AI and the Apocalypse

So Mike, we got a special treat yesterday, a nearly two-hour primetime address from President Trump as he hit the road for the U.S. midterms, and a lot of big promises came through here.

He said that if you elect Republicans, every American will get $5,000.

He also said he'll make his tax cuts permanent and also would eliminate all, uh, swiping fees on credit cards.

So big attention-grabbing stuff.

But amid all those pledges came one prediction that was quite one that we need to talk about.

I mean, he said that the Iran war will end immediately after the U.S. midterms.

Now, I don't think this is quite as reassuring as he thinks, because Brent crude's still holding above 100 bucks a barrel this morning.

That's still a long time for markets to wait, isn't it?

Well, we, we were talking yesterday, uh, uh, that, that the markets were now starting to, uh, assume that this, uh, which they have assumed for six months since the war started, that somehow it would be wound down before the elections, and that's why we're kind of rising as the intense, uh, pretty intense, most intense shipping attacks since the war started over the last, uh, couple of days.

Uh, beginning to assume this is not going to end before the election, before November, and Trump effectively, uh, confirmed that last night, saying, sort of somehow that it would, it would end just after the elections.

But we are seeing reports even in The Wall Street Journal this morning that Trump advisors are beginning to, uh, get him to condition Americans for the war lasting potentially for the rest of his term, which would be another two years.

The implications for the oil markets are very clear.

We closed last night at Brent crude, its highest level since May.

We're again this morning probing that 102 level, which is the highest intraday level, uh, since July.

So, you know, you might connect all these things because, you know, that very high energy price puts inflation pressures on them, and we'll, we'll get the first of this week's two inflation updates later today with the producer price report.

Uh, and that's, you know, that's running hot, certainly on a headline basis and a core basis, running at 4% or 5%, uh, annually.

And the Treasury market is very worried now about this, uh, uh, rising fuel price and the inflationary implications and of course the interest rate implications.

And we saw the 10-year U.S. Treasury yield hitting its highest level in three years yesterday, and that was even as, uh, Scott Bessent's buyback program, his supposed, uh, big rescue to, to calm down the bond market, uh, had its first foray yesterday, and it had virtually no impact.

Market's basically saying that 6 billion of, of, of purchases was, was almost, uh, irrelevant, uh, uh, given the way in which the yields, uh, behaved on the day.

And then you go back to the Trump speech, you talk about the 5,000 checks.

I think anyone in the bond market looking at where that money's going to come from, um, um, will be scratching their heads.

If y- if every American were to get a 5,000 check, that's a total bill of $1.3 trillion.

You know, the Treasury might have to go back to the well and start borrowing that again, and that's, uh, that, that's, that's another stimulus into an economy that people are fearing is overheating already.