This is a more serious Market Mindset this week. There are some fun parts but there are some important points I will make towards the end of this along with a potential action item, so promise me you’ll read to the end just this once!
It’s all about the Benjamins. Right? Perhaps not … It’s really all about the Rockefellers. If we actually put who is perhaps most responsible for our petrodollar, perhaps he would belong on that bill. As owner of Standard Oil in the 1880s he once controlled 95% of America’s oil refining capacity.1 I’ve heard from many people for many years bring up the petrodollar and how weak it is growing, how the BRICS nations (Brazil, Russia, India, China, and South Africa) have expanded to include Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates, and that the cohort had grown too powerful. I’ve heard how the US debt and increasing financial obligations abroad through our nonstop issuing of US Treasury bonds and bills has brought us to the brink of losing our place in the world, and how China and Russia were eager to take that mantle from the US and leave our petrodollar and the Rockefellers out of gas along the highway.
This war would appear on the surface to exacerbate that. According to a Pentagon official in a Reuters story2, the US has already spent $25 billion on Operation Epic Fury, not to mention how much it would cost to replace the firing of nearly 50% of our missile stockpile over the next 4 years. Not to mention what a huge $1.5 trillion defense budget President Trump requested for 2027. Last I looked at the military allocation in the National Budget was 2024 and the number was $800 billion. That, of course, barring much new revenue from taxation into the system, would add even more to the $39 trillion debt. And folks at the Pentagon must be planning … aside from the headlines, a very important X account “Pentagon Pizza Watch”4 showed yesterday that activity at “We, the Pizza” and Papa John’s near pentagonal building was up over 170%. Carbs lead to crashes people.
But zooming over to the Middle East now, the brotherly love between some BRICS nations has grown far from the proper love of a brother. Iran’s wrath from being attacked has fallen on its neighbors and that has not been without consequence. In a monumental announcement, the world’s 3rd leading oil producer, the United Arab Emirates, is now exiting OPEC and OPEC+. They haven’t been the only ones to do so. Other significant countries have done so including Angola in 2024, Ecuador in 2020, notably Qatar in 2019 and Indonesia who has twice skipped out, the last time occurring in 2016. As strong of a united image as this cartel has tried to project, they are NOT united. They are NOT monolithic and they are NOT the unstoppable price setters that they’ve been in the past. The largest producer, Saudi Arabia, broke from the ranks a few years back to ramp up their production. And now, the UAE, feeling similar pressure exited the ambitious group. The petrodollar is far from dead.
However …
Ominous clouds are gathering. Yesterday I watched some interviews of some investment gurus that I respect. Not all talking heads are stupid or corporate shills after all. Mohammed El-Erian, former IMF Deputy Director, was on LBC (Leading Britain’s Conversation) a few days ago5. El-Erian relayed the IMF set of forecasts. He said, “In every single scenario, growth’s lower and inflation is higher in the UK and the world.” El-Erian said that Asia is worried about not just price but running out of fertilizer and other things and that if the war went on then Europe would be just as vulnerable, citing the 20,000 flights that Europe’s carriers have already cancelled.
El-Erian said, “It’s likely the UK and globe avoid a global recession provided the Strait is re-opened in the next 4 to 8 weeks and if they aren’t re-opened it will look very different.”
Host Shelah Fogarty asked, “That would take us into global recession in your view?”
“Yes it would,” he said without missing a beat or taking time to think.
“Bond King” Jeffrey Gundlach, CEO of Doubleline Capital was on CNBC yesterday saying the oil spike will have lingering effects6. He’s very negative on long-term bonds and said the only bonds that were up were emerging market debt. He said that investors should “hold on to commodities.” He wasn’t really fond of gold, however, in the near term and that the metal could go down to $4,000 before resuming its way up. He brought up food prices going up because fertilizer costs were going up and oil was going up. All of this contributes to a changing interest rate outlook. He discussed a potential “4 handle” on the CPI and pointed out that the probability of a hike is now better than the odds of a cut. (Price projections by Mr. Gundlach are his own and don’t necessarily reflect the opinions of our firm. He isn’t a client nor was he compensated for his appearance in this article. ~The Compliance Department)
Departing Fed Chairman Jerome Powell was defiant yesterday in his swan song as chair. He asserted that the Fed’s independence was under attack and is still going to remain as a Fed governor but would be keeping a lower profile. For my part I think he’s been treated with kid gloves on. Analyst Charlie Bilello on X brought up that Powell had 63 press conferences as the Fed chair and in all that time, not a single journalist asked a single question about the 40% money supply surge in 2020 to 2021or even about the $18 trillion increase in the national debt being an underlying cause of inflation. Not … one … single … question. I was trained in journalism. Like Bilello stated I will concur that that is either incomparable incompetence on the part of the journalists or supreme suppression of some basic truths of our economy.
This could be China’s moment for Taiwan, as our Tomahawk missile supply is down by a third or more and our capacity to adequately defend the island against the plethora of Chinese ships has been certainly diminished. According to Kyle Bass, of the Council of Foreign Relations, the best months to invade Taiwan due to the currents in the strait between them are May, June and August. If Jinping is ever going to go get it …
I’m bringing up some scary things. I know. I’m not intentionally trying to scare anyone. However, I think it’s important to be transparent about what we believe the risk factors to be. You don’t want us to sugarcoat things about the present and near future. You don’t want me to tap dance. That would not be a pretty sight.
There are some very important financial action items I might likely propose to those of you who answer yes to one of the following 2 questions:
- Are you worried that a potential global recession due to rising prices would cause a big drop in stock prices and therefore your retirement accounts beyond what you feel your lifestyle or peace of mind could endure?
OR
- Would you like more income so that you are not selling more shares in a down market to give you the income that you need as prices rise? What you want to avoid is the reverse of the dollar-cost averaging that helped so many of you accumulate wealth in your 401(k)s. It can be debilitating to your wealth to sell more shares in a market event when they are worth less to give you the same level of income pre-crisis.
If you answered “Yes” to either question, then we’d like to speak to you. The action items could take several forms, and I won’t mention them all here as there are different ways to address the issue. But the time could be right for many of you to take some capital out of the market that could produce some necessary income. As to what percentage that is is a totally individual advisor-client conversation can happen.
All is not lost. Innovation is igniting progress all over the country in so many fields. Scientists are coming up with results in real life that they’ve only seen in their dreams. AI will solve problems and dramatically improve efficiency. Energy and information will move with light. Materials and products will become lighter, stronger than steel and more conductive than copper. With Elon’s SpaceX and many, many other exploration companies, we are star-bound, or at least our robots will be …
The future is incredible and indescribable. The present is scary and surrounds us.
As long as your risk tolerance, time horizon and goals allow it, your investments may help you claim an acre of that undiscovered country that we are just beginning to catch glimpses of and map out. For those of you that have the asset levels to “let it ride” don’t let the present scare you out of a promising future.
But … we know that some of your needs are in the present and so can’t afford to risk more while dreamcasting about the future. If those needs are close or you are worried about a big drop in the stock market, call us and tell us. Remember, if you listen to us, we’ll change your financial world …
Sincerely,
Scott Wright
Portfolio Manager
The Wealth Training Academy
(Marketing Disclaimer: Investing advice is provided by Idle Hill Advisors, LLC, an SEC Registered Investment Adviser. Past performance is never a guarantee of future results. We offer a lot of services. Our planning, tax, and insurance strategies are designed to improve financial outcomes when implemented as recommended. We’re confident in these strategies, but results will vary based on individual circumstances. Investment results cannot be guaranteed. Unless otherwise indicated, no third party individuals mentioned in this article are clients of our firm, nor have they been compensated for appearing. This article is for educational purposes only – we do not recommend anyone buy or sell any security discussed here. Instead, we recommend readers call our office for personal advice about your circumstances! ~The Compliance Department.)
Sources:
1Standard Oil | History, Monopoly, & Breakup | Britannica Money
2US war in Iran has cost $25 billion so far, says Pentagon official | Reuters
4Pentagon Pizza Watch (@pizzintwatch) / X
5Economic expert gives ‘4-8 week’ recession warning – YouTube
