1 00:00:10,720 --> 00:00:13,840 Speaker 1: Hello, and welcome to another episode of the All Thoughts Podcast. 2 00:00:13,880 --> 00:00:17,639 Speaker 1: I'm Tracy Alloway and I'm Joe. Wisn't Joe? Big news 3 00:00:17,760 --> 00:00:21,800 Speaker 1: today from Europe, which is that Russia is cutting off 4 00:00:21,840 --> 00:00:26,479 Speaker 1: supplies of gas to countries Poland and Bulgaria specifically that 5 00:00:26,560 --> 00:00:29,800 Speaker 1: refused to pay in rubles. And you know, this is 6 00:00:29,840 --> 00:00:33,560 Speaker 1: something that has sort of been expected in some sense, 7 00:00:33,640 --> 00:00:36,760 Speaker 1: but lots of people are viewing this as the beginning 8 00:00:36,960 --> 00:00:42,400 Speaker 1: of the weaponization of commodities. Yeah, and it fits with 9 00:00:42,520 --> 00:00:45,640 Speaker 1: you know, a theme obviously we've talked about several times, 10 00:00:46,040 --> 00:00:48,320 Speaker 1: which is this sort of I guess there's two things. 11 00:00:48,360 --> 00:00:50,640 Speaker 1: I mean, on some level, it's like this fracturing of 12 00:00:50,680 --> 00:00:55,200 Speaker 1: the commodity supply chain, trade route changing, but then also 13 00:00:55,440 --> 00:00:59,400 Speaker 1: the changing nature of like the financing side of commodities 14 00:00:59,480 --> 00:01:01,800 Speaker 1: and of the idea that okay, you can have you 15 00:01:01,800 --> 00:01:03,440 Speaker 1: can buy the same commodities, but you have to do 16 00:01:03,480 --> 00:01:08,039 Speaker 1: it differently. Currency. This is, you know, this fundamentally is 17 00:01:08,160 --> 00:01:11,440 Speaker 1: beginning to shift just the way commodities are paid for 18 00:01:11,520 --> 00:01:13,840 Speaker 1: in finance. Right. So this is a point that I 19 00:01:13,840 --> 00:01:16,600 Speaker 1: think a number of our guests at this point have made. 20 00:01:16,680 --> 00:01:21,640 Speaker 1: So Salton Poesar, Pierre and Duran Jeff Curry. If countries 21 00:01:21,680 --> 00:01:24,959 Speaker 1: aren't importing Russian gas anymore or oil, they need to 22 00:01:24,959 --> 00:01:27,920 Speaker 1: find that from somewhere else. And simultaneously, it means Russian 23 00:01:27,959 --> 00:01:31,559 Speaker 1: gas and oil might be going elsewhere, like to China 24 00:01:31,640 --> 00:01:34,840 Speaker 1: to the east, and all of that re routing is 25 00:01:34,880 --> 00:01:38,200 Speaker 1: going to take additional money. And we've seen lots of 26 00:01:38,240 --> 00:01:41,120 Speaker 1: players in the commodities talk about this. They've talked not 27 00:01:41,200 --> 00:01:45,080 Speaker 1: only about the upfront costs of transportation of commodities, but 28 00:01:45,120 --> 00:01:47,560 Speaker 1: they've also talked about what all of this means for 29 00:01:47,600 --> 00:01:51,720 Speaker 1: the market itself. And we've seen intense amounts of volatility, 30 00:01:51,800 --> 00:01:55,240 Speaker 1: which to some extent mean that the commodities traders are 31 00:01:55,280 --> 00:01:58,080 Speaker 1: making loads of money. But on the other hand, they 32 00:01:58,120 --> 00:02:00,760 Speaker 1: are having to deal with this volatility and it can 33 00:02:00,920 --> 00:02:04,280 Speaker 1: disrupt their business, right And of course, and you know 34 00:02:04,600 --> 00:02:07,560 Speaker 1: this is obviously and you mentioned it's something that Resulton 35 00:02:07,720 --> 00:02:11,800 Speaker 1: has been talking a lot about. All these trades are financed. 36 00:02:12,000 --> 00:02:16,240 Speaker 1: There's leverage involved, there's borrowing, and when you have a 37 00:02:16,320 --> 00:02:20,120 Speaker 1: really big jump in volatility, then of course financing gets 38 00:02:20,240 --> 00:02:22,520 Speaker 1: more expensive. You have to put up more collateral and 39 00:02:22,520 --> 00:02:26,040 Speaker 1: you get margin calls and things like that. Also adding 40 00:02:26,120 --> 00:02:29,520 Speaker 1: the complications of you know, some banks have been sanctioned 41 00:02:29,560 --> 00:02:33,000 Speaker 1: and you can't deal with some institutions, so the financing 42 00:02:33,280 --> 00:02:36,200 Speaker 1: side of all these trades just gets much more costly 43 00:02:36,320 --> 00:02:38,840 Speaker 1: and complex. Yeah, and it's not exactly as if it 44 00:02:38,880 --> 00:02:41,560 Speaker 1: was transparent to begin with, and now it's just become 45 00:02:41,600 --> 00:02:44,919 Speaker 1: even murkier in some respects. So today I am very 46 00:02:44,960 --> 00:02:47,160 Speaker 1: pleased to say we are going to be digging into 47 00:02:47,400 --> 00:02:51,640 Speaker 1: the financing side of commodities trading, and we really do 48 00:02:51,800 --> 00:02:54,359 Speaker 1: have the perfect person to talk about it with. We're 49 00:02:54,400 --> 00:02:56,400 Speaker 1: going to be speaking with Happy a Blast. He has 50 00:02:56,440 --> 00:02:59,320 Speaker 1: of course a Bloomberg opinion columnists, but he is also 51 00:02:59,520 --> 00:03:02,360 Speaker 1: the author of the World for Sale, which is a 52 00:03:02,400 --> 00:03:05,840 Speaker 1: book on the commodities trading houses. An excellent book on 53 00:03:05,880 --> 00:03:09,840 Speaker 1: the commodities trading houses. So again, the perfect guest. Have you. 54 00:03:10,160 --> 00:03:12,239 Speaker 1: Thank you so much for coming on all thoughts, thank 55 00:03:12,240 --> 00:03:15,120 Speaker 1: you for me I kind of I'm sort of amazed 56 00:03:15,160 --> 00:03:17,000 Speaker 1: we haven't done this sooner. You're one of the most 57 00:03:17,040 --> 00:03:19,720 Speaker 1: requested Yes, we're always like what are you getting via 58 00:03:20,280 --> 00:03:22,280 Speaker 1: We're gonna get We're gonna get her onto it. And 59 00:03:22,280 --> 00:03:24,919 Speaker 1: then we ran into Javier in the in the news rooms, 60 00:03:24,919 --> 00:03:26,639 Speaker 1: like let's just do it right now. I think that's 61 00:03:26,680 --> 00:03:32,200 Speaker 1: that's that's that's my parents probably on Twitter reaching out goods. Um, 62 00:03:32,240 --> 00:03:35,560 Speaker 1: why don't we start, I guess with the basics, I 63 00:03:35,560 --> 00:03:38,040 Speaker 1: mean sort of potted history of your book. But how 64 00:03:38,080 --> 00:03:41,280 Speaker 1: did we wind up with a situation where we have 65 00:03:41,440 --> 00:03:44,720 Speaker 1: all these independent commodities traders who are dealing with you know, 66 00:03:44,840 --> 00:03:47,560 Speaker 1: important goods, things like oil and gas that we depend 67 00:03:47,600 --> 00:03:52,400 Speaker 1: on for transport and heating, food supply, vital strategic goods, 68 00:03:53,080 --> 00:03:57,920 Speaker 1: with seemingly not that much oversight. Well, yeah, you're you're 69 00:03:57,920 --> 00:04:02,800 Speaker 1: absolutely right. Um, we need the commuity traders because commuities 70 00:04:02,840 --> 00:04:05,680 Speaker 1: are not produced generally where they are consumed. So you 71 00:04:05,760 --> 00:04:09,680 Speaker 1: need someone to take the race of moving the staff 72 00:04:09,720 --> 00:04:12,480 Speaker 1: from A to B. And and that's the role that 73 00:04:12,560 --> 00:04:15,040 Speaker 1: the physical commuity traders play. I mean, these are not 74 00:04:15,200 --> 00:04:17,479 Speaker 1: guys who are betting on the futures market or the 75 00:04:17,520 --> 00:04:20,920 Speaker 1: options market behind a screen. These are guys who go 76 00:04:21,120 --> 00:04:24,120 Speaker 1: into up country, as we call it a mind in 77 00:04:24,320 --> 00:04:29,520 Speaker 1: the DRC, deep into Africa, Peru, oil fields in Iran, 78 00:04:29,600 --> 00:04:31,720 Speaker 1: and they get the oil, they put in a tanker 79 00:04:31,839 --> 00:04:35,440 Speaker 1: and they transport to um the consuming markets, and they 80 00:04:35,480 --> 00:04:38,000 Speaker 1: finance all that process. They deal with all the logistics 81 00:04:38,040 --> 00:04:41,880 Speaker 1: which are mind blowingly complicated. In some cases, you know, 82 00:04:41,920 --> 00:04:44,520 Speaker 1: the main reason is because commorities are not produced where 83 00:04:44,520 --> 00:04:47,760 Speaker 1: they are consumed, and they need someone to intermediate that risk. 84 00:04:47,839 --> 00:04:51,680 Speaker 1: And that's quite a lot of races. Financial is logistics, 85 00:04:51,839 --> 00:04:56,160 Speaker 1: is credited? Is operational is whether it is risky in 86 00:04:56,279 --> 00:04:58,640 Speaker 1: terms that you know, some of these commoti traders are 87 00:04:58,680 --> 00:05:01,680 Speaker 1: often operating on words and you still need them to 88 00:05:01,680 --> 00:05:04,400 Speaker 1: to get the commorities out, and they get paid very 89 00:05:04,400 --> 00:05:06,880 Speaker 1: well for for that service. Yeah. So when I think 90 00:05:06,880 --> 00:05:09,719 Speaker 1: about like traders, typically in my mind, you know, I 91 00:05:09,720 --> 00:05:12,880 Speaker 1: imagine someone looking at a screen and there's like, you know, 92 00:05:13,279 --> 00:05:16,719 Speaker 1: one basis point difference between a tenure treasury and a 93 00:05:16,760 --> 00:05:19,840 Speaker 1: tenuere treasury futures, and this finds some way to like 94 00:05:20,040 --> 00:05:22,520 Speaker 1: make a penny off of that. But when we're talking 95 00:05:22,560 --> 00:05:26,560 Speaker 1: about commodities, we might be talking about equivalent barrel of 96 00:05:26,600 --> 00:05:31,120 Speaker 1: oil moving out of Russia that's sixty dollars cheaper than something, 97 00:05:31,320 --> 00:05:34,400 Speaker 1: you know, another the same barrel of oil and continental Europe, 98 00:05:34,720 --> 00:05:37,520 Speaker 1: and then someone their job is to find a way 99 00:05:37,560 --> 00:05:40,040 Speaker 1: to get that cheaper barrel of oil to someone who 100 00:05:40,120 --> 00:05:43,200 Speaker 1: wants it. And if you can do that, that that seems lucrative. Yeah, 101 00:05:43,240 --> 00:05:46,599 Speaker 1: that's exactly what they do. At times that is very 102 00:05:46,600 --> 00:05:49,440 Speaker 1: complicated because well, you know, you are dealing with all 103 00:05:49,480 --> 00:05:51,960 Speaker 1: those logistics, you are dealing with all that risk, and 104 00:05:52,040 --> 00:05:54,960 Speaker 1: because you you actually have to put a lot of 105 00:05:55,000 --> 00:05:58,520 Speaker 1: money at work. Uh, the size of the business. I mean, 106 00:05:58,640 --> 00:06:03,200 Speaker 1: some of these companies they have turnover of three hundred billion, 107 00:06:03,400 --> 00:06:06,840 Speaker 1: four hundred billion dollars a year, which is a mind 108 00:06:06,880 --> 00:06:10,400 Speaker 1: blowing number. And obviously they don't have, uh the profits 109 00:06:10,440 --> 00:06:13,560 Speaker 1: equivalent to what appoll or Coca Cola or Amazon will 110 00:06:13,600 --> 00:06:16,159 Speaker 1: make if they were having those sales. But the size 111 00:06:16,200 --> 00:06:19,640 Speaker 1: of the turnover is just amazing because of the of 112 00:06:19,960 --> 00:06:22,159 Speaker 1: the volumes that they move. I mean, Beetle, which is 113 00:06:22,160 --> 00:06:26,000 Speaker 1: the world's largest oil trader, moves enough oil to supply 114 00:06:26,560 --> 00:06:32,240 Speaker 1: five or six of the largest European economies. So it's 115 00:06:32,279 --> 00:06:35,080 Speaker 1: not an easy business at the best of times. You 116 00:06:35,160 --> 00:06:39,000 Speaker 1: just described it as really complex. What's it like in 117 00:06:39,040 --> 00:06:42,040 Speaker 1: a moment like we've just experienced over the past month 118 00:06:42,040 --> 00:06:46,800 Speaker 1: where we've seen intense volatility, We've had drama with a 119 00:06:46,920 --> 00:06:52,400 Speaker 1: particular commodities exchange over this volatility and canceling trades and 120 00:06:52,440 --> 00:06:54,880 Speaker 1: things like that. What actually happens in a period of 121 00:06:54,880 --> 00:06:58,240 Speaker 1: intense volatility for the commodities traders. Well, the first thing 122 00:06:58,279 --> 00:07:01,719 Speaker 1: to understand, which is very importan done, is that physical 123 00:07:01,720 --> 00:07:06,000 Speaker 1: commuity trading is a highly leaberage business. These companies operate 124 00:07:06,080 --> 00:07:09,880 Speaker 1: with theen equity and they borrow money from banks. And 125 00:07:09,920 --> 00:07:14,840 Speaker 1: these are not typically borrowing from Wall Street banks. They're 126 00:07:14,880 --> 00:07:18,640 Speaker 1: borrowing money from commoity trade finance which are the typical 127 00:07:18,720 --> 00:07:22,760 Speaker 1: European bank where you may have a mortgage. Actually, my 128 00:07:22,760 --> 00:07:25,800 Speaker 1: my mortgage bank for my flat in London probably is 129 00:07:25,840 --> 00:07:28,480 Speaker 1: a big finance here of the commuity trading houses. So 130 00:07:28,600 --> 00:07:31,600 Speaker 1: these are not the big that they are not borrowing 131 00:07:31,640 --> 00:07:34,200 Speaker 1: money from the likes of government SAT. They are used 132 00:07:34,800 --> 00:07:38,640 Speaker 1: borrowing money from europe and commercial banks and sorry just 133 00:07:38,640 --> 00:07:41,280 Speaker 1: to be specific, like a BNP parableut that sort of thing. Yeah, 134 00:07:41,320 --> 00:07:44,680 Speaker 1: I mean BMP was the largest lender to the industry. 135 00:07:45,080 --> 00:07:48,200 Speaker 1: It just decided a few years ago to shut down 136 00:07:48,200 --> 00:07:52,120 Speaker 1: the business after they got involved in some bad case 137 00:07:52,200 --> 00:07:54,720 Speaker 1: with with the U S Department of Justice. But we're 138 00:07:54,760 --> 00:07:57,400 Speaker 1: talking about the likes associating it all of I n 139 00:07:57,440 --> 00:08:01,320 Speaker 1: G suits um so unique credit of Italy that that 140 00:08:01,440 --> 00:08:05,640 Speaker 1: kind of European banks and well when commoti prices go 141 00:08:05,720 --> 00:08:09,000 Speaker 1: through the roof has happened in recent days and weeks. 142 00:08:09,040 --> 00:08:11,880 Speaker 1: Two things happen for the commoty trading houses. First of all, 143 00:08:11,920 --> 00:08:14,560 Speaker 1: they need to borrow a lot more money because a 144 00:08:14,920 --> 00:08:17,520 Speaker 1: barrel of oil is more expensive. So if a barrel 145 00:08:17,560 --> 00:08:22,800 Speaker 1: of oil a year ago was close to actually almost negative, 146 00:08:22,840 --> 00:08:25,480 Speaker 1: but you know, say that it was dollars and you 147 00:08:25,520 --> 00:08:28,320 Speaker 1: were moving a million barrels of oil and a super tanker, 148 00:08:28,400 --> 00:08:31,440 Speaker 1: you need million dollars to borrow. Today at more than 149 00:08:31,480 --> 00:08:33,960 Speaker 1: a hundred it means that you need a hundred million dollars. 150 00:08:33,960 --> 00:08:37,880 Speaker 1: So the borrowing needs have increased significantly. Also, because of 151 00:08:37,880 --> 00:08:40,720 Speaker 1: all the volatility in the futures market, if you are 152 00:08:40,920 --> 00:08:44,640 Speaker 1: heading that operation on the futures market, you mean that 153 00:08:44,720 --> 00:08:47,480 Speaker 1: you are long physical you are short on on the 154 00:08:47,520 --> 00:08:50,240 Speaker 1: paper side. The price continues to go, so you are 155 00:08:50,280 --> 00:08:53,280 Speaker 1: getting hit by marketing calls, and those marketing calls could 156 00:08:53,440 --> 00:08:57,640 Speaker 1: get very high. We have seen some commoti trading houses 157 00:08:57,720 --> 00:09:02,319 Speaker 1: getting a billion dollars a day of additional variation margin calls, 158 00:09:02,360 --> 00:09:05,160 Speaker 1: and that combination has really put a lot of pressure 159 00:09:05,200 --> 00:09:07,600 Speaker 1: on the finance of some of these companies. That, as 160 00:09:07,679 --> 00:09:10,160 Speaker 1: I said, for the starting point, they don't have a 161 00:09:10,160 --> 00:09:13,400 Speaker 1: lot of equity and they rely on banks, and banks 162 00:09:13,400 --> 00:09:15,560 Speaker 1: are really reaching the limits of how much money they 163 00:09:15,559 --> 00:09:17,400 Speaker 1: can lend to them. What do you walk is through 164 00:09:17,440 --> 00:09:19,480 Speaker 1: a trade? I mean things you know, you sort of 165 00:09:19,520 --> 00:09:21,480 Speaker 1: you walk through some of the prices of oil and 166 00:09:21,520 --> 00:09:25,120 Speaker 1: the tanker. But there's the idea that Okay, there's some 167 00:09:25,160 --> 00:09:28,760 Speaker 1: buyer who wants oil, there's some seller halfway around the world, 168 00:09:29,440 --> 00:09:32,960 Speaker 1: and then the trading house makes it happen. But to 169 00:09:33,000 --> 00:09:34,920 Speaker 1: make it happen, they borrow. They don't want to put 170 00:09:34,960 --> 00:09:38,040 Speaker 1: up their own money to transport that oil. They borrow 171 00:09:38,120 --> 00:09:40,240 Speaker 1: for the duration like how long are they borrowing for? 172 00:09:40,800 --> 00:09:43,280 Speaker 1: They revolving lines of credit like walkers there a little 173 00:09:43,280 --> 00:09:45,199 Speaker 1: bit more like how the trade work. They have all 174 00:09:45,320 --> 00:09:49,720 Speaker 1: kinds of different borrowing facilities, from from revolving to bilateral 175 00:09:49,800 --> 00:09:52,880 Speaker 1: deals to to just at for for the transaction. But 176 00:09:53,120 --> 00:09:56,880 Speaker 1: a typical transaction right now will be buying Russian oil, 177 00:09:56,920 --> 00:09:59,120 Speaker 1: which is still legal if you are moving it into 178 00:09:59,320 --> 00:10:02,320 Speaker 1: say the Netherlands rather than is the center of the 179 00:10:02,640 --> 00:10:05,400 Speaker 1: European oil industry. So say that you are a trading 180 00:10:05,480 --> 00:10:10,440 Speaker 1: house Joe Commodities Incorporated Obviously on attacks Heaven because all 181 00:10:10,559 --> 00:10:13,800 Speaker 1: these companies are are incorporated on on on some places 182 00:10:13,800 --> 00:10:16,360 Speaker 1: like the British Virgian Islands and similar. And you are 183 00:10:16,400 --> 00:10:20,199 Speaker 1: buying a million barrels of oil from Rosnev, the Russian 184 00:10:20,280 --> 00:10:24,040 Speaker 1: state control company. You will have put that's gonna cost 185 00:10:24,080 --> 00:10:28,800 Speaker 1: you around eighty million dollars because Rossnef is selling a 186 00:10:28,840 --> 00:10:31,880 Speaker 1: big discount to the market. You probably are gonna put 187 00:10:32,400 --> 00:10:36,199 Speaker 1: perhaps as little as five million dollars of your own money, 188 00:10:36,320 --> 00:10:38,760 Speaker 1: and you're gonna go to a bank and you're gonna 189 00:10:38,800 --> 00:10:41,760 Speaker 1: borrow all the rest of the money, and then you 190 00:10:41,880 --> 00:10:44,959 Speaker 1: will at that moment you own a million barrels of 191 00:10:45,320 --> 00:10:48,360 Speaker 1: Russian oil. So you are long physical. You want to 192 00:10:48,400 --> 00:10:50,760 Speaker 1: protect yourself because you don't you don't want to see 193 00:10:50,760 --> 00:10:54,000 Speaker 1: a price drop hurting use. So you will take a 194 00:10:54,080 --> 00:10:57,160 Speaker 1: short position on the futures market to make sure that 195 00:10:57,240 --> 00:11:01,079 Speaker 1: you you are head long physical, short paper. Everything s 196 00:11:01,080 --> 00:11:03,640 Speaker 1: will be fine. And then you get a vessel, which 197 00:11:03,679 --> 00:11:05,880 Speaker 1: is complicated because there are not many companies who want 198 00:11:05,920 --> 00:11:08,400 Speaker 1: to go to a Russian port to pick up the crude. 199 00:11:08,679 --> 00:11:11,200 Speaker 1: You will have to deal with all the operational Sometimes 200 00:11:11,200 --> 00:11:13,160 Speaker 1: there is bad weather and you cannot send the rip, 201 00:11:13,440 --> 00:11:16,520 Speaker 1: so it gets complicated. On that say that you get 202 00:11:16,559 --> 00:11:19,280 Speaker 1: everything right, You get the oil into the tanker and 203 00:11:19,280 --> 00:11:22,360 Speaker 1: then you move it to Rotterdam. You try to discharge 204 00:11:22,360 --> 00:11:26,280 Speaker 1: into a refinery. But in that period, just in mind 205 00:11:26,320 --> 00:11:28,120 Speaker 1: that the price of oil goes to a hunt from 206 00:11:28,120 --> 00:11:30,400 Speaker 1: a hundred to a hundred and fifty. You are going 207 00:11:30,440 --> 00:11:33,120 Speaker 1: to be making You are fine because you are headed, 208 00:11:33,400 --> 00:11:37,640 Speaker 1: but obviously the marketin's the change is gonna start demanding 209 00:11:37,760 --> 00:11:42,040 Speaker 1: significant variation margins on that short position, and then you 210 00:11:42,080 --> 00:11:45,480 Speaker 1: have this cast flow mismatch. You have not yet delivered 211 00:11:45,520 --> 00:11:48,720 Speaker 1: the oil, so you have not really cash in your loan. 212 00:11:49,040 --> 00:11:53,040 Speaker 1: Physical position at the same time you're shot on the 213 00:11:53,120 --> 00:11:57,200 Speaker 1: paper is massively underwater. You're getting the marketing calls, so 214 00:11:57,240 --> 00:11:59,600 Speaker 1: you're going to have to go to another bank and say, please, 215 00:11:59,640 --> 00:12:01,640 Speaker 1: can you give me some money and I borrow you 216 00:12:01,720 --> 00:12:04,520 Speaker 1: money because I need to pay to this change. When 217 00:12:04,800 --> 00:12:08,040 Speaker 1: all of these is not just one tanker, but hundreds 218 00:12:08,080 --> 00:12:11,480 Speaker 1: of tankers a day floating around and billions of dollars 219 00:12:11,480 --> 00:12:14,360 Speaker 1: on borrowing, is when it gets very difficult, and when 220 00:12:14,760 --> 00:12:17,840 Speaker 1: some of the companies reached the limit on how much 221 00:12:18,240 --> 00:12:20,520 Speaker 1: they are borrowing from the banks, as when the banks 222 00:12:20,520 --> 00:12:23,760 Speaker 1: say we cannot continue lending to you. And that's where 223 00:12:23,880 --> 00:12:27,040 Speaker 1: we saw the lobby group of the European energy traders 224 00:12:27,360 --> 00:12:30,280 Speaker 1: go to several central banks and saying we are running 225 00:12:30,280 --> 00:12:34,480 Speaker 1: out of liquidity, we have a big problem. Marketing calls 226 00:12:34,480 --> 00:12:37,600 Speaker 1: had effectively killing us. I want to get into this 227 00:12:37,679 --> 00:12:40,360 Speaker 1: idea of whether or not central banks or governments should 228 00:12:40,360 --> 00:12:44,240 Speaker 1: support commodities trading and finance. But before we do one thing, 229 00:12:44,280 --> 00:12:48,559 Speaker 1: I've been wondering, given the volatility and given the types 230 00:12:48,600 --> 00:12:51,319 Speaker 1: of margin calls that we've seen, do people hedge more 231 00:12:51,679 --> 00:12:54,120 Speaker 1: or less in this environment? Because you can kind of 232 00:12:54,200 --> 00:12:56,840 Speaker 1: argue it either way. Right, you know, you don't have 233 00:12:56,880 --> 00:12:59,600 Speaker 1: as much credit, so everything you have is sort of 234 00:12:59,640 --> 00:13:02,560 Speaker 1: just stop in the trade plus can be used for 235 00:13:02,600 --> 00:13:05,079 Speaker 1: the hedge. But on the other other hand, there's so 236 00:13:05,120 --> 00:13:07,000 Speaker 1: much volatility at the moment that you would want to 237 00:13:07,080 --> 00:13:09,200 Speaker 1: make sure that you're hedged. I mean, this is the 238 00:13:09,240 --> 00:13:12,800 Speaker 1: time that everyone should be hedged as well as they can, 239 00:13:13,320 --> 00:13:18,200 Speaker 1: because the market is moving in huge price increases. I mean, 240 00:13:18,240 --> 00:13:22,480 Speaker 1: we have seen Brent crude, a market that for many 241 00:13:22,559 --> 00:13:26,720 Speaker 1: years have never traded more than thirty dollars or forty dollars. 242 00:13:27,120 --> 00:13:31,120 Speaker 1: We have seen price movements of dollars in the space 243 00:13:31,160 --> 00:13:34,280 Speaker 1: of a week. You are not hedged, the market could 244 00:13:34,360 --> 00:13:36,839 Speaker 1: kill you. But you are absolutely right. My suspicion is 245 00:13:37,120 --> 00:13:40,720 Speaker 1: that a lot of the trading houses have reduced significantly 246 00:13:40,760 --> 00:13:43,600 Speaker 1: the hedging you simply because they cannot afford it, which 247 00:13:43,640 --> 00:13:46,560 Speaker 1: is extremely risky, and that's what could bring a company down. 248 00:13:47,400 --> 00:13:50,280 Speaker 1: You know, I want to go back to something just 249 00:13:50,360 --> 00:13:53,200 Speaker 1: in like the why of these companies and I, you know, 250 00:13:53,320 --> 00:13:56,440 Speaker 1: just your explanation. It's like, look, the commodities made somewhere, 251 00:13:56,440 --> 00:13:59,120 Speaker 1: it's probably gonna be consumed somewhere else. You need someone 252 00:13:59,200 --> 00:14:01,920 Speaker 1: to take on the risks and the process of doing that. 253 00:14:02,480 --> 00:14:07,560 Speaker 1: Why did they these companies emerge separately from the major banks? 254 00:14:07,600 --> 00:14:10,800 Speaker 1: Like why in theory is this not just something that's 255 00:14:10,800 --> 00:14:13,480 Speaker 1: done inside the government sex or inside the JP. Morgan 256 00:14:13,840 --> 00:14:17,439 Speaker 1: very good point. And indeed at some point government stars 257 00:14:17,480 --> 00:14:20,640 Speaker 1: and Morgan Stanley were big physical traders. They were moving 258 00:14:21,160 --> 00:14:23,920 Speaker 1: millions of barrels a day of crude and undefined products. 259 00:14:23,960 --> 00:14:27,040 Speaker 1: Coleman starts pre I p O on an oil refiner 260 00:14:27,080 --> 00:14:30,680 Speaker 1: in Rotterdam. Morgan Stanley was a big trader of all 261 00:14:30,760 --> 00:14:35,400 Speaker 1: kinds of commorities including metals, agricultural, etcetera. Etcetera. But over 262 00:14:35,520 --> 00:14:41,920 Speaker 1: time the business gravitated to privately owned independence because, um, 263 00:14:42,040 --> 00:14:45,280 Speaker 1: you have to go to difficult places on earth, places 264 00:14:45,320 --> 00:14:48,320 Speaker 1: that usually regulators will not like banks to be there. 265 00:14:48,920 --> 00:14:52,480 Speaker 1: And and because over the years the good money on 266 00:14:52,560 --> 00:14:57,040 Speaker 1: community trading has been made in operating on those kind 267 00:14:57,080 --> 00:14:59,880 Speaker 1: of Um, what is the nice work gray areas of 268 00:15:00,000 --> 00:15:02,480 Speaker 1: the global economy. It feels like you have to have 269 00:15:02,560 --> 00:15:05,480 Speaker 1: a somewhat mercenary attitude where it's like, this is the 270 00:15:05,560 --> 00:15:08,360 Speaker 1: job the world that Jack and I use on the 271 00:15:08,400 --> 00:15:10,400 Speaker 1: world for sale, and our book was you have to 272 00:15:10,400 --> 00:15:14,280 Speaker 1: be a bit of trust, walk clean. I think that 273 00:15:14,280 --> 00:15:17,840 Speaker 1: that probably is a nice way to say buccaneer or mercenary. 274 00:15:17,920 --> 00:15:20,440 Speaker 1: But look, the commority traders made a lot of money 275 00:15:20,440 --> 00:15:23,440 Speaker 1: over the last thirty or forty years helping sadan Hu's 276 00:15:23,440 --> 00:15:28,360 Speaker 1: saying to bypass un Sancion's, helping upper heads of Africa 277 00:15:28,560 --> 00:15:34,520 Speaker 1: government to get oil, helping um Fidel Castro Cuba barter 278 00:15:34,840 --> 00:15:39,000 Speaker 1: sugar for oil, and keeping the communist revolution alive. And 279 00:15:39,200 --> 00:15:41,840 Speaker 1: they never have a problem whether it was a communist 280 00:15:41,880 --> 00:15:45,280 Speaker 1: regime of our right wing regime. The same commoty traders 281 00:15:45,320 --> 00:15:48,160 Speaker 1: that were helping Castro were dealing with pinot chet in 282 00:15:48,240 --> 00:15:50,800 Speaker 1: Chili to sell the copper, but you need to have 283 00:15:50,880 --> 00:15:55,280 Speaker 1: the appetite to go to where no one goes. I 284 00:15:55,320 --> 00:15:58,360 Speaker 1: mean these when I said earlier that these commoty traders 285 00:15:58,400 --> 00:16:02,479 Speaker 1: are often in or songs, they are. They have executives 286 00:16:02,480 --> 00:16:05,600 Speaker 1: that have been in Libya during the civil war. And 287 00:16:06,160 --> 00:16:10,000 Speaker 1: the hotel lobby where it was, it was an interesting combination. 288 00:16:10,040 --> 00:16:13,120 Speaker 1: You were in Benghasi, the front line was not far away, 289 00:16:13,920 --> 00:16:17,760 Speaker 1: um or checkpoints in the city everywhere, and it was 290 00:16:17,800 --> 00:16:20,600 Speaker 1: a hotel where it was kind of the hotel to 291 00:16:20,640 --> 00:16:23,280 Speaker 1: be in town during the Libyan war. And the people 292 00:16:23,320 --> 00:16:26,320 Speaker 1: who were living in that hotel were a combination of 293 00:16:26,960 --> 00:16:32,160 Speaker 1: a few diplomas, um cultural attaches of those diplomas meaning 294 00:16:32,160 --> 00:16:37,160 Speaker 1: their spies, a few war reporters, and then the commodity 295 00:16:37,200 --> 00:16:41,120 Speaker 1: traders find Libyan oil to put it into the global market. 296 00:16:54,200 --> 00:16:57,440 Speaker 1: So setting aside, I guess the issue of morality as 297 00:16:57,560 --> 00:17:02,640 Speaker 1: as many traders have done historically. Um. You mentioned that 298 00:17:02,760 --> 00:17:06,159 Speaker 1: the fact that commodities traders just make tons of money 299 00:17:06,200 --> 00:17:10,600 Speaker 1: over time, and I'm curious what the money making opportunity 300 00:17:10,720 --> 00:17:13,320 Speaker 1: is like right now, because again it kind of feels 301 00:17:13,320 --> 00:17:16,320 Speaker 1: like a best of times, worst of time scenario. So 302 00:17:16,920 --> 00:17:20,600 Speaker 1: the opportunity to make profit is there if you can 303 00:17:20,640 --> 00:17:24,879 Speaker 1: secure the funding and navigate the volatility. But it seems 304 00:17:24,880 --> 00:17:27,840 Speaker 1: like the industry is also starting to um split a 305 00:17:27,880 --> 00:17:30,640 Speaker 1: little bit, like the big guys are taking even more 306 00:17:30,720 --> 00:17:33,399 Speaker 1: market share. Some of the smaller players seem to be 307 00:17:33,440 --> 00:17:37,240 Speaker 1: really squeezed by the financing pressures. What's going on there? 308 00:17:37,240 --> 00:17:41,800 Speaker 1: You're right, the banking financing is gravitating towards the big 309 00:17:41,800 --> 00:17:45,360 Speaker 1: players because the banks feel that they have enough equity 310 00:17:45,400 --> 00:17:49,639 Speaker 1: to withstand the volatility, and the smaller medium sized traders 311 00:17:49,640 --> 00:17:53,080 Speaker 1: are really struggling to get support from the banks. The 312 00:17:53,119 --> 00:17:56,639 Speaker 1: opportunity right now you can't make it through. You can 313 00:17:56,800 --> 00:18:00,000 Speaker 1: whether the volatility. You could make a ton of money 314 00:18:00,040 --> 00:18:03,880 Speaker 1: in this market. I mean, think about Russian oil um 315 00:18:04,200 --> 00:18:07,040 Speaker 1: the flagship of Russian Crewe is something that we call 316 00:18:07,240 --> 00:18:12,720 Speaker 1: urals that is selling around thirty five dollars discount to brand, 317 00:18:12,840 --> 00:18:15,199 Speaker 1: which is the main benchmark. So if you are a 318 00:18:15,200 --> 00:18:18,920 Speaker 1: commuity trader, you could buy from rosnev oil at a 319 00:18:19,000 --> 00:18:22,119 Speaker 1: thirty five dollar discount, put it on a boat and 320 00:18:22,160 --> 00:18:24,359 Speaker 1: ship it to India where you could sell it at 321 00:18:24,400 --> 00:18:28,000 Speaker 1: five dollar discount. You could make thirty percent margin on 322 00:18:28,040 --> 00:18:31,320 Speaker 1: a barrel of oil right now, which is a lot 323 00:18:31,359 --> 00:18:33,360 Speaker 1: of money. I mean, this is this is an industry 324 00:18:33,440 --> 00:18:37,359 Speaker 1: where making fifty cents on a barrel of oil is 325 00:18:37,359 --> 00:18:39,159 Speaker 1: a big profit, and all of a sudden you have 326 00:18:39,520 --> 00:18:43,840 Speaker 1: thirty dollar profitability options. Uh, and that's what they're doing. 327 00:18:43,840 --> 00:18:45,679 Speaker 1: I mean, you see the same traders who are buying 328 00:18:46,119 --> 00:18:49,080 Speaker 1: Russian oil at a discount of certified dollars, they're selling 329 00:18:49,080 --> 00:18:52,879 Speaker 1: it to India at a five dollars discount. There's a 330 00:18:53,400 --> 00:18:55,600 Speaker 1: for anyone who is interested or if you have a 331 00:18:55,680 --> 00:19:00,440 Speaker 1: terminal there we have a urals Brent spread ticker fu 332 00:19:00,560 --> 00:19:03,840 Speaker 1: d b M one and you can see like you know, 333 00:19:04,040 --> 00:19:07,240 Speaker 1: up until basically at the beginning of February, this was 334 00:19:07,359 --> 00:19:10,719 Speaker 1: a you know, it looked like Russian oil typically traded 335 00:19:10,760 --> 00:19:14,520 Speaker 1: for about a dollar fifty cheaper than brand and currently 336 00:19:14,680 --> 00:19:17,840 Speaker 1: it's thirty one dollars cheaper. So here's the basically, here's 337 00:19:17,880 --> 00:19:20,520 Speaker 1: this huge opportunity. All you need to do is find 338 00:19:20,560 --> 00:19:23,000 Speaker 1: the boat. It's such a crazy like that's the basic idea. 339 00:19:23,320 --> 00:19:25,399 Speaker 1: If you can find a boat that can get it 340 00:19:25,440 --> 00:19:28,520 Speaker 1: can ship into India for less than thirty dollars a barrel, 341 00:19:28,600 --> 00:19:30,240 Speaker 1: you need the boat, and you need also bank was 342 00:19:30,280 --> 00:19:32,040 Speaker 1: willing to finance that, or you need to have the 343 00:19:32,080 --> 00:19:34,920 Speaker 1: equity to to to finance this operation on your own 344 00:19:34,920 --> 00:19:39,159 Speaker 1: balance sheet. And then I mean, but he asked the question, 345 00:19:39,200 --> 00:19:44,120 Speaker 1: will will Joe Commodities incorporated on the British Building Islands 346 00:19:44,280 --> 00:19:47,000 Speaker 1: want to get involved in this? Would you want to 347 00:19:47,040 --> 00:19:51,400 Speaker 1: be trade in Russkan oil? And many many people will 348 00:19:51,440 --> 00:19:53,440 Speaker 1: say no, I don't want to do anything with Russia, 349 00:19:53,520 --> 00:19:55,920 Speaker 1: but a lot of the Commoity trader said, well, we 350 00:19:56,160 --> 00:19:58,879 Speaker 1: are not involved in politics. We have both politics, and 351 00:19:58,880 --> 00:20:02,600 Speaker 1: we are here about out making money and it's legal 352 00:20:02,640 --> 00:20:04,560 Speaker 1: to move the oil, so we're going to move it 353 00:20:04,680 --> 00:20:07,240 Speaker 1: and they're obviously making a lot of money. Tracy. It 354 00:20:07,280 --> 00:20:10,320 Speaker 1: actually reminds me a little bit of the same bankman 355 00:20:10,359 --> 00:20:14,760 Speaker 1: freed bitcoin trade from, like the huge gap in bitcoin 356 00:20:14,840 --> 00:20:17,160 Speaker 1: pricing in the U s and Japan finding a way 357 00:20:17,200 --> 00:20:20,200 Speaker 1: to like but there's a reason why that that gap exists. 358 00:20:20,240 --> 00:20:24,159 Speaker 1: So okay, speaking of gaps and crazy charts, there is 359 00:20:24,200 --> 00:20:27,040 Speaker 1: something that you tweeted this morning, have a about the 360 00:20:27,160 --> 00:20:32,560 Speaker 1: ultra low sulfur diesel futures closing like a crazy amount, 361 00:20:32,600 --> 00:20:34,640 Speaker 1: And there's been a couple of charts that just look 362 00:20:35,160 --> 00:20:37,720 Speaker 1: like something weird is going on in the market. We're 363 00:20:37,720 --> 00:20:41,320 Speaker 1: getting these odd technical squeezes higher. What's going on there 364 00:20:41,400 --> 00:20:45,000 Speaker 1: and how is that related to the financing situation? Well, 365 00:20:45,800 --> 00:20:48,399 Speaker 1: the diesel market. I mean, I have been warning that 366 00:20:49,160 --> 00:20:51,439 Speaker 1: we are talking at about the problem in the oil market, 367 00:20:51,480 --> 00:20:55,119 Speaker 1: the crude market, but we're real Thinness is what we 368 00:20:55,200 --> 00:20:57,920 Speaker 1: call the middle of the barrel when he's refined. That's 369 00:20:58,000 --> 00:21:00,240 Speaker 1: diesel and jet fuel, and we have barely all of 370 00:21:00,280 --> 00:21:03,800 Speaker 1: it because consumption is booming because Russia produced a lot 371 00:21:03,840 --> 00:21:08,919 Speaker 1: of diesel. What's happening there is that on community markets, 372 00:21:08,960 --> 00:21:11,320 Speaker 1: when you are on the futures market at the end 373 00:21:11,359 --> 00:21:15,119 Speaker 1: of the day, some of those contrasts are still physically deliverable. 374 00:21:15,160 --> 00:21:18,120 Speaker 1: You take a long or short position, and you may 375 00:21:18,480 --> 00:21:21,879 Speaker 1: take or have to deliver the community to this change. 376 00:21:22,640 --> 00:21:25,959 Speaker 1: Inventories of diesel in the East Coast of the United 377 00:21:26,000 --> 00:21:29,280 Speaker 1: States are at the moment at the lowest seasonal level 378 00:21:29,359 --> 00:21:33,080 Speaker 1: since we have data that's thirty two years um. The 379 00:21:33,280 --> 00:21:36,480 Speaker 1: pricing point for the futures market for diesel in the 380 00:21:36,560 --> 00:21:39,760 Speaker 1: United States is here in New York Harbor. That is, 381 00:21:39,800 --> 00:21:43,960 Speaker 1: New York Harbor is where you price diesel for basically 382 00:21:44,000 --> 00:21:47,160 Speaker 1: the whole of the Americas, and what happened here really matters. 383 00:21:47,400 --> 00:21:50,639 Speaker 1: It's so important that it was a big energy trade 384 00:21:50,640 --> 00:21:54,639 Speaker 1: there in the nineties at morganized Stanley, who he was 385 00:21:54,720 --> 00:21:57,000 Speaker 1: known as the King of New York Harbor because he 386 00:21:57,040 --> 00:22:00,199 Speaker 1: controlled all the leases of all the oil tanks and 387 00:22:00,280 --> 00:22:02,960 Speaker 1: he could in some ways I think that the world 388 00:22:02,960 --> 00:22:05,720 Speaker 1: manipula will be wrong, but he could sway the market 389 00:22:05,760 --> 00:22:09,520 Speaker 1: on his favor very very often. Because we have so 390 00:22:09,640 --> 00:22:14,560 Speaker 1: little inventory, everyone who is short in this market is 391 00:22:14,600 --> 00:22:18,000 Speaker 1: trying to close the positions because came Friday they need 392 00:22:18,040 --> 00:22:20,680 Speaker 1: to deliver the diesels. There is no diesel around. The 393 00:22:21,000 --> 00:22:24,879 Speaker 1: lawns are very happy holding their positions. And what we 394 00:22:25,000 --> 00:22:28,520 Speaker 1: have was a hell of a squeeze over the last 395 00:22:28,600 --> 00:22:33,800 Speaker 1: forty eight hours where um the premium for May to 396 00:22:34,040 --> 00:22:38,320 Speaker 1: June contract balloon to an incredibly high level. I mean 397 00:22:38,359 --> 00:22:40,960 Speaker 1: it's something that again, you know, this is a chart 398 00:22:41,040 --> 00:22:44,880 Speaker 1: that we shall see. I spread of no more than 399 00:22:44,960 --> 00:22:49,840 Speaker 1: five ten cents will be something unprecedented. And yesterday we 400 00:22:50,000 --> 00:22:53,240 Speaker 1: went beyond seven defense, which was the chart one mesical 401 00:22:53,600 --> 00:22:56,000 Speaker 1: and it was it was a clear sign that it 402 00:22:56,160 --> 00:22:59,800 Speaker 1: was a short position in deep trouble, uh knowing that 403 00:23:00,119 --> 00:23:03,320 Speaker 1: in three days he has borrows, it doesn't have any borrows, 404 00:23:03,359 --> 00:23:05,120 Speaker 1: and it needs to get out and he would pay 405 00:23:05,200 --> 00:23:08,120 Speaker 1: whatever is needed to get out of the So like, 406 00:23:08,440 --> 00:23:13,080 Speaker 1: it's a pretty big societal disaster. If certain commodities simply 407 00:23:13,119 --> 00:23:16,840 Speaker 1: cannot be delivered. If you if if if, if planes 408 00:23:16,960 --> 00:23:20,480 Speaker 1: can't get jet fuel, that's a really big economic problem. 409 00:23:20,600 --> 00:23:24,719 Speaker 1: In fact, it briefly happened at the airport in Austin, 410 00:23:24,760 --> 00:23:28,280 Speaker 1: Texas that they ran out of fuel at that location. 411 00:23:28,520 --> 00:23:33,879 Speaker 1: But other things, obviously food, obviously huge implications. You know, 412 00:23:33,960 --> 00:23:38,359 Speaker 1: this stuff really matters, and so it's interesting, Um, you know, 413 00:23:38,760 --> 00:23:40,199 Speaker 1: talk to us a little bit about the role of 414 00:23:40,280 --> 00:23:43,399 Speaker 1: regulators in the central banks, because you know, there was 415 00:23:43,480 --> 00:23:46,280 Speaker 1: talked last month with the whole Nickel blow up about 416 00:23:46,320 --> 00:23:50,000 Speaker 1: what should the central banks be backstopping or bailing out 417 00:23:50,119 --> 00:23:53,600 Speaker 1: some of the players in this space because it's so crucial. 418 00:23:53,640 --> 00:23:57,560 Speaker 1: I mean, what is uh do does there need to 419 00:23:57,640 --> 00:24:02,520 Speaker 1: be more of a reg gulatory infrastructure such that if 420 00:24:02,560 --> 00:24:05,919 Speaker 1: there is need for bailout or emergency financing, the central 421 00:24:05,920 --> 00:24:08,720 Speaker 1: banks or in the position to provide it. Well, using 422 00:24:08,800 --> 00:24:11,600 Speaker 1: the example that I gave you, if you know, Joe 423 00:24:11,680 --> 00:24:16,879 Speaker 1: commodity is incorporated. Uh, well, you have no regulation. No 424 00:24:16,920 --> 00:24:18,960 Speaker 1: one is looking at you. It's pretty like that you 425 00:24:19,000 --> 00:24:21,560 Speaker 1: could do whatever you please. And and and you know this, 426 00:24:21,760 --> 00:24:24,840 Speaker 1: this this happened. Just in mind that that trade that 427 00:24:24,920 --> 00:24:27,000 Speaker 1: we in mind, you know, buying a barrel of of 428 00:24:27,160 --> 00:24:30,320 Speaker 1: Russian oil and deliberate into rotther than you will encounter 429 00:24:30,720 --> 00:24:33,680 Speaker 1: not a single regulator other than on the financial side. 430 00:24:33,720 --> 00:24:36,119 Speaker 1: And the financial side, when you're putting your head, you 431 00:24:36,160 --> 00:24:38,840 Speaker 1: will have the CFTC looking at you what you are doing. 432 00:24:39,040 --> 00:24:42,159 Speaker 1: But on the physical side, there is absolutely nothing. You 433 00:24:42,280 --> 00:24:44,760 Speaker 1: do put on a ship, put it on the shape, 434 00:24:44,920 --> 00:24:48,280 Speaker 1: and there is no regulation. And sometimes there is nothing 435 00:24:48,280 --> 00:24:52,320 Speaker 1: even a single country, because you may not even buy 436 00:24:52,560 --> 00:24:56,280 Speaker 1: the oil from the terminal. You may buy the oil 437 00:24:56,440 --> 00:25:00,560 Speaker 1: on the high seas from you know, some science. Two 438 00:25:00,600 --> 00:25:04,160 Speaker 1: oil tankers get together, we call it ship to ship transfer. 439 00:25:04,440 --> 00:25:06,480 Speaker 1: They get together on the high seas. They can move 440 00:25:06,560 --> 00:25:09,720 Speaker 1: the oil from one tank to the and you're on 441 00:25:09,760 --> 00:25:13,040 Speaker 1: the high seas. It's literally you are almost the only 442 00:25:13,119 --> 00:25:16,160 Speaker 1: rules there is the United Nations Convention of the Sea. 443 00:25:16,160 --> 00:25:19,720 Speaker 1: It's kind of propriacy level. So you you you don't 444 00:25:19,720 --> 00:25:24,560 Speaker 1: have any regulation. And and it's quite interesting the things 445 00:25:24,560 --> 00:25:26,880 Speaker 1: that you could get away, or you could almost get 446 00:25:26,920 --> 00:25:30,840 Speaker 1: away until very recently. For example, you were incorporated in 447 00:25:30,880 --> 00:25:34,960 Speaker 1: Switzerland and you decide to bribe someone to get business 448 00:25:34,760 --> 00:25:39,760 Speaker 1: a businessman overseas. Not only that was considered legal until 449 00:25:39,840 --> 00:25:44,600 Speaker 1: very recently, but it was tax deductible. So the Swiss 450 00:25:44,640 --> 00:25:48,160 Speaker 1: were rather a commodative to what the commoti traders needed 451 00:25:48,200 --> 00:25:50,560 Speaker 1: to do. And on the book we tell the story 452 00:25:50,600 --> 00:25:53,120 Speaker 1: of some commoti traders telling us that they were traveling 453 00:25:53,160 --> 00:25:56,800 Speaker 1: to London with half a million pounds on the briefcase 454 00:25:56,880 --> 00:25:59,320 Speaker 1: to to make payments to two people. I mean, they 455 00:25:59,320 --> 00:26:03,119 Speaker 1: call it commissions, but those are brown envelopes. There's also 456 00:26:03,359 --> 00:26:06,480 Speaker 1: there's a great story in your book about the Soviet 457 00:26:06,560 --> 00:26:10,320 Speaker 1: Union basically owning the US and the commodities traders in 458 00:26:10,359 --> 00:26:13,600 Speaker 1: the nineteen seventies by going from commodities house to commodities 459 00:26:13,640 --> 00:26:16,159 Speaker 1: house buying up grain, and no one realized they were 460 00:26:16,200 --> 00:26:18,719 Speaker 1: doing this with everyone. Because they don't talk to each other, 461 00:26:18,840 --> 00:26:21,160 Speaker 1: they keep everything secret, and because there is no one 462 00:26:21,480 --> 00:26:23,920 Speaker 1: that they need to report all of these transactions. There 463 00:26:24,000 --> 00:26:27,359 Speaker 1: is not that registry. If you are trading on the 464 00:26:27,400 --> 00:26:31,359 Speaker 1: financial market, that you are buying oil futures or options 465 00:26:31,400 --> 00:26:33,879 Speaker 1: all of those trades are registries. On one there is 466 00:26:33,880 --> 00:26:38,080 Speaker 1: a trade repository. The CFTC could look into it, the 467 00:26:38,200 --> 00:26:40,960 Speaker 1: FED can look into it. You know, if any any 468 00:26:41,119 --> 00:26:45,160 Speaker 1: indication of wrongdoing, someone can go and see exactly who 469 00:26:45,240 --> 00:26:48,680 Speaker 1: bought what at what price with whom. On the physical 470 00:26:48,800 --> 00:26:52,800 Speaker 1: market you could buy oil, metals, agricultural commodities and you 471 00:26:52,840 --> 00:26:55,920 Speaker 1: do not have to disclose anything. There has been at terms. 472 00:26:55,920 --> 00:26:59,520 Speaker 1: I mean in nineteen seventy nine they D seven agreed 473 00:26:59,600 --> 00:27:04,000 Speaker 1: to create EATE, an international repository of oil physical deals. 474 00:27:04,320 --> 00:27:07,560 Speaker 1: And of course what is now forty three years later 475 00:27:07,760 --> 00:27:10,480 Speaker 1: we are here and that has not happened because opposition 476 00:27:10,520 --> 00:27:13,280 Speaker 1: from from the industry. I can't even imagine getting to 477 00:27:13,320 --> 00:27:16,200 Speaker 1: the point where people would agree to it now much 478 00:27:16,280 --> 00:27:20,880 Speaker 1: less enacted. Like it just seems like when I recently 479 00:27:21,000 --> 00:27:23,600 Speaker 1: wasn't speaking to people on the regulatory wall and and 480 00:27:23,640 --> 00:27:26,600 Speaker 1: say well you could do you could create a registry, 481 00:27:26,680 --> 00:27:29,960 Speaker 1: and they will absolutely bemused that. I indicate a look 482 00:27:30,000 --> 00:27:33,240 Speaker 1: look at the G seven V nine communicated was the 483 00:27:33,240 --> 00:27:36,800 Speaker 1: samit in Tokyo is there he says, we agree, the 484 00:27:36,920 --> 00:27:41,000 Speaker 1: G seven agrees to create an international database of trades. 485 00:27:41,080 --> 00:27:43,239 Speaker 1: And they were like, well, that would not happen. Now, 486 00:27:43,280 --> 00:27:46,080 Speaker 1: it's no way that all the country WI will agree. 487 00:27:46,280 --> 00:27:48,800 Speaker 1: So just going back to the central bank point though, 488 00:27:48,960 --> 00:27:51,399 Speaker 1: so it seems like so far most of the major 489 00:27:51,480 --> 00:27:55,359 Speaker 1: central banks have swatted away this idea of providing support. 490 00:27:55,440 --> 00:27:57,760 Speaker 1: So the e c B kind of did it more definitively, 491 00:27:58,000 --> 00:28:00,959 Speaker 1: the FED has made noises that suggest that it's not 492 00:28:01,040 --> 00:28:06,800 Speaker 1: interested in backstopping commodities traders. Is the a why not? Um? 493 00:28:06,840 --> 00:28:09,480 Speaker 1: I guess moral hazard is the sort of big one there, 494 00:28:09,680 --> 00:28:12,960 Speaker 1: But b it is part of the idea that they 495 00:28:13,000 --> 00:28:16,439 Speaker 1: get support through banks that are back stopped by the 496 00:28:16,520 --> 00:28:19,520 Speaker 1: third Yeah. I mean I think that the central bands 497 00:28:19,520 --> 00:28:23,240 Speaker 1: have looked into commoted trading recently and they found two 498 00:28:23,280 --> 00:28:26,359 Speaker 1: things that I think that they didn't like. One and 499 00:28:26,480 --> 00:28:28,960 Speaker 1: you know, the Bank of England was rather candid about it. 500 00:28:29,040 --> 00:28:32,680 Speaker 1: They put opposition paper just indicating that they could not 501 00:28:32,760 --> 00:28:34,840 Speaker 1: really even understand what was going on because of the 502 00:28:34,840 --> 00:28:37,840 Speaker 1: opacity of the market. Uh and you know that that 503 00:28:37,960 --> 00:28:41,720 Speaker 1: to to to see a central band recognizing publicly we 504 00:28:41,800 --> 00:28:44,680 Speaker 1: look at these we found it to be very opaque, 505 00:28:45,080 --> 00:28:47,000 Speaker 1: so we don't really know what's going on. I was 506 00:28:47,440 --> 00:28:49,880 Speaker 1: it's rather concerning both the EA CY b and the 507 00:28:49,920 --> 00:28:54,120 Speaker 1: FED say, well, the threshold for intervention of an unregulated market, 508 00:28:54,120 --> 00:28:56,720 Speaker 1: as they call it, is very high. And the FED, 509 00:28:57,320 --> 00:29:00,320 Speaker 1: using FED to speak effectively told the industry will be 510 00:29:00,320 --> 00:29:03,280 Speaker 1: a good idea if you raise equity and you show 511 00:29:03,400 --> 00:29:05,760 Speaker 1: up your your own finance. I mean, let's not forget 512 00:29:05,760 --> 00:29:07,960 Speaker 1: a lot of these companies are privately owned that there 513 00:29:08,000 --> 00:29:10,200 Speaker 1: are very few that they are listed on the market. 514 00:29:10,400 --> 00:29:13,440 Speaker 1: But they are also owned by extremely wealthy individuals. I 515 00:29:13,440 --> 00:29:16,040 Speaker 1: mean they're making billions of dollars every year, and the 516 00:29:16,160 --> 00:29:20,280 Speaker 1: partners could put money back into into the business. Um. 517 00:29:20,320 --> 00:29:24,280 Speaker 1: The problem for the central banks is what if a 518 00:29:24,360 --> 00:29:28,480 Speaker 1: big multi trade company was to fail and it goes 519 00:29:28,640 --> 00:29:31,920 Speaker 1: under with billions of dollars on credit lines to a 520 00:29:31,960 --> 00:29:35,160 Speaker 1: bunch of European banks, and all of a sudden you 521 00:29:35,240 --> 00:29:38,640 Speaker 1: realize that the likes of we were commenting earlier, you know, 522 00:29:39,680 --> 00:29:43,960 Speaker 1: uh banks who have branches on the highest treet in 523 00:29:44,000 --> 00:29:47,720 Speaker 1: Europe have two, three, five six billion dollars of exposure, 524 00:29:48,320 --> 00:29:52,040 Speaker 1: and you don't know what if anyone else gonna calm down, 525 00:29:52,480 --> 00:29:55,880 Speaker 1: the industry gets under massive stress. I think that we 526 00:29:55,960 --> 00:29:59,160 Speaker 1: can get into a position in which central bands hands 527 00:29:59,280 --> 00:30:03,440 Speaker 1: maybe use forced into act and supporting the industry. But 528 00:30:03,600 --> 00:30:06,680 Speaker 1: it gets complicated because a difference of the a lot 529 00:30:06,720 --> 00:30:09,480 Speaker 1: of the banks, a lot of these com multi trading 530 00:30:09,520 --> 00:30:12,080 Speaker 1: houses are not even incorporated in Europe. You are going 531 00:30:12,120 --> 00:30:14,760 Speaker 1: to be bailing out companies that are in the British 532 00:30:14,800 --> 00:30:19,160 Speaker 1: bulding Islands, in um in Dubai, in Singapore, and and 533 00:30:19,240 --> 00:30:24,640 Speaker 1: companies also that you could discuss whether what Liman Brothers 534 00:30:24,720 --> 00:30:27,760 Speaker 1: or band stands we're doing, we're good for society and 535 00:30:27,760 --> 00:30:30,320 Speaker 1: so on. But these companies, a lot of the trouble 536 00:30:30,400 --> 00:30:32,880 Speaker 1: that they're getting now is because they are trading Russian oil, 537 00:30:33,720 --> 00:30:37,320 Speaker 1: which goes so just in mindor situation in which a 538 00:30:37,360 --> 00:30:40,680 Speaker 1: central bank effectively has to bail out a commulti trading house, 539 00:30:41,200 --> 00:30:44,440 Speaker 1: and the central bank is either the FED or the EASYB, 540 00:30:44,920 --> 00:30:47,480 Speaker 1: and you are bailing out a community trading house which 541 00:30:47,520 --> 00:30:51,280 Speaker 1: is involved in shifting Russian oil, which is more or 542 00:30:51,360 --> 00:30:55,280 Speaker 1: less against what the company trading and trading house and 543 00:30:55,320 --> 00:30:58,600 Speaker 1: the tax haven making it easier for latter we're to 544 00:30:58,600 --> 00:31:02,480 Speaker 1: get revenue. And now coming potentially thinking the easy B 545 00:31:02,680 --> 00:31:04,760 Speaker 1: or the Bank of England to the FED us in 546 00:31:04,840 --> 00:31:08,240 Speaker 1: mind what the hearing in Capitol Hill when they ask 547 00:31:09,120 --> 00:31:12,280 Speaker 1: cherman power and Secretary jal And why you bail out 548 00:31:12,320 --> 00:31:16,080 Speaker 1: these guys? I mean, you know, you understand why the 549 00:31:16,160 --> 00:31:19,320 Speaker 1: FED and the easy we were terrified at that situation. 550 00:31:19,360 --> 00:31:22,280 Speaker 1: But on the other hand, while both the EASY b 551 00:31:22,440 --> 00:31:25,440 Speaker 1: and the AND and the FED have said no, I 552 00:31:25,480 --> 00:31:27,440 Speaker 1: think that they're very aware that they could be a 553 00:31:27,520 --> 00:31:31,080 Speaker 1: situation in which they may have to because the financial 554 00:31:31,120 --> 00:31:33,480 Speaker 1: health of a number of European banks is at risk, 555 00:31:33,960 --> 00:31:37,160 Speaker 1: But the political consequence of having to bail out these 556 00:31:37,160 --> 00:31:41,120 Speaker 1: guys were are terrifying. Yeah, I hadn't thought I hadn't 557 00:31:41,120 --> 00:31:43,959 Speaker 1: thought about that at all. Something that you talk about 558 00:31:44,360 --> 00:31:47,360 Speaker 1: is and and you know, again, I guess I'm going 559 00:31:47,360 --> 00:31:51,120 Speaker 1: back to like the why these companies is that in 560 00:31:51,160 --> 00:31:53,320 Speaker 1: the past, and maybe it's with oil, but I think 561 00:31:53,320 --> 00:31:57,920 Speaker 1: other commodities as well, the supply chains were much more 562 00:31:58,800 --> 00:32:02,360 Speaker 1: vertically integrated, and so whether from the drilling to the 563 00:32:02,400 --> 00:32:05,760 Speaker 1: literal gas station where someone would get their fuel, it 564 00:32:05,840 --> 00:32:08,160 Speaker 1: might have been like all one company. And then it's 565 00:32:08,200 --> 00:32:11,160 Speaker 1: sort of like as that fragmented. You talk a little 566 00:32:11,160 --> 00:32:16,600 Speaker 1: bit about how the trading houses emerged out of essentially 567 00:32:16,720 --> 00:32:21,760 Speaker 1: restructuring of the industry itself. It happened mostly around the 568 00:32:21,760 --> 00:32:24,480 Speaker 1: seventies sixties and seventies, and and you know, oil was 569 00:32:24,720 --> 00:32:27,840 Speaker 1: particularly the one that broke down. I mean it was 570 00:32:27,880 --> 00:32:32,160 Speaker 1: a time where everything was particularly integrated in the oil 571 00:32:32,200 --> 00:32:37,280 Speaker 1: industry exce on oil exce and oil fields will produce oil, 572 00:32:37,320 --> 00:32:41,200 Speaker 1: they will put on excellent own pipelines into excellent tankers 573 00:32:41,200 --> 00:32:45,720 Speaker 1: to exon refineries and to exon gas stations. And that 574 00:32:46,240 --> 00:32:50,760 Speaker 1: broke down for a number of reasons, very importantly nationalization 575 00:32:50,880 --> 00:32:53,320 Speaker 1: of the oil resources in the Middle East and North 576 00:32:53,360 --> 00:32:57,120 Speaker 1: Africa through the seventies, um the commoti trade. That when 577 00:32:57,400 --> 00:33:00,480 Speaker 1: the Middle East countries nationalized that they're oil, all of 578 00:33:00,520 --> 00:33:03,120 Speaker 1: the sudden, those countries who have never solved it on 579 00:33:03,240 --> 00:33:07,040 Speaker 1: oil have plenty to sell and they needed someone to help. 580 00:33:07,080 --> 00:33:10,880 Speaker 1: And that came the oil traders who became the big intermediaries. 581 00:33:11,320 --> 00:33:15,120 Speaker 1: And the industry has really broke down. There is not 582 00:33:15,280 --> 00:33:19,760 Speaker 1: that vertical integration anymore, and the traders have have benefited 583 00:33:19,760 --> 00:33:23,600 Speaker 1: from that. Would you expect some form of vertical integration 584 00:33:23,680 --> 00:33:27,640 Speaker 1: to return, like the obvious one given the shipping shortage 585 00:33:27,800 --> 00:33:30,960 Speaker 1: shipping issues would be for commodities traders to just start 586 00:33:31,200 --> 00:33:35,280 Speaker 1: buying or building a bunch of huge, very large crude 587 00:33:35,320 --> 00:33:38,480 Speaker 1: carriers or stuff like that would that kind of thing 588 00:33:38,520 --> 00:33:41,320 Speaker 1: come back. I think that where you may have some 589 00:33:41,480 --> 00:33:46,080 Speaker 1: vertical integration is companies have come to realize now that 590 00:33:46,440 --> 00:33:50,120 Speaker 1: if they need a particular supply that is in critical 591 00:33:50,200 --> 00:33:53,720 Speaker 1: for their business and no one is investing, they may 592 00:33:53,760 --> 00:33:56,120 Speaker 1: have to do it themselves. I mean test Lies is 593 00:33:56,200 --> 00:33:58,720 Speaker 1: kind of a good example of these, I mean Elements 594 00:33:58,800 --> 00:34:01,800 Speaker 1: is talking about the shortages of lithun. So you could 595 00:34:01,800 --> 00:34:04,280 Speaker 1: see at some point Tesla having to go into mining 596 00:34:04,360 --> 00:34:08,880 Speaker 1: lithun or coinvesting with some traders into that because you know, 597 00:34:09,239 --> 00:34:11,560 Speaker 1: in effect you have a market failure, so you may 598 00:34:11,680 --> 00:34:14,600 Speaker 1: want to integrate. The one thing that I see, which 599 00:34:14,640 --> 00:34:19,080 Speaker 1: is not vertical integration, but is uh the commoity traders 600 00:34:19,080 --> 00:34:22,600 Speaker 1: have benefited a lot from their movement by everyone to 601 00:34:22,800 --> 00:34:25,480 Speaker 1: use in time. They were the ones who were holding 602 00:34:25,520 --> 00:34:28,759 Speaker 1: inventories for everyone else, and they made money from that. 603 00:34:28,800 --> 00:34:30,759 Speaker 1: I mean a lot of companies they didn't have to 604 00:34:30,800 --> 00:34:33,840 Speaker 1: carry inventories. The inventories were in the hands of the traders. 605 00:34:33,880 --> 00:34:37,080 Speaker 1: The traders were financing those inventories. So a lot of 606 00:34:37,520 --> 00:34:40,960 Speaker 1: chief financial officers of companies that need resources were very 607 00:34:40,960 --> 00:34:44,760 Speaker 1: happy not to carry those financing course, all the sudden 608 00:34:44,840 --> 00:34:47,000 Speaker 1: you realize that just in time may not be a 609 00:34:47,000 --> 00:34:49,799 Speaker 1: great idea. And you are a company that needs a 610 00:34:49,840 --> 00:34:52,799 Speaker 1: lot of aluminium or a lot of copper, you may 611 00:34:52,920 --> 00:34:55,400 Speaker 1: want to move from relying a bit less on the 612 00:34:55,400 --> 00:34:58,840 Speaker 1: commority traders and controlling a lot more of those inventories. 613 00:34:59,040 --> 00:35:02,080 Speaker 1: Which is really bad right now because we have low 614 00:35:02,120 --> 00:35:06,279 Speaker 1: inventories everywhere, supplies trolling with demand and we are having 615 00:35:06,440 --> 00:35:09,440 Speaker 1: is a number of companies building their own inventories right 616 00:35:09,480 --> 00:35:12,640 Speaker 1: now at the worst possible time, which is exacerbating the 617 00:35:12,680 --> 00:35:16,759 Speaker 1: short Yeah, this is a real diversion. But while you're here, 618 00:35:16,840 --> 00:35:20,000 Speaker 1: I'm just gonna ask you, did anyone actually get paid 619 00:35:20,080 --> 00:35:23,480 Speaker 1: to take oil in spring when it went negative? Like 620 00:35:23,520 --> 00:35:25,680 Speaker 1: were there's some people in a position where they like 621 00:35:25,719 --> 00:35:29,120 Speaker 1: took oil and got paid the warehouse it made a fortune. Yeah, 622 00:35:29,560 --> 00:35:32,480 Speaker 1: there were. There were some commoty traders certainly buying oil 623 00:35:32,520 --> 00:35:35,200 Speaker 1: in cushion. Uh. And you know by buying, I mean 624 00:35:35,280 --> 00:35:37,799 Speaker 1: getting paid to take the oil. There was not a 625 00:35:37,840 --> 00:35:41,000 Speaker 1: lot of it. Uh. And you know the reason that 626 00:35:41,080 --> 00:35:43,880 Speaker 1: we went negative was a lot of technicality around the 627 00:35:44,040 --> 00:35:47,280 Speaker 1: contract and probably some people pushing the market at closing 628 00:35:47,480 --> 00:35:49,960 Speaker 1: in the in the right direction for for their for 629 00:35:50,080 --> 00:35:53,839 Speaker 1: their positions. But yes, there were commuity traders who that day, 630 00:35:53,920 --> 00:35:55,840 Speaker 1: and not only that day, I mean on the physical 631 00:35:55,920 --> 00:35:59,360 Speaker 1: market in the US for a few weeks before the 632 00:35:59,400 --> 00:36:04,279 Speaker 1: doublet when negative we have domestic grades on kind of 633 00:36:04,960 --> 00:36:08,239 Speaker 1: areas were very difficult to move the oil out where 634 00:36:08,239 --> 00:36:11,160 Speaker 1: prices were negative, and some of the commuity traders were 635 00:36:11,360 --> 00:36:14,360 Speaker 1: we're taking the oil I mean Mercuria, big oil trader 636 00:36:14,600 --> 00:36:17,440 Speaker 1: who takes oil in some areas of the U S 637 00:36:17,480 --> 00:36:21,640 Speaker 1: which had lacked lockdown, with very very difficult access over 638 00:36:22,360 --> 00:36:26,480 Speaker 1: two pipelines and so on, was buying negative and negative 639 00:36:26,520 --> 00:36:44,080 Speaker 1: prices for about two weeks. There's one part of the 640 00:36:44,120 --> 00:36:47,239 Speaker 1: commodities ecosystem that we haven't really discussed yet, and it 641 00:36:47,360 --> 00:36:49,920 Speaker 1: was the drama that I was referring to in the intro, 642 00:36:50,120 --> 00:36:53,640 Speaker 1: and that's the exchanges. And the big drama was the 643 00:36:53,680 --> 00:36:57,120 Speaker 1: London Medals exchange canceling a bunch of Nichols trades after 644 00:36:57,520 --> 00:37:00,719 Speaker 1: the price just went absolutely nuts. And this was really 645 00:37:00,760 --> 00:37:04,680 Speaker 1: controversial at the time. But you know, obviously a lot 646 00:37:04,680 --> 00:37:07,760 Speaker 1: of what the commodities traders are doing are through futures 647 00:37:07,800 --> 00:37:11,840 Speaker 1: contracts that go through an exchange. What sort of response 648 00:37:11,880 --> 00:37:14,879 Speaker 1: have we seen from the exchanges in terms of adapting 649 00:37:15,280 --> 00:37:18,840 Speaker 1: to this new environment, well, the response from these changes 650 00:37:18,880 --> 00:37:24,000 Speaker 1: have been to increase margins massively to everyone and particularly 651 00:37:24,120 --> 00:37:28,120 Speaker 1: not use variation margins. By initiation margins very expensive right 652 00:37:28,120 --> 00:37:33,120 Speaker 1: now to put a trade on energy commodities oil, power, gas, 653 00:37:33,400 --> 00:37:36,120 Speaker 1: it just have got very very expensive. I think that 654 00:37:36,440 --> 00:37:38,759 Speaker 1: you know that the reaction from these changes have been, 655 00:37:39,960 --> 00:37:42,760 Speaker 1: Oh my gosh, we got very very close to disaster 656 00:37:42,880 --> 00:37:46,080 Speaker 1: with the Leemy. I mean the Leemy have not shut 657 00:37:46,120 --> 00:37:48,879 Speaker 1: down the nickel market and then canceled the trade, which 658 00:37:48,920 --> 00:37:52,400 Speaker 1: is extremely controversial the session and many people on the 659 00:37:52,440 --> 00:37:54,480 Speaker 1: market will say illegal decision and this is going to 660 00:37:54,560 --> 00:37:58,120 Speaker 1: be uh, there's gonna go into lawsuits, etcetera, etcetera. But 661 00:37:58,960 --> 00:38:02,400 Speaker 1: these changes have been quite open. Four or five brokers 662 00:38:02,400 --> 00:38:05,959 Speaker 1: will have default that morning. The market was shut down 663 00:38:06,000 --> 00:38:08,279 Speaker 1: at a fifteen in the morning and the trades were 664 00:38:08,360 --> 00:38:11,239 Speaker 1: canceled at a fifteen in the morning. Market calls were 665 00:38:11,320 --> 00:38:14,759 Speaker 1: due and nine. So we can say that four or 666 00:38:14,760 --> 00:38:17,640 Speaker 1: five big brokers at the enemy were forty five minutes 667 00:38:17,880 --> 00:38:23,560 Speaker 1: from going berry. Um if they if the brokers go, uh, 668 00:38:23,800 --> 00:38:27,560 Speaker 1: what happened to because then the brokers default to the 669 00:38:27,600 --> 00:38:30,120 Speaker 1: exchange and the clearing house. What would have happened to 670 00:38:30,160 --> 00:38:32,480 Speaker 1: the clearing house. The change said that the clearing house 671 00:38:32,480 --> 00:38:35,759 Speaker 1: will have survived, but we don't know the reality and 672 00:38:35,800 --> 00:38:37,960 Speaker 1: what will have happened to some of the banks which 673 00:38:37,960 --> 00:38:41,359 Speaker 1: are behind the brokers. I mean the financial consequences could 674 00:38:41,400 --> 00:38:44,600 Speaker 1: have been significant billions of dollars of losses. And you know, 675 00:38:44,680 --> 00:38:46,480 Speaker 1: a lot of the race today we have moved the 676 00:38:46,600 --> 00:38:50,399 Speaker 1: race out of OTC markets into clearing houses. Uh, and 677 00:38:50,560 --> 00:38:52,440 Speaker 1: you know, we don't know. And this was a test, 678 00:38:52,480 --> 00:38:56,680 Speaker 1: I mean, having to cancel the trades. It's a massive decision. 679 00:38:56,719 --> 00:38:59,160 Speaker 1: I mean that you know, my my, my, my ward 680 00:38:59,239 --> 00:39:01,160 Speaker 1: is my bond. I have a trade, I have a 681 00:39:01,160 --> 00:39:05,960 Speaker 1: contract and that's dawn and those contracts were evaporated in minutes. UM, 682 00:39:06,000 --> 00:39:09,560 Speaker 1: So there's changes. Reaction so far is to increase margins 683 00:39:09,600 --> 00:39:12,680 Speaker 1: and trying to make sure that the buffer on the 684 00:39:12,719 --> 00:39:17,000 Speaker 1: clearinghouse is there for a potential default. But obviously that's 685 00:39:17,080 --> 00:39:19,440 Speaker 1: draining a lot of liquidity from from this change. We 686 00:39:19,520 --> 00:39:22,320 Speaker 1: have seen liquid in the oil market at a six 687 00:39:22,320 --> 00:39:26,640 Speaker 1: seven year low that's not coming back. Um At times, 688 00:39:26,680 --> 00:39:29,840 Speaker 1: the oil market, I think that I said that the 689 00:39:29,960 --> 00:39:32,480 Speaker 1: bid as a spread on double T I which usually 690 00:39:32,480 --> 00:39:34,560 Speaker 1: is no more than one cent. There were times that 691 00:39:34,719 --> 00:39:37,399 Speaker 1: was seven eighth fens wide, which I said, well, that's 692 00:39:37,600 --> 00:39:39,680 Speaker 1: wide enough to put an oil tanker through. I mean, 693 00:39:39,719 --> 00:39:43,600 Speaker 1: like you could make a fense of a dollar just basically, 694 00:39:43,600 --> 00:39:46,440 Speaker 1: are we try and beat as beat as spread on 695 00:39:46,520 --> 00:39:48,319 Speaker 1: dou w t I, which is as insane as it's 696 00:39:48,360 --> 00:39:51,200 Speaker 1: kind of almost free money crazy, you know, you're we're 697 00:39:51,200 --> 00:39:53,520 Speaker 1: talking about like, oh, these commodity traders and make a 698 00:39:53,600 --> 00:39:55,600 Speaker 1: ton of money, but they weren't always. I mean, and 699 00:39:56,080 --> 00:39:59,759 Speaker 1: then let you know, prior to COVID, commodities was not 700 00:40:00,160 --> 00:40:03,799 Speaker 1: booming business. And one of the themes that comes up 701 00:40:04,080 --> 00:40:06,640 Speaker 1: a lot on odd lots is um you know, this 702 00:40:06,719 --> 00:40:10,400 Speaker 1: idea of like under investment, under investment in physical resources, etcetera. 703 00:40:10,600 --> 00:40:13,040 Speaker 1: But I'm curious also about like the sort of I 704 00:40:13,080 --> 00:40:16,640 Speaker 1: guess the E S G aspect because my impression is, 705 00:40:17,040 --> 00:40:20,319 Speaker 1: and I think some people want to dismiss that. Other 706 00:40:20,360 --> 00:40:23,279 Speaker 1: people say it's everything, But my impression is a lot 707 00:40:23,360 --> 00:40:27,600 Speaker 1: of people just either different kinds of financial companies just 708 00:40:27,640 --> 00:40:29,960 Speaker 1: sort of like cut all of their units related to 709 00:40:30,000 --> 00:40:33,120 Speaker 1: restractive industries, related to mining and so forth, like we're 710 00:40:33,160 --> 00:40:36,080 Speaker 1: just gonna get out of this business. It does feel 711 00:40:36,160 --> 00:40:42,120 Speaker 1: like the sort of negative attitude towards dirty industries really 712 00:40:42,160 --> 00:40:45,360 Speaker 1: caused a lot of these sort of financing and to disappear. 713 00:40:45,640 --> 00:40:48,120 Speaker 1: The Russian based in the Ukraine has been really the 714 00:40:48,200 --> 00:40:51,440 Speaker 1: finalist draw on on on the market. That has tightened 715 00:40:51,440 --> 00:40:54,960 Speaker 1: things a lot, But the market was already tightened, tightening 716 00:40:55,040 --> 00:40:57,440 Speaker 1: a lot on the on the run up. And and 717 00:40:57,520 --> 00:41:00,080 Speaker 1: one reason is that we have on that investment in 718 00:41:00,400 --> 00:41:04,160 Speaker 1: fossil fuels, in mining, it just generally has been seen 719 00:41:04,160 --> 00:41:07,319 Speaker 1: as a deity industry. E. S G has kicking. We're 720 00:41:07,360 --> 00:41:09,719 Speaker 1: not having probably enough investment. I mean here we are 721 00:41:10,320 --> 00:41:14,480 Speaker 1: at unprecedented prices for coal. I mean a good price. 722 00:41:14,760 --> 00:41:17,600 Speaker 1: If you have told a coal miner a couple of 723 00:41:17,680 --> 00:41:20,919 Speaker 1: years ago that two hundred and fifty dollars a tone, 724 00:41:21,200 --> 00:41:22,640 Speaker 1: whether they will take it, I mean they will have 725 00:41:22,719 --> 00:41:25,279 Speaker 1: signed a contract right now, thank you very much. That's 726 00:41:25,320 --> 00:41:27,560 Speaker 1: a great price. And the market is now at four 727 00:41:27,640 --> 00:41:30,799 Speaker 1: hundred and no one is building a mine, no one 728 00:41:30,880 --> 00:41:33,720 Speaker 1: is opening that. Everybody got out of coal finance. Everyone 729 00:41:34,440 --> 00:41:36,879 Speaker 1: everyone is out of coal finance. You could not get 730 00:41:36,920 --> 00:41:39,759 Speaker 1: a bank to finance a coal mine. And you know 731 00:41:39,880 --> 00:41:42,760 Speaker 1: some of the call companies I speak to the CEOs 732 00:41:42,800 --> 00:41:44,919 Speaker 1: and said, why you are not now announcing a big 733 00:41:44,920 --> 00:41:47,320 Speaker 1: expansion and so on, because he said, if I announced 734 00:41:47,360 --> 00:41:50,080 Speaker 1: that we're expanding products and capacity, my share price goes 735 00:41:50,120 --> 00:41:52,719 Speaker 1: down ten percent. Because that's the last thing that you know, 736 00:41:52,760 --> 00:41:55,359 Speaker 1: we have targets that we have to reduce. And you know, 737 00:41:56,080 --> 00:41:58,920 Speaker 1: the sad thing right now of the energy transition is 738 00:41:58,960 --> 00:42:03,040 Speaker 1: that we have been told about cutting emissions, reducing CO 739 00:42:03,080 --> 00:42:05,759 Speaker 1: two and so on and two we're going to see 740 00:42:05,840 --> 00:42:08,600 Speaker 1: record demand for oil, record demand for natural gas, and 741 00:42:08,680 --> 00:42:12,480 Speaker 1: record demand for thermal coll and that's despite the fact 742 00:42:12,520 --> 00:42:15,000 Speaker 1: that we have been trying to reduce reliance on thermal 743 00:42:15,040 --> 00:42:17,560 Speaker 1: call for the last I mean, some people will say 744 00:42:17,680 --> 00:42:20,440 Speaker 1: hundreds and fifty years, but seriously for the last twenty years. 745 00:42:21,239 --> 00:42:24,440 Speaker 1: I have a related but slightly weird question. Um. But 746 00:42:24,600 --> 00:42:27,640 Speaker 1: speaking of under investment, you know central banks around the 747 00:42:27,680 --> 00:42:30,439 Speaker 1: world gearing up for rate hikes if they haven't done 748 00:42:30,480 --> 00:42:34,000 Speaker 1: so already, and the whole intent there is to try 749 00:42:34,040 --> 00:42:37,840 Speaker 1: to bring down inflation, which presumably with lower commodities prices. 750 00:42:37,880 --> 00:42:42,200 Speaker 1: But I'm curious how do commodities traders feel about rate 751 00:42:42,280 --> 00:42:44,759 Speaker 1: hikes at the moment, because the other argument you could 752 00:42:44,800 --> 00:42:48,040 Speaker 1: make is that you're increasing the cost of capital, the 753 00:42:48,080 --> 00:42:51,719 Speaker 1: cost of funding at precisely the wrong time for that 754 00:42:51,840 --> 00:42:57,239 Speaker 1: particular industry. I mean commodity traders. They feel that demand 755 00:42:57,600 --> 00:43:01,000 Speaker 1: is outstrapped in supply and that the only thing that 756 00:43:01,080 --> 00:43:04,080 Speaker 1: could bring down the market is just a good old 757 00:43:04,120 --> 00:43:09,480 Speaker 1: fashioned procession. Uh So, can you reduce commotive prices via 758 00:43:09,640 --> 00:43:12,560 Speaker 1: interest rates hikes? Yes, but at the court of killing 759 00:43:12,560 --> 00:43:15,600 Speaker 1: the economy. But if you're going to achieve the south landing, 760 00:43:15,680 --> 00:43:17,399 Speaker 1: I don't I don't think that you are. I mean, 761 00:43:17,400 --> 00:43:19,640 Speaker 1: the demand is going to be still there. I don't 762 00:43:19,640 --> 00:43:22,520 Speaker 1: see how that's just gonna reduce inflation. I mean, nothing 763 00:43:22,560 --> 00:43:25,200 Speaker 1: that the FAT can do other than killing the economy 764 00:43:25,560 --> 00:43:28,040 Speaker 1: can bring more oil, or more coal or more wheat. 765 00:43:28,080 --> 00:43:30,400 Speaker 1: I mean, you know that just we have a problem 766 00:43:30,440 --> 00:43:33,000 Speaker 1: with with supplies right now because we have lost the 767 00:43:33,200 --> 00:43:36,239 Speaker 1: number one and number three supplier to the Wall and 768 00:43:36,719 --> 00:43:38,600 Speaker 1: the e c B, the Bank of England or the 769 00:43:38,640 --> 00:43:40,799 Speaker 1: FAT cannot do anything about that. I mean, you know, 770 00:43:40,920 --> 00:43:44,239 Speaker 1: higher interest rates are not gonna produce more wheat, and 771 00:43:44,280 --> 00:43:47,160 Speaker 1: they're not gonna produce more oil. But you know, interestingly, 772 00:43:47,600 --> 00:43:50,400 Speaker 1: I'm interesting it is the designed statement of the obvious. 773 00:43:50,400 --> 00:43:53,879 Speaker 1: Why now the global economy faces much higher energy, cause 774 00:43:53,960 --> 00:43:58,479 Speaker 1: much higher food costs, and higher cost of money. So 775 00:43:58,640 --> 00:44:02,799 Speaker 1: you know, I I have a hard time wrapping my 776 00:44:02,840 --> 00:44:05,960 Speaker 1: head around how big of a deal it is to say, Okay, 777 00:44:06,239 --> 00:44:09,560 Speaker 1: some European countries are gonna buy Russian gas in rubles, 778 00:44:09,719 --> 00:44:12,640 Speaker 1: or maybe China is going to enter into some contract 779 00:44:12,680 --> 00:44:15,480 Speaker 1: of Saudi Arabia to use you end. Some people when 780 00:44:15,520 --> 00:44:17,960 Speaker 1: these headlines hit there's a huge deal at the end 781 00:44:18,000 --> 00:44:20,640 Speaker 1: of the dollar, And I'm always like not sure how 782 00:44:20,680 --> 00:44:23,319 Speaker 1: to think about it. Just what's your take, and like 783 00:44:23,360 --> 00:44:27,960 Speaker 1: how significant is pricing commodity sales and non dollar currencies. 784 00:44:28,239 --> 00:44:29,759 Speaker 1: Is it a big deal or is it sort of 785 00:44:29,800 --> 00:44:32,440 Speaker 1: just accounting? Depends on what we are talking about. We 786 00:44:32,440 --> 00:44:36,719 Speaker 1: are talking about pricing the commoity in a non dollar currency, 787 00:44:36,800 --> 00:44:39,080 Speaker 1: then I think it's a big deal. But a lot 788 00:44:39,120 --> 00:44:42,200 Speaker 1: of what we are talking about is about embosing the 789 00:44:42,480 --> 00:44:46,440 Speaker 1: commodities pricing dollar, but you are you are pricing dollars. 790 00:44:46,480 --> 00:44:49,000 Speaker 1: But when you you transfer the money, you you wire 791 00:44:49,040 --> 00:44:51,319 Speaker 1: the money in a different currency, which is a very 792 00:44:51,360 --> 00:44:55,399 Speaker 1: different thing from you know, no, non pricing indollars. Look, 793 00:44:55,640 --> 00:44:58,560 Speaker 1: I do think that it does have an impact. Obviously, 794 00:44:58,680 --> 00:45:00,319 Speaker 1: there are a number of countries that they try to 795 00:45:00,360 --> 00:45:04,920 Speaker 1: reduce their reliance on the dollar. But it was quite interesting. 796 00:45:04,960 --> 00:45:07,520 Speaker 1: I was recently speaking to a senior executive of a 797 00:45:07,560 --> 00:45:10,640 Speaker 1: Middle East company about what would you would you want 798 00:45:10,680 --> 00:45:13,880 Speaker 1: to to get pay in juan? And and you know, 799 00:45:14,000 --> 00:45:16,480 Speaker 1: he's not a friend of the United States, this this 800 00:45:16,600 --> 00:45:20,040 Speaker 1: particular gentleman. But he he said, and then what do 801 00:45:20,120 --> 00:45:22,840 Speaker 1: we do with the duan? We get paid with the juan. 802 00:45:23,000 --> 00:45:26,200 Speaker 1: It's not converted, it's not properly convertible. We can pay 803 00:45:26,280 --> 00:45:29,040 Speaker 1: for for Chinese goods, but we have enough demand for 804 00:45:29,120 --> 00:45:31,279 Speaker 1: Chinese and staff. And say, like, they may not like 805 00:45:31,400 --> 00:45:34,279 Speaker 1: the dollar, they may not like policies with the United States, 806 00:45:34,320 --> 00:45:36,120 Speaker 1: but they know that the moment that they have the dollar, 807 00:45:36,239 --> 00:45:39,319 Speaker 1: they can compare that to anything that they want. They 808 00:45:39,320 --> 00:45:43,280 Speaker 1: can move it around, etcetera, etcetera. So you've been covering 809 00:45:43,320 --> 00:45:47,560 Speaker 1: commodities for a very long time, and obviously your book 810 00:45:47,560 --> 00:45:51,080 Speaker 1: deals with the long term history of commodities trading. What 811 00:45:51,400 --> 00:45:55,280 Speaker 1: about the past month or so has surprised you? What's 812 00:45:55,280 --> 00:45:58,080 Speaker 1: been the most striking to you? A couple of things. 813 00:45:58,640 --> 00:46:03,640 Speaker 1: I have been a struck by how little regulators in 814 00:46:03,680 --> 00:46:07,719 Speaker 1: this day know about the industry. The fact that a 815 00:46:07,760 --> 00:46:09,919 Speaker 1: lot of them seem to be completely in the dark 816 00:46:10,000 --> 00:46:12,600 Speaker 1: of what's going on and who are the big players 817 00:46:12,640 --> 00:46:15,920 Speaker 1: and how things work. Considering that we have had several 818 00:46:15,960 --> 00:46:18,880 Speaker 1: white cup calls, I would have thought that the regulators 819 00:46:18,920 --> 00:46:21,279 Speaker 1: will have really getting up to a speed onto that. 820 00:46:21,400 --> 00:46:25,440 Speaker 1: And I that is really concerning because I am not 821 00:46:25,520 --> 00:46:28,240 Speaker 1: a big believer that you need super extra heavy regulation 822 00:46:28,280 --> 00:46:31,360 Speaker 1: on commodities. But really concerns me when when regulators and 823 00:46:31,400 --> 00:46:34,600 Speaker 1: policymakers basically have no idea what's going on, that that 824 00:46:35,040 --> 00:46:38,120 Speaker 1: remains a surprise. The other one, on the other hand, 825 00:46:38,239 --> 00:46:43,200 Speaker 1: has been sell sunsoning how you know, public pressure has 826 00:46:43,320 --> 00:46:46,040 Speaker 1: led to so many players to say, even if this 827 00:46:46,160 --> 00:46:48,600 Speaker 1: is legal, we're not going to touch it. I don't know. 828 00:46:48,719 --> 00:46:52,560 Speaker 1: This is an era of social media where public pressure 829 00:46:52,600 --> 00:46:56,319 Speaker 1: goes quicker to companies. But in the past I would 830 00:46:56,400 --> 00:46:59,640 Speaker 1: have expected a lot more companies to continue dealing on 831 00:47:00,000 --> 00:47:02,600 Speaker 1: scan oil with no problem, and we have seen a 832 00:47:02,680 --> 00:47:05,719 Speaker 1: number of companies just you know, taking a step back, 833 00:47:05,960 --> 00:47:08,280 Speaker 1: and the companies that tried to use the old tricks 834 00:47:08,360 --> 00:47:11,360 Speaker 1: like the blending and things like that getting name and 835 00:47:11,440 --> 00:47:14,000 Speaker 1: shame and very very quickly saying, oh yeah, I would mistake, 836 00:47:14,120 --> 00:47:16,000 Speaker 1: We're not gonna do that. Yeah, you've had some great 837 00:47:16,040 --> 00:47:19,560 Speaker 1: columns about blending. They called Latvian oil and that's that. 838 00:47:19,719 --> 00:47:24,399 Speaker 1: Then it's like coffee. It's like coffee or cocktails. You 839 00:47:24,400 --> 00:47:26,759 Speaker 1: you kind of you know, you mix. So it's when 840 00:47:27,160 --> 00:47:29,400 Speaker 1: when Russian oil is not really Russian oil. I mean 841 00:47:29,440 --> 00:47:32,120 Speaker 1: for some companies, they will say that as long and 842 00:47:32,440 --> 00:47:34,880 Speaker 1: fifty one percent of the oil is from somewhere else, 843 00:47:35,160 --> 00:47:38,680 Speaker 1: the other could be Russian, and then they bend all 844 00:47:38,760 --> 00:47:41,479 Speaker 1: these names which are kind of you know, cocktail names. 845 00:47:41,520 --> 00:47:44,800 Speaker 1: Latvian blend to many study blend to to avoid calling 846 00:47:44,840 --> 00:47:49,239 Speaker 1: it Russian. I just have one more question, and I 847 00:47:49,239 --> 00:47:51,120 Speaker 1: guess it's like a culture thing again. But you know, 848 00:47:51,120 --> 00:47:54,719 Speaker 1: in this world of commodities, commodities being so important, you know, 849 00:47:54,719 --> 00:47:58,000 Speaker 1: and I think of traditional traders maybe they're like physicists 850 00:47:58,000 --> 00:48:02,160 Speaker 1: these days, or electrical engineer or mathematicians or something who 851 00:48:02,200 --> 00:48:09,720 Speaker 1: becomes commodity traders ha um. I mean, like language skills 852 00:48:09,760 --> 00:48:11,520 Speaker 1: might be useful if we're talking about all these like 853 00:48:11,560 --> 00:48:15,200 Speaker 1: international I think that language skills you have to have 854 00:48:15,280 --> 00:48:17,640 Speaker 1: a sense of adventure and you know, be willing to 855 00:48:17,719 --> 00:48:20,480 Speaker 1: live in the middle of nowhere. Trouble two hundred and 856 00:48:20,480 --> 00:48:23,839 Speaker 1: fifty days a year, take quite a lot of personal risk. Um. 857 00:48:24,000 --> 00:48:27,120 Speaker 1: There is as a commoity trading house called or Land 858 00:48:27,160 --> 00:48:29,719 Speaker 1: which is based in Singapore and the CEO is a 859 00:48:29,760 --> 00:48:34,920 Speaker 1: gentleman called Sandy Burge. Mr Burgess started in Nigeria, so 860 00:48:35,040 --> 00:48:39,239 Speaker 1: he he still sends all the down traders upcountry in 861 00:48:39,280 --> 00:48:41,840 Speaker 1: the middle of nowhere for a couple of years. So 862 00:48:41,880 --> 00:48:44,439 Speaker 1: they learned the business that the kind of the hard way. 863 00:48:44,440 --> 00:48:46,840 Speaker 1: I mean, you need to be prepared to go to 864 00:48:46,920 --> 00:48:50,759 Speaker 1: leave in somewhere quite distant. This is not if all 865 00:48:50,800 --> 00:48:53,040 Speaker 1: what you want to do is be sitting in Mayfair 866 00:48:53,200 --> 00:48:55,920 Speaker 1: in London or or you know, Walla Street here in 867 00:48:55,960 --> 00:48:57,880 Speaker 1: New York. That's not the business for you. You have 868 00:48:58,000 --> 00:49:00,239 Speaker 1: to be you have to be willing to go too. 869 00:49:00,280 --> 00:49:03,200 Speaker 1: King Shasha in the Democratic Republic of Congo and know 870 00:49:03,320 --> 00:49:06,640 Speaker 1: everyone there, know the president, know your ways to get 871 00:49:06,680 --> 00:49:09,200 Speaker 1: the copper and cobal out of the country. I think 872 00:49:09,200 --> 00:49:12,160 Speaker 1: a lot of people like that, Like just you're describing that, 873 00:49:12,400 --> 00:49:13,800 Speaker 1: it's like I've bet a bunch of people here that 874 00:49:13,880 --> 00:49:16,560 Speaker 1: It's like I want that. Even in journalism, when I 875 00:49:16,600 --> 00:49:19,040 Speaker 1: started out in financial journalism, I wanted to report on 876 00:49:19,120 --> 00:49:21,359 Speaker 1: commodities and it didn't happen for me, so I had 877 00:49:21,360 --> 00:49:24,440 Speaker 1: to make it happen through our thoughts at various times. Well, 878 00:49:24,480 --> 00:49:26,520 Speaker 1: I mean, you know, you you are a commotive reporter. 879 00:49:26,680 --> 00:49:28,920 Speaker 1: You en visiting a lot of countries that they are 880 00:49:28,920 --> 00:49:32,759 Speaker 1: not the traditional you know, holiday destination, and it's kind 881 00:49:32,760 --> 00:49:35,640 Speaker 1: of my dad used to say, So you look at 882 00:49:35,680 --> 00:49:38,520 Speaker 1: the least of countries and the Foreign Office recommend not 883 00:49:38,600 --> 00:49:41,560 Speaker 1: to travel and you basically your favorite place that you've 884 00:49:41,640 --> 00:49:43,839 Speaker 1: visited that no one else has that hardly anyone else 885 00:49:43,880 --> 00:49:47,320 Speaker 1: has been. Look, I have. I have had a great 886 00:49:47,400 --> 00:49:49,759 Speaker 1: time every time I have been in Iraq. It's it's 887 00:49:49,760 --> 00:49:53,480 Speaker 1: one of those my favorite places back back. It's a 888 00:49:53,520 --> 00:49:56,600 Speaker 1: great place. I have favorite restaurants in back back and 889 00:49:56,640 --> 00:49:58,640 Speaker 1: things like that. I mean, you get to travel to 890 00:49:58,760 --> 00:50:00,759 Speaker 1: a lot to the to the Middle least and and 891 00:50:01,160 --> 00:50:04,719 Speaker 1: Iraq and Iran are a kind of favorite places. But 892 00:50:04,800 --> 00:50:07,080 Speaker 1: also you get you need to get used to from 893 00:50:07,120 --> 00:50:11,360 Speaker 1: time to time to get deported for a few countries. Well, obvious, 894 00:50:11,440 --> 00:50:13,760 Speaker 1: that was fantastic. I think I said at the beginning, 895 00:50:13,760 --> 00:50:17,160 Speaker 1: you're one of the most requested guests, and I can 896 00:50:17,360 --> 00:50:19,440 Speaker 1: I can see why. So I appreciate you so much 897 00:50:19,440 --> 00:50:21,759 Speaker 1: for coming in Lama, thank you for having me man. 898 00:50:21,920 --> 00:50:24,080 Speaker 1: That was great. Thanks so much. Having God, we could 899 00:50:24,080 --> 00:50:41,239 Speaker 1: make it happen. So Joe, obviously, that was a really 900 00:50:41,280 --> 00:50:44,279 Speaker 1: enjoyable conversation. One of the things that struck me is 901 00:50:45,000 --> 00:50:48,840 Speaker 1: just how untransparent this market seems to be. And you know, 902 00:50:48,960 --> 00:50:52,560 Speaker 1: happiest point about how we still don't have a trade 903 00:50:52,600 --> 00:50:56,879 Speaker 1: repository for physical commodities is just like in in this 904 00:50:56,960 --> 00:50:59,960 Speaker 1: day and age, On the one hand, everything in the 905 00:51:00,040 --> 00:51:05,120 Speaker 1: world seems to be tracked except actual physical vital goods, 906 00:51:05,160 --> 00:51:08,520 Speaker 1: which is insane. But on the other hand, I cannot 907 00:51:08,600 --> 00:51:12,000 Speaker 1: see anyone in the current environment actually agreeing to do it. Yeah, 908 00:51:12,000 --> 00:51:14,359 Speaker 1: when you actually that's what I thought too, And when 909 00:51:14,400 --> 00:51:16,960 Speaker 1: you actually think about what it would take, it's like, 910 00:51:17,000 --> 00:51:19,600 Speaker 1: how would you even do that? Like how would you 911 00:51:19,640 --> 00:51:24,360 Speaker 1: regulate and create a central repository for something in which 912 00:51:24,640 --> 00:51:27,840 Speaker 1: you can literally swap the oil from one boat to 913 00:51:27,880 --> 00:51:31,600 Speaker 1: another boat and you could mix the oil so that 914 00:51:31,760 --> 00:51:33,760 Speaker 1: you know, he was talking about the lot ving blend 915 00:51:33,840 --> 00:51:36,040 Speaker 1: of Okay, you have a barrel of oil that's forty 916 00:51:36,120 --> 00:51:41,040 Speaker 1: nine Russian and fifty point zero one something else. Like 917 00:51:41,320 --> 00:51:44,239 Speaker 1: the just the complexity of that, like, how would you 918 00:51:44,280 --> 00:51:48,560 Speaker 1: even like start to conceptualize tracking every trade when there 919 00:51:48,600 --> 00:51:51,560 Speaker 1: are so many ways to just do a unilateral one 920 00:51:51,600 --> 00:51:53,640 Speaker 1: to one hand off of a good you could see 921 00:51:53,680 --> 00:51:57,200 Speaker 1: why it's so tough. Absolutely. And then the other thing 922 00:51:57,239 --> 00:51:59,640 Speaker 1: that was striking to me, I don't know a lot 923 00:51:59,680 --> 00:52:04,160 Speaker 1: of it felt like confirmation of this idea that going forward, 924 00:52:04,480 --> 00:52:07,719 Speaker 1: getting commodities is just going to cost more money, Like 925 00:52:07,840 --> 00:52:11,080 Speaker 1: you're it's going to be more difficult to get financing. 926 00:52:11,440 --> 00:52:14,040 Speaker 1: There's going to be extra volatility, it seems like, which 927 00:52:14,040 --> 00:52:18,360 Speaker 1: means you have to pay additional variation margin. The exchanges 928 00:52:18,400 --> 00:52:21,719 Speaker 1: have already upped the initial margin. So the whole thing. 929 00:52:22,440 --> 00:52:25,359 Speaker 1: And I haven't even mentioned shipping, shipping cross through the roof, 930 00:52:25,920 --> 00:52:29,440 Speaker 1: it just an insurance. It just feels like everything is 931 00:52:29,440 --> 00:52:33,760 Speaker 1: coming together to make it more expensive, expensive and complicated, 932 00:52:34,160 --> 00:52:36,000 Speaker 1: and and and I and I you know, and so 933 00:52:36,280 --> 00:52:39,600 Speaker 1: this idea of like localized shortages where even if you 934 00:52:39,719 --> 00:52:43,080 Speaker 1: ostensibly have the money to pay for the price of 935 00:52:43,080 --> 00:52:45,840 Speaker 1: a commodity that appears on the screen, can you actually 936 00:52:45,880 --> 00:52:48,760 Speaker 1: get it delivered to in a predictable man. It feels 937 00:52:48,800 --> 00:52:51,719 Speaker 1: like that's going to get tougher, or get to stay tough, right. 938 00:52:51,760 --> 00:52:54,600 Speaker 1: It's the sort of disconnect between the financial and the physical, 939 00:52:54,680 --> 00:52:57,359 Speaker 1: which we've been talking about. And that's also why what 940 00:52:57,440 --> 00:53:00,480 Speaker 1: was happening with the New York diesel contract that was 941 00:53:00,520 --> 00:53:03,000 Speaker 1: describing is so interesting as well, because that's the kind 942 00:53:03,000 --> 00:53:07,160 Speaker 1: of localized stress that could happen or you know the other. 943 00:53:07,280 --> 00:53:11,080 Speaker 1: And he made this point, which is that everybody remembers 944 00:53:11,200 --> 00:53:14,840 Speaker 1: when w T I oil went down into negative forty, 945 00:53:14,880 --> 00:53:17,800 Speaker 1: but there were other regional benchmarks like we don't we 946 00:53:17,840 --> 00:53:19,479 Speaker 1: don't talk about them, but if you look on the terminal, 947 00:53:19,560 --> 00:53:23,560 Speaker 1: there's like dozens of North American oil prices depending on 948 00:53:23,680 --> 00:53:25,920 Speaker 1: what pipelines they have access to, in the cost to 949 00:53:25,920 --> 00:53:28,080 Speaker 1: get them out, and some of those were already negative. 950 00:53:28,080 --> 00:53:31,000 Speaker 1: And it's like, well, who's who's who has some empty 951 00:53:31,040 --> 00:53:34,680 Speaker 1: space just at the right moment to charge someone for 952 00:53:34,800 --> 00:53:37,759 Speaker 1: getting their oil off a boat or out of a pipeline. 953 00:53:38,600 --> 00:53:43,279 Speaker 1: Incredibly incredibly complicated during volus. Yeah, like an industry that 954 00:53:43,360 --> 00:53:48,279 Speaker 1: was already insanely granular, it's just getting even more granular 955 00:53:48,320 --> 00:53:51,240 Speaker 1: and specific. It feels like I thought that was interesting too. 956 00:53:51,360 --> 00:53:54,160 Speaker 1: It's like the oil traders, like, what am I going 957 00:53:54,200 --> 00:53:56,759 Speaker 1: to do with that? Chinese? Un Like, Okay, even if 958 00:53:56,760 --> 00:53:58,640 Speaker 1: you don't Even if you don't really love the idea 959 00:53:58,680 --> 00:54:02,759 Speaker 1: of heaving your entire business being denominated in dollars, other 960 00:54:02,880 --> 00:54:05,160 Speaker 1: currencies may not be that appealing. It's nice to have 961 00:54:05,200 --> 00:54:09,040 Speaker 1: a fungible global reserve currency. There are some benefits. Al Right, 962 00:54:09,200 --> 00:54:11,120 Speaker 1: shall we leave it there, Let's leave it there. Okay. 963 00:54:11,280 --> 00:54:14,080 Speaker 1: This has been another episode of the All Thoughts podcast. 964 00:54:14,120 --> 00:54:16,520 Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at 965 00:54:16,560 --> 00:54:19,560 Speaker 1: Tracy Alloway and I'm Joe Wisn't All. You can follow 966 00:54:19,600 --> 00:54:23,040 Speaker 1: me on Twitter at the Stalwart. Follow our guest Javier 967 00:54:23,120 --> 00:54:25,920 Speaker 1: Bloss He's at Javier Blast, and also check out the 968 00:54:25,960 --> 00:54:29,320 Speaker 1: book he co authored with Jack Bargie, The World For Sale. 969 00:54:29,840 --> 00:54:33,520 Speaker 1: Follow our producer Carmen Rodriguez at Carmen Arman. Follow the 970 00:54:33,520 --> 00:54:37,719 Speaker 1: Bloomberg head of podcast, Francesco Leaving at Francesco Today, and 971 00:54:37,840 --> 00:54:40,600 Speaker 1: check out all of our podcasts at Bloomberg under the 972 00:54:40,640 --> 00:55:06,960 Speaker 1: handle at podcasts. Thanks for listening, Tea Ye