Kaos Theory Episode 14: Lakshmi Sreekumar

0:10 Introducing Lakshmi Sreekumar to Kaos Theory Before we get going, here's the bit where I remind you that nothing we discussed should be considered as investment advice. This conversation is for informational and hopefully entertainment purposes only. So while we hope you find it both informative and entertaining, please do your own research or speak to a financial advisor before putting a dime of your money into these crazy markets. 0:30 And now on with the show. 0:38 Speaker 2 Welcome, everybody, to another edition of Chaos Theory, joining me, as always, Human Chaos himself, Michael Cow. Hi my friend, how are things? 0:48 Speaker 3 I am well and I'm super excited about our guest today because I have been trying to get Lakshmi Srikumar as a guest on here for years and she's always been somewhat hands have been tied because of her institutional role at Capital One. 1:07 But as our audience will find out shortly, Lakshmi has recently resigned from Capital One and she's making her social media debut on Chaos Theory. So we're very honoured to have her as her debut post Capital One appearance. 1:25 Speaker 2 I wasn't familiar with Lakshmi until you started sharing her work with me. She's fantastic. So I'm. I've been really looking forward to this. It's taken us a while to get this one in the books, but we've. 1:33 Speaker 3 Managed to do it. I'll say that the reason why I have valued her analysis throughout the years, Grant, is that she calls it like it is, but she's not a perma bull. She's not a perma bear and I think that especially in a commodity like oil, is just critical because you can get really burnt being Burma anything. 1:54 Speaker 2 Absolutely. What do you say we we say hello to Lakshmi? 1:57 Speaker 4 Welcome, Lakshmi. Thank you, Mike. Finally, we are doing this. 2:00 Lakshmi's Journey to Oil Macro Analysis I know go back to the beginning real quick and as you walk us through a little bit your background, how you got to becoming an oil macro analyst and definitely tell us a little bit about your experience sitting on the Dallas Feds Energy Council as well. 2:20 Speaker 4 So starting at the beginning, I think it might be relevant to this conversation too, is that I was raised in the small island country of Bahrain in the Middle East. I came to Texas to attend university. I went to Rice, studied electrical engineering and computer science. 2:38 I used absolutely zero of that degree professionally because I immediately graduated and went to the trading unit of BP trading natural gas. After that I moved into derivatives and I've spent pretty much all the rest of my time in derivatives at BP, Barclays, Macquarie and then Capital One, which is where you and I met eight years ago. 3:03 And how I got to doing macro and especially oil macro is it's just a necessity, just nobody was doing it. And I had, there was such a, an interest from our clients for somebody to put out something original, not something boring and something funny and interesting. 3:26 And I figured I would do that in terms of I had all the data at all the analysis. I just had to sit down and write it in a way that people would enjoy reading it. That's how I got into doing that work. And most of my work, I will say, is focused on now casting and forecasting. 3:43 And I will argue that demand is the part of my work that is probably most recognized. And you know this as well, Mike, the largest body of my work is around demand forecasting. About the Energy Count Advisory Council, Absolutely. 4:02 I feel so fortunate and I am part of the 11th District's Energy Advisory Council advising President Laurie Logan, and we are one of many advisory councils that she has in place and this is true of most of the other districts as well. 4:18 I can't speak of every FOMC member, but from the people I've observed and had the opportunity to connect with, I can tell you they are arming themselves with as much information as possible all the time. High frequency data and direct input from subject matter experts constantly. 4:37 So my biggest take away if you ask me is as an outsider coming in and serving on the council, I take great comfort in the fact that monetary policy is not being made in a vacuum. It is a very involved process. There's a lot of thought that goes into it, a lot of data that goes into it, so I think that's something that the public can take comfort in as well. 5:00 Speaker 3 Well, I certainly take comfort on the fact that they have somebody of your caliber informing them. So I really mean that. 5:07 Unpacking the Oil Price Paradox and Hormuz I guess we'll jump right in because we've chosen today as a well, today was a perfect day to talk about, well, right as hostilities in the Middle East seem to be resuming again. You've coined a couple of great terms in your various pieces. You've called it, it's called the Strait of Hormuz, Schrodinger St. 5:26 You've recently referred to it as a sieve. And perhaps we can just talk about that a little bit because you and I have talked for many years about this notion of a potential price shock that we've called this supply demand singularity. 5:41 And to walk our listeners briefly through that premise, it goes like this. If you have a commodity that is priced to the marginal barrel and you come to a point in time where the supply curve is particularly inelastic, and it could be inelastic because of a number of things, the Permian rolling over, a geopolitical shock, all of the above, You could have a situation where the price just goes crazy to $300 a barrel. 6:13 And that's where a lot of pundits were forecasting oil at the beginning of this Iran conflict. And yet, despite this extreme conflict, we have oil only in the 80s and 90s. 6:30 So talk about how we got there and why people have been so wrong. 6:35 Speaker 4 Well, it is a paradox, isn't it? If you turn on the news, you'll hear roughly 20 million barrels a day of oil has vanished from the system over the past six months. And then you could immediately jump to assumptions that we're drawing some ungodly amount of oil from storage. 6:53 So pre war roughly 16,000,000 barrels a day of crude and condensate and about 4 million barrels a day of refined product was moving through the narrows of the straight between March 1st and August 31st. The global inventory tells us that we have drawn about 566,000,000 barrels. 7:15 That's only about 3 point O 8 million barrels a day. Of that, roughly 1.75 is Crudencan say and 1.35 is products. Now this is a meaningful draw. Don't get me wrong, it's over a half a billion barrels a day of draw in a six month period, but it is nowhere close to 20 million barrels a day. 7:36 So where are these missing barrels? And this is the conundrum. So I try to remind people that oil prices are where they are. Not because we just ignored war and followed headlines or whatnot. It's where we are. 7:52 Where they are because we finance the disruption from 4 places. In the 1st place is demand. We financed it via demand destruction. 2nd place is bypasses. There were enough bypasses to get oil out to blunt the effect of this loss. 8:13 The third is obviously your inventories, which we talked about the smallest bit of it. And the 4th is the most interesting 1M and the most controversial one, which is the straight as a sieve. It is indeed a sieve, and I can we can go into this in a little bit of detail if you want, or we can go straight into the straight as a civil peace, whichever way you want to proceed. 8:38 Speaker 3 I think if you're able to try to quantify each of these four factors, that would be really helpful because a lot of people similarly mis forecast the Russia, Ukraine conflict. And I remind people that in that conflict, in that four year conflict, now we really didn't lose any barrels, but that conflict also didn't have a choke point like Hormuz. 9:04 So let's maybe compare and differentiate. 9:07 Speaker 4 Absolutely. Well, we'll start with demand, and you might remember this from my writing in March when the conflict first started across the board, the consensus was you're going to get a demand loss in the hundreds of thousands of barrels a day. 9:26 Very early on, I said I think it's going to be around 4 to 5 billion barrels a day at a price between 90 and $100. Now to really bring this full circle, I was wrong by about 100%. 9:46 The actual number of demand loss peak to through was closer to 8 million barrels a day. That's how wrong I was with my own very aggressive demand prediction. And I run a top down and bottom up model which makes a difference. 10:04 Their top down model is looking at all the economic factors and bottom up model looks at all of the high frequency factors and they converge somewhere and that's when we know here we got something here. That model called a number that still came in 100% below reality, That goes to tell you how humble you should be when you approach demand modeling in this market. 10:30 And that economic structures globally are changing so fast that analysts can't keep up with it. And China is a great example of that. Of that 8 million barrels a day of loss, the largest portion portion of that came from Asia. 10:50 And here I do want to give some concept around the word demand. What does demand mean? And there are two types of demand. The first type of demand is oil demand and oil demand. The only thing you can use oil for is to burn it directly and make power out of it or put it into a refinery, refine it and get the refined products. 11:13 So your oil demand equals refinery runs plus any direct burn. The second type of demand is the one we are all very familiar with, which is demand for those refined products, the one that we put gas in our car and we run our industries on with diesel etcetera. 11:31 So keep that in mind as well. We're talking here about oil first, because if we talk about products, that's going to be a whole other episode. So demand was the most striking and most unexpected balancer of flows in this entire paradox. 11:50 The second was bypasses, which is you. We have two main bypasses. Pretty much everyone knows about it. Saudi Arabia's East West pipeline that can move about 7 million barrels a day to Yanbu, but then again, Yanbu Port has a limitation of about 5 million barrels a day of loading. 12:07 Then you have UAE hubs and Fujairah pipeline that adds about 1.8 million barrels a day to that bypass route. You have some Iraqi redirections to say Han, some smaller land routes to Jordan and Syria. You combine all of that, you have a capacity there of upwards of 8 million barrels a day, but roughly about 6,000,000 barrels a day have been transiting that path between March and August. 12:33 So that's your second piece, your bypass and then you come to the Strait itself, which that the lows was transporting nothing, right. There were days where you had 0 transits through the narrows of the Strait. So you were just relying on these bypasses and demand on all these other levers to help balance flow. 12:55 But now all that's changed, the Strait has turned into a sieve, if you, if you can think about it. And we'll get to that point in a bit, but I want to give a quick percentage of who balance the flows. So bypasses were 37% of flow balance refinery runs, which quote UN quote is oil demand is 33%. 13:18 The straight as a sieve on average between March and August was 19% and inventories were only 11%. And that, my friends, is why oil prices are not $250. 13:33 If everything else was zero and inventory was 100% of this flow balance, we'd be in such trouble. It wouldn't be $200. It'd be something north of that if we were pulling that much out of storage, right? But this goes to show that the system is so beautiful, it is so efficient, it's functioning properly, it is healthy. 13:56 This should make us all feel really good that we have a global system in the oil markets that's functioning quite well. The elasticity is quite strong. That's how it should be. 14:08 Why Oil Price Forecasts Are Often Wrong Lakshmi, the energy markets are in some way very basic. We all need energy. We need oil, we need diesel. We need all the things you talked about there. And they're a very basic need for every developed society on earth. And yet we have more granular information about the oil markets, the energy markets than just about any other sector on earth. 14:28 And yet given the basic necessities of the oil market, the basic supply, the basic demand, the basic flows, the basic requirements of all these countries and all that granular data, somehow oil prices seem to blind side the collective foresight in what the price are going to be more often than just about anything. 14:47 So. So perhaps you can help people understand why it is that it seems to be a common reoccurrence that the consensus oil price forecast is wildly offsides. 14:59 Speaker 4 Yeah, it's great question. I wish more people would ask this question. I would say that having all the data doesn't mean you are able to draw the right conclusions from that data. I can have a well every data point in the entire universe in front of me regarding oil, so can somebody else and we may come to different conclusions because our paradigms are for constructing an opinion based on that data is different. 15:30 The common pitfalls that I see people making are these the NUM, the first one is starting micro and going up, starting from the bottom up approach, which is I'm going to count every barrel. I'm going to count. I'm going to make sure I balance every micro balance in every pad in the US. 15:49 And then I'm going to do that for every location. And you put a trade on based on that, and one tweet from Donald Trump blows up your entire position. You see the problem here? You've done the work. You've all the data. You are probably the most data centric person ever. 16:08 And you were right from a fundamental perspective, but you ignored policy and you ignored the politics of oil. Oil is a highly political commodity. I've traded various commodities, metals, oil, gas, etcetera. 16:26 And I will tell you there's nothing comes close to oil. In fact, if you look at presidential ratings, gasoline prices are a are very highly ranked in how people rate a presidential approval rating. 16:43 So when you're treating a political commodity, you have to start your framework from the places where the data has most weight. You first have to weight the data. Yes, you can put on a trade now and be right in four years or six years or what have you. 16:59 Those are long term investors. I understand that's a completely different frame of mind. The thing that I do, which is an outcasting and forecasting in the mid, in the near to medium term, it requires that the framework be different. You have to pay attention to macro, you have to pay attention to political leanings, you have to pay attention to geopolitics. 17:20 You have to pay attention to balances as well and flows. This is the issue I find mostly trips up people in the oil market is they can't get comfortable with one model and you rest your laurels on that. 17:35 Instead of constantly asking the question, how am I wrong? Constantly, every day sitting at my desk, I ask my question, OK, this is what the model says. How do I blow this case up? And this is a good place to move to the Strait as a sieve Mike, if you want to hear about that. 17:56 Or we can move to some other topic. 17:58 Speaker 3 Yeah, when I go back to that infamous Trump rug pool of Q4 of 2018 where every barrel counter out there was getting bullish oil on the pulling out of JCPOA and the fact that Trump said there would be no waivers, he decided that there would be 11 waivers at the very last minute and collapse the price of oil. 18:20 I will never, ever forget that episode. So to your point. But yeah, let's why don't we talk about the Hormuz sieve and the geopolitical aspect of this? 18:32 The Strait of Hormuz: A Data-Driven Sieve Absolutely. 18:33 Speaker 4 So before I I get into this topic, I want to make some base rules clear. One of my rules is that risk management is not a partisan business and I have 0 political leanings. And I want to say that up front because people invariably assume that if one analysis doesn't fit their own political lens, then it must be partisan. 18:56 Trust me, I am on the shit list of every political party because I'm only interested in facts and it kind of makes you ungovernable in some ways. So going back to the Strait is the Strait of Sieve, I think. So my data test that tells me so. 19:12 The root of this controversy around the Strait of Hormuz, the Gulf of Oman, and Middle East as a whole from a flow's perspective, is coming from two issues. The first issue is that people are comparing apples to orangutans. 19:27 Total Middle East flows are not the same as Hormuz flows are not the same as Gulf of Oman exits. Everyone is narrowly focused on one section of that data, and they're drawing comparisons to different parts of the flows. I just told you how much was going through the bypass. 19:44 Are you taking that into account? So when you're comparing something, make sure you're comparing apples to apples. The second issue is that a lot of the popular data providers out there are still relying heavily on AIS sourcing for vessels. 20:04 Now this is a perfectly fine, beautiful data set You it provides a lot of information. Nothing wrong with it. In fact, you cannot build a model without it. You absolutely need continuous AIS signal data, but there's a layer on top that's relevant and it comes in because. 20:24 As vessels are transiting the Persian Gulf and moving through the Narrows, we are noticing, and they have been doing this since April, even March, they're turning off their AIS signals, which is the automatic identification system. 20:39 It's required by the IMO for vessels over a certain weight and they're transiting quote UN quote dark. How do you find these vessels? This is where you have to construct a dark layer and I'm not going to get into the details of each of these six layers that I create, but I'll give a rough idea of what it looks like. 21:02 There is a satellite aperture radar layer and on top of that a satellite Electro optical imagery layer. These are layers that help you catch those vessels that have turned off their AIS and are transiting dark. 21:18 Now remember these vessels will at some point turn them on and we can reconcile them at that point. That may be days away. That may be weeks away. There's there are vessels that I find that have transited the straight that are showing up in the Indian Ocean and turning on their AIS signals. 21:36 That's too long. You can wait, great. But we're not in the business of waiting weeks before we know what the data is. We want to know that now and that's the construction that has to go into it. You're basically lining up sensors and observing the same waters and roughly the same time, and you're getting multiple snapshots of this every single day. 22:02 Then you're aggregating the data. It's a lot of data, it's a lot of processing, but ultimately you get a reasonable answer. So just to give you some some numbers, total Middle East exports including the bypasses are now clearing 67% of 2025 averages on a 7 day moving average basis for crude and products, crude alone, oil alone, crude and condensate alone is closer to 70%. 22:31 And these are staggering numbers. And if the question we're asking is the US administration lying about volumes going back to 2/3 of pre war, they're not, they're not from my perspective. This is checking out. 22:46 Daily numbers can fluctuate, even weekly numbers can fluctuate sometimes, but overall the message that flows half normalized to 2/3 of pre war levels is verifiable. Now we've had two pretty large attacks on ships here in the last 24 hours so we should pay attention. 23:05 That can change the picture. And I will also point out that it's not for the lack of Iran attacking ships. Iran's been throwing missiles and drones and all kinds of things that had ships over the last several weeks. It's not for lack of attacks, it's just that they haven't hit them yet. 23:22 It's thanks to our Navy. the US Naval Consort is helping prevent those. That's an. 23:28 Speaker 2 Incredibly detailed picture. Thank you of how that all works. 23:31 The Geopolitics of Iran and Hormuz Control Can we talk a little bit about the reality on the ground so that I think that those of us consuming and use in the West that don't have access to fantastic Oilers like you? We've all seen the Looney Tears cartoon. Straight, open, straight, close, straight, open, straight, close. So can you give us a sense of what it actually means to close the straight, what that actually looks like in practical terms? 23:54 And maybe the negotiating points on both sides about the state, why it's important to Iran, why it's important to the US, and how they're actually going about this process. Because it's impossible to get a real handle on when all we're given is a straight. It's open, it's closed. Yeah, this. 24:09 Speaker 4 Is why I wrote the article with Schrodinger straight, which was later copied by many people I had at least the title was. But it's interesting question Grant that is the straight open, is the straight closed? The answer is the straight is a sieve it's truly not closed, but some parts of it are closed and what does it mean to close the straight? 24:34 This is a fascinating answer because the only real effective closure of the Strait has been to that of Iranian barrels closed by the US Navy. The naval blockade line that is held and 0 Iranian barrels have transited the Strait. 24:55 So that's what it looks like to close a Strait. You have a a huge naval presence. If any ships threaten to get out, you stand there and you warn them to turn around, and if they don't, you should. That's how you enforce it. You close a straight. 25:11 What Iran has done is obviously using projectiles to from their shores to hit vessels, sometimes obviously causing a lot of damage. We've had many vessels that have gone up in flames, completely rendered useless after the hits, but some of them only take minor damage and they continue their transit. 25:31 And of course, with our Navy helping, it's been a bit easier to make those transits of a little bit safer to make those transit. But that's still not without risks. As we saw over the last 24 hours, you can still get hit. 25:47 Now the question around who should control the Strait of Hormuz and how can we get a framework that is workable eventually? My position has been, and Mike, you know this, that giving Iran unilateral control of the Strait of Hormuz would do far more than just conceding administrative authority over Shipping Lane. 26:15 And it's framed that way to appear benign. Oh, it's just administrative authority, right? It's framed that that way as administrative. But the way I see it, this is how you would fund the next, next confrontation. It's how you funnel money, leverage and ultimately legitimacy to the IRG CS control over this body of water. 26:38 And I'd like to remind the listeners that if you don't know yet, here's a data point. The IRGC controls over 50% of the Iranian economy right now. And this flow of cash that may come from Iran assessing a fee and unilaterally controlling the Strait of Hormuz, one would think, hey, this would go towards repairs and civilian population and rehabilitation of the country. 27:07 I don't think that's realistic at all. It would go to pad the RGC coffers. And this is layered on top of mechanisms like the roughly $6 billion of non monetary gold imported in 2024 for sanctions evasion. And this explains why control and fee assessment has remained a central thesis of Iranian demands. 27:29 You go back to the MOU, you go back to every negotiating point we've had with them, they have demanded that they control the straight and they have a fee assessment. And why is this problematic? I know lots of people are like, oh, this is not problematic. We'll just pay around $2.00 a barrel. 27:46 Well, what if you had a little tiff with the RGC, You were the Saudis, and you said something and the RGC didn't like it. All of a sudden, Boom, three day delays for Saudi vessels for special inspections. 28:02 Right? Let's say the Emiratis had a disagreement. OK, here's an extra $13 per barrel environmental fee for every Emirati vessel. Basically, the IRGC wants leverage, and it wants to use that leverage as it pleases to control how transit happens through the street. 28:24 And they'll use it for these political purposes. And Iran's negotiating posture already points in this direction. Michael's familiar with this. I do this demand index, a maximalist demand index for Iran. It's up 400% their demands from June of 2025 to now. 28:42 It's getting more and more maximalist. The the second point I worry about unilateral control is it can become an economic deterrent protecting Iran's nuclear program. Imagine we make get to a nuclear deal and we're trying to enforce that deal. 29:00 We are looking at snapback sanctions, etcetera. They could again go back to the straight to use it as leverage to against countries voting against them in the UN. And finally, this is robably the worst one of all of them. 29:15 And that's it. Gives the IRGC a chance to tell the people, hey, guys, look, Iranians. We closed the Strait of Hormuz, the world negotiated, the US conceded, and we emerged with permanent authority. 29:31 That would be devastating to any, any argument for any pragmatists that remain in the system. They're few and far between. But there are still pragmatists in the system that will may be willing to come to the table to make a good faith deal, but #1 they're not in power right now. 29:49 That's number one problem. And #2 if we allow this to happen, they lose every bit of support from the people. These are the issues I would take. 29:59 Speaker 3 It even a step further, Lakshmi, because I completely agree with you saying that Iran must never collect a hormones toll and how that must be a red line. Because in recent days, as we all know there, there have been a lot of, there's a lot of constant talk about in the US debt clock and what Besan is doing at the long end and Druckenmiller's critique of that and everything. 30:21 And I've been writing that I think all of this is trumped by geopolitics and control of critical resources. And the biggest determinant of what I call the US hegemonic premium is geopolitics and not deficit or the debt clock 100%. 30:38 Speaker 4 So. 30:38 Speaker 3 How we deal with this Hormuz situation and similarly how we deal with China and Taiwan are much more critical, in my opinion. 30:48 Proposing a Consortium for Hormuz Management Yeah, that's. 30:48 Speaker 4 Coming up in next three years, we're going to be dealing with that. But I will tell you one thing. I'm a pragmatist as well, right? I know that not having any sort of deal in the Strait of Hormuz is probably, I probably might be dreaming, might not be how it all plays out. 31:07 The devil's advocate of this again, when I told you I always come up with my framework and I ask myself, how am I wrong? And the devil's advocate piece of this is if we allow a GCC LED and Iraq to be part of it too and GCC and Iraq LED consortium that includes Iran as a participant that would then have authority over the straight. 31:33 And Mike, you familiar with the Malacca framework, right? It's something like that would do a few things right if Iran accepts it. Again, this is all contingent that the IODC even entertains this and I personally believe there has to be a lot more pressure for them to even consider this option. 31:52 But if it's a GCC LED consortium with Iraq and Iran is a participant, we can actually get the Strait of Hormuz open. And there is economic value in that. There's economic value. Look at the the cost of freight, look at the cost of insurance. 32:07 All of that would unwind if the Strait truly opened and there was confidence that vessels can transit safely. The second is that it gives Iran at a a seat at the table without giving away the cash to the IRGC. 32:23 It's a face saving exercise. And I know I just said that hey, giving them a face saving exercise is actually a bad thing because it it undermines the pragmatist. But in this case, it may be the only way to get them to the table is to give them an exit route that has some modicum of decorum. 32:44 And most importantly, the the biggest piece of that is that the payoff from closing the Strait of Hormuz again changes. Today, Iran can shoot missiles and shoot drones and been quote UN quote, shut the Strait and demand concessions for reopening it. 33:03 But inside a consortium, reopening is no longer Iran's gift to the world, right? It's it is in compliance with an institution it would have voluntarily joined, with violations potentially costing them funding and standing and benefits. 33:20 So I'm not suggesting A consortium would subtly turn the IRGC into a room full of utility maxing economists. That's absolutely not going to happen. But what I'm saying is that we have to consider the other side of it and think what are our options? 33:37 That is an option. And if the structure restores gulf flows, stabilizes prices and contains headline inflation before midterms, it is a far more politically salable proposal for the US as well. So I leave it out there. I don't know which way the administration would go, which way anyone would go. 33:54 I think they're leaning to the former analysis, but there is a second idea here as well. It's. 34:01 Speaker 2 Interesting that things have developed significantly through this conflict. And when it began, it seemed as though the conflict was when we talked about negotiating with Iran, we were talking about negotiating with the Ayatollah and negotiating with ideologues. 34:18 Now when we talk about negotiating with Iran, it seems more and more you've been specific about it, but more and more the implication is we are negotiating with the IRGC. And it seems to me as though whilst they may well be put in place by ideologues and commanded by ideologues, they may be more incentivized by different outcomes, IE finances, and they're clinging onto parents. 34:43 So they are driven by financial concerns rather than that. We've also seen Scott Besson change his tack in the last couple of weeks and the measures that he's talking about now, which you know, a lot of people, myself included, said, well why didn't you lead with this? 35:01 Why didn't you go in with this at the? 35:02 Speaker 4 Beginning. 35:03 Speaker 2 But fair enough for kinetic conflicts and war changes that everybody's planning. But I think today he talked about we know where all these Virgin Island shell companies are. We know where your money is. Does this actually make it easier now to reach a conclusion on this? 35:22 Because as Mike pointed out in our last conversation, Mike every he talked about how the the Venn diagram of overlapping interest made it very difficult to get a win that was anywhere near the centre of an overlapping Venn diagram from all the players here. But realistically speaking, if it if we are now negotiating with the IGC, they are driven not primarily by ideological goals, but financial goals and power goals. 35:47 Is there a better path, a simpler, more straightforward path through this to reach some kind of settlement? 35:53 Starving the IRGC: Regime Remodeling in Iran Oh my. 35:53 Speaker 4 Gosh, Grant, I have been and my closes, I have been pushing this particular idea, which is creating a lasting liquidity crisis within the IRGC as the economic structure for a very long time. 36:10 The reason we haven't done it or hadn't done it up until now, whether it was under the Trump administration or Bright administration, is because we were afraid of $100 oil and we were afraid of $4.00 gasoline. Well, we've had all of that. We almost have that now. So what do we have to lose at this point? 36:26 The cost that you have to pay for this sort of long road, as I call it, is it can go for six months, 8 months longer. It's who blinks first. That's the game we're in. And the idea here is, if you want to, what we're talking about here is really regime remodeling. 36:48 The power held within Iran has shifted considerably away from the civilian government towards the RGC. And that is in part, in my opinion, why the MO U completely fell apart. Of course there were transgressions from both sides on on serving the MO U at large, but the people that are controlling the decisions now have almost perverse incentives that don't align at all in the interest of the Iranian people. 37:18 So the way I see this playing out, if it played out well, is basically a controlled transfer of power from IRGC hardliners to the sect of civilian government with some element of pragmatism in the and how do you do this? 37:33 You have to combine the naval blockade. The naval blockade must remain in place. The Navy restrains the molecules that Iran can export, and the Treasury constrains the money attached that molecule. The goal is to turn an export income shock, which they're facing now during the naval blockade, into a lasting liquidity crisis that has to last 6-8, maybe more. 37:59 Oh, I had a third. 38:00 Speaker 3 Arm which was you saw there were there were some military strikes on some of the alternate land routes that Iran could have taken right. So got to shut down their sieve, yes. 38:10 Speaker 4 As well. 38:10 Speaker 3 Yeah. 38:10 Speaker 4 Absolutely. So Iran's exports are not just oil and petrochemicals, they are export a bunch of. So they export food products, nuts, all this, all other things. So if you are going to shut down their exports, the FX disappears and now Iran must choose among essential imports. 38:27 Are they going to defend their currency? Are they going to defend subsidies, military reconstruction, soldiers, payrolls? And this is where the IRGC becomes vulnerable because a mutiny is not automatic, but because the organization is built on patronage and not loyalty. 38:45 And that becomes much harder to hold together when you don't pay your soldiers. That is the corruption that we can exploit within the system, but it again, requires time. It's like a staring contest. You can engage in this, but who's going to blink first? 39:02 And This is why the election cycle is difficult to navigate. But at the same time, the bigger question to ask, it's now or never. There is an opportunity right now to do this and stay the course, or you punt it and then you'll deal with it at a later time. 39:19 The one thing I want to be very clear in this long road case is that if we go down this path, prices will remain elevated for some time until we get a blink from either side. Either we quit, we say we're done. This thought experiment, this experiment is not working. 39:35 It's been 12 months and we're out of here and we pulled troops, or Iran blinks and says, OK, we're going to come back in good faith to the table. And I can't promise you how long that's going to be. I can tell you it's not two months. It won't be here. They're not going to blink by November. 39:52 Are they going to blink at six months in eight months? Is it going to take longer? Nobody knows because the threshold of pain that Iranians have been prepared for, they've been preparing for this for decades. 40:07 And this is an important thing to realize as well. The demographics in Iran, 76% of the population is under the age of 50, and they were either born into or substantially raised under this regime. They don't know anything else and they have been prepared for difficulty. 40:27 Difficult life to take pain. In many ways it's similar to Israel, right? The threshold of pain for the that the people are prepared for is very high. Very similar here as well. So I'm very interested to see how this plays out. 40:43 This is my regime remodeling thesis for. 40:49 Speaker 3 These are Lakshmiisms. I love the Lakshmiisms and the other side. 40:53 Speaker 4 People always ask me, they challenge me all the time. What the hell are we doing with regime remodeling? Why don't we just do a regime change now? If the goal is regime change, This is a longer Rd. still and we should be prepared to your. 41:06 Speaker 3 Point we look, we America should have learned by now that top down regime change has not worked so well for the US. So I think your point about regime remodeling, maybe I my, my paraphrasing of that is regime change from within, right from a bottom up perspective and that's the way it has to happen. 41:27 Speaker 4 Yeah, and I will present an idea. We can edit this out if it's not valuable, but I'll present an idea that I was asked about and how I think regime change could happen. And I was reminded of a famous Richard Rose quote. 41:43 You can move mountains, but the mountains have to agree to be moved, right? What we've done so far from a Western perspective, we've told the people of Iran, oh, you guys, help is coming. We're behind you. Go, people. And then we've sent this help in the form of good vibes and godspeed when it mattered, right? 42:04 OK, here's the help. Good vibes, Godspeed. And that's just not going to work. This is how thousands of people get slaughtered in the streets in an attempt to overthrow the regime. It's happened many times. And this is not something that is AUS role either. You need the world to say, OK, enough is enough. 42:23 And we are actually going to offer the people of Iran unconditional support. And that word unconditional means exactly as it is written, written in the dictionary. That means the support we provide to the people against the regime, it cannot come with the next free date that lines up with our elections. 42:42 It cannot come with a stipulation on how they fight and with what. And we can't say, oh, we're done because some of some change in economic conditions or political conditions back home. And it also cannot come with a precondition that we will get to install our own puppet as a democratically chosen leader of Iran. 43:03 If the goal for the world is to welcome and a new Iran to the world stage. The leader has to be chosen by the people. This is 92 million people. It is a different culture. It is not Cuba, it's not Venezuela. 43:20 It's very different. And this leader may not be our first choice or second choice. And we should be OK with it. And if we're not OK with it, don't attempt it. I mean, our Congress can't even decide on what flavor of doughnuts to order for their committee meetings. 43:37 Can you imagine? Every two years we turn over having remaining committed to this cause for an extended period of time. This is the problem. This is why it has to be sort of a global effort and not just AUS effort. There has to be some buy in from Europe, some buy in from the rest of the Middle East. 43:57 China, I don't know. China's probably not going to, but still possible with the rest of the support I want to. 44:03 Speaker 3 Turn the discussion, the geopolitical discussion and tie that back to the question that Grant raised earlier about why it is that so many people get oil price wrong. And he walked us through some of the detailed methodologies you have for coming up with the supply part of the equation, especially in this fog of war that we have with Hormuz. 44:27 But I'd like to remind people that actually counting barrels on the supply side, believe it or not, is actually the easy part compared to forecasting demand. And one of the charts that you have on your dashboard that I want to call attention to is how Chinese demand has completely fallen off from essentially 12 million barrels per day and coughing around 7 million barrels per day. 44:51 And now get cat bouncing to about 8 and a half million barrels per day. Now, I remember when the initial collapse came, you and I were talking about maybe is China just playing a political geopolitical game where they're trying to appear like the good guy while restricting product exports, which are really the anchor of consumer facing inflation. 45:14 But the fact that that demand has remained low and you know that President Xi is no altruist in terms of helping President Trump. So what do you think is going on here? 45:28 Analyzing China's Structural Oil Demand Decline Because is that demand loss truly a secular demand loss? Great. 45:35 Speaker 4 Question and the number you're referencing, Mike, was the imports, right? The imports were around 77 million barrels in June and then it's gone up to around 88.6 for August, OK, it's a bounce, but to your point, hardly anything to be get excited about. 45:54 So the question that we're going to ask here is what demand is coming back and what's not. And that has a framework and that framework is our top down and bottom up, my top down and bottom up demand models. 46:11 So from the for the top down, just to give an overview, so everyone's oriented the top down, we start with macro. So it's things like household purchasing power, inflation, economic activity, price sensitivity. This means although even the diffusion indices go into this, the bottom up is built from high frequency data across transport, freight, refining, Petro chemicals, aviation industry. 46:35 And so we look for convergences in the 2. So this is basically the way I do demand and I think I can look back historically and say this is what's worked out when we test back to see how it performed. 46:51 Now with respect to China, I've divided these, this demand loss that we've seen here into 3 buckets. 1st is a destroyed bucket. This is demand that's gone. The second is a deferred bucket. This is demand that will come back when things normalize. 47:09 And then there's a displaced bucket. That means this demand has been taken over by something else or some policy has been in place and at the right price that policy will unwind and we will come back to using the barrels that we were using prior. 47:29 Now with China, the real demand product loss that we've seen again, remember there is a where you've talked about the imports piece of it, there's a refinery run piece of it and then there's a real refined product demand piece of it. 47:49 So when you look at the dashboard mic, you can see year over year for September. I have modeled September, it's down about 1.6 million barrels a day. At the peak though, it was down closer to 3,000,000 barrels a day, right? How much of this is going to come back? 48:05 Is that 1.6 million barrels a day in that we're expecting in September being down, all gone in China, over 30% of that is actually in the destroyed bucket, which means at least half a million barrels a day is going to be gone. 48:22 It's just God, it's structural changes that they have been working for decades. Since 2010, they've been working on this. You have the numbers in the Nev picture, you can see where 60, almost 65% of all new passenger vehicles sold in China are new energy vehicles. 48:45 And when it comes to trucking, it's short haul trucking, it's in the 4040 to 45% of it. So China prepared for this. And when you asked me a question about why they're doing this now, why did they decide to all of a sudden say we're not going to import as much? 49:04 Well, if you think about the last several years in the post COVID period, China's imports from Iran for about 1,000,000, 1/2 barrels a day. China's imports from Russia was about a million and a half barrels a day, million to million and a half barrels a day. 49:21 So that's three million barrels. And then from Venezuela was another call. I'm just going to round out bits of how did I eat 5900 round up to 1,000,000 barrels a day, right? So now 4 million barrels a day of imports that they had coming of a total of 12,000,011 to 12 million, significant percentage was coming from very cheap sanctioned barrels. 49:48 They were picking these up at somewhere between 2018 to $20 a barrel for Venezuelan, 12 to $15 a barrel for a Russian, 8 to $10 a barrel for Iranian. Of course it fluctuates, but I did the calculation for this in one of the papers. 50:08 And for 2025, their average cost of their barrel that they imported from these four countries was in the 50s, in the low fifties. So why wouldn't they buy all that? Why wouldn't they have Max imports? 50:23 And now all of those barrels are gone. Venezuela, no more sanctions, 100% of Venezuelan barrels are coming to the United States and of course, being resold. Nothing is going to China. Iranian barrels have a naval blockade, nothing going to China. 50:39 Russian barrels are still moving to China. But that also is that's the next stage we can talk about if we want to the next thing to next shoe to fall. But they have no incentive to go out and buy a bunch more barrels at prevailing prices because they're used to filling up on 4 million out of 10/11/12 million barrels with 50 something dollars. 51:03 Their threshold for purchase is much lower because they have figured out a way to run their economy at a much lower oil intensity. And this is remarkable. I will give China the credit it deserves here. 51:20 No other country has been able to do this quickly and we should be paying attention to this. And this is not a fluke. This is not something they just dreamed up overnight. They even had policies in place during the spike, the price spikes where there was a lot more work from home, there was a lot more schooling from home. 51:39 Everything was managed politically and yes, the economy is not doing well, but that's not a new thing. Prices up or not. Chinese economy has been dwindling in a way since COVID, really since 2022. It's not really picked up and materially improved, but it's not falling apart completely either, right? 52:00 It's hanging in there in spite of these types of restrictions. Something to really pay attention to. And This is why I have my China dashboard which gives you all the now cast numbers and the even the forward-looking numbers, because this is the biggest piece of the puzzle going into 2028 when you talk. 52:20 Speaker 3 About Russian barrels, Iranian barrels and Venezuelan barrels. It reminds me that this geopolitical game we call the great game, I I really do think that in the end, this could all be about isolating China and the news is being tightened. 52:38 But the question I have though is they have this massive shock absorber in terms of their SPR. Do you have any idea how much of that has been drawn down as a result of this reduction in import demand? Yeah, it's. 52:52 Speaker 4 Very fascinating, right. So you have the chart right there at the peak inventories, again, these are observed inventories where was around 1.43 million barrels. 53:07 Today it's around 1.34 million barrels, right. So in this entire period of time, they haven't drawn much to explain at least from visible inventories to explain this huge gap that that's presented that's there. 53:26 And then that begs us to ask the question, so is this demand loss real? Were there underground stocks that they were drawing from? That's possible because I have done the work to see that perhaps there is another 180 million barrels a day or so of stocks that are in military installations and underground stocks and things like that, that they could have drawn from that we can't see here. 53:52 But it still wouldn't explain the gap. And that's why I think the real demand destruction from a policy perspective was real to a great extent. Now there's going to be some delta we won't be able to solve about everything, but this is not by fluke. 54:09 What I want to impress upon people is that what you see in this dashboard, these patterns that you see out of China is not an accident. It is pre planned. It is well executed and they're the only country that's been able to pull this off. 54:25 Let's talk. 54:25 Speaker 2 About where we go from here, because we understand the problems, we understand the complexities, we understand the various interested parties and a lot of what kind of drives them. 54:38 Exploring Future Oil Paths and 2027 Outlook What paths do you see forward from here? O I've. 54:41 Speaker 4 Resented a few cases, right? And we can go through those cases here. And I want to remind everyone, these are just bookends. These are the extremes that we're talking about. The reality is going to fall somewhere in between. And I have my base case as well. 54:58 So the case number one, which is the extreme bookend is President Trump wakes up and that says, screw this, I'm out of here, I am out. We're done. Call the boys back. Middle East, GCC, you take care of the straight, do whatever you want. 55:14 We're out there. It's unlikely that this happens, but you never know. He surprises us in so many different ways that anything is possible. So I have to allow for it. This is the case where you would see maybe he doesn't exit without some fireworks, right? 55:31 Maybe there's a symbolic strike at a nuclear infrastructure like pickaxe mountains, that he talks about it all the time. So you do us as quick symbolic strike at a nuclear facility, pull back troops, we're out of here. Immediately the war premium unwinds. 55:48 Whether or not the straight is safe, we don't know. But this is the immediate reaction of the market is going to be to unwind the war premium. And if the straight goes back to normalcy, if the GCC actually puts together a consortium with Iran and things start to move, then yes, supply comes back very quickly. 56:05 Demand recovers, but the destroyed wedge still remains gone. Don't forget the destroyed wedge and we will recoup most of the deferred and the displaced over time. But this is where you get oil prices ending 2027 in the 60s. 56:20 This is a bear case to pull out now. But the positive is that you get disinflation into midterms and beyond and there will be no additional impairment risk for Middle Eastern assets. And when I talk about impairment risk, I'm talking about real infrastructure being hit. 56:39 We have not yet seen courts go up in flames. We have not yet seen pipelines. Well, we've seen some attack on pipelines, but nothing to the point where it's irreparable and completely destroyed. Same thing with processing facilities. 56:55 So this is case number 11 side of the bookend. Now, the middle Rd. middle case that I have, which is my base case, is the Long Road case. I wrote this case well before Secretary Beson announced his economic pressure campaign. 57:10 This is my 8 month plus case where we get into a staring contest with the IRGC. We say we're cutting off every source of income. Every source of every export will be regulated by us. Every import will be regulated by us. 57:25 It will be a humanitarian only import regime. Food, medicine, essentials only. And we see if they blink. But this is a case where prices remain elevated, elevated for some time until until they blink. 57:43 I can't tell you when that is. If I assume it's eight months, then OK, we get some resolution in Q3 of next year and sure, we can have an unwinding of the risk right after that. So this is where prices move up steadily remains elevated coastal Indian in this $9000 range and then settles down into the 80s into 2027 year end assuming we get a resolution. 58:11 It's not an ideal case for inflation, for election etcetera, but it's I think it's an effective outcome in the long run. If we're thinking in terms of 50 and 100 year timelines, this is a small price to pay. 58:27 The other end of the bookend is very sinister cases, and these are my case 3, which is 3A and 3B3A is mimics the first case. President Trump says, OK, that's it, we're going to quit. 58:43 Now everybody come home, says nothing gets through the elections and then strikes resume in Q1. And this is where we would then allow Iran to potentially rebuild and recoup even with the naval blockade via land routes, which Michael talked about. 59:02 And we do we have a blockade on land routes or not, I don't know. And will we have it? I don't know. So we have to allow for the idea that they may be able to rebuild. Now you're coming back in Q1 post election and starting strikes again. This is where there is huge impairment risk for real assets in the Middle East, where Iran might say this is bullshit and we're going to now strike what hurts most the outcomes that nobody wants to see, which is strikes on processing plants, strikes on ports. 59:34 And I'm not talking with drones. I'm talking real strikes that cause damage lasting that might take years to fix. And this is where you can see oil upwards of 13140 and settling into the high 90s by year end 2027. Case 3B is even more sinister. 59:52 I don't want to explain it but it is going to be a much higher intensity strike. Let's hope this doesn't happen for the sake of civilian lives, but. This is a case that will be a recession case globally speaking, and this is also will be a quick strike and move on. 1:00:13 So you may get a quick spike in oil, but it's just going to have such a reverberation of effects into global economies and as well as the region that it might put us into our recessionary trend. So that's those are the cases. 1:00:30 Again, the base case, my case is the long road case. I'm renaming it the best in case and I'm hoping they stick with it because there's a credibility test for that coming here soon. I'm going to hold judgement for everything that's come so far, but I'm waiting. 1:00:45 I'm waiting and I'm watching. I'm watching for names, I'm watching for sectors that they're going to look at next. Let's zoom. 1:00:52 Speaker 3 Out real quick and talk about overall macro because. 1:00:55 Speaker 2 I think it's. 1:00:56 Speaker 3 Important to in light of your 4 scenarios, even in the sort of oil bullish case scenarios, I think it's important to point out that you do say that eventually every path does end in surplus and there's a. 1:01:11 Speaker 4 Big 2028, yes, and there's a. 1:01:13 Speaker 3 Big difference between an oil, a sort of supply shock driven oil spike versus a demand LED oil spike that we saw coming out of COVID. This is not that and the fact that both high oil prices now as well as high interest rates are both inherently demand destructive for the bigger economy. 1:01:38 And to quote another Lakshmi ISM, you had a great piece where you you liken to the the macro economy to a properly Baked Alaska. You said lava baked. 1:01:46 Speaker 4 Alaska, yes. 1:01:48 The Macro Economy: Baked Alaska and Fed Policy You said toasted on the outside, frigid on the inside with the the recent weakening in the non foreign payrolls. And I think he also pointed out that some of the other macro data have been disinflationary. And I tie this back to my own framework and optimism around our ability to maybe get back to this what I call this benign gravity of disinflationary growth. 1:02:14 Because to me that's ultimately the only way we can grow out of our deficit is to have a period of disinflationary growth again to what we saw in the mid to late 90s. Do you see that as a possibility given how things are developing, especially with your oil lens? 1:02:34 I'm curious I. 1:02:35 Speaker 4 Would say it depends on your timeline. Like if you are looking for beautiful disinflation to play out over the next 6 to 12 months, I would be careful. Yes, I will give that certain large parts of the CPI basket is in disinflation and notably shelter which is a large piece. 1:03:00 But there are items that are just not moving and may not move depending on our policy choices. For example, the middle Rd. base case does not allow for prices to retreat far enough to be a smooth disinflationary process. 1:03:20 At the same time, I see other parts of the basket that are providing support to that disinflationary thesis to help combat some of the inflationary pressure we're seeing from the energy side alone. 1:03:36 And actually, I hate saying the energy side alone because this is not just an energy side alone problem. There's a fertilizer issue. There's a Greens issue with Ukraine, Russia conflict going on. There's all kinds of commodity problems that are playing into this. So we need to keep that in mind as well. 1:03:51 Now if the question is around, will we have a Fed meeting coming up in September and what would I do? the Fed member, I think given the balance of all of the data we had the July payrolls, I jolts was out today. 1:04:09 I didn't, I haven't looked at it yet, but we had the July payrolls, which is really not great and unemployment is 4.1%. But the denominator doing all the work also not great. So you have a labor market that's OK. It's, it's not great, it's not terrible. 1:04:26 And then you have this inflationary picture where we are truly in a coin flip situation depending on what policy is going to govern that picture. So the, in my opinion, the Fed should wait because if we start hiking now, get on that hike path now. 1:04:46 And I know there are a lot of people who argue for it and say, OK, we need to T do we need to signal the bond market, blah, blah, blah. OK, that's all great. But that doesn't pay bills. OK? The average person, the lowest income quintile don't pay their bills based on what the tenure is doing. 1:05:03 For me, we have to be really careful here because of how the administration has surprised us in many ways with policy. It we have the data supports await here. Now, I am sympathetic to all the Hawks. 1:05:19 I understand why they are very anxious because persistent product inflation hits lower income households hardest and rotecting inflation. Credibility absolutely matters, I understand that. But I also understand the doves arguments, which is the transmission mechanism from a high cut or hold doesn't reach households immediately. 1:05:44 It reaches the system, it reaches with a long lag. While fiscal policy as we've seen now is pushing things in the opposite direction. So my assessment is that looking at the balance of risks is that the economic data is giving Fed room to sit still for another meeting while it learns more about the energy and political path. 1:06:05 And to be perfectly honest, actually, Besson has given them a gift with what he's doing with the long end. So I think it's OK to wait. There's no reason to rush into a hike right now. I agree with. 1:06:20 Speaker 3 You as the Fed? Never. 1:06:21 Speaker 2 Needs encouragement to stand there's a very. 1:06:26 Speaker 3 Interesting little chart. So on my own urban caliber panel I have this thing called the Macro regime calculator, right? And it basically plots inflation momentum on the Y axis and against economic growth momentum on the X axis. 1:06:42 So if you can picture 4 quadrants, the top left would be a stagflationary quadrant where you've got high inflation slowing growth. Top right would be a reflation quadrant where you've got inflation and high growth. 1:06:57 Bottom right would be Goldilocks where you've got that disinflationary growth scenario. And then bottom left would be a deflation quadrant. I've been watching this very closely over the last year and it's really interesting because we've basically been going around traversing all four quadrants right in the center. 1:07:18 So just a month, maybe about six months ago, we were in that Goldilocks. As of very recently, we were in that reflation quadrant. But now, believe it or not, we're in the deflation quadrant again, where we're seeing both inflation and growth metrics trending down. 1:07:35 So I'm not sure where the the wheel stops, the wheel of fortune stops, but yeah, that's the trillion dollar. 1:07:43 Speaker 4 Question. Absolutely. And This is why again I'm reiterating to everyone, you can collect all the data in the world you want, but one tweet will blow it up. And if you don't have a framework on based on policy, I think your geopolitical analysts are the ones that should be really celebrated during this time. 1:08:07 Those that are giving good guidance or so many great ones, I really celebrate them because without them I would be in a terrible position. 1:08:17 Concluding Thoughts and Finding Lakshmi's Work So we're getting to the time limit here, but I wanted to maybe ask people. I know your plans are still in flux, but what is the best way for people to reach you? 1:08:31 Speaker 4 We will. I'll give you a link, Mike, to put in the show notes where you can click that link and reach me directly. Remember that most of the work I do is institutional work, so just keep that in mind when you're reaching out for information or to reach me to see my work. 1:08:52 Speaker 2 Do you, do you have any plans to be on social media actively or anywhere like that that people will find you know? 1:08:56 Speaker 4 What I should have, I believe I have a Twitter account that I've never used. I think the only person I follow on Twitter is you, Mike. So yes, I will have an I Yeah, sure. 1:09:13 Why not? If people are want to ask questions, that is actually a great idea. Thank you, Grant. If people have questions, you're welcome. I I think you'll find. 1:09:21 Speaker 2 You'll get a lot of followers that would be. 1:09:22 Speaker 4 A great place to ask questions because one of the things I struggle with is just because of the type of work I do, the now casting and forecasting. There's so much context that needs to be provided. And I know Mike will call me one day and we'll talk for an hour and a half about one small thing. 1:09:39 We're like the BLS birth death model. We'll have an entire hour long conversation about something like that and that's what it takes to do this well. So if there are any avenues you could suggest where I can engage with people and answer their questions and you know, more easy way, I'm happy to do it. 1:09:58 Well, rest. 1:09:58 Speaker 2 Assured when you set those avenues up, Mike and I will be publicizing those you guys are the. 1:10:03 Speaker 4 Sweetest, by the way, I'm. 1:10:05 Speaker 3 Going to contest something that you said at the outset, Lakshmi, which is you said that you've not made use of your electrical engineering one iota. I've seen what Lakshmi has built in terms of these. 1:10:17 Speaker 4 These dashboards. 1:10:18 Speaker 3 It is Grant. It is unbelievable what she's built so. 1:10:24 Speaker 4 It helps to know how to code. But remember Mike, we coded in C++ and freaking Fortran, right? The world is so different. It's so nice. It's so nice. Now it's a little easier. 1:10:35 Speaker 2 Now very cool. 1:10:37 Speaker 3 Well, actually, no. 1:10:37 Speaker 2 Thank you so much for for doing this. It took us a while to get it together. We've had all kinds of technical difficulties, but I'm so glad we finally got to have this conversation. It's been an absolute blast. Wonderful. 1:10:48 Speaker 4 I'm really grateful. 1:10:48 Speaker 2 For coming on and we wish you all the very best with your future endeavours, I have a feeling. 1:10:53 Speaker 3 We'll be having Lakshmi coming back. We have we. 1:10:56 Speaker 4 Still haven't touched half your questions, Mike. Yeah, right. 1:11:00 Speaker 3 We didn't get through. 1:11:01 Speaker 4 Half your questions leave people wanting. 1:11:03 Speaker 2 More Lakshmi. That's the first thing you need to know. You've got to leave people wanting a bit more. Exactly. 1:11:07 Speaker 4 That's fantastic. Take care. Bye bye. Well, there. 1:11:11 Speaker 2 You have folks, Mike, you've been singing Lakshmi's praises for ages now and building up the anticipation for me having a chance to talk to her, and she did not disappoint. That was fabulous. 1:11:21 Speaker 3 Fantastic. I have a feeling we'll have her back again. She's just full of knowledge. And I think I really enjoyed these last two editions of Cast Theory that we did because it's really tied together geopolitics with Michael every last edition and then tying that into the macro and geopolitics of oil, which is really the still the world's most important commodity as we see today. 1:11:46 Absolutely. 1:11:46 Speaker 2 And to your point, I think it's going to be a dramatically evolving landscape. So how fortunate for us to have Lakshmi at the end of a phone that we can get back to help us navigate as as things get choppy. The challenge? 1:11:58 Speaker 3 Of course, is trying to come up with any sort of agenda for these types of conversations. I think we went through it three or four, Yeah, just because of how fluid this situation is. But well. 1:12:10 Speaker 2 This is my friend before we wrap up, we know that actually doesn't have any social media yet, but if she does, you and I will champion her to the echo. But you do. So let people know where they can follow your excellent work. I am. 1:12:19 Speaker 3 At Urban Cowboy with AKAO on X and my sub stack is urbancowboy.com. Yes, you. 1:12:27 Speaker 2 Are there are my friend, It's been a pleasure as always. Let's do this again in the not system future. What do you think? Thank you my. 1:12:32 Speaker 3 Friend our brother take. 1:12:34 Speaker 2 Care. 1:12:39 Speaker 1 Nothing we discussed should be considered as investment advice. This conversation is for informational and hopefully entertainment purposes only. So while we hope you find it both informative and entertaining, please do your own research or speak to a financial advisor before putting a dime of your money into these crazy markets.