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That makes it one of the most expensive US reconstruction projects since Kylie Jenner. How do you say? Money markets met. If money is evil, then that building is hell. Show those up! [Cheering] The dogs are never watching show. [Cheering] Welcome to Profty 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. Okay. 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. Third-lyzer 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. War risk insurance premiums for vessels have increased by about 50%. And oil tanker shipping costs have exploded by as much as 200%. So here to break down what all of this means for global supply chains, we're joined by Ryan Peterson, CEO of Flexport, one of the world's leading freight and logistics platforms. Ryan, I always love having you on whenever something is happening with supply chains because you're one of the few people who is actually in this business and you're seeing what is happening on the ground. I have been reading about what is happening to prices, specifically diesel prices. I've been seeing what's happening to diesel prices and fuel. And I've been seeing that this is just exploding prices for all forms of freight, basically anything that ships anything. I would just be interested to hear what you're seeing on the ground right now. Yeah, great. Thanks for having me on. Especially we're seeing an air freight market, which obviously is very jet fuel driven, but also the Middle Eastern air carriers, I think Emirates and Qatar and Etihad. And I guess Saudi, which is the Saudi one, they represent 18% of all air cargo capacity in the world. Emirates is the one's biggest airline I think and Dubai is the biggest air cargo airport in the world. So it's just a huge end. There's basically been take it offline. They started to eat their way back up. I didn't see the latest today, but we were trying to bring flights back and then new attacks at the airport. They've more or less ramped that way, way down. So especially Asia to Europe, the air cargo prices are double. In fact, we have Flexport have built this service to ship going from Asia to Europe. We ship in cargo across the Pacific Ocean, bringing it to LAX and then flying it to Europe from Los Angeles, which is not suboptimal to say the least, but same people moneyed it by doing that way and getting it there. The alternative, actually the biggest impact on ocean freight is the Persian Gulf is not that big of a deal from a container shipping standpoint. The bigger story obviously, by far is oil, you mentioned fertilizer, some of these other downstream kind of things that come off of the petroleum products. But the bigger story from container shipping is the Red Sea, which had we have not been using container ships have effectively not been going through the Red Sea since December of 2023 with the Houthi attacks, these terrorist attacks in the Red Sea. And in February, the carriers, three of them had just started to return service via the Suez Canal, and they immediately pulled out for too much, it was too risky. So that actually the big impact here is it was about to get a lot better. Supply chains were about to normalize and now it's on back to going around the tip of Africa. So that's going to add right now, it's increased the price of ocean freight about 50%. And so and that's a much longer transit time going around. So we've got oil prices going up, which means that it's more expensive to fuel all of these vessels and all of these aircraft carriers, basically anything that carries anything. We've got the fact that almost impossible for any of these ships to go through the straight up, we're now you're also pointing out that we've got these issues at the Red Sea. So multiple different issues here. How difficult is it right now to be in the supply chain business compared to other times in history? I think for example, maybe COVID as an example where it was obviously like a real supply chain problem. Like how bad is it out there? I think it obviously depends very much on what you're trying to do. Like if you're trying to ship to the Middle East as a disaster, I mean, you can't get into the Persian Gulf. There's no container ships going through a like I think oil and gas. I think we're seeing about three ships went out yesterday. Normally it's over a hundred. So it's a huge reduction in that supply chain. If you're on a global basis, like the ocean freight story here is a pretty small scale. If COVID was at eight out of 10 and the Red Sea disruption has been like a six out of 10, this container shipping story of the straight up four mues is only like a three. It's because yes, and I'm not saying it's only three for the global economy. I just mean four container shipping is specifically for the global economy. This is probably the worst thing in our lifetime if they can't get a result soon because how energy is upstream of everything and more importantly, food, the fertilizer production coming out of that region. It's planting season. So it's a very bad timing for the world's agricultural supply chains. But the Persian Gulf from a container shipping standpoint is a cul-de-sac. You don't need to go in there unless you're delivering to there. And there's only the stat that we're looking at is 0.6 percent of the world's containerships are currently stuck inside the straight. So it's not a, it's kind of a round-of-rounding area. It's not a big deal for container shipping. Now, fuel prices have gone up 87 percent for ocean bunker fuel, the fuel that powers the ship. So that's, you know, there's definitely, it's an energy story is what I would say rather than a container shipping story. Ultimately, that energy story is going to affect people like you, right? I mean, if it's more expensive to get the fuel to put the fuel in the ship, what would it put the fuel in the aircraft to go somewhere? Is that not also an issue on your end or is it less of an issue? Yeah, it is. It is. As I said, the prices have gone up about 50 percent. And the United Airlines CEO said earlier this week or end of last week, he said that this is their model was, their modeling, this, this, the, the jet fuel price increases is going to cost them $11 billion. Wow. And he said that in their best year ever at United, they made $15 billion in profit, which tells you they're going to have the model basically says they have to increase plane ticket prices by 30 percent to just to pay the fuel. So just to give you a sense of like how this is upstream of everything else. And that's really everything. I mean, this, we don't think about it, but plastic is all made from petroleum products like huge percent pharmaceuticals and healthcare cosmetics, consumer goods, paint, you know, it's in everything. And the US will be okay relative to other markets because we're self sufficient energy and fuel. You're going to see a lot of markets, a lot of countries where they, it's not about prices. It's like actual shortages. Like you can't get stuff like any price. And yeah, of course, the price will go parabolic at that point. But that's, that's the real danger that I think the economy is facing right now. And hopefully, I mean, we take it for granted that supply chains and
and civilization actually, it's like, it's all built on a foundation of kind of peaceful coexistence here that if you upset that apple card, it can get really bad. - Yeah, give us a sense of how this could trickle down to the consumer because it seems like all that we're really seeing right now, if you're paying for gas at the pump, you're immediately feeling this right now, you're immediately seeing how this is impacting your life. But I think the thing that is probably less understood is how the disruptions in the supply chain could also affect your life in some way. It could translate to the price increases in, I don't know what, so penis a picture of how this could translate for consumers. - The one that we narrowly avoided is on the west coast. So California shut down all or most of its refineries in an effort to go green. But of course, we still consume a lot of oil in California, a lot of oil based petroleum gasoline, and whatever. And so we've been importing refined oil, refined petroleum from Korea and other Asian markets because we shut down the refineries in California. Well, those markets are now out of crude to process 'cause they're getting their crude from the Middle East. And so the president had to last week suspend a temporary provision but waived the Jones Act. And the Jones Act is what prevents the reason that they have to get refined petroleum from Asia is because under the Jones Act, which is a hundred-year-old law, if you wanna move oil by ship from Texas to California, it has to be under US-made tanker with a US crew, citizens, American citizens as the crew, and those don't exist. So it's not possible for American, we don't have it, California's not connected to the Texas energy market. And they actually did it not to save California but to save Alaska because anchorages, the world's, I said, Dubai's the biggest cargo airport, Dubai anchorages right up there. It's a massively important air cargo market because you can't fly a 747 loaded with cargo, can't make it from Asia to the United States without refueling. They all stop in anchorages to refuel. And so anchorages, and if they were about to not have any jet fuel, if they hadn't waived this Jones Act. So there's these things that are, you know, we just kinda take from granted. 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 unrest. The president has some emergency powers, but it's not a permanent waiver of that. So let's 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 chain's 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 that'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? - Sorry question. 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 you most remember like, you know, before during the British Empire and prior, and sensory 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 US Navy, basically providing protection and freedom of navigation and saying, hey, no, you know, you can say anyone can sail anywhere. US Navy will protect the sea lanes and you could, you know, open up trade. And so that's why this is 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 US Navy capable of opening the straight of hormones? And we've already seen they're not capable of opening the Red Sea, they tried to see carrier task force and the, you know, small group of rebels in Yemen prevailed and have continued to made it so that the contingent 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. 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, as you say, start to build up military force for the first time, say, maybe we can't count on just America to defend us. And there's a, 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? Yeah. You know, and it actually going through the Red Sea, like the one ocean carrier that was providing service last couple of years was CMA because the French Navy was providing escorts to the French container shipping line. So you're starting to see a little bit of that. Yes, of course it's not good. Like we want to live in a world of open free trade, like our mission is to make global trade. It's easy for everybody. So these things make it harder. We've found, and you want to be in a growing market, like every entrepreneur wants to be in a growing market. We like to say, you know, we like to think like, I would say our market is so big, it is. It's vast. And so flight sport can be successful even if the market shrinks. But we've already learned like, man, it's way better if your market's growing and you don't have to fight. It doesn't have to be such a night fight for every incremental customer. So yeah, it's bad for business. We have found ways to stand out. You know, technology becomes a big piece of this puzzle of like our visibility tech has been more important than ever for helping people figure out where's my stuff. When is it going to arrive? What container ships are having to be rerouted? Where are these containers getting dropped? Like some of the core value props that Flexport offers are like actually more valuable and more differentiated in that environment. Same on the tariff front. Like we built all this tech to help companies manage their tariffs and figure out how much today, oh, 'cause it used to be simple to calculate. But now you need to know on what date did this container clear customs. Right. Tariff rate on one day is way different than it was a week earlier or a week later. And at what refund am I going to get? And how do I help people get refunds from Tariff's now that the Supreme Court kind of overturn the tariffs? So we've seen, 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 goldy-locks. 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 SaaS pocket lips hits the markets. And for even more markets insights, you can subscribe to my weekly newsletter, simply
[email protected]. (dramatic music) When you put imagination to work at canva.com. (dramatic music) This week on version history, our chat show about the best and worst and most important products in the history of technology. We're talking about a gadget that was meant to be used on phone lines and was eventually used by the military and then finally changed the music business forever. That's right, of course, I mean,
the vocoder, the thing that let us all play our voices like an instrument, and change the way that we think about our voices. We have a really fun guest, we have a really fun story to tell, all of that is on version history, on YouTube, and wherever you give podcasts. We're back with Profty Markets. Anthropic is yet again moving markets. On Monday night, the company released a new Claude 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're speaking with Gil Luria, head of technology research at DA Davidson. This is the SaaS Parkleps Part 2. 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 for Anthropic, and are you as concerned as other investors appear to be? Computer use by AI is actually a really big milestone. It is a big leap forward for the capabilities for artificial intelligence within the workplace, within the business context. These days, as has been the case for the last few months, the market is associating good for AI with bad for software. That's where we probably diverge in our opinion. We do think it's a very big deal for AI. It's very good for AI. Take from that, it's really bad for software. It's probably a little too much. Now, mind you, there are software companies that are particularly exposed to this. UI Path is the most one. You can see their stock decline the most dramatically today because UI Path has the last generation of automated computer use, which is robotic process automation. Think of it as macros in Excel for anything on your desktop, and that used pre-AI technology. Now, the fact that AI can do that and use your computer without you interfering is a big leap forward, and it's really big problem for companies like that. The saying that it's a big problem for all other software companies goes back to the same debate that's being had for the last three to six months around software. There is our opinion that winners in software will continue to win, and companies that are vulnerable, a disruption is always a bigger deal for. Walk us through what Anthropic has actually released here. We had that first slate of new tools, like Cloud Cloud Co-Work, and that was what Royal The Markets the first time. Now we're seeing this new development. What is so striking about what they have announced here, and how does it differ from the first round? Yeah, so computer use is literally what it sounds like, which is to say, you can now ask an agent to do things on your desktop or your laptop that previously only you were able to do. So not just interact with a single piece of software or write a little bit of code, rather press buttons on your screen to start an application to make progress an application, to make choices within an application, jump to another application, and move information to that one. So the possibilities are endless because it's really anything that you could do on your computer, you can now ask an agent to do for you. That is a leap forward from just having automated tasks happening in your applications. For instance, you can now use, if you're away from home, but you have Cloud installed on your phone, you can now instruct your home computer to execute tasks from your phone because Cloud can now control your desktop. That is actually a pretty big leap forward, an AI, and again, I want to put this in contact. This is a milestone towards HGI. This is something that a year ago we thought may or may not happen, and now it's happened. One thing that's not totally clear to me, we've have seen this before in the form of this AI agent that went viral recently called OpenClore, and it was very exciting to a lot of people, a lot of people were using it, and it was doing the things that we're describing. It was this agent going in and just executing tasks once you tell it what to execute. It'll go in and clear inbox and send emails and manage a calendar, etc. So we've seen it before and we know that it's possible, but now Anthropic is jumping on, and they're releasing the tools of their own, and that seems to spark a very different reaction from investors. Why is that? If we knew that this was possible, or at least that it was in the pipeline, why is it suddenly so rattling to investors now? No, it's a good point. The OpenClore's open source, it was a little bit of a lab experiment. It didn't have any guardrails. It was actually quite dangerous because it was open source. So you probably read about many instances where it did things that were highly unpredictable and counterproductive to the user. Now we're talking about something else. Now we're talking about an actual product from an actual frontier lab that is much better secured, much more under control, and shows that you can actually use this in a workplace. I don't think a lot of companies would install OpenClore, but there are many companies that already have other instances of cloud and other uses of cloud that this is now a natural extension for. So it does take it to another level. Yeah. Just going back to your point that some software companies might get hurt, but not all of them. And it appears that we're sort of again throwing the baby out with the bathroom to here. But just to go through some names here, like Adobe got hurt. Service now, Palantir, Microsoft got clobbered on this news. What are the companies that you believe are actually insulated from the concerns here? And all that perhaps any software companies that might actually benefit from this right now? So it's a range. I would say that first and foremost, the companies that provide infrastructure software are the ones that appear to be more secure. So security software, infrastructure software like snowflake, data.dog, Microsoft are probably more benefiting from any growth in AI because you need infrastructure in order to deliver AI. And so those are more insulated and more positively impacted by AI. Then there's a whole range of companies that are probably more secure. Companies that control a large part of the enterprise data schema, how data is organized. And so then you're talking about your Palantir, your service now, even your Salesforce and Adobe and Oracle to some extent. Those are a little safer. And the ones that have been, have had the most concerned, probably justified. We saw our companies that deliver either customer center software or again, workflow software. Those are the companies that are most exposed, you're nice, you're 5'9, you're UI path. Those are the companies that are most at risk. And this just exacerbates the risk. But again, the reaction is so strong that you have to step back and say, we are going to be using software humans or going to be using software for a very long time. And as long as that's the case, you need the same software, even if agents will be using the software as well. And now you know me is a lot like the internet. Just because Chagy PT can go shopping for me online, doesn't mean I don't also want to go shopping on these human websites as well. I think the same thing is going to happen for software, at least for the foreseeable future where there's both a human and an agent user, which means the software still has a lot of value. In fact, I'd argue the some extent even more value. You mentioned the point that a year ago we said that this might not be possible. Or it was very much just a concept in the ether. Having covered the tech sector for a number of years, what are your reflections on what we're seeing here in terms of this technological transformation? In what sense have the rules of your game changed? And how has this changed your perception of technology in general? The rate of change has become exponential. If the technology disruption used to be happened over time, over months, over years, the disruption now is happening over weeks and days. The level of progress being made is incredible. And it's for a variety of reasons. One is that we're putting so much capital in.
into this. So all those hundreds of billions of dollars in data center spend are making it possible for us to run these models that are increasing, that their quality is going up so substantially every year that they are able to accomplish things that we wouldn't have imagined. If you showed somebody four years ago what these models are doing, they would have called it AGI. We have now become desensitized to it because the rate of change is so fast but we are so far past the touring test. We blew past the touring test a while ago. And again in the mindset of five years ago the touring test was artificial intelligence was AGI and now we're just blowing past that and doing things that we never imagined that we'd be able to do. So the rate of change has become exponential which makes my life a lot more interesting. All right, Gil Luria, head of technology research at DA Davidson Gil. Thank you very much. Thank you. Okay, let's talk about insider trading specifically in relation to Iran first a review of the facts. On Sunday morning about 15 minutes before Trump announced he was engaging in talks with Iran, we saw gigantic spikes in trading volumes across multiple different markets. So in the oil markets at around 6.50 a.m. more than half a billion dollars in oil futures changed hands. This is an unusually large number for such a short amount of time. Over in the stock market we saw similar moves roughly one and a half billion dollars worth of S&P futures were purchased again at around 6.50 a.m. We also saw similar things in the prediction markets. One user made nearly one million dollars betting on the war with 93% accuracy and multiple traders have now been flagged for making what appeared to be insider trades which leaves us with two conclusions. Either a handful of individuals are getting extraordinarily lucky with their extraordinarily large and well timed bets or a handful of individuals knew something and they decided to trade on it in the belief that one they'd get very rich which they did and two that they wouldn't be punished which they probably weren't. Now if we agree that the second option is more likely that they knew something probably because of a connection to the president then the next question becomes isn't that illegal? Shouldn't they be in jail? And the answer to that question is a resounding yes. If someone knew what Trump was going to do ahead of time then that is material non-public information that meets the SEC's definition of what constitutes illegal insider trading. But and here is the most important part. The SEC under this administration has very little interest in prosecuting and investigating cases of insider trading. In fact last year SEC enforcement actions declined by about 30% after Trump had taken office. It also settled only $800 million worth of cases which is the lowest number ever in which we've seen an administration change and here is the kicker. Last week the SEC's enforcement director resigned. Why? Because she was reportedly plashing with her bosses over her attempts to investigate cases involving wait for it, the Trump family. In other words not only have our markets been compromised but our regulators have been compromised as well. Criminal activity and financial fraud can now run completely unfettered because there is now no one left to punish it, not the SEC, not the FBI and certainly not the president who seems to be involved in these activities which means that there's nothing much that you or I could do here. I mean I can talk about it on this podcast. I can keep looking at the markets and I can keep trying to understand what's happening here but beyond detecting that it happened there is literally nothing else we can do and there is nothing to disincentivize this behavior. We don't know who they are, we don't know what they know, we don't know who they've bribed or with whom they've spoken, we really don't know anything and so not to be overly dramatic here but this is the moment where democracy does have to play a role. This is the kind of thing where you actually have no choice but to use your vote. You have to get rid of these people if you want to see any justice whatsoever. This is the most corrupt administration of all time. There is no question about it and people are increasingly agreeing on that point but if we don't do anything about this well then let's just be realistic this is only going to get worse. Okay that's it for today. This episode was produced by Claire Miller and Alison Weiss edited by Joel Passon and engineered by Benjamin Spencer. Our video editor is Brad Williams our research team is Dan Sholan is Valakinsel, Chris Nodonohue and Measel Vario and our social producer is Jake McPherson. Thank you for listening to Procty Markets from Procty Media. If you liked what you heard give us a follow. I'm Ed Elson. I will see you tomorrow.
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