Episode summary
The Perfect Price of Oil | Animal Spirits 456
Animal Spirits
· · 1 hr 20 min · Hosts: Michael Batnick, Ben Carlson
Summary
The hosts argue that oil is still the dominant macro question, but they think the market is treating it with surprising calm. One host leans on the idea that oil is already low relative to the disruption risk, citing the view that if the current supply shock persisted, crude could move much higher. The other pushes back that markets usually overreact more often than they underreact, so the burden of proof is on the bearish thesis. They also note that inflation-adjusted oil is less dramatic than the nominal price suggests, which helps explain why stocks have not fully repriced the geopolitical risk.
That oil discussion spills into broader market behavior. They say energy stocks have been a standout winner since the 2020 bottom, while financials and some consumer-lending names look weak. The hosts see a lot of the market still being driven by AI and a narrow leadership group, but they also think broadening under the surface creates career-risk pressure for portfolio managers who had to own the megacaps.
The second half moves into AI, where they debate whether the technology is becoming a bubble or a durable new platform. One host argues the economics of compute may prevent a classic bubble, while the other worries AI may make society dumber if people use it as a shortcut. They also touch on housing affordability improving as wages outpace prices, and on private credit redemptions, where they think advisers and fund managers are increasingly stuck between investor pressure and long-term lockups.
Key takeaways
- The hosts think oil could justify much higher prices if supply disruption persists, but they say markets are still pricing in a quick resolution.
- They argue that inflation-adjusted oil looks less alarming, which makes the current market reaction easier to understand.
- Energy stocks have been a major winner since the 2020 bottom, while financials like Capital One and Ally are showing weakness.
- The hosts think AI may not be a classic bubble because compute is expensive and demand is already huge, but they worry it could make many users dumber.
- They say housing affordability is improving mainly because wages have risen while home prices have stagnated.
- They see private credit redemptions as a warning sign for advisers who sold illiquid products to clients without matching the time horizon.
Notable quotes
“the burden of proof is on you, not the market”
“Why are we why are we not and I'm serious here. Why are we not inflation adjusting oil”
“This feels like the subprime lending crisis. This feels like AIG”
“AI is not going to help you find your AirPod cases”
How the episode opens
On last week's talk your book, Chris Gallipo from Franklin Templeton talked about the market broadening beyond the MAG 7 with nearly 2/3 of S&P 500 stocks beating the index at the time. When leadership widens, opportunity opens up, but it only helps if you are positioned for it. That's where Franklin Templeton's active ETFs come in.
With more than 50 strategies across equity, fixed income, multiasset, and municipal solutions, the lineup is built to adapt as markets evolve. Backed by over 75 years of active experience, Franklin Templeton is your trusted partner for what's ahead. Learn more at franklinleton.com/active ETFs.
Before investing, carefully consider a fund's investment objectives, risks, charges, and expenses. You can find this and other information in each perspectus or summary perspectus if available at franklinton.com. Please read it carefully.
All investments involve risk, including possible loss of principal, Franklin Distributors LLC member FINRA SIPC. Welcome to Animal Spirits with Michael and Ben. Michael, one of the things that annoyed me the most in the post GFC years was that everyone was fighting the last war.
And so I you constantly were had a barrage of people predicting the next great financial crisis. This feels like the subprime lending crisis. This feels like AIG.
this feels like labor. So you had it was constant. It wouldn't go away.
And I feel like we finally reached escape velocity because now today's stuff that's going on it's co and liberation day. I feel like it's been replaced. It's replaced the GFC because the way that people are thinking now is there there's two lines of thinking about the current market, right?
One is this is February 2020. People have no idea what's coming. the oil markets are gonna explode higher to $200 a barrel and it's going to wreck the global economy and this is people are just way too
Complacent — Complacent about this, right?
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- oil prices
- energy stocks
- ai bubble
- bitcoin
- private credit redemptions
Companies and tickers mentioned
- DASH
- DoorDash
- Franklin Templeton
- Ritholtz Wealth Management
Watch the episode
Watch “The Perfect Price of Oil | Animal Spirits 456” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Animal Spirits
Animal Spirits, this episode and its artwork belong to The Compound. Octagon is not affiliated with the show; this page is an independent summary.
