#235 - Trump v Harris Victory Scenarios w/ Cousin Marko

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Episode 235 • 1st October 2024 • The Jacob Shapiro Podcast • Cognitive Investments

Jacob Shapiro: 00:00:01

Hello, listeners.

Jacob Shapiro: 00:00:01

Welcome to another episode of the Jacob Shapiro podcast.

Jacob Shapiro: 00:00:04

Finally back on the podcast is our good cousin Marko Papich.

Jacob Shapiro: 00:00:07

Back at BCA research.

Jacob Shapiro: 00:00:09

We went almost 2 hours in this episode.

Jacob Shapiro: 00:00:12

I was originally going to hold this until next Monday, but we recorded here on Tuesday, October 1, and we're going to push it through just because I'm not sure what's going to happen in the Middle east in the next 36 to 48 hours.

Jacob Shapiro: 00:00:20

And I think it makes sense to just put it out.

Jacob Shapiro: 00:00:23

So if you have any questions about anything you hear on the podcast, you can email me at Jacob cognitive investments.

Jacob Shapiro: 00:00:30

Otherwise, take care of the people that you love.

Jacob Shapiro: 00:00:32

Cheers and see you out there.

Jacob Shapiro: 00:00:38

Cousin Marco.

Jacob Shapiro: 00:00:39

We're both in our homes for once, and we're talking to each other.

Jacob Shapiro: 00:00:42

How's it going, man?

Marko Papich: 00:00:43

It's going great.

Marko Papich: 00:00:44

It's going great, Jacob.

Marko Papich: 00:00:45

This is a good moment to have this podcast.

Marko Papich: 00:00:48

Very excited, you know, like yalla.

Marko Papich: 00:00:50

Let's go.

Marko Papich: 00:00:51

Let's get it going.

Jacob Shapiro: 00:00:53

Yallah.

Jacob Shapiro: 00:00:53

Yallah, yallah.

Jacob Shapiro: 00:00:55

Well, so we're going to start.

Jacob Shapiro: 00:00:57

We're going to start with the middle east because as we're recording here, Tuesday, October 4.

Jacob Shapiro: 00:01:00

It is: 1014

Jacob Shapiro: 00:01:02

Is that.

Jacob Shapiro: 00:01:02

Is that 814 Pacific?

Jacob Shapiro: 00:01:04

You're up early.

Jacob Shapiro: 00:01:05

You look good for being up at 814.

Jacob Shapiro: 00:01:08

Iran is threatening an imminent missile attack on Israel.

Jacob Shapiro: 00:01:12

We'll see exactly where that goes.

Jacob Shapiro: 00:01:14

I've been waiting for the imminent missile attack since they assassinated Ismail Hania on iranian soil, and nothing has happened.

Jacob Shapiro: 00:01:19

But I guess going after Hezbollah has finally triggered the Iranians to do something.

Jacob Shapiro: 00:01:25

Marco, I'll set the stage by saying this.

Jacob Shapiro: 00:01:27

I, in the last 48 hours, have decided that I need to completely rethink my approach to the Middle east and in particular to Israel.

Jacob Shapiro: 00:01:36

I had been saying since October 7 that I thought Israel was pursuing tactically brilliant operations for completely unstrategic goals.

Jacob Shapiro: 00:01:44

It felt like the entire country was going through post traumatic stress disorder, rightfully so, from the October 7 attacks.

Jacob Shapiro: 00:01:50

But I could not divine any strategy but what they've done to Hezbollah in the last two weeks.

Jacob Shapiro: 00:01:56

They went after the Houthis in a big way at the end of last week, which I think hasn't gotten enough attention because that signals that they can strike over much longer distances than I thought that they could strike at.

Jacob Shapiro: 00:02:07

Now they're incursions into southern Lebanon.

Jacob Shapiro: 00:02:10

I'm beginning to wonder if I was wrong and if there is a method to the madness.

Jacob Shapiro: 00:02:13

What is your take right now on what Israel's operational goals are, or take the.

Jacob Shapiro: 00:02:17

Take.

Jacob Shapiro: 00:02:18

Take the conversation whatever direction you want, but I'm curious what you think about that.

Marko Papich: 00:02:21

Well, I think the most important thing for us to handle right now is the imminency of the attack.

Marko Papich: 00:02:27

Iran did retaliate.

Marko Papich: 00:02:29

It did retaliate against Israel's assassination of Hamas leader in Tehran.

Marko Papich: 00:02:35

It sent its drones and missiles.

Marko Papich: 00:02:37

None of them really hit anything.

Marko Papich: 00:02:39

So I don't see why this ballistic missile strike will be more successful.

Marko Papich: 00:02:45

The US and Israel are really, really good at intercepting missiles.

Marko Papich: 00:02:49

So let's see where this goes.

Marko Papich: 00:02:52

But the point is that there was already an attack in the spring that we had.

Marko Papich: 00:02:55

We've already gone through this motion and I'm not quite sure or certain why.

Marko Papich: 00:03:02

For Iran, degradation of Hezbollah is a greater impact than a direct attack on their soil by Israel for the first time in their history, like what happened earlier this year was an exchange of missiles, drones and attacks between Iran and Israel.

Marko Papich: 00:03:17

For the first time in their history, they've never directly attacked each other.

Marko Papich: 00:03:21

And so I think the market is overstating the impact on equities.

Marko Papich: 00:03:26

I don't see it, honestly, I don't see a scenario where us equities, like earnings of us companies, are impacted negatively by what's going on in the Middle east.

Marko Papich: 00:03:35

That scenario does not exist.

Marko Papich: 00:03:37

So I would definitely fade what's happening in the market right now on the equity side.

Marko Papich: 00:03:42

But where I've changed my view is on the oil side.

Marko Papich: 00:03:46

So for twelve months I've been telling clients there won't be any impact on oil.

Marko Papich: 00:03:49

I've been wrong, I should have shorted it.

Marko Papich: 00:03:55

High conviction view, this is not going to be a macro relevant conflict.

Marko Papich: 00:03:59

It's going to get worse, but it won't have any macro relevance.

Marko Papich: 00:04:02

And that's been the fact.

Marko Papich: 00:04:03

Oil is down 20% since October 7.

Marko Papich: 00:04:06

However, very, very important thing happened over the last week, and it's nowhere near the Middle east.

Marko Papich: 00:04:14

It's the announcement of chinese stimulus in Beijing, and it's the fact the Fed has decided to front load 100 basis points worth of cuts.

Marko Papich: 00:04:21

So I do think the macro context for oil has changed.

Marko Papich: 00:04:25

And so geopolitical risks can be very useful ways to kind of front run what should happen over the next six months.

Marko Papich: 00:04:34

In other words, oil prices should probably come up from the doldrums.

Marko Papich: 00:04:38

They're done.

Marko Papich: 00:04:39

So I would not be fading.

Marko Papich: 00:04:41

Oil moves right now the way I had been.

Marko Papich: 00:04:44

In fact, I've gone long oil with the chinese stimulus announcement, the Politburo meeting, which was quite interesting.

Marko Papich: 00:04:52

So I just wanted to handle the imminency of what's going to happen.

Marko Papich: 00:04:55

There's going to be iranian retaliation.

Marko Papich: 00:04:58

Israel is going to retaliate against Iran.

Marko Papich: 00:05:00

And I do think that where there is a constraint is on Iran.

Marko Papich: 00:05:05

I think that if Iran retaliates in a way that crosses certain red lines, which you and I can maybe discuss what those are, but if Iran crosses red lines, it will invite american retaliation against them.

Marko Papich: 00:05:17

And I think at that point they have absolutely nothing.

Marko Papich: 00:05:21

They have no way to defend themselves, and that will be the end of their nuclear program.

Marko Papich: 00:05:27

It will be the end of potentially significant amount of infrastructure.

Marko Papich: 00:05:31

The United States of America has no interest or reason to put boots on the ground in Iran.

Marko Papich: 00:05:35

Obviously, like I'm saying something that everybody knows, but the reason I say that is that the United States is an unparalleled military force when it can just bomb you from 30,000ft.

Marko Papich: 00:05:47

It's an act of God as far as you're concerned.

Marko Papich: 00:05:50

And so Iran would be inviting that kind of retaliation if it crossed certain red lines.

Marko Papich: 00:05:55

And that's where I don't think that they can really create a dynamic where this conflict gets out of hand.

Marko Papich: 00:06:01

Now, in Israel, though, I do agree with you.

Marko Papich: 00:06:04

I mean, it does seem like there's method to the aggressiveness of Israel, but I still don't think strategically it's going to improve israeli security one bit.

Marko Papich: 00:06:15

So I think that there is absolutely nothing new in what's going on.

Marko Papich: 00:06:18

This is mowing the grass, if Israelis like to call it.

Marko Papich: 00:06:22

You know, every six to 18 months, you're going to have to do something like this.

Marko Papich: 00:06:25

This is just the neighborhood you live in.

Marko Papich: 00:06:27

And I'm actually extremely concerned long term for Israel because it's a whack a mall.

Marko Papich: 00:06:33

You know, like you whack Hamas in Hezbollah, but you create new risks, including what's happening in Jordan, for example.

Marko Papich: 00:06:41

Jordan's stability, I think, is at risk because of everything that's happened and especially what's happening in West Bank.

Marko Papich: 00:06:50

I also think long term, the most important thing for Israel, the most important thing for Israel has nothing to do with the Middle east.

Marko Papich: 00:06:56

It has to do with capitalism in the west.

Marko Papich: 00:07:00

And if Israel loses goodwill in the west, that will definitely deteriorate its security situation over the next 20 years.

Jacob Shapiro: 00:07:08

There's a lot to unpack there.

Jacob Shapiro: 00:07:10

We're going to get to China stimulus and fed cuts and the broader macro picture.

Jacob Shapiro: 00:07:15

A couple things I want to push back on you against.

Jacob Shapiro: 00:07:18

I disagree with you on Israel's biggest threat being necessarily loss of support from the west.

Jacob Shapiro: 00:07:23

I mean, they very much depend on the west, but they have shown the ability to find other security patrons.

Jacob Shapiro: 00:07:28

And this is one of the reasons why the strike on the Houthis is so interesting to me, because you're right that there hasn't been a, an overall direct one to one investment impact from October 7 and all of the things that have been happening since.

Jacob Shapiro: 00:07:41

But shipping has changed.

Jacob Shapiro: 00:07:43

There is no legitimate shipping that's going through the Red Sea and the Suez Canal anymore.

Jacob Shapiro: 00:07:47

And that means we've gotten a reprieve from that, I think, because of low oil prices.

Jacob Shapiro: 00:07:51

And I have been as wrong as you were about oil.

Jacob Shapiro: 00:07:53

I am trigger shy now.

Jacob Shapiro: 00:07:54

I'm not going to say any direction where I'm going to go because I was shocked at how low it's gone, despite everything that's happening.

Jacob Shapiro: 00:07:59

But shipping is going around Africa now.

Jacob Shapiro: 00:08:00

It's not going through the Suez, it's not going through the Red Sea.

Jacob Shapiro: 00:08:03

And low oil prices have covered that up a little bit because it doesn't cost that much.

Jacob Shapiro: 00:08:08

Once you got the ships in rotation and they were going around, you could kind of fix the problem.

Jacob Shapiro: 00:08:12

But there has been that impact in general.

Jacob Shapiro: 00:08:15

But the point I wanted to make before was Israel, I think, does face a long term strategic threat from Turkey, and it's not mowing the grass there.

Jacob Shapiro: 00:08:22

I also think they've gone a step ahead of mowing the grass.

Jacob Shapiro: 00:08:25

They're putting the black tarp on the earth and sowing salt in the fields.

Jacob Shapiro: 00:08:29

I mean, some of these groups will eventually come back again, but I did not think for a moment they had this level of capability to knock out Hezbollah.

Jacob Shapiro: 00:08:37

They lost in: 2006

Jacob Shapiro: 00:08:41

And now we're fast forwarding roughly two decades and suddenly they've decapitated the entire organization.

Jacob Shapiro: 00:08:48

ic relationship begins in the: 1960

Jacob Shapiro: 00:09:08

We have a nice little partner here that we can rely on.

Jacob Shapiro: 00:09:10

What if the Israelis knock out the Houthis?

Jacob Shapiro: 00:09:13

Then Israel can go to Washington and be like, hey, you really do need us in the long run.

Jacob Shapiro: 00:09:18

We're not just some crazy state that's going after the West bank and the Gaza structure were actually a strategic instrument for you, which I think is really interesting.

Jacob Shapiro: 00:09:27

And the last thing I'll just say about this, and then I'm curious to get your pushback is you're right that Iran responded to the bombing of that embassy.

Jacob Shapiro: 00:09:33

I believe in Syria.

Jacob Shapiro: 00:09:35

It has not yet responded for Ismail Hania.

Jacob Shapiro: 00:09:37

And when it responded to the embassy or the consulate, whatever it was bombing, it did exactly what it's doing now.

Jacob Shapiro: 00:09:43

It telegraphed it, it told everyone and their mother, hey, we are about to bomb Israel and we're going to bomb over here like with these rockets at these times.

Jacob Shapiro: 00:09:52

And it was an interesting attack because, yes, it didn't really do any damage to Israel.

Jacob Shapiro: 00:09:57

I think only a couple missiles or rockets or drones actually landed.

Jacob Shapiro: 00:10:01

But it cost Israel many millions, if not tens of millions of dollars for all the interceptors that intercepted the iranian rockets and drones.

Jacob Shapiro: 00:10:09

And these were the crude ones.

Jacob Shapiro: 00:10:10

These were the lowest of the low.

Jacob Shapiro: 00:10:12

Iran.

Jacob Shapiro: 00:10:12

Iran was really just throwing stuff at Israel, in part, I think to impose a cost in part to tell them we have the capability to strike you.

Jacob Shapiro: 00:10:19

And by the way, we'd like to see where all of these missile defense apparatuses and how effective they are in general.

Jacob Shapiro: 00:10:26

They're telegraphing it again.

Jacob Shapiro: 00:10:27

So that tells you already, Iran is not that serious.

Jacob Shapiro: 00:10:30

If they were really serious, we wouldn't have time to prepare and do a podcast on this.

Jacob Shapiro: 00:10:35

But one of the things about asymmetric warfare is Iran can make really cheap rockets that can meaningfully impact the israeli economy much easier than Israel can build enough missile defense interceptors to fight back against everything that Iran is pushing over the wall.

Jacob Shapiro: 00:10:51

And I think that maybe is one of the things that Iran can at least rely on.

Jacob Shapiro: 00:10:55

But you're also absolutely right that waiting in the wings is the United States.

Jacob Shapiro: 00:10:59

den's governing like it's the: 1990

Jacob Shapiro: 00:11:04

So in that sense, Israel's got a friend.

Marko Papich: 00:11:07

Yeah, I mean, I think that.

Marko Papich: 00:11:10

Where do we start?

Marko Papich: 00:11:12

So, yeah, I mean, I thought it was also hilarious the way that Iran attacked Israel.

Marko Papich: 00:11:18

You could literally follow their drones and flight path, as I joke.

Marko Papich: 00:11:23

So you're right, it was very telegraphed, the drone attack from Iran to Israel.

Marko Papich: 00:11:27

I remember reading on like CNN breaking news, it will arrive in 5 hours.

Marko Papich: 00:11:31

You know, you're like, what?

Marko Papich: 00:11:33

Sounds ridiculous.

Marko Papich: 00:11:34

Now, if those drones were launched from Syria, presumably they would have been able to maybe sneak in because there wouldn't have been any way to intercept them over the course of 5 hours, where the Saudis, the Jordanians, the Americans, everybody could have gotten along and done something.

Marko Papich: 00:11:53

If you launch those drones from Syria, you have, I think a much different result.

Marko Papich: 00:11:58

But one thing that's interesting to me is that both Hezbollah and Iran have, for the most part, over the last month, really focused on military facilities in Israel as well.

Marko Papich: 00:12:08

So that's another way in which I think that there was that soccer field disaster where Hezbollah hit field and killed civilians, which launched the latest israeli moves against Lebanon.

Marko Papich: 00:12:19

But for the most part, Hezbollah has actually been trying to hit military facilities.

Marko Papich: 00:12:24

And when Iran launched its drones and missiles, they were all targeting military facilities as well, obviously with varying accuracy.

Marko Papich: 00:12:32

The point I'm making is that there could be indiscriminate attacks against civilians in Israel that would have definitely made this difference.

Marko Papich: 00:12:40

So I think Iran is definitely trying to toe a line.

Marko Papich: 00:12:44

It doesn't want to repeat what happened basically in the eighties with the operation praying mantis, where Iran threatened shipping in the Straits of Hormuz and the US in the course of 36, 48 hours, destroyed Iran's navy.

Marko Papich: 00:12:58

You know, there is no way for Iran to fight against America.

Marko Papich: 00:13:01

None.

Marko Papich: 00:13:02

There's no way.

Marko Papich: 00:13:02

It has no tools.

Marko Papich: 00:13:04

It's literally like, you know, the Incas versus the conquistadoras, that level of technological difference.

Marko Papich: 00:13:12

It just is.

Marko Papich: 00:13:12

It just is.

Marko Papich: 00:13:13

It just is.

Marko Papich: 00:13:15

Now where I kind of.

Marko Papich: 00:13:17

So that's the one now where I think that your view, where I disagree with your view is that Israel's making any long term or even medium term successes.

Marko Papich: 00:13:29

Drones, missiles, fighter jets are great for power projection, but they don't really make meaningful long term change.

Marko Papich: 00:13:39

And Israel has no way to occupy and change the reality of the Middle east.

Marko Papich: 00:13:43

It just doesn't.

Marko Papich: 00:13:44

I mean, think about what's happening in Lebanon.

Marko Papich: 00:13:46

I mean, it's degraded Hezbollah massively, but Shias are like 35%, 40% of lebanese population, christians in Lebanon are very pro Shia.

Marko Papich: 00:13:57

Hezbollah has defended christian villages from Islamic State attacks across the border throughout the last decade.

Marko Papich: 00:14:06

We're talking cross border attacks from Syria.

Marko Papich: 00:14:11

Throughout syrian civil war, Hezbollah was a key battlefield, sort of operational unit against the Islamic State.

Marko Papich: 00:14:20

So unless Israel wants to invade all of Lebanon, which it doesn't have the capability to do, all that's going to happen is Hezbollah is going to withdraw, it's going to lick its wounds, it's going to come back.

Marko Papich: 00:14:29

So I'm not sure that anything that's happened over the last month really improves long term security of Israel.

Jacob Shapiro: 00:14:39

Except, Marco, that Hezbollah is dead.

Jacob Shapiro: 00:14:43

All of the senior commanders, the leaders, they're all gone.

Jacob Shapiro: 00:14:47

And the same is basically true for Hamas.

Jacob Shapiro: 00:14:49

Sinwar, the architect attack behind the October 7 attack, apparently has not been seen in weeks.

Jacob Shapiro: 00:14:54

And the Israelis are considering whether they accidentally knocked him out when they were bombing some facility in Gaza.

Jacob Shapiro: 00:14:59

So I'm with you that, like, a younger generation will rise up and will probably be even more radicalized.

Jacob Shapiro: 00:15:04

But the experience that, like, the seasoned fighters and commanders have had, that's gone.

Jacob Shapiro: 00:15:10

Like, it's just.

Marko Papich: 00:15:11

I'm not sure.

Jacob Shapiro: 00:15:11

They have no human capital left.

Marko Papich: 00:15:13

I'm not.

Marko Papich: 00:15:13

I'm not sure.

Marko Papich: 00:15:14

So Hamas, fine, Hamas, you know, Gaza, small enough that Israel can actually invade it physically and actually can flush the pipes, you know, drain the pipes and that.

Marko Papich: 00:15:23

But Lebanon is big.

Marko Papich: 00:15:24

Israel is not going to invade all of it.

Marko Papich: 00:15:26

oing to invade what it did in: 2006

Marko Papich: 00:15:30

And so Hezbollah still has troops in Syria who were operational against the Islamic State.

Marko Papich: 00:15:36

Its senior leadership commanders are, you know, like, suffering abdominal wounds and all the other stuff.

Marko Papich: 00:15:43

I agree with you with that.

Marko Papich: 00:15:44

It's definitely deteriorated.

Marko Papich: 00:15:46

But I.

Marko Papich: 00:15:47

Hezbollah is not going anywhere.

Marko Papich: 00:15:49

So, I mean, it's fine.

Marko Papich: 00:15:50

Like, look, I'm not.

Marko Papich: 00:15:52

Israel's gonna do what it's doing.

Marko Papich: 00:15:53

But I do think.

Marko Papich: 00:15:55

I look at it differently.

Marko Papich: 00:15:56

I think this is more of a two level game.

Marko Papich: 00:15:58

And what I mean by that is that there's this concept in political science that no decision of foreign policy is made in a vacuum from domestic politics.

Marko Papich: 00:16:07

And I think that domestic politics just matters a lot more for Israel right now than strategic, geopolitical foreign policy.

Marko Papich: 00:16:15

And I think that I kind of buy in with the conventional view.

Marko Papich: 00:16:19

I think Netanyahu is trying to stay in power.

Marko Papich: 00:16:22

I think he's trying to figure out how to pivot from the Gaza operations, which have been largely.

Marko Papich: 00:16:29

I mean, they're going to be unsatisfying in five to ten years from a security perspective, unless Israel's just going to ship everyone off somewhere else.

Jacob Shapiro: 00:16:42

Yeah.

Jacob Shapiro: 00:16:42

I mean, another thing that happened this month, and this was something that I think axios had this first.

Jacob Shapiro: 00:16:48

I apologize if somebody else had it first, but in early September, Israel conducted a precision strike against a weapons facility in Syria where apparently Hezbollah and Iran together were manufacturing the rockets and missiles that Hezbollah was going to use against Israel.

Jacob Shapiro: 00:17:04

And now Hezbollah can no longer produce those medium range missiles because Israel, and I think there was even a land component of this, too, where they landed some commandos in there to really go and destroy this facility.

Jacob Shapiro: 00:17:15

This is not the first time, by the way, that Israel has spent time in Syria destroying facilities.

Jacob Shapiro: 00:17:19

They destroyed a potential nuclear reactor there.

Marko Papich: 00:17:22

But that's my point.

Marko Papich: 00:17:25

None of this is new.

Marko Papich: 00:17:26

We all know the entebbe operation.

Marko Papich: 00:17:29

So Israel has attacked Iraq, the nuclear facility in Iraq.

Marko Papich: 00:17:36

It's attacked Syria.

Marko Papich: 00:17:38

But my point is then this sounds kind of like mowing the grass, and it's just very good at it.

Marko Papich: 00:17:44

By the way, you don't have to make missiles in Syria, you can make them in Iraq.

Marko Papich: 00:17:48

The thing is, why isn't Iran doing more?

Marko Papich: 00:17:52

That's the big question.

Marko Papich: 00:17:54

Shipping in the Red Sea is over.

Marko Papich: 00:17:56

I joked when I said I was wrong on oil prices, just to be clear, my point is they won't go high, they won't go up at all.

Marko Papich: 00:18:03

This will be macro irrelevant.

Marko Papich: 00:18:05

So I didn't short oil because I didn't think that we were going to have a recession.

Marko Papich: 00:18:10

Oil prices have declined so much, it almost feels like we had a recession over the last twelve months, which is why I think there's upside now.

Marko Papich: 00:18:17

But what I'm getting at here is this, why is Iran hesitating?

Marko Papich: 00:18:21

And one, I think the number one reason is us retaliation.

Marko Papich: 00:18:24

Ok, fine.

Marko Papich: 00:18:25

But there's another reason which no one's going to like.

Marko Papich: 00:18:28

When I say Iran is the one winning, not Israel.

Marko Papich: 00:18:32

Iran has won the last two years, and it's sitting and it's laughing at what's going on.

Marko Papich: 00:18:38

Why do I say that?

Marko Papich: 00:18:40

I say that because in: 2021

Marko Papich: 00:18:49

In: 2021

Marko Papich: 00:18:57

And in: 2021

Marko Papich: 00:19:09

So the point is that if you think about whats happened over the last three years, the Saudis have withdrawn from Yemen, just said to the Houthis, you want it, have it, keep it.

Marko Papich: 00:19:18

Fine.

Marko Papich: 00:19:19

Theyve withdrawn support from Muqtad al Sadr in Iraq.

Marko Papich: 00:19:22

And so the jewel of the Middle east, which definitely is not Lebanon, it's Iraq.

Marko Papich: 00:19:29

Iraq is run as a province of Iran.

Marko Papich: 00:19:33

And Saudis have withdrawn funding for the sunni militant groups in Syria and effectively ceded control of the country to Bashar al Assad, who showed up in Riyadh after October 7 and kissed the crown prince, Mohammed bin Salmandhe.

Marko Papich: 00:19:50

If you actually see what's going on in the Middle East, Iraq has gained control over massive swaths of territory.

Marko Papich: 00:19:59

We're sitting here being like, yeah, go Israel.

Marko Papich: 00:20:02

You push back Hezbollah 30 km away from your border.

Marko Papich: 00:20:06

I don't see why Iran would risk the gains it's made over the last three years for the sake of its proxy in Lebanon that everybody makes a really big deal about like, oh, Hezbollah is a huge iranian proxy.

Marko Papich: 00:20:21

It is.

Marko Papich: 00:20:22

I'm not saying it isn't.

Marko Papich: 00:20:23

But you know what's better is owning Iraq, a country that produces four to 6 million barrels a day, potentially eight, that is a buffer against Saudi Arabia controlling Syria, which has its own access to ports in the Mediterranean that has russian facilities, and Yemen that controls clearly the Red Sea.

Marko Papich: 00:20:45

Iran is winning.

Marko Papich: 00:20:46

If Hezbollah was completely eliminated, I think Tehran would be like, meh, you know, let's trade that for the control of everything else.

Marko Papich: 00:20:53

And that's what I think has made them hesitate over the last twelve months because they don't want to get Saudi Arabia to actively support the US and Israel, which it hasn't done.

Marko Papich: 00:21:03

Saudis have been neutral.

Marko Papich: 00:21:05

Talk of Abraham Accords are completely gone.

Marko Papich: 00:21:07

The Saudis don't need Israel for anything at all.

Marko Papich: 00:21:10

They're just saying like, look, we're going to let this play out.

Marko Papich: 00:21:12

You guys figure it out.

Marko Papich: 00:21:13

But we're good.

Marko Papich: 00:21:14

And I think that is a very favorable context for Iran.

Jacob Shapiro: 00:21:19

Yeah, I was singing your tune up until a couple of days ago and I think I might still be convinced that that is the correct tune to sing.

Jacob Shapiro: 00:21:27

But I will say just a couple of things and then maybe we can move on to some of the macro context here, which is, I think it's turkey as the one that has to be sitting back and laughing because it seems to me that Iran, okay, they're going to lose.

Jacob Shapiro: 00:21:39

Hezbollah, their most prominent and probably their strongest proxy in Lebanon, if Hezbollah falls or if Lebanon is a shadow of itself for a couple of years.

Jacob Shapiro: 00:21:49

Syria really does come into question because Hezbollah played a big role in propping up the Assad regime.

Jacob Shapiro: 00:21:54

Russia has also got its own problems with Ukraine and Turkey is lurking.

Jacob Shapiro: 00:21:57

Turkey is waiting to swallow up.

Jacob Shapiro: 00:21:59

Syria for itself, already has troops of its own in northern Iraq and in Syria as well.

Jacob Shapiro: 00:22:04

Now the Israelis are not just showing us that they can go after Hezbollah, but that maybe they can go after the Houthis in Yemen.

Jacob Shapiro: 00:22:09

And if they can get the United States to come on board with that and let's say that they can do to the Houthis what they did to Hezbollah, maybe you can't eliminate them completely, but can you knock out the leadership?

Jacob Shapiro: 00:22:18

Can you defang them or mow the grass for a six to twelve month period?

Jacob Shapiro: 00:22:23

Then there's no proxies left, then it's just Iran.

Jacob Shapiro: 00:22:27

And Iran is just sitting there.

Jacob Shapiro: 00:22:28

Well, what do we do?

Jacob Shapiro: 00:22:28

That's nice that we have oil coming out of Iraq, but crude is at what, 70 a barrel?

Jacob Shapiro: 00:22:33

The Saudis are talking about pumping more to steal back market share.

Jacob Shapiro: 00:22:36

It feels like we're in March: 2020

Jacob Shapiro: 00:22:38

Times.

Jacob Shapiro: 00:22:38

Like there are limits to how important that is.

Jacob Shapiro: 00:22:41

And then the other question is, Israel showed incredible intelligence capability, which is funny because it was terrible intelligence capabilities on October 7, but incredible intelligence capabilities and identifying exactly where and how to knock out the Hezbollah leaders.

Jacob Shapiro: 00:22:56

Do they have similar intelligence on iranian leaders?

Jacob Shapiro: 00:22:59

Do they have similar intelligence on Iran's nuclear program?

Jacob Shapiro: 00:23:02

Are they going to share that with the United States to go in?

Jacob Shapiro: 00:23:04

And then before we get to all of that, there's also.

Jacob Shapiro: 00:23:06

Iranian domestic politics are a mess.

Jacob Shapiro: 00:23:09

Ibrahim Raisi died in a very suspicious helicopter crash just a couple of months ago.

Jacob Shapiro: 00:23:13

Where is the IRGC versus the government versus the supreme leader, who might be sick?

Jacob Shapiro: 00:23:18

So I don't think it's all so rosy from Iran.

Jacob Shapiro: 00:23:22

One other thing I want to say.

Jacob Shapiro: 00:23:23

I did not have the balls to go long Israel after October 7, although I wanted to.

Jacob Shapiro: 00:23:29

I don't get any credit for that, because they didn't actually put the capital to work.

Jacob Shapiro: 00:23:32

But I will say the Tel Aviv stock exchange is up 90% since October 7.

Marko Papich: 00:23:36

Yeah.

Jacob Shapiro: 00:23:37

So that was probably the move if you were thinking that Israel was going to be able to respond.

Marko Papich: 00:23:44

Yeah, no, I mean, look, it's not all rosy for Iran, for sure.

Marko Papich: 00:23:46

It's just that this is why you have proxies.

Marko Papich: 00:23:49

You have proxies not to attack Israel, but to take the israeli attack.

Marko Papich: 00:23:55

And.

Marko Papich: 00:23:56

Yeah, I mean, like, look, it's just very difficult to use drones and fighter jets to meaningfully conquer territory over a long period of time or to change the reality on the ground.

Marko Papich: 00:24:08

And unless Israel is going to invade Yemen, unless Israel is going to invade Syria or Lebanon, most of Lebanon, not just the south, you know, unless it's going to do what it did in Gaza to all of these places, iranian proxies will remain in place.

Marko Papich: 00:24:22

They'll just be degraded.

Marko Papich: 00:24:23

They'll be licking their wounds.

Marko Papich: 00:24:25

And so we aren't really doing anything other than mowing the grass.

Marko Papich: 00:24:30

From an israeli perspective, this is what.

Jacob Shapiro: 00:24:32

Is so amazing, though, about what they did to Hezbollah, because, yes, they're talking about incursions and they're in Hezbollah tunnels and things like that, but it looks like they didn't even need to do that.

Marko Papich: 00:24:41

I agree.

Jacob Shapiro: 00:24:42

They found all the headquarters, they found all the bunkers.

Jacob Shapiro: 00:24:44

They blew up their communication systems.

Jacob Shapiro: 00:24:47

like the complete opposite of: 2006

Jacob Shapiro: 00:25:01

This time Israel is leading with, okay, you're right, like, fighter jets and drones by themselves don't do anything.

Jacob Shapiro: 00:25:06

But we know where all of you live.

Jacob Shapiro: 00:25:08

We know how all of you communicate, and we're going to obliterate it all.

Jacob Shapiro: 00:25:12

I mean, that's powerful.

Marko Papich: 00:25:14

Okay.

Marko Papich: 00:25:14

And look, I just don't think that it changes dynamic for the long term.

Marko Papich: 00:25:17

Let's talk about some long term risks.

Marko Papich: 00:25:19

Long term risk is not Hezbollah, as you said, it's Turkey.

Marko Papich: 00:25:22

But I would also argue that for Israel's perspective, it's also Jordan.

Marko Papich: 00:25:26

I mean, Jordan has a real problem with its hands.

Marko Papich: 00:25:28

And the long term risk for Israel is, like, I think we get overly, especially in the US, we get overly focused on the mechanisms of war.

Marko Papich: 00:25:39

So on CNN, you got some general explaining how cool Israel is.

Marko Papich: 00:25:44

But, like, what's happening in West bank is, like, not cool.

Marko Papich: 00:25:48

And what I mean by that is that the long term viability of, like, what do you do with the human beings who happen to be arab speaking palestinian in the West bank in the long term, why is this a problem?

Marko Papich: 00:26:01

It's a problem because that dynamic cannot be solved with drones and missiles.

Marko Papich: 00:26:07

Israel's got an issue on its hands because Gaza has encouraged domestically, basically, further settlement in the West bank.

Marko Papich: 00:26:15

And Jordan is an ally.

Marko Papich: 00:26:17

Like, the fact that Jordan flipped and became an ally of Israel is why Israel is secure.

Marko Papich: 00:26:25

That is a big, big border, and it has no geography, no geographical barriers.

Marko Papich: 00:26:31

I mean, Jordan river, I've.

Marko Papich: 00:26:33

I've lived next to it for four years.

Marko Papich: 00:26:36

It's not a river.

Marko Papich: 00:26:37

You know what I mean?

Marko Papich: 00:26:37

It's not even a stream.

Marko Papich: 00:26:39

So the big problem I think that Israel has is that these are all just very cool.

Marko Papich: 00:26:44

Fancy, like, interesting.

Marko Papich: 00:26:46

Like, oh, my God, they use pagers to kill some Hezbollah people.

Marko Papich: 00:26:48

Cool.

Marko Papich: 00:26:49

But what's going to happen ten years from now if more and more Palestinians have to move to Jordan?

Marko Papich: 00:26:54

Jordan is 75%, 70% palestinian.

Marko Papich: 00:26:57

They had a civil war in the seventies where the PLO tried to take out the king.

Marko Papich: 00:27:00

The king cannot be ignorant to what's going on in West bank, which Jordan has basically given up control of to a potential future palestinian state.

Marko Papich: 00:27:12

And then finally, what happens with Egypt and Turkey?

Marko Papich: 00:27:15

So, in other words, I don't really think the security situation for Israel has improved.

Marko Papich: 00:27:19

I still think we're in mowing the grass.

Marko Papich: 00:27:21

Israel is just really, really good at mowing the grass.

Jacob Shapiro: 00:27:24

Yeah.

Jacob Shapiro: 00:27:25

So this is where I agree with you completely.

Jacob Shapiro: 00:27:27

And I mean, to take it to another depressing level.

Jacob Shapiro: 00:27:30

I mean, I think what Israel is going to do to the West West bank is exactly what it did to Gaza.

Jacob Shapiro: 00:27:35

They closed the accounts in Gaza.

Jacob Shapiro: 00:27:37

They mowed the grass.

Jacob Shapiro: 00:27:38

They're mowing the grass in Lebanon.

Jacob Shapiro: 00:27:40

They will mow the grass in the West bank next.

Jacob Shapiro: 00:27:42

And the uncomfortable answer to your question is they will kick those people out or they will make those cities that are still under palestinian control.

Jacob Shapiro: 00:27:49

They will either take control of them, they will expel them, they will raise them to the ground.

Jacob Shapiro: 00:27:52

They've shown us the exact playbook.

Jacob Shapiro: 00:27:54

And that's going to be horrible for Jordan.

Jacob Shapiro: 00:27:56

It'll be probably horrible for long term security.

Jacob Shapiro: 00:27:58

And to the, you know, one of the pieces that you sent me before we got on about how the real existential threat here is, well, what does that do to Israel's soul and to its status as a, you know, aspiring liberal democracy?

Jacob Shapiro: 00:28:10

Like, I agree with you on all of that.

Jacob Shapiro: 00:28:12

So.

Marko Papich: 00:28:15

I know we got other things to talk about, but this is the long term risk to Israel.

Marko Papich: 00:28:19

Right?

Marko Papich: 00:28:19

Because you're right.

Marko Papich: 00:28:20

You're correct.

Marko Papich: 00:28:21

Israel has had many different allies.

Marko Papich: 00:28:23

Not all of them have been liberal states.

Marko Papich: 00:28:25

Soviet Union, of course, helped.

Marko Papich: 00:28:26

Czechoslovakia was a big exporter of weapons.

Marko Papich: 00:28:31

Yugoslavia as well.

Marko Papich: 00:28:32

During that initial forties, fifties phase.

Marko Papich: 00:28:34

Then France, as we all know, it's been on the wrong side of the United States twice.

Marko Papich: 00:28:42

In the fifties and in the sixties, the US basically forced Israel to give up gains.

Marko Papich: 00:28:48

That all makes sense.

Marko Papich: 00:28:50

It can find other allies.

Marko Papich: 00:28:52

But my point is it's going to have to find other allies because if it does to West bank what you're describing it to Gaza, that's a break with the west.

Jacob Shapiro: 00:29:02

Is it?

Marko Papich: 00:29:03

I mean, it is.

Jacob Shapiro: 00:29:05

I don't think.

Jacob Shapiro: 00:29:05

I'm sorry, I don't think any.

Jacob Shapiro: 00:29:07

And this is not my personal view about this.

Jacob Shapiro: 00:29:08

I think it's actually horrible and horribly depressing, but nobody gives a shit.

Jacob Shapiro: 00:29:14

I said this at the very beginning of the conflict and gotten a lot of crap for it and I stick to it.

Jacob Shapiro: 00:29:17

Nobody cares about the Palestinians.

Jacob Shapiro: 00:29:19

It's why the palestinian plight is so depressing.

Jacob Shapiro: 00:29:22

They've been betrayed by their own leaders, they've been betrayed by their arab allies.

Jacob Shapiro: 00:29:25

They've been betrayed by an israeli population that thinks it's better than all of that.

Jacob Shapiro: 00:29:30

Nobody cares.

Jacob Shapiro: 00:29:31

And if what is happening in Gaza has not caused the break with the west, it's not going to be the West bank.

Jacob Shapiro: 00:29:36

Maybe something else will happen and they'll use the West bank as an excuse.

Jacob Shapiro: 00:29:39

But like, it's not like nobody cares.

Marko Papich: 00:29:42

Well, I would say is that it kind of has, though.

Marko Papich: 00:29:44

It's become more difficult for many countries to send weapons to Israel.

Marko Papich: 00:29:48

I mean, not the US, not yet, at least.

Marko Papich: 00:29:52

Just the Germans, although the Spanish as well, Italians.

Marko Papich: 00:29:56

I mean, there's.

Marko Papich: 00:29:57

I mean, and Germans.

Marko Papich: 00:29:57

By the way, the fact that it has caused Germans to rethink is huge, because Germany, of course, because of the second world War and the Holocaust has always been like, we'll support Israel no matter what.

Marko Papich: 00:30:08

And even the Germans are now thinking, like, maybe not the UK as well.

Marko Papich: 00:30:12

The destabilization of Jordan will be a big deal if it leads to that.

Jacob Shapiro: 00:30:16

Yes, the destabilization of Jordan, that's a major geopolitical issue that people will start to intervene on and that will also call into question Egypt.

Jacob Shapiro: 00:30:24

And that is also a really, really big deal.

Marko Papich: 00:30:27

This is where I think that, look, there's ways to support Israel.

Marko Papich: 00:30:32

There's varying degrees of support.

Marko Papich: 00:30:35

t would be my priority number: 1234

Marko Papich: 00:30:46

Right?

Marko Papich: 00:30:46

Ten out of ten.

Marko Papich: 00:30:47

I want technology, I want the cutting, I want the latest.

Marko Papich: 00:30:49

I want endless supply of weapons.

Marko Papich: 00:30:51

Everything.

Marko Papich: 00:30:52

Anything that erodes that.

Marko Papich: 00:30:54

It doesn't have to go to zero, but even if it goes to seven or eight, I think you're in trouble.

Marko Papich: 00:30:59

And that's why I would say that I do think that there is a constraint over Israel.

Marko Papich: 00:31:04

There is a sort of ideological constraint.

Marko Papich: 00:31:07

This, like, Israel is a product of enlightenment.

Marko Papich: 00:31:12

Like, Zionism, in my view, is nothing different from national movements throughout Europe throughout the 19th century, they gave birth to every other country.

Marko Papich: 00:31:22

So, like, that line that connects Israel to western civilization and thought, I think, is very, very important, and it suddenly starts acting like a rogue state with ethnic cleansing or apartheid on a large scale, not on sort of like a Gaza scale, but like, large scale.

Marko Papich: 00:31:42

I do think that that will erode support from the ten out of ten to less than that.

Marko Papich: 00:31:47

And that, I think, is critical for Israel not to lose, because you don't want to lose the technology that allows Israel to continue to be far more superior than any of its neighbors.

Jacob Shapiro: 00:31:58

Yeah, I mean, just to point out they have nuclear weapons, so in violation of non proliferation, they've flattened Gaza, they've now invaded southern Lebanon.

Jacob Shapiro: 00:32:06

Like, if you're ticking, like, you know, aspects of a rogue state.

Jacob Shapiro: 00:32:11

Like, it's a very organized rogue state, but, like, it has some of the aspects, sorry to say.

Marko Papich: 00:32:15

I mean, yeah, but, like, most of that has been thus far blessed, right?

Marko Papich: 00:32:18

It has nuclear weapons.

Marko Papich: 00:32:19

Because France gave it to them.

Marko Papich: 00:32:21

So, you know, and that's where, like, none of the fighter jets are built in Israel.

Marko Papich: 00:32:26

Israel does not have, other than the Iron Dome, which is the bottom layer, all of the other layers of its air defense have been gifted to it by the US.

Marko Papich: 00:32:36

So technologically speaking, Israel is not capable by itself to maintain the edge over its neighbors.

Marko Papich: 00:32:45

And that's something that most Israelis don't want to admit.

Marko Papich: 00:32:48

It's a fact.

Marko Papich: 00:32:49

So it is something to just keep in mind.

Marko Papich: 00:32:53

At some point, I do think Israel will be disciplined, and I think we're getting very close to that point.

Jacob Shapiro: 00:33:01

Why don't we spend 30 minutes on the Middle east for something that I think you and I both think is ultimately not that important for markets.

Marko Papich: 00:33:09

But from the market perspective, though, I do think equity declined on October 1, which we're in now.

Marko Papich: 00:33:16

I don't think that makes sense.

Marko Papich: 00:33:19

I wouldn't be shorting us stocks again, just to reiterate, because of the constraints on both Israel and on Iran.

Marko Papich: 00:33:26

I think it just doesn't make sense.

Marko Papich: 00:33:28

I don't even think if they went to war fully, us equities should go down.

Marko Papich: 00:33:33

I mean, if Israel use nuclear weapons against Iran, I'm not sure I'm shorting us stocks, but I think oil, I have changed my view.

Marko Papich: 00:33:41

It's been now exactly a year or one week less than a year.

Marko Papich: 00:33:45

And I do think that at this point, just fading upside moves to oil doesn't really make sense because of where we should probably go next, which is like what's happening in China and the US.

Jacob Shapiro: 00:33:56

Yeah, let's hit China next because I have not yet talked to you or seen what your take was on the recent stimulus announcement.

Jacob Shapiro: 00:34:04

We talked about it on the pod with Rob at the end of last week.

Jacob Shapiro: 00:34:07

And I feel like I incline toward being bullish, China.

Jacob Shapiro: 00:34:10

But even I'm a little skeptical that they've really made any real changes yet.

Jacob Shapiro: 00:34:16

Tell me what you're thinking about China stimulus.

Marko Papich: 00:34:18

So the monetary policy stimulus announcements, I think, came on Monday or Tuesday of last week.

Marko Papich: 00:34:25

So September 24, I think it was.

Marko Papich: 00:34:28

And I was just, I didn't even read it.

Marko Papich: 00:34:30

I was like, okay, like, China is stuck in a secular stagnation.

Marko Papich: 00:34:38

It's got a liquidity trap.

Marko Papich: 00:34:39

The private sector is deleveraging.

Marko Papich: 00:34:41

When the private sector deleveraging.

Marko Papich: 00:34:43

We learned this in: 2010

Marko Papich: 00:34:46

It doesn't do anything.

Marko Papich: 00:34:48

So more monetary policy solutions are just not the way to go.

Marko Papich: 00:34:52

And so I just, like, you know, hit snooze went back to sleep, whatever.

Marko Papich: 00:34:55

And then two days later, you have this shark Polybira meeting.

Marko Papich: 00:35:00

Polybura doesn't meet in September to discuss economy, like, ever.

Marko Papich: 00:35:05

And basically this was the highest level, Xi Jinping level.

Marko Papich: 00:35:10

They take away strategic patients.

Marko Papich: 00:35:14

That was the term they've used.

Marko Papich: 00:35:17

They take away any reference to prudence.

Marko Papich: 00:35:20

They take any reference to provincial debt levels are important to us.

Marko Papich: 00:35:26

They take all those three strategic patients gone.

Marko Papich: 00:35:29

Prudence gone, provincial debts gone, and they focus on fiscal.

Marko Papich: 00:35:35

So they haven't announced anything?

Marko Papich: 00:35:37

Jacob nothing.

Marko Papich: 00:35:38

And yet they've announced everything.

Marko Papich: 00:35:40

China is not about mathematics.

Marko Papich: 00:35:43

If you're investing in China because you're going to extrapolate linearly, some fancy relationship on a chart on a cartesian plane, you're in the wrong business.

Marko Papich: 00:35:53

China is about like, oh, my God, that is a policy shift.

Marko Papich: 00:35:57

So what I call this, I call it a policy bottom.

Marko Papich: 00:36:01

The statement was so forcefully bullish and so forcefully rhetorically different from what they had said in July at the Politburo, where it was just more of the same.

Marko Papich: 00:36:14

Moral hazard.

Marko Papich: 00:36:14

Moral hazard.

Marko Papich: 00:36:15

So what I think happened, Jacob, is something that happens in every society.

Marko Papich: 00:36:19

This isn't weird, China being maoist or communist.

Marko Papich: 00:36:24

Here's the news.

Marko Papich: 00:36:25

Okay?

Marko Papich: 00:36:25

This happened in Scandinavia when they had their own real estate bubble.

Marko Papich: 00:36:28

In Japan, in the US, in Europe, when you have a real estate bubble, the imminent concern of politicians and voters and households and everybody is, oh, my God, we were naughty.

Marko Papich: 00:36:43

So we have to get our comeuppance.

Marko Papich: 00:36:44

Moral hazard.

Marko Papich: 00:36:46

Moral hazard.

Marko Papich: 00:36:47

Moral hazard.

Marko Papich: 00:36:48

Remember: 2010

Marko Papich: 00:36:49

You would turn on Meet the Press and it's like, we're gonna be the next Greece.

Marko Papich: 00:36:53

You know, the government has to tighten its belt, just like you were doing at home, which is, of course, mathematically stupid.

Marko Papich: 00:37:00

As Richard Koo, the eminent economist, has discussed, a balance sheet.

Marko Papich: 00:37:06

Recession requires the public sector to leverage with fiscal spending in order to facilitate faster deleveraging by the private sector.

Marko Papich: 00:37:15

And so Japan did a start and stop stimulus.

Marko Papich: 00:37:17

It would always do a stimulus and then get concerned about budget deficits and then start doing tax increases.

Marko Papich: 00:37:23

The US had the tea party.

Marko Papich: 00:37:24

We elected a party in the United States that was effectively politicizing self flagellation.

Marko Papich: 00:37:33

And in Europe, obviously, austerity became like a political fetish, right?

Marko Papich: 00:37:38

So it's normal to focus on moral hazard after a real estate bubble, because everyone was naughty, the bankers were naughty, the households were naughty, politicians were naughty, everybody was naughty.

Marko Papich: 00:37:48

And then at some point, which varies with time due to politics.

Marko Papich: 00:37:54

Politics is like the variable.

Marko Papich: 00:37:55

The various is you go from moral hazard concerns to political concerns, straight up political concerns, low growth, low inflation.

Marko Papich: 00:38:05

Macro context is terrible for people in debt because the real rates go higher.

Marko Papich: 00:38:11

So you get deeper and deeper and deeper into debt.

Marko Papich: 00:38:14

Doesn't matter that the actual nominal rate is at zero or even negative.

Marko Papich: 00:38:18

And that's what happens.

Marko Papich: 00:38:19

And at some point, people just rebel against it.

Marko Papich: 00:38:21

Even people who voted for austerity rebel against it, as happened in the United States of America, where republican voters, conservative voters, abandoned fiscal conservatism, became like, yeah, let's see, like Trump, and he'll just stimulate.

Marko Papich: 00:38:34

So I think we've reached that point in China.

Marko Papich: 00:38:36

I think what's been difficult for China, for us, watching it from outside and for chinese leaders themselves is to know when they reach that point, because they don't have any feedback mechanism through elections.

Marko Papich: 00:38:48

So they had no way to see a flip from, yeah, let's vote for tea party, Chinese tea Party to, oh, let's vote for a populist in China.

Marko Papich: 00:38:56

And I think that they're starting to concern that they've crossed that barrier.

Marko Papich: 00:39:00

And I think that Politburo's communique was so important because it infers that we've reached that point.

Jacob Shapiro: 00:39:08

Yeah, I agree.

Jacob Shapiro: 00:39:09

I agree with some of that.

Jacob Shapiro: 00:39:11

Do you follow this, the sub stack Pekingology?

Jacob Shapiro: 00:39:15

I haven't followed it until recently, but I just started following it and it's really good.

Jacob Shapiro: 00:39:19

I would recommend listeners go check it out.

Jacob Shapiro: 00:39:21

It's now the second thing that I always read about China, Bill Bishop obviously being the first.

Jacob Shapiro: 00:39:25

And he translated some comments from a couple chinese economists from Saturday, September 28.

Jacob Shapiro: 00:39:31

So after all of the things that happened that week at a Tsinghua People's bank of China School of Finance forum, and there were a couple of senior economists in China, and for instance, one of them went up there and said, okay, the central bank made the statement.

Jacob Shapiro: 00:39:45

It was very positive.

Jacob Shapiro: 00:39:46

The overall direction is very correct.

Jacob Shapiro: 00:39:48

We like all the positive feedback.

Jacob Shapiro: 00:39:49

But if the minister of finance was here in front of me, I would ask him, what exactly are you planning to do?

Jacob Shapiro: 00:39:55

Because you turn the morale around, you've done all these great things, but what are the specific policies?

Jacob Shapiro: 00:40:01

And he goes and translates all these different people who came up and basically say the same thing.

Jacob Shapiro: 00:40:06

And I find myself in the same position.

Jacob Shapiro: 00:40:08

What is actually going to happen here?

Jacob Shapiro: 00:40:10

ey would have done that since: 2008

Jacob Shapiro: 00:40:18

That's a Bloomberg report, considering it's not the actual thing we're talking about one time handouts, like ahead of a festival.

Jacob Shapiro: 00:40:24

But like what?

Jacob Shapiro: 00:40:26

I just don't see the specifics yet.

Jacob Shapiro: 00:40:28

So maybe you're right that this is the very, very, very beginning and they're going to search for the policies, but I don't see the real see change quite yet.

Marko Papich: 00:40:36

At least what I would say to you, you never do.

Marko Papich: 00:40:39

Right.

Marko Papich: 00:40:39

And this is why investing is not a science.

Marko Papich: 00:40:42

Right?

Marko Papich: 00:40:43

Policy bottom means that we haven't reached the economic bottom.

Marko Papich: 00:40:48

Like, that's why I call it a policy bottom.

Marko Papich: 00:40:50

But markets are going to respond to policies, not the economy, number one.

Marko Papich: 00:40:55

Number two, I'm also waiting to see what they're going to announce after this very forceful Politburo meeting.

Marko Papich: 00:41:01

And what I would argue is that, Jacob, first couple of things that happened.

Marko Papich: 00:41:05

I'm going to come back on your show and you're going to be like, this wasn't enough.

Marko Papich: 00:41:08

ns after whatever it takes in: 2012

Marko Papich: 00:41:16

And there were still disappointments.

Marko Papich: 00:41:18

There were still Alphabet soup of disappointments.

Marko Papich: 00:41:22

The point is there was an inflection.

Marko Papich: 00:41:24

There was a policy inflection from being focused on moral hazard.

Marko Papich: 00:41:28

Oh, let's not bail out Portugal like that easily, right?

Marko Papich: 00:41:32

Like, I remember this famous meeting when Merkel and Serko Z come out and they're like, well, but we will, we will bail in the boat holders.

Marko Papich: 00:41:40

And it was like, no.

Marko Papich: 00:41:42

You know, like they kept making these own goals.

Marko Papich: 00:41:45

You go from moral Hazard to whatever it takes.

Marko Papich: 00:41:48

It's a political hazard now.

Marko Papich: 00:41:50

And I think we've reached that with this.

Marko Papich: 00:41:51

We're gonna look back like a year from now and say, that was the moment.

Marko Papich: 00:41:55

Now what that means for actual investors.

Marko Papich: 00:41:58

I went long right away on September 26, chinese stocks.

Marko Papich: 00:42:03

But there's going to be a pullback, no doubt.

Marko Papich: 00:42:06

This is a tactical trade.

Marko Papich: 00:42:07

There's going to be disappointments.

Marko Papich: 00:42:08

The bears are going to come out, shake their fist and say, hey, hey, 2 trillion is nothing.

Marko Papich: 00:42:13

And we're all going to be like, oh, but the most important thing is, what do policymakers in China do?

Marko Papich: 00:42:18

Do they react like, well, that's it, moral hazard?

Marko Papich: 00:42:21

Or they're like, oh, my God, that wasn't enough.

Marko Papich: 00:42:22

Let's do more.

Marko Papich: 00:42:23

And I think that we've crossed into the ladder, and a lot of people I respect who focus on China were also shocked.

Marko Papich: 00:42:31

A lot of people onshore that I talked to in China read that Politburo communique, and right away they were like, this is different from everything we've seen.

Jacob Shapiro: 00:42:40

Over the last three years, which one of the reasons I can't quite get there yet, because like I said, that's my instinct.

Jacob Shapiro: 00:42:47

My instinct is always actually to be bullish China, because they have always outdone what all of the external analysts said that they couldn't do.

Jacob Shapiro: 00:42:54

So I think, like, if you're the last 70, 80 years as a geopolitical analyst, if you took the over on China, yeah, you'd see some pretty huge dips in different periods.

Jacob Shapiro: 00:43:01

But overall, like, China has done better.

Jacob Shapiro: 00:43:04

And that's usually where I want to be.

Jacob Shapiro: 00:43:05

But then the next question here, and this ties us into the US, is, I can't help but shake, you know, the suspicion that if you get a second Trump administration, if you get a Trump victory in November and he starts coming in with the 60% tariffs and things like that, does that dent the investor narrative?

Jacob Shapiro: 00:43:22

Because the investor narrative is still largely external foreign investors with China, this is not mom and pop chinese citizen.

Jacob Shapiro: 00:43:28

I mean, the Communist Party would love it if the chinese people are buying stocks.

Jacob Shapiro: 00:43:32

I don't think they're doing it quite yet.

Marko Papich: 00:43:36

It is professionalizing.

Marko Papich: 00:43:38

All right, so why do you have your cousin Marco on your show?

Marko Papich: 00:43:42

Why do you have me on the show?

Jacob Shapiro: 00:43:44

But aside from your good looks, I.

Marko Papich: 00:43:46

Mean, aside from that, why?

Jacob Shapiro: 00:43:49

Well, because you bathe in indifference and you can tell us what's going to happen next as a result.

Marko Papich: 00:43:53

Okay, fine.

Marko Papich: 00:43:54

But really, really, the reason I'm here, the reason you brought me here, as Paul Pierce said, famous jumper, right?

Marko Papich: 00:44:02

The reason you brought me here, Jacob, is for hyperbole and for fuck and for humor.

Marko Papich: 00:44:08

Let's.

Marko Papich: 00:44:08

Let's be honest.

Marko Papich: 00:44:09

Because, because, because like our favorite basketball player, ISO Joe, I have never seen a turnaround.

Marko Papich: 00:44:19

Turnaround jumper I don't like.

Marko Papich: 00:44:21

I will take a shot.

Marko Papich: 00:44:22

I don't care.

Marko Papich: 00:44:22

I'm like Kobe, right?

Marko Papich: 00:44:24

That's.

Marko Papich: 00:44:25

I take shots.

Marko Papich: 00:44:26

And so here's my shot.

Marko Papich: 00:44:27

This is, this is why.

Marko Papich: 00:44:28

This moment right here is why you brought me.

Jacob Shapiro: 00:44:30

All right, let's do it.

Jacob Shapiro: 00:44:31

I'm here.

Marko Papich: 00:44:32

If Donald Trump wins the election, you buy chinese stocks and don't look back.

Marko Papich: 00:44:38

My high conviction view, my high conviction view is that Donald Trump is going to do the deal.

Marko Papich: 00:44:46

He's going to do the deal with China.

Marko Papich: 00:44:48

He's been telling us this for the last six months, and nobody's paying attention.

Marko Papich: 00:44:52

So what he's been doing for the last six months on the road is telling everyone who wants to listen that he is going to force China to build factories in the United States.

Marko Papich: 00:45:02

And nobody paid attention because this is, you know, he's talking to, you know, his supporters across the midwest, who cares?

Marko Papich: 00:45:08

Blah, blah.

Jacob Shapiro: 00:45:09

And he's also like selling new watches and talking about new crypto projects.

Marko Papich: 00:45:13

There you go.

Marko Papich: 00:45:15

But then he has the convention speech.

Marko Papich: 00:45:18

Now, the convention speech is probably the most, the only semi scripted speech.

Marko Papich: 00:45:23

And it was hilarious because it was not scripted.

Marko Papich: 00:45:25

He ended off going off, I was actually in a CNBC green room waiting to come on the show, discussed the speech, and then they had to tell me it was canceled because he's talked so long.

Marko Papich: 00:45:36

The CNBC show was over.

Marko Papich: 00:45:38

And I was like, oh, it was at midnight, you know, I was in there for like an hour.

Marko Papich: 00:45:41

And they were like, sorry, mister Poppage, you can leave now because like, we don't know when he's gonna end talking.

Marko Papich: 00:45:47

So here's what I'm getting at this speech.

Marko Papich: 00:45:49

At this speech, you can go, you can find a transcript.

Marko Papich: 00:45:51

Control f, tariffs, tariff, whatever, you get only two, only two items.

Marko Papich: 00:45:58

One is about Iran, where he's actually saying we were going to get a deal.

Marko Papich: 00:46:02

Let's leave that aside because I think he will get one with Iran as well.

Marko Papich: 00:46:06

And then the other one was like, he said, I'm going to raise tariffs on China unless they move their ev factories into the United States.

Marko Papich: 00:46:16

And so that's where the record player should have skipped.

Marko Papich: 00:46:19

There should have been like a skip, collective skip in the financial industry.

Marko Papich: 00:46:23

Instead, everyone's ignoring it.

Marko Papich: 00:46:25

You know, it's hilarious to me, watching these investment banks like Goldman Sachs has like 17 PhDs in economics trying to tell us what 60% tariff is going to do to the us economy.

Marko Papich: 00:46:37

Why?

Marko Papich: 00:46:37

Based on what?

Marko Papich: 00:46:38

I'll tell you what they're basing it on.

Marko Papich: 00:46:40

There was a Washington Post article that said that three people in the Trump administration confirmed to Washington Post in February of this year that he asked him what would happen if he raised theirs 40%.

Marko Papich: 00:46:51

And then suddenly everyone is going to raise.

Marko Papich: 00:46:53

It was like one article, three sources that he goes on to Fox News, he gives Fox News interview in the morning.

Marko Papich: 00:47:00

So like, you're talking semi caffeinated Trump, and they're like, President Trump, are you going to raise tariffs?

Marko Papich: 00:47:06

He's like, you know, sure, whatever.

Marko Papich: 00:47:08

They've been mean to us.

Marko Papich: 00:47:09

And then off goes Goldman Sachs and Morgan Stanley and JP Morgan.

Marko Papich: 00:47:13

We're all in the financial industry.

Marko Papich: 00:47:14

Such nerds.

Marko Papich: 00:47:14

We're like 60% percent terms.

Marko Papich: 00:47:16

Let me get my calculator.

Marko Papich: 00:47:18

Let me see where this goes.

Marko Papich: 00:47:21

And so no one's actually paying attention to what President Trump has been actually saying, and he's saying, I'm going to be mean, I'm going to be tough, I'm going to breathe fire, and then I'm going to get them to build factories in the Midwest.

Marko Papich: 00:47:33

Now, if President Biden did the same thing in a campaign speech, Beijing Joe, if Vice President Harris did the same thing, suggested the same.

Marko Papich: 00:47:45

It's Kao Tao camela.

Marko Papich: 00:47:47

Boom.

Marko Papich: 00:47:49

Right?

Marko Papich: 00:47:49

Very nice.

Marko Papich: 00:47:50

Thank you.

Marko Papich: 00:47:51

Trademark.

Jacob Shapiro: 00:47:52

I like comrade Kamala better, but I'll give you count.

Marko Papich: 00:47:55

No, because it's related more to China, you know.

Marko Papich: 00:47:57

Okay, fine.

Marko Papich: 00:47:58

And my point is also k, right?

Marko Papich: 00:48:01

Marko Papich: 00:48:02

Very nice.

Jacob Shapiro: 00:48:03

I would spell comrade with a k.

Jacob Shapiro: 00:48:04

That makes it cute.

Marko Papich: 00:48:05

Oh, there you go.

Marko Papich: 00:48:06

Fine, fine.

Marko Papich: 00:48:07

Nice adjustment.

Marko Papich: 00:48:08

Poetic lessons.

Marko Papich: 00:48:10

My point is, only Trump can say something like this and not get any flak for it.

Marko Papich: 00:48:14

Kind of being, well, conciliatory and almost, I don't want to say pro China, but, you know, China will do.

Marko Papich: 00:48:23

I mean, China will take this deal so fast.

Marko Papich: 00:48:27

You know, they'll be like, whatever, but they're already, if you look at the FDI chart, this is something fascinating that I think most us policymakers are completely unaware of.

Marko Papich: 00:48:36

China is the country that's financing american national security priorities.

Marko Papich: 00:48:41

They have spent the most ever in their history outward FDI this year.

Marko Papich: 00:48:47

China has basically has a tsunami wave of FDI because it is actually financing american de risking from itself.

Marko Papich: 00:48:57

China basically said, oh, you don't want made in China.

Marko Papich: 00:48:59

Hold my beer, I got this.

Marko Papich: 00:49:01

It's gone around the world financing infrastructure projects to facilitate american de risking from itself.

Marko Papich: 00:49:08

And so if America suddenly says, well, we don't.

Marko Papich: 00:49:12

And this is what Trump is doing, I mean, he's smart enough to know that this $70 billion a year that China's spending is going to Vietnam, Mexico, Indonesia and other countries.

Marko Papich: 00:49:20

And he's just saying, no, no, no, no, you're going to put that into the United States.

Marko Papich: 00:49:25

We're going to have gillion cherry factories.

Marko Papich: 00:49:27

And I suspect that he's going to push on them very, very hard and say things like this.

Marko Papich: 00:49:33

What you did to us in the nineties, in the early two thousands, we're going to do to you.

Marko Papich: 00:49:37

So we want jvs.

Marko Papich: 00:49:39

GM is a terrible company.

Marko Papich: 00:49:41

Doesn't know how to make a car.

Marko Papich: 00:49:43

Nobody notices in America because everyone loves trucks.

Marko Papich: 00:49:45

But no self respecting non american would ever own a GM vehicle.

Marko Papich: 00:49:49

So they're, you know, make a JV, you know, you want BYD cars built in America.

Marko Papich: 00:49:55

Teach GM how to do it.

Marko Papich: 00:49:57

And I think the Chinese say, yes, why not?

Marko Papich: 00:50:01

It's perfect.

Marko Papich: 00:50:02

So what I'm getting at with this is that I think the Trump is not a factor of downside risk for China.

Marko Papich: 00:50:10

I think there's massive upside risk to chinese equities, whereas if Harris wins, I think that the trade war effectively continues on the same trajectory and that we can extrapolate that linearly into, I don't know, world war three or something.

Jacob Shapiro: 00:50:23

But, yeah.

Jacob Shapiro: 00:50:25

So I want to ask the Kamala question in a second, first of all.

Jacob Shapiro: 00:50:31

Okay, so Kobe just, just had game seven, his six for 24 performance.

Marko Papich: 00:50:35

I got 14 rebounds.

Jacob Shapiro: 00:50:37

Yeah, that's great.

Jacob Shapiro: 00:50:40

Poor went out for Dakimbe Mutombo, long long in Atlanta Hawk center and someone I met at Atlanta Hawks basketball camp.

Jacob Shapiro: 00:50:46

So I will do my best, mutumbo, and try to swat away some of these things that you just said.

Jacob Shapiro: 00:50:51

First of all, Trump has said this on the campaign trail many times.

Jacob Shapiro: 00:50:53

He's actually recently taken to saying that the tariffs that he talked about before were not enough.

Jacob Shapiro: 00:50:57

So it might be even higher than 60% and higher than 10% on all the other countries in the world.

Jacob Shapiro: 00:51:02

So I don't think it's fair to say it's just three wonks talking to a Washington Post reporter.

Jacob Shapiro: 00:51:07

That that's coming from now.

Marko Papich: 00:51:08

You're right.

Marko Papich: 00:51:09

That's the speech where you set your phone.

Jacob Shapiro: 00:51:13

Well, yeah, but as you said, he went off the script after ten minutes because he wasn't getting the audience that he wanted to.

Jacob Shapiro: 00:51:18

He had just been, there had just been an attempted assassination attempt.

Jacob Shapiro: 00:51:22

And the other thing about him is, and this is one place where I think you and I are going to disagree, because I read your great report about him as not a chaos agent.

Jacob Shapiro: 00:51:29

I've been reading the McMaster book recently, and I think he's up for grabs.

Jacob Shapiro: 00:51:34

I think it depends who the last person was he talked to and his own contrarian nature.

Jacob Shapiro: 00:51:38

And I relate to this as a contrarian myself, I think gets in his own way because he'll hear something and he'll want to say that's wrong.

Jacob Shapiro: 00:51:44

The experts think that I'm going to do the exact opposite, or he'll get somebody in his mind and he'll listen to them for two months, and then he'll decide they're completely wrong and I'm going to go hire John Bolton, and then I'm going to fire this guy, and then I'm going to do this.

Jacob Shapiro: 00:51:55

So I don't think we exactly know.

Jacob Shapiro: 00:51:57

I don't even think he knows exactly what his policy is going to be if it's going to be something like Ev's.

Jacob Shapiro: 00:52:02

I bet China would take that deal in a second, too.

Jacob Shapiro: 00:52:04

China's over producing EV's, and there's all these doubts about that.

Jacob Shapiro: 00:52:08

The question to me is, well, there's a two fold question number one.

Jacob Shapiro: 00:52:12

There was the phase one China trade deal.

Jacob Shapiro: 00:52:14

China took the deal and then did none of it.

Jacob Shapiro: 00:52:16

And my, my american farmer listeners all know this because they were supposed to sell all these ag products to China, and they didn't get them there.

Jacob Shapiro: 00:52:22

Now, if you want to be kind to President Trump and his team, you'll say, well, Covid affected things like Covid completely shut everything down.

Jacob Shapiro: 00:52:29

It would have been a great trade deal if not for Covid, but we had to deal with that stuff.

Jacob Shapiro: 00:52:33

So I'm willing to talk about that.

Jacob Shapiro: 00:52:34

But the last thing I'll just say is, before I turn it over to you to try and dunk on the.

Jacob Shapiro: 00:52:40

Which, remember, Kobe always wins over Mutumbo.

Jacob Shapiro: 00:52:42

So I'll be valiant here, and I'll collect my defensive player of the year award.

Jacob Shapiro: 00:52:44

But I'm expecting that Kobe is going to get the MVP.

Jacob Shapiro: 00:52:47

Is that, you know, South China Morning Post head out this week that Huawei's trying out new chips so that they don't have to have Nvidia chips anymore.

Jacob Shapiro: 00:52:55

And the real thing for China is, sure, we'll build ev factories in your, in your little country.

Jacob Shapiro: 00:53:01

That's fine.

Jacob Shapiro: 00:53:02

Meanwhile, we are slowly ascending value change.

Jacob Shapiro: 00:53:05

We are slowly getting more and more self sufficient, and eventually, we will be the middle kingdom again.

Jacob Shapiro: 00:53:10

We will be the economic center of gravity with all of the tech, the high grounds of tech, blah, blah, blah, blah, blah.

Jacob Shapiro: 00:53:17

So that's how I would push back against you a little bit, at least in the Trump scenario.

Jacob Shapiro: 00:53:21

And I want to do the Harris scenario separately, because I think that is actually very important.

Marko Papich: 00:53:25

Look, I will say I respect General HR McMaster massively.

Marko Papich: 00:53:30

I've met him.

Marko Papich: 00:53:31

He's written the blurb on my book.

Jacob Shapiro: 00:53:34

You know, some.

Jacob Shapiro: 00:53:35

Some name drop.

Jacob Shapiro: 00:53:36

Should I get name dropping?

Jacob Shapiro: 00:53:37

I need to get my broom and sweep up some names that are being dropped over here.

Marko Papich: 00:53:41

Kobe's just warming up right now.

Marko Papich: 00:53:43

This is Kobe just flexing.

Jacob Shapiro: 00:53:45

Kobe's looking down on you like my son.

Jacob Shapiro: 00:53:47

Good job.

Jacob Shapiro: 00:53:47

Let's go.

Marko Papich: 00:53:49

Thank you.

Marko Papich: 00:53:50

So, look, I mean, General McMaster was there, and I think he experienced the chaos.

Marko Papich: 00:53:55

But from a very 30,000 foot view, what I see is a bunch of deals done.

Marko Papich: 00:54:04

And I hate to say it, because I remember before Trump became the president, people told me, have you read Trump's book?

Marko Papich: 00:54:10

Whatever, because he's a deal maker, Marco.

Marko Papich: 00:54:13

And I was like, no, he's a chaos agent.

Marko Papich: 00:54:16

That was my view pre: 2016

Marko Papich: 00:54:18

He's a chaos agent.

Marko Papich: 00:54:19

You can't predict Trump.

Marko Papich: 00:54:20

And then what do we get?

Marko Papich: 00:54:21

We got a USMCA deal.

Marko Papich: 00:54:22

We got phase one with China, each one preceded by massive insanity.

Marko Papich: 00:54:27

Oh, with Korea, we got a Singapore summit.

Marko Papich: 00:54:30

Shockingly, us president.

Marko Papich: 00:54:33

I mean, nothing.

Marko Papich: 00:54:33

Nothing.

Marko Papich: 00:54:34

And by the way, by the way, Jacob, none of these deals were the greatest deals ever.

Jacob Shapiro: 00:54:38

No.

Jacob Shapiro: 00:54:39

I think you've left out his biggest success, which was Operation Warp speed.

Jacob Shapiro: 00:54:42

I think when we look back at his first term, the ability to do that was amazing.

Marko Papich: 00:54:47

I agree.

Marko Papich: 00:54:47

It's just, it wasn't a deal necessarily.

Marko Papich: 00:54:49

You know, he didn't have to like.

Marko Papich: 00:54:51

But my point is, like USMCA, you can very easily argue that Canada wiped the floor with the United States trade representative.

Marko Papich: 00:54:58

Canada won that deal, not us.

Marko Papich: 00:55:00

If you look at the initial negotiating asks by the us administration, us got none of them.

Marko Papich: 00:55:05

You know, phase one.

Marko Papich: 00:55:06

Your point?

Marko Papich: 00:55:06

Like, by the way, let's say even if China did buy agricultural products for the US, I mean, it's not like that's going to boost productivity in the US.

Marko Papich: 00:55:14

You know, it's.

Jacob Shapiro: 00:55:15

No, but I'm just saying you could at least claim a victory that you made a deal with them and they did what they.

Marko Papich: 00:55:20

All I'm saying is I want to both give credit to President Trump that I don't think he was a chaos agent.

Marko Papich: 00:55:26

I think his negotiating style is chaotic.

Marko Papich: 00:55:29

But I also don't want to give him too much credit because I don't think that these deals were necessarily huge wins for the US.

Marko Papich: 00:55:35

I think that's kind of what I'm getting at.

Marko Papich: 00:55:37

But the point is that if you think about Navarro, John Bolton, there is a pattern in President Trump.

Marko Papich: 00:55:43

He takes Navarro to China.

Marko Papich: 00:55:46

Why?

Marko Papich: 00:55:48

Because he wants to show the Chinese there's a lot worse things than lighthizer.

Marko Papich: 00:55:54

He takes John Bolton to Iran.

Marko Papich: 00:55:56

You know, proverbially.

Marko Papich: 00:55:58

Why?

Marko Papich: 00:55:58

Because he wants to show Iranians there's far worse things than Matt Pottinger or Donald Trump.

Marko Papich: 00:56:06

And so I actually, when I look at Donald Trump, I think he's the only president in recent american history who understands game theory.

Marko Papich: 00:56:16

He understands how to establish credibility of threats, of us threats, whether they're military threats or whether they're financial.

Marko Papich: 00:56:23

And so I see that it's not really chaotic.

Marko Papich: 00:56:28

It produces results and it produces deals that there are not.

Marko Papich: 00:56:32

Again, I don't want to give too much credit.

Marko Papich: 00:56:34

I mean, President Trump, if he was here, he would say, Marco, you're wrong.

Marko Papich: 00:56:36

These are the greatest deals ever done.

Marko Papich: 00:56:37

No one's ever done deals like this.

Marko Papich: 00:56:39

And I'll be like, I mean, you know, no, phase one.

Marko Papich: 00:56:43

All I would say to you is that, yes, I do think Covid mattered, but I think something else mattered.

Marko Papich: 00:56:49

President Xi and Liu, he made that deal with President Trump and lighthizer, and there was an expectation that certain things would follow.

Marko Papich: 00:56:57

And then Harris comes, and there's that incredible meeting in Anchorage where basically the US tells the Chinese, we want you not to do this, this, this, and this.

Marko Papich: 00:57:07

Actually, they don't even tell them what they want to do.

Marko Papich: 00:57:10

The Biden administration has never given Chinese a list of demands.

Marko Papich: 00:57:14

So why the hell would Xi Jinping fulfill phase one?

Marko Papich: 00:57:18

Why?

Marko Papich: 00:57:19

It's a complete regime shift.

Marko Papich: 00:57:21

It goes from, your trade is in balance with us.

Marko Papich: 00:57:25

We have a mercantilist reason to go after you to now this complete fusion of national security with trade, where the Chinese are smart enough to know that there will never be a deal with a democratic president, ever.

Marko Papich: 00:57:39

Why?

Marko Papich: 00:57:40

Because it's unfair.

Marko Papich: 00:57:41

American politics are unfair.

Marko Papich: 00:57:43

A democratic president will always be seen as Beijing.

Marko Papich: 00:57:47

Zhou kowtow, Kamala.

Marko Papich: 00:57:51

And they will never be able to go to China.

Marko Papich: 00:57:53

Only Nixon can go to China.

Marko Papich: 00:57:54

And so why would they fulfill phase one?

Marko Papich: 00:57:58

For what reason?

Marko Papich: 00:57:59

What are you gonna give us if we fulfill it?

Marko Papich: 00:58:01

And so that's how I see their unwillingness to fulfill phase one.

Marko Papich: 00:58:06

I think that the Biden administration has never given China a list of demands for them to fulfill because they're afraid the Chinese will fulfill those demands because they can't sell a deal with China.

Marko Papich: 00:58:14

Like China could give Taiwan as the 51st state to the United States of America.

Marko Papich: 00:58:18

I don't think that Joe Biden could sell that to the american public.

Marko Papich: 00:58:21

So here's what I'm getting at.

Marko Papich: 00:58:23

What I'm getting at here is that I think that China can satisfy a Trumpian administration, which is far less concerned about waiving national security with trade than Biden is.

Marko Papich: 00:58:37

Trump doesn't have to show tough.

Jacob Shapiro: 00:58:41

Let me just hit pause on that, because you had in your explanation there.

Jacob Shapiro: 00:58:45

I think the key question, so what is Trump going to give China if this scenario comes to pass?

Jacob Shapiro: 00:58:51

He's elected.

Jacob Shapiro: 00:58:53

All of the tariff thing was a ruse so that he could punch them in the mouth and get the deal.

Jacob Shapiro: 00:58:57

China opens the EV factories or whatever else.

Jacob Shapiro: 00:58:59

Demented things he said in his conventions speech.

Jacob Shapiro: 00:59:02

What is Trump giving China?

Marko Papich: 00:59:05

What Trump is giving China is a path to growth.

Marko Papich: 00:59:09

What Trump is giving China is a sense that the United States of America is not actively.

Marko Papich: 00:59:14

It's a rival.

Marko Papich: 00:59:15

We're not friends, we're enemies, we're rivals.

Marko Papich: 00:59:20

But you do have a path where you can get to your chinese dream.

Marko Papich: 00:59:25

You can do that you have by.

Jacob Shapiro: 00:59:29

Selling EV's to the american middle class.

Jacob Shapiro: 00:59:31

Made in Ohio.

Marko Papich: 00:59:32

Absolutely.

Marko Papich: 00:59:33

That's part of it, yes.

Marko Papich: 00:59:35

You know why?

Marko Papich: 00:59:36

Because so the Biden administration is effectively lying to Beijing.

Marko Papich: 00:59:41

You know, there's this view that America has.

Marko Papich: 00:59:45

We're not trying to de risk from China.

Marko Papich: 00:59:47

We're a decouple.

Marko Papich: 00:59:48

We're de risking.

Marko Papich: 00:59:49

And we're going to do that by doing small gardens with high walls and.

Marko Papich: 00:59:53

Yeah, like four nanometer chip.

Marko Papich: 00:59:55

That's a very small garden.

Marko Papich: 00:59:56

You don't need a four nanometer chip to be a viable middle income country.

Marko Papich: 01:00:00

You don't like.

Marko Papich: 01:00:01

Germany doesn't have the ability to produce five nanometer chips.

Marko Papich: 01:00:04

And Germany is.

Marko Papich: 01:00:05

Okay, so the problem is that the Biden administration doesn't know where to stop.

Marko Papich: 01:00:11

And it's imposed 100% tariffs on EV's.

Marko Papich: 01:00:14

EV's are not a small garden, Jacob.

Marko Papich: 01:00:17

Okay.

Marko Papich: 01:00:17

EV is like a national forest.

Marko Papich: 01:00:20

And telling China it's not allowed to produce EV's, like, for what reason?

Marko Papich: 01:00:24

Where's the security danger in EV's?

Marko Papich: 01:00:26

It makes no sense.

Marko Papich: 01:00:28

It just doesn't.

Marko Papich: 01:00:29

Nobody can convince me otherwise.

Marko Papich: 01:00:31

EV is not that technologically advanced like China's.

Marko Papich: 01:00:35

You can tell the Chinese, like the Europeans have, hey, you need to raise prices of EV's because you've supported them with industrial policy.

Marko Papich: 01:00:42

That's not fair.

Marko Papich: 01:00:43

But just saying we're not going to have chinese EV's.

Marko Papich: 01:00:46

You're telling China there's a million and a half people that work in China in assembly, and there's about 30 million who work in auto manufacturing.

Marko Papich: 01:00:54

We want them all out of jobs.

Marko Papich: 01:00:56

We want you to not get to middle income.

Marko Papich: 01:01:00

That is world war three stuff.

Marko Papich: 01:01:03

And what Trump is going to give them is like, yeah, you can have your workers work in certain industries.

Marko Papich: 01:01:08

We can compete with that.

Marko Papich: 01:01:09

In fact, come on over, teach GM how to make this stuff.

Marko Papich: 01:01:13

And no, I'm not concerned that you're going to press a button in Beijing and then suburban moms driving a BYD EV are going to become a suicide barber, which is what Congress is currently, by the way, discussing.

Marko Papich: 01:01:27

US Congress is literally saying software technology in cars that's built in China could one day become like a trojan horse.

Marko Papich: 01:01:34

And like, all these suburban moms driving groceries are going to mow down people on the streets.

Jacob Shapiro: 01:01:40

Yeah, that comes from the Trump administration that comes from the attack on Huawei and about thinking that they're going to be trojan horses and bombs and all sorts of other things inside a Huawei kit.

Marko Papich: 01:01:50

I disagree.

Marko Papich: 01:01:51

I disagree because Trump went off of Huawei for, like, a company specific attack.

Marko Papich: 01:01:57

It wasn't like, a broad attack on every sector.

Marko Papich: 01:01:59

And the second thing is that once phase one was concluded, this is somewhere in some archive.

Marko Papich: 01:02:06

weeted, right, in February of: 2020

Marko Papich: 01:02:20

I'm sick and tired of it.

Marko Papich: 01:02:22

American, great, american companies are going to go to China and make money in China.

Marko Papich: 01:02:28

I don't want, like, all this nonsense.

Marko Papich: 01:02:30

Everything is a security threat.

Marko Papich: 01:02:32

And so the point is that there's a mercantilist solution here where America gets to adjust, gets FDI from China, gets blue collar workers assembling GM, bYD, whatever, clones, and then China gets to say to itself, okay, the Americans are enemies.

Marko Papich: 01:02:49

They don't want us to have, you know, genuinely high tech.

Marko Papich: 01:02:52

They're not gonna help us on that.

Marko Papich: 01:02:54

But we are gonna be able to assemble cars.

Marko Papich: 01:02:56

We are going to be able to.

Marko Papich: 01:02:57

And assembling cars is very important.

Marko Papich: 01:02:59

You know, this isn't frivolous.

Marko Papich: 01:03:01

Why is it important?

Marko Papich: 01:03:02

Because if you have a car industry, you have a car seat industry, you have a gear industry, you have a door, you have an aluminum industry.

Marko Papich: 01:03:08

This is why countries like Malaysia or my former homeland of Yugoslavia build crappy cars.

Marko Papich: 01:03:14

They do it so they can have the tip of the pyramid, and then you have all the other stuff that goes along with it, which is important.

Marko Papich: 01:03:22

The Biden administration is effectively sending a signal.

Marko Papich: 01:03:25

There's no small gardens.

Marko Papich: 01:03:26

It's huge gardens, because we don't know how to stop.

Marko Papich: 01:03:29

We don't know how to defend making a deal with China domestically.

Marko Papich: 01:03:32

Politically, Trump is like, hold my beer.

Marko Papich: 01:03:34

I can do whatever I want.

Marko Papich: 01:03:36

I can shoot someone on Fifth Avenue.

Marko Papich: 01:03:37

My supporters will like me.

Marko Papich: 01:03:38

He's right.

Marko Papich: 01:03:39

And he can make a deal with China that gives China a flight path so they can continue to grow but continues to punish China if it goes into way too high tech stuff while focusing on getting China to pay for that.

Marko Papich: 01:03:53

How do you pay for that?

Marko Papich: 01:03:54

Either buy our soybeans or come into the country and build a factory or do both.

Marko Papich: 01:03:59

So, yeah, I do think that there's a real serious element here.

Marko Papich: 01:04:02

The real nut, like the fulcrum, is that I fundamentally think Trump doesn't see national security as tied into every component of the trade relationship as do the Democrats.

Marko Papich: 01:04:16

And lighthizer, actually, although he's definitely a hawk.

Marko Papich: 01:04:19

Remember, he was talking about China being mean to America and unfair way before China was seen as a national security threat.

Marko Papich: 01:04:27

He never tied the two together that intensely, where everything China produces is going to become a trojan horse in a world war three scenario.

Marko Papich: 01:04:37

Final thing on Huawei.

Marko Papich: 01:04:40

I think the other reason that Trump is doing this shift is that he is actually very, very smart.

Marko Papich: 01:04:46

What do I mean by that?

Marko Papich: 01:04:47

I think that Donald Trump understands that in a multipolar world, you're just not going to get your allies to support you.

Marko Papich: 01:04:56

So what's America going to do when China starts doing FDI into Vietnam or Malaysia or Indonesia?

Marko Papich: 01:05:03

What is the US going to do?

Marko Papich: 01:05:04

EMBARGO everyone on the planet?

Marko Papich: 01:05:06

That's a diplomatic and economic disaster for the US.

Marko Papich: 01:05:09

It can't do that.

Marko Papich: 01:05:10

And I can tell you, Jacob, you travel a lot.

Marko Papich: 01:05:13

I travel a lot.

Marko Papich: 01:05:15

I've been to Colombia.

Marko Papich: 01:05:16

I've been to Malaysia.

Marko Papich: 01:05:17

I've been to Brazil.

Marko Papich: 01:05:18

Just now, man, you walk into an electronics store anywhere outside of the west, Apple's got a little tiny counter, and there's Xiaomi, there's Huawei, there's Samsung.

Marko Papich: 01:05:29

Like the rest of the world just couldn't care less about this stuff.

Marko Papich: 01:05:32

It just doesn't like Japan and Netherlands are cheating America and destroying California's semiconductor industry by doing so.

Marko Papich: 01:05:41

So what Trump is basically saying is like, look, I'm not going to do whack a mole and try to fight our allies on this stuff.

Marko Papich: 01:05:48

You know, I'm not going to do that.

Marko Papich: 01:05:50

I'm going to force China to come into the US and do the FBI it was going to do in Vietnam, do it here.

Marko Papich: 01:05:58

And I think the Biden administration and the Harrison administration is going to continue to make a mistake by thinking that they can pursue a trade war against China in a multipolar world.

Marko Papich: 01:06:06

It's just not going to work.

Marko Papich: 01:06:07

And the best example of that is that China has abandoned high end semiconductor manufacturing and has effectively decided to come to dominate the 20 to 40 nanometer.

Marko Papich: 01:06:22

This is the product of the Biden administration's incorrect semiconductor policy, in my view.

Marko Papich: 01:06:27

They've basically steered China into this kind of legacy chip production.

Marko Papich: 01:06:32

Guess what the problem with that is?

Marko Papich: 01:06:34

The problem with that is that legacy chip production is what actually matters for war.

Marko Papich: 01:06:39

So China is now going to come to dominate all of the production of chips that go into washing machines, cars, tanks, missiles, and.

Marko Papich: 01:06:46

Yeah, so they're not going to be able to put a chip into this.

Marko Papich: 01:06:49

Or maybe Huawei is some chip, but, like, this doesn't matter.

Marko Papich: 01:06:53

It just doesn't matter.

Marko Papich: 01:06:55

You know, this doesn't matter.

Marko Papich: 01:06:57

Like, Israel is not beating the crap out of Hezbollah because of, you know, phones.

Marko Papich: 01:07:04

It's beating them because of pagers.

Jacob Shapiro: 01:07:06

Well, because of pagers, which goes back to the suburban mom and the software and the ev I'm with.

Jacob Shapiro: 01:07:12

Well, I'm not sure that Xi Jinping is going to take that deal, even if it's what happens.

Jacob Shapiro: 01:07:15

But just a few things before we turn to Harris.

Jacob Shapiro: 01:07:17

The first is that you talked about one of President Trump's last tweets.

Jacob Shapiro: 01:07:21

One of the last things that he did was he started considering whether to name Vietnam a currency manipulator.

Jacob Shapiro: 01:07:27

So, yes, like, there was a game of whack a mole that was emerging and probably would have expanded had he stayed in power.

Marko Papich: 01:07:33

It's not going to work.

Jacob Shapiro: 01:07:35

Yeah, I didn't say it was going to work.

Jacob Shapiro: 01:07:37

I'm just saying he's going to try Vietnam.

Marko Papich: 01:07:39

Look, here's the reason.

Marko Papich: 01:07:40

It's just, he's not going to try.

Marko Papich: 01:07:42

Why?

Marko Papich: 01:07:43

Why?

Marko Papich: 01:07:43

Because it's going to be very quickly explained to him.

Marko Papich: 01:07:46

Like, look, Vietnam, Malaysia, Indonesia, if we start targeting them for chinese inward investment, they're going to turn against us.

Marko Papich: 01:07:54

You know, like Vietnam's 400 year history of fighting China.

Marko Papich: 01:07:58

Like, nah, you know what?

Marko Papich: 01:07:59

It actually doesn't matter.

Marko Papich: 01:08:01

A lot of these countries are going to go to the US and say, like, no, no, no, no.

Marko Papich: 01:08:04

Our loyalty to you is not, like, based on what?

Marko Papich: 01:08:07

Love of, like, freedom and liberal progressive values?

Marko Papich: 01:08:11

No.

Marko Papich: 01:08:13

F U p m.

Marko Papich: 01:08:15

This is a family friendly show.

Marko Papich: 01:08:16

So I'm going to use the acronym.

Jacob Shapiro: 01:08:18

Oh, it's not.

Jacob Shapiro: 01:08:18

It's rated explicit.

Jacob Shapiro: 01:08:19

You can say whatever you want.

Marko Papich: 01:08:20

Yeah, I mean, fuck, you.

Marko Papich: 01:08:21

Pay me.

Marko Papich: 01:08:21

That's what every one of these countries is going to tell the US.

Marko Papich: 01:08:24

So you can't.

Marko Papich: 01:08:25

Like, this is why a multipolar global environment is so difficult.

Marko Papich: 01:08:29

You cannot enforce your own allies.

Marko Papich: 01:08:32

So, yeah, I mean, I think that.

Marko Papich: 01:08:34

I think that the Republicans have kind of reached a point where they understand this better than the Democrats.

Jacob Shapiro: 01:08:40

Yeah.

Jacob Shapiro: 01:08:41

And the last thing I'll just say here, though, because it's a very compelling take.

Jacob Shapiro: 01:08:45

I'm not sure I quite buy it, but I.

Jacob Shapiro: 01:08:46

One of the unintended consequences of Trump's, even if you think that's not what he believed it was, part of his chaotic negotiating style, was if you go back and look at gallup polls or pew polls, right around the time that Trump came into office, older Americans mistrusted China because they still had the memory of the cold war and communism in their heads.

Jacob Shapiro: 01:09:05

But younger Americans and younger chinese people actually liked each other and thought well of each other.

Jacob Shapiro: 01:09:10

That has changed.

Jacob Shapiro: 01:09:11

And one of the reasons why everything is being tied to national security security is because the top level messaging has been China this, China that, China tariffs, China is a threat.

Jacob Shapiro: 01:09:20

And that's why you're getting like politicians who the one thing everybody can agree on is China is bad to the point where even Gen Z ers who have no other experience of China, even they think China is now a national security.

Jacob Shapiro: 01:09:32

Trump bears some of the benefit for that.

Marko Papich: 01:09:34

No, no, listen, listen.

Marko Papich: 01:09:35

First of all, Trump is the guy who initiated that, but he's the only one who can reverse it.

Marko Papich: 01:09:38

So I agree.

Marko Papich: 01:09:39

But here's what I agree with you.

Marko Papich: 01:09:41

If you look at all the different priorities in this election, you know what's the dead last?

Marko Papich: 01:09:45

Dead last?

Marko Papich: 01:09:47

Trade and globalization.

Marko Papich: 01:09:50

Nobody cares anymore.

Marko Papich: 01:09:51

It's a solved problem.

Marko Papich: 01:09:55

It's not an issue.

Marko Papich: 01:09:57

So what I'm getting at is that everyone's miffed with China in the US, like by the unfavorability of China is the highest it's ever been.

Marko Papich: 01:10:04

It's peaked and it's coming down.

Marko Papich: 01:10:05

By the way, the chart has like crested.

Marko Papich: 01:10:07

So I'm not saying people love China, I agree with you.

Marko Papich: 01:10:10

It's just that it's peaked.

Marko Papich: 01:10:12

It's slightly coming down.

Marko Papich: 01:10:13

But that's not the issue.

Marko Papich: 01:10:15

People don't like China.

Marko Papich: 01:10:17

But guess what?

Marko Papich: 01:10:17

China hasn't been a very good villain for the past four years, since COVID China's been kind of a poor villain.

Marko Papich: 01:10:26

It's just, it's not carrying the role of the antagonist for a reason, because they're not stupid.

Marko Papich: 01:10:30

And so the american public, you can't just look at a poll and say, everybody doesn't like China.

Marko Papich: 01:10:35

You have to ask yourself, how intense is their belief that they don't like China?

Marko Papich: 01:10:39

Are they willing to incur costs to their pocketbook because they don't like China?

Marko Papich: 01:10:43

And the answer is no.

Marko Papich: 01:10:44

And I think Trump can sniff that up.

Marko Papich: 01:10:46

So that's the first issue.

Marko Papich: 01:10:47

The second thing I would argue is that the policymakers have run over their skis on this issue.

Marko Papich: 01:10:59

That's where I think the momentum is there.

Marko Papich: 01:11:01

But that's where Trump and the Republicans can actually get closer to the median voter on this.

Marko Papich: 01:11:08

I think the median voter in the US believes that China has been unfair in its trade practices and they're objectively correct.

Marko Papich: 01:11:16

Like, Lighthizer has made the case for this twelve years ago in a congressional testimony.

Marko Papich: 01:11:22

So the american public believes that trade with China should be fairer and more beneficial to the US, but it doesn't want world War three.

Marko Papich: 01:11:36

And that's where I think the Harris campaign will ultimately make a mistake, by overemphasizing the national security component of this, because China hasn't invaded anyone.

Marko Papich: 01:11:47

Many other countries have.

Marko Papich: 01:11:48

Over the last two years, China hasn't actually been even in the news for any aggressive military other than exercises.

Marko Papich: 01:11:56

The Philippines.

Jacob Shapiro: 01:11:57

I mean, it's like, yeah, violated japanese airspace for the first time.

Jacob Shapiro: 01:12:02

Japanese defense forces.

Marko Papich: 01:12:04

I mean, you know, Germany, fluor, like, yeah, look.

Jacob Shapiro: 01:12:07

Yes, relative.

Jacob Shapiro: 01:12:09

It's that there's no Russia, Ukraine, Middle east war happening in South China Sea, which I have been at the front of saying there's not going to be.

Jacob Shapiro: 01:12:15

Because China, as you said, they've gone from Wolf Warrior to puppy warrior.

Jacob Shapiro: 01:12:18

Like, they're not interested right now.

Marko Papich: 01:12:20

But they know why they're doing that for a reason.

Marko Papich: 01:12:22

Right?

Marko Papich: 01:12:22

Because they don't want to incentivize the creation of a bipolar world.

Marko Papich: 01:12:26

There's a real logic here.

Marko Papich: 01:12:28

A bipolar world ends China, like tomorrow.

Jacob Shapiro: 01:12:30

Yep, I agree with you.

Marko Papich: 01:12:32

But because they haven't been a good antagonist, I think that you can handle the China threat in different ways, and I think that the Trump administration will pivot to that.

Marko Papich: 01:12:41

But anyways, look, it's good to disagree, first of all.

Marko Papich: 01:12:44

Second of all, I think that we will see right away, we'll be able to see the tone.

Marko Papich: 01:12:50

I think there will be volatility right away.

Marko Papich: 01:12:52

I think Trump will definitely threaten tariffs and raise tariffs.

Marko Papich: 01:12:55

But the question to me is going to be, is it a tool of negotiations with a deal at the end, or is it a new phase of US China threats and everything?

Marko Papich: 01:13:05

That during those four years of the Trump administration shows us that he is a very good game theorist.

Marko Papich: 01:13:12

He uses these to get deals.

Jacob Shapiro: 01:13:15

Okay, what if Harris wins?

Marko Papich: 01:13:18

If Harris wins, we continue on the current trajectory.

Marko Papich: 01:13:22

There's no change, and national security will continue to be interwoven with economics.

Marko Papich: 01:13:26

And because only Nixon can go to China, why do we have that adage in the US?

Marko Papich: 01:13:35

Why is that in the us political consciousness?

Marko Papich: 01:13:38

Why do we say only Nixon could go to China?

Marko Papich: 01:13:40

He was an ardent anti communist.

Marko Papich: 01:13:42

He went to China.

Marko Papich: 01:13:43

He could.

Marko Papich: 01:13:43

If Jimmy Carter had gone to China, everybody would have said, of course he did, he's a communist.

Marko Papich: 01:13:48

So when Nixon went to China politically, he was seen as like, okay, we got it.

Marko Papich: 01:13:54

Like, he got us a good deal.

Marko Papich: 01:13:55

Whether he did or did not, it didn't matter.

Jacob Shapiro: 01:14:00

This is the great tragedy of the Democratic Party.

Jacob Shapiro: 01:14:02

Like, all of their biggest foreign policy failures of the last, like, hundred years have been because they wanted to be tough on China, the korean war, because Truman wanted to be tough on China, Vietnam, because Johnson wanted to be tough on China, because they had that sort of.

Jacob Shapiro: 01:14:14

In there.

Jacob Shapiro: 01:14:14

So I take that point well, I mean, that's it.

Marko Papich: 01:14:17

That's all I think.

Marko Papich: 01:14:18

I just don't think there's any, you know, Jake Sullivan made a great speech.

Marko Papich: 01:14:23

I remember she read at the Brookings Institute.

Marko Papich: 01:14:26

It's a famous, I think it is the speech of this administration.

Marko Papich: 01:14:29

I would call it the Sullivan doctrine.

Marko Papich: 01:14:31

And it's basically maga, but basically translated so the CFR crowd doesn't spit out their cocktail drinks or choke on their canapes.

Marko Papich: 01:14:45

And effectively, it's economic nationalism.

Marko Papich: 01:14:47

You know, it's economic nationalism, but couched in the verbiage of, like, foreign policy for the middle class.

Marko Papich: 01:14:55

And it's extremely important speech because it basically says that the Democratic Party of the United States of America, the center left party of the US, has abandoned any pretense of trying to solve economic and social injustices of the US through domestic policy.

Marko Papich: 01:15:10

They're just abandoning that effort completely.

Marko Papich: 01:15:13

They believe polarization is so high, they are not going to try to pursue universal healthcare or universal childcare.

Marko Papich: 01:15:21

They're just not going to waste time on that anymore.

Marko Papich: 01:15:23

So they're just going to do what Trump did really well, blame China.

Marko Papich: 01:15:27

That's effectively what the speech did.

Marko Papich: 01:15:29

And I think that that means that being anti China has now become inherently a democratic party position that they can't pivot on.

Marko Papich: 01:15:37

On top of that, I think that you're right.

Marko Papich: 01:15:39

Democratic Party has a deep insecurity in that.

Marko Papich: 01:15:42

I think policymakers don't want to appear to be doves, and so they tend to want to show to the national security establishment.

Marko Papich: 01:15:50

They take these things very seriously.

Marko Papich: 01:15:52

And so I just think there's no way to solve, and the danger in that is that if these small gardens keep expanding, I think at some point the danger, Jacob, is that China goes, we have no way to get out of this doom loop other than by just abrogating our tie to the US.

Marko Papich: 01:16:13

And then they overreact.

Marko Papich: 01:16:15

And that's the prospect theory in political science.

Marko Papich: 01:16:18

When your prospects for a solution just end, you tend to take very dramatic action.

Marko Papich: 01:16:25

Think about, for example, oil embargo against Japan leads to Pearl Harbor.

Marko Papich: 01:16:29

I think eventually we could get to that point.

Marko Papich: 01:16:32

If the US continues to tie national security and economic relations with China.

Jacob Shapiro: 01:16:38

Does this mean that if Harris wins, you're closing your long position China equities the next day?

Marko Papich: 01:16:43

Well, listen, Jacob, I mean, this is such a tactical view, you might close it in a month.

Marko Papich: 01:16:49

To your point, the next announcement on fiscal is going to disappoint if we use the euro area playbook from the would argue that if I'm advising a pension fund or a sovereign wealth fund, I would tell them that they can play this rally for the next couple of days, which they wouldn't because they're sovereign wealth fund or pension fund.

Marko Papich: 01:17:11

I would tell them that if Kamala Harris wins the election, you should continue to see China as effectively uninvestable.

Jacob Shapiro: 01:17:20

It's an interesting take we've gone on for a while, but I can't let you go until we talk about Russia Ukraine for a bit.

Jacob Shapiro: 01:17:28

What's on your mind with Russia Ukraine?

Marko Papich: 01:17:32

Our dear friend Matt Gerkin, who is, again, my colleague here at BCA research, he's pointed out, like, look, everyone's focused on Middle east and China and all this stuff, but with the US election going on, the one country that really cares about this is Russia.

Marko Papich: 01:17:49

So if anyone is going to have an October surprise, the Kremlin really needs one.

Marko Papich: 01:17:58

And so I would say that, I think pre election.

Marko Papich: 01:18:01

I agree with Matt.

Marko Papich: 01:18:02

Who knows what happens?

Marko Papich: 01:18:03

But I think it's pretty clear the conflict is.

Marko Papich: 01:18:06

I mean, we've been talking about this, Jacob, for two years.

Marko Papich: 01:18:10

The borders haven't changed much.

Marko Papich: 01:18:13

There's a kursk incursion by the Ukrainians, which was, I think, a massive strategic error.

Marko Papich: 01:18:20

They took some of their best troops into middle of nowhere, hoping the Russians would rebalance.

Marko Papich: 01:18:26

And the Russians were like, no, we're cool.

Marko Papich: 01:18:28

You are a western ally, a liberal state that doesn't believe in annexation.

Marko Papich: 01:18:34

So why would we defend our territory and Kursk have more?

Marko Papich: 01:18:39

You know, go ahead.

Marko Papich: 01:18:41

otten for ten years now since: 2014

Marko Papich: 01:18:55

And so I think that Ukrainians made a mistake.

Marko Papich: 01:18:58

I think that the other thing that everyone misses, this is kind of like my point that Iran doesn't care about Hezbollah that much, which is, I know, an unorthodox view.

Marko Papich: 01:19:06

I also have another unorthodox view, which is that you can't give, there's no amount of weapons you can give to Ukraine that will make any difference.

Marko Papich: 01:19:14

F 16s are a complete waste of time in space.

Marko Papich: 01:19:18

They can't even get them up into the air.

Marko Papich: 01:19:20

They did.

Marko Papich: 01:19:22

A ukrainian hero died in that completely useless action.

Marko Papich: 01:19:28

And now they're going to have to ground those f 16s.

Marko Papich: 01:19:30

Why?

Marko Papich: 01:19:30

Because the S 400s can target them from within russian territory.

Marko Papich: 01:19:37

Just like this is.

Marko Papich: 01:19:39

There's just no way to really help Ukraine unless the west fought on its behalf.

Marko Papich: 01:19:45

But unless you're going into russian territory, unless you're going to conduct suppression of enemy air defense operations, saud operations with wild weasels and all sorts of anti radiation missiles against russian radar installations, Ukraine does not have an air force and never will.

Marko Papich: 01:20:02

We could give Ukraine 300 f 35s.

Marko Papich: 01:20:05

It would be useless.

Marko Papich: 01:20:06

They wouldn't take a single one of them off the ground.

Marko Papich: 01:20:11

So I think that the logical sort of where this is headed and the reason I say that is I was just in Germany.

Marko Papich: 01:20:20

There's a new leftist party, BSW, which is basically very anti war.

Marko Papich: 01:20:25

Forget the Afd.

Marko Papich: 01:20:26

Obviously they are anti war, too.

Marko Papich: 01:20:28

Marine le Pen did well in the election in France.

Marko Papich: 01:20:30

In Europe, there will be a new government in Germany in twelve months time, led by much more conservative CDU.

Marko Papich: 01:20:38

I've talked to some of the more conservative politicians, ex politicians in Germany.

Marko Papich: 01:20:44

There's a real sense of them being used by the US in a way like Nord stream was blown up by somebody that is a piece of german real estate, of a german infrastructure that was just wantonly destroyed.

Marko Papich: 01:20:59

There is a real sense in Europe that this war has gone far enough.

Marko Papich: 01:21:03

And there's also a sense of that in the US, too.

Marko Papich: 01:21:05

I mean, you have this dramatic difference between Harris and Trump.

Marko Papich: 01:21:08

And so I think that it's pretty clear that where we're headed is a frozen conflict, not a peace negotiations that I think unrealistic.

Marko Papich: 01:21:19

No one's going to force Ukraine to give up its territory.

Marko Papich: 01:21:22

That's crazy.

Marko Papich: 01:21:24

Anybody, why would they say yes, but a frozen conflict that allows the west to pivot its aid to Ukraine from aid thats used in the purpose of continuous warfare, which doesnt really help Ukraine to aid thats used in the purpose of creating a model eastern european state that actually acts as a much, much better ballpark against Russia than conflict.

Marko Papich: 01:21:49

And so what Im talking about is a transition of Ukraine into a west german status.

Marko Papich: 01:21:54

West Germany was like western example to why west was superior to the east.

Marko Papich: 01:22:02

Right?

Marko Papich: 01:22:02

Because East Germany, you had to wait twelve years to get a trombon, a four cylinder car that didn't work in west German.

Marko Papich: 01:22:10

You had a choice between BMW, Opel, Audi, blah, blah, blah.

Marko Papich: 01:22:15

That was the sort of great example.

Marko Papich: 01:22:18

And I think that that's where we're headed.

Marko Papich: 01:22:20

And I think that, you know, Trump hastens that moment again.

Marko Papich: 01:22:25

I don't think that Harris would.

Marko Papich: 01:22:26

I think on the foreign policy side here, I think the US and the UK will probably hold out in supporting the military operations for a little bit longer.

Marko Papich: 01:22:35

But whether it's two months from now or whether it's 24 months from now, I believe this is where we're headed.

Jacob Shapiro: 01:22:42

Yeah.

Jacob Shapiro: 01:22:43

I'm also worried that Ukraine made a pretty large strategic error in going after Kursk.

Jacob Shapiro: 01:22:48

And the metaphor I've been using is, I don't know if you know this, Mark.

Jacob Shapiro: 01:22:51

I'm a huge civil war nerd.

Jacob Shapiro: 01:22:53

And it had a very strange overtone to me of Robert E.

Jacob Shapiro: 01:22:56

Lee invading the north because the union was just going to come and cut the Mississippi in half and burn its way through, like, all the rest of the population centers.

Jacob Shapiro: 01:23:03

But, okay, like, Robert E.

Jacob Shapiro: 01:23:04

Lee was going to try to get into the north and maybe use that victory to get international diplomatic support that could sue peace with the union, and you're going to get an anti war vote.

Jacob Shapiro: 01:23:13

A lot of things had to go right, and it wasn't going to go right.

Jacob Shapiro: 01:23:15

And I have that sense.

Jacob Shapiro: 01:23:16

But the question I have, because I find the scenario that you painted there very compelling.

Jacob Shapiro: 01:23:20

But does Putin allow that he's going to let western Ukraine become the model, eastern european state backed, I would assume.

Jacob Shapiro: 01:23:27

It's like a very defensive oriented, almost kind of a mini Israel in terms of its actual defense capabilities.

Jacob Shapiro: 01:23:33

He's going to let Kiev and all them off the hook, and he's just going to take, as you've said on the podcast before, the West Virginia of Europe for himself and be cool with that.

Jacob Shapiro: 01:23:41

Like, it doesn't seem to me he's gonna be.

Jacob Shapiro: 01:23:42

He's gonna take that deal.

Marko Papich: 01:23:44

I mean, you know, Jacob, I would like to have a six pack, you know, like.

Marko Papich: 01:23:50

And yet here I am.

Marko Papich: 01:23:52

I don't have one.

Marko Papich: 01:23:53

What am I getting with this?

Marko Papich: 01:23:54

It's like, I think one of the worst myths in western intellectual discourse is the myth of Munich.

Marko Papich: 01:24:06

You know, we could have done something to Hitler in Munich.

Marko Papich: 01:24:11

The difference between Hitler and Putin is that Hitler was actually, at least in those early days, militarily competent.

Marko Papich: 01:24:20

100,000 Germans did not die invading Sudetenland.

Marko Papich: 01:24:26

The invasion of Poland took, like, three weeks.

Marko Papich: 01:24:29

You know, so when we think about how Hitler was never satiated and how his ambitions grew, it was because his actions were successful, at least until he decided to invade the Soviet Union.

Marko Papich: 01:24:48

Putin has been extremely unsuccessful in Ukraine, it's been a disaster.

Marko Papich: 01:24:52

And so what I would answer to you, Jacob, is that he will have to take what he can.

Marko Papich: 01:24:57

And I think that the.

Marko Papich: 01:25:00

The shift, the strategic shift for the west going from trying to support Ukraine's military operations, which are failing, which are not successful, and which are draining Ukraine of human capital.

Marko Papich: 01:25:12

And by the way, the Ukrainians themselves agree with me, because guess what?

Marko Papich: 01:25:15

They're not doing volunteering for war.

Marko Papich: 01:25:19

ecause in those early days of: 2022

Marko Papich: 01:25:37

It's not like, hey, Donets Kuhansk, life will go on.

Marko Papich: 01:25:41

And, in fact, it makes Ukraine a much more homogeneous and viable political entity.

Marko Papich: 01:25:46

To not have parts of Ukraine that are potentially mixed in their loyalty.

Marko Papich: 01:25:52

It is what it is.

Marko Papich: 01:25:54

My point is that it does appear to me that at this point, Putin is not really going to care about this.

Marko Papich: 01:26:02

Jacob, were talking about time horizons of five to 15 years in which Ukraine becomes a viable western entity.

Marko Papich: 01:26:11

What's going to happen to Putin in five to 15 years?

Marko Papich: 01:26:13

I don't think he thinks in those time horizons.

Marko Papich: 01:26:16

I don't think he's Xi Jinping.

Marko Papich: 01:26:18

I don't think Putin is truly that interested in the future of Russia.

Marko Papich: 01:26:25

I think he is much, much more petty in his goals.

Marko Papich: 01:26:30

And I think that even this invasion, and I've said on your podcast, I think we disagree with this, but it's fine.

Marko Papich: 01:26:35

I think that he did it for domestic political reasons.

Marko Papich: 01:26:37

I think that this invasion was not strategic.

Marko Papich: 01:26:40

If it was strategic, where's the invasion of Finland?

Marko Papich: 01:26:43

Excuse me?

Marko Papich: 01:26:45

Finland is Stone's throw away from Arkangels and St.

Marko Papich: 01:26:50

Petersburg.

Marko Papich: 01:26:51

Where is the invasion of Finland if NATO is such a big deal?

Marko Papich: 01:26:56

So to me, I think that Putin will just lick his wounds and declare victory.

Marko Papich: 01:27:00

You know, he'll call his good friend w, say, I need the mission accomplished banner, and he'll proclaim the annexation of Donbas in Crimea as a great, great gain for Russia, which it definitely is not, because ten years from now, when Putin is long gone, what's going to happen is that Ukraine is going to look awesome and Russia is not because of what happened over the last three.

Jacob Shapiro: 01:27:27

Years before we close Russia, Ukraine.

Jacob Shapiro: 01:27:32

I have been wrong, and I think a lot of people have been wrong, that we were going to see increases in wheat prices or corn prices or sunflower prices all these commodities that are supposed to come out of Ukraine.

Jacob Shapiro: 01:27:40

Ukraine we haven't seen, you know, we had an initial spike, but everything has been, everything in the commodity complex has been relatively low.

Jacob Shapiro: 01:27:45

There's a couple exceptions there.

Jacob Shapiro: 01:27:47

But do you think that that continues?

Jacob Shapiro: 01:27:49

Do you have any view on what the next six to twelve months in the Russia Ukraine war does for those specific commodities or the commodity complex in general coming out of the Black Sea?

Marko Papich: 01:27:58

So, first of all, I would say the Black Sea is extremely unstrategic.

Marko Papich: 01:28:02

And this is why I said this at the beginning of the conflict.

Marko Papich: 01:28:05

Black Sea is a, is an internal lake of another lake.

Marko Papich: 01:28:09

You know, it's completely unstrategic.

Marko Papich: 01:28:12

Many russian, many ukrainian farms are equidistant to the Baltic as they are to the Black Sea.

Marko Papich: 01:28:18

And what I think we've seen both in this conflict and in the Red Sea, I mean, your point about shipping being completely changed, fine, fair.

Marko Papich: 01:28:25

But, like, what tea prices in England went up?

Marko Papich: 01:28:28

You know, like, I can't tell you, I work for a macro research firm.

Marko Papich: 01:28:32

I can't tell you, like, what's going on, really.

Marko Papich: 01:28:34

Like, it hasn't affected anything, except I will say there's a lot to do in shipping, so you can make a lot of money in shipping.

Marko Papich: 01:28:40

Bulk carrier prices have gone up for sure.

Marko Papich: 01:28:43

For sure.

Marko Papich: 01:28:43

But, like, the global economy has not been affected by Ukraine Russia war or Israel Iran war.

Marko Papich: 01:28:50

And why?

Marko Papich: 01:28:51

It's because in a multipolar world, you're not taking entire chunks of the planet off the market.

Marko Papich: 01:28:58

You're taking small parts.

Marko Papich: 01:28:59

And then we can, we can use technology and infrastructure to create new shipping lanes.

Marko Papich: 01:29:05

So what's happened is the Baltic has become a real important shipping route.

Marko Papich: 01:29:10

Russia, as I'm sure you know, because you're much better expert on ports than I am, Russia has just built a new port in the Baltic specifically for its wheat exports, which are booming.

Marko Papich: 01:29:23

Productivity in Russia has increased as well over the last five years in agricultural output.

Marko Papich: 01:29:29

And so I think it's a great example, the fact that wheat prices have not gone up or that oil prices have not gone up, although that's also supply.

Marko Papich: 01:29:37

It also tells you that we're much better at since COVID What Covid has taught us is that the world is actually incredible good in the 21st century in changing supply lines.

Marko Papich: 01:29:49

So what Ukrainians have done is they've used trains to ship to baltic ports.

Marko Papich: 01:29:55

They've also used Danube in Romania.

Marko Papich: 01:29:58

And I think that's a good example of how.

Marko Papich: 01:30:03

Be very careful of following Twitter.

Marko Papich: 01:30:06

Remember the neon gas crisis?

Jacob Shapiro: 01:30:09

I do.

Jacob Shapiro: 01:30:09

Remember?

Jacob Shapiro: 01:30:09

I remember you throwing a lot of cold water on that too.

Marko Papich: 01:30:14

But before we go though, wait, hold on a second.

Marko Papich: 01:30:16

Are you going to end the podcast right now?

Jacob Shapiro: 01:30:18

No, no, I was going to ask you one more thing and then talk about basketball, but I was going to actually, you brought the neon thing.

Jacob Shapiro: 01:30:24

I was going to ask if high purity quartz is the next neon or if you're really worried about the flooding in western North Carolina.

Marko Papich: 01:30:31

I have no idea.

Marko Papich: 01:30:32

Sorry, I have not looked at that.

Jacob Shapiro: 01:30:34

Yeah, I've been looking at it and I'm scared.

Jacob Shapiro: 01:30:36

Well, before I ask you about the basketball season, just fire up the hot take machine for me and tell me, do you have a hot take on Claudia Schoenbaum and on what mexican governance and trade looks like over the next two to three years?

Marko Papich: 01:30:48

You know, this is a great.

Marko Papich: 01:30:52

I need to be disciplined here, right?

Marko Papich: 01:30:54

Because my whole thing is politics is usually to be fated when macro fundamentals are so good.

Marko Papich: 01:31:01

You and I have both been, I think, some of the biggest bulls in Latin America for the past five years.

Marko Papich: 01:31:09

I would say four years.

Marko Papich: 01:31:09

Five years.

Marko Papich: 01:31:11

And it's worked.

Marko Papich: 01:31:12

It's worked until the election in Brazil and Mexico.

Marko Papich: 01:31:15

So I had this trade on where I was long, Latin America relative to Southeast Asia.

Marko Papich: 01:31:21

It's like a straight line until the last six months or so.

Marko Papich: 01:31:25

And it's because of deterioration of fiscal policy and trade policy, pro business, basically policy in Brazil and Mexico.

Marko Papich: 01:31:34

So I worry about it.

Marko Papich: 01:31:35

Honestly, Jacob, I worry that in this case, politics is moving against our reasons to be bullish.

Marko Papich: 01:31:41

Latin America are not about like the debt trap or fiscal adjustment.

Marko Papich: 01:31:46

It was about the global context, which is bullish for this region.

Marko Papich: 01:31:51

So I do worry that the judicial reforms make no sense.

Marko Papich: 01:31:56

I'm not saying this ideologically.

Marko Papich: 01:31:58

Like Mexico is allowed to do whatever it wants, but directly electing judges to deal with corruption, how is it going to help with a corruption?

Marko Papich: 01:32:06

Like it's going to make it worse for God's sakes, you know?

Jacob Shapiro: 01:32:09

Yeah, I mean, there's a problem in the sense that a lot of the judges are from the old pre single party authoritarian regime.

Jacob Shapiro: 01:32:18

And so if you're a new party regime, you want to get rid of those judges so that you can have your judges in, so they can rubber stamp all the changes that you want to make.

Jacob Shapiro: 01:32:24

But to your point, that's not going to fix corruption, because now you're just getting judges who are loyal to you.

Jacob Shapiro: 01:32:29

And by the way, the cartels can maybe now buy judicial appointment.

Jacob Shapiro: 01:32:32

So, like, there was a corruption problem there, but you're just, you're just moving the deck chairs around on the corruption titanic here.

Marko Papich: 01:32:38

Yeah, I mean, look, so, so I'm worried about it.

Marko Papich: 01:32:40

I'm worried about what it flags, you know?

Marko Papich: 01:32:43

So that's, that's, I think, an issue.

Marko Papich: 01:32:46

But what I'm excited about though, Jacob, is that I do think that what's happening in Argentina is, is very, very positive in that the charts are looking.

Marko Papich: 01:32:57

I mean, a lot of things is off the chart.

Marko Papich: 01:32:59

Adjustment in inflation, the adjustment in the budget deficit is perhaps one of the fastest fiscal adjustments in human history.

Marko Papich: 01:33:07

Macri failed because of two reasons.

Marko Papich: 01:33:09

Macri failed because he opened the capital accounts too quickly.

Marko Papich: 01:33:14

And that's the one thing that millade has not done.

Marko Papich: 01:33:17

So he said, no, no, no, I'm going to fix it first, then open it up to portfolio flows.

Marko Papich: 01:33:23

Smart.

Marko Papich: 01:33:23

The second thing is, Mark refilled, not for any of his reasons.

Marko Papich: 01:33:27

I mean, growth just slowed down, commodity prices didn't rebound.

Marko Papich: 01:33:31

And so Argentina was not in a very good macro context.

Marko Papich: 01:33:35

And so I was very worried for Millie because I did think that odds of recession in the US were rising.

Marko Papich: 01:33:41

And then you saw what was going on in China and the rest of the world, it just wasn't looking good.

Marko Papich: 01:33:45

But if the Fed really is cutting 100 basis points, which it is like, in seven weeks, by the way, we should have a whole podcast on the politicization of the Fed, maybe at some point.

Marko Papich: 01:33:56

Let's leave that aside.

Marko Papich: 01:33:57

Let's leave that aside.

Marko Papich: 01:33:58

The Fed is cutting and China is stimulating.

Marko Papich: 01:34:01

It could be very good for.

Marko Papich: 01:34:02

Why am I shifting to Argentina?

Marko Papich: 01:34:03

Because, as you know, best practices in Latin America kind of spread through osmosis.

Marko Papich: 01:34:10

Bad practices, too.

Marko Papich: 01:34:11

This is the political science theory of the third wave of democratization.

Marko Papich: 01:34:15

As an example, like things like Chicago boys, it just spreads like wildfire.

Marko Papich: 01:34:23

The experiment in Argentina is successful over the next twelve months, I think it's going to be really difficult for Lula and Shinbaum to just ignore what's going on because I was just in Brazil, by the way, just one last thing.

Marko Papich: 01:34:39

I was just in Brazil.

Marko Papich: 01:34:40

And what I would say is, it's going to be difficult to ignore because the last thing you want is Argentina beating.

Jacob Shapiro: 01:34:48

Yeah, I've been very interested in Argentina since Millet was elected.

Jacob Shapiro: 01:34:53

And I mean, he is absolutely insane.

Jacob Shapiro: 01:34:55

Like, he's a crazy person, but he's not governing like a crazy person.

Jacob Shapiro: 01:34:58

And I actually said to a group of people in July, I mean, if any listeners want to take us up on this, maybe Marco and I can be your tour guides.

Jacob Shapiro: 01:35:04

Like if I was somebody who had a lot of capital, like ultra high net worth, I'm just chilling.

Jacob Shapiro: 01:35:09

I'd be on the first flight to Buenos Aires, and I'd be buying shit up right now.

Jacob Shapiro: 01:35:13

Just, you know, take a shot and go there.

Jacob Shapiro: 01:35:15

Not.

Jacob Shapiro: 01:35:16

Not investment advice, but if I had won the lottery like that, that's what I would be doing with my time right now.

Jacob Shapiro: 01:35:21

And definitely something to think about.

Jacob Shapiro: 01:35:23

Okay, let's talk basketball before you have to go.

Jacob Shapiro: 01:35:26

We've gone on.

Jacob Shapiro: 01:35:26

This is like a Joe Rogan level length, which is what we wanted when we booked off the 2 hours.

Jacob Shapiro: 01:35:31

Marco, I was wrong about basically every prediction I made last year when it came to basketball.

Jacob Shapiro: 01:35:35

I was wrong about Jason tatum.

Jacob Shapiro: 01:35:37

Sorry, Jason.

Jacob Shapiro: 01:35:37

Good job winning the finals or whatever you did.

Jacob Shapiro: 01:35:40

Wrong about my pelicans, wrong about everything.

Jacob Shapiro: 01:35:42

So why don't you take the wheel here?

Jacob Shapiro: 01:35:43

Cause obviously my tactics are not to be trusted.

Marko Papich: 01:35:47

What did I say?

Marko Papich: 01:35:48

Did you go back and look at it?

Jacob Shapiro: 01:35:50

No, because, like, it was this interesting thing where I usurped the hyperbole role, and I was like, Jason Tatum's never gonna be the best player on a championship team.

Jacob Shapiro: 01:35:58

And I even shocked you.

Jacob Shapiro: 01:36:00

You were like, oh, no, I can't beat that.

Jacob Shapiro: 01:36:02

You didn't prepare me for this shit so well.

Jacob Shapiro: 01:36:04

I mean, you were better than me.

Marko Papich: 01:36:06

Wait a whole second.

Marko Papich: 01:36:07

Technically, you were right.

Marko Papich: 01:36:08

Jacob Shapiro: 01:36:08

No, they won.

Jacob Shapiro: 01:36:09

They won the finals.

Jacob Shapiro: 01:36:11

Good.

Jacob Shapiro: 01:36:14

He won.

Jacob Shapiro: 01:36:15

So how are you feeling about the Lakers?

Jacob Shapiro: 01:36:17

I would not be feeling good, but I think depends.

Marko Papich: 01:36:20

What's your interest?

Marko Papich: 01:36:21

You know?

Marko Papich: 01:36:21

Like, what do you really want in life?

Marko Papich: 01:36:24

You know, do you want a championship ring, or do you want to just rake in money because of views and clicks?

Marko Papich: 01:36:29

Because let me tell you, the Lakers are going to dominate the views and clicks of.

Marko Papich: 01:36:34

They're doing this, as Drake would say, they're doing this entire season for the gram.

Marko Papich: 01:36:41

This is.

Marko Papich: 01:36:41

te t shirts, you know, lakers: 2025

Marko Papich: 01:36:45

We did it for the gram because they're going to lead every story, every ESPN.

Marko Papich: 01:36:51

They always do anyways.

Marko Papich: 01:36:52

But you've got LeBron, you've got his son, you know, you've got a podcast personality.

Marko Papich: 01:36:58

Hey, JJ Reddick.

Marko Papich: 01:36:59

If JJ Reddick can lead the Lakers, why can't Jacob Shapiro run a small latin american state?

Jacob Shapiro: 01:37:06

It's true.

Marko Papich: 01:37:07

Guyana.

Marko Papich: 01:37:08

Like, let's go.

Marko Papich: 01:37:09

Like, give us a call, you know, Suriname.

Marko Papich: 01:37:13

I represented Suriname at a model of the United nations once, by the way.

Marko Papich: 01:37:16

So I'm qualified.

Marko Papich: 01:37:17

Let's go.

Marko Papich: 01:37:18

I will let you be the president.

Marko Papich: 01:37:19

I'll be the foreign minister.

Marko Papich: 01:37:21

I just think if JJ Reddick can run the freaking Lakers and his only qualification is that he was a podcast host.

Marko Papich: 01:37:28

You and I are qualified to run a country.

Jacob Shapiro: 01:37:32

I can't argue with that.

Jacob Shapiro: 01:37:33

Although Guyana has a bunch of oil now, so I think we're late on that party.

Jacob Shapiro: 01:37:37

They've probably got bigger.

Marko Papich: 01:37:38

Maybe I picked it for a reason, right?

Marko Papich: 01:37:39

Like, you know, this guy likes his luxuries, so we're not just going to pick a random country.

Marko Papich: 01:37:47

But look, I think that the Lakers are going to be a show.

Marko Papich: 01:37:50

It's going to be incredible reality tv.

Marko Papich: 01:37:52

I hope they record reality tv show out of this.

Marko Papich: 01:37:55

I'm going to enjoy it.

Marko Papich: 01:37:56

You can't win championships every year, but at least you have to be entertaining, so that's going to be fun.

Marko Papich: 01:38:02

I think everyone's, like, overbidding Oklahoma City Thunder, you know, I was not impressed with the way that Luca just completely eviscerated them.

Marko Papich: 01:38:13

That was weird.

Marko Papich: 01:38:15

I think the Timberwolves, everyone's writing off Rudy Gobert.

Marko Papich: 01:38:19

I think they're going to be revitalized by the trade cat for Randall.

Marko Papich: 01:38:23

I think it's interesting.

Marko Papich: 01:38:24

I mean, I don't think Randall's your kind of guy, which is cool.

Marko Papich: 01:38:27

I get it.

Marko Papich: 01:38:28

There's a lot not to like about him.

Marko Papich: 01:38:30

I agree.

Marko Papich: 01:38:31

But I think it spaces the floor a little bit better for them.

Marko Papich: 01:38:34

I think there's going to be a nice pick and roll game.

Marko Papich: 01:38:39

I think he fits better with Gobert.

Marko Papich: 01:38:42

And then what else?

Marko Papich: 01:38:44

What else is interesting out there?

Jacob Shapiro: 01:38:47

Well, I think if Embiid, and he probably can't stay healthy, if embiid finishes the season healthy, it seems to me the Sixers are in a very, very good position, but he's probably gonna not be healthy.

Marko Papich: 01:38:58

You know, what I think is actually the most interesting thing?

Marko Papich: 01:39:00

I think this season is going to be the season of disgruntlement, you know?

Marko Papich: 01:39:06

And what I mean by that is like, we've got a lot of stars, really, really incredible stars that are going to be disgruntled.

Marko Papich: 01:39:14

And so this season will be the season that will set up the next season.

Marko Papich: 01:39:18

And what I mean by that is like, you've got jokic.

Marko Papich: 01:39:20

I mean, the Denver Nuggets.

Marko Papich: 01:39:23

We may not be able to run Suriname or Guyana, but I'm pretty sure we could run the Nuggets better, Dave.

Marko Papich: 01:39:30

I mean, they could implode as a team.

Marko Papich: 01:39:34

He's surrounded by, like, you and I could be on that team.

Marko Papich: 01:39:38

I think that's a really, really big problem.

Marko Papich: 01:39:40

They have no bench.

Marko Papich: 01:39:42

They've got Russell Westbrook who I am.

Jacob Shapiro: 01:39:44

That was crazy.

Marko Papich: 01:39:45

No, I know.

Marko Papich: 01:39:45

And I'm like the last person that owns a condo on Westbrook island.

Marko Papich: 01:39:49

And even I'm like, come on, man, you're going to waste the season of one of the greatest basketball minds in history with Russell Westbrook.

Marko Papich: 01:39:58

What are you doing?

Marko Papich: 01:39:59

So there's that.

Marko Papich: 01:40:01

The only reason Jokic will stain Nuggets is because he doesn't care.

Marko Papich: 01:40:05

Then you got Luka Doncic.

Marko Papich: 01:40:07

There's already already news.

Marko Papich: 01:40:10

I mean, he will look very cute in purple and gold, let me tell you.

Marko Papich: 01:40:14

Those blonde locks, you know, he's going to look very good as a Laker.

Marko Papich: 01:40:18

I'm going to call it right here.

Marko Papich: 01:40:19

I think Lucas a Laker in like two years, time and again.

Marko Papich: 01:40:24

Why?

Marko Papich: 01:40:24

Because I think they're going to underachieve.

Marko Papich: 01:40:26

The Nuggets are going to underachieve.

Marko Papich: 01:40:27

And then finally Giannis, like, that team is done.

Marko Papich: 01:40:31

Right, Jacob?

Marko Papich: 01:40:32

Like, what?

Marko Papich: 01:40:33

What are they going to do?

Marko Papich: 01:40:34

Giannis is leaving.

Marko Papich: 01:40:35

So that's three, like, pyramid guys.

Marko Papich: 01:40:39

As Simmons talks about them, top 20 players in history of basketball.

Marko Papich: 01:40:46

And I think that the whole story this year will be that they are not on teams that can compete.

Jacob Shapiro: 01:40:52

Yeah, and we haven't even said Durant, who every year does this anyway, so.

Jacob Shapiro: 01:40:56

And I'm sure he won't be very happy on the Phoenix sense, I don't think.

Jacob Shapiro: 01:40:59

I know.

Jacob Shapiro: 01:41:00

Oh, and by the way, the comment about running a small country, I mean, you know, this is what Americans used to do.

Jacob Shapiro: 01:41:04

I'm in the middle of reading the fish that ate the whale.

Jacob Shapiro: 01:41:06

Like, Americans used to go to small latin american countries and just run them as their filibustering.

Jacob Shapiro: 01:41:12

Yeah.

Jacob Shapiro: 01:41:12

I mean, that was like a thing.

Jacob Shapiro: 01:41:15

I don't know what's going to happen in the NBA, but I'll tell you two things that I hope for.

Jacob Shapiro: 01:41:18

Number one, I just hope that we get a full Zion season because at the end of last year, he was finally putting it together.

Jacob Shapiro: 01:41:26

He was giving it to y'all in the playing game.

Jacob Shapiro: 01:41:28

Like, it felt like it was finally coming together and then boom, hamstring, like, done for the playoffs.

Jacob Shapiro: 01:41:33

So I just, like, I don't even need to win a playoff series.

Jacob Shapiro: 01:41:35

I just want to see a full season of Zion.

Jacob Shapiro: 01:41:38

And he seems to be motivated and healthy and like, listen, I have my hopes.

Marko Papich: 01:41:43

That was one of the most incredible games I've ever seen.

Marko Papich: 01:41:45

I mean, he made LeBron James look old.

Marko Papich: 01:41:48

Like he was small.

Marko Papich: 01:41:49

He was stunning him.

Marko Papich: 01:41:51

There was this one moment where he just plowed into LeBron and it was like what LeBron's been doing for 20 years to everyone else, Zion did it.

Marko Papich: 01:41:59

To him, it was like.

Marko Papich: 01:42:00

And you could see the face, LeBron's face go like.

Marko Papich: 01:42:03

Like, you just look tired, you know?

Marko Papich: 01:42:06

I think the problem, though, Jacob, is, like, for the Pelicans, and I really wish them well because I like the team.

Marko Papich: 01:42:12

I like everything.

Marko Papich: 01:42:13

It's like, I love Ingram.

Marko Papich: 01:42:14

I love Ingram and Randall because I'm such a psychotic Laker fan.

Marko Papich: 01:42:20

And by the way, if anyone wonders why I'm a Laker fan, it's actually a trick I do with my mind.

Marko Papich: 01:42:24

The way I stayed neutral and nihilist, and I don't care.

Marko Papich: 01:42:28

What happens in the world is by having a religiously insane zeal towards being a Laker fan, I put all of my bias into it.

Marko Papich: 01:42:37

So, for example, I love ex Laker players ball.

Marko Papich: 01:42:41

Randall Ingram.

Marko Papich: 01:42:42

I love Ingram.

Marko Papich: 01:42:42

I love him.

Marko Papich: 01:42:43

I want him to come back to Lakers.

Marko Papich: 01:42:45

The problem is, he just doesn't fit.

Marko Papich: 01:42:47

It doesn't seem to me like he fits with the team.

Marko Papich: 01:42:50

You know, it's just because Zion can't just be a post op player.

Marko Papich: 01:42:54

He needs to face up and then use his speed, you know, in that mid range area.

Marko Papich: 01:42:59

But.

Marko Papich: 01:42:59

But Ingram is doing the same thing, and so they're both, in a weird way, kind of a point forward ish player, and I just don't think he fits.

Marko Papich: 01:43:08

I think they just need to give up on it.

Jacob Shapiro: 01:43:11

Yeah, well, there's a couple things there, and I think they're trying, and I think maybe they were in on the cat trade.

Jacob Shapiro: 01:43:16

I think maybe that's why the Knicks moved first.

Jacob Shapiro: 01:43:19

But I will say this, because Zion has been hurt so often for all these years, whenever Zion goes down, Ingram becomes the best guy on the team.

Jacob Shapiro: 01:43:27

And so Ingram has years of sort of, you're the alpha, even though he's not an alpha personality, and that's not his type of deal.

Jacob Shapiro: 01:43:33

If Zion can have a full season where he's doing what he did at the end of last season, and Ingram is unquestionably the number two or number three option, we've never actually seen Ingram get to live in the number two option for more than, like, 30 games, because then Zion gets hurt, and Ingram has to come back in, and I think he has the personality type to do that, but it's going to have to be because Zion is there and is overwhelming, and they don't have to tell him, okay, fire it up.

Jacob Shapiro: 01:43:57

You've got to be the alpha now.

Jacob Shapiro: 01:43:58

So I agree with you, but there's a glimmer of hope there.

Jacob Shapiro: 01:44:01

The only other hope I have for the basketball season is not only do I hope the Knicks are good, I hope the Knicks win it all.

Jacob Shapiro: 01:44:07

I love the story.

Jacob Shapiro: 01:44:08

I love everything.

Jacob Shapiro: 01:44:09

I was mad they traded Devincenzo because I loved the whole Villanova story, but I still.

Jacob Shapiro: 01:44:14

I want the Knicks to, like, run over everybody.

Jacob Shapiro: 01:44:16

I don't think it'll happen, but that's what I'm rooting for.

Marko Papich: 01:44:19

What's your prediction?

Marko Papich: 01:44:20

Finals.

Jacob Shapiro: 01:44:23

Let's see.

Jacob Shapiro: 01:44:24

Prediction for the finals.

Jacob Shapiro: 01:44:26

Like I said, if Embiid's healthy, I think it's the Sixers, but he's not gonna be healthy.

Jacob Shapiro: 01:44:29

So it's going to be Celtics.

Jacob Shapiro: 01:44:32

I'm going to go Celtics, wolves, and let's say wolves and seven.

Marko Papich: 01:44:35

Wow.

Marko Papich: 01:44:36

Yeah.

Marko Papich: 01:44:36

You know, like, it's interesting because I.

Marko Papich: 01:44:37

I thought the same thing, and I think Celtics win.

Jacob Shapiro: 01:44:42

You know, I think Anthony Edwards is that guy.

Jacob Shapiro: 01:44:45

I think.

Jacob Shapiro: 01:44:46

I think this is the coming out party.

Jacob Shapiro: 01:44:47

I love taking cat off the floor.

Jacob Shapiro: 01:44:49

I don't care about Randall.

Jacob Shapiro: 01:44:50

I wouldn't be surprised if they trade him midseason.

Jacob Shapiro: 01:44:52

I love Dev and Genzo for them.

Jacob Shapiro: 01:44:53

I love a gritty, in your face, high volume, extremely precise shooter, can play defense next to Edwards with Rudy on the backstop and everything else they got going, I think overall, they lost the talent on the trade, but I think in terms of fit, it's much better.

Jacob Shapiro: 01:45:08

And they're going to be able to do tons of things that no other team is going to be able to do.

Marko Papich: 01:45:12

Yeah, that's really interesting.

Marko Papich: 01:45:14

I like the wolves a lot, and I think Edwards ran out of gas.

Marko Papich: 01:45:18

I also think that they were over reliant on Conley.

Jacob Shapiro: 01:45:23

Yeah.

Marko Papich: 01:45:23

You know, and I just don't think it's gonna matter.

Marko Papich: 01:45:26

You know, this is.

Marko Papich: 01:45:27

This is one of those, like, who's MJ's point guard?

Jacob Shapiro: 01:45:32

First it was Ron Har or, sorry, in the latter years it was Ron Harper, and then in the early years, it was that BJ Armstrong, Don Paxson role.

Marko Papich: 01:45:40

Harper, he won the Lakers ring.

Marko Papich: 01:45:42

But, like, you know, like, no one's sitting there, like, being like, man, you know, remember Ron Harper, man?

Marko Papich: 01:45:47

Like, six foot seven point guard?

Marko Papich: 01:45:49

So I think, you know, what you do is you just slot anyone next to Edwards, a defender, you know, I think they just need to get a little bit better running offense through him when calmly sitting.

Marko Papich: 01:46:05

And that's it.

Marko Papich: 01:46:06

So I agree with you.

Jacob Shapiro: 01:46:09

All right, well, Marco, that's the one.

Marko Papich: 01:46:10

Thing we agreed on today.

Jacob Shapiro: 01:46:12

No, no.

Jacob Shapiro: 01:46:13

We also agreed on Russia.

Jacob Shapiro: 01:46:13

I was with you on Russia, Ukraine for the most part.

Marko Papich: 01:46:16

And I think from a market perspective, we probably agree on most things, but yeah, like, it'll be interesting.

Marko Papich: 01:46:22

It'll be interesting.

Marko Papich: 01:46:22

Lots of things going on.

Marko Papich: 01:46:23

So let's not wait four or five months, however long it was.

Jacob Shapiro: 01:46:29

Well, maybe we should do a live or next day election reaction podcast, if you.

Marko Papich: 01:46:33

Let's pencil that in.

Jacob Shapiro: 01:46:35

Okay.

Marko Papich: 01:46:35

Next day election.

Marko Papich: 01:46:37

Let's do that.

Marko Papich: 01:46:38

I'm done.

Jacob Shapiro: 01:46:39

I love it.

Jacob Shapiro: 01:46:40

And hopefully that by the next day the election is decided.

Jacob Shapiro: 01:46:45

All right.

Jacob Shapiro: 01:46:46

On that note, the views expressed in this commentary are subject to change based on market and other conditions.

Jacob Shapiro: 01:46:54

This podcast may contain certain statements that may be deemed forward looking statements.

Jacob Shapiro: 01:46:58

Please note that any such statements are not guarantees of any future performance, and actual results or developments may differ materially from those projected.

Jacob Shapiro: 01:47:05

Any projections, market outlooks, or estimates are based upon certain assumptions and should not be construed as indicative of actual events that will occur.

Jacob Shapiro: 01:47:12

Cognitive Investments, LLC is a registered investment advisor.

Jacob Shapiro: 01:47:15

Advisory services are only offered to clients or prospective clients where cognitive and its representatives are properly licensed or exempt from licensure.

Jacob Shapiro: 01:47:23

For additional information, please visit our website at www.

Jacob Shapiro: 01:47:26

Dot cognitive dot investments.

Jacob Shapiro: 01:47:28

The information provided is for educational and informational purposes only and does not constitute investment advice and it should not be relied on as such.

Jacob Shapiro: 01:47:35

It should not be considered a solicitation to buy or an offer to sell a security that does not take into account any investors particular investment objectives, strategies, tax status or investment horizon.

Jacob Shapiro: 01:47:45

You should consult your attorney or tax advisor.

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