Bulwark Takes - The Global Economy Is Literally Being Choked (w/ Sal Mercogliano)

Episode Date: March 21, 2026

Andrew Egger and maritime history and shipping expert Sal Mercogliano take on the rapidly escalating crisis in the Strait of Hormuz—and why it’s far more dangerous for the global economy than mos...t people realize. As Iran tightens its grip on one of the world’s most critical shipping chokepoints, up to 25% of global trade is being disrupted. Tankers are stalled, crews are stranded, and energy markets are already feeling the shock.Watch more of Sal’s videos here: https://www.youtube.com/channel/UCT_yBgKSiwb3WP4ACPnF5nAText TAKES to 64000 to get a FREE pocket pivot and their 10-pattern sprayer with the purchase of ANY size Copper Head hose. Message and data rates may apply.

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Starting point is 00:00:50 holy hazelnut asai bowl, and nutty booster ball. All made with rich, creamy hazelnut spread. Try them today. at booster juice, Canadian-born, blending since 1999. Hi, guys, this is Andrew Eger with the Bullwork. Welcome to Bullwork Takes. If you had not heard of the Strait of Hormuz before this month, you probably have now. Iran's choke point on this passage, which is what connects the Persian Gulf to the Gulf of Oman and beyond that to the Indian Ocean, it's been responsible for not all, but most of the economic disruption that we
Starting point is 00:01:17 have already seen, just three weeks into America and Israel's war on Iran. You've almost certainly heard that much, but this is really one of those stories that kind of it gets crazier, the closer at it you look. So to walk us through some of the ends and outs of the Strait of Hormuz Crisis, I am very pleased to be joined by maybe the best guy there is on this subject. Sal McCogliano, he is a historian. He's a former merchant mariner. He's a professor of maritime industry policy. And you may perhaps have stumbled upon him recently or a while ago on his YouTube show, what's going on with shipping, which I have been a new convert to for perhaps good reason just this week as we have been weathering this particular crisis.
Starting point is 00:01:56 So, Sal, thanks for coming on to the show. Andrew, thanks for having me, a big fan of the bulwark. Oh, that's so nice of you to say. Why don't you just start by setting the table for us here? What does normal peacetime function look like in the Strait of Hormuz? Who's going through there? And why is it important for the economy? Yeah, so Strait of Hormuz is a classic maritime choke point,
Starting point is 00:02:15 a little narrow pinch in the ocean where commerce and trade. So it's not the busiest place on the planet. You know, that's the English Channel, the Strait of Malacca, the Taiwan Strait, but about 135 ships a day go through there, big energy ships. We're talking about tankers, liquefied natural gas, liquefied petroleum gas, ore carriers, you name it. It's just a mesh. About 25% of global trade goes through this narrow little choke point.
Starting point is 00:02:44 And what we've seen happen is that choke point has gotten choked off. Yeah, so let's talk about that. In the opening days of the war, I mean, it seems like this dawned on the president very quickly. And of course, you know, this is something they had. had in the back of their minds in the event of possible war with Iran forever, that this is something Iran could, in theory, do. Very quickly, it became clear Iran was grinding all traffic to a halt through this straight. In the last week or so, though, that story seems like it started to change of it. More vessels are making it through. The problem is it's mostly the ones that Iran wants to let
Starting point is 00:03:15 through. Can you talk about kind of the new status quo that Iran is sort of imposing on the straight in the last few days here? Yeah. So, I mean, we had a kind of shutdown. with this. And again, we went from 130-something vessels going through the just, you know, single digits in some cases until a complete stop there for a brief period. And right now what we're seeing is that countries are going to Iran. We're hearing about China, India, Pakistan, maybe a few others going to Iran and getting kind of permission to run their ships through. And what we're seeing is ships sailing out of the Strait of Hormuz, but not through the normal strait. There's a what we call a traffic separation scheme, right down the middle of the straight. It's kind of like a highway where you go to one side,
Starting point is 00:03:59 just like a center divider. But instead, these ships are routing all the way up into Iranian waters between two islands and then coming out through Iranian territorial waters. And that tells us that Iran is basically inspecting these ships, clearing these ships, and we actually suspect they may be paying to go through, maybe as much as $2 million a ship to go through. And what basically has happened here, one of the objectives for the Trump administration was to, to ensure that Iran doesn't control the straight-of-hor Moos? Well, Iran controls the straight-of-hor Moos now. They're controlling who's going in and who's coming out. This is one of the things that has just completely boggled my mind, because by every indication that we have, I mean, it is actually true
Starting point is 00:04:38 that militarily, you know, we have a real stranglehold on on the straight right now, on Iran right now. I mean, we really do, we are actually exerting military supremacy, basically, over that whole region. We're flying wherever we want to. We're hitting the things that we want to hit. And yet, Iran has much more economic control over the traffic through that straight than they have ever had in the past. I mean, what's the, what's the disconnect here? Why is this like weird asynchronousity the way it is right now? Well, I would say two things. Number one, the Trump administration has a series of objectives. And unfortunately, keeping the straight open is toward the bottom of that list of objectives. And even though we have an impressive military force over there, we don't have enough to do
Starting point is 00:05:19 all those missions concurrently, especially in the case of escorts. I mean, there's just not enough vessels in the U.S. Navy deployed over there to do it. And plus, we've been kind of sandwiched with past 20 years of poor shipbuilding programs. We haven't gotten the right mix of vessels. We've got some very good high-end vessels like Arlie Burke-class destroyers, but they're $2 billion a piece and we don't have enough of them over there. On the flip side of that, Andrew, one of the things we've seen since 2022 in the Black Sea and 2024 in the Red Sea, you don't need a Navy to exert an anti-ship campaign. The Ukrainians have demonstrated this. against the Russians with absolutely no Navy, and the Houthis have done it against global shipping
Starting point is 00:05:59 for the past two years. So even, you know, what Secretary Hedgeseth says is, you know, we're going to give the Iranian Navy their half, the bottom half, doesn't matter, because you don't need a Navy. It's just a threat, either unmanned aerial or uncrewed surface vessels, drones, even the threat of mines, for example, is enough to cause havoc among shipping. And that's exactly what we're seeing. Over 20 ships have been attacked so far since March 1st. Yeah. Can you actually explain? expand on that a little bit about what the specific logistics of what Iran is using to keep the straight bottled up are and why it is that, you know, it's difficult for at least the sorts of military
Starting point is 00:06:35 pressures that America has brought to bear so far to prevent that. Yeah. So what we see the Iranians using is kind of a variety of weapons. They really haven't brought the one we think they were going to bring into full bear, which is their missiles, they're either guided missiles or ballistic missiles. We think because the U.S. has done a good job in basically targeting them and really knocking them out. They have basically focused on them. We think maybe one or two ships early on were hit by something like that. The vast majority of what we see them using are these unmanned aerial vehicles, kind of the Shaheed drones, which are these big, huge kite things, with basically a moped motor on the back of them. And then unmanned surface vessels, which are
Starting point is 00:07:13 basically remote control speedboats that they literally drive out with a human crew on board, they get close to a vessel, hop off, and then remote control them almost wily coyote into the side of a vessel. But it's effective, and we're seeing that. Unfortunately, we've seen at least eight merchant mariners killed. Several ships, you know, not sunk, but extremely damaged that we had a burnt out tanker off the coast of Basra. In Iraq, we had a Thai balker, lose three crew members with an engine room fire. So I would argue that one of the things that the U.S. Navy is prepared to do is like kind of counter, you know, the flock of geese coming at you. They're good to shoot down the flock of geese. What the problem is, is the Iranians aren't coming with a flock of geese. They're coming
Starting point is 00:07:55 with a horde of gnats. And the gnats can get everywhere. They're really hard to hit. And it's almost impossible to get all of them. And that's what we're seeing right now. Yeah, that's a great analogy and kind of a horrifying analogy at the same time. When it comes to, you know, the maybe there's a silver lining here. Maybe it doesn't count as a silver lining. The fact that they have actually, you know, sort of succeeded in destroying a lot of that missile capacity and things like that. I mean, presumably it is worse for one of these giant vessels to be hit by a cruise missile than to be hit by, you know, basically a speedboat driving into the side of the thing. But perhaps it's not really like a meaningful difference when it comes to just sort of the risk assessments for these for these
Starting point is 00:08:35 boats. I mean, like, is it basically the case that as long as Iran can do any of these things, the vast majority of these ships are just not going to not going to risk it? Is that basically the situation we're looking at here? Yeah. So, you know, I was very critical of both the Biden and Trump administration when they did the Red Sea operations. A Biden administration did it early in 2020, uh, three in 20204 when the Red Sea shut down and you had Operation Prosperity Guardian and Poseid and Archer where they attacked the Houthi. And then later on, President Trump did Operation Rough Rider. And one of the things we found out was, first of all, the U.S. military is really good at shooting down drones and missiles. And they, you know, had almost a near perfect record of doing
Starting point is 00:09:14 that. The problem was the U.S. military considers a 99% success rate, you know, a mission kill. It's great. It's slam dunk. If you tell a military guy, you got a 99% chance of success, they're going to do it in a minute. If you tell a commercial shipping guy, there's a 99% chance you're going to get through. What they hear is there's a 1% I'm not going to get through. How do I minimize the downside of that? That's my concern. And, you know, if I'm on a liquefied natural gas carrier, which is carrying natural gas at minus, you know, 250 degrees Fahrenheit. And you're going through and you get hit by one of these weapons. You're basically on a floating bomb.
Starting point is 00:09:50 And, you know, that's not really where I want to be. And what I need is security. I need to be ensured that that 1% isn't getting through, but it's so hard to ensure the 1%. This episode of Bullwark Takes is brought to you by Pocket Hose, the world's number one, expandable hose. Old-fashioned hoses get kinks and creases at the spigots. with copperhead's pocket pivot swivels, 360 degrees for full water flow and freedom to water
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Starting point is 00:11:31 But just on that topic, one thing I've been really struck by listening to your show this week is, obviously, it's, it's easy for everybody to kind of think about, you know, the hit to their own pocketbooks, you know, sitting here in America from all of this stuff that's going on. But just the human element of the people on the ships. I mean, there are a lot of people, hundreds, thousands of crews is my understanding, sort of bottled up in the Persian Gulf right now who can't dock and they can't leave. I mean, can you just talk about what the kind of situation is on the ground for all of these crews right now? Yeah. I mean, it's so easy to be very abstract when we talk about war and not talk about civilians in Iran and what they're going through. But,
Starting point is 00:12:07 On board ships, and it's the thing I've been talking about a lot because I've been talking to some of the crews out there, you know, we estimate the International Maritime Organization has estimated 3,200 ships in the Persian Gulf with about 20,000 seafarers on board. And I received a note from one seafarer who talked about an encounter with a ship that they had a problem on board. Their water maker, their purifier was out. And the ship was out of water. I mean, they just literally out of water. And they were begging to go into port to get water and the port refused them. They didn't want them in port because they didn't want a target coming in.
Starting point is 00:12:37 And this mariner along with others out there telling me, listen, we came in here three weeks ago. We're 22, 23 people on board. We don't have enough food. I mean, we just don't have enough food because we're running low on stores. We replenished when we go into port. We get, you know, how often do you go to the grocery and get food, you know? And, you know, you prepare for long voyages, but you plan on resupply at periodic points. Ships are running out of fuel.
Starting point is 00:13:00 I mean, they're just running out of fuel. And the concern here is a humanitarian crisis that goes on. they're starting to call themselves the yellow fleet. And the reason they use that term is back during the six-day war, back in 1968, when the Suez Canal closed, there was a fleet of ships that got stuck in the Suez Canal. And they were there for years. And the ships turned yellow from the dust. And they're worried about becoming a new version of that stuck inside the Strait of Hormuz kind of corked in the bottle. I mean, it's just such a crazy situation. Let's talk a little bit now about the exception to the rule, which are some of these
Starting point is 00:13:36 ships that we have started to see get through apparently on, you know, with the blessing of Iran. And these are ships that are, you know, either Iranian ships themselves or they, they are, they're flagged by Iranian allies. And it does actually appear that Iran is just sort of has carte blanche and who gets in and who gets out and they've actually begun to, to, you know, operationalize that in the last few days. Obviously, you know, you don't need that much material to stop all these other ships from getting out. But that cuts both ways, right? I mean, in theory, the United States could be also blocking Iranian ships from getting out under ordinary American economic policy.
Starting point is 00:14:15 Iranian oil is not supposed to be being sold around the world to begin with, right? So can you just talk a little bit about the posture that the U.S. has taken here in terms of economic policy toward Iran and this oil that we have seen start to get out of the Persian Gulf here? Yeah, well, the word I use, Andrew is confusing. I'm trying to figure it out myself. If you look at U.S. policy, for example, toward Venezuela, we initiated a takedown of 10 tankers that were carrying Venezuelan oil. I mean, the U.S. military executed this, seized the vessels, brought them into U.S. ports, are in the process of selling off the ship and the oil. Iranian ships are not just sailing out in the ocean.
Starting point is 00:14:51 I mean, they're loading at Karg Island and Jaska port outside of the Strait of Hormuz. They're loading and sailing out of the Straits. And not only are they sailing and out, we just had Secretary Besson come out. the energy secretary come out and say, we want that Iranian oil on the global market to make up for the shortfall that oil that is stuck in the Persian Gulf, which is caused by Iran, which is just the most confusing policy out there. I just can't quite get a handle on it. But it's interesting, because I had talked about early on, you know, an interesting policy for the U.S. would have been to seize those Iranian tankers. You know, minimal crews on board, civilian crews, perfect negotiating
Starting point is 00:15:29 tool if you want to end the conflict. Because my concern is how do you end this conflict. What does it look like at the end? Because the fear here is that the Strait of Hormuz becomes kind of like the Red Sea in that it's not clear that it's over yet with the Houthi. Is it clear that it's over with the Iranians? This is the issue with Karg Island. There's not enough troops going to the Persian Gulf to seize Iran by any means, but they can grab Karg Island. But Karg Island is, I would argue, could become a hostage in this deal. But bombing Kargai Island would put Iran in a tough situation because I got nothing to lose at that point. So it's a lot of very high-stake oil politics here, you know, that they're playing between the Trump administration and
Starting point is 00:16:15 Iran right now. You mentioned the fear of there never really being a get-back to a real normal scenario here. And I'm just, my producer, Matt here is just sending me apparently the president just a few minutes before we started talking. He was asked about some of this stuff. And he said, you know, we don't use the straight. We don't need it. You know, we don't use the straight. We don't see the United States. We don't need it. So that's kind of an interesting, a little bit of insight into his mind on all of this.
Starting point is 00:16:41 But you talk about some of the weird sorts of policies that seem to be at loggerheads with one another. And I do think there's a pretty strong case to be made that this is just them, you know, sort of reacting against one domestic political pressure or another, right? I mean, if the question is, how do you prevent, you know, some of these sort of smaller scale attacks, one answer would be, well, you send in troops and you stop them from sort of launching these these sorts of guerrilla assaults on shipping and things like that and you sort of occupy the coasts there. And that is, you know, an argument that that probably would work, at least in the short term for doing some of these things. But it would cross, you know, a pretty stark political red line in America where, you know, it seems to be the case that Americans, for whatever reason, are a lot more comfortable with, you know, bombing the shit out of a country from afar than they are with troops on the ground.
Starting point is 00:17:29 know, for perhaps good and bad reasons. Or you talk about, you know, why are they letting this Iranian oil through? Well, obviously, the president, one of the things that he is really concerned about is these upward pressures on global gas prices all over the place. And if it's, if it's a choice between, you know, letting Iran rake in a bunch of money and keeping prices somewhat lower and stopping them from doing that and letting prices go even higher, I guess the triangulation that they've made is that they're going to just try to keep the gas prices pushed down. I mean, is that seem, seem like a fair-ish reading of, of at least sort of connecting some of these dots together? Well, I mean, what you, the way to understand the policy right now, unsanctioning Russian and Iranian fuel,
Starting point is 00:18:12 a 60-day waiver, the Jones Act, which allows foreign ships to move cargo between U.S. ports, they're trying to push down the gas crisis. That's exactly what they're trying to do. This is all an effort because while President Trump is exactly right, we don't get a lot of exports out of the Persian Gulf. We live in a global world that's interconnected. And if you cut off 20% of global oil and you cut off 17% of the LNG, liquefied natural gas coming out and you cut off a third of the fertilizer coming out, well, that's got to come from somewhere else.
Starting point is 00:18:44 And what we're seeing is that's being pulled out of the United States. We're seeing gasoline being pulled out of the United States, diesel fuel, oil, natural gas being pulled out of the United States, which is great for us. It's a great marketplace because we're being able to sell that on the global marketplace. But what means for the consumer is we're seeing gas prices go up, higher than almost ever before. The gas has been the highest in February 2022 when Russia invaded Ukraine because it caused a shock to the system. That's what this is doing right now. We don't live in an isolated world where you can choke off 25% of global trade and don't think it affects the rest of the world.
Starting point is 00:19:20 I use the analogy all the time. You look at that big huge map of the world with all ships going through everywhere. And that's like the circulatory system of global trade. What we've done is put a clamp on ephemeral artery. And we've choked off 25% of the blood flow. If you leave a clamp for a long period of time, you're going to cause permanent damage. And that's the problem we're seeing right now. You've got to get the straight back open.
Starting point is 00:19:41 But even if today, Andrew, both President Trump and the new Ayatollah hugged and made up and it was unicorns and rainbows again, shipping companies are going to look at it. It's like, is this safe to go through again? Because it's still the Ayatollah. Trump is still president until 2029. You know, could this happen again? And have we fundamentally restructured the global economy because of this? And I don't know that the Trump administration had that on their list of accomplishments what they
Starting point is 00:20:07 were going to achieve when they went into Iran. I think this was low down on their order. And if anybody said this in that meeting, they were probably in the back row and probably were afraid to raise their hand. Yeah. I mean, you're talking about, again, sort of a best case scenario here where not only does this happen, does this reopen tomorrow? But, you know, Iran and Israel and we all agree, you know, no more hitting energy infrastructure, no more, no more actual permanent damage to just pull
Starting point is 00:20:34 in all this stuff up out of the ground to begin with. And then, you know, immediately trying to get underway on snarling these supply chains. Let me talk, let me ask you about the flip side of that, which is that, you know, CNN reported today, the defense intelligence agency had made sort of a preliminary estimate that maybe Iran could keep the straight closed for as long as one to six months. I mean, what kind of a world are we talking about there where this is just closed off? I mean, if six months from now, we're finally getting around to reopening the Strait of Hormuz, can we even game that out? Or what can we say about what the economy would look like under those conditions? Well, I mean, you're talking about bankrupting Bahrain, Qatar, Oman, Kuwait.
Starting point is 00:21:14 You know, Saudi is going to be crippled from this because they can't get the majority of their oil out. UA.E. I mean, these are economies that are huge. energy demands. There's not enough energy to meet this. So, for example, on the oil issue right now, I argue to the very first week, okay, shutting down oil from out of the straits is not a big deal because, number one, we've got 100 million barrels of oil afloat sitting off Singapore and Malaysia all the time because guess what? We don't flow oil right from an oil well into a refinery. It goes through basically holding tanks. There's always storage out there. But the story that got me today was, hey, that fleet of vessels off of Singapore and Malaysia is going down.
Starting point is 00:21:53 If you look at the number of tankers that are loaded, they're decreasing, which means once they go away, you're pulling directly from refineries. You're an adjust in time type of logistics for oil. And then you start pulling down from reserves in the United States and Japan and China. That creates problems. Now you have energy shortages. You're seeing it in Pakistan right now where we're seeing Pakistan rationing energy right now in power because they were getting fuel out of Saudi Arabia.
Starting point is 00:22:19 but they're not getting that fuel out of the Persian Gulf now, which means longer miles. We may have to ship cargo over longer miles, which means we need more tankers, which we don't have. This is going to cause disruptions. And again, for every, you know, the best analogy I have for this, Andrew is whenever given went sideways in the Suez in March of 2021, pinched off and closed the Suez Canal for six days. 450 ships piled up on each side of the canal kind of is just like a cork in a bottle. And then we popped it out and all of a sudden traffic started flowing. It took six weeks to three months to sort that out before the log jam and ports, before everything
Starting point is 00:22:57 kind of settled back down from what you did. On a best case estimate, it takes you a week to fix a one-day massive disruption. We're 21 days into this. You're talking about 21 weeks. You're talking about a third of a year. It's almost half a year we're getting to before we see this resonate out. If you go further than a month out, I don't know. You're talking about restructing.
Starting point is 00:23:19 the global trade patterns of the planet, which literally only happens during world wars. I mean, that's the only time you see it. And when this happens, we change the way we do transportation. When the Suez closed in 1968, for eight years, we created supertankers because it was more efficient to create these huge behemoth tankers to go around Africa and go to Asia. What do we do now? I don't know. We're going to have to rewrite how we do trade on the global scale because we don't. So we substantially move more cargo today than we did back then.
Starting point is 00:23:51 We were moving maybe about two to three billion tons of cargo a year back in the 1960s and 70s. We moved 12 billion today. So, I mean, we're just so interconnected. And the volume and velocity in which we move traffic is such that when you create these disruptions, it resonates throughout the entire supply web. Yeah. I mean, it really is amazing. And this is one of those thoughts that you almost only ever have caused to think,
Starting point is 00:24:16 unless it's your whole job, like it's kind of your whole job to think about these things. The frictionless functioning of global trade and just all of the stuff that is constantly hurtling around at all times and just sort of the efficiency and the economic benefits that generates that you just don't even notice until all of a sudden, I mean, it's like the circulation of your blood. It's not until you have the, you know, coronary episode that you really come to appreciate how important that was. Yeah, I mean, it's really remarkable. One other thing, I mean, I just not to dwell on the president. I mean, it is kind of his thing. This is kind of why this is all happening. But he said something in the Oval Office yesterday that really struck me, which is
Starting point is 00:24:53 that he said, yeah, you know, I know there's been some economic pain from this. We had to do it. We had to do it. And, you know, they had foreign policy aims. They wanted to pursue whatever. But he said, you know, and actually, I kind of thought the economic situation was going to be worse. I've been kind of pleasantly surprised by, by, you know, the amount of damage that we've seen. And I'm just listening to you talk about what's coming. next and I am I'm like my eyes are getting wider and wider and I'm starting to freak out a little more and a little more. But I guess that might be a fine place to leave it for now, a dark place to leave it for now, but a fine place to leave it for now. Obviously, we are going to continue to follow this story a lot.
Starting point is 00:25:28 Everybody else will as well, whether they want to or not, because it is, it's coming for everybody. You actually do get a lot out of global trade when it works right. And right now it's not working very well for all of these reasons. Sal, thanks for coming on. Tell the people where they can find you. Yeah. You can find me at YouTube. I run my channel what's going on with shipping where we talk about this all the time i'm on twitter at mercogliano s and at blue sky so if you want to follow me you can follow me over there and i'll leave you with this andrew i just want to say that listen global shipping has been challenged in the past we've seen huge events happen but it's pretty resolute and i think the i think the human beings are very resolute i think we will
Starting point is 00:26:04 overcome this i think the trump administration underestimated the situation and i think that's what is caught them right now and i think right now we're scrambling to kind of fix it and it's going to take a concentrated effort to do it. But, you know, I tend to be optimistic, not pessimistic, but I apologize if I came across like that. But it's serious and I think it's important that everybody knows that. That's a better note to end on. I'm so glad you came in with that because I hate just driving off into the dark that way. So I appreciate it. Sal, Mercogliano, thank you very much for coming on and talking through some of this stuff with us. And thanks to everybody out there who has been following along. Thanks for listening, whether you're on YouTube,
Starting point is 00:26:41 whether you're on our substack. We hope you'll head over to the bulwark.com. Check out more of stuff. Check out Sal's podcast as well. Just such fascinating stuff. We'll see y'all next time. Ah, snow melting, weather getting warmer, bird singing, but what is the first true sign of spring? Hey dad, I'm coming home from university.
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