Oil shock and debt spiral: how the Iran crisis hits portfolios

0:00Right now, something dangerous is happening to your money and it has nothing to do with the stock market. It started with a war, but the real damage, it's hiding in a place most people never ever look. Everyone's talking about oil prices right now, right? And yes, oil matters, but the oil price is just the surface. Underneath it, there is a $29 trillion mountain of government debt. And that debt is about to get much, much more expensive.

0:35And if you have a portfolio, a 401k, a retirement account, or any kind of savings at all, your money is sitting right on top of that mountain. That's what this video is about. Today, I'm going to walk you through a 3-step chain reaction. It starts with the Iran war. It moves through the global debt system and it ends inside your retirement account.

1:01I will show you each step. I will explain it in plain English and at the end I will give you a simple framework. 3 things you can do right now to protect yourself. Most people only understand step 1. The smart money is already acting on step 3. And because this training is so important, I've also put together a full workbook research document for you that walks you through every single step, including the sectors, the stocks, the ETFs, gold, and so on that may benefit from this situation.

1:37You can download that for free in our free community. Join well over 30,000 people in there. And there's a link down below to that. I think it's felixfriends.org/resource. It's a link down there, you just click on it and it'll show you a glorious research report so that you can really make sense of this because this is going to be a little information dense here.

1:56But the thing that no one's really talking about is that the governments around the world are trying to fix this crisis. But the way they're fixing it is actually making it worse. They're borrowing money at very high interest rates to pay for programmes that fight high prices. But the borrowing itself pushes prices higher. Think of it like this. Imagine you owe money on a credit card. The interest rate is really high.

2:24So what do you do? You open another credit card to pay off the first one. But this new card has an even higher rate. That is what the governments are doing right now. Except the credit card they're using, it has your retirement savings as the guarantee.

2:40My name is Felix Prehn. I'm an ex-investment banker and I've watched how the biggest players in finance move their money when systems come under stress. And what's happening right now is a pattern I've seen before. It happened in the 1970s. It happened during COVID but this time the numbers are bigger than anything we have ever dealt with.

3:03So here's how today's video training will work. I call this the oil to 401k chain reaction. It has 3 links. Link 1 is the oil shock and that's the part you already know about. Link 2 is the debt spiral and that's the part the media is largely ignoring. And link 3 is the very, very flawed fix and that's the part that should worry you the most. And then I'll give you the survival framework. 3 steps to actually protect your money.

3:30So let's start at the beginning. On February 28th, the United States and Israel launched a military operation against Iran. They call it Operation Epic Fury. They don't call these things wars anymore because that would need congressional approval. So it's just an operation. And they hit military targets, nuclear sites, leadership buildings, and Iran hit back. Missiles flew at Israeli cities. Attacks hit US bases in the Gulf.

3:55But the biggest move wasn't a missile. It was that Iran blocked the Strait of Hormuz, which I've got a drawing of here. But we can do one better than a drawing. We can see it live because I actually built a tool for this called Metal Minute, largely for you gold and silver investors. And you can see here what's going on and you can see all the important sites that are happening around it and all the news that's evolving around it. But you can also see the actual traffic going through it.

4:22And what you notice here is that there is bugger all traffic here, tons of ships here, tons of vessels here. And they're scared to cross through it because if they do and they don't pay, they get blown up. Right? So this Strait of Hormuz is this little bit here. It's a very narrow strip of water between Iran and the Arabian Peninsula and about 20 million barrels of oil pass through it on a good day. Now Iran shut it down and the result of course is that oil prices are going to the roof. $126 has been the highest level so far. Let's see what happens in the coming week.

4:57Now there's a direct ripple effect from oil to your gas prices. They're up to, I don't know, is it $4 or something in the US, follows $11, but 38% up since the war's begun. And but you see that's only link 1, that's the obvious part. Link 2 is where things get really dangerous and the news isn't really connecting the dots for you about.

5:19So before we go there, before I really break that down, which is the most important thing I think to understand right now, I want to invite you to something that will give you much better skills and tools than you are able to obtain in a 20-minute YouTube video. I'm going to run a live training on exactly how Wall Street, the smart money, selects stocks in this very environment we're in right now. It's going to be free. It'll be on Saturday morning New York time, 9:00 a.m., which is 2:00 p.m. London time if you're in the UK or the Soviet States of Europe.

5:54So if you want to join me for that, grab yourself a free seat. There are about 3,000 of them available. felixfriends.org/training I believe is the link. And again, it's down below in the description. You can just click on that and I'll help you understand how to apply the same rules Wall Street insiders have been using for literally 5 decades. That's how old this rule set is and it's still being used every single day. So 3,000 free seats. Grab yourself one of those.

6:21And let me show you link 2 because this is the part that changes everything. Because people think of oil and they think of the gas price, right? But they don't think of the food price, do they? Why not? Well, where do you think fertiliser comes from? The stuff that they sprinkle on your delicious vegetables. It's oil. Yeah. Oil is also used to power the trucks that brings you the food. Trucks deliver everything you buy.

6:46So when oil goes up, delivery costs go up. And that means the price of literally everything you order goes up. Oil is also used to generate electricity in many parts of the world. So electricity bills go up. So your electric bill could go up too. Or the people who are making the goods you're buying or the services you're buying, theirs is going up, right? Heating bills are going up. And as I said, fertiliser.

7:12That part of the world produces 30% of all fertiliser. Now why on earth we put chemical oil-based fertiliser on our food is absolutely beyond me but we do, right. And that fertiliser has to pass through the same ship lane here that you can see. And if you want to get access to our tools and community and data and everything else you can of course do that too.

7:43And I actually want to touch back on the gold side in a second because institutions were serious gold buyers the week before, they flipped again to gold sellers. And that's kind of an interesting thing that we are tracking here amongst many other things that we're tracking. So check that out. It's like $6 a week.

8:01But to understand that not just oil is blocked but also a third of the world's fertiliser. It means food prices are going to rise even more. And there are loads of other chemicals by the way that are necessary to make memory and computer chips, a lot of electronics and so on. So all the costs there are going to go up.

8:20So inflation means not just one price goes up, your gas bill, all prices across the board. And the Fed, the Federal Reserve, the goons who control the interest rate, their favourite inflation measure, they said it would be 2.4% this year, which is pretty good news for everybody. And now the war's come in and they've revised it up, and that happened before the worst oil spike just kicked in. So the real number is probably going to be a lot higher.

8:50And we're already seeing it. It's affecting real people. We see it in the data. The 401k contributions in the US just dropped from 9.2% I believe to about 8.9%. Doesn't sound like a big difference, but it's a really big difference because people are putting less money into the retirement because they need that money right now to pay for gas, to pay for food, to keep the lights on, literally.

9:18And even worse, 20% of workers took a loan from their own 401k last year. That is the highest number ever recorded. So let me put the links together here, right? Oil goes up, gas prices are up about 38% so far. But it is also food, it is electricity, everything goes up because oil touches absolutely everything. And that inflation that was meant to be under control again since COVID, first time your interest rates are meant to come down, you're giving the economy the boost it needed. Well, that isn't really happening.

9:55So what's the real second link here? Well, the Fed was supposed to cut rates, right? Lower interest rates. That was the promise. And everyone else was counting on that. Lower rates means what? Cheaper mortgages, cheaper business loans, more money flowing through the economy. But you see, lower rates also cause more

10:17Inflation. And when you are in a place where you already have more inflation than you want, you can't cut interest rates. So the Fed is stuck. If they cut rates, inflation gets even worse. If they increase rates, what do they do? They make the debt cost even higher.

10:38Borrowing is more expensive. Mortgages go up, businesses stop hiring, and the economy slows down. But the government also has to pay more interest on its own borrowing. So we get a recession. There really isn't a great place here. It's inflation or recession. They're trapped.

10:53And the Fed chair Jerome the money printer Powell, his term ends on May 15th. So on top of everything else we don't even know who will be making these decisions in a few weeks and what kind of decisions he's going to make. And then we have this, the number that connects everything. $29 trillion. That is how much money governments around the world need to borrow this year, just in 2026. That is double what they borrowed just 10 years ago.

11:25In the United States, the government debt is over $38 trillion and they add trillions to it every single year. Now, a lot of this debt was originally borrowed when interest rates were super low. They were like 1%, 2%, very very good to borrow at those rates. During COVID rates were like zero. So governments borrowed a ton of money and it was cheap to do that. But that debt does not last forever.

11:56It comes due. It matures. It expires. And when it does, the government has to borrow new money to pay back the old debt. Now the new money costs a lot more because interest rates are much higher now. So imagine this. You had a loan at like 1%, lovely and cheap, right? Now that loan's expiring and you need a new loan, but the new loan's going to be like 5%. So your interest cost is 5 times higher. Your monthly payment just got much bigger, but your income hasn't changed.

12:28That's what's happening to governments all over the world. We call it the debt wall or the trillion dollar debt wall. Old cheap debt needs to be refinanced at today's much higher rates. Not just an American problem, by the way. It's the same everywhere. UK, Japan, Australia, Europe, the whole lot of them. All irresponsible people spending money they don't have.

12:54So why should you really care about this? Because hasn't this been going on for a long time? I hear you. Well, you probably own some bonds, right? Especially if you are in some target date funds or something like that. They usually have 30 to 40% of your money in bonds. And the one rule you need to know and please write this down. When interest rates go up, which is what we're seeing right now, what happens? Bond prices go down.

13:21So that 30, 40% of your money in those bonds is a problem. It's going down. It's not an opinion, by the way. It's a math fact. They move in opposite direction. Higher rates, lower bond prices. It's a bit counterintuitive, but that's the way it works. So when this Iran crisis pushes inflation up and the Fed can't cut rates and government borrowing costs rise, the bonds in your portfolio lose value.

13:48But it doesn't just stop there. Government borrows more money. What does it do? It sucks up capital. There is less money available for companies to borrow. Slows down business growth. It hurts corporate profits. Pushes stock prices down. Now I have your attention, right? Higher interest rates also mean mortgage rates go up. People buy fewer homes. They spend less. Companies make less money. Stock prices fall again.

14:13So your portfolio, your 401k gets hit from both sides. The bonds lose value, the stocks lose value. It's like being squeezed from the left and right at the same time. And that is part 2. And that links straight to part 3, which is the most important part of this video.

14:29Here's how governments around the world are currently fixing the higher inflation problem. Governments in their infinite wisdom are doing what? They're borrowing money at say 5% interest. And then they're using that money to pay subsidies to lower your energy costs. Now, where do those subsidies go? Well, they go to oil companies indirectly.

14:57And what's the actual outcome of this madness? Well, you get more debt now because you have to sell more debt. You have to convince people to buy the debt. Therefore, you have to offer them higher interest rates. Now, with higher interest rates, what do you do? You depress the economy. So therefore, the government is going to stimulate the economy and they're going to do that by borrowing more money to pay more subsidies to you, companies, everybody to just keep the economy alive.

15:29That then causes profits to go to companies who are financed through higher debt and through higher rates, which again destroys the economy. So it goes round and round and round in this vicious circle of just destroying the economy. So when you're getting that rebate check or there's a cap on your energy prices you think, woo, right, great, power to the people. But the government gets that money from where? Borrows it.

15:56Right now borrowing is very expensive. So government is borrowing at the high interest rates to fight high prices. The borrowing makes the debt bigger. Bigger debt pushes interest rates higher. Higher interest rates make the next round of borrowing even more expensive. It's a loop. It's a doom loop, right? You borrow to subsidise and subsidies grow the debt and the debt pushes rates higher and higher rates make the next crisis worse. So you need more subsidies which means more borrowing.

16:24You see where we're going with this, right? Yes. All right. Let's stop it right there. And we've seen this. Go back to COVID, right? Stimulus checks, business loans, wage subsidies. What happens? Government debt explodes. Inflation hits levels we hadn't seen in 40 years. Took years to bring it down. Now we'd almost brought it down. The same approach is being used again.

16:42So, who actually benefits from this? Somebody always benefits, right? Well, we got a slide on this. Fancy. The top 10% own 93% of all stock. That's a Federal Reserve figure. I didn't make that up. So, when the government subsidises your energy bill, the money goes where? Goes to the companies that sell the energy and the companies, who owns them? The top 10%, right?

17:09And I'm not a socialist if you're under that impression. Quite the opposite. The wealthiest 10% of people own 93% of the stock market. So when the government borrows money in your name to pay the oil companies so you can afford gas, the profits from those payments flow to the people who own the shares of those companies, which is again the wealthiest people in the country. Debt goes higher and higher to fund the subsidies. And that debt stays on the government books and eventually gets paid through high taxes, inflation, or government cuts. Probably just higher inflation.

17:40So, who pays for the higher inflation? It's not a conspiracy theory. It's just fact. Well, you do. It's very simple. Shareholders get richer. The working man gets poorer. And before you start burning down Wall Street, that's not what I'm encouraging at all. I'm just saying you have a choice to make.

18:02You can be an asset owner, which is somebody who owns shares for example or gold or any other real estate or something like that. Or you can be a salaried man as they call them in Japan. These people get poorer. It's the system. It is not a side effect. It isn't an accident. It is the exact system we live in. And the asset owners get richer. It is literally a choice.

18:30Now you might be thinking, but I'm a salaried man or maybe woman. So what do I do? Well, take your salary and buy assets with it because that way you become an asset owner and that way over time you get richer and richer while your salary becomes less and less of part of the issue.

18:49And that brings us to our survival framework for this. There are 3 parts to this. Part 1 is follow the green stuff, the money. And if you really want to dive deeper into that, make sure you join me on Saturday because I'll spend like 2 hours with you on that. And 2 is you got to find your pressure points. Don't worry, this will not end up in a massage. And then number 3, you want to position before the crowd of the unwashed masses.

19:22So you understand already the chain reaction. You understand that oil shocks lead to inflation. Inflation leads to debt spirals and the government's fix to make this is going to make the spiral worse. So the question is what do you do with your money? So let me give you the 3 step oil shock survival framework. And this isn't just for this crisis. You can use this mental model in any kind of energy crisis.

19:46So we follow the money. How do we do that? Well, one thing is we look at price divergence. And you can look at that in the silver market for example where institutions have almost stopped selling which is kind of interesting to see. But just look at the Shanghai premium for example. They're paying 13% above the paper market for physical silver. And the same is true in the oil market for example. People are paying far more for physical oil than the actual paper prices.

20:12So we got to follow where the money is moving. And the institutional guys are moving into very specific plays. Commodities, energy stocks, silver. We're seeing here gold, last week there seemed to have been a significant seller, the week before they were buying a lot. So again watch other metals. So you want to follow literally the flow of the money and I'll teach you that, not right now because I'm going to make this video an hour long, it would be silly. But you don't want to follow the headlines, right? The headlines usually tell you the story far too late.

20:42Unless you go to a particularly good data source. And then secondly, the pressure point audit is very simple. This is part two. So part one is follow the money. Part two is what percentage of your money is in bonds, right? Because they're getting hammered with high interest rates.

21:01Are you in target date funds? Do you have a variable rate mortgage? I know most Americans don't, but some people will. And what percentage of your spending goes to things like gas and food which are going to get hit fairly hard by inflation? Do you have 2 or 3 months of expenses in an emergency fund? Right? That's very important.

21:22Those are your pressure points. And do you honestly know what's inside your 401k? Most people don't. They just picked some fund years ago and they never looked at it again. Right? So you might be losing money you don't even know about it. So here's what I want you to do tonight. Log on to your 401k account. Find that bloody login, right? Look at what you actually own. What percentage of stocks? What percentage is in bonds? What is in cash? And ask yourself, is this the right approach?

21:46And then 3, and this is where it becomes fun because this is where we get a lot more positive and proactive about it. This is the position before everybody else does approach. And again, we'll break that down in a lot of detail on Saturday. So what are the rules here? There's some simple ones. The first one is don't panic, right? You panic, you definitely lost. So panic is not something we're encouraging here.

22:08Markets tend to reward patience, but they also reward smart activity. So you might want to think about rebalancing. That means adjusting what you own. Again, I'm not a financial adviser. I'm not telling you what to buy or sell, you have to come to a conclusion yourself. But maybe you want more exposure to commodities. Maybe that's too volatile for you. Depends on what you already own.

22:29Maybe it is metals. Maybe it is quality stocks. Why? Because quality stocks are typically less impacted by inflation. What do I mean by quality? And we got a tracker on this. You can literally look at every market in the world and you just click on high quality. Again, it's not a buy recommendation, but you can see, and we've got English stocks in here. Dear Lord, help us. Let's look at American ones.

22:55No offence to my formerly great friends. Now you're just Britain, right? You're looking at stocks with high margins. Stocks that when they invest a dollar, they're getting back a lot, right? Stocks with low debt levels. And those are the kind of companies that'll typically be able to survive the apocalypse or whatever else is coming.

23:17And inflation hedges. Again, metals, we talked about gold a bit. That's something to look at. You want to have definitely a buffer. You want to have 2 to 3 months of money you can access quite easily. Why? Because look, if this gets worse and the market dives, you don't want to tap into your retirement account and sell something at the worst possible moment just because you need to pay the bills, right?

23:40But the people I listen to here at the moment is the oil industry. Why? Because they care about the environment and penguins. But now the oil industry is saying it's going to take 3 to 4 months to return to full production or near full production once the war ends. So this is not something that's gonna end with Trump going mission accomplished again, right?

24:04So if these things get worse, most people will panic and they'll rush in with fear of missing out and things get better. And both of those are emotional reactions and both of them typically cost you a lot of money. If you have a plan now, you can be the kind of person who acts calmly while everyone else reacts emotionally.

24:24And if you understand that framework, you follow the money, you find your own pressure points, deal with those first, position before the crowd, and you come and join me on Saturday, spend 2 hours of me teaching it to you, you'll be in a much better position to come out of this war smiling.

24:42But let's just put it all together. The Strait of Hormuz, that little oil bit of the world, carries 1 in 5 seaborne oil barrels. That's why oil is higher, right? Gas is up 38%. And that oil shock pushed inflation higher. The Fed is trapped. They can't cut rates now. Government borrowing costs are surging, right? $29 trillion needs to be borrowed just this year at much higher interest rates.

25:12And then therefore your portfolio which holds bonds and stocks gets squeezed from both sides. That's the second part we discussed. And then governments are responding in the only way they know how, by borrowing even more money to subsidise the crisis. But that borrowing makes the debt burden even higher, pushes rates higher. It creates a loop that feeds on itself. And the only people who benefit from this are the smart shareholders, the wealthy.

25:36Right? So once you understand that chain reaction between oil shock, debt spiral, the flawed fix, it gives you a framework now of how you follow the money, you watch where institutional capital is moving and you pay attention to the gap between the paper and the physical oil and metal prices and all those important things that we always talk about here. And make sure that you are going to be calm going into this. Start positioning before the crowd, rebalance calmly, and build that cash buffer to make sure that you can survive whatever is happening.

26:11If you want to go deeper on this and you're serious about investing, come and learn with me how Wall Street insiders are picking stocks right now. And join our free live training this Saturday, 9:00 a.m. Eastern time. That's 2:00 p.m. London time. 3,000 free seats available. Once they're gone, they're gone. Go to felixfriend.org/training. Links down below in the description.

26:35If you got some value from this, share it with a friend who might get some value from it too. And I wish you all the best. Wall Street's panicking, and most Americans have no idea why. Japan's debt just collapsed, and it's about to hit your portfolio harder than you think. Right as I'm recording.