Israel-Iran Conflict Drives Oil Prices, Meta Monetizes WhatsApp, & Tron’s IPO Grift

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Speaker 10 Welcome to Profit Markets. I'm Ed Elson.
It is June 17th. Let's check in on yesterday's market vitals.

Speaker 10 The major indices rallied on the news that Iran wants to de-escalate the conflict with Israel, even as strikes continued. The Dow recovered nearly half of its Friday losses.

Speaker 10 The S ⁇ P advanced 1%, and the NASDAQ surged 1.5%

Speaker 10 as tech led the charge. Meanwhile, oil prices fell after spiking over the weekend.

Speaker 10 More on that in a a moment, and after hitting a record high Friday, gold fell 1% as investors retreated slightly from the safe haven asset.

Speaker 10 Okay, what else is happening? Oil prices were on the move after the conflict between Iran and Israel escalated over the weekend. The initial attacks by Israel sent oil prices up around 7% on Friday.

Speaker 10 Brent crude hit a high point of $74 per barrel, which is actually lower than the average for 2024, but it's still a lot higher than where it was about a month ago.

Speaker 10 The markets continued to waver, but then yesterday, after the Wall Street Journal reported that Iran is now signaling it wants to de-escalate this conflict, the price of oil came back down.

Speaker 10 It closed the day 2% lower.

Speaker 10 So this is a very serious and scary situation that is unfolding. And I don't think the story here is what's happening to the price of oil.

Speaker 10 The story here is obviously the war between Iran and Israel and what could happen if this war escalates any further. That is what matters here.

Speaker 10 And I'm also not here to give you any trading tips on how to play this conflict. That's not of interest to me.
I don't think it should really be of interest to anyone.

Speaker 10 But the reason the price of oil is worth paying attention to is that it does provide some worthy context on this situation that is quite difficult to pass out.

Speaker 10 And I think the question a lot of people have been asking is, how bad is this? You know, is this World War III? Is this the precipice of a nuclear situation?

Speaker 10 Is this war going to spread further across the Middle East and perhaps towards the West? Those are the questions that I have been hearing. And I don't know the answers to those questions.

Speaker 10 I'm not a geopolitical analyst, but I can look at the price of oil. And if you look at the price of oil today, the answer to those questions would be no.

Speaker 10 The initial jump we saw on Friday was quite scary, and it was a similar one-day increase to what we saw in 2022 when Russia invaded Ukraine.

Speaker 10 But unlike that invasion, where the price of oil continued to surge, what we have seen thus far is some moderation. This is the market telling us we're worried, but we're not that worried.

Speaker 10 The conflict remains relatively contained. Iran is still in quite a weak position.

Speaker 10 And even though Israel did target Iran's domestic oil facilities, its international export facilities, those are still intact and Iran can still participate in the global oil economy.

Speaker 10 So in sum, the market seems to believe that the situation is relatively manageable and it certainly does not believe that we have a World War III on our hands, which everyone was understandably worried about.

Speaker 10 Having said that, we don't know what's going to happen next. And there are huge tail risks in all of this.
I mean, Israel has proven it could cripple Iran if it wanted to.

Speaker 10 And if it decided to take that route, if, for example, it decided to attack those export facilities that I mentioned, then suddenly Iran would have a lot less to lose and the situation could spiral out of control.

Speaker 10 These are all very real possibilities. And I'm not going to predict what is or isn't going to happen.

Speaker 10 But if you look at the markets and if you look at the price of oil today, your best bet here would be that the situation is somewhat under control.

Speaker 10 Now, we wanted to find out more about this, specifically about how investors are pricing in all of this uncertainty.

Speaker 10 So our producer, producer Claire spoke with Rebecca Babin, senior energy trader at CIBC Private Wealth.

Speaker 12 The real tail risk here is that Israel pushes Iran to a point where they throw a Hail Mary and they try to start targeting shipping through the Strait of Hormuz.

Speaker 12 Iran exports 1.6 million barrels a day out of the 103 million we consume.

Speaker 12 If you target the Strait of Hormuz, that's 20 million barrels of crude and product that flows through there that could therefore be impacted.

Speaker 12 In that scenario, the math that people have done put crude at going to something over $100 a barrel, maybe $120 a barrel, if the Strait of Hormuz flows are actually impacted.

Speaker 12 This is a very low probability, right? This is why crude isn't reacting.

Speaker 12 The place you see this is being priced, and this might be really kind of in the weeds, is in the option market, crude oil options.

Speaker 12 People are buying those kind of tail hedge options to kind of hedge themselves for that event. And so those options have gotten very expensive.

Speaker 12 It's not what people think is going to happen, but the outside chance has gone from like a 1% probability to now people saying it's a 10 to 12% probability.

Speaker 12 In terms of Iranian supply, if we do see Israel hit those export facilities,

Speaker 12 like we're down today, we will absolutely rally.

Speaker 12 I think there will be a 5% to 10% rally on that, not only because it solidifies or crystallizes the fact that supply will be impacted, whereas right now we're just fearing that reality,

Speaker 12 but it'll also very likely lead to a significant next step and escalation.

Speaker 12 And we don't all know what that next step would be, but we know the straight of hormuz is the threat that Iran has already always used. So that's where the market's mind is going to go.

Speaker 12 So you would see a very significant reaction if that were to happen. There's a tremendous amount of uncertainty in terms of what they're targeting, how they're doing it.

Speaker 12 But as of right now, looking at it,

Speaker 12 it doesn't look like they want to go that direction. So I think something would have to change to make that happen.

Speaker 12 Most analysts would reference a significantly large amount of civilian casualties in Israel might be that red line that would push that type of action.

Speaker 12 And then the crude market, for sure, is not priced for that right now.

Speaker 10 That was Rebecca Babbin, trader at CIBC Private Wealth. Somewhat assuring, but as she says, still extremely uncertain.
So we will keep tabs on this.

Speaker 10 Meta is finally bringing ads to WhatsApp. The company announced yesterday that businesses will now be able to run what they call status ads on the app.

Speaker 10 Those ads will be displayed in the WhatsApp updates tab, which will be kept separate from your personal conversations.

Speaker 10 Meta will also start monetizing WhatsApp's channels feature with search ads and subscriptions. Meta shares rose 2.5%

Speaker 10 on that news. So a lot of people are a little upset about this.

Speaker 10 I think they're especially upset considering that WhatsApp's whole thing before they were acquired by Facebook was that they did not run ads.

Speaker 10 And that was 11 years ago when Facebook acquired the company for $19 billion.

Speaker 10 Now here we are, 2025, WhatsApp is running ads. And I get it.
You know, ads are annoying. No one likes them.
And if you're a power user of WhatsApp, you're probably not happy about this news.

Speaker 10 But if there's anyone out there who is surprised by this or shocked that WhatsApp would go against their word, all I would tell you is that you haven't been paying attention.

Speaker 10 Because if there's anything we've learned about the digital economy in the past 10, 15, 20 years, it's that everything will at one point or another be subsidized by ads, whether it's YouTube or recently Netflix or even Uber and DoorDash, which are, as we discussed in yesterday's episode, increasingly becoming ad companies.

Speaker 10 Both of those companies are estimated to have generated more than a billion dollars in ad revenue last year. So the way I would put it is that in 2025, there's no such thing as an ad-free lunch.

Speaker 10 And WhatsApp was never an exception to that rule, and it never was going to be an exception to that rule.

Speaker 10 They've got roughly 3 billion users around the world, half of which interact with that updates tab every single day.

Speaker 10 So by our very conservative estimates, this is going to generate nearly $4 billion in additional ad revenue for Meta. That's an annual increase of 3%.

Speaker 10 So this is a great and more importantly, easy opportunity for Meta. And it was never a question of if they were going to monetize.
It was always a question of when.

Speaker 10 Now, as it happens, our own Scott Galloway is parting it up at Cannes lions right now which is the mecca of the advertising industry perhaps he's learned something so let's check in on what's happening in camp

Speaker 4 scott how's it going it's going really well ed i'm here at the hotel de cap so yeah everything's great give it give us a little more of a view of what's going on at the hotel de cap that's probably the most famous hotel in the world not a lot going on here though the happening is the iHeart Media Party, which I did not get invited to, but I'm going to go down anyways and tell them I know Ed Olson.

Speaker 4 Oh, that would be nice.

Speaker 10 I'm surprised you didn't get invited to the iHeart party, considering you won the iHeart Award last year.

Speaker 4 How does that make sense? Yeah, it doesn't make sense, and I'm lying. Of course, I'm invited.
Anyways, let's talk about WhatsApp.

Speaker 4 So WhatsApp's, they're starting monetizing it. It's kind of shocking it took them this long.

Speaker 4 The revenue estimates will be overestimated because the places WhatsApp is strongest have the lowest monetization. And the U.S.
Meta gets about $70 a personal RPU.

Speaker 4 In the markets where WhatsApp is strongest, it doesn't get nearly that monetization. It gets a dollar to $5.
However, it'll be incremental revenue growth.

Speaker 4 It'll get analysts excited around the potential. You know, WhatsApp is, I think, is arguably the biggest messaging company or phone telecom.

Speaker 4 I would just hate to be ATT or Verizon right now in a world of WhatsApp. I find WhatsApp is actually more dependable than ATT and Verizon.

Speaker 4 And the thing that strikes me is Mark Zuckerberg has made two of the three or four best acquisitions in history. Instagram at a billion, probably objectively worth $200 to $300 billion now.

Speaker 4 And WhatsApp, everyone thought he was fucking crazy for spending $19 billion on WhatsApp, a company with nearly zero revenue.

Speaker 4 And that looked like it's probably going to add $100 or $200 billion to market cap if he were to suss it out.

Speaker 4 And this is going to be a great story for them in earnings calls.

Speaker 4 They'll be able to report huge increases in revenue on the WhatsApp division.

Speaker 10 Now, you are at Cannes, which is, I would call, the advertising mecca. You're at the heart of it all.
So what are the takeaways so far from Cannes?

Speaker 10 And specifically, what are these ad executives thinking with respect to Meta and potentially with respect to this new update from WhatsApp?

Speaker 4 I think the vibe is the same, and that is...

Speaker 4 We're in our 30s and 40s. We have good jobs.
We get to come to Cannes, and the oxygen is being sucked out of the room slowly. So let's enjoy it while we can.

Speaker 4 I don't, I mean, if you think about it, Public, which is really interesting, is kind of pulled away from WPP and Omnicom, and it's now worth 25 or 26 billion. So

Speaker 4 WPP is 8 billion. And I was at Salesforce today.
They have a new kind of, you can tell who's growing and who isn't. Salesforce has a beach now.
And their market cap is 250 billion.

Speaker 4 So Salesforce is worth quintuple five times what the entire ad industry, the traditional ad industry, is worth.

Speaker 4 And then down the beach, you have Meta and Alphabet who are worth five times what Salesforce is worth. So it's kind of like,

Speaker 4 it's kind of, you know,

Speaker 4 Can is what I'd call an extended last meal for the advertising business.

Speaker 10 Just pulse marketing.

Speaker 10 What share of people that you're hanging out with or meeting work for big tech,

Speaker 10 would you say? And has it increased since you were there, say, 10 years ago?

Speaker 4 Oh, there's no comparison. It used to be one in 10.

Speaker 4 Now it's one in three.

Speaker 4 And

Speaker 4 80% of the good parties are being financed or paid for by big tech.

Speaker 4 So, you know, let me put it this way,

Speaker 4 big tech might be only have a third of the people here, but they're definitely on top. They've really taken over.
It's just, it's just striking how over the last 10 years, how the world has changed.

Speaker 4 You know, I mean, whoever thought I'd be. hosting a podcast with a fucking 26-year-old.
Anyways.

Speaker 4 All right.

Speaker 10 Well, we'll let you go enjoy your drinks on the beach with iHeart. Sounds very fun.

Speaker 4 I'm WPP, your meta. You're 2008.
I'm 2008.

Speaker 10 I don't think that's true.

Speaker 3 There you go.

Speaker 10 Well, enjoy your night, Scott. Thanks for tuning in.

Speaker 4 All right, brother.

Speaker 3 Bonsoir. Take care.

Speaker 10 After the break, a crypto firm with ties to Trump is going public. Stay with us.

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Speaker 10 We're back with Profit Markets. Crypto platform Tron will go public in the U.S.
this year in a reverse merger with the publicly listed company SRM Entertainment.

Speaker 10 After the news was reported yesterday by the Financial Times, shares in SRM Entertainment surged 647%.

Speaker 10 Now, that is obviously significant given the percentage increase, but it's also not that significant considering the market cap of the company, which is still quite small at $155 million.

Speaker 10 But it's the context around this reverse merger that really matters here and that we should really focus on. And I'm just going to go through some of the details in that context.
So first detail.

Speaker 10 In 2023, Tron and its founder, Justin Sun, were charged by the SEC over allegations that they had sold unregistered securities and engaged in market manipulation.

Speaker 10 That investigation was dropped, however, four months ago when Trump took office.

Speaker 10 The second important detail is that last month, Justin Sun, the founder, attended President Trump's crypto banquet as he was one of the top 24 holders of the Trump meme coin.

Speaker 10 Justin Sun also invested $75 million into World Liberty Financial, which is a crypto company run by Trump's family.

Speaker 10 I will also note that President Trump personally derived $57 million in income from that company.

Speaker 10 The third detail, the investment bank that broke this deal, this reverse merger, is a slightly obscure boutique bank known as Dominari Securities. This bank is headquartered in New York.

Speaker 10 It is more specifically headquartered in Trump Tower, and even more specifically, headquartered on the 23rd floor, two floors below the Trump organization's office.

Speaker 10 A company filing also reveals two new appointments to the Dominari Securities Advisory Board, and they are Eric Trump and Donald Trump Jr. So that's the third detail.

Speaker 10 And the fourth and final detail, which is the most important, Eric Trump is expected to take up a role in this company, which will be called Tron Inc.

Speaker 10 So if the grift wasn't apparent to you before,

Speaker 10 let me just lay it out again for you now.

Speaker 10 A crypto founder who was charged with securities fraud and market manipulation, who then bought millions of dollars worth of Trump coin and world liberty, who then got his fraud charges dropped by Trump's SEC, is now going public in a reverse merger that was brokered by the bank that is advised by Trump's children and which will place Eric Trump in a leadership position of this new public company.

Speaker 10 I can't really believe it, but what I just said is a real and factually accurate sentence.

Speaker 4 That is actually happening.

Speaker 10 And it's sad for so many reasons. I mean, one of which is the fact that the president has now become this investment vehicle in which you can basically park money to flout and escape the law.

Speaker 10 And another is the fact that this type of bribery can actually make you a lot of money. I mean, it's not a coincidence that the stock ripped more than 600%.

Speaker 10 But the part that really upsets me is the fact that all of this grift is contingent on their going out and raising money in the public markets.

Speaker 10 It would be different if they were, say, going to Wall Street and pitching private institutional investors on all of their money laundering schemes.

Speaker 10 But the thing is, they know that that won't work because they know that the people on Wall Street are, frankly, too smart to buy into this bullshit. So instead, what do they do?

Speaker 10 They go out to the public markets.

Speaker 10 And this is what they've done every time because they believe that the only person dumb enough to hand over their money to them like this is a Trump-loving retail investor who thinks Eric and Don Jr.

Speaker 10 are the geniuses who are going to make them rich. That's who they're going after.

Speaker 10 And look, you can call me pretentious and you can call me rude for saying that, but what I'm telling you is that's what they think. That's what they believe.
And that's why they're doing this.

Speaker 10 And so anytime you hear these guys talking about how much, you know, they love the American people, how much they love their supporters, how they love the base, just remind yourself, remember what they really think of the base.

Speaker 10 Just think of how lowly you would have to regard these people to rip them off as shamelessly as they've done.

Speaker 10 And keep in mind the fact that while a handful of insiders, including Justin Sun, by the way, made more than a billion dollars dollars on that Trump coin, there are 600,000 other small-time investors out there who have lost almost $4 billion on this so far.

Speaker 10 So this is just another story of grift and corruption in Trump's crypto network. We've seen it all before, but look, you can lock in this very easy prediction from me right now.
It won't be the last.

Speaker 10 Okay, that's it for today. Thanks for listening to Profit Markets from the Vox Media Podcast Network.
I'm Ed Elson. I'll see you tomorrow.

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