FOXES & HEDGEHOGS (Guest: Jacob Shapiro)

Jacob Shapiro, head of research at Bespoke Group, discusses the shift from a unipolar world dominated by the U.S. to a multipolar landscape with various rising and falling powers. He draws historical parallels to the 1890s, suggesting a complex geopolitical environment rather than a simple U.S.-China competition. Shapiro reflects on his journey from academia to geopolitical analysis, emphasizing the immediate feedback from markets that enhances his analytical capabilities.

He introduces the concept of "foxes" and "hedgehogs," explaining that foxes adapt their views based on new data, while hedgehogs cling to singular narratives. He stresses the importance of recognizing mistakes and adjusting quickly in analysis, citing his experience with the Russian market prior to the invasion of Ukraine. Shapiro advocates for a flexible approach to analysis, emphasizing that politics is constantly evolving and that claiming absolute truths is an act of hubris.

The U.S. is losing its ability to dictate global terms, with countries moving away from the dollar in response to U.S. trade policies. This shift indicates a transition to a multipolar world, accelerated by current U.S. government actions. The speaker questions the wisdom of immediate political resolutions, suggesting that the perception of the U.S. as a permanent dominant power is changing. The Trump administration has hastened changes like inflation and yield curve control, which were previously thought to be years away.

Shapiro highlights that in a multipolar world, relationships are based on interests rather than permanent alliances, aligning with George Washington's advice against permanent allies. He notes that the U.S. emerged victorious in the Cold War, but as China grew economically, its interests began to diverge from those of the U.S. The conversation emphasizes the need for more transactional relationships, as increased trade can coexist with intense competition.

China's limited alliances contrast with the U.S.'s extensive network, raising questions about NATO's relevance. The speaker reflects on the inevitability of multipolarity, suggesting that while Trump may have accelerated this trend, a return to a unipolar world is unlikely. The COVID-19 pandemic illustrated the rise of multipolarity, as countries acted in self-interest rather than uniting against a common threat.

Investment strategies in this multipolarity context include a shift away from viewing U.S. and allied investments as inherently safe, with rising powers like Mexico, Brazil, Turkey, and India identified as promising opportunities. Shapiro expresses ambivalence about India's future, uncertain whether it will rise as a power or face collapse, while highlighting Mexico's appeal due to nearshoring and its skilled labor force.

The conversation also touches on Turkey's economic resilience and Brazil's potential as a regional leader, emphasizing the importance of technology and energy in geopolitics. Shapiro shares insights from his role at Bespoke Group, balancing macroeconomic analysis with specific investment inquiries. The discussion includes recent jobs numbers, market reactions, and the implications of immigration on economic growth.

The podcast concludes with a focus on various investment strategies, including gold options and the outlook for crude oil and natural gas markets. The conversation reflects on the dynamic nature of global markets and the importance of adapting to changing geopolitical landscapes.