Programming note: At noon in the East and 9:00 a.m. in the West, tickets for our Bulwark Live: California shows go on sale for everyone. I’m not going to make it out there for this tour, but you’ll be in great hands with my best friends Sarah and Tim and Sam Stein. These shows are truly great; they feed the soul. Don’t sleep on this, SoCal friends.
And today at 12:30 p.m. ET I’ll be on with Catherine Rampell for Receipts Live on Substack and YouTube.
1. Oil and Allbirds
The American economy is not great right now. We’ve had the largest oil shock in history at the same time that job growth has been flat and unemployment has ticked up. Inflation is not runaway, but it is persistent.
Yet even as the actual real world is not-great, the speculative world of the stock market is going gangbusters.
Here are two news items from this week that I’d like you to rationalize. First, the Financial Times on April 13:
The last oil tankers to traverse the Strait of Hormuz before the outbreak of war will reach refineries in the coming days, in a pivotal moment analysts warn could herald physical shortages in Europe and the US within weeks.
The final ships to clear the strait before the Iran war began on February 28 are expected to reach their destination in Malaysia and Australia by April 20, intensifying the supply shock rippling across Asia.
But with Asian refineries responding by buying up a record number of crude oil cargoes that would normally have sailed to Europe and the US, analysts said refiners in some of the world’s wealthiest countries may soon also face shortages.
“It will hit the west in a month when all the Asian cargoes bought leave the Atlantic basin,” said Nic Dyer, an analyst at Energy Aspects.
And here’s the FT two days later:
How do you reconcile these pieces of information?1
I have a theory.
For a decade Trump apologists have toyed with the “Madman Theory” of foreign policy—the idea that ackshually it’s good to have a crazy president because rival states will give him whatever he wants since no one knows what he’s capable of.
As Andrew Egger explained recently, the Iran war has disproven the Trump Madman Theory in the realm of foreign policy.
But what if it’s is true for the financial world?
Here’s my Madman Theory of the Stock Market:
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