Replay
Prepared Remarks
The “Insurance Blockade” in the Strait of Hormuz
Bianco argues that the media is misdiagnosing the surge in oil prices. He contends that the Strait of Hormuz is not physically closed by Iran, but rather “financially closed” by London insurers.
The Problem: Post-2008 capital rules (like Solvency II) require insurers to model “one-in-200-year” risks. The conflict designated the Strait a war zone, triggering these rules. Insurers literally don’t have the capital to write the policies, so they canceled them.
The Incentive: Shipping companies (who self-insure via P&I clubs) are actually profiting from this because global shipping rates are soaring. They have little incentive to rush back into the Strait until a “reinsurance blanket” (potentially from the U.S. government) is provided.
Market Outlook: Crude oil is in massive backwardation (spot prices are much higher than future prices). This suggests the market sees a temporary supply squeeze, not a long-term shortage.
Agentic AI: The “SaaS Killer”
Bianco believes we are in a second wave of AI—moving from “Generative AI” (chatting) to “Agentic AI” (executing tasks).
The Collapse of Software Costs: He shares an example of a user recreating a $24,000/year Bloomberg Terminal using “Perplexity Computer” for $200/month.
Threat to BDCs: Business Development Companies (BDCs) and private credit firms are at risk because they lent money to SaaS companies based on the idea that these companies had “moats.” Agentic AI allows individuals to recreate complex software by simply describing it, effectively destroying those moats.
The Beneficiaries: While the creators of software (Salesforce, etc.) are in trouble, the consumers of software (the rest of the world) will see a massive drop in their software bills, which explains why the broader market is outperforming the “Magnificent Seven.”
Federal Reserve and Inflation Divergence
There is a growing gap between how the public and the Fed view inflation, which Bianco believes will lead to a “hawkish” surprise.
PCE vs. CPI: The Fed’s preferred measure, Core PCE, is rising (estimated at 3.1%), while the “Normie” measure, Core CPI, is falling (2.5%). The Fed uses PCE, so they have “zero appetite” to cut rates.
The Vote Count: Bianco analyzes Fed sentiment and concludes that out of 12 voters, 10 are currently hawkish. He argues that Fed watching is now a simple “exercise of counting to seven,” and the votes for a rate cut simply aren’t there.
The “Labor Supply” Myth
Bianco addresses the weak payroll numbers (13,000 average vs. the old 150,000 average) by pointing to population growth.
Since immigration has slowed and the working-age population is barely growing, the economy doesn’t need 150,000 jobs a month to stay at full employment.
He argues that because the unemployment rate isn’t spiking and final demand remains strong, the labor market is actually in balance, further removing the pressure on the Fed to stimulate the economy.
| Indicator | Current State | Jim’s Take |
| Oil Prices | High Spot/Lower Futures | A financial/insurance bottleneck, not a military one. |
| SaaS Stocks | Underperforming | Agentic AI is destroying the cost-moat of legacy software. |
| Fed Policy | Hawkish Sentiment | No rate cuts coming; PCE is the only metric they care about. |
| Labor Market | Lower Job Growth | This is “Full Employment” given the lack of population growth. |
Q&A
Private Credit & “Gated” Funds
The “Gate” Feature: The speaker argues that withdrawal limits (gates) in private credit funds (like Blue Owl or Blackstone) are a feature, not a bug. They exist to protect the majority of investors from forced liquidations of illiquid assets.
Liquidity Reality Check: He reminds investors that if they wanted instant liquidity, they should have bought ETFs instead of private credit.
Saba Capital Tender: He highlights Boaz Weinstein’s offer to buy Blue Owl shares at a 25% discount, viewing it as a test of whether investors are truly panicking or if they understand the long-term nature of their investment.
The Impact of AI on SaaS Moats
Valuation vs. Future Risk: The speaker acknowledges a “realistic fear” that agentic AI could allow competitors to recreate expensive software (like Bloomberg or Salesforce) at a fraction of the cost.
Current Standing: However, he notes that these companies currently maintain strong cash flows and “moats.” Private markets price based on today’s cash flow, whereas public markets are already selling off in anticipation of 2027–2028 risks.
Shipping Rates & Insurance Tactics
Strait of Hormuz: The speaker questions why ship owners are staying out of the area despite still having active war risk insurance.
Market Manipulation: He suggests ship owners might be “playing the system” by intentionally creating a shortage to drive up shipping rates, rather than being motivated by the safety of their crews.
The U.S. Dollar
Contradicting Headlines: He dismisses recent magazine covers (e.g., Barron’s, The Economist) claiming the “reign of the dollar” is ending.
Safe Haven Status: He points out that as soon as geopolitical tensions rose, investors immediately rushed back to the dollar, proving it hasn’t lost its “exceptionalism.”