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Chapter 1: What is the tentative deal between the U.S. and Iran about?
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The government just shut down a really powerful AI model. You're listening to Motley Fool Hidden Gems Investing. Welcome to Motley Fool Hidden Gems Investing. I'm Jon Quast and I'm joined today by Foolish contributors, Matt Frankel and Rachel Warren. And we're gonna talk about that government concern with AI and leading to that shutdown.
We're also gonna talk about an acquisition that I didn't see coming personally. But first we want to talk about the news of the weekend and that is that the US and Iran have a tentative deal in place to end the ongoing conflict. And it looks like they may sign that deal in Switzerland on Friday. Hopefully that is the case.
Chapter 2: How long will it take for the Strait of Hormuz to reopen if the deal holds?
But as we think about this as terms of what this does, obviously it ends the conflict. That is really good from a human life perspective. But the main economic benefit is regarding the Strait of Hormuz. The Strait of Hormuz, so much passes through that little narrow part of that waterway. And it's been not working very well since this conflict began.
But it seems like maybe we can get this straight reopened. So, Rachel, if the straight was fully reopened, let's just pretend it's going to be fully reopened today as a result of this deal. How long would it take before we start catching back up from it being closed all this time to begin with?
Well, I think it's important to note that fixing the bottleneck will take far longer than breaking it did. So just to put some perspective to this, about 2,000 ships and about 170 million barrels of crude oil are currently stranded or idling in the Persian Gulf. And so clearing these immense maritime traffic bottlenecks, that will take several weeks to a month alone.
And this is due to a variety of factors. It's also worth noting that tankers physically move at very low speeds. On the production side, we see independent energy assessments from sources like Wood Mackenzie that indicate that affected Middle Eastern oil fields will require three months to safely ramp back up to 70% of prior production and six months to reach 90% production levels.
So consequently, the global energy supply chain will face a residual lag.
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Chapter 3: What are the potential benefits for companies if the Iran deal is successful?
It's very unlikely to fully catch up to its pre-war fluid capacity until late 2026.
Yeah. And so just to be clear, we're talking about the traffic in the strait. That's going to, according to, I mean, some of Rachel's, what she's been researching is going to take several months at a minimum.
And I guess I think that for some of our listeners, they're vaguely aware that maybe they're paying a little bit more at the pump than what they would like to be paying as a result of what has been going on. The fact that oil can't ship freely through that strait. I've got a summer road trip coming up where I'm going to be putting a lot of gallons of gas in the tank.
Does this mean that we're not going to see any relief at the pump anytime soon?
If the deal holds, we should see relief at U.S. pumps within three to four weeks or so. I mean, we already saw based on the news of this deal, Brent crude plummeting over five percent at one point. It might be more by the time we're recording this. But I would Also want to note, this agreement is somewhat fragile compared to past deals.
It relies on an intense 60-day negotiation window covering nuclear capabilities and sanctions relief.
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Chapter 4: Why did the government shut down Anthropic's Fable 5 AI model?
And all of that creates a dynamic where there is still a lot of uncertainty moving forward. But this also means at a very practical level, for example, that shipping operators are highly skeptical and they're likely going to delay major voyages until, for example, mine clearance is verified. So we are still very, very much at the early stages of this thing.
Yeah, that is such a good point because this isn't the first time that it felt like maybe we could see the light at the end of the tunnel, that maybe there was finally a framework to end the conflict only for that to fall through.
So Matt, I do want to ask you here about confidence because it's one thing to have potentially the deal signed in Switzerland this Friday, but does that mean that everyone has the confidence to go ahead and start acting on it?
Yeah, I mean, this is the closest we've had to having signatures on a deal. We don't have that yet. But Rachel did a good job of going through all the numbers, but I want to put some kind of just context behind them. So there's a few things that need to happen here. So first, the reopening of the Strait is just one part of it, right? Captains need to be willing to sail their ships through.
Insurance companies need to be willing to underwrite those ships sailing through the Strait with, you know, like she said, with the minesweeping not necessarily complete. tanker owners must be willing to take the risk that they have, then refining is going to need to ramp back up to produce gasoline, diesel fuel, et cetera.
I'd say a four to six month normalization timeline is reasonable when it comes to normalizing. As Rachel said, we should feel some relief at the pump within a few weeks, but as far as getting back to like pre-war normals, I'd say a four to six month timeframe is more likely.
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Chapter 5: What are the national security concerns related to AI models?
So when it comes to consumer confidence and things like discretionary spending, it's a little bit harder to say. So actual consumer spending tends to lag what the surveys are telling us. So just because we might see consumer confidence spike on this deal, that doesn't mean we're going to see actual increases in spending.
Like we've said, gas prices are likely to remain elevated for at least a few weeks, if not more. So it could really delay the house, just middle class households spending. willingness to spend more money. And I'm not 100% convinced that this is the end of it. We'll have to see if the Strait actually reopens. Rachel mentioned the negotiation window going on.
And really, we need to see both sides adhere to their ends of the agreement. None of that is a given at this point.
Well, let's pretend that it is going to go through. We're going to make that assumption. Maybe we're just going to manifest some optimism here. But are there any stocks that are kind of on your radar thinking this stock could benefit from this deal actually being followed through on?
Chapter 6: How could the shutdown of Fable 5 impact Anthropic's business?
Rachel, let's start with you.
Yeah, there's a couple. And I have to go to the airline industry, right? So Delta and United Airlines, in my view, are two downstream stocks that could benefit immensely from a peace deal. Obviously, a resolution would eventually lower the skyrocketing cost of jet fuel. I mean, we know that these fuel spikes have already forced United to slash their earnings guidance.
Delta already had to absorb about $2 billion in unexpected overhead. And That's notable. The crisis has been so intense that this even overwhelmed Delta's unique corporate safety net, which is its ownership of the trainer refinery in Pennsylvania. So obviously, if we do see a lasting agreement, there are a lot of first, second and third order ramifications.
Of course, there is the hoped for stability for global crude prices. And that would allow these legacy carriers to better protect their profit margins and also offer more predictable international scheduling. But this will take time, I think, as I've tried to caution. And it's worth noting, these are companies that have achieved all time records for their recent operating revenues.
Chapter 7: What does Fox's acquisition of Roku mean for the streaming industry?
They're seeing robust demand. A lot of the headwinds they're facing now are very much external pressures.
Matt, how about you? Yeah, so everyone knows me as the real estate guy, so it shouldn't be too surprising what direction I'm going to go in here. Residential real estate in particular has kind of been stuck in a holding pattern for about four years since interest rates started to spike in 2022. And this could be a big catalyst.
So lower oil prices mean inflation getting a little bit more under control. That could lead to the Fed resuming rate cuts quicker than they otherwise would have. That could mean mortgage rates finally trending lower. We saw mortgage rates just under 6% for the first time in years right before the Iran war started. So not long enough to really... see all the potential that that could cause.
Rocket companies in particular, ticker symbol is RKT, it soared 10% right after the Iran announcement. And it's easy to see why. I mean, they not only have big exposure to purchase mortgages, but refinancing is really their bread and butter.
Chapter 8: Should investors hold or sell Roku shares after the acquisition announcement?
And even like a 50 basis point drop in mortgage rates could lead to a massive spike in refinancing. So I'm not surprised that the market seems optimistic. And if we get an actual deal and actual lower interest rates, Rocket could have a lot of upside.
Well, here's to truly hoping that this deal follows through and holds. But after the break, we're going to talk about something else. We're going to talk about how the government just shut down a powerful AI model. You're listening to Motley Fool Hidden Gems Investing. Welcome back to Motley Fool Hidden Gems Investing.
So Anthropic, one of the hottest, biggest AI companies out there right now, it just launched its newest model. That's Fable 5 on June 9th. Launched it for general use. And on June 12th, just three days later, it disabled it for all users. And the reason it did this was because the government, the U.S. government, requested that it do so, citing it as a national security risk.
And so I think it was just incredibly, wow, three days later and we already have the government saying, shut it down. Matt, is AI a legitimate national security risk?
Yeah, so I've called Anthropic the IPO that I'm most likely to buy out of the big three that we're seeing this year, the SpaceX and OpenAI being the other two, and this doesn't change that. Just speaking more broadly, AI is certainly a national security issue.
I mean, regardless of the reasons for this move or any opinions you might have about this particular shutdown and the motivation behind it, The fact is that the more powerful AI models become, the more potential damage that can be done with them. It's just like how making chips domestically is part of national security.
The shutting down of the fable and mythos models for now is not the biggest risk all by itself to Anthropic. Most enterprise customers of Anthropic who I've spoken with, including myself, find the Opus and Sonnet models more than sufficient for most tasks. I can count on one hand the number of times I've had to switch from Sonnet to Opus, the more powerful model, to complete a task.
On the other hand, the risk is that the government can simply block its software. That could put Anthropica at a competitive disadvantage to OpenAI and other competitors. But we'll really have to see how this plays out. A temporary shutdown, if they roll out certain safeguards and the government's satisfied and they roll these back out within a week or two, that's one thing.
A prolonged shutdown where the government says this product cannot see the light of day ever is something else. So that's really where I see. I don't see any big immediate moves, but it's definitely something I'm monitoring.
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