WEBVTT - Goldman's Jeff Currie on the Silver Squeeze and the Coming Boom in Commodities 0:00:10.800 --> 0:00:14.440 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.520 --> 0:00:19.159 I'm Joe Wisnal and I'm Tracy all Away. Tracy, So, 0:00:19.239 --> 0:00:23.479 obviously markets have been really fun and wild and crazy lately. 0:00:24.160 --> 0:00:27.680 You know. I think that, um, when we started talking 0:00:27.800 --> 0:00:30.160 about some of the stuff with game Stop and everything 0:00:30.320 --> 0:00:36.280 and a liquid small small stocks being pushed on message boards, 0:00:36.520 --> 0:00:42.080 we didn't expect it to move to a major commodity market, no, 0:00:42.520 --> 0:00:44.960 And I have to say, I'm reminded of the post 0:00:45.040 --> 0:00:48.040 you wrote a week or two ago about how it 0:00:48.080 --> 0:00:52.000 can always get crazier, and I think what we're seeing 0:00:52.080 --> 0:00:55.480 right now is proof that it can indeed always get crazier. 0:00:55.520 --> 0:00:59.640 But what started with a relatively small single stock game 0:00:59.680 --> 0:01:02.520 Stock migrated to a bunch of other stocks like AMC 0:01:02.800 --> 0:01:06.280 and Nokia, and then it seemed to go to the 0:01:06.319 --> 0:01:09.680 silver market. And I think silver future has jumped quite 0:01:09.680 --> 0:01:13.160 a bit, although as we're recording this, uh, let's see, 0:01:13.319 --> 0:01:16.399 it is February second, and they are starting to come 0:01:16.400 --> 0:01:19.759 back down a bit. But the notion that retail money 0:01:19.840 --> 0:01:25.120 would go after a market as large as silver is 0:01:25.160 --> 0:01:29.280 pretty intense. Like that is a big market, certainly multiples 0:01:29.480 --> 0:01:33.000 of game Stop. Now it should be noted that there 0:01:33.080 --> 0:01:37.160 is some ambiguity about where this silver trade emanated from. 0:01:37.240 --> 0:01:40.320 There are people on the subrettit Wall Street bets to say, hey, 0:01:40.360 --> 0:01:43.520 this isn't us. We never said anything about silver. That's 0:01:43.560 --> 0:01:47.360 not clear. What is clear is that something happened and 0:01:47.400 --> 0:01:50.080 in a span of just a few days, starting at 0:01:50.080 --> 0:01:52.320 the end of the last week, maybe Thursday, Friday through 0:01:52.360 --> 0:01:57.200 the weekend, basically every retail silver coin site was just 0:01:58.120 --> 0:02:01.840 instantly out of inventory, some of them saying, um that 0:02:01.880 --> 0:02:05.040 they got as many sales in two days as they 0:02:05.040 --> 0:02:08.120 would expect to get for an entire month. So something happened. 0:02:08.400 --> 0:02:11.840 They just sent silver demand both through physical demand and 0:02:11.880 --> 0:02:14.160 also plays on the e t F and then into 0:02:14.200 --> 0:02:18.519 the future of market. Absolutely wild. Yeah, this is why 0:02:18.600 --> 0:02:21.200 I find some of the reddit or Wall Street bets 0:02:21.240 --> 0:02:24.519 pushed back on this really weird. Like they're all saying 0:02:24.600 --> 0:02:28.840 that it's hedge funds buying silver and its bots trying 0:02:28.840 --> 0:02:31.120 to push the price of silver up on the subreddit. 0:02:31.200 --> 0:02:34.120 But the fact that all the coin stores are sold 0:02:34.160 --> 0:02:36.840 out of American eagles kind of makes me think that 0:02:36.880 --> 0:02:39.800 there is a retail component here. And I'm sure you know, 0:02:39.880 --> 0:02:42.400 Ken Griffin isn't going down to his local coin store 0:02:42.520 --> 0:02:49.440 to load up on Philharmonic coins or something like that. Now, Tracy, 0:02:49.520 --> 0:02:51.040 we're gonna get to our guests in a second, But 0:02:51.200 --> 0:02:55.320 have you um posted a video yet of you stacking silver? 0:02:55.919 --> 0:02:58.640 You promise you were going to do that. I did, 0:02:58.680 --> 0:03:00.960 but then I got really a side tracked and um 0:03:01.200 --> 0:03:04.880 tired by the podcast recording schedule. I will do it. 0:03:05.320 --> 0:03:08.240 I will try it this week. I promise again. Maybe 0:03:08.400 --> 0:03:10.440 maybe you could, maybe you could time the release of 0:03:10.480 --> 0:03:15.880 the video for this episode. So, unfortunately, we're not interviewing 0:03:15.960 --> 0:03:18.360 your dad because we've been talking about that forever. We 0:03:18.440 --> 0:03:20.560 know your dad is a big silver bug, but we're 0:03:20.560 --> 0:03:23.560 not getting him. But I'm extremely excited about our guests. 0:03:23.560 --> 0:03:27.400 In fact, we booked him before all the silver mania 0:03:27.440 --> 0:03:29.600 happened because there is actually so much more to talk 0:03:29.639 --> 0:03:32.560 about in the broader world of commodities, and it was 0:03:32.600 --> 0:03:35.040 originally we're going to talk about all that. So there's 0:03:35.080 --> 0:03:39.600 so much going in commodities, silver, oil, the broader macro picture, 0:03:39.640 --> 0:03:43.600 industrial commodities, copper, etcetera. All wild stuff this year. So 0:03:43.600 --> 0:03:45.880 we have the perfect guest for it. We're going to 0:03:45.920 --> 0:03:48.360 be speaking with Jeff Curry. He has the Global Head 0:03:48.400 --> 0:03:52.200 of Commodities Research at Goldman Sex or role he's occupied 0:03:52.280 --> 0:03:56.040 the two thousand and six longtime veteran at Goldman Sex, 0:03:56.320 --> 0:03:58.680 been there for twenty five years and really just sort 0:03:58.720 --> 0:04:01.080 of knows more about the commodities world than almost anyone 0:04:01.160 --> 0:04:04.200 you'll speak to. So the perfect guest today, So um, 0:04:04.280 --> 0:04:07.040 Jeff Curry, thank you so much for joining us. Great 0:04:07.120 --> 0:04:10.440 thanks for having me. Jeff. I don't want to get 0:04:10.440 --> 0:04:12.600 you in trouble or have you say anything bad about 0:04:12.640 --> 0:04:16.000 people who buy commodities, But honestly, what is the deal 0:04:16.160 --> 0:04:18.800 with people who go who buy silver? Because I will 0:04:18.839 --> 0:04:23.119 say that in my career following markets for the last 0:04:23.200 --> 0:04:26.400 ten or so years, there's something about silver people. They're 0:04:26.440 --> 0:04:29.040 just like wired a little bit different silver people, And 0:04:29.160 --> 0:04:32.120 I'll just leave it at that, silver bug, silver people. 0:04:32.200 --> 0:04:34.800 What is the deal with silver? And why does stuff 0:04:34.839 --> 0:04:38.200 like this happen? Well, you know, you know the piece 0:04:38.240 --> 0:04:41.839 we put out this this morning was silver is remains 0:04:41.960 --> 0:04:45.160 the Populist medal, And you go back in history for 0:04:45.640 --> 0:04:50.280 you know, hundreds of years. Silver has always been associated 0:04:50.320 --> 0:04:54.880 with populist movements, and so the market today is focused 0:04:54.960 --> 0:04:59.440 on the Hunt brothers cornering at the silver market as 0:04:59.480 --> 0:05:03.960 the his oracle analog. We think the appropriate historical analog 0:05:04.480 --> 0:05:09.839 is actually William Jennings Bryan's Cross of Gold speech, where 0:05:10.440 --> 0:05:15.680 essentially he argues that the government in the banks, um, 0:05:16.080 --> 0:05:21.200 we're suppressing inflation and economic potential, which is similar to 0:05:21.240 --> 0:05:24.960 the rhetoric that the you know, the Wall Street veterate 0:05:25.279 --> 0:05:30.360 hedit Um group was advocating. And the key here is that, 0:05:30.839 --> 0:05:34.520 you know, take somebody like Brian. He was advocating silver 0:05:34.640 --> 0:05:37.200 coinage as a way of getting around this, and so 0:05:37.560 --> 0:05:40.839 it has that historical populist element to it, and I 0:05:40.880 --> 0:05:43.479 think that's really what it's at play here, and the 0:05:43.520 --> 0:05:46.960 way we view the Wall Street Vets group is this 0:05:47.040 --> 0:05:50.960 is just a continuation of the rise of populism or 0:05:51.000 --> 0:05:55.000 it's just you know crescendo occurring um, you know, week 0:05:55.080 --> 0:05:59.120 after week. That's representing I think this need for governments 0:05:59.160 --> 0:06:02.800 to address some these issues around income inequality and other 0:06:02.880 --> 0:06:07.160 social needs. So we alluded to this in the intro. 0:06:07.480 --> 0:06:10.960 But trying to force a squeeze in a commodity market 0:06:11.360 --> 0:06:14.159 is very very different to trying to force a squeeze 0:06:14.240 --> 0:06:19.120 in a single stock with high short interest. How how 0:06:19.160 --> 0:06:23.280 effective do you think retail could be. And again we 0:06:23.320 --> 0:06:26.440 should just repeat the Wall Street butts is refuting the 0:06:26.480 --> 0:06:29.320 idea that they're behind all of this. But how effective 0:06:29.360 --> 0:06:32.320 do you think retail could be in moving the price 0:06:32.320 --> 0:06:35.520 of silver? At this point, again going back to the 0:06:35.600 --> 0:06:41.760 Hunt Brothers, there was significant regulatory changes in these markets, 0:06:41.800 --> 0:06:46.240 in particular position limits that makes it almost nearly impossible 0:06:46.320 --> 0:06:48.760 to be able to squeeze these markets on the same 0:06:48.800 --> 0:06:51.599 scale that we saw forty one years ago. Um, you know, 0:06:51.800 --> 0:06:55.479 and also in terms of thinking about the magnitude the 0:06:55.560 --> 0:06:59.919 size of these macro markets versus let's say game stock. 0:07:00.120 --> 0:07:02.680 You know, the size of the silver market in terms 0:07:02.720 --> 0:07:05.120 of what's being produced and all out there is you know, 0:07:05.160 --> 0:07:08.680 somewhere around three hundred billion US dollars. You know, it's 0:07:08.720 --> 0:07:11.480 three hundred times the size of the original market cap 0:07:11.520 --> 0:07:14.880 of games. And so when we and by the way, 0:07:15.080 --> 0:07:17.480 that's a in our world, silver is one of the 0:07:17.560 --> 0:07:20.680 smallest markets we deal with. You put something like gold, 0:07:21.080 --> 0:07:23.680 you know, in term you include everything in the central banks, 0:07:23.720 --> 0:07:26.360 it's just like a seven trillion dollar market. But I 0:07:26.400 --> 0:07:28.920 think you know, the key point here is that if 0:07:28.960 --> 0:07:33.760 you take the what five million Wall Street Bets subscribers, 0:07:33.800 --> 0:07:35.960 they would imply that each one of them would have 0:07:36.040 --> 0:07:39.400 to own somewhere around forty two hundred ounces of silver 0:07:39.680 --> 0:07:42.560 to be able to replicate what the Hunt brothers did. 0:07:42.920 --> 0:07:46.400 Then the ability for them to do it, given position limits, 0:07:46.440 --> 0:07:48.720 means that you would have to split the position fifty 0:07:48.800 --> 0:07:52.880 three ways, with each position representing two hundred and seventeen 0:07:52.920 --> 0:07:56.720 million dollars um, and they would all need to be coordinated. So, 0:07:56.760 --> 0:07:59.200 in other words, it's nearly impossible to do in the 0:07:59.240 --> 0:08:03.360 current environment, and that's one of the smaller commodities. I 0:08:03.400 --> 0:08:08.360 think Wall Street Cuts is now seven or eight million subscribers, 0:08:08.400 --> 0:08:11.760 so the number keeps going up. But point taken about 0:08:11.880 --> 0:08:14.960 the amount of firepower that would be needed, yeah, it 0:08:15.040 --> 0:08:17.680 still seems very unlikely that they're going to do what 0:08:17.800 --> 0:08:21.560 would be needed to really corner this market. Jeff, you know, 0:08:21.640 --> 0:08:25.520 there's this persistent myth or this thing that people say, 0:08:25.560 --> 0:08:27.160 and I don't really understand it, but I guess it 0:08:27.200 --> 0:08:29.720 gets back, you know, to some of the William Jennings 0:08:29.720 --> 0:08:34.280 Bryan populism. There's this persistent myth out there that the 0:08:34.320 --> 0:08:38.280 Wall Street banks and in particular JP Morgan for some reason, 0:08:38.360 --> 0:08:40.920 and I never understood why, what the what the story 0:08:41.080 --> 0:08:43.520 is they're like, oh, they're sitting on this huge naked 0:08:43.559 --> 0:08:46.440 short position, and if we just jack up the price 0:08:46.480 --> 0:08:48.480 of silver enough, they're gonna have to cover and then 0:08:48.520 --> 0:08:50.280 that's the way we're going to take down the bankers 0:08:50.280 --> 0:08:52.320 and get them back and all that stuff. Do you know, 0:08:52.400 --> 0:08:54.280 like what do what? Can you walk us through the 0:08:54.320 --> 0:08:57.959 origin of this notion that for some reason banks Like 0:08:58.240 --> 0:09:00.640 where did they get this idea that banks are sitting 0:09:00.679 --> 0:09:05.520 on these huge unhedged short silver positions. If you look 0:09:05.559 --> 0:09:11.400 at the c TC positioning reports, what you see is 0:09:11.600 --> 0:09:16.400 that the U, the swap dealers, the banks are have 0:09:16.800 --> 0:09:22.200 very large short positions in um precious metals. Now, the 0:09:22.240 --> 0:09:26.440 thing that's forgotten is that these are typically hedges to 0:09:26.559 --> 0:09:29.320 the physical positions and like the E T s And 0:09:29.320 --> 0:09:32.400 that's the one thing that makes commodity markets very different 0:09:32.559 --> 0:09:35.760 from financial markets or the long only markets is that 0:09:35.840 --> 0:09:39.040 there's zero sum, meaning that for every long is a short, 0:09:39.320 --> 0:09:41.920 and I think people forget that. And also, you know, 0:09:42.000 --> 0:09:45.040 it goes to a broader point about the ability for 0:09:45.679 --> 0:09:49.760 um speculators to impact these markets. Uh, when you have 0:09:49.800 --> 0:09:53.280 a speculator coming and buy the share of a company, 0:09:54.040 --> 0:09:56.440 the only way you create more supply of those shares 0:09:56.520 --> 0:09:59.839 is through the SEC approval and then you issue new shares, 0:10:00.240 --> 0:10:02.840 so if the speculator buys those shares, they can drive 0:10:02.920 --> 0:10:05.559 up the price. Now, when you think about a commodity 0:10:05.600 --> 0:10:09.079 market like let's say, you know oil or something like that, 0:10:09.120 --> 0:10:12.280 where you have the the you know every long there 0:10:12.400 --> 0:10:15.040 is a short, you're adding more loans means you're adding 0:10:15.040 --> 0:10:18.560 the short. Now, what separates silver and gold from all 0:10:18.600 --> 0:10:21.079 the other commodity markets is that E t F is 0:10:21.120 --> 0:10:23.960 physically backed. And so to answer your question, what they're 0:10:24.000 --> 0:10:27.840 observed is the fact that the lights of the entities 0:10:27.880 --> 0:10:30.680 that are supporting those e t F s are using 0:10:30.760 --> 0:10:34.520 the comac silver market as a hedge mechanism. And hint, 0:10:34.720 --> 0:10:37.120 that's why you see the shorts in that market. But 0:10:37.320 --> 0:10:39.440 I actually always want to quickly go to a point 0:10:39.440 --> 0:10:43.240 about the physical aspect of those e t F gold 0:10:43.280 --> 0:10:47.080 and silver is if you take the the the current 0:10:47.200 --> 0:10:52.040 size of the of the gold et F, you know 0:10:52.559 --> 0:10:57.280 it's somewhere around a hundred and fifty billion dollars of gold. 0:10:57.760 --> 0:11:01.280 You could put the hundred and fifty billion dollars into 0:11:01.360 --> 0:11:04.280 your office. It may break the floor, it's so heavy 0:11:04.360 --> 0:11:07.120 it falls through. But the key point is that you 0:11:07.160 --> 0:11:09.720 don't need a lot of space to store it. Now, 0:11:09.720 --> 0:11:13.280 in contrast, if you take the oil et F, which 0:11:13.320 --> 0:11:16.560 is all paper, not physical, and you look at the 0:11:16.559 --> 0:11:19.240 total amount in there, it's something like a hundred and 0:11:19.280 --> 0:11:21.360 eighty million barrels. By the way, don't quote me on 0:11:21.400 --> 0:11:24.400 these numbers I made. They changing quickly. But the point 0:11:24.400 --> 0:11:26.800 I want to illustrate here is that if you take 0:11:26.840 --> 0:11:30.880 a hundred and eighty million barrels, one BLCC carries two 0:11:30.960 --> 0:11:33.640 million barrels. So think about this, A hundred and eighty 0:11:33.640 --> 0:11:37.920 million barrels is ninety blccs. Now, why don't you even 0:11:38.000 --> 0:11:41.160 envision in your head parking ninety b LCCs in the 0:11:41.200 --> 0:11:43.600 East River, New York or the Thames here in London. 0:11:43.920 --> 0:11:47.920 It becomes incredibly difficult. Now, in contrast, you take that 0:11:48.000 --> 0:11:51.160 hundred eighty million barrels at fifty dollars a barrel, that's 0:11:51.240 --> 0:11:54.480 nine billion dollars parked out on the Thames River. And 0:11:54.520 --> 0:11:57.640 if you can think about the gold et F, I've 0:11:57.679 --> 0:12:00.600 just stored a hundred and fifty billion dollar dollars in 0:12:00.720 --> 0:12:03.480 my office. I'm gonna get you need to concrete floor 0:12:03.600 --> 0:12:05.520 to be able to store. But the key message here 0:12:05.840 --> 0:12:07.920 is you can do it, you can't do it in oil. 0:12:08.200 --> 0:12:11.200 Hence why you have physical e t s in both 0:12:11.240 --> 0:12:15.800 gold and silver. Yeah, don't take physical delivery of oil, 0:12:16.360 --> 0:12:21.280 something I learned from first hand experience. So so what's 0:12:21.280 --> 0:12:23.840 your what's your take on why the price of silver 0:12:24.160 --> 0:12:27.120 actually moved this week? If if we're saying that retail 0:12:27.280 --> 0:12:30.240 probably doesn't have enough firepower to do it by themselves, 0:12:30.520 --> 0:12:33.839 what's going on here? Well, I mean in terms of 0:12:33.840 --> 0:12:37.440 looking at you know, near term volatility. Absolutely, they can 0:12:37.480 --> 0:12:41.960 create volatility by moving uh, you know, in and out 0:12:41.960 --> 0:12:45.360 of the market and creating velocity and changes in open interest, 0:12:45.440 --> 0:12:47.680 which they are doing because you know, we're down again 0:12:47.720 --> 0:12:50.680 today similar to this we were up. But in terms 0:12:50.679 --> 0:12:54.000 of thinking about a long term structural shift, you need 0:12:54.040 --> 0:12:58.240 to have physical demand for those coins and real physical silver. 0:12:59.120 --> 0:13:02.480 It's increased. What but is they going to create a 0:13:02.559 --> 0:13:05.200 squeeze or anything of that, Megan to The answer is no. 0:13:05.720 --> 0:13:07.920 And I so I don't want to dismiss the inability 0:13:07.960 --> 0:13:10.720 to move markets, because clearly they did. Yesterday's silver was 0:13:10.920 --> 0:13:14.520 up eight percent. But the question is are they going 0:13:14.559 --> 0:13:18.280 to stay in this market and maintain those positions. That 0:13:18.400 --> 0:13:21.200 becomes a much more difficult task because the one thing 0:13:21.240 --> 0:13:24.880 about commodities that separates them from again from financial markets 0:13:25.440 --> 0:13:28.680 is not only are they long short, but also there's 0:13:28.679 --> 0:13:32.160 an expiration that they mean the financial market expires into 0:13:32.200 --> 0:13:34.440 the physical, which means at some point they have to 0:13:34.520 --> 0:13:37.880 roll these positions back out onto the financial market to 0:13:37.920 --> 0:13:41.439 avoid taking delivery like our example with oil, and because 0:13:41.480 --> 0:13:44.800 of that need to roll, they prefer, you know, these 0:13:44.840 --> 0:13:47.600 financial instruments like the E t F, which is where 0:13:47.640 --> 0:14:10.040 most of the retailer activity remains. So regardless of where 0:14:10.080 --> 0:14:14.040 the uh the idea to go crazy to buy silver originated, 0:14:14.120 --> 0:14:16.280 it did happen. Obviously we saw the buying and the 0:14:16.640 --> 0:14:19.800 s l V E t F. I mentioned that the 0:14:19.800 --> 0:14:22.960 the coin dealers all had to put out put up 0:14:22.960 --> 0:14:24.960 signs saying we can't sell coins right now because we're 0:14:24.960 --> 0:14:28.440 out of inventory. As an analyst, now now that you've 0:14:28.480 --> 0:14:32.400 seen this happen in the silver market, how do you 0:14:32.480 --> 0:14:34.520 think about it going forward? Because maybe okay, this is 0:14:34.520 --> 0:14:37.160 gonna die down and maybe silver in a week or 0:14:37.200 --> 0:14:39.280 two weeks we'll be back to where it was. But 0:14:39.360 --> 0:14:42.080 now that this can happen and we're aware that they 0:14:42.160 --> 0:14:45.160 sort of like flash mob buying can happen in a 0:14:45.240 --> 0:14:48.520 physical commodity. How does that make you think about sort 0:14:48.520 --> 0:14:51.360 of like volatility in the space going forward, the risk 0:14:51.400 --> 0:14:54.440 of it happening um again and sort of changing the 0:14:54.480 --> 0:14:57.040 ability for the market to get at least short term 0:14:57.080 --> 0:15:01.240 disrupted so quickly, so fast us all these markets, the 0:15:01.320 --> 0:15:05.360 volatility has started to rise substantially, and this represents a 0:15:05.440 --> 0:15:08.440 significant departure from you know, let's say two to three 0:15:08.520 --> 0:15:11.040 years ago. UM. And I think it, you know, has 0:15:11.080 --> 0:15:14.280 to do with the fact that you have these markets 0:15:14.560 --> 0:15:19.000 running at much lower inventory levels, which goes into this 0:15:19.080 --> 0:15:21.560 more structural story, you know, because you know, I think, 0:15:21.600 --> 0:15:25.400 as you you're aware, we're advocating we're entering a new supercycle. 0:15:25.720 --> 0:15:28.960 And the evidence that we're you know, in you know, 0:15:29.040 --> 0:15:32.200 this transition between a tactical bowl market and structural bowl 0:15:32.240 --> 0:15:34.760 market is that every single one of these markets, with 0:15:34.840 --> 0:15:38.160 the exception of zinc and coco, is in a deficit 0:15:38.280 --> 0:15:42.440 right now. That's a very rare dinam, which means that, um, 0:15:42.520 --> 0:15:46.560 when you have volatility of positions going in and out 0:15:46.560 --> 0:15:50.160 of a market that has tight physical fundamentals is going 0:15:50.200 --> 0:15:53.760 to manifest itself in greater volatility. You know, we like 0:15:53.840 --> 0:15:57.280 to say that the biggest shortage facing silver today is 0:15:57.640 --> 0:16:01.560 the ability to give the physical to the exchanges, whether 0:16:01.600 --> 0:16:04.240 if it's the Leemy or the COMAX. And that's the 0:16:04.280 --> 0:16:07.080 type of volatility that's being generated. Because if you have 0:16:07.160 --> 0:16:10.120 more than adequate inventory everywhere, getting into an exchange is 0:16:10.160 --> 0:16:13.480 pretty easy. When you're short, it becomes much more difficult 0:16:13.520 --> 0:16:17.960 and creates, you know, much more volatility. On that note, 0:16:18.000 --> 0:16:21.000 walk us through your structural both thesis, because I think 0:16:21.040 --> 0:16:24.640 for a lot of people, many people are going to 0:16:24.720 --> 0:16:27.160 still be thinking about and we have this big hit 0:16:27.240 --> 0:16:32.000 to economic growth. We saw oil prices collapse, and a 0:16:32.080 --> 0:16:34.400 lot of people are thinking also that we're getting the 0:16:34.480 --> 0:16:38.480 screen energy revolution, which might be bad for oil. So 0:16:38.720 --> 0:16:42.800 the notion that we're entering a long term up cycle 0:16:42.920 --> 0:16:47.440 in commodities might be counterintuitive to some what's your line 0:16:47.440 --> 0:16:52.840 of thinking here, Well, we think about oil itself, it 0:16:53.000 --> 0:16:58.680 actually benefits from the green stimulus in the very near term, 0:16:58.840 --> 0:17:03.200 long before the energy transition begins to hurt its demand. 0:17:03.240 --> 0:17:08.240 And let's say, and so when we put oil into 0:17:08.280 --> 0:17:11.399 the mix we're talking about over the next let's say, 0:17:11.480 --> 0:17:13.960 you know, three to five years, we would see that 0:17:13.960 --> 0:17:18.440 that tipping point is somewhere around four. But let's talk 0:17:18.480 --> 0:17:22.160 about what we think is creating that the structural bull market. 0:17:22.560 --> 0:17:26.800 And we like to emphasize that while the vaccine represents 0:17:26.880 --> 0:17:33.920 tactical upside, the pandemic itself creates the structural catalyst for 0:17:34.040 --> 0:17:37.840 a supercycle type of bull market. And we would use 0:17:37.960 --> 0:17:41.439 analogy more like the seventies in the two thousand's, but 0:17:41.600 --> 0:17:44.680 it is back to see a bull market along those 0:17:44.720 --> 0:17:47.680 lines of either like the nineteen seventies or two thousand's. 0:17:47.720 --> 0:17:51.119 And there's three themes that we're focused on. One is 0:17:51.320 --> 0:17:55.720 structural under investment in supply, and historically we've termed that 0:17:55.880 --> 0:17:59.160 the revenge of the old economy, meaning that the new 0:17:59.160 --> 0:18:02.399 economy has capital away from the old economy because they 0:18:02.440 --> 0:18:05.639 have much better returns starved the old economy of the 0:18:05.720 --> 0:18:08.960 building the ability to grow out the production capacity. That 0:18:09.040 --> 0:18:11.679 then creates a problem once we see a recovery and 0:18:11.720 --> 0:18:15.440 demand as we're witnessing today and why nearly every single 0:18:15.440 --> 0:18:17.800 one of these markets is in a deficit, and then 0:18:17.840 --> 0:18:20.440 we overlay E s G concerns on top of that, 0:18:20.760 --> 0:18:24.240 you know, you see a very tight supply picture going forward, 0:18:24.480 --> 0:18:27.920 particularly in oil second big theme that we're focused on 0:18:28.400 --> 0:18:31.760 is policy driven demand and we like to call that 0:18:32.200 --> 0:18:37.200 revving commodity demand r E D. And what is the 0:18:37.640 --> 0:18:43.360 r E V and for redistributional policies environmental policies as 0:18:43.400 --> 0:18:46.400 well as versatility and supply chains. And you can think 0:18:46.400 --> 0:18:51.320 about comparing this to seventies. Redigital redistributional policies are like 0:18:51.800 --> 0:18:56.480 the War on poverty in the night late sixties. In seventies, 0:18:56.680 --> 0:18:59.600 the environmental policies again like the seventies, are like the 0:18:59.600 --> 0:19:02.679 war are on acid rain where he took all the 0:19:02.720 --> 0:19:05.480 sulfur out of out of the fuels. And then the 0:19:05.720 --> 0:19:09.200 versatility and supply chains would be like the Cold War 0:19:09.280 --> 0:19:11.440 with the Soviets. This time we have a Cold War 0:19:11.840 --> 0:19:14.200 with the Chinese. And by the way, that Cold War 0:19:14.280 --> 0:19:19.200 type dynamic immediate play today. The Chinese are buying grains 0:19:19.600 --> 0:19:22.000 at a very torrid pace right now. One of the 0:19:22.080 --> 0:19:25.280 key reasons they want to create security and supply, just 0:19:25.359 --> 0:19:28.480 like the Americans and Europeans did back in the late 0:19:28.520 --> 0:19:32.520 sixties and seventies against the Cold War with the Soviets, 0:19:32.560 --> 0:19:36.040 build up these strategic stockpiles at these critical commodities. So 0:19:36.240 --> 0:19:38.040 again that's why we kind of like in the current 0:19:38.119 --> 0:19:42.240 environment more being more like the seventies is fascinating. I mean, 0:19:42.359 --> 0:19:45.879 talks us a little bit more about the under investment 0:19:45.920 --> 0:19:48.359 we've seen in commodities. I mean in the post grade 0:19:48.359 --> 0:19:52.120 financial crisis era. I think like in the immediate way 0:19:52.400 --> 0:19:55.879 twenty nine we saw this pretty big oil spike and 0:19:55.960 --> 0:19:59.680 jump in other commodities, but basically it was just all 0:19:59.760 --> 0:20:03.639 down downhill in a lot of industrial commodities, in particular 0:20:03.720 --> 0:20:07.840 for the last decade. Talk to us about what that did, 0:20:07.960 --> 0:20:12.080 that long decade long bear market in commodities did to 0:20:12.560 --> 0:20:16.600 um investment, how much under investment created and really what 0:20:16.640 --> 0:20:20.240 we're talking about when we talk about various industrial commodities 0:20:20.560 --> 0:20:24.880 being indeficit. Yeah, I think the bottom line is that 0:20:25.440 --> 0:20:30.840 the companies in these industries had very poor returns, and 0:20:31.240 --> 0:20:35.359 those poor returns um you know, basically we're you know, 0:20:35.440 --> 0:20:40.280 reached a peak or you know, they capitulated when we 0:20:40.320 --> 0:20:44.320 reached negative oil prices in April of last year. And 0:20:44.400 --> 0:20:47.679 so when we look at the willingness of investors to 0:20:47.760 --> 0:20:50.960 come into this space, you know it's gonna take a 0:20:51.080 --> 0:20:54.800 significant track record before they show any interests. And you 0:20:54.840 --> 0:20:57.119 know the reason why we termed it the revenge of 0:20:57.160 --> 0:21:01.439 the Old economy. Goes back to the dot com boom 0:21:01.640 --> 0:21:04.680 in the late nineties and early two thousand's a period 0:21:04.800 --> 0:21:08.360 in which you know, the tech sector was attracting all 0:21:08.359 --> 0:21:11.720 the capital because of you know, the much better prospects 0:21:11.720 --> 0:21:15.119 and outlook. And essentially what occurred over that time period 0:21:15.240 --> 0:21:18.679 is investors abandoned the space. That's when you created the 0:21:18.720 --> 0:21:22.280 Exxon mobils, the vps, the shells because they had to 0:21:22.400 --> 0:21:25.840 reduce costs to survive in an environment with very poor returns. 0:21:26.200 --> 0:21:28.119 I don't know if they come back this time because 0:21:28.160 --> 0:21:30.200 you have the e S G overlay, Because you got 0:21:30.200 --> 0:21:31.960 to ask yourself, even if we went to a hundred 0:21:31.960 --> 0:21:35.360 dollar barrel hall, are you interested investing in oil when 0:21:35.359 --> 0:21:38.320 you know it's only a to three year, maybe five 0:21:38.400 --> 0:21:42.680 year proposition at best. I want to go back to that, 0:21:43.040 --> 0:21:46.240 the notion that there's a sort of arms race in 0:21:46.600 --> 0:21:52.200 commodities and in securing things like food and oil. One 0:21:52.200 --> 0:21:55.119 thing I've never quite understood is I understand why you 0:21:55.119 --> 0:21:58.000 would want to build a stock pile of something like 0:21:58.080 --> 0:22:01.000 grains in the short term, but I'm trying to think 0:22:01.000 --> 0:22:02.800 how to phrase this. This is kind of a stupid question, 0:22:02.840 --> 0:22:06.320 But how long would that stockpile actually last? Like if 0:22:06.359 --> 0:22:09.680 you're buying a boatload of grains because you're worried about 0:22:10.400 --> 0:22:14.240 food security way out in the future, Like, how useful 0:22:14.400 --> 0:22:17.200 is that to you? What exactly is the strategy here? 0:22:17.280 --> 0:22:22.639 Is it about actually accumulating physical commodities in case you 0:22:22.720 --> 0:22:26.080 run out? Or is it about building relationships and securing 0:22:26.240 --> 0:22:32.000 supply lines with suppliers and countries and partners for the future. 0:22:33.920 --> 0:22:36.360 To answer that question, you just go back to biblical 0:22:36.480 --> 0:22:38.800 times and you ask where does that seven year number 0:22:38.840 --> 0:22:41.120 come from? That you hear over and over. But when 0:22:41.119 --> 0:22:43.920 we think about the strategic reserves in oil and the 0:22:44.119 --> 0:22:46.880 US has you know, six hundred seven hundred million barrels 0:22:46.880 --> 0:22:51.400 of oil that was built up during those nineteen seventies. Um, 0:22:51.400 --> 0:22:53.879 the oil lasts a lot longer, and they they recycle 0:22:53.920 --> 0:22:55.760 it in and out and they make sure that it 0:22:55.880 --> 0:22:58.280 is you know, up to par in terms of being 0:22:58.280 --> 0:23:00.960 able to create products. Um. But I think you know, 0:23:01.040 --> 0:23:04.520 going to to your your broader question here is that 0:23:04.600 --> 0:23:06.880 you know, when you look at China, there's a lot 0:23:06.880 --> 0:23:10.080 of different motivations here, and we talk about versatility and 0:23:10.119 --> 0:23:13.320 supply chains. You know, we're talking about duplicate five G 0:23:13.520 --> 0:23:17.440 networks responding to the trade war with you know, manufacturing 0:23:17.960 --> 0:23:20.920 UM supply lines. You've heard Biden talk about made in America. 0:23:21.040 --> 0:23:23.800 That's part of this dynamic that we're talking about. It means, 0:23:24.080 --> 0:23:26.520 you know, if if Biden wants to go out and 0:23:26.560 --> 0:23:31.960 promote evs that are made in America and using unionized labor, 0:23:32.000 --> 0:23:34.480 it means you need to build different supply chains in 0:23:34.520 --> 0:23:37.560 America and that's going to take time and require more commodities. 0:23:37.600 --> 0:23:41.879 So that's what we mean by this versatility and supply chains, 0:23:42.000 --> 0:23:46.240 is this need to create your own secure domestic supply 0:23:46.400 --> 0:23:49.040 chains to deal with you know, host of different issues, 0:23:49.080 --> 0:23:51.840