WEBVTT - At The Money: Hungry? Should You Invest in Wheat?

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news, to die.

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<v Speaker 2>Before the harvest, the crops, the grains, fields of rippling wheat, wheat.

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<v Speaker 2>All there is in life is wheat. Sonia, here's your

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<v Speaker 2>chance to do something kind.

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<v Speaker 1>For a dying boy. But I don't really love wars.

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<v Speaker 2>I mean, I love him, but I'm not in love

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<v Speaker 2>with him. Oh wheat, lots of wheat, fields of wheat,

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<v Speaker 2>A tremendous amount of wheat.

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<v Speaker 1>Ever since Russia invaded Ukraine, grain prices have exploded. Gaining

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<v Speaker 1>exposure to grain like wheat is usually a challenge. Futures

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<v Speaker 1>are an entirely different animal than stocks are bonds. They

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<v Speaker 1>have a very different risk profile, not only from stocks,

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<v Speaker 1>but just against options. There's a whole lot more downside

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<v Speaker 1>with futures. The wheat etf doubleds the war started and

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<v Speaker 1>have come back down to pre war levels. Is wheat

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<v Speaker 1>a fit for your portfolio? I'm Barry Ridoltson on today's

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<v Speaker 1>edition of At the Money. We're going to explore the

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<v Speaker 1>question of buying and selling wheat in your investment accounts.

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<v Speaker 1>To help us unpack all of this and what it

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<v Speaker 1>means for your portfolio. Let's bring in sal Gilberti. He's founder, CEO,

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<v Speaker 1>and chief investment officer of Techrium Trading, best known for

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<v Speaker 1>creating exchange traded funds that give investors direct exposure to

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<v Speaker 1>agricultural futures. He's also an old school commodity trader since

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<v Speaker 1>way back in nineteen eighty two. So what was the

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<v Speaker 1>problem that the wheat fund symbol WAT was designed to

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<v Speaker 1>solve for investors who wanted exposure to wheat but are

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<v Speaker 1>a little skittish about holding futures directly.

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<v Speaker 2>Well, and thanks for having me berry wheat. So futures

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<v Speaker 2>of any kind are tough to trade, right, so you've

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<v Speaker 2>got to have a margin account. They're they're volatile. It

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<v Speaker 2>requires a different expertise. And when I heard about ETFs,

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<v Speaker 2>I didn't even know what an ETF was when I

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<v Speaker 2>founded this company. And I found out and said, wow,

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<v Speaker 2>that's brilliant because I always trading commodities and futures. And

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<v Speaker 2>I said, anybody can can buy these things on their

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<v Speaker 2>in their stock account, that's amazing. And so we package

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<v Speaker 2>these things inside of ETFs, and the wheat ETF has

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<v Speaker 2>been very popular. I don't know if you know Andy Heckt,

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<v Speaker 2>but he basically says, you know, wheat is more political

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<v Speaker 2>commodity than oil. It's older. I think it's mentioned fifty

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<v Speaker 2>or seventy something times in the Bible, like wheat is wheat,

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<v Speaker 2>it's it's a big deal. It also of the crops

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<v Speaker 2>that I think a higher percentage of wheat is directly

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<v Speaker 2>consumed by humans than say corner soybeans, which also goes

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<v Speaker 2>to animals and fuel and all that. Now, you can

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<v Speaker 2>run wheat through an ethanol plant as an aside if

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<v Speaker 2>it's lousy, and it'll turn into ethanol, but that's not

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<v Speaker 2>a common thing. So such so integral to human life.

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<v Speaker 2>Basically a right bread tortillas. It's a big deal. You

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<v Speaker 2>got to have wheat. And so we thought there should

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<v Speaker 2>be a week fund, and we started this fund, and

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<v Speaker 2>we structured it, we think properly so people can buy

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<v Speaker 2>it in their stock account. They don't need a margin

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<v Speaker 2>account like any other ETF. They can they can buy it.

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<v Speaker 2>We worry about the futures inside of it, and it's

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<v Speaker 2>designed to track wheat prices through wheak futures. When they

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<v Speaker 2>go up, the fund designed to go up. And when

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<v Speaker 2>the week futures go down, the fund's designed to go down,

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<v Speaker 2>you know, less some some fees and expenses and a

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<v Speaker 2>little bit of static, but it generally worked pretty well.

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<v Speaker 1>So you mentioned prices, You're not talking about the price

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<v Speaker 1>cash price of physical wheat. You're talking about the sea

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<v Speaker 1>boat price, the futures price. What's the distinction between the two.

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<v Speaker 1>How to investors see this reflected in their in their

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<v Speaker 1>grocery prices.

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<v Speaker 2>Well, so it's it, you know, there's a there's kind

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<v Speaker 2>of a disconnect, not a direct disconnect, but it's wheat

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<v Speaker 2>prices are going to move up and down on a

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<v Speaker 2>bulk level. On a wholesale level, investors can't buy that.

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<v Speaker 2>I mean, you know, you want to buy a truckload

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<v Speaker 2>of wheat or a cargo load of wheat somewhere and

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<v Speaker 2>shipping around, it's impossible. So futures as a proxy, they

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<v Speaker 2>have delivery points. Okay, each delivery location is going to

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<v Speaker 2>be a different price. But the advantage of futures and

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<v Speaker 2>the CMEE futures are you know, the global standard basically

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<v Speaker 2>for the soft red winter softwad wheat. That all you

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<v Speaker 2>have to do is look at that price. Okay, every farm,

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<v Speaker 2>every location is a different price for physical wheat. It

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<v Speaker 2>doesn't matter. It all gets to be a future's equivalent

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<v Speaker 2>price when you factor in delivery, and so futures is

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<v Speaker 2>the standard to look at to know where wheat's going.

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<v Speaker 2>That's what you look at.

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<v Speaker 1>You mentioned soft winter. When I was doing some research

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<v Speaker 1>for this conversation, I was kind of shocked at how

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<v Speaker 1>many distinct wheat markets there are. Hard red winter, hard

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<v Speaker 1>red spring, soft red winter, white wheat, Durham. What are

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<v Speaker 1>all these different wheats?

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<v Speaker 2>So in general, all you need to know is the

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<v Speaker 2>wheat that everybody looks at is the soft red and

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<v Speaker 2>that's used for baking, okay, in general, just just baking,

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<v Speaker 2>home baking, that kind of stuff. The hard wheats are

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<v Speaker 2>used more for specialty things like pasta, all right, and

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<v Speaker 2>you know, but unless you're chefoo cares. I mean, it's

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<v Speaker 2>you're going to buy your your wheat and your grocery store,

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<v Speaker 2>and that's fine. That generally you're soft unless you're buying

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<v Speaker 2>a specialty wheat for whatever you want to do. And

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<v Speaker 2>softwheat is the benchmark for wheat price. Global wheat prices

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<v Speaker 2>on CME.

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<v Speaker 1>USDA does forecasts out for the rest of the year

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<v Speaker 1>and to next year. They're forecasting hard red winter wheat

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<v Speaker 1>at its lowest price since nineteen fifty seven, fifty eight.

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<v Speaker 1>How on earth is that possible that seventy five years

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<v Speaker 1>later wheat prices are still the same. It just seems

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<v Speaker 1>crazy to make.

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<v Speaker 2>So farming advancements and we've kept up with demand. So

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<v Speaker 2>that's that's what's happened. That's why you know, haggs get

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<v Speaker 2>a bad name because people say, well, inflation adjusted, your

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<v Speaker 2>return is zero or negative. Well, okay, but if you

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<v Speaker 2>if you've got that commodity, it's very cyclical. It trades

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<v Speaker 2>at flatline. Basically, it trades at break even because farmers

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<v Speaker 2>are subsidized. And then when it doesn't rain somewhere or

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<v Speaker 2>there's a political upheaval, like like in Ukraine, the press

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<v Speaker 2>explodes higher when there's a drought in the Upper Midwest. Granted,

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<v Speaker 2>wheat is grown in virtually every country Okay, and wheats.

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<v Speaker 1>Probably have staple food crop every It's in everything, and everybody.

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<v Speaker 2>Eats everything, and everybody uses it. What matters to the

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<v Speaker 2>price of wheat is how much is available for export. Okay,

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<v Speaker 2>and wheat versus corner soybeans probably has more countries that

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<v Speaker 2>exported in volume than the other two. The other two big,

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<v Speaker 2>big ones, and so it's important to know that at

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<v Speaker 2>this eruption in you know, the the United States wheatbelt okay,

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<v Speaker 2>a disruption in China or India okay, and I believe

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<v Speaker 2>India is the number one grower of wheat in the world,

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<v Speaker 2>but they don't.

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<v Speaker 1>Export an Okay, that's really interesting.

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<v Speaker 2>Yeah, So there's a big difference between how much wheat

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<v Speaker 2>is grown in a certain spot and how much weat

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<v Speaker 2>is exported in a certain spot. What investors care about

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<v Speaker 2>is how much is exported, and that's why during the

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<v Speaker 2>Ukraine War wheat prices exploded higher. Because of that. The

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<v Speaker 2>amount exporter out of the Black Sea from Russia and Ukraine,

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<v Speaker 2>which are they're both in the top five global wheat exports.

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<v Speaker 2>Russia is number one by far, Okay, the EU is

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<v Speaker 2>right up there as a block, so that whole area

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<v Speaker 2>of the world exports. Most of the exports of the

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<v Speaker 2>world come out of there. Australia as an enormous exporter.

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<v Speaker 2>In fact, the the I believe the record high wheat

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<v Speaker 2>price is still maintained even after COVID in the Ukraine War,

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<v Speaker 2>and we have to go look it up, but it

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<v Speaker 2>was for years intact based on back to back droughts

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<v Speaker 2>in Australia back in I think the early two thousands.

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<v Speaker 1>Or Wow, that's amazing. So you had mentioned futures trading

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<v Speaker 1>and how different it is from traditional options trading, whether

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<v Speaker 1>it is a similarity or different maturities, different expiration dates.

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<v Speaker 1>WAT holds three distinct contracts across three different maturities about

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<v Speaker 1>a thirty each, a little more a little less. Why

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<v Speaker 1>go with that structure? That's really kind of interesting with

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<v Speaker 1>that sort of spread you've created two reasons.

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<v Speaker 2>One is you know these these are more, as we've said,

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<v Speaker 2>strategic allocation products. So they trade flatline for quite a

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<v Speaker 2>while in your break even and then they explode higher.

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<v Speaker 2>So investors kind of layer in a percent or two

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<v Speaker 2>in their portfolio when they're low and they just sit

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<v Speaker 2>on them, and then when they go high, they get out.

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<v Speaker 2>So we in fact, there's an expression weight it into

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<v Speaker 2>your portfolio when they're break even, W E I, G

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<v Speaker 2>H T. Then weight wait and when there's a drought,

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<v Speaker 2>get out. So it's weight weight drought out.

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<v Speaker 1>And you know that take away drought out.

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<v Speaker 2>Yeah wait, wait, drought out. And so an Ria told

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<v Speaker 2>us that we didn't make that up but so what

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<v Speaker 2>happens is when you layer these things into your portfolio,

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<v Speaker 2>you're kind of sitting on them for a while. So

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<v Speaker 2>if we just held spot month futures, there'd be a

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<v Speaker 2>lot more volatility. And what you really want is the

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<v Speaker 2>general price appreciation. When price goes up, and you're buying

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<v Speaker 2>this thing for the price to go up, and you're

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<v Speaker 2>buying it for portfolio stability, you're going to be more

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<v Speaker 2>stability because if you own out the curve and there's

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<v Speaker 2>some temporary dislocation in the front month, your portfolio isn't

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<v Speaker 2>gonna move as much, so you're gonna have less volatility

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<v Speaker 2>in that holding. Yet, if there's a true supply disruption

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<v Speaker 2>and the whole structure of the curve moves up over

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<v Speaker 2>the course of a half a year or a year, you're

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<v Speaker 2>going to participate. And so that's that's what we designed

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<v Speaker 2>for investors. The other practical matter is these things have limits.

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<v Speaker 2>So agricultural commodities have very strict limits in terms of

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<v Speaker 2>how many you can own per month, And if we

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<v Speaker 2>just concentrated this fund in one month, we wouldn't be

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<v Speaker 2>able to handle all the money that comes in because again,

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<v Speaker 2>you know before the Ukraine War, we had about eighty

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<v Speaker 2>million in this fund. In weeks after the Ukraine War

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<v Speaker 2>broke out, we had eight one hundred million in the fund.

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<v Speaker 2>And so you know, it was easy. It easy to

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<v Speaker 2>move in, easy to move out. These These are incredibly

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<v Speaker 2>liquid instruments because of the underlying commodity, So you can

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<v Speaker 2>put as many you can write as big a ticket

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<v Speaker 2>as you want and put it in there. Just you know,

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<v Speaker 2>as with any ETF, don't use a market order ever.

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<v Speaker 2>Put in your limp, and don't trade in the first

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<v Speaker 2>fifteen minutes of the market. Let the markets open because

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<v Speaker 2>everything's electronic and if there's from price glip at glitch

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<v Speaker 2>in one component, you're not going to get the best price.

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<v Speaker 2>So just sit on your hands until nine to forty

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<v Speaker 2>five East Coast time every morning when you're trading an ETF,

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<v Speaker 2>and don't put a market order in.

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<v Speaker 1>That's so funny. It's so funny you say that. I

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<v Speaker 1>started on a trading desk and some of the rules

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<v Speaker 1>us neobies how to learn were no, no market orders,

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<v Speaker 1>always limit orders. Although I have a few funny stories

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<v Speaker 1>about market orders that got executed. MCI WorldCom deal is

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<v Speaker 1>pretty stupid. Ull be really careful around around the open,

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<v Speaker 1>and no trading IPOs. I mean, those were the three rules, everybody.

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<v Speaker 2>Those are good rules.

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<v Speaker 1>Those are pretty good rules. One of the things I've

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<v Speaker 1>always been fascinated with commodities and futures. The thing that

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<v Speaker 1>probably confuses lay people the most backwardization and contango. Explain

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<v Speaker 1>what those two things are and how you manage around those,

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<v Speaker 1>all right.

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<v Speaker 2>So I didn't think you're going to bring that up,

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<v Speaker 2>But that's the reason we have three exposures. It's complicated,

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<v Speaker 2>but that mitigates backwardization and contango. And that's just in

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<v Speaker 2>a nutshell. Let's keep this to you know, thirty or

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<v Speaker 2>sixty seconds, all right. So when I when I was

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<v Speaker 2>working at Cargilt, we called the cost of carry, all right,

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<v Speaker 2>that's canentangle. They both begin with a C. That's how

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<v Speaker 2>I remember, right, But it's cost of carry. If you're

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<v Speaker 2>a grosser and you buy canopies, put it on a

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<v Speaker 2>shelf until somebody buys that. You had a cost. You

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<v Speaker 2>had to buy the canopies, You got insurance for your store,

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<v Speaker 2>you got to pay all these other bills until it

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<v Speaker 2>goes off the shelf. That's the cost of carry.

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<v Speaker 1>Simple inventory. You pay for it until you sell it

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<v Speaker 1>laid out to cash, and.

0:12:14.240 --> 0:12:16.600
<v Speaker 2>So over time it costs you money to keep that

0:12:16.640 --> 0:12:19.920
<v Speaker 2>thing on the shelf. So actually, if grocers were really,

0:12:21.240 --> 0:12:23.319
<v Speaker 2>if they didn't care about the consumer sentiment and just

0:12:23.400 --> 0:12:25.640
<v Speaker 2>cared about market prices, they would raise the price of

0:12:25.679 --> 0:12:28.280
<v Speaker 2>that canopeas once in a month, okay. They'd say, well, heck,

0:12:28.320 --> 0:12:30.280
<v Speaker 2>that cost me a penny more to hold it and

0:12:30.320 --> 0:12:32.439
<v Speaker 2>pay for heating and air conditioning. And you know it

0:12:32.520 --> 0:12:34.280
<v Speaker 2>might cost the money. I could earn interest on that

0:12:34.280 --> 0:12:37.560
<v Speaker 2>money or put it to better use. So the price

0:12:37.640 --> 0:12:39.840
<v Speaker 2>as you go out the future's curve should go higher

0:12:39.880 --> 0:12:41.800
<v Speaker 2>because you have to store corn for it's the costs

0:12:42.040 --> 0:12:44.600
<v Speaker 2>roughly about a nickel a month to store corn, okay.

0:12:44.640 --> 0:12:46.880
<v Speaker 2>So if you buy corn at four dollars a bushel

0:12:47.120 --> 0:12:49.360
<v Speaker 2>at the end of a year, you better get four

0:12:49.480 --> 0:12:52.080
<v Speaker 2>sixty for that corn if you stored it, because it

0:12:52.160 --> 0:12:54.440
<v Speaker 2>cost you a nickel a month, all right to go

0:12:54.480 --> 0:12:56.320
<v Speaker 2>out there, So it cost you another sixty cents to

0:12:56.320 --> 0:12:58.600
<v Speaker 2>hold that corn. If you look at a future's curve,

0:12:58.640 --> 0:13:02.240
<v Speaker 2>buy and large, that's priced in, all right, that's priced in.

0:13:02.480 --> 0:13:06.199
<v Speaker 2>So cost of carrier contango is a normal market, all right,

0:13:06.280 --> 0:13:08.280
<v Speaker 2>prices go up slightly as you go out, just to

0:13:08.320 --> 0:13:11.400
<v Speaker 2>reflect the cost of buying and holding that commodity. You remember,

0:13:11.400 --> 0:13:14.040
<v Speaker 2>commodities are real things. It's just not paper. Right. The

0:13:14.120 --> 0:13:16.560
<v Speaker 2>only it doesn't matter in gold, right, because gold's worth

0:13:16.679 --> 0:13:17.920
<v Speaker 2>so much and you just put it in a big

0:13:17.960 --> 0:13:19.800
<v Speaker 2>pile and there's a guy with no neck and a

0:13:19.840 --> 0:13:23.040
<v Speaker 2>gun guarding the pile. Doesn't cost much, right, But in

0:13:23.120 --> 0:13:25.920
<v Speaker 2>terms of moving corn around and sticking it in a

0:13:25.960 --> 0:13:28.000
<v Speaker 2>grain silo and holding that, that's a big deal. You

0:13:28.040 --> 0:13:30.000
<v Speaker 2>got to keep the humidity right and all that. So

0:13:30.480 --> 0:13:33.760
<v Speaker 2>backwardation is when that breaks, when that system breaks, and

0:13:33.800 --> 0:13:37.040
<v Speaker 2>that system generally breaks when you when you afraid there's

0:13:37.120 --> 0:13:39.480
<v Speaker 2>not going to be enough corn that next month, so

0:13:39.480 --> 0:13:42.079
<v Speaker 2>you buy all your corn this month. Okay, Well, now

0:13:42.080 --> 0:13:45.679
<v Speaker 2>you've broken the supply demand economics because as more buyers

0:13:45.679 --> 0:13:48.160
<v Speaker 2>come in, the price goes higher. So if the price

0:13:48.320 --> 0:13:52.400
<v Speaker 2>nearby goes higher than the price that's further out, that's backwards.

0:13:52.480 --> 0:13:54.679
<v Speaker 1>So that's why it's not it's not lower left to

0:13:54.760 --> 0:13:57.559
<v Speaker 1>upper right suddenly it's upper left to lower right or right.

0:13:57.640 --> 0:13:58.480
<v Speaker 1>The chart looks like.

0:13:58.480 --> 0:14:02.520
<v Speaker 2>Correct and backwardation is not a natural occurrence. It's an

0:14:02.520 --> 0:14:05.320
<v Speaker 2>occurrence during a disruption of some sort. B it's applyed

0:14:05.320 --> 0:14:06.840
<v Speaker 2>disruption or political disruption.

0:14:07.040 --> 0:14:13.920
<v Speaker 1>Huh. Really intriguing. So, of all the commodities we've talked about,

0:14:14.040 --> 0:14:17.960
<v Speaker 1>wheat is probably the most global commodity. Not only does

0:14:18.000 --> 0:14:22.360
<v Speaker 1>it go into everything from from bread to pasta or whatever,

0:14:23.160 --> 0:14:28.960
<v Speaker 1>it's just such a basic food staple. How do you

0:14:29.000 --> 0:14:37.000
<v Speaker 1>look at the global changes in wheat production? You mentioned Australia, obviously, Russia, Ukraine,

0:14:37.560 --> 0:14:42.200
<v Speaker 1>lots of parts of Europe, Argentina and South America, plus

0:14:42.240 --> 0:14:47.200
<v Speaker 1>the United States and Canada. Given the global production, how

0:14:47.240 --> 0:14:49.760
<v Speaker 1>do you track all the weather and all the factors

0:14:50.440 --> 0:14:53.720
<v Speaker 1>driving total global wheat production.

0:14:54.600 --> 0:14:57.400
<v Speaker 2>If you're in the business, you hire an analyst. If

0:14:57.440 --> 0:15:00.280
<v Speaker 2>you're normal person, you look at the USDA report once

0:15:00.280 --> 0:15:03.200
<v Speaker 2>a month, and if you're everybody, just look at the

0:15:03.240 --> 0:15:05.000
<v Speaker 2>futures price. It all gets built in because all the

0:15:05.000 --> 0:15:07.040
<v Speaker 2>people doing the first two things I just said are

0:15:07.040 --> 0:15:09.840
<v Speaker 2>building that into the price, and so you know, just

0:15:09.920 --> 0:15:12.480
<v Speaker 2>look at the futures and you'll see what's out there.

0:15:12.680 --> 0:15:15.160
<v Speaker 2>But yeah, really watch the weather. If it's dry in

0:15:15.200 --> 0:15:18.840
<v Speaker 2>Western Canada, if it's dry and the Dakotas are in Kansas,

0:15:19.080 --> 0:15:23.960
<v Speaker 2>if it's dry in Ukraine or Russia. If it's dry

0:15:24.000 --> 0:15:27.080
<v Speaker 2>in Australia, if it's dry in Argentina, you're going to

0:15:27.120 --> 0:15:28.000
<v Speaker 2>have a wheat problem.

0:15:28.720 --> 0:15:33.800
<v Speaker 1>Huh, really really interesting. So obviously the price volatility is

0:15:33.880 --> 0:15:37.960
<v Speaker 1>driven by changes in supply, in demands. There's a little

0:15:37.960 --> 0:15:41.840
<v Speaker 1>bit of geopolitical risk premium. We talked about tariffs and

0:15:41.840 --> 0:15:47.040
<v Speaker 1>export restrictions and sanctions and obviously war. But how do

0:15:47.080 --> 0:15:53.040
<v Speaker 1>we generally think about prices of wheat are what are

0:15:53.080 --> 0:15:56.360
<v Speaker 1>the key drivers that are going to affect this going forward?

0:15:56.920 --> 0:16:00.600
<v Speaker 1>Is it simply weather or is that pretty much the

0:16:00.640 --> 0:16:01.840
<v Speaker 1>only thing that's driving it?

0:16:02.520 --> 0:16:06.600
<v Speaker 2>Honestly, for wheat, it's it's weather and geopolitics. And again

0:16:06.640 --> 0:16:08.360
<v Speaker 2>as we saw, you know, if you see if you

0:16:08.360 --> 0:16:11.320
<v Speaker 2>see the choke points, which primary is Black Sea is

0:16:11.320 --> 0:16:13.880
<v Speaker 2>a choke point, all right, So that's the geopolitic part.

0:16:14.120 --> 0:16:17.840
<v Speaker 2>And it look at understand, even during the height of

0:16:17.840 --> 0:16:21.560
<v Speaker 2>the Ukraine War and the political fallout in the first

0:16:21.640 --> 0:16:24.200
<v Speaker 2>year of that, you could still buy Russian wheat. Anybody

0:16:24.200 --> 0:16:26.440
<v Speaker 2>who wanted to could buy Russian week Sanctions don't go

0:16:26.520 --> 0:16:29.720
<v Speaker 2>on food that you don't do that, like even during war,

0:16:30.040 --> 0:16:32.960
<v Speaker 2>nobody puts sanctions on food. You can import food from

0:16:32.960 --> 0:16:36.000
<v Speaker 2>your enemy. It's perfectly legal, but you might not go

0:16:36.120 --> 0:16:37.920
<v Speaker 2>to ship to go in there because of the war

0:16:38.000 --> 0:16:40.120
<v Speaker 2>premium and all that, but you can buy it. Nobody's

0:16:40.120 --> 0:16:41.840
<v Speaker 2>going to put restrictions on food. So as soon as

0:16:41.840 --> 0:16:43.440
<v Speaker 2>people figured out, well, wait a minute, there's going to

0:16:43.480 --> 0:16:46.800
<v Speaker 2>be free flow, that price came back down. Where you

0:16:46.800 --> 0:16:49.560
<v Speaker 2>have an issue is when it doesn't rain, because again,

0:16:49.640 --> 0:16:52.880
<v Speaker 2>that pile at harvest is small. You've only got on

0:16:53.000 --> 0:16:56.160
<v Speaker 2>average six months excess supply at any given time. In

0:16:56.200 --> 0:16:59.520
<v Speaker 2>the world of wheat, if if you have a major problem,

0:16:59.560 --> 0:17:02.360
<v Speaker 2>a major crop problem, be a drought or disease in

0:17:02.360 --> 0:17:04.800
<v Speaker 2>a major producing area, suddenly you have five months or

0:17:04.840 --> 0:17:06.639
<v Speaker 2>four months. What if that happens two years in a

0:17:06.720 --> 0:17:08.560
<v Speaker 2>row and they have one month to two months. That's

0:17:08.560 --> 0:17:11.120
<v Speaker 2>why the price is so responsive, and that's why when

0:17:11.160 --> 0:17:13.920
<v Speaker 2>you see these things flatlined at the low long term

0:17:13.960 --> 0:17:16.760
<v Speaker 2>price levels, that's when you need to look at maybe

0:17:16.800 --> 0:17:18.119
<v Speaker 2>an allocation to those things.

0:17:18.240 --> 0:17:22.800
<v Speaker 1>Huh So, wheat w a t v ETF is an

0:17:22.920 --> 0:17:29.520
<v Speaker 1>unleveraged product, but obviously wheat futures trade with leverage and

0:17:29.640 --> 0:17:33.720
<v Speaker 1>a lot of volatility. What sort of time horizon and

0:17:33.800 --> 0:17:37.960
<v Speaker 1>risk tolerance should an investor that's suitable for this, really

0:17:38.160 --> 0:17:39.640
<v Speaker 1>really be thinking about sure.

0:17:39.640 --> 0:17:42.119
<v Speaker 2>Well, again, it's a strategic allocation. So I think that

0:17:42.280 --> 0:17:44.399
<v Speaker 2>if people, if you do the math, every four to

0:17:44.440 --> 0:17:47.080
<v Speaker 2>seven years there's a drought. If you look at the charts,

0:17:47.119 --> 0:17:50.320
<v Speaker 2>things flat line at certain prices. And with wheat, now

0:17:50.359 --> 0:17:53.320
<v Speaker 2>your break even is it's generally about roughly a dollar

0:17:53.400 --> 0:17:56.960
<v Speaker 2>a bushel more than corn, and that varies a little bit.

0:17:57.000 --> 0:17:58.560
<v Speaker 2>But if you know, if you see corn down at

0:17:58.600 --> 0:18:01.679
<v Speaker 2>four bucks, if you see wheat down approaching five dollars,

0:18:02.000 --> 0:18:06.480
<v Speaker 2>you're looking at you know, based on history, limited historical

0:18:06.560 --> 0:18:10.480
<v Speaker 2>downside and you know, pretty significant historical upside. And so

0:18:11.480 --> 0:18:13.280
<v Speaker 2>you know, it's not these things can't move lower. They

0:18:13.320 --> 0:18:15.359
<v Speaker 2>just tend not to stay there because of the usage,

0:18:15.359 --> 0:18:18.520
<v Speaker 2>and the farmers will just ship crops. So I think

0:18:18.560 --> 0:18:21.400
<v Speaker 2>that it's a strategic allocation. It's something that you move

0:18:21.480 --> 0:18:25.320
<v Speaker 2>money into when prices are low, and you you know

0:18:25.400 --> 0:18:27.280
<v Speaker 2>it's in the headlines. When you run out of food,

0:18:27.320 --> 0:18:29.359
<v Speaker 2>it's not going to be lost in your portfolio and

0:18:29.359 --> 0:18:31.359
<v Speaker 2>the price w spike. It's you've got a one percent

0:18:31.359 --> 0:18:33.639
<v Speaker 2>allocation or corn or wheat or whatever it is, and

0:18:33.640 --> 0:18:35.160
<v Speaker 2>all of a sudden it's two percent. When you look

0:18:35.200 --> 0:18:38.240
<v Speaker 2>at your rebalance quarterly, you know you take some.

0:18:38.240 --> 0:18:42.919
<v Speaker 1>Action really interesting. So to wrap up, investors looking to

0:18:43.000 --> 0:18:48.080
<v Speaker 1>hedge against the cost of food inflation, against geopolitical turmoil,

0:18:48.560 --> 0:18:53.240
<v Speaker 1>against exposure to other asset classes that are all fairly

0:18:53.400 --> 0:18:57.680
<v Speaker 1>correlated might want to consider commodity etf such as wheat.

0:18:58.200 --> 0:19:02.720
<v Speaker 1>I'm barry redults, you've been listening to Bloombergs at the money.

0:19:02.680 --> 0:19:05.560
<v Speaker 2>Fields of wheat. A tremendous amount of wheat