anything, that'll strengthen the dollar, strengthen dollar system, all of those things. Um, but failing that sort of special super weapon that allows us to sort of take the untakeable, right, that, you know, because I think Grant's exactly right, you know, invading Iran is like invading Russia in the winter time. It's a it's a bad idea. It's not going to go well. um failing failing our ability to do that then yeah I think the best case at this point is a 1956 moment because the again hormuz

49:30 is still closed the Iranians still control it we have gone from we're going to take it we are going to overthrow you and we're going to run it to well maybe we'll share it with you to well we'll put someone that we like in charge that you manage it responsibly like That's, you know, Trump's, you know, asking, you know, he's he's famous for if you want a dog for Christmas, ask for a pony. And he so he asked for a pony and then he asked for a dog and now he's asking for like, you know, a mouse and and, you know, then a cricket. And pretty soon he's like, you know, please kick my ass. And like that's that's how this negotiation has gone with with the Iranians, you know, even as they've had a bunch of their stuff blown up without question. >> What's the risk? Let me just ask you

50:17 because he you know President Trump is a a very effective marketer right and you know evidence of this would be six months ago we eviscerated Iran's nuclear competency right um everything all the equipment was decimated uh for a long period of time right that was the message that was was sent home and 6 months later it's suddenly there's an imminent threat and where that threat came from when we decimated all the material only 6 months ago doesn't matter because a new narrative came out. People have short memories and uh new headlines just dominated the day. And so there's an element here where the US could withdraw, ugly as it may be, but focus entirely on the messaging at home and

51:04 kind of get away with it from a domestic standpoint. Is is there not? And if that was the attempt, what's the the bigger picture implication there? Is that the Suez moment where the rest of the world says, "I know what you told your folks at home, but we saw what really happened. You got caught over your skis and you you had to run away. You know, this is this is the reality of what occurred." Is is that kind of the parallel when you say the Suez Canal is now best case scenario? >> Absolutely. Because the real message of that Yeah. And I think, you know, Americans will believe whatever they're told. Like after 5 years ago, like you could tell them the sky's green and the moon's made of cheese and 80% of the country will believe that and that's fine. whatever. Um the bigger issue is that we will have

51:49 seen a shift from naval powers to land powers as it relates to mayhem doctrine for the first time in 400 years. So for 400 years give or take British Navy you control mayhem doctrine you control naval choke points you control the world. Brits controlled it with their navy. Then we took it over we control with our navy. How often have you heard in discussions around the dollar and he hijgemony and power? Well, the American dollar is ultimately backed by these 13 aircraft carriers. Well, when the shooting started, you know what those three aircraft carriers did? They all turned and ran to 750 to a,000 kilometers into the Indian Ocean. When there's a fire, do firefighters run away from the fire? When there's shooting, do the police run away from the from from the shooting, from the trouble?

52:36 It's a huge moment the world hasn't grasped yet and that is and it's something that various commentators on weapons systems etc have been commenting on for four five six years which is missiles and drones change they shift the balance of power from naval powers back to land powers. Eric Prince said this a year ago in a speech. The former head of Blackwater said the the the tactics being used in Ukraine mark the biggest shift in military power since Genghask Khan put stirrups on horses 800 years ago. And so yes, internally Americans will believe whatever they're told. The rest of the world will go, "Holy cow,

53:23 you don't need aircraft carriers to control choke points. You need satellites, missiles, and drones, and you can stand off the most powerful carriers in the right. What What happened? We had three carriers there. One of them is now back at Greece getting repairs for a 30hour long laundry fire. >> Mhm. Mhm. Maybe it was. >> Maybe it was, maybe it wasn't. I don't know. It doesn't matter. It's not there. That's why I think it's a Suez moment that will be absolutely appreciated by the entire world, which is, you know, think about it. We're going to stick up for Taiwan by doing what? Sailing carriers. And Eric Prince specifically said that in his speech. If we sail carriers to try to stop a blockade of Taiwan, they

54:10 will get very badly damaged or worse. His words, not mine. You will see a smoking US carrier on television if we tried to do that. This was our test case. What do we have? A smoking carrier that's back in base due to a laundry fire. And two of them that when the shooting started got as far away as they could, right? Yesterday, even Trump Trump, one of Trump's charms is he hints, he tells you what's really happening sometimes without telling you because he's so boisterous. Yesterday he gave a press conference where he said one of our carriers had a 100 missiles shot at it and they shot them all down. Well, number one, I thought Iran was out of missiles or just about. Number two, I'm sure they did shoot them all down. But number three, and this is why I

54:55 would never ever get invited, you know, a but invited once, but but definitely not invited twice to a presidential briefing. Mr. President, where how far away were from the from the launch points were those missiles? Were they 750 to 1,000 km as as the satellite data would suggest? And if so, how much less reaction time would US destroyers and aircraft carriers have if they were in the Persian Gulf 100 km away, 50 km away? If that time is measured in minutes versus seconds, what would the hit ratio be on those 100 missiles coming at you, sir? And that's what no one wants to answer. That's the Suez moment. Missiles,

55:40 drones, satellites. I think this is why the US opened a space force. Everyone laughed at at the time. They shouldn't be laughing anymore after this. Satellites, missiles, drones. Our 13 carriers are obsolete. They're great for humanitarian. They're great for projecting power against, you know, goat herders and and and sort of, you know, Taliban, you know, with no sophistication. But against >> I mean Iran you know there's Iran, Russia China. So that's why I think that's the base case now >> that the US56 is now our base case. The whole world knows missiles, drones, satellites beat carriers. >> Yeah. >> Yeah. Yeah, and you you wrote about that, you know, and I' I've had Eric on

56:26 the show a couple times, but he made that parallel that the drone war warfare revolution, if you want to call it that, is the biggest disruption to warfare since Genghis Kong put stirrups attached to saddles and just swept through Central Asia. Um, that's okay. So, you know, if that's if that's the best case scenario that the US withdraws, runs back home, tail between the legs, but manages the narrative at home to spin some kind of a we did it scenario, but the rest of the world sees very clearly what actually happened and that impacts their confidence in the US on a go forward basis. That's the Suez situation. The rest of the world watched the Suez crisis. UK went home with tail between the legs, maybe spun a narrative

57:11 at home, but it didn't matter because everybody else saw what really happened. But the key thing is they had somewhere else to go, right? The Dutch Gilder in order to fall needed the pound sterling to step up and say, "We're a safer home for your capital." And the pound needed the dollar. The dollar therefore needs blank. Right? So two things have to happen. Am I right? Number one is the world has to plainly see the emperor has no clothes. But also there has to be a second place you can go a replacement that's stepping up waving their hand and you know where do we get where do we begin that conversation you know is that is that the the where would you begin there because you can get to like pro gold we talked about this Iran is now letting ships through I believe if they're selling their oil in yuan which

57:58 as you've written about is the equivalent of selling your oil in gold when you look at how that transaction and the mechanics of it have to complete. Could you walk us through that Luke? I'll stick with you and then pass back to you Grant. >> Yeah, I think you know it's been fascinating ships that are pricing in Yuan or or transacting in Yuan are coming and going, right? You I thought I thought it was an under reportported or underappreciated dynamic when you were hearing about these other nations ships identifying as Chinese to get through safely. When was the last time we heard that? Like as an American, I just kind of look at that and go, "Wow." Right? like um that's really interesting and I think ultimately what you're going to

58:45 go to is like the dollar's fine for transacting in right it's it's sort of like you know if you're at Chuck-e-Cheese I use Chuck-E-Cheese tokens to go play ski ball and you know I play ski ball and I win a bunch of tickets I take them over and I I get you know a prize at the counter and I walk out of there with the prize and so like people are so focused on the Chuck-e-Cheese token when it's really the prize that you're after, right? The token is just the way of the pri token ticket prize. We can go to a multicurrency energy pricing, right? Pricing in in in yuan. Chinese are not going to open their capital account on a full basis, but they they have their capital account is open through gold um on a limited basis. And the Chinese are happy to transact in

59:31 yuan for Chinese goods, right? So, you know, everyone's like, "Oh, they're overproducing electric cars and they're overproducing everything." Well, not anymore, are they? BYD, they're they're flying off shelves. All done in yuan. I'm I'm sure. Right. Um, so I think the system you are we're going to go to is the system that you back into that will be dictated by the factory power, right? The producing power. The power the factory power of the world is China, not the United States. And that's been true for at least 10 years uh and maybe longer. And the way that system looks is hey you know transact in whatever currency you want to transact in and settle in gold and as as and and

1:00:20 you're seeing that already gold already overtake dollars in global FX reserves and I think it's only a matter of time. Do you see it start overtaking it in more collateral markets? um you're seeing some some innovative products, you know, like Abacks in Singapore where they're effectively using gold collateral for sort of immediate settlement um for energy and other commodities. So, I think that's where we're going, which is effectively, you know, use whatever Chuck-E-Cheese token to buy that you want and settle any surpluses, net surpluses in gold. You're going to basically be cramming commodity markets into the gold market. And the commodity markets are still 12 15 times bigger than the gold market. So that's that's

1:01:06 the dollar is not going to be replaced by anything. It's going to be replaced by this multi-currency payment gold settlement system. Um which is kind of going back to the future by the way, right? Like Putin and she in 2023 were caught on a live mic saying we're making changes to the system that haven't happened in 100 years. We'll go back a 100 years. It was Genoa conference 1922. That's what uh um Jacru called the original monetary sin of the west. That's where the US and UK said back up before then the only thing in reserves was gold. And that's when the US and UK said well we can still have gold reserves and we can have dollar reserves and pound sterling are both equal to gold in reserves. And that started this whole currency as

1:01:51 reserves double counting fraud essentially. But so people are like, "Oh, we've got to have something to replace it." No, we don't. We just got to go back to 1921 and where gold's the only reserve. And I think that's where we're going. You know, it um and so China doesn't have open capital markets or uh on their currency, right? So this hinders the use of yuan in global trade except for that there's a a gold transaction effectively um you can buy yuan for gold right this is it this is how you participate >> you want an oil if you make my my understanding is you can buy if you

1:02:36 trade on the yuan oil markets you can take your profits out in any currency you want >> okay you know it's it's an interesting repetition of history to a degree in that uh China has a bunch of stuff the world wants and the world doesn't have a lot of stuff that China wants except gold and silver right and you know this is like we all know the story of the opium wars now where silver was the place China was the place where silver goes to die um UK's addiction to Chinese tea just you know drained their treasuries of silver bigger story than that I'm oversimplifying but similar scenario in the Roman Empire 2 years ago when they discovered silk and porcelain and you know um those two empires ruled the world when they bumped up against each other. Rome's appetite for silk uh

1:03:23 most importantly sort of draining their treasury to a crazy extent and you know China was like we'll take the gold and silver but we don't want anything else you have. You love our silk, you love our porcelain and um Europeans couldn't figure out how those things were made. Um Grant like what's what's your take on what Luke just shared and and you know

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