Last week was a very volatile week in markets, totally headline driven. Starting with the labor market. In February, we had a shockingly bad non-formance perils report... we got a loss of 90,000 jobs. On Friday, the market was still expecting some degree of jobs growth but what we got was far beyond anyone's expectations. 178,000 jobs created. But more importantly though, the unemployment rate ticked lower. The Fed's mandate is full employment and price stability. With the unemployment rate ticking lower, the market immediately priced in a more hogish path of policy.

Now we have very interesting research from the Fed helping us understand how the Fed could be looking at the labor market. The amount of jobs you create each month to maintain your unemployment rate has to have some link with your overall growth of your labor market. But what's happening now is because the Trump administration has been enforcing immigration law... and because boomers are aging... the labor force actually this year is expected to not grow at all. According to this research, the amount of jobs created each month that would maintain the unemployment rate is basically around zero. Even if we were to get a zero NFP print, that's not a cause for alarm.

The totality of the data still suggests to me that the labor market is weakening. One way you can see this is the steady deceleration in wages. If you look at the Jolts report, the number of job openings per person looking for a job continues to decline. If you look at where the job growth has been the past year, it's basically entirely been in health care.

Secondly, we have to talk about the ongoing war in Iran because it looks like we are steadily climbing Professor Pap's escalation ladder. A ground invasion of Iran appears imminent. The rhetoric it really has shifted to more of an outright destruction of Iran's industrial capacity. The president has been talking about sending them back to the stone ages.

Every time the US tries to have some kind of step down, the person they negotiate with, it gets killed by Israel. US and Israel are on the same team, but they have different goals. Yesterday Iranian air defenses shot down a fighter jet. A leaked intelligence report suggests Iran actually still has about 50% of their missiles.

If you look at oil prices, the ultimate tell here is that oil prices continue to trend higher. There's some interesting work done by some analysts that suggest that in the coming weeks that the oil market is going to hit an air pocket. Between the time the ships leave the street of Hamus to when they land at their respective ports that's a period of a few weeks. Next week and the week after it seems to be a time where we could hear an air pocket where there's no oil arriving from there. When that pocket hits you could have oil prices definitely react in a nonlinear way.

By all accounts the US is preparing some degree of ground operation in Iran. A ground invasion into Iran is basically a suicide mission. Iran is vast. It has a million man army. Reinforcements beget more reinforcements. And just like Vietnam, maybe one day you wake up and you have a sizable contingency there.

I hear some reports saying that guys, this is not going to affect the US because the US is energy independent. That is totally totally wrong. Oil is a global market. So in a global market when some regions have shortages then they will bid for oil in other regions. That pushes US prices up. And so at the end of the day, US consumers face higher oil prices. If you have a permanent decline in supply of oil, that is a global recession. The US will suffer.

One other note, it's about the quote unquote petro dollar system. Iran is receiving payment in R&B. The petro dollar system is something that is kind of more of a historic relic than something that's relevant today. Once upon a time the US and Saudi Arabia had a secret agreement whereas Saudi Arabia selling oil to the US receives dollars would reinvest those dollars into US treasuries... However though that system basically ended about a decade ago. The reason being that the oil countries really weren't making that much of a surplus. Saudi Arabia began to invest more of their surplus into their own country trying to diversify their economy. So that system is more of a description of what happened in the past than how it is today.

This morning the president tweeted out a 48 hour ultimatum to Iran. It looks like we're going to have further escalation. Remember US and Israel are nuclear powers. It's possible that Israel could use nuclear weapons. This is a very dangerous situation.