The Market Still Doesn’t Get It

The Know Your Risk Podcast episode 'The Market Still Doesn’t Get It' delivers a stark warning about the global energy crisis triggered by renewed hostilities in the Strait of Hormuz. Hosts Zach Abraham and Chase Boulard argue that the market’s failure to react meaningfully to escalating supply disruptions—despite oil prices rising, production losses exceeding 2 million barrels per day from Iran alone, and critical infrastructure like Fujairah being targeted—reveals a broken 'nerve response function.' They emphasize that the U.S. is not in control of the strait, that commercial shipping remains severely constrained, and that the market is ignoring fundamental realities in favor of artificial narratives around AI and tech earnings. The hosts draw a parallel to the VIX surge in early 2020, suggesting that oil markets are in a similar 'boring, convex' trade where reality will eventually force a dramatic repricing. They also highlight the cascading risks: collapsing inventories, inflationary pressures from food and energy, and the potential for a global recession if fiscal stimulus doesn't materialize. The episode closes with a call to trust fundamentals over market sentiment and to prepare for a prolonged period of economic stress. Key takeaways include: 1) The market is ignoring real-world supply shocks, especially in oil and agri-commodities; 2) The U.S. is not in control of the Strait of Hormuz, and the blockade is not working as advertised; 3) Inflation will be structurally higher due to supply-side constraints, not just demand; 4) The bond market is pricing in rate hikes, but the Fed may be constrained by inflation’s root causes; 5) Investors should focus on convex trades like long oil positions that benefit from delayed market recognition; 6) Consumer spending is under unprecedented pressure from rising prices across all goods; 7) Global growth is now at risk, especially without coordinated fiscal stimulus; 8) The narrative around AI and tech earnings is distracting from real economic damage. The hosts maintain a sober, urgent tone, balancing realism with strategic patience.