DEBATE | Michael Pento vs Adam Parker: What Comes Next After The Iran War Ends?

**Adam Taggart** (0:10)
And we should be live. Welcome to Zero Hedge Debates, folks. I'm Adam Taggart, founder and host of the Financial Podcast Channel, Thoughtful Money, and I'll be your moderator for the evening. Tonight's debate topic is the post-Iran War economy. Hopefully, a negotiated resolution to the Iran War happens within the next few weeks or month.
But if indeed so, well, folks, what comes next? What will happen to the price of oil and other key Gulf commodities like natural gas, fertilizer and helium after the Strait of Hormuz reopens?
Will they plunge or will the damage done so far to world trade keep prices elevated for longer than many expect? What about the economy? Will it be able to shrug off the effects of the conflict or is there a wave of demand destruction that can't be prevented at this point? Is a recession likely or not? To unpack for us, we've got the great good fortune to be joined by Money Manager Michael Pento of Pento Portfolio Strategies and Researcher Adam Parker, CEO and Founder of Trivariate Research LP. Gentlemen, thanks very much for joining us this evening.

**Adam Parker** (1:16)
Thanks for having me.

**Michael Pento** (1:17)
Great to be with you guys.

**Adam Taggart** (1:19)
All right. Well, look, I know Michael Pento very well from having interviewed him on my channel over the past several years. Adam Parker, you and I are meeting for the first time here. Very excited to get to hear your insights here. I told you before we get on here, it's a little weird for me because my middle name is Parker, but I'm somehow going to get used to that.
We're going to talk for the next hour or so. We'll hold to that loosely in case this conversation wants to go a little bit longer, and you gentlemen can still stay around. If so, we'll try to take a few questions from the live audience, but I've got a bunch of ones already prepared for you here. Let's start with the top one here, which is assuming that the Strait of Hormuz opens tomorrow, how severe is the damage that's already been done, and when do you think it'll show up in the economy?
Adam Parker, since you're the new guy here, let's start with you.

**Adam Parker** (2:07)
Well, it's funny. I really don't think much about the economy, so meaning like, all right, I'll go a little crazy and say, I don't really think economists know what already happened, forget what's going to happen, so I don't really rely on economists. When I worked at Morgan Stanley, there were 44 economists working there. I thought the correct number they should have was a lot closer to zero, maybe like four.
So, and the reason I'm doing that, I say that is like, I think 30 or 40 years ago was a very respected kind of Bachelor of Science degree, but now I think it's, I mean, I can use any of the basic kind of AI tools to get a summary on the economy in one second and get facts, and then two, the correlation between the equity market and stock returns, I mean, the stock market predicts the economy, not the other way around.
So I don't really think, I think economists should be using stock prices to predict things, not the other way around. And then lastly, like economics and stocks are completely, economists want to raise their GDP, so they want higher capital spending and lots of hiring so they can raise their GDP, but I'm sure Mike will tell you if he owns a stock and they surprise him with tons of capbacks and tons of hiring, he's probably not super excited about the margin profile on the multiple. So I don't really think about the economy. I'll take the tenor of your question of like, where are estimates more achievable and less achievable because of sustainably higher oil and when will that appear in the earnings and revisions? And in that light, I'll say, I'm most negative on staples and discretionary consumer and select industrials where I think there's just going to be rising input costs that aren't in the prices and I think stocks go down when they miss. Our biggest observation, and then I'll pause, is just the penalty for missing has been way, way harsher than the award for beating. And so that's why I care. I care that the earnings could be too high for companies that have high exposure to input costs on oil derivatives.

**Adam Taggart** (4:07)
Okay, Michael, I'm going to come to you just a second, just to stick with you for a second, Adam Parker.
So if market prices are all that matter, market doesn't seem too worried at this point, right? We're back at all time highs, right? So do you think that that is, as best you can tell, the right pricing or are you concerned that the market isn't pricing in some of these shocks from the oil price shock?