WEBVTT - Surveillance: Silver Slumps as Reddit Trades Crumble

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<v Speaker 1>Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene Jay Lee.

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<v Speaker 1>We bring you insight from the best in economics, finance, investment,

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<v Speaker 1>and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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<v Speaker 1>Bloomberg dot com, and of course on the Bloomberg John

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<v Speaker 1>Let's bringing someone on Amazon, on Alphabet and on Conservative

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<v Speaker 1>managed Investment. Christopher Grassanti with us to the m AI

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<v Speaker 1>Capital joining us right now, Chris Grosanti. What an Amazon

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<v Speaker 1>and Alphabet signal this afternoon? So Tom, I we're expecting

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<v Speaker 1>decent earnings there, Tom, and I think it will be

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<v Speaker 1>more of the same, strong growth through the pandemic. Great

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<v Speaker 1>company to own when times are tough, but also great

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<v Speaker 1>companies to own as the economy for covers. So you know,

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<v Speaker 1>the spotlight is on game Stop, but but the action

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<v Speaker 1>the sizzles and game Stock. The steak is Amazon and

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<v Speaker 1>Google and Facebook, etcetera. One of the ways you go higher.

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<v Speaker 1>Our selected walls of worry measure the walls of worry

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<v Speaker 1>right now? Is there enough gloom out there, Chris where

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<v Speaker 1>you've got major enthusiasm about a leg up? Oh? I

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<v Speaker 1>think so, Tom. I mean everyone for the last week

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<v Speaker 1>has been talking about how the markets are broken because

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<v Speaker 1>game Stop has gone up a thousand percent and and

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<v Speaker 1>we need regulation, and it seems to me the markets

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<v Speaker 1>are working pretty well. Game Stop is coming back down

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<v Speaker 1>to earth. Uh, nobody's gone no broker dealer has gone bankrupt, etcetera.

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<v Speaker 1>And people made or lost the money as capitalists do so,

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<v Speaker 1>but I think the attention ought to come back to

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<v Speaker 1>where the cash flow really is, which are for many

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<v Speaker 1>the large technology and others. Two parts of that answer.

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<v Speaker 1>Let's go with the first part first, Chris, orderly is

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<v Speaker 1>a word we hear a lot. Can you just walk

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<v Speaker 1>me through the distinction between the orderly price action that

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<v Speaker 1>you witnessed and something you would consider to be more

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<v Speaker 1>disorder Oh sure, Well, you know, obviously disorderly has a

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<v Speaker 1>new definition of the dictionary under game Stop. And it

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<v Speaker 1>was the short squeeze really of my thirty five year career.

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<v Speaker 1>Um So, but again the system work, uh, steam is

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<v Speaker 1>coming out investors. Capital plugged the whole of the hedge

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<v Speaker 1>funds and robin Hood so that we could continue through it,

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<v Speaker 1>and it did it in its own self. And you know,

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<v Speaker 1>I don't think this is a terrible story of a

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<v Speaker 1>broken system. I think it's a system that's stressed and

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<v Speaker 1>then work any distications you took advantage of, Chris absolutely.

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<v Speaker 1>I think that's a great point, Jonathan. When prices moved

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<v Speaker 1>without fundamental reasons for them moving, there's always opportunities. So

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<v Speaker 1>while the focus was were on these small short squeezes, um,

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<v Speaker 1>you know, the rest of the market, as you guys covered,

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<v Speaker 1>really dropped the worst in October. So stocks like Facebook

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<v Speaker 1>that came in um with quite stronger and last week,

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<v Speaker 1>uh you know, and it's down ten or fifteen percent

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<v Speaker 1>from its highs of a couple of months ago. A

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<v Speaker 1>terrific opportunities. So we moved in there. Um, we would

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<v Speaker 1>move into Lockheed Martin. We bought a new position in

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<v Speaker 1>Texas instruments we called semiconductors the oil of the digital economy. Um,

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<v Speaker 1>all of that stuff was left by the wayside, and

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<v Speaker 1>the attention focused on this kind of tiny bit of

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<v Speaker 1>the market. Christmas Santy and folks game stop breaking through

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<v Speaker 1>the new lows one thirty two level right now, Chris

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<v Speaker 1>Kers Santy. In terms of measured investment, it does come

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<v Speaker 1>back to earnings and revenue. I guess we're seeing earnings

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<v Speaker 1>resiliency are we seeing revenue resiliency. I don't think yet, Tom,

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<v Speaker 1>you are. For obviously the companies that we all knew

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<v Speaker 1>were resilient, like the Amazon. But I think you'll see

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<v Speaker 1>more fickle to stuff like a Disney with the theme parks,

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<v Speaker 1>like a Comcast. Um. You'll see these companies show their

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<v Speaker 1>resiliency as the economy opens up. And of course the

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<v Speaker 1>market is in anticipating that. But but we're in the

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<v Speaker 1>middle of the cold, dark winter, and uh, what if

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<v Speaker 1>you rolled the tape forward, You've already vaccinated almost ten

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<v Speaker 1>percent of the population if you rolled the tape forward

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<v Speaker 1>three or four months. It's hard not to be optimistic

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<v Speaker 1>about the emerging county. Fact, I'm more worried about overheating

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<v Speaker 1>by the end of the year. But but I'm very

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<v Speaker 1>confident the economy is going to get there and you'll

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<v Speaker 1>see that revenue growth well do you kind of will

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<v Speaker 1>get rid of the revenue growth picks up? We're getting

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<v Speaker 1>out front. Now are we pricing for the end of summer?

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<v Speaker 1>Are we already pricing into two thousand twenty two? Oh?

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<v Speaker 1>I don't think so, Tom. I think when when when

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<v Speaker 1>an economy comes out of a recession, And remember that

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<v Speaker 1>says this was a deep recession for many travel companies,

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<v Speaker 1>restaurant companies, things like that. UM, the revenue and earnings

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<v Speaker 1>growth typically takes analysts by surprise on the upside. So

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<v Speaker 1>how many of us are sitting at home planning that

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<v Speaker 1>vacation we haven't been able to take for eighteen months now?

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<v Speaker 1>So I think you're gonna see pent up the and

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<v Speaker 1>I think you're gonna see strong ernie. Um. Have we

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<v Speaker 1>priced some of that in? Absolutely? Have we priced it

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<v Speaker 1>all in? I don't think. Let me jump in, Tom.

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<v Speaker 1>Do you remember when we talked about Mr Olariya over

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<v Speaker 1>Ryan Air. I think it's about three months ago and

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<v Speaker 1>he came on Bloomberg and he said the beaches will

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<v Speaker 1>be packed in Europe next summer. They will be packed

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<v Speaker 1>three months later. Tom, there's anyone think the beaches will

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<v Speaker 1>be packed in Europe this summer now? And again it's

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<v Speaker 1>it is about the COVID the vaccine recovery. But John,

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<v Speaker 1>as you mentioned earlier, the fact is we are seeing

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<v Speaker 1>better statistics in the United States and we have some

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<v Speaker 1>form of a daily and John, I'm gonna say this

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<v Speaker 1>on the X axis as much as I can. It

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<v Speaker 1>is a daily effort to get people vaccinated, and to me,

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<v Speaker 1>that's non linear. That really pays off down the road.

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<v Speaker 1>Find a question, Chris. It's really spice here. Sure, but

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<v Speaker 1>but I think you're being way to pestimistic John as usual. Hey, Chris,

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<v Speaker 1>I've got the flight book for Italy that I'm just

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<v Speaker 1>asking a question. I'm just asking a questions. It's a

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<v Speaker 1>matter of timing. It's not a matter of if. It's

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<v Speaker 1>a matter of when, So the beaches will be packed

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<v Speaker 1>in or later, and that's what we're inst I hope.

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<v Speaker 1>So Chris, git to catch you up first. Thank you,

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<v Speaker 1>m Ai Capital on the vaccine. This is my most

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<v Speaker 1>important conversation of the day. Washington State and the University

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<v Speaker 1>of Washington is definitive in microbiology. Leading their charge academically

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<v Speaker 1>is Deborah Fuller. They do terrific work across all of

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<v Speaker 1>biology and virology as well. Dr Fuller, thank you so

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<v Speaker 1>much for joining us. The Mayo Clinic tells me I

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<v Speaker 1>need a tetness shot every ten years to prose like

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<v Speaker 1>you just assume that we're going to be vaccinated for

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<v Speaker 1>COVID out into the future. We're anticipating that these particular

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<v Speaker 1>viruses as we see this virus evolve and we see

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<v Speaker 1>new variants occur UH. That desirous is going to the endemic,

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<v Speaker 1>and that means that it will remain in our population

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<v Speaker 1>for years UH to come, and that we can anticipate

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<v Speaker 1>occasional outbreaks and possibly even new variants to merge UM.

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<v Speaker 1>But we do have the weapon to fight that, and

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<v Speaker 1>that is with vaccines. Just like you mentioned with tetanus,

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<v Speaker 1>that's every ten years we've studied the particular pathogen and

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<v Speaker 1>we know that's how often you need to get re

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<v Speaker 1>vaccinated to sustain your immunity. We're going to be studying

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<v Speaker 1>that for stars covie too, and it could be just

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<v Speaker 1>like influenza, where you have to get the annual vaccination

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<v Speaker 1>to sustain your immunity. Do you assume that this covid

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<v Speaker 1>vaccination is specific to this two thousand twenty bug or

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<v Speaker 1>can it be used on other covid viruses forward. That's

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<v Speaker 1>a great question. We are studying that right now in

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<v Speaker 1>terms of particularly with the development of vaccines and trying

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<v Speaker 1>to design new vaccines that will eventually protect against just

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<v Speaker 1>this SARS covie too. But could we actually design vaccines

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<v Speaker 1>against future variants that we haven't even seen yet. And

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<v Speaker 1>the way we do that is we try to focus

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<v Speaker 1>immune responses against parts of the virus that will not

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<v Speaker 1>undergo viral evolution. They just can't, otherwise it would actually

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<v Speaker 1>result in loss of fitness of the virus itself. So,

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<v Speaker 1>uh so that's a that's a futuristic study of futuristic

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<v Speaker 1>exaccine down the line. In the meantime, tweaking viruses and

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<v Speaker 1>updating them to keep pace of emerging variant is a

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<v Speaker 1>common practice, one that we know work certainly for other pathogens,

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<v Speaker 1>and we anticipated it should work for this one too, Deborah,

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<v Speaker 1>is the question of the moment. I keep going back

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<v Speaker 1>to it, vaccine nationalism. Can you just comment on it,

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<v Speaker 1>how world you are about it vaccine nationalism? To find

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<v Speaker 1>that for me, please absolutely sure. So Europe right now

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<v Speaker 1>does not want to export some of the vaccines. The

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<v Speaker 1>UK is far more concerned about vaccinating its population beyond

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<v Speaker 1>just the at risk in society, to try and get

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<v Speaker 1>the whole population towards what some people would consider her

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<v Speaker 1>immunity at the sense of not making sure that the

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<v Speaker 1>developing world also has access to the vaccine, and therefore

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<v Speaker 1>we could have a proliferation of the mutations that we've

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<v Speaker 1>seen already in places like Brazil, South Africa and in in

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<v Speaker 1>the UK, and it would stop us from being able

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<v Speaker 1>to re up from the economy. Is that okay, No,

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<v Speaker 1>that's not okay. That's a major concern. As long as

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<v Speaker 1>there is virus somewhere in the world, we are going

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<v Speaker 1>to be battling this pandemic. So it needs to be

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<v Speaker 1>a worldwide collective effort to to shut down this uh,

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<v Speaker 1>this pandemic everywhere in the world. And that's that's why

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<v Speaker 1>too we're looking at wanting to make sure that we

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<v Speaker 1>develop vaccines that are going to be able to be

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<v Speaker 1>distributed UH to far reaches of the world and we

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<v Speaker 1>cost effective and hopefully UH work potentially in a single shot. Debra,

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<v Speaker 1>thank you appreciate your time this morning. Thank you very much.

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<v Speaker 1>Debra Fella, the University of Washington School of Medicine, Microbiology Professor.

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<v Speaker 1>On some of the key issues right now surrunder up

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<v Speaker 1>as the society general, they have an acute heritage of

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<v Speaker 1>mathematics and bonds where thrills you could join us today

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<v Speaker 1>on rates strategy, sour boundary. What level do you need

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<v Speaker 1>on ten year yield to signal breakout out of the

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<v Speaker 1>range for me that level is is one twenty in intense.

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<v Speaker 1>I think that it's that teny years. We're gonna struggle

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<v Speaker 1>to get past one until we see clear signs of uh,

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<v Speaker 1>you know, return to normalcy, you know, more vaccine deployment.

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<v Speaker 1>So so really the struggle is going to be trying

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<v Speaker 1>to get past one twenty. Also, I think has implications

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<v Speaker 1>for a broader risky assets. If you talk to say

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<v Speaker 1>equity analysts or or corporate bonds strategies, what yourtability time

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<v Speaker 1>to hear is that you know, beyond one intense they

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<v Speaker 1>could see some stress in the in risky assets, and

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<v Speaker 1>the FED is very much heen on keeping rates in

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<v Speaker 1>place so that you know, you don't see the sort

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<v Speaker 1>of route in ski assets. So that's gonna be a

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<v Speaker 1>moving target. But I just wonder where they're comfortable and

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<v Speaker 1>where they start to get uncomfortable. We know the e

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<v Speaker 1>c B from our reporting there are some levels of

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<v Speaker 1>spreads that they are targeting. We don't know what those

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<v Speaker 1>levels are, but apparently they exist. What do you think

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<v Speaker 1>it is the point on the curve that they're focused

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<v Speaker 1>on the level of rights yields that makes them a

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<v Speaker 1>little bit more uncomfortable. Well, I think any sort of

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<v Speaker 1>rapid rising yields is going to make them uncomfortable. So

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<v Speaker 1>the repricing in rates has to be very gradual and

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<v Speaker 1>something that they feel like they have have a handle on.

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<v Speaker 1>We don't want to see what we saw back in

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<v Speaker 1>in March, where you saw this unruly moving in yields

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<v Speaker 1>and the felt had to come in and intervene. So

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<v Speaker 1>if you do see a rising yields, and if it's

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<v Speaker 1>gradual and over time and warranted as fundamentals improved, then

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<v Speaker 1>I think they'll be comfortable with it. I mean, our

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<v Speaker 1>forecast for your end is one fifteen ten or yields.

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<v Speaker 1>I think it's on the high end of of street

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<v Speaker 1>forecast contrast to what we had last year when we

0:11:59.280 --> 0:12:01.480
<v Speaker 1>were in the had the lowest forecast for for ten

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<v Speaker 1>ye year olds. Um. So I think that we will

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<v Speaker 1>get there, but I think it has to be very,

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<v Speaker 1>very gradual. I think a lot of that move in

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<v Speaker 1>tenny years is going to happen in the second half,

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<v Speaker 1>not so much in the first half. What's positioning like

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<v Speaker 1>Savantra right now, it just feels like a massive change

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<v Speaker 1>that everyone's on the same page for once of a

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<v Speaker 1>treasuries typically come into any given year and people will

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<v Speaker 1>be looking for something a hundred basis points higher, something

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<v Speaker 1>north of that. Sometimes it seems like the ranges for

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<v Speaker 1>estimates is a lot lot tighter than it has been

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<v Speaker 1>in years gone by. Yeah, it's it's entirely because of

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<v Speaker 1>fair intervention. I mean J Pow fed chair J Power

0:12:37.200 --> 0:12:39.840
<v Speaker 1>last week basically shot down the idea of tapering asset

0:12:39.880 --> 0:12:43.240
<v Speaker 1>purchases anytime this year. They're sort of on track to

0:12:43.280 --> 0:12:46.000
<v Speaker 1>continue to to buy bonds. So I think for the

0:12:46.040 --> 0:12:49.720
<v Speaker 1>most part, positioning it's kind of, you know, is sort

0:12:49.760 --> 0:12:52.120
<v Speaker 1>of favoring the range trade. Are you when you start

0:12:52.160 --> 0:12:56.200
<v Speaker 1>getting towards you know, one percent, you know, investors are

0:12:56.200 --> 0:12:58.320
<v Speaker 1>broadly thinking, oh, this is probably a good good place

0:12:58.360 --> 0:13:02.000
<v Speaker 1>to go short the market. And around one seventy you're

0:13:02.000 --> 0:13:04.920
<v Speaker 1>gonna start seeing people cover shorts. So that's kind of

0:13:04.960 --> 0:13:06.679
<v Speaker 1>the range I think that people are going to be

0:13:06.720 --> 0:13:08.959
<v Speaker 1>trading in. That's right right where I wanted to God.

0:13:09.160 --> 0:13:12.440
<v Speaker 1>The idea here of convexity or the dynamics of the

0:13:12.480 --> 0:13:16.040
<v Speaker 1>full faith and credit a ginormous market as well. If

0:13:16.080 --> 0:13:18.520
<v Speaker 1>we go one eleven to one twenty, do we get

0:13:18.520 --> 0:13:22.840
<v Speaker 1>accelerated tendencies can convexity click in and the market as

0:13:22.880 --> 0:13:26.080
<v Speaker 1>deep as the ten year yield. Yeah, I mean you

0:13:26.120 --> 0:13:29.560
<v Speaker 1>do have some some convexity hedging activity, but you know,

0:13:29.640 --> 0:13:31.480
<v Speaker 1>for the most part, it's not going to come from

0:13:31.480 --> 0:13:34.600
<v Speaker 1>the mortgage universe. And for the mortgage convexity had just

0:13:34.679 --> 0:13:37.360
<v Speaker 1>to come in and start hedging their duration. It's going

0:13:37.400 --> 0:13:41.000
<v Speaker 1>to have to happen perhaps beyond one twenty, but I

0:13:41.000 --> 0:13:43.600
<v Speaker 1>think within one to one twenty you're going to see

0:13:43.640 --> 0:13:46.560
<v Speaker 1>the range trade, um, you know, alive and well where

0:13:46.559 --> 0:13:48.360
<v Speaker 1>people start to sort of take profits when they get

0:13:48.360 --> 0:13:53.959
<v Speaker 1>to intense. How will the Federal respond at one I

0:13:53.960 --> 0:13:56.880
<v Speaker 1>don't think they're going to be concerned. If the fundamentals

0:13:56.960 --> 0:13:59.360
<v Speaker 1>warrant the rise in years, and we saw at any

0:13:59.400 --> 0:14:03.200
<v Speaker 1>yields get to one seventeen are so in today this year.

0:14:03.880 --> 0:14:05.960
<v Speaker 1>So I think that if it's if it's accompanied by

0:14:06.040 --> 0:14:10.400
<v Speaker 1>strong data, arise in inflation expectations arise in real yields,

0:14:10.920 --> 0:14:12.760
<v Speaker 1>which is what we saw earlier on this year, so

0:14:12.800 --> 0:14:15.679
<v Speaker 1>it's sort of a healthy reflation trade, then I think

0:14:15.679 --> 0:14:17.400
<v Speaker 1>the Fed is not going to be very concerned. I

0:14:17.440 --> 0:14:20.080
<v Speaker 1>think that they're much more concerned, but sort of you know,

0:14:20.520 --> 0:14:24.080
<v Speaker 1>dramatic moves higher or lower and yields um You know

0:14:24.200 --> 0:14:28.320
<v Speaker 1>that that's going to you know, disrupt the risky assets

0:14:28.360 --> 0:14:31.760
<v Speaker 1>and and and the national conditions generally speaking. Spante graz

0:14:31.840 --> 0:14:34.680
<v Speaker 1>catchy up. Now, the estimate in this ball market last

0:14:34.760 --> 0:14:37.880
<v Speaker 1>year really did Supantrac Grazer, catchy up. Sabato Japa of

0:14:37.960 --> 0:14:46.360
<v Speaker 1>Silk Gent talk about the global commandities markets, talk about gold,

0:14:46.440 --> 0:14:51.080
<v Speaker 1>oil and silver. Jeffrey Curry Golden sax Scobe ahead of commodities. Jeffrey,

0:14:51.440 --> 0:14:52.880
<v Speaker 1>thank you so much for coming on. I don't know

0:14:52.920 --> 0:14:55.200
<v Speaker 1>whether the parallels right between game Stop and some of

0:14:55.240 --> 0:14:59.560
<v Speaker 1>the Reddit action can really directly transferred to silver because

0:14:59.560 --> 0:15:02.040
<v Speaker 1>it's a differ market and actually in the positions from

0:15:02.040 --> 0:15:04.800
<v Speaker 1>a lot of the hedge funds were completely different. Well,

0:15:04.800 --> 0:15:06.760
<v Speaker 1>I think when we look at the silver market, one

0:15:06.760 --> 0:15:09.480
<v Speaker 1>thing to keep in mind, it is a lot larger

0:15:09.520 --> 0:15:12.560
<v Speaker 1>than these equity markets. You know, you put the total

0:15:12.600 --> 0:15:17.320
<v Speaker 1>amount of of open interest of silver, including both above

0:15:17.400 --> 0:15:19.960
<v Speaker 1>ground and below ground, you know, somewhere in that two

0:15:20.080 --> 0:15:23.480
<v Speaker 1>hundred billion dollar range on an annual output basis, you

0:15:23.560 --> 0:15:26.760
<v Speaker 1>know that is substantially larger, and as a result, to

0:15:27.000 --> 0:15:31.200
<v Speaker 1>corner the market and create a short squeeze. Um, we

0:15:31.360 --> 0:15:35.400
<v Speaker 1>estimate it require each one of these Wall Street individuals

0:15:35.440 --> 0:15:40.240
<v Speaker 1>to accumulate a positions of somewhere around that's a lot

0:15:40.280 --> 0:15:42.080
<v Speaker 1>of silver, and where are you going to put it?

0:15:42.160 --> 0:15:45.520
<v Speaker 1>So that the analogy to let's say, the Hunt Brothers

0:15:45.600 --> 0:15:49.480
<v Speaker 1>are uh, you know Thursday, you know silver Thursday, I

0:15:49.520 --> 0:15:52.760
<v Speaker 1>think are far stretched. And also, let's not forget because

0:15:52.800 --> 0:15:56.400
<v Speaker 1>of the Hunt Brothers squeeze back in nineteen eighty, there

0:15:56.440 --> 0:16:00.720
<v Speaker 1>are regulatory policies put in place that prevent a re

0:16:00.880 --> 0:16:04.360
<v Speaker 1>replication of that, you know, i e. Position limits. So

0:16:04.760 --> 0:16:07.400
<v Speaker 1>to see a similar type of dynamic take place in

0:16:07.480 --> 0:16:12.200
<v Speaker 1>a macro market, we see it as extremely unlikely. So, Jeff,

0:16:12.240 --> 0:16:14.800
<v Speaker 1>what are you expecting silver to go from here until

0:16:14.800 --> 0:16:17.640
<v Speaker 1>the end of the year. You know, our target is

0:16:17.760 --> 0:16:22.720
<v Speaker 1>thirty dollars announced, really being driven by a combination of

0:16:23.160 --> 0:16:27.560
<v Speaker 1>a stronger gold market as well as you know, the

0:16:27.600 --> 0:16:32.600
<v Speaker 1>solar panel demand or call it the green capex driving prices. Now,

0:16:32.760 --> 0:16:36.440
<v Speaker 1>we do expect if you see the Biden administration approved

0:16:36.720 --> 0:16:40.760
<v Speaker 1>its solar ambitions, UM that target had moved to thirty

0:16:40.800 --> 0:16:43.720
<v Speaker 1>three dollars announced. Now, given the markets trade in in

0:16:43.880 --> 0:16:48.720
<v Speaker 1>that dollars announced, it means there's a real fundamental story here.

0:16:48.800 --> 0:16:52.480
<v Speaker 1>We like silver, however, we don't like it because of

0:16:52.520 --> 0:16:55.800
<v Speaker 1>a sports short squeeze. We like it because of the

0:16:55.840 --> 0:16:59.000
<v Speaker 1>fundamental story behind it. But Jeff Curry, you were mentioning

0:16:59.040 --> 0:17:02.800
<v Speaker 1>as we went into the interview about Jennings Bryan and

0:17:02.880 --> 0:17:05.040
<v Speaker 1>the cross of gold. Let's talk about the cross of

0:17:05.119 --> 0:17:09.640
<v Speaker 1>silver right now, which is the fixation of the public

0:17:09.840 --> 0:17:16.359
<v Speaker 1>on trading commodities versus the fundamental story around tangible assets.

0:17:16.400 --> 0:17:20.720
<v Speaker 1>You've always waited the fundamental story is that a dated view?

0:17:20.800 --> 0:17:23.560
<v Speaker 1>Do you have to shift and be more supple than

0:17:23.640 --> 0:17:29.080
<v Speaker 1>you're thinking about the speculative market of tangible assets. Well,

0:17:29.480 --> 0:17:33.639
<v Speaker 1>we think about the fundamental story of commodities in real

0:17:33.680 --> 0:17:36.919
<v Speaker 1>assets more broadly. Part of the reason we never saw

0:17:37.040 --> 0:17:40.440
<v Speaker 1>a commodity bullmarket over the last let's say, twelve or

0:17:40.480 --> 0:17:45.560
<v Speaker 1>fifteen years is because we never saw significant demand for commodities.

0:17:45.960 --> 0:17:48.639
<v Speaker 1>What we think that these populist movements are likely to

0:17:48.720 --> 0:17:52.800
<v Speaker 1>do is create an environment in which government starts spending,

0:17:52.920 --> 0:17:57.080
<v Speaker 1>particularly on lower income households. That will create that demand

0:17:57.160 --> 0:18:00.480
<v Speaker 1>for commodities and goods more broadly and create a more

0:18:00.640 --> 0:18:05.080
<v Speaker 1>cyclical commodity intensity economic backdrop. And that really sits at

0:18:05.119 --> 0:18:08.040
<v Speaker 1>the core of our bullish view on commodities as we

0:18:08.160 --> 0:18:14.840
<v Speaker 1>see red policies, redistributional policies, environmental policies like environmental capex

0:18:15.119 --> 0:18:18.480
<v Speaker 1>and versatility and supply chains, um and and these things

0:18:18.520 --> 0:18:21.240
<v Speaker 1>are very much related. You know, I think I could

0:18:21.280 --> 0:18:25.880
<v Speaker 1>use green leveling spending on green capex to level income.

0:18:26.320 --> 0:18:29.040
<v Speaker 1>These types of expansion programs are really going to be

0:18:29.040 --> 0:18:32.719
<v Speaker 1>behind our bullish view on commodities. Your bulls, your bullish

0:18:32.760 --> 0:18:35.600
<v Speaker 1>view and commodities. There's been noted there's some people pushing

0:18:35.680 --> 0:18:38.880
<v Speaker 1>against you, Jeff Curry. It seems like it's just guarded

0:18:38.880 --> 0:18:42.680
<v Speaker 1>and you're out two standard deviations. Uh, through the trend.

0:18:42.760 --> 0:18:46.640
<v Speaker 1>It's a really remarkable breakout of the long term resistance

0:18:46.680 --> 0:18:51.000
<v Speaker 1>that we've seen. Reaffirmed the magnitude of the movement you

0:18:51.040 --> 0:18:54.040
<v Speaker 1>believe we will see. Yeah, I would put it on

0:18:54.119 --> 0:18:57.399
<v Speaker 1>car to the bullmarket we saw in the seventies or

0:18:57.440 --> 0:19:00.080
<v Speaker 1>the bull market we saw in the two thousands. I

0:19:00.080 --> 0:19:02.240
<v Speaker 1>would say this is more akin to what we saw

0:19:02.320 --> 0:19:06.679
<v Speaker 1>in the seventies to the two thousands. Why our redistributional

0:19:06.720 --> 0:19:10.399
<v Speaker 1>policies back then were the um the greatest society of

0:19:10.440 --> 0:19:14.639
<v Speaker 1>the War on poverty, are environmental policies. You had the

0:19:14.680 --> 0:19:17.680
<v Speaker 1>War on Acid rain, Clean Air Act, you had the

0:19:17.760 --> 0:19:21.360
<v Speaker 1>Clean Water Acts and lots of spending environmental policy back then.

0:19:21.720 --> 0:19:24.920
<v Speaker 1>And then our be our versatility and supply chains or

0:19:24.960 --> 0:19:28.399
<v Speaker 1>resiliency and supply chains. You know, then you have the

0:19:28.480 --> 0:19:31.600
<v Speaker 1>Cold War with Russia. Now we have a quaisi cold

0:19:31.640 --> 0:19:34.520
<v Speaker 1>war with China's that can require spending. In fact, the

0:19:34.760 --> 0:19:37.200
<v Speaker 1>big move in agriculture that we have seen over the

0:19:37.280 --> 0:19:41.320
<v Speaker 1>last week is buying by the Chinese. Their building strategic

0:19:41.359 --> 0:19:44.760
<v Speaker 1>reserves and grains, very similar to what the US and

0:19:44.840 --> 0:19:47.480
<v Speaker 1>Europeans did back in the seventies and when they built

0:19:47.480 --> 0:19:50.280
<v Speaker 1>their strategic reserves. So you know, the analogy here in

0:19:50.280 --> 0:19:53.440
<v Speaker 1>the magnitude is probably something more similar to the supercycle

0:19:53.520 --> 0:19:55.800
<v Speaker 1>of the seventies than the one of the two thousand's.

0:19:57.160 --> 0:19:59.600
<v Speaker 1>And Jeff, going back to the silver trait, do you

0:19:59.600 --> 0:20:02.320
<v Speaker 1>see the potential for retail traders to actually break into

0:20:02.400 --> 0:20:06.440
<v Speaker 1>natural gas or oil? Again, the size of these markets,

0:20:06.520 --> 0:20:08.880
<v Speaker 1>they're extremely large. They can break in it and they

0:20:08.960 --> 0:20:11.560
<v Speaker 1>trade it and they have been a part of these markets. Um,

0:20:11.680 --> 0:20:13.960
<v Speaker 1>you have the e T f s and natural gas,

0:20:14.000 --> 0:20:16.480
<v Speaker 1>you have the e T s in oil, which are

0:20:16.600 --> 0:20:20.200
<v Speaker 1>very large and um you do see an active presence

0:20:20.200 --> 0:20:24.920
<v Speaker 1>of retail participation in those markets. However, I think what

0:20:24.920 --> 0:20:28.240
<v Speaker 1>what is different about this is the idea that they

0:20:28.240 --> 0:20:31.400
<v Speaker 1>could drive these markets and push them. And they did

0:20:31.520 --> 0:20:34.800
<v Speaker 1>drive and push silver yesterday, But when you start to

0:20:34.840 --> 0:20:38.440
<v Speaker 1>get to markets like oil and natural gas, the liquidity

0:20:38.520 --> 0:20:41.440
<v Speaker 1>is substantially larger and it becomes that much more difficult

0:20:41.480 --> 0:20:43.520
<v Speaker 1>to do. So, I don't you know, there's a question

0:20:43.560 --> 0:20:47.160
<v Speaker 1>here participation. Yes they are participating, Yes they are part

0:20:47.200 --> 0:20:50.240
<v Speaker 1>of these markets. But to be the marginal driver of

0:20:50.280 --> 0:20:53.520
<v Speaker 1>these markets like they wear in silver yesterday, is you know,

0:20:53.600 --> 0:20:57.760
<v Speaker 1>a much larger question. Market different. Is there an instrument

0:20:57.800 --> 0:21:00.639
<v Speaker 1>though that that could if that's what they decided to do,

0:21:01.160 --> 0:21:02.800
<v Speaker 1>you know, would they play it through E t S

0:21:02.880 --> 0:21:05.400
<v Speaker 1>or is there an instrument that would make it easier

0:21:05.400 --> 0:21:08.480
<v Speaker 1>of access? You know? The E t F is that

0:21:08.640 --> 0:21:11.000
<v Speaker 1>the the easiest accessing one thing, And I want to

0:21:11.040 --> 0:21:15.600
<v Speaker 1>point out that makes oil radically different than silver or gold.

0:21:15.920 --> 0:21:19.280
<v Speaker 1>The E t F in silver and gold is physically back.

0:21:19.400 --> 0:21:23.120
<v Speaker 1>In fact, that short that the retail investors were focused

0:21:23.160 --> 0:21:26.919
<v Speaker 1>on in the comax market is the hedging of that

0:21:27.000 --> 0:21:29.840
<v Speaker 1>physical position in the E t F. The E t

0:21:30.080 --> 0:21:33.440
<v Speaker 1>F in natural gas and oil is nothing other than

0:21:33.480 --> 0:21:36.919
<v Speaker 1>a rolling front month G s c I style contract.

0:21:37.240 --> 0:21:40.160
<v Speaker 1>It is a paper position. It's not a physical position.

0:21:40.160 --> 0:21:43.200
<v Speaker 1>To understand why, I like to make this simple example,

0:21:43.520 --> 0:21:46.520
<v Speaker 1>you can take all of the E T F physical

0:21:46.600 --> 0:21:49.280
<v Speaker 1>position in gold and put it in your office. It

0:21:49.320 --> 0:21:51.960
<v Speaker 1>may break the four floor it's so heavy is it

0:21:51.960 --> 0:21:54.520
<v Speaker 1>would fall through. However, you can fit it in this office.

0:21:54.520 --> 0:21:56.639
<v Speaker 1>And then let's think about this. The E T F

0:21:56.760 --> 0:21:59.879
<v Speaker 1>position in oil, if you were to hold it in

0:22:00.080 --> 0:22:04.159
<v Speaker 1>physical position, it will require something like seventy or ninety

0:22:04.200 --> 0:22:08.359
<v Speaker 1>b LCCs. Now, imagine in your head parking ninety b

0:22:08.560 --> 0:22:11.040
<v Speaker 1>LCCs in the East Rimber in New York. Are the

0:22:11.119 --> 0:22:15.600
<v Speaker 1>Thames here in London, It would be pretty difficult. Jeffrey,

0:22:15.640 --> 0:22:18.560
<v Speaker 1>thanks so much, Jeffrey Curry there, Goldman Saxon. Thanks for

0:22:18.680 --> 0:22:23.080
<v Speaker 1>listening to the Bloomberg Surveillance podcast. Subscribe and listen to

0:22:23.240 --> 0:22:28.960
<v Speaker 1>interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer.

0:22:29.520 --> 0:22:32.840
<v Speaker 1>I'm on Twitter at Tom Keane before the podcast. You

0:22:32.880 --> 0:22:36.280
<v Speaker 1>can always catch us worldwide. I'm Bloomberg Radio