After the U.S. bombed Iran’s nuclear facilities last Saturday, many fear the outbreak of World War III. But geopolitical strategist Jacob Shapiro says something more dangerous may be unfolding: U.S. unpredictability is accelerating global realignment, weakening alliances, and fueling the decline of the dollar.
In this must-watch interview with Maggie Lake, Jacob breaks down:
- Trump’s decision to strike Iran: calculated gamble or global liability?
- Why China and Russia aren’t coming to Iran’s
- How Iran’s internal chaos could backfire, or spark revolution
- What China really wants, and how it plans to get it without war
- Why you shouldn’t trade geopolitics, but what risks to watch
- The growing debt crisis and weakening U.S. financial leadership
- The greatest underappreciated threat facing the West right now
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Jacob Shapiro 0:00
We’ve got chaos everywhere. We’ve got Russia, Ukraine. War ongoing. We just had India and Pakistan. Now we’ve got Israel, Iran. This is not world war three. With apologies to Steve Bannon and Pippa mongren and anybody else out there who is Hawking world war three. Nobody’s coming to Iran’s defense. Nobody all these countries looking at the United States and being saying, We can’t really trust this country anymore.
Maggie Lake 0:26
Hello everyone. Welcome to wealthion. I’m Maggie Lake, and joining me today is Jacob Shapiro, head of geopolitical and macro at the bespoke group. Hey Jacob, it’s great
Jacob Shapiro 0:33
to see you. Hi, Maggie. Can’t imagine what we’re gonna talk about today.
Maggie Lake 0:37
I know it’s, it’s, we’re gonna have to joke about it, because it’s so serious, and I’m sure for a lot of people watching so stressful, but I’m glad we have the opportunity to break it down a little bit. So as we speak, over the weekend, the United States launched a military strike against Iran’s nuclear facilities. Israel and Iran are exchanging new strikes as we record this. What’s your read on the developments unfolding
Jacob Shapiro 1:02
now. We could take that in so many different directions. I think there are a couple important points to sort of make at the outset, and then we can get into all of the nitty gritty of inside baseball. The first is, if you just take a step back from Iran and Israel for a minute, I know it’s hard to but if you look at just Eurasia in general, we’ve got chaos everywhere. We’ve got Russia, Ukraine, war ongoing. We just had India and Pakistan, you know, have a whatever their skirmish was. I don’t know if we want to call it a war or not. Now we’ve got Israel, Iran. So if you’re looking out at the world, like, there are pockets of stability, like, I can’t believe we’re saying, but like, South America looks relatively stable by comparison. Southeast Asia, I mean, technically, part of the Eurasian landmass, but looks relatively stable if you’re in stable. If you’re in Oceania, hanging out in Australia, like things look good, but otherwise there’s just this, this huge belt of instability. And I say that because I think we need to put this in a global context. It’s not just there’s this thing happening in the Middle East, it’s happening in South Asia. It’s happening in Europe. And I think that has implications. That’s the first thing. The second thing is a lot of this is going to depend on what President Trump does next. If the United States just bombed Iran a few times and that’s it, then there’s not that big of a deal. Like United States has bombed Iran before operation praying mantis. That was the last time that I know of. There might have been a more recent time. But where Iran was making shipping difficult in the Persian Gulf, United States bombed them. They stopped so like there, this is not unprecedented, and the US has been interfering in Iranian politics and doing things since literally, the 1950s but, you know, I sort of thought we were in limited strike territory. You know, I’m sure you saw President Trump’s truth about how maybe they should do regime change and maybe they should make Iran great again. So I don’t know what the f he’s talking about. Pardon my French, because that’s, that’s, that’s not a limited strike. And when you, even when you when you were listening to, I don’t know if you saw vice president Vance, somebody asked him why this time was different in terms of US involvement the Middle East. I’ll paraphrase him, but this pretty close to a quote. He basically said, Well, look, our previous presidents were dumb. Our current president knows that this should be a limited strike and that, you know, it will take years to dismantle the Iranian nuclear program, and that will do that, okay, like, which is it, or is it a limited strike one time bomb, or are we, like, embarking on a multi year process to make sure that Iran never acquires a nuclear weapon? So there’s that point. And then I think the third point that we need to keep in mind is what’s happening inside of Iranian politics, and this it’s there’s a lot of gray and there’s not a lot of good reporting. There wouldn’t be good reporting if bombs weren’t flying everywhere. But New York Times had a report two days ago saying that the current Supreme Leader, 86 year old, Ali Khamenei, put forward some potential successors, and that the process was accelerating to pick a potential successor in case he is assassinated. Does that mean that Iran’s going to be one big radical move, and then he’s going to get assassinated? He gets martyred, and then somebody else takes over? Unclear. Then Reuters this morning, though, is also similar reporting, but the New York Times report said that Ali Khamenei son was out of the running, and that his son being in the running had caused some problems in Iran over the last 12 months, because one of the whole points of overthrowing the Shah was to get rid of hereditary monarchy. So if the Supreme Leader gets to hand pick his son as who’s going to take over for him, that’s a problem. And there was, there was some dissension in Iran months ago about this. So New York Times said he’s out, which seemed to me like, oh, the regime really knows what’s up. They’re good, like they’re going to be able to hold things together. This morning, Reuters has no no, like the sun is in the running, and so is the grandson of the first supreme leader, Ruhollah Khomeini. So it’s like, Oh, so you’re going to the sun and grandsons of the previous supreme leaders, like, I don’t think the Iranian people will like that very much. So it’s impossible to deal with the scientifically about whether the Iranian people will rise up, whether they will replace this current regime, by the way, even if they do, does that mean they’re going to not want a nuclear weapon after everything that’s happening to them? It was the Shah that started the nuclear program when Iran was a US ally, not this current, like government. So, like, there are a lot of uncertainties there as well. So those are the three big picture thoughts I would ask people. To keep in mind, and we can dive into whatever you want from
Maggie Lake 5:02
there. If you have any questions about how to navigate the current environment, wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below, or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time. Again, that’s wealthion.com/free thanks so much for joining us. So let’s start with the first one, because I think that this is especially for markets, part of what people are trying to tease out. And I think you’re so right to put it in that larger context of uncertainty. So the questions that we’re hearing a lot of is, if we’ve got these pockets of unrest and there’s very little stability, what’s the knock on effect from this, who stands with Iran? Is it? Is it Iran alone? Where are the alliances shifting in the wake of this, or what would you be looking for in terms of something broader? Well,
Jacob Shapiro 6:06
this is why this is not world war three. With apologies to Steve Bannon and Pippa mongren and anybody else out there who is Hawking world war three, nobody’s coming to Iran’s defense. Nobody. Vladimir Putin, I don’t know if you saw his crazy comments with it yesterday, the day before he where he was where he said, you know, Israel has 2 million Russian speakers in it, so we have to factor that into whether we’re going to respond, okay, like wild stuff here, China. China doesn’t want any of this. China just wants cheap Iranian oil on the market. But they’re not going to go in and protect Iran or help Iran against Israel or against the United States. They’re going to put out strongly WordPress statements. So that also, like in the context of the Russia, Ukraine war, in the context of India, Pakistan, all limited conflicts, we hear reports about World War Three all the time, but all three of these conflicts are going to be, like, relatively muted now the United States is involvement here, maybe opens up a door, but like, nobody else is coming to Iran’s aid. So unless the Iranians, like honestly, the only market impact is if the Iranians want to try to blockade or block the Strait of Hormuz and send oil prices up, okay, you’ll have an oil price shock, and the United States will intervene in a more serious way and bomb the Iranians back into the 15th century. And then the lanes will be open again, and that will be that, I don’t think there’s going to be any immediate market impact, unless, by the way, you’re trading Israeli stocks, which go look at a chart of the Israeli of the Tel Aviv Stock Exchange. Since October 7, it’s almost doubled. Like, I was wrong about Israel sort of being weak in the knees. Like everything is going from strength to strength. There war, it turns out, is good for an economy. Or, like, if you do get some kind of regime change in Iran, and everybody holds hands and sing Kumbaya, okay? Like, maybe there’s an argument that this is 1990s early 1990s Russia, and this is a great frontier economy with a hugely motivated, educated population. So if you know anybody who speaks Farsi and you want to go run around Iran on the potential of buying up cheap assets, cool, but unless you’re doing things like that, or unless you’re playing for an unlikely but possible oil price spike like, this isn’t going to affect your portfolio that much. Like, there’s nothing like market driven today, immediately it’s going to work. And this is, this is one thing I would put in people’s minds, like, I think it’s incorrect to try and trade geopolitics. You can have some asymmetric strategies, or some bets on some, you know, high impact, low probability events that if something happens like, you’re going to do really, really well, but you’re using geopolitics wrong. If you’re like, Aha, like, I’m going to hit oil at this price versus this price because of this market instability? No, no. It’s about the general context and the geographies that are going to fare well and the world that is in front of us, and the geographies that are not going to fare well. And I, you know, I have a little list of things that I like in geographies that I think are going to do well. I want cheap access to energy. I want relative political stability and mature political institutions. Distance from Eurasia is starting to look good, although that doesn’t have to be the case. Israel is a case in point. If you have a secure as my dear chosen cousin Marco papage said on our podcast over the weekend, if you’re a garrison state and you’re secure, like you’re Ukraine or you’re Israel or some of these other states, Saudi Arabia comes to mind. Yeah, then you could do sort of really well. So, like, those are some of the things that I’m looking for. And I do think that these conflicts point towards which countries are good ideas and which countries are bad ideas. But you know, if we’re thinking about, is this going to affect the Treasury yield? Is this going to affect what’s happening in the US, China trade war and what happens with inflation? Not really sorry, like, sorry to disappoint you. Like, it’s just not, like it’s
Maggie Lake 9:24
not gonna happen actually, Jacob, I think people are gonna be really relieved to hear that, because that’s the, you know, the fear is that we’re embarking on something, and you’ve gotta sort of rush to find a haven or horde. So the fact that there is not that knee jerk immediate reaction, I think is, is probably a relief to people. Let me ask you about the China thing, though, because you were talking about access to energy. So the the China angle, I should say that there, there are two concerns. One is that they, they may not respond militarily. But they do care very much, because they do want that access to Iranian oil and cheap Iranian oil to stay intact. And they’ve built a railroad, and they’ve have access, direct access, and they are not going to want to lose that, that so called pipeline. And so they very much have a vested interest to get involved or somehow complicate things. Do you not think that that’s true?
Jacob Shapiro 10:25
Well, two things, first of all, the thing about safe havens, what’s, what’s, if you’re thinking about market perspective, the fact that is more disturbing is that the dollar and the US Treasury is no longer a safe haven asset. And if you’re looking at how the dollar and Treasury is behaving with all of the different things that are happening in the world right now, along with the one big, beautiful bill like that is something that should make you sit up in your seat. If you look at like performance of Swiss franc or Singapore dollar, or other currencies against the US dollar, when you think about what all the stablecoin legislation could mean and the weaknesses that that could inject in the system like that, stuff like is much more market relevant and some of this goes into it. Because I think one constant in all of this is that the Trump administration keeps on writing checks that it’s not going to be able to cash. So it’s picking trade wars with friends and allies. It’s getting involved in a in a war in the Middle East like these are not the things that you do if you want other countries to trust you and think that you are the adult in the room, the adult in the room. Sorry, if this is jarring for the listeners, is China. They’re the stable ones. They are the ones that I’m not uncertain about what China is going to do. I know exactly what they’re going to do. They’re very, very predictable right now. Do they care about the 2 million barrels per day, or whatever it is coming out of Iran? Absolutely. Are they going to dispatch the People’s Liberation Army Navy to secure those 2 million barrels per day. If the Strait of Hormuz is blocked, absolutely not. They watched the US movie where the US was dependent on Middle East oil from roughly the 1970s until the shale revolution. They have no desire to repeat that. If you, if you lost the Iranian barrels per day, okay, so you get an upward spike in oil prices, the Chinese will have to pay a little bit more for oil, or they’ll have to pivot to coal for a little while. But if you look at what they’re doing in their own domestic economy, they are accelerating as quickly as possible, solar, nuclear, wind, anything that they can possibly get their hands on. They’re doing and they’re scaling remarkably. Now they have so much demand that it’s a question of whether they can continue to scale at a pace that meets their demand. But if you look at the scale of the energy like that they’re rolling out, it’s absolutely it’s it’s absolutely massive. And so the thing I would say is that this is sort of like Huawei and the trade war in general, where the first Trump administration went after Huawei, and it didn’t kill Huawei. What it did was it forced China to innovate and to figure out how to not be dependent on the United States or on some of these inputs by if you do this to Iran and if Iranian crude goes off the market, you’re not going to encourage China to get involved. They don’t want to get involved. And yes, you will. You will cause some short term pain in the Chinese economy as energy prices go up, and they’re going to be the most exposed to the barrels that are coming off the market at that time. But you’re also just accelerating what they already know, which is they don’t want to be don’t want to be dependent on the Middle East at all. They want to be self sufficient with nuclear and solar and any other potential resource that they can get, so that they aren’t having to project a lot. They aren’t having to project over long supply chains and be dependent on the political vagaries of the Middle East. So do they have an interest in the Iranian crude being on the market. Yes, would they prefer it that way? Absolutely. I would be absolutely gobsmacked if that meant that they’re going to send their one aircraft carrier to the Persian Gulf to open up the Strait of Hormuz if the Iranians block it, like that would be, I mean, like, I could be wrong about anything. I’ll come back here and, like, heat my notepad that I’m making notes on right now if that happens. But like, it’s just not on my bingo card
Maggie Lake 13:42
and so. So it sounds like you do not believe that China, Russia and Iran are looking to get into some sort of, you know, Alliance, lined up against the US.
Jacob Shapiro 13:56
Where’s the Alliance? Here’s the opportunity for the Alliance. Iran is getting bombed by the little Satan and the great Satan. Like, where’s the Alliance? Like, if With friends like these, who needs enemies? Seriously? Like, there’s no Alliance here. There’s no aid forthcoming. And this is what you know, Russia basically said, we’ve got our hands full. And this points to Russian weakness. This already, Armenia already learned this in their little brief conflict with Azerbaijan, which we shouldn’t skirt over when we’re talking about Eurasian war and instability, Armenia has Russia as an ally, and Russia said, Eh, like you’re on your own, like Azerbaijan backed by Turkey, you guys can just take this disputed territory that’s super important to Armenia. Or think about the way that China is, like going into Central Asia, China itself, like they didn’t come to Pakistan’s aid in the India Pakistan, where they’re certainly not going to stick their neck out for Iran when the United States is bombing Iran, like it’s just not there. I think you we really have to think in terms of especially China, like they don’t think in terms of alliances and relationships the same way we do. They view that as a cost, as something that you have to do if something happens to somebody. Else across the world, and that used to be US foreign policy, like the US emphasis on strategic alliances and these networks and coming to collective defense like that’s a product of the Second World War. And one of the issues, I think, with the United States right now, you can see this, by the way, in some of the friction that the United States is having with NATO allies, and in particular with Japan, asking them to boost, you know, defense spending and all these other things in Japan, like not showing up to meetings as a result, and saying, maybe we’ll skip the NATO summit as well, like we don’t want to, we don’t want to listen to the United States is behaving. It sort of has this anachronistic alliance based foreign policy, and yet it keeps on insulting its allies and doing things that are pushing the Allies further away. Sorry, I rambled a little bit. But no, I the the very short and succinct answer to your question is, What? What? Iranian Russia, China Alliance. Iran is under attack by the United States and Israel. If there was an alliance, Russia and China would be rushing to their defense. They’re not. And that’s it. That’s all you need to know about the quote, unquote Alliance. You can, like, like, throw the bricks in there. Like, if one of the bricks gets in, like, the United States starts bombing the bricks, I bet you, like Russia and China don’t come to their aid either.
Maggie Lake 16:06
Interesting. And so the other, I think the other thing that’s been coming up a lot is that, now that the US is distracted and committing resources in the Middle East, once again, does that raise the probability that China invades Taiwan? That’s been a huge, another huge issue to come up when we’re talking about all of the stuff lying around on the net,
Jacob Shapiro 16:25
yeah, short answer, no. And if they were you’d like, you would be able to follow it, like they would be massing troops and like, it wouldn’t be such a big secret. But no, I just don’t think that’s the way that China thinks about this. I think China thinks about Taiwan the way that it thought about Hong Kong. And I think it’s playing a very long game where it’s going to isolate Taiwan economically and politically. It’s going to brain drain their top engineers. It’s going to make it so fewer and fewer countries are willing to recognize Taiwan or come to its defense. They’re going to get to a they want to get to the point in US politics where a US president basically says, like, we’re not going to defend Taiwan, like it’s not going to happen. And then then they can make their move in the same way that they did this with Hong Kong and the UK and Margaret Thatcher in the 1980s that, I think, is what they’re doing. They also like, can look at, specifically at what Russia did to Ukraine and say, this is probably not that good of an idea, because ever Russia can’t take Ukraine. We’re nowhere near ready to do an amphibious assault across an ocean where we probably we wouldn’t just be dealing with the United States. We’d be dealing with maybe Japan, maybe India, maybe Australia. Like there are still countries that are very committed to the idea that Taiwan should be able to resist a Chinese attack. And that’s before we get to the Taiwanese defenses themselves, and whether they would attack so, no, I don’t think that that is a realistic scenario like and I also think that goes back to the second major point that I made with you. Is this a limited strike, because if it’s if this is all the United States is going to do okay, like, maybe for a week, it makes capacity a little bit less, but it doesn’t meaningfully impact US military capacity to do things around the world. If it’s if Donald Trump, like, went to sleep one night Trump and woke up the next day, you know, haunted by the spirit of John Bolton, and he’s a real neocon, okay, then it’s like a different story. Like, if we’re going to have neocon Trump and we’re going to make Iran great again, which he tweeted in the morning, very, very different story. And then, if you’re China, you’re like, Okay, let’s wait for them to get bogged down in another land war in the Middle East. And then maybe you could start thinking about that, but we’re a very, very, very long way from that being a realistic possibility. And I don’t think that’s what’s going to happen. I think, I think President Trump wants a limited strike, and I think he’s going to stick to a limited strike, yeah, what? What
Maggie Lake 18:41
about does this change perceptions of the Trump administration, both both abroad and at home? Has anything changed in in how this administration is viewed based on this activity?
Jacob Shapiro 18:54
I’m not sure it changes perceptions. It maybe confirms things that it confirms perceptions that were already held. It speaks to the United States being willing, being willing to use military force if it’s not listened to. So if I was Panama, and thinking about the Panama Canal, or if I was Denmark and Greenland, or if I was and if I was China, and thinking about not Taiwan, but, you know, the Philippines and some of these, a tolls and maritime disputes that they have in that region, yeah, I would be thinking twice. Like, oh, is, is? Is there a stick that backs up? The President Trump doesn’t really offer carrots, but is there a stick that backs up if I don’t agree to the tariffs or to the trade negotiations or things like that? Like, you know, I think you could have that. I think also, like, it’s and you’re already seeing this, and some of that friction I talked about with the United States and Japan, and how South Korea is starting to think about its foreign policy, and the way that Europe is thinking about its own sovereignty from a defense perspective, from a digital services perspective, everything else, all these countries looking at the United States and being saying, We can’t really trust this country anymore. We don’t know what they’re going to do. Yeah. And, you know, the the simplest way to underscore that, if anybody objects to that, is, literally, on Friday, I thought I was going to have a good weekend, because Trump said we had two weeks, like, we’re going to give two weeks for diplomacy to work, and then it’s Saturday night, and okay, like, as Steve Bannon said, the party is on, so, like, there’s just, there’s no predictability and no stability out of Washington. So that’s not new. That’s not a change, but the Trump administration is not showing that it recognizes that that is causing problems in US foreign policy, and the more it doubles down on that, the more you’re going to get countries that want to go their own way, politically, economically, a trade perspective, a military perspective, a security perspective, like all of those. All those things are driving countries to reevaluate whether the United States can be trusted
Maggie Lake 20:42
when I think there are segments, and this is the perception at home, I think there are segments of the voter base, of the American public, of Maga, who who like the idea of an isolationist, more isolationist us, who are sort of tired of the costs associated with some of the foreign policy that we pursued. Do you think there’s an understanding that that road also means de dollarization? I mean, you’re connecting the two. Do you think that’s understood domestically, in the US, the risks around that?
Jacob Shapiro 21:12
No, I think you’re giving way too much credit, credit to the the median voter in the United States. I don’t think the median voter in the United States even knows what de dollarization means. Apologies, I was thinking more politicians, not even voters. I’m not even sure the politicians quite understand what that means. I mean, maybe some of them, but you’re telling me Howard Lutnick understands the intricacies of these arguments, or some of these congressmen that are foaming at the mouth like I think there are.
Maggie Lake 21:37
Nick runs is in charge of an investment bank, brokerage, and has been involved in financial markets. You don’t markets. You don’t think he understands de
Jacob Shapiro 21:44
dollarization. Maybe he thinks that in doing some of these things, like, he’s going to devalue the dollar so that US exports get more competitive, like, maybe he’s done like, that sort of calculus in his head, but based on the things that he has done and said, No, he doesn’t understand that that’s not going to work if you’re also going to alienate your allies, and you’re going to testify in front of Congress that, okay, all we have to do is, like, grow bananas here in the United States. Because, you know, we’re going to have the terrorists. We’re going to make America grow bananas. We literally can’t do that. Howard, like, look at a map. Look at like, you know, he’s saying things that don’t make any sense. So, no, I don’t have huge faith that that’s I don’t have huge faith that the average politician understands these things. I certainly don’t have faith that this administration is of one mind about how to achieve these things. I think Scott Besant has a plan. I think Lutnick has a plan in his mind. Navarro has a plan. Trump probably has some semblance of a plan. And they’re just picking and choosing from all the different grab bags and applying things based on whatever’s happening in the moment, rather than a, you know, you can make a very, very good faith intellectual argument for the dollar is overvalued. It has wounded the United States competitiveness. We need to have a managed devaluation of the dollar, and also, probably we need to loosen up monetary policy in order to so we can outgrow the some of these issues. Like we’re not going to pay back the debt. Let’s outgrow the debt. Like we can make that argument, but that’s not the level at which this is happening. Like we’re having Oh, tariffs on everybody. Oh, like, just kidding. Oh, we have a deal with China. Oh, let’s bomb Iran. Oh, by the way, the tariff deadlines coming up. Like none of this
Maggie Lake 23:16
cohesive policy and you mentioned, what does Donald Trump do next as one of the three pillars we talked about in the beginning that you’re watching do so there’s a what does he do next in terms of Iran and militarily, and is this a limited strike? Do you think this affects the approach around the trade negotiations? Is there an impact there? Because that’s coming up really quickly, July 9.
Jacob Shapiro 23:47
I think the effect is that the administration is distracted. I don’t think we’re going to see deals anytime soon. It takes, takes a long time to negotiate trade deals. So my guess is we’re going to get more extensions, or maybe we get right down to the wire and we do some more high stakes, you know, political melodrama television, and we’re doing the tariff counter on Flex, the NBC and things like that. And then they’ll just extend them out. So I would be shocked. So
Maggie Lake 24:08
you think they’ll extend them as opposed to getting tough? Coming off of this what appears to be a decisive military victory, you don’t think that’ll embolden him to sort of throw down some sort of ultimatums again, in a kind of repeat of Liberation Day.
Jacob Shapiro 24:21
He loves ultimatums. I’m sure he’ll throw out some ultimatums, but will he follow through? No, because he would tank the US economy. And to your point, he does have some problems. How big they are? Not in the Maga base, we’ll see. My hunch is that it’s a relatively small local minority that are against this. I also have to say I saw Marjorie Taylor green speak about this from from my my old home state of Georgia, like I almost had a seizure because I was like, oh my god, am I green? God, am I green? With every word out of Marjorie Taylor Green’s mouth, am I okay? Do I need to, like, see a doctor or take some medication anyway? The but the point being like, Yeah, I think that he will absolutely kick the can down the road, because he’s already seen what happens if he tries to do it, like Liberation Day. He tries. Tried to do it, and what happened? Dollar didn’t do what he wanted it to do. Treasury yields didn’t do what he wanted them to do. Market started revolting, like people running for the exits, countries like Japan saying, no, no, thank you. Like come back to us when you want to actually talk, but we’re not doing this. And so we had to reverse course. That’s exactly what would happen again if he tried to do Liberation Day again. I also like, don’t if you’re like, let’s play devil’s advocate a second here. If you are a foreign leader or a foreign official advising a foreign leader, and you’re trying to interpret Trump’s behavior around Iran, one interpretation is He’s tough. He’s got the bunker busters. Like, he’s not going to be afraid to back up what he’s saying with force. Another narrative is he let Israel get him into a war that he didn’t want to be in. Even two weeks ago, he was talking about an Iran nuclear deal, and then and he told Israel, like, Hey, I don’t want this. I don’t want you to do this right now. I want to give you a chance. I want to give negotiations a chance to go because I want this Trump version of the Iran nuclear deal. And not only did Israel not listen to him, they literally assassinated the dude who was in charge of the negotiations. And so like, President Trump had a choice. He could look weak and say, Oh, I can’t control Israel and slap them on the wrist. Or he could start taking credit for the military prowess that Israel showed in bombing Iran. And he went for the latter point, being like, there’s a devil’s advocate case for if you’re advising that foreign leader to say this bombing of Iran is actually confirmation that he always chickens out that he is fundamentally weak. He’s not willing to confront a US ally who dragged him into a war that he didn’t want to be in and went directly against his biggest foreign policy interest, which is don’t get involved in other people’s wars and negotiate trade deals, but we can have peace and prosperity. That’s the sign of a strong leader. Not at all. You can have whatever you want. Just punch the bully in the mouth and like you will get what you want from the bully. I think that’s a meaningful I’m not saying that’s the one, but if you’re thinking about how foreign leaders are trying to interpret this, that’s one of the scenarios on their call sheet. That’s one of the ones he
Maggie Lake 26:58
likes to be on the winning team, right? You could argue that if Israel was not as successful as they were, that that it would have been a different conversation. He doesn’t like losers, right?
Jacob Shapiro 27:09
That’s true. That’s true. And that was that’s it was a gamble by Israel to do this, and it was a good one. But look at how some countries, like you know, Japan is saying no. Japan is drawing a line, in part because they’re strong enough to do so. Look at how Vietnam is reacting to some of this. Vietnam doesn’t want the tariffs. It’s very overexposed. Vietnam has been one of US companies best choices for for getting manufacturing production out of China. And what is Vietnam doing? They’re suspending different laws so they can build a Trump development and a Trump golf course and a Trump Hotel. So ingratiating themselves to him to make them feel better about him. He literally talked about giving Ireland a better tariff rate than the rest of you, because he likes Ireland, and he’s got hotels there, and he’s got properties there, and they said really nice things to him. So you can also go that route. You can say flattery will get you wherever, wherever you want, with him. So you know, like, I Yes, I absolutely believe that he will kick the can down the road on tariffs. And if he doesn’t, the midterms will be an absolute slaughter, and he won’t be able to get anything done for the rest of administration.
Maggie Lake 28:07
Do you think that the the you mentioned the chicken out, this taco meme has just exploded. Trump always chickens out and and one has to imagine it. It just drives him crazy. He must really not be happy with that. Does that push him to be tougher? Is there a risk somehow, that just knowing that’s out there is going to raise the possibility that he’s unwilling to kick the can? I know what you’re saying. He’s He’s caught between a tough place because he knows that he doesn’t want the economic fallout. But one has to imagine, there’s a part of him that also absolutely hates that that concept is out in the universe.
Jacob Shapiro 28:49
I’m sure he does, and it might make him want to try again, even though he has data to show him what happens.
Maggie Lake 28:55
I guess that’s the risk like, that’s the risk people are worried about well,
Jacob Shapiro 28:59
and that might very well happen. But if that happens, it was James Carville, I believe, who said, you know, if he died, he wanted to come back and be reincarnated as the bond market so that he could intimidate anyone that he wanted. Like, if he does that, watch what the bond market does, and then watch him change his tune within 24 hours. Because, yes, you’re right. Trump is mercurial. He is a megalomaniac. He takes things really, really personally. So he’ll take the talk if he’s watching this, he’s going to take it personally. Maybe he’ll go bomb Iran a couple more times just to make sure that Jacob Shapiro didn’t get the best word on President Donald Trump. But if he does what you’re talking about with the economy, he will wake up 24 hours later, and Treasury yields will be screaming at him, and he and Scott Besant will be like, Dude, you’re going to tank the whole economy, you have got to reverse course. And that’s the other thing about Trump, though. Like, yes, he’s all those things I just said. He is also incredibly flexible as a result, if something’s not working, I just changed my mind. Like, think about the bombing like, think about bombing Iran. Like, he went from absolutely not to Okay. Like, make Iran great again. So. Like, he can very easily, like, have that reaction you’re talking about, talking about, do something that causes the market to freak out, and then 48 hours later, be like, okay, like, Fine, I’ll put lipstick on the pig, or I’ll do something else over here, so you’re distracted, and I’ll bring it back in, because things don’t stick to him, and he knows that that’s like, one of his, I don’t know virtue is a strong word to use, but it’s one of his strengths,
Maggie Lake 30:20
one of the tools in his toolbox. So we have the the other big issue on the plate for them is getting this budget through. I I had just had a conversation with somebody who sort of offered another perspective, a sort of unique perspective, because I think a lot of people are worried about it. Everybody, anytime you go have a bill go through Congress, everybody talks about the parts they hate, and it never seems like it’s, it’s a mishmash of terrible compromises that doesn’t ever really fix anyone. There’s, there’s a lot to complain about and hate in any of these things. But his thought was, actually, they’re cutting spend. They’re not they’re still growing the deficit, but by less than it could be. They are showing some restraint. They are showing a willingness to finally take on entitlements in Medicaid. You may not like what they’re cutting, but they’re trying. They they are finally putting that sort of third rail, you know, untouchable, on the table, which might open up the avenue for that. And even though everyone hates the tariffs, they’re getting revenue from them and so So somehow, from a fiscal perspective, this maybe isn’t as bad as some of the the rhetoric you hear flying around again, not not making a comment on the choices, but overall, it could be worse. And there is, I don’t want to say fiscal discipline, but there is some attempt to sort of get back on track. Do you think that can hold through the process? And do you think that’s true? I’ve
Jacob Shapiro 31:40
heard that argument, and I’ve heard it from people who I respect, and I just disagree, and the first thing I would refer folks to is go look at a chart that shows you a breakdown of the spending, because they’re projecting spending out over a couple of different years, and look at where they’re adding to the deficit, and look at where they’re starting to reduce. They’re not talking about reducing any spending whatsoever until President Trump’s second term is over. So he’s basically kicking the can. And if you, if you tell me that the next President is going to come on and be like, I inherited these cuts, so I will follow through, because President Trump, like, put through this plan, like, okay, they’re also going to give out the goodies, and they’re going to have a new bill and a new budget, and they’re going to do all these other things. It’s also look at where he’s cutting versus look at where he’s adding. He’s going to add to things like defense, and he’s cutting from things like research and innovation and Medicare and Medicaid. So like taking care of the people who us, wealth inequality has exploded since the 1990s it’s globalization gives and it takes away. But so you’re going to take away from the lowest, like rungs of society, and you’re going to strip, you know, universities. And we can talk about like, universities are not perfect. I’m not saying out here that they’re they didn’t need to be reformed. But all, like the the partnerships with universities and tech innovation that’s all going away, things like USAID going away, and we’re just going to add defense and we’re going to get some revenue from tariffs, and we’ll sell off some government owned lands, and that’s going to balance it. Like, I’m sorry. Like, you know, okay, it’s not 10 to 15 trillion added to the deficit. Great. It’s only two to 3 trillion. Okay, that’s still trillion. And this is still a government that campaigned on, no, we’re going to actually reform this. Like, what was Elon doing in the department of government efficiency? He was trying to drive down spending. The interest on American debt is almost equal to the defense budget right now. So we don’t have two or 3 trillion to add. If what you’re thinking about is that we need to approach this. So I think there is something to be said for markets. We’re expecting more. So maybe there is market psyche that things are better than they could have been, and maybe markets will behave a little bit differently over a two to four year time horizon, because just from sort of an emotional and in a sentimental point of view, this is better than what the market was expecting. But in terms of the bigger problem, which is interest on US debt is almost, if not greater than what we’re paying for the defense budget. People are already running away from the dollar in US Treasuries because of some of the policy things that we’ve talked about here so far, and now they’re looking at the United States and saying, Okay, let’s put the policy aside. Can the United States afford this anymore? Is the United States heading towards a major debt crisis in the future? Like that’s a reasonable question to ask, so I don’t buy it. I think that maybe you get a short term reprieve, but in the long run, the patient is still sick and you’re missing I don’t want to be sensationalist about it. I’m sure there will be future opportunities to deal with this, but President Trump came to power talking about how he was going to deal with the budget and start getting us back towards some level of fiscal concern. I never believed he was going to do that, but, like, I just can’t get on board with the argument that, okay, because it’s not 10 trillion, it’s 2 trillion, everything is fine. Like, sorry, I can’t get there.
Maggie Lake 34:51
Well, you bring up an excellent point, and that is that, you know, in the wake of Liberation Day, if, if Trump couldn’t do it. It’s hard to argue who can and that raises some real concerns about the fiscal trajectory and the debt levels here that are not that do not have positive implications for treasuries. So that is an important takeaway that’s kind of been lost in all the other news.
Jacob Shapiro 35:16
Yeah, and this is one thing I’ve said over and over again. There have been three times in US history where US wealth inequality got this, this insane, the most recent time was the 1970s and stagflation, Reagan comes in, and you get deregulation, everything else. It happened in the 1920s and you get FDR in the New Deal. It also happened in the 1850s I hope we can avoid what happened sort of after the 1850s but what happened in each one of those moments, and I’m really focusing on the 1920s and the 1970s was 1970s was the economy got so bad at a certain point that voters stopped with the ideological nonsense and said, we just need to fix the economy, like, let’s stop arguing about stupid things and fix things. And the United States economy is doing great. It’s doing really well, and it’s been doing really well relative to the rest of the rest of the world since COVID, we can argue about why that is. Maybe it’s because of irresponsible fiscal maybe it’s empty, okay, but it’s been doing great until Americans are actually feeling the pain. They are not going to put people in office who are going to make tough decisions and do these reforms and do these real spending cuts. I think you’re right that President Trump had an opportunity, that his base believes in him so much that he probably could have sold some fiscal conservatism to them and survived it. But that obviously isn’t what he wanted to do. In the end, he wanted to, you know, he didn’t want to be the guy who cut spending and took the goodies away. He wants to be the guy that everybody likes it says the economy is greater than it’s ever been. So I think he missed that opportunity. Little piece of history, I’ll say is, I also think it’s really instructive to compare where the US is at right now to late stage British Empire. And I say that because at the end of the 1700s things looked terrible for the British. They lost the United States and the American Revolution. They were getting their butts handed to them on the continent by Napoleon and France, and their debt had also ballooned to some massive figure. I think it was over 200% of GDP. I forgot. GDP. I forget the exact figure. And in the end, like Napoleon gets defeated, and the British get another lease on life, because they reform, and also they colonize India, and that gives them a shot in the arm, and they’re able to balance their debt, and they get another 100 years. In general, I’ve been thinking about that example a lot. I think there are ways out of the debt problem for the United States. Like, I don’t think, like you have some people out there who are saying, Oh, it’s doom and gloom, like, the United States dead. It’s this is an absolute catastrophe. No, like, there are ways out of it, but nobody who’s in power right now is seriously doing anything about it, and they’re not seriously doing anything about it, because the voters don’t really care. Like, the voters are mostly fine right now, when you start getting inflation like that’s really high, or if we start getting all this, you know, unemployment rates going up, things like that, then I think you’ll see a different tenor to politicians at Washington who are going to be answerable to people who are no longer talking about Maga this and the luxury of whether to bomb Iran or not, but are talking About, I don’t have a job,
Maggie Lake 37:59
pragmatic pragmatic technicians and people with bold ideas will, will it’s, that’s, that’s really interesting. So let’s, let’s circle it back to sort of where we started, and that was with the focus on the Middle East. And I’ll ask two questions. We’ve been talking a lot about the, you know, knocking down some of the narratives that are out there, but we haven’t talked about about this. What could happen? Do we, you know, the the negatives that people are concerned about, are there any, is there any potential for positive outcome from here? Does this somehow open up a possibility for, I don’t want to say peace in the region, because it just sounds absurdly naive to say that, but a sort of reset of relations to Saudi Arabia and Israel suddenly have the potential to have a dialog. Does this shift things in some way,
Jacob Shapiro 38:55
some things have shifted. Saudi Arabia and Iran aren’t fighting each other in the context of this war, like they’re quoting the Saudi foreign minister, like the brotherly nation of Iran, like Saudi Arabia’s actually, at least rhetorically, been against this, I’m sure behind closed doors, they’re happy with it. So things, things change all the time. Look, I think there is a small probability, but there is a scenario where this is a absolute smash hit success, if the US bombing tips this over. And if the Iranian people rise up against this regime and overthrow it, and you get another Iranian Revolution, and what you get installed instead is a pragmatic, maybe secular leaning Iran that that calls back to, you know, previous generations of very, very smart and sophisticated Iranians who are some of the most like, I mean, like, look at there’s a reason there have been Persian empires repeatedly throughout history, because this is great geography. It’s a it’s a population with tons of human capital, well, like all these other things. So if they take over, and they get rid of their, you know, theocratic thugs that are at the top of the regime, and they start dealing with the world in that sense, and they come. In from the cold. Well, then it’s beautiful, and then President Trump really can take credit. He could say, You know what, everybody else has been talking about, Iran and all these problems, I’m the one who fixed it, because I knew that I just had to put the nail in the coffin. And if I did that, the people would rise up. Now they’re here. Now we’re going to start doing business deals with Iran. We’re going to start getting the Iran and the Abraham accords. Let’s do it. Like, let’s get Trump Tower in Tehran. Like, that’s a scenario. It’s like, five or 7% on my scenario board right now, so not a zero. Like, it’s definitely there, but the negative scenarios, like, outweigh it. But yeah, there is certainly. The neocons are not stupid. They’re wrong, but, like, They’re not stupid. Like, I get the idea. It’s a very enchanting, alluring idea. And I’m sure that most of us, when we were in our 20s or when we were at university, had similar simplistic ideas about how the world is supposed to work. So maybe this will be the time that it works. But I don’t know. It seems a little bit too complicated for me, but, but there’s your positive spin. And
Maggie Lake 40:55
what do you think the greatest unappreciated risk is? What are you most concerned about right now,
Jacob Shapiro 41:01
the one I’m worried about the most. And it’s funny, like, I have a sense of how much this is in the public Zeitgeist. When you know, my family members start asking me about what’s going on, like, most, most of times, my family doesn’t care about what I do. They want to do other things. But like, both my wife and my sister and, like, the last 48 hours have been like, do I need to be worried about this? Like, what? What’s going on? So that tells you that there’s like, a bigger baseline consciousness of this for the American voter than, say, Russia, Ukraine, even, or Pakistan, India, which didn’t seem to move, didn’t seem to move the needle there that much. The thing that makes me nervous, and I’m less nervous by the day, because I think they would have done it already if they had this in their back pocket, is, could Iran rush to nuclear breakout really quick, and show that they have a nuclear weapon, and then have to demonstrate that they do have that nuclear deterrent and or can they activate terrorist cells that have access to really destructive weaponry, whether it’s dirty bombs or things like that, to try and asymmetrically respond to the west, I’m less I’m less and less confident that the first scenario is even possible. I feel like if they could have broken out now would be a really good time to show off your nuclear weapon. Like, if you want to stop the onslaught, like, just go test a nuclear weapon and show them that it’s too late and that you have a nuclear deterrent. And if you don’t stop, you can push back. So that seems off the board. But the terrorist, the terrorism in the West thing is not something to be dismissed. I mean, you know, Hezbollah pulled off a huge terrorist attack in Buenos Aires in the 90s, like you got to think that maybe Iran has some of these cells around the world that they can activate. But even here, like the picture of Iran that we’re seeing right now is one that was all bark and no bite. They seem tremendously weak. It seems tremendously corrupt. It seems like they haven’t been able to respond to anyone. They weren’t able to deter the Israelis. Their quote, unquote alliances have not come to their aid when they were attacked by the United States. So I actually don’t know that they have that many cards to play, which really suggests that maybe this does go back to some kind of nuclear deal and the low level instability that we’re used to in the Middle East. But yeah, the things that keep me up at night Iranian nuclear breakout. And does Iran have terrorist cells? Or, you know, is the example of the United States bombing Iran, going to make other terrorist cells decide that now’s a really good time to try and, you know, attack the United States or other capitals in the West.
Maggie Lake 43:18
Jacob, always heavy things we talk about, but I appreciate you being able to sort of translate it for all of us and kind of reset and help us zero in on what we should be focused on. So really appreciate your time today. Thanks so much. Of course, I’m here whenever you need me. If you have any questions about how to navigate the current environment, wealthion can help connect you with a vetted advisor to get a free portfolio review, just click the link in the description below or head to wealthion.com/free there’s no obligation, and it will just take a few minutes of your time again. That’s wealthion.com/free thanks so much for joining us. We’ll see you again next time you.
