There's an old saying about explosions: you see the flash long before you hear the bang. I've been thinking about that a lot lately.

Matt: "And we saw the flash on February 28th. You could see the flash, and you could see all of this happening, but there's no bang yet."

Six months ago, my worst case for the Strait of Hormuz was a couple thousand Marines landing somewhere and a bloodbath. I never imagined Saudi Arabia and Yemen at war and the whole thing spreading. Doug says the really worst hasn't happened yet.

Oil on the ground vs. oil on paper

North Sea oil trades at spot for $136 a barrel. The futures market has it in the $90s. Doug points out that the distillates from a $100 barrel now add up to about $200, "and that's what really counts."

To me that gap says something serious is changing. We're in a Fourth Turning, people are losing faith in institutions, and markets are an institution too.

Doug: "E- everybody has known theoretically that you could not trust politicians, but we always thought we could trust the price reporting mechanisms of markets. And that's being called into question, uh, at this point."

I can't help thinking the oil futures market has become one of Doug's self-licking ice cream cones, disconnected from reality.

Saudi Arabia is next

What happens when Saudi Arabia can't export oil and still has to import nearly everything it needs? It needs dollars, and the only thing it can do is sell Treasuries. Doug went a step further:

Doug: "And what happens when MBS, the current crown crown prince, is overthrown? And I think that that's almost inevitable for several reasons."

The princes he locked in the Hilton haven't forgotten, and Yemen turns out to have about 400,000 men under arms. Doug also flagged Egypt as the time bomb nobody is reading about, with Suez Canal and tourism income both at risk.