[David] Matt Graham. Thanks so much for your commentary and report. Check out Matt Graham’s mbslive.net website. For up to the nanosecond updates. You can sign up for the system, give it a trial period, use the LOL and you don’t need a credit card during that time. That’s nice of you. Appreciate it, but you should sign up. It’s so affordable and it’s got such great information. Alright, couple things. Notable Bill, is that starting off with you on interest rates four 10 to four 40 we’ve been staying in there and he thinks that we could be heading back up into that territory, but am I wrong in thinking that it seems like the markets really trying to go down. There’s seems that it really wants to prove.
[Bill] So boy, starting off with, am I wrong? Is a loaded question. Am I wrong? Yeah, of course. Yeah. especially listening to Matt, The market is too complacent and yeah. Yes. I think there’s a desire to go lower, but yet couple of things that have been bouncing around. So first of all and I think this is being said for two reasons. First Scott Bassett last week, and then Christopher Waller, who both come out and been pretty vocal about, they believe that they’re fed lowering the rate rates in the near future until all the Middle East things sort out should be off the table. And I think they’re doing that for two reasons, right? One is what I think is the economic reality of this is going to be inflationary, right? So then the debate is. God forbid you used the T word again, is it going to stick around like the seventies or not? It’s also I think there’s a lot of it that’s preemptive to take having wars confirmation hearings and kind of temper that a lot and not make it about lowering interest rates. Warsh would say the same thing that both of them have said when the question comes up in the current environment, there’s a fair amount of inflation risk and lowering rates is not appropriate. They’re, I think both just getting out publicly in front of that. The confirmation hearings in that respect, a lot less confrontational. I also think that, those of us that sit in the US are not really paying as much attention to what’s happening with supply of petroleum and petroleum based products in the rest of the world. And, we’re not entirely energy dependent. Let me back up there. There’s a difference between being energy, depending, and not having to rely on any outside sources for petroleum based products. And then there’s also geographic issues. But I think there’s a lot more going on with supply concerns and supply, not even concern, real supply issues outside of the US that’s not getting a lot of attention. And there was an article last week in, financial Times about, this armada of tankers that is leaving from US ports and other ports to go to Australia because they’re already starting to run out. And by the way, think of all of the industrial mining activity and things that are done in Australia. You don’t have diesel, you don’t, mine means we don’t have minerals that we need. We’re impacted by this eventually.
[David] Great point. The domino effect
[Bill] And yeah. So There’s a lot longer term effects. I don’t think we should be looking at straight of issues going away in days or weeks. ‘Cause by the way, when it gets to the point where you think it’s calmed down and they only need to send one drone out there, and then all the ships just stop dead in their tracks again. I think this is gonna go on for quite a while. Part of what’s keeping treasuries short term, longer term in the range is, we talked about last week you’ve got inflationary pressure, but you’ve also got pressure on the downside to, what does this do to economic growth? So when in doubt, stay in the middle.
[David] Very good points.
[Bill] Yeah and I do think that, my other comment for the day, so there were two other things that I saw, and by the way, just, to show you how crazy this is, so I saved various articles in the Financial Times to read. I was looking at one today and it’s great by the way because my daughter’s a financial analyst in the uk so I actually piggyback off of her subscription, oh. Starting to be a little payback for the years and years of it going the other way. But in, so articles I saved and I just happened to glance across, and so there’s the usual comments about oil supply, but then there’s about a proposal in the UK that Brits are going to be paid. Pay attention to this, they’re going to be paid to use more electricity during the middle of the day because one of the downsides with, yeah, renewable energy is right. You can’t store it, use it or lose it. All this energy that’s generated in the middle of the day just goes nowhere. She’s oh, we’re gonna pay people to do laundry in the middle of the day. they’re also, at the same time, they’re pushing back on development of oil and gas in the North Sea, and at the same time there are massive demonstrations for the last three or four weeks in Ireland over, the increase in energy prices and, Europe is in UK especially, they’re talking about running out of jet fuel. In, less than a month. There are just so many different things going on right now that it’s just hard to keep track of. But I’m gonna, play an out and I’m gonna end with a little bit of a joke, what’s the similarity between Larry Bird and the US Navy? It only takes one shot. You’re close. That’s good, Larry. That, that’s a good Yes. Kill. That’s good. Yep. Larry Bird was notorious for being a trash talker. Oh. And you li you listened to other NBA grades, that had to cover ’em. And they said he’d be coming down the court and he’d be telling you. I’m gonna stop here. I’m gonna take two dribbles a step to the right and put up a jumper. That’s what the navy’s doing now. You hear the clip of, with that that freighter, they’re like, evacuate your engine room. ’cause we’re about to put a missile into the engine room. Yes. Yep. They, they don’t need an element of surprise. We’re gonna tell you exactly what we’re gonna do.
[David] So thank each your interim because this objects are gonna be flying right through it really soon. Yep. I think we’ve got good control over it. Again, what I’m been amazed at is that there hasn’t been more of a negative reaction to the latest developments. ‘Cause I was, I woke up this morning and seeing that we had boarded a ship and stopped it and going oh, great. Interest rates are gonna be jumping up. Matt was saying there’s general optimism or, that’s what I’m looking at this. I’m encouraged that we haven’t had more of a negative reaction that we’re now bumping up to the upper end of that upper end of that range that Les talked about. Four 40 we’re not even close. Or 4 25 right at the moment. So when you look at that, yeah, no, that is we there? Yeah.
[Bill] That is a the absence of bad news is good news.
[David] Yeah. Yeah. Or is there a possibility that there’s actually, people are starting to go they’re starting to get this war, there’s gonna be some prosperity for America on the other side of this that could be there. And I think that’s another thing here going hurry up, do what you need to do. But, ’cause we see some really good things coming. Ahead Mr. Kittle, your thoughts.
[Kittle] A lot on what Bill said, but let’s go to energy for just a second. We keep hearing that we have all the oil we need, all the crude we need, and we do. What we don’t have is all the refined oil that we need for gas, and that’s part of the problem. Right now. We’re still on the global market for refined oil. As I had a little company down in the US VIA couple of years ago, and on St. Croix where we were based and where I lived for almost three years. There’s a refinery sitting there that was shut down in June of 2021 by President Biden and a lot of repair. And yes, it’s in hurricane alley sometimes, but that’s a year to get it up and going or less. Takes three to five years, probably five years to build a new refinery. And we need two or three of them. I would encourage the administration not to forget what’s sitting in the USVI down there and go down and fix it and restart it while they’re, and I think they can chew gum and walk at the same time while they’re building a couple of more. And then our gas prices wouldn’t be affected by some of this. So while they’re saying we have a lot of oil, we do, it’s not refined to warsh, I think he’ll get approved, maybe not still through. They’ll beat him up a little bit because they can. And they have the votes to put him through. I’m probably in Bill’s camp, there won’t be a media lowering of rates at all unless this war. Which is what it is, ends quickly. Unexpected. Yeah. Quickly. And I’ll finish with this for everybody on the left or whoever it is saying, this is Trump’s war and he wants to go in and he loves it and he started the war and everything. There’s probably not a president that hates killing or war more than we’ve had in a long time than Trump. Otherwise we’d already have those marines on the ground taking the island over there, and we’ve already wiped everybody out and blown them all up. So he’s given ’em every opportunity. He does not bluff. No. If something settled by tomorrow, then he’s gonna start taking out bridges and power plants and everything else. We’ll just do it. Yep. And so it’s gonna get settled one way or the other pretty soon. That’s my prediction. That didn’t take rocket science to predict. And I think rates write this down. I’m happy to, not happy to be wrong, but I think they’re gonna go down a little bit towards the rest of the summer once. This is settled and a new Fed chair is in place.
[David] Yep. I absolutely agree with that a hundred percent. Alice, you’re writing all these notes down. Thoughts on reflections on what Bill said and what we heard from Matt and our good friend Les,
[Alice] Yeah. So it seems like the markets are pricing in that the conflict is gonna last, a minimum of several more months. Is that your take on it? Bill, you were just referencing that you think, this isn’t weeks. Do you think the broader market, the broader and the bond markets are pricing that in to that this is going to be longer?
[Bill] I think the market is still expecting shorter term. Okay. I think one of the things, people that I pay attention to talk about, looking at oil for delivery further out, and that those prices seem to be saying, a month-ish, two months, let’s say, but then there’s the unknown as to how long does it take really, to get oil and gas and all the products back moving again. And I like somebody’s analogies when this is done, is gonna be like when there’s a major blizzard on the east coast for the airports, and then the snow goes away. And then you’ve gotta figure out how do you get all the planes and crews and everything right in the right place before things can start flowing normally again. He said, the difference is when you need to move a jet from, New York to Miami, it takes two hours. If you figure out that the tanker is in the wrong place and it needs to move, three, 4,000 miles doesn’t happen overnight. It happened until,
[Alice] And it can’t go around. There’s only one place to go through. Those airplanes. Yeah. You can take around. Yeah. Yeah. That’s a good analogy. I guess I will Dave brought up, the president doesn’t bluff and so I don’t wanna step too far into politics, but I am not in favor that he would go in and start bombing civilian targets up. Yeah. And civilian infrastructure. If that’s gonna be in the recording, I’m gonna ask that we have a counterpoint to that one in the final recording.
[Kittle] I don’t think that power plants, you can call it with, that’s not real. It’s civilian, but it’s not, he’s gonna tell him he is coming in. Civilians aren’t gonna get hurt, but it is gonna be part of their infrastructure and it’s more of a pain point to get him to the table. These are bad people and I like the point counterpoint here or the discussion about it, but it is true. They’ve been killing us for 47 years and everybody’s allowed ’em to do it. And they’ve been terrorizing other people for a long time, and somebody’s gotta take care of these people. And they hold hostage the straight of news and they shut the economy down for the world. That hurts civilians in and of itself. So there’s, there is a point counterpoint to it, but somebody’s gotta stop these bullies and Trump’s doing it, and I support it.
[Alice] My sister has very close friends in, Iran, and she’s been talking to them regularly and there are people there who are very happy that this happened. So I, I’m not trying to cross come across as one side. There’s lots of sides to this. I just oh yeah, boy, that’s an that’s so true, Alice. There’s so many sides that, yeah.
[David] Yeah. Mark, you were in military intelligence for a good amount of time. Love to get your take on all this. Oh, I gotta chime in, man. This is my favorite subject. I now have positively got confirmation that Mr. Kittle and I are brothers from another mother. Okay. No doubt in my mind.
[Marc] We think so much, a lot alike on this topic. I’m not one that advocates war. I’ve seen it, I’ve lived it, I’ve felt it. I’ve lost friends. I try to stay out of those kind of things if you can. But if you look at the 47 years, and I’m assuming that’s right ’cause Mr. Kittle said it that what’s been going on over, it’s been a hot mess over there, bu let’s go back to what we’re talking about our financial system. It’s a hot mess right now, and I do believe that part of that unintentionally probably has been caused by Trump. Trump sometimes has feel good messages that kind of insinuate things have been done, that haven’t been done, et cetera. And I know he’s trying to walk the path of any president of not saying too much to endanger our troops, endanger our shipping and everything else over there, so we can’t play all our cards out in front of him. But in doing so, he’s sending mixed signals about where we are and where we really in control of this and that we really have a game plan and all that. And I hear that from a lot of folks right now, and those are the people that are frustrated kinda like I am. Let’s get it done. We need to get it done and if it’s military targets and if it’s in our inter plans, get it done because we’re not gonna have any material change in the market as long as we continue to make people feel good, but what we say and then nothing happens from it and then we do another two week cease fire and another two week cease fire. That’ll comment comment about you to not noted to go to the John or stay away from it. It’s where we are right now. We need to move on and make some headway on this because if not, we’re gonna fool around and have all those ships sitting down there and the next thing you know, they’re gonna land a couple rockets on them and kill a couple thousand people because we didn’t do what we need to do in a timely manner. So I think we give ’em the cease fire. He gets something done and sends a positive message that we’re not gonna stand by and let this happen. Then we will see some movement in the market. It’d be favorable. And I’m looking forward to that. I hate that fact that people might lose their lives. But look at the people that lost their lives already. Look how many people that they just assassinated over there recently of their own people. ’cause they were protestors. That tells you what kind of regime we’re dealing with and that can’t be tolerated in this world today. And we let that happen one time in Germany. We can’t let it happen again. Yeah, it’s been going on too long.
[Kittle] A number is someplace between, what, 25 and 40,000? They don’t know exactly. It’s at least 30 people of their own people. Yeah. Yeah. It’s not a small amount. Not a small amount. It’s all affecting US economic.
[David] It’s having an impact on mortgage rates. I’m encouraged that rates are not higher right now. The bottom line is if you’re in the mortgage industry, originating mortgage loans, do them. Don’t pay attention. Just get in and start locking loans up. We can always refinance the people that are, we’re taking care of right now.