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Chapter 1: What is the main topic discussed in this episode?
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Welcome to Profiteer Markets. I'm Ed Elson. It is March 25th. Let's check in on yesterday's market vitals. The S&P and the Dow declined marginally as investors looked for clarity on negotiations with Iran. Meanwhile, the Trump administration deployed more troops to the Middle East and oil resumed its climb. And finally, the Nasdaq dropped as software stocks took yet another dive.
More on that later. OK, what else is happening? The Strait of Hormuz, which carries a fifth of global energy exports, has now been effectively closed for 25 days, and the ripple effects are being felt across the globe. Fertilizer prices are up 25% since the war began. Gas is up 30%. Diesel is up 40%. Meanwhile, shipping disruptions are raising global freight costs and extending delivery times.
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Chapter 2: How could rising oil prices disrupt global supply chains?
Yeah, of course you can get jet fuel at the airport, but it's very interconnected now. And actually, I should have looked this up before I came on. I don't know how long they actually can suspend the Jones Act for, but it's not permanent. It's an act of Congress. The president has some emergency powers, but it's not a permanent waiver of that. So we'll see how that plays out.
When I think about the global supply chain at this point, it feels like we've had these immense shocks. I mean, first it was COVID and suddenly everyone realized, okay, supply chains matter. I think that's when you became, honestly, you really burst into the scene in that moment because everyone was like, oh my gosh, we need to understand this stuff.
Then we see, obviously, what's happened in the Middle East and how it's disrupted the Red Sea, as you mentioned, something that's less talked about. Also, tariffs. and what that has done to the supply chain. And now here we are again with this war in Iran. I guess my question to you, do you think that this is a temporary shock that we will kind of move through over the maybe short to medium term?
Or have supply chains just structurally become more difficult? Is this kind of issue something that's here to stay?
It's the right question.
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Chapter 3: What impact does the closure of the Strait of Hormuz have on shipping costs?
I think... There's a... Let's hope that it's temporary. You got to plan as if it's not, though. And we really take this for granted. I mean, it didn't used to be like this. It used to be worse. Before World War II, if you wanted to do trade anywhere, you sort of... Countries just traded with their own colonies and, like, most...
Remember, like, you know, before, during the British Empire and prior, centuries prior, like, if you wanted to do trade, you put a bunch of cannons on your merchant and you sailed around the world ready to blast anybody, you know? And it was, like, way worse. And we got to the world order that we have today after World War II with the U.S. Navy, right?
Basically providing protection and freedom of navigation and saying, hey, no, you know, you can say anyone can sail anywhere. U.S. Navy will protect the sea lanes and you could open up trade. And so that's why this is so such a fundamental challenge. The Red Sea first and now. And now the Persian Gulf, because it's a challenge to that global order. It's like, is the U.S.
Navy capable of opening the Strait of Hormuz? And we've already seen they're not capable of opening the Red Sea. They tried. The Supercarrier Task Force and a small group of rebels in Yemen prevailed and have continued to make it so that the container ships have to go around.
So it's a massive question for globalization, the way that our economies are structured, our companies are all built around these globalized supply chains. And I think people need to start thinking about plan B of more regional supply chains that are not as exposed. Yeah. Countries need to think hard about who their strategic partners are.
More countries are going to arm up and create, you know, have to invest in their own navies. Probably see this from Japan, starting to see a lot of European companies start to, European countries, I should say, start to build up military force for the first time, saying maybe we can't count on
just America to defend us and realize there's a lot of bad guys in the world and you can't just sit around and expect that everything's going to be fine.
It's a really interesting point. I guess I'm wondering, as the CEO of one of the biggest companies that works exactly in this space, What does that mean for you? Like, how do you change your strategy in a world where you can't take globalization and free and unfettered trade for granted? And you do have to start thinking about geopolitics, about violence, about war.
I mean, if we're talking about cannons on ships and you're saying that Europe needs to think about that again for the first time since before the war, before the World War I or World War II, like, what does that mean for you?
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Chapter 4: How is the air freight market affected by current geopolitical tensions?
Same on the tariff front. Like we built all this tech to help companies manage their tariffs and figure out how much do they owe. Because it used to be simple to calculate, but now you need to know on what date did this container clear customs. Tariff rate on one day is way different than it was a week earlier or a week later. And what refund am I going to get?
And how do I help people get refunds from tariffs now that the Supreme Court kind of overturned the tariffs? So we've seen that we can definitely stand out with tech in this volatility and turn it to our advantage. That said, like, you know, I'd much rather have a growing market where everything's Goldilocks. It's very interesting.
Okay, Ryan Peterson, CEO of Flexport. Ryan, really appreciate it. Thank you. Yeah, my pleasure. After the break, round two of the SaaSpocalypse hits the markets. And for even more markets insights, you can subscribe to my weekly newsletter, Simply Put, at simplyput.profgmedia.com.
Bye. Bye. Bye. There's basically been one guy in Republican politics who's argued for regime change in Iran for years and for America to take a proactive military role in making it happen. Ambassador John Bolton, President Trump's former national security advisor. But now even Bolton says Donald Trump is messing it up.
As far as we can tell, he did no preparation of the opposition actually inside Iran. No coordination, no effort to see what they would do, no effort to support them, to provide resources, money, arms, if that's what they wanted, telecommunications, just no coordination at all. And they don't seem prepared for it. how Trump lost the Republican Party's biggest Iran war hawk.
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We're back with Profty Markets. Anthropic is yet again moving markets. On Monday night, the company released a new clawed co-work feature which allows its AI model to autonomously access apps, navigate browsers, and edit files. This news immediately spooked the markets. Major software companies like Microsoft, Salesforce, and Palantir all ended the day in the red.
As a whole, the IGV software ETF closed down roughly 4%. It's now off more than 30% from its peak last fall. Here to break down what is happening in software, we are speaking with Gil Luria, head of technology research at DA Davidson. Gil, this is... the SaaSpocalypse part two, probably less intense than the first one.
But it is striking that we're seeing the same thing, a new AI tool released by the same company. And again, investors are very concerned about this. What do you make of the new tool from Anthropic? And are you as concerned as other investors appear to be?
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