Houthis and the Blowfish
Tea and Crumpets
In this episode of Tea and Crumpets, Will Brown and Adam Eagleston dive into a rapidly evolving geopolitical and economic landscape shaped by escalating tensions in the Middle East. With a fragile ceasefire in place and ongoing uncertainty surrounding key shipping routes like the Strait of Hormuz, the conversation explores how quickly conditions on the ground, and in the markets, are shifting. They highlight the difficulty of interpreting real-time information in an environment flooded with conflicting narratives and misinformation. At the center of the discussion is the global energy market,...
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We Interrupt This Podcast…
Tea and Crumpets
In episode 98 of Tea and Crumpets, Will Brown and Adam Eagleston address a rapidly unfolding geopolitical and market situation, as well as the broader assumptions investors have been relying on. What begins as a discussion of escalating tensions in the Middle East quickly turns into a deeper examination of how fragile global energy infrastructure, shifting policy decisions, and uncertain military outcomes are colliding in real time. The hosts highlight how quickly sentiment can swing, with markets reacting sharply to both escalation and temporary de-escalation, underscoring just how sensitive...
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Oil, Private Credit, and A.I.
Tea and Crumpets
In this episode of Tea and Crumpets, Adam Eagleston and Will Brown examine a rapidly evolving global environment where geopolitics, energy markets, and structural risks in finance are colliding. The discussion begins with the escalating conflict involving Iran and Israel and the immediate shock to global oil markets, where prices surged dramatically before partially retracing. Adam and Will explore how disruptions to Middle Eastern energy infrastructure and shipping routes could tighten global supply, increase inflation pressure, and complicate monetary policy decisions for the Federal...
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Under the Surface
Tea and Crumpets
After a brief hiatus (courtesy of a historic Southern ice storm), Adam and Will return to find an index-level market that looks deceptively calm—roughly flat since their last episode—while significant damage has been done beneath the surface to individual stocks. The disconnect between index stability and individual-stock carnage is the central thread of the episode. The first major topic is AI capital expenditure. Most of the Mag 7 have committed to spending at a scale that would have seemed absurd just a few years ago, and the market, which once rewarded this enthusiasm, has begun to...
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Happy New Year
Tea and Crumpets
We look at the eventful start to 2026 and try to put some context around potential market impacts. Geopolitically, we saw the renewed vigor of the Monroe Doctrine in full force with U.S. action against Venezuela’s Nicolas Maduro. Whether stemming the flow of drugs or increasing the supply of oil was the primary factor is undetermined, though decades of underinvestment in infrastructure make any meaningful near-term effect on oil supply unlikely; lower oil prices have been one of the few things keeping inflation in check. We also discuss saber rattling as it relates to Greenland, whose...
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Christmas Present
Tea and Crumpets
We take a detour into the Dickensian in evaluating the state of the economy. First, the recent inflation print, which showed a significant decline in the level of price increases, was a fiction worthy of Dickens, with the majority of the data simply made up as a result of the government shutdown. Setting that aside, since 2021, wage growth has not kept pace with inflation for food, shelter, and services, though we can count our blessings that at least alcohol prices have not increased as much… Challenges face the Fed chair (both current and yet to come), and managing a deteriorating labor...
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Ish
Tea and Crumpets
After Thanksgiving, we take a look at poultry, especially how dove-ish the Fed is now expected to be, a sharp reversal from a few weeks ago. We also discuss the odds-on favorite for the next Fed chair and how his political leanings may (or may not) influence which direction the Fed takes. Recent employment data has been lackluster, to put it mildly, which is forcing the Fed’s hand as it relates to continued cuts. To wit: Total change in private employment – Negative 32k Manufacturing and construction – Negative 27k Small businesses – Negative 100k Wage growth, especially for lower...
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I Have Two Gavels. One for Each of You.
Tea and Crumpets
After a long hiatus (no, not related to the government shutdown) we return with a look at the economy and markets. On the economic front, despite a lack of formal data, signs point to a weakening labor market. Consumers in the bottom 80% have spending post-Covid that has barely kept pace with inflation, with prices higher by around 25% since 2020. Unemployment has climbed to over 9% for those between 20 and 24 years of age. All these are signs of a K-shaped economic recovery, with a strong stock market supporting higher spending for those in the top 20% of incomes. The Fed faces a challenge...
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Red October?
Tea and Crumpets
In this episode, we talk a pay homage to Will’s mentor by focusing on value and discipline, two things very much out of favor in the market at present. It is easy to see why as in the wake of five consecutive months of market gains, statistically the odds favor further appreciation. Moreover, even though valuations are high, historically valuation has proven a sub-optimal timing tool as it relates to near-term returns. With the Fed now more inclined to look more at weakening employment versus inflation, accommodative monetary policy seems supportive of valuation even at these elevated...
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Hot Pot Paranoia
Tea and Crumpets
In this episode, we talk a lot about the job market, which is anything but hot, and its implications for the Fed, which is under pressure. All of the below tend to support President Trump’s criticism of Powell being “too late”: weakening job growth this summer (only +22k jobs in August, mostly in health care). likelihood of significant negative revisions this week. unemployment that would be over 5% if not for lower labor force participation. Although unemployment is not an issue (yet), the risk in the labor market is a dearth of new jobs, with the odds of finding a job if you lose on...
info_outlineIn this episode, we talk a lot about the job market, which is anything but hot, and its implications for the Fed, which is under pressure. All of the below tend to support President Trump’s criticism of Powell being “too late”:
- weakening job growth this summer (only +22k jobs in August, mostly in health care).
- likelihood of significant negative revisions this week.
- unemployment that would be over 5% if not for lower labor force participation.
Although unemployment is not an issue (yet), the risk in the labor market is a dearth of new jobs, with the odds of finding a job if you lose on today only 45%, the lowest level in over 12 years. We believe that AI is having an outsized effect on job openings, especially at the entry level.
All of these factors, along with a shift away from a focus on inflation by the Fed, support the market’s consensus view of a rate cut being on tap for next week, with two or three more likely to follow in quick succession. Historically, this has been a positive for equity markets if (and that is a big if) a recession can be avoided. the Fed has cut rates after an extended pause (like the one we are in now) eight times in the last forty years; four times we avoided a recession, and markets gained, on average, around 15%. the other four times, we entered a recession, with markets typically experiencing a 10-15% drawdown. Although there are some parallels between now and the late 1990s, valuations are not quite as stretched at the top, with the median P/E of the top 10 stocks around 31x versus a 41x multiple in 1999. However, investor allocation to equites is now at 55%, above its prior peak in 1999.
We also discuss the reasons why, despite Fed rate cuts, the all important 10-year yield may not cooperate. Chief among these are the lagged impact of tariffs on prices and the relatively high (and growing) level of U.S. government debt. Will the U.S. be forced to suppress yields a la the bank of Japan in order to unlock the housing market, and is that what is causing tempers to flare between members of the administration?
Learn more about Formidable Asset Management, Will Brown, and Adam Eagleston by visiting www.formidableam.com.