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Speaker 1: Welcome the trillions. I'm Joel Webber and I'm Eric Valcunas. Eric. Uh,

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Speaker 1: the world is in a very different place than the

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Speaker 1: last time we had trillions, and we felt like we

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Speaker 1: needed to bring everyone up to speed on on sort

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Speaker 1: of the big macro implications of this war in Ukraine

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Speaker 1: and the role of commodities and what what's happening in

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Speaker 1: the commodities market, because there's a lot of turmoil and

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Speaker 1: and uh, commodities are basically part of the thing that

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Speaker 1: everybody's watching. Yeah, you know, we planned to do this

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Speaker 1: episode really because commodities are the new shiny objects. I mean,

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Speaker 1: if you look at the commodities category, which has been

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Speaker 1: really bad for like a decade, it's now the hot spot. Really,

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Speaker 1: it's green all over no matter what commodity you pick,

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Speaker 1: pretty much. And we were going to do it because

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Speaker 1: commodities are up because of inflation fears where they were

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Speaker 1: Now you have geopolitics. So we've got two major catalysts

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Speaker 1: here that are creating potentially a really attractive category and

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Speaker 1: investors are starting to put in money. And the commodities

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Speaker 1: e t f s have grown by about fift over

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Speaker 1: the past fourteen months. In organic growth. So there's a

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Speaker 1: lot of trapdoors, a lot of um rated our products

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Speaker 1: in here places. To you know that you don't know

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Speaker 1: what you're doing, it can be tricky. So we really

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Speaker 1: need to be careful when we go over a category

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Speaker 1: like this. So to help us make sense of everything,

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Speaker 1: Mike mccloan commodity strategist with Bloomberg Intelligence, is gonna help

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Speaker 1: us understand the field, this time on trying in the

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Speaker 1: boom in commodities. Last, Mike, welcome to trillions. Thanks for

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Speaker 1: having so. Mike, before you were at Bloomberg, you actually

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Speaker 1: were in the E T F world, So let's just

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Speaker 1: start there. What what would you do before you're a

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Speaker 1: commodity strategist? But I did, I like to say it

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Speaker 1: just took me thirty years to get to Bloomberg. But

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Speaker 1: Eric and I met on a panel. I was the

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Speaker 1: head of research at et S Courtage, which is not

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Speaker 1: Wisdom Train, and I remember discussing precious medals and stuff

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Speaker 1: like that, and um so we've been it's been how long?

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Speaker 1: Has that there? About eight nine years now? It was

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Speaker 1: probably about ten years ago. Can I just explain what

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Speaker 1: Mike did on this panel? I think we were in Austin,

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Speaker 1: Texas at or Dallas in this like cool art bar.

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Speaker 1: We were using these unique venues to do presentations on

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Speaker 1: e t s and panel discussions. Anyway, Mike actually brought

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Speaker 1: like physical gold coins or silver coins and he held

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Speaker 1: them up and I was like, I told him after

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Speaker 1: him like props. I like that. That's good. I gotta

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Speaker 1: I gotta use some props in my thing too, because

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Speaker 1: these panels can be so boring, So anything that you

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Speaker 1: can do to spice them up, I like as a presenter,

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Speaker 1: and I was. That's how I first met Mike. And

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Speaker 1: then that night or later that day, I saw him

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Speaker 1: in the line at the airport waiting for bags, and

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Speaker 1: that's how we started talking, and um we met. That's

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Speaker 1: how we became friends. And man, I remember I had

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Speaker 1: a silver one of those silver dollars. If I had

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Speaker 1: just given you the equivalent, had the equivalent mont of bitcoin,

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Speaker 1: it would have been much better off. So so much

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Speaker 1: for the physical like mindys anymore. I guess they're coming

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Speaker 1: back a little. Also worth mentioning that you you cover

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Speaker 1: cryptocurrencies for bluemrinkin Intelligence, which I'm sure we'll talk about.

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Speaker 1: But Mike, Mike has gone full crypto. You know, we

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Speaker 1: talk half crypto, Mike's I think he's probably so, Mike,

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Speaker 1: let's start in a non crypto space. Let's talk about Ukraine.

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Speaker 1: UM commodities has been just on this terror there's you know,

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Speaker 1: the word supercycle was dropped many times last year. So

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Speaker 1: where where are we at in that supercycle? And sort

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Speaker 1: of bring us up to speed on on inflation and

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Speaker 1: what you're seeing in Ukraine. Well, I think the most

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Speaker 1: important thing for investors to realize here is allocating or

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Speaker 1: some partial allocations to commodities has worked really well as

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Speaker 1: a diversifier. And that's been the investors who did that

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Speaker 1: early on UM reaping the benefits at least having that

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Speaker 1: hedge says, you know, the boomer commodity in decks up

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Speaker 1: almost on the year, crew up on as of the

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Speaker 1: beginning of March, and stock market down, you NASTAC down.

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Speaker 1: They're doing what they're supposed to do. UM. But the

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Speaker 1: key thing that's happened is the market's price for a

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Speaker 1: significant amount of demand about a supply shock out of

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Speaker 1: the Russia invasion of Ukraine. And I still think it's

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Speaker 1: going to be the opposite. I think it's gonna be

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Speaker 1: more of a demand destruction event like happen in two

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Speaker 1: thousand and eight. I'll bring those parallels in there. But

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Speaker 1: one thing we need to point out is this will

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Speaker 1: be a absolute boom for North American commodity producers. Now

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Speaker 1: we can get in that later and a lot of

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Speaker 1: our our audience will be interested in some of those

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Speaker 1: producers because right now Crudels is the first time w

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Speaker 1: h I really sustained above a hundred dollars of bail.

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Speaker 1: The first time I did that was in two thousand eight,

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Speaker 1: right about this time of year. Will dig into that.

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Speaker 1: The parallels are uncanny, very scary, but we're basically almost

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Speaker 1: triple the cost of US production shale, where if producers

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Speaker 1: can head you out two to three years based on

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Speaker 1: the curve, and you can roll down that curve when

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Speaker 1: you're investing in those commodities and they can double their

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Speaker 1: cost of production in terms of a price in the screen.

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Speaker 1: It's happening in all the grains and everything. So this

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Speaker 1: is an absolute boom for those producers. It's the question

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Speaker 1: is sustainability. My fears this war will trigger a global

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Speaker 1: recession which was overdue, and the whole thing will tumble

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Speaker 1: down like two eight. Well, okay, let's that's a lot

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Speaker 1: of like in the no macro talk rate. Let's just

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Speaker 1: take a big step back and talk oil. Okay. Xcel

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Speaker 1: e is a is a popular ETF people use. I

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Speaker 1: believe Lestimer looked AT's in the past year. This wasn't

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Speaker 1: supposed to happen. I remember some people were like, oil

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Speaker 1: is over, this is a green revolution, this will never happen.

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Speaker 1: Just explain to us why oil in particular is up

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Speaker 1: so much in the past twelve months. If we're supposed

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Speaker 1: to be like over oil, well, the first of all,

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Speaker 1: the bottom line, the foundation for oil going up to

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Speaker 1: Hunter down the barrel was it went down the negative

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Speaker 1: forty back in April. That shut off a lot of production,

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Speaker 1: and from that we came out with this almost unprecedent

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Speaker 1: discipline from OPEC. Now we're returning to a demand environment

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Speaker 1: and the supply is not they're OPEC discipline. But if

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Speaker 1: the lessons of oil is a good example, the higher

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Speaker 1: price cure should kick in and we should go back

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Speaker 1: to where we were before. So it's point out right

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Speaker 1: now the price of oil is about fifty below the peak,

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Speaker 1: maybe below the peak in two thousand and eight. There's

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Speaker 1: a reason for that because the US back in two

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Speaker 1: thousand eight was a net importer, one of the largest

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Speaker 1: in the world, and we had a financial we had

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Speaker 1: a real estate crisis. Now the world's largest import is

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Speaker 1: China and they're having a real estate crisis. But the

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Speaker 1: key thing about oil was it's on the back of

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Speaker 1: that major demand shock. Now we're getting supply to kick in,

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Speaker 1: and the rule in commandities I'll leave you with this

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Speaker 1: is a higher price cure should kick in right now.

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Speaker 1: We have the war and there's fears of how that

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Speaker 1: will happen, and we'll have a cut off of rush

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Speaker 1: and supply, but Russia's supply is probably gonna goes directly

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Speaker 1: to China and then I don't think there'll be a

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Speaker 1: major disruption supply in the planet. But key thing to

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Speaker 1: think about what's happening right now is this is a

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Speaker 1: major shock to inflations, major shock to the FED for consumers,

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Speaker 1: and it's basically repeated what it did in two thousand eight.

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Speaker 1: So I'm worried that this is going to revert lower.

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Speaker 1: And that's what Karel has been doing since the peak

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Speaker 1: in two thousand eight. I'll end with this three times

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Speaker 1: since two thousand has dropped, So that's what investors have

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Speaker 1: to be worried about, and that would be more of

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Speaker 1: a lower tide for everything. Okay, you mentioned the North

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Speaker 1: American producers, which is an interesting component here because OPEC

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Speaker 1: seems like it's gonna probably just do its own thing,

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Speaker 1: maintain status quo. But what could happen over here in

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Speaker 1: North America now that there's this that that opportunity, that

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Speaker 1: margin that you know, if you're a shale producer, you're

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Speaker 1: looking at hundred dollar oil that you could spool up

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Speaker 1: real quick and start pumping again. I mentioned I focus

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Speaker 1: on North America, Joel, because that North America's supply has

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Speaker 1: been major paradigm pressure shift in crude oil since the

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Speaker 1: peak in two thousand and eight. Back then, North America

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Speaker 1: was in that import of about ten million barrels of

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Speaker 1: liquid fuels a day as of this year, Department of

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Speaker 1: Energy Estiment, So we'll probably be North America will probably

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Speaker 1: have a surplus about four of production of liquid fuels

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Speaker 1: versus consumption. Now I say liquid fuels because I'm from

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Speaker 1: a farm background. In this country, towel percent of our

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Speaker 1: unletted gas comes from ethanol, and that bio fuel kick

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Speaker 1: self is kicking in so UM and I have to

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Speaker 1: include Canada UM. But that's that's spend the paradise m

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Speaker 1: this pressured oil. That's what's changed from just a decade ago.

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Speaker 1: And what does that mean for the future. That supply

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Speaker 1: is not gone forever, it's just coming back, it's revisiting,

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Speaker 1: it's resetting. The key thing is that peak has been

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Speaker 1: in consumption. I just remember being in the business line

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Speaker 1: met eric All. It was all about the peak crude

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Speaker 1: oil supply and it turned out to be Creek Keep

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Speaker 1: peak consumption in North America. So US total liquid fuel

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Speaker 1: consumption the US peaked around twenty four in barrels in

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Speaker 1: two thousand eighteen. Maybe we get to twenty three million

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Speaker 1: barrels a day. But the major, the most significant returning

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Speaker 1: ever in the history of automotive manufacturers, is towards EVS.

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Speaker 1: I own an e V and that's has probably peaked

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Speaker 1: forever and it's gonna head lower. And also versus GDP,

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Speaker 1: it's not it's insignificant. Now. The demand side is on China.

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Speaker 1: But what's China facing major property crisis like you US

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Speaker 1: had had. Now if the world has some recession, all

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Speaker 1: that demand pulled for China, and of course it's gonna

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Speaker 1: be a problem. Of course, this effect of China of

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Speaker 1: the automobile sales last year where vs. First time? Ever,

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Speaker 1: where's that going well? I I would add that to

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Speaker 1: make evs you need fossil fuels. I mean, there's a

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Speaker 1: lot of fossil fuel behind the scenes of clean energy.

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Speaker 1: But let's move to oil. You mentioned something in your

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Speaker 1: first answer, which was the curve, And just to deconstruct this,

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Speaker 1: I have two categories of commodity ets. Those that are

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Speaker 1: physically backed like gold, where it really does track the

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Speaker 1: price very well, but then ones that you can't store,

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Speaker 1: like oil, natural gas, corn. They are different than the

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Speaker 1: price because they own futures and they have to constantly

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Speaker 1: roll them from one month to the next as the

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Speaker 1: one becomes closer to expiry because no one wants to

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Speaker 1: get oil delivered to their house. So can you explain

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Speaker 1: to me, if we have USO or an oil et

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Speaker 1: F like that, what the annual roll costs look like

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Speaker 1: right now versus what it looked like before, And what

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Speaker 1: should investors be looking for when it comes to those

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Speaker 1: roll costs or is it just worth it? So the

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Speaker 1: key thing there, Eric is it's it's probably questions does

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Speaker 1: it get much better for commodity and energy investors right now?

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Speaker 1: Because of backwardation. What backwardation means you have to roll

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Speaker 1: that future and every time you roll it periodically roll

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Speaker 1: to a higher to a lower price. The front end

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Speaker 1: this bid. The back isn't Why is the front end bid?

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Speaker 1: Because typically what happens in you but a short term

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Speaker 1: issue with the UM excess demand and lack of slacks supply,

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Speaker 1: and then it's always expected to where can say it

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Speaker 1: does that it's a higher price cure. The question is

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Speaker 1: how much better is it yet? So right now crewe

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Speaker 1: went in backgardation on a one year basis. I always

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Speaker 1: look at the annual most of the futures positions roll

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Speaker 1: each contract. That depends on how they work. But you

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Speaker 1: meant there's that's the key thing I want to point.

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Speaker 1: You mentioned natural gas. You've got to point a natural gas.

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Speaker 1: It's the world's worst commodity investment history and mankind probably

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Speaker 1: because if you look at the price right now, it's

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Speaker 1: four to five dollars at the same price as twenty

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Speaker 1: years ago, yet's the most expensive to store and always

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Speaker 1: cost a fortune. UM and it's the key thing to

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Speaker 1: remember about investing commodities. When you invest in commodities, sometimes

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Speaker 1: it's better to be more tactical. And if you're thinking

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Speaker 1: longer term, bye, hold stick with the metals gold. You

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Speaker 1: mentioned precious metals because it will hold the physical you

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Speaker 1: don't have the role as much. But the way I

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Speaker 1: look at nowadays, you cannot be invested in any commands

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Speaker 1: most noted goal without having some Bitcoin in that space

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Speaker 1: because it's the fact that bitcoin is taking flows from

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Speaker 1: gold and investment portfolio. So looking forward to what it's

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Speaker 1: what's the actual roll yields? It really is dependent hipally.

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Speaker 1: It costs on average five to seven percent annualized to

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Speaker 1: hold crude oil in a normal contango environment. Right now

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Speaker 1: you're probably making that in positive um positive returns in

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Speaker 1: addition to this spot price. That's just the role. Okay,

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Speaker 1: So we just went over oil, a little bit of

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Speaker 1: natural gas. I would put all of those as big

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Speaker 1: chunks of what's called broad commodity E T F S

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Speaker 1: H and the biggest one on the market right now

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Speaker 1: that's taking in the most flows and it's up this year,

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Speaker 1: which is one of the best performers of the year's

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Speaker 1: p DBC So this is going to hold a whole

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Speaker 1: bunch of future commodity futures. You talked about tactical and

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Speaker 1: I know that's what you do. You write for people

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Speaker 1: who are trading, But what about a long term investor.

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Speaker 1: Is this the kind of fund that is better to

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Speaker 1: hold long term or should you never hold anything that

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Speaker 1: holds commodity futures long term? Well, the lessons of commodities

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Speaker 1: is more the latter. Unfortunately, just look at performance p

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Speaker 1: dbc um from two thousand fifteen is you know, it

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Speaker 1: is around twenty four or so right now it's sixteen.

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Speaker 1: The problem is because there's a negative role in commodity.

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Speaker 1: It's not like equities. You can buy and put them

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Speaker 1: away and they're donny. You're you're in coupons, you use

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Speaker 1: that buybacks. You have to worry about in this type

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Speaker 1: of product. There's always have to rule that futures and

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Speaker 1: the rule commodities is normal contangle. You're always in the

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Speaker 1: long term half gonna have to pay some form of

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Speaker 1: cost of storage. Natural gas is the most expensive. His

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Speaker 1: historic commodity goal is the cheapest the store, and bitcoin

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Speaker 1: is actually the cheapest now, So that's why I wrote

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Speaker 1: that in there, So that's gonna come out through the

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Speaker 1: future's role. Now there's periods when you have like now,

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Speaker 1: you get some great performance um, and it's just a

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Speaker 1: question of how long that lasts. But the bottom line

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Speaker 1: is always remember is the cure for higher prices and

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Speaker 1: commodities is higher prices. So why is the price of

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Speaker 1: crudal right now? The same price is two thousand and

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Speaker 1: eight wheat the same prices, two thousand and eight corn,

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Speaker 1: the same price, and then let's looking even even um copper,

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Speaker 1: it's the same price as two thousand and eleven. That's

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Speaker 1: a problem. It has been a problem. You mentioned the

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Speaker 1: performance the last ten years, but looking forward, when prices

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Speaker 1: go up, I mentioned there's so much profits in the

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Speaker 1: space that supply will come back. That's the difference withholding

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Speaker 1: equities or commodity based equities, which I've understand a lot

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Speaker 1: of institution investors like to focus on if they want

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Speaker 1: the commodity exposure, because you don't have that always working

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Speaker 1: against that contangle work in the long term working against you.

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Speaker 1: So you you mentioned some specific areas there, the wet,

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Speaker 1: the copper, corn, What other et F do you watch

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Speaker 1: and and from you know, from a an investors standpoint,

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Speaker 1: if we're back to a certain level and we have

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Speaker 1: a potential for for this to be an area where

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Speaker 1: we could see increased flows. Which which ETFs are you watching? Uh?

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Speaker 1: Usually watched the man. I don't watch commodity t F

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Speaker 1: particularly much anymore. Having been done, been there, done that.

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Speaker 1: I managed many of um an SMP because I know

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Speaker 1: what happens with those over time. They're melting ice cubes.

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Speaker 1: It's just the fact that comminded except from the metal.

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Speaker 1: It's the key ones. I watched our g l D

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Speaker 1: and GBTC, and Eric knows which that is, because I

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Speaker 1: think what's going to happen is GBTC will convert to

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Speaker 1: a ETS. It's gonna whip take out that discount, and

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Speaker 1: it probably end up being one of the best ways

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Speaker 1: to get exposure the bitcoin, which is becoming the global

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Speaker 1: digital reserve asset and going the world going that way. Okay, Mike, woa, Okay,

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Speaker 1: So you just went over a lot quickly. I just

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Speaker 1: want to can we just put bitcoin aside for a minute.

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Speaker 1: We're gonna we'll get there when we When we look

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Speaker 1: at at gold in particular, just it seems as though

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Speaker 1: I guess we can bring bitcoin rebeck in g BTC

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Speaker 1: is a is a trust which doesn't have new share creations,

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Speaker 1: so it's trading in a discount. That's a that's a

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Speaker 1: really unique trade that people are looking at. Let's let's

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Speaker 1: put that aside. Let's look at golden bitcoin. It seems

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Speaker 1: as though gold is a better store of value right now.

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Speaker 1: It doesn't move around as much bitcoin. It seems to

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Speaker 1: be trading like a high beta tech stock. So what

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Speaker 1: isn't the bid on gold right now make make more

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Speaker 1: sense if you're worried about inflation and the world, you know,

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Speaker 1: having geopolitical situations. It just seems like gold is actually

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Speaker 1: showing why. It's more uh true zero correl correlation. It's

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Speaker 1: a more better diversifier slash hedge, whereas bitcoin is really

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Speaker 1: more like a shiny object. I have to push back

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Speaker 1: on that a little bit. Gold has been a horrible

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Speaker 1: performer last couple of years, despite the highest inflation in

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Speaker 1: forty years, and bitcoin has done very well. Serium has

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Speaker 1: done a lot better. So I look at it this way.

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Speaker 1: I can't speak about gold anymore without bitcoin in the

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Speaker 1: same bucket. Because the world is going digital and bitcoins

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Speaker 1: the digital reserve asset, and I see it and sense

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Speaker 1: it every day that the old guard that held and

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Speaker 1: allocated the gold, I'll know they have to have some

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Speaker 1: Bitcoin in that bucket. The key thing about goal is

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Speaker 1: I fully expect it's going to perform a lot better

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Speaker 1: in a deflation environment UM, and it has. And that

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Speaker 1: is a good indication for that would be when the

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Speaker 1: long bond yields starts dropping, which I expect UM long

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Speaker 1: bond yield right now it's peaked last year two point

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Speaker 1: five percent and now it's like two point one. That's

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Speaker 1: a recessionary trade. And gold had some major competition competition

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Speaker 1: for a stock market last three years in a row

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Speaker 1: of stock markets up SMP five average. Who needs goal

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Speaker 1: in that environment? That to me is what should be changing.

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Speaker 1: But the key thing fact is Eric and that's why

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Speaker 1: what I mentioned earlier E T S. I watch gotta

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Speaker 1: watch something that tracks bitcoin um because those two belong together.

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Speaker 1: And I say gold is naked without bitcoin in the

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Speaker 1: same bucket. That's just the facts of where things are

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Speaker 1: going and have been going in the last few years.

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Speaker 1: So now that Ukraine and this war is underway, a

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Speaker 1: lot of interest in what bitcoin will do what's your tick.

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Speaker 1: I think it's showing divergent strength versus stock market. Certainly

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Speaker 1: is Bitcoin is down a few percent, but it has

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Speaker 1: it basically trades that three to four x volatily, meaning

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Speaker 1: the risk two D sixty day valta is that much higher.

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Speaker 1: So Bitcoin at this stage versus the stock market should

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Speaker 1: be done a lot more. So. What I think has

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Speaker 1: happened is Bitcoin is transition from a risk on asset

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Speaker 1: to a risk off asset. And what's happened in this

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Speaker 1: war might have just set that tone, kicked the inflection

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Speaker 1: point and bend the trigger point. People in Ukraine and

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Speaker 1: Russia who can't get a penny from a t m

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Speaker 1: s have have access to crypto dollars via their phones

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Speaker 1: and cryptocurrencies and bitcoin is the biggest one. So to me,

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Speaker 1: this is the transition. And the key fact is ask

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Speaker 1: a millennial about gold. What do they say, Yeah, sorry,

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Speaker 1: I'm going from bitcoin. The world is going that way,

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Speaker 1: and I look at it, it it is why take the

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Speaker 1: risk of not being allocated to one of the best

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Speaker 1: performing assets in the world. In the world is going digital,

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Speaker 1: And like I said, I'm bullish gold. I think at

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Speaker 1: some point what's gonna happen is golds is gonna pop

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Speaker 1: above two thousand dollars and ounce and stay there. But

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Speaker 1: I fully expect bitcoint about performing. The key thing is

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Speaker 1: how will we perform if when we get the next

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Speaker 1: down leg in the stock market, which I expect bitcoin

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Speaker 1: is still risk. Gasket will probably gravitate lower. But it's

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Speaker 1: been only very good support around thirty and I think

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Speaker 1: I'll end with this. I think it's just a matter

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Speaker 1: of time that this global digital collateral goes to under grant.

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Speaker 1: It's just a matter of time that's just based on

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Speaker 1: supplied demand and increasing adoption. Let me ask you this question,

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Speaker 1: which is something that I've been seeing debated on Twitter

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Speaker 1: over the past couple of days, and it's a really

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Speaker 1: good one, which is this idea of crypto trying to

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Speaker 1: have it both ways like and this question really strikes

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Speaker 1: at the core of that. Should crypto exchanges comply and

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Speaker 1: do what the US government wanted to do in terms

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Speaker 1: of freezing Russian accounts or should it say, no, Biden administration,

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Speaker 1: that's not what we are. We are defy And that's

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Speaker 1: the whole point is that we're not run by the governments.

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Speaker 1: What should they do? And this is this is this

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Speaker 1: is a war, and in war, the government can make

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Speaker 1: them do it, and they should be smart enough to say, Okay,

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Speaker 1: we're gonna do help the cause here because we have

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Speaker 1: a very oppressive dictator um taking over and and taking

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Speaker 1: over a free country. That's got to stop right away

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Speaker 1: or it won't stop. And so any other financial institution

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Speaker 1: has to do. Why shouldn't crypto exchanges to be different? Also,

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Speaker 1: licensed will be revoked. That's just the fact of war.

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Speaker 1: Get used to it, and get used to pay taxes

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Speaker 1: when you make money. It's just that's life. The thing is,

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Speaker 1: this is a revolution in digital assets. Now anybody in

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Speaker 1: those they can run their own nodes. You don't have

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Speaker 1: to go through an exchange to do things um, and

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Speaker 1: they can figure it out away from these exchanges. But

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Speaker 1: when you're have k y C and a m L

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Speaker 1: rules and to be licensed in the U S, you

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Speaker 1: gotta do what the government tells since the fact. But

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Speaker 1: that's what's gonna happen this year. I fully expect we're

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Speaker 1: gonna have more clarified regulation from the US eventually. I know,

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Speaker 1: Eric is your space side. To me, it's just a

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Speaker 1: matter of time we get properly. UM tracking physical ETPs

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Speaker 1: attract an index of cryptos um just catching up to

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Speaker 1: Europe and Canada. You know what's happening. Funds are leaving

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Speaker 1: the world, and but bitcoin is becoming global digital reserve asset,

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Speaker 1: and it's war is defining that. But the exchanges have

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Speaker 1: to comply to what's happening the world. I expect a

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Speaker 1: year from now we're gonna see Russia completely isolated on

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Speaker 1: a global economic stage. And if we don't do that,

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Speaker 1: we are risking this tyranny spreading. We have to. So

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Speaker 1: it's just like, yes, she's investing when you're when you

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Speaker 1: when your grandmother in Ohio who used the former teacher

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Speaker 1: finds out that some of her pension fund money is

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Speaker 1: invested in Russia, there's gonna be an uproar. It's got

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Speaker 1: to be complete. Pull the plug. Yeah, I agree, Bitcoin

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Speaker 1: is here to stay, cryptos here to stay. I just

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Speaker 1: think there's a lot of you know, the performance and

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Speaker 1: the use cases are are definitely gonna be debatable for

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Speaker 1: a while in my opinion. But let's cook. Let's just

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Speaker 1: take a big step back and just talk to me

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Speaker 1: about I just told at the beginning of the UM

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Speaker 1: podcast we talked about commodity e T s up a

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Speaker 1: good amount over the past year as as because inflation

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Speaker 1: fears are here, is now a good time to add

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Speaker 1: to that? Uh? And we're you know, what, which, what

430
00:22:00,119 --> 00:22:04,840
Speaker 1: practically should people do with a portfolio in terms of commodities? Uh?

431
00:22:04,880 --> 00:22:06,840
Speaker 1: You know, should they use like a broad commodity and

432
00:22:06,840 --> 00:22:09,520
Speaker 1: then add it with a little G l D and crypto?

433
00:22:09,640 --> 00:22:12,000
Speaker 1: And I know we can't give investment advice, but what

434
00:22:12,240 --> 00:22:15,000
Speaker 1: generally should people think about in terms of how to

435
00:22:15,040 --> 00:22:18,640
Speaker 1: put this into a portfolio. I think think about commodities

436
00:22:18,760 --> 00:22:20,720
Speaker 1: is a hedge. It's worked great as a hedge. But

437
00:22:20,760 --> 00:22:23,399
Speaker 1: if you want to just be overweight or underweight, the

438
00:22:23,560 --> 00:22:25,720
Speaker 1: rule of commodities in most markets you should be buying

439
00:22:25,720 --> 00:22:27,840
Speaker 1: when they're crying, someone when they're yelling and the market

440
00:22:27,960 --> 00:22:31,000
Speaker 1: is extremely high levels and don't ever underestimate the higher

441
00:22:31,040 --> 00:22:33,480
Speaker 1: price cure. So I fully expect Rudell can easily drop

442
00:22:33,880 --> 00:22:38,280
Speaker 1: fifties six seventy this year. UM. And that's just what

443
00:22:38,359 --> 00:22:40,720
Speaker 1: it's done three times since two thousand and eight, So

444
00:22:40,880 --> 00:22:43,439
Speaker 1: be prepared for that. And I fully expect if you

445
00:22:43,680 --> 00:22:46,000
Speaker 1: are worried about inflation, which is what you should have

446
00:22:46,000 --> 00:22:47,560
Speaker 1: been worried about a year ago. I mean, it's just

447
00:22:47,720 --> 00:22:49,480
Speaker 1: it's this is not the time to worry about inflation.

448
00:22:49,520 --> 00:22:52,360
Speaker 1: It is time to worry about the base effect UM

449
00:22:52,440 --> 00:22:56,240
Speaker 1: and FED tightening and most assets going back down UM,

450
00:22:56,280 --> 00:22:58,400
Speaker 1: which has always happened, and it's gonna happen, I think,

451
00:22:58,480 --> 00:23:03,080
Speaker 1: particularly because we have a risk of this recession UM.

452
00:23:03,080 --> 00:23:06,159
Speaker 1: But that's the key thing now. And overweighting commodities here,

453
00:23:06,200 --> 00:23:07,960
Speaker 1: I just learned this lesson. Been in the business for

454
00:23:07,960 --> 00:23:10,120
Speaker 1: a long time. You just never want to get two

455
00:23:10,119 --> 00:23:12,920
Speaker 1: bullish commodities when they when producers can make so much

456
00:23:12,960 --> 00:23:15,720
Speaker 1: money at such good levels. And you know, that's the

457
00:23:15,720 --> 00:23:17,760
Speaker 1: old days when the US was a net importer of

458
00:23:17,840 --> 00:23:20,080
Speaker 1: liquid fuels and now that you as as a net exporter.

459
00:23:20,160 --> 00:23:23,800
Speaker 1: And this is UM and the world's changed. And and

460
00:23:24,000 --> 00:23:27,000
Speaker 1: I view commodities as naked if there's not some digital

461
00:23:27,000 --> 00:23:30,200
Speaker 1: assets in that space, because that's what's changing. The adoption

462
00:23:30,200 --> 00:23:32,800
Speaker 1: of bitcoining the theorem is happening rapidly. And I'll leave

463
00:23:32,840 --> 00:23:35,520
Speaker 1: you with this. The most widely traded cryptos and the

464
00:23:35,600 --> 00:23:40,159
Speaker 1: planet are digital crypto dollars. People call them stable coins,

465
00:23:40,200 --> 00:23:42,880
Speaker 1: but the really crypto dollars because the vast majority track

466
00:23:42,960 --> 00:23:45,520
Speaker 1: the dollar. They're all based on stereum tokens. It's just

467
00:23:45,560 --> 00:23:48,600
Speaker 1: a better way to do business. Um, just like you

468
00:23:48,640 --> 00:23:51,280
Speaker 1: didn't learn an ets, it's just a better way to invest.

469
00:23:51,400 --> 00:23:54,080
Speaker 1: Crypto dollars a better way to do business and um

470
00:23:54,119 --> 00:23:58,159
Speaker 1: instant settlements four seven trading costs nothing. You're an interest.

471
00:23:58,200 --> 00:23:59,840
Speaker 1: What more do you need to know? And the essential

472
00:23:59,880 --> 00:24:01,960
Speaker 1: I you don't need a bank in between. Um, So

473
00:24:02,000 --> 00:24:04,560
Speaker 1: that's gonna be regulated. But they're based on the storium tokens.

474
00:24:04,560 --> 00:24:06,640
Speaker 1: That's part of when the sterium is doing its revolutionaries

475
00:24:06,680 --> 00:24:09,080
Speaker 1: in the space. And then there's bitcoint the digital version

476
00:24:09,080 --> 00:24:19,199
Speaker 1: of goal in the world going digital. You mentioned, uh,

477
00:24:19,280 --> 00:24:21,960
Speaker 1: the potential for recession a couple of times. How do

478
00:24:22,000 --> 00:24:24,560
Speaker 1: you see that playing out? And is the commodity market

479
00:24:24,600 --> 00:24:28,200
Speaker 1: and does that provide indicators for what may transpire? Oh?

480
00:24:28,240 --> 00:24:32,360
Speaker 1: Sure right now. Spiking energy, the most severe energy crisis

481
00:24:32,440 --> 00:24:35,160
Speaker 1: in Europe in my lifetime, is a very good sign

482
00:24:35,240 --> 00:24:37,480
Speaker 1: of what will happen to consumer spending. It's going to

483
00:24:37,600 --> 00:24:41,840
Speaker 1: get crushed. I mean, just simple facts of inflation. Um.

484
00:24:41,880 --> 00:24:46,800
Speaker 1: And this is not profound, this is almost exactly what

485
00:24:46,880 --> 00:24:48,320
Speaker 1: happened two thousand and eight. But it was not. It

486
00:24:48,400 --> 00:24:51,359
Speaker 1: was It's gonna be worse. I think this time UM,

487
00:24:51,400 --> 00:24:54,040
Speaker 1: because it's global, it's being centered in Europe and China

488
00:24:54,080 --> 00:24:56,600
Speaker 1: and US should come out very well. So spiking energy

489
00:24:56,640 --> 00:24:58,399
Speaker 1: is really bad. So let's look at the fact that

490
00:24:58,440 --> 00:25:02,000
Speaker 1: the SMP five is the trolls drop fift this year,

491
00:25:02,080 --> 00:25:06,680
Speaker 1: yet the Fed funds are still priced for six tightenings

492
00:25:06,840 --> 00:25:08,800
Speaker 1: pointings in the next year and in the next year.

493
00:25:08,840 --> 00:25:10,959
Speaker 1: I used the one year measure. The last time we

494
00:25:11,000 --> 00:25:14,040
Speaker 1: had correction in the stock market was two thousand eighteen.

495
00:25:14,520 --> 00:25:17,359
Speaker 1: In September two th eighteen, markets price for four hikes

496
00:25:18,160 --> 00:25:20,000
Speaker 1: high titans in the next year. By the time we

497
00:25:20,040 --> 00:25:23,359
Speaker 1: got December, they're they're talking about easy. We're still priced

498
00:25:23,359 --> 00:25:27,119
Speaker 1: for hikes. So the headwinds are increasing for asset revisions.

499
00:25:27,160 --> 00:25:29,520
Speaker 1: We have this war, which I think is a significant

500
00:25:29,520 --> 00:25:35,159
Speaker 1: trigger trigger for UM negative consumer sentiment. And and I'll

501
00:25:35,280 --> 00:25:38,639
Speaker 1: end on this. At the beginning of the year, versus

502
00:25:38,640 --> 00:25:42,720
Speaker 1: their sixty month moving average, the SMP five, Bloomberg Comandity

503
00:25:42,720 --> 00:25:45,560
Speaker 1: in next were both about fifty above those levels. That's

504
00:25:45,560 --> 00:25:47,640
Speaker 1: never happened in the last six years where they're both

505
00:25:47,680 --> 00:25:50,960
Speaker 1: that stretched. So simple mean reversion is what I'm worried,

506
00:25:50,960 --> 00:25:54,280
Speaker 1: and now we have pretty significant triggers for that. Alright,

507
00:25:54,320 --> 00:25:56,919
Speaker 1: stuff to watch, you know, Mike. One et F we

508
00:25:56,920 --> 00:26:00,320
Speaker 1: haven't talked about is wheat w A t you crane

509
00:26:00,359 --> 00:26:04,680
Speaker 1: being such a big producer of wheat, obviously the war

510
00:26:04,760 --> 00:26:06,480
Speaker 1: is going to jeopardize that production. What do you think

511
00:26:06,920 --> 00:26:09,840
Speaker 1: would happen to that ETF? By low cell hi the

512
00:26:09,880 --> 00:26:13,440
Speaker 1: higher price cure, there's gonna be massive supply coming on

513
00:26:13,640 --> 00:26:17,280
Speaker 1: in the US wheat tracks. The US wheat future has

514
00:26:17,320 --> 00:26:20,920
Speaker 1: to roll and contango. Historically, whea it's expensive to store um.

515
00:26:20,960 --> 00:26:23,720
Speaker 1: If you're gonna invest in anything commodities in that space,

516
00:26:23,760 --> 00:26:25,879
Speaker 1: look at soybeans. You know it was virtually it's one

517
00:26:25,920 --> 00:26:30,440
Speaker 1: of the best roll yields of all commodities UM soy

518
00:26:30,480 --> 00:26:34,520
Speaker 1: and um corn across you maybe six seven percent the

519
00:26:34,600 --> 00:26:37,639
Speaker 1: year costs just to hold it. And wheat is great.

520
00:26:37,720 --> 00:26:39,400
Speaker 1: But the time to buy wheat was two years ago.

521
00:26:39,440 --> 00:26:41,119
Speaker 1: And if you know, if you've been long, you're supposed

522
00:26:41,119 --> 00:26:43,480
Speaker 1: to be lightning up. I would not suggest overwaiting here.

523
00:26:43,840 --> 00:26:45,240
Speaker 1: And this is the problem. You have to be careful

524
00:26:45,280 --> 00:26:47,480
Speaker 1: about people chasing markets and that's the last thing you

525
00:26:47,520 --> 00:26:48,960
Speaker 1: ever want to do in commodities. If you miss it,

526
00:26:48,960 --> 00:26:51,679
Speaker 1: you miss it um And if you want to get

527
00:26:51,720 --> 00:26:54,280
Speaker 1: in that space, look at soybeans because they're not gonna

528
00:26:54,280 --> 00:26:58,280
Speaker 1: cost you historically, they're easy to store, typically don't have

529
00:26:58,320 --> 00:27:02,200
Speaker 1: that contangle to roll in we um you have cantangled

530
00:27:02,280 --> 00:27:04,520
Speaker 1: role and I typically cost you six percent annually just

531
00:27:04,560 --> 00:27:07,600
Speaker 1: to hold it. Last question for you, what is your

532
00:27:07,680 --> 00:27:15,600
Speaker 1: favorite e t F ticker? G BTC. Come on, I

533
00:27:15,640 --> 00:27:19,920
Speaker 1: was hoping to Eric, I listen, listen. This is why

534
00:27:20,080 --> 00:27:22,480
Speaker 1: I think Mike's gone full bitcoin because the old Mike,

535
00:27:23,080 --> 00:27:25,960
Speaker 1: he would have picked g L t R Glitter, which

536
00:27:26,000 --> 00:27:30,159
Speaker 1: is this cool basket of the physically backed gold, palladium, platinum,

537
00:27:30,200 --> 00:27:32,680
Speaker 1: and silver. We we we that we kind of like

538
00:27:32,760 --> 00:27:33,920
Speaker 1: this e t F on the team. We feel like

539
00:27:33,960 --> 00:27:36,920
Speaker 1: it's a kind of a cool like diversified metals e

540
00:27:37,040 --> 00:27:40,160
Speaker 1: t F that has no weird role cost in it.

541
00:27:40,520 --> 00:27:42,960
Speaker 1: And that was from Mike's old company. And but the

542
00:27:43,000 --> 00:27:45,960
Speaker 1: fact that he didn't pick it shows Mike has he's

543
00:27:45,960 --> 00:27:49,959
Speaker 1: gone Bitcoin. He's gone. I gotta give it two reasons

544
00:27:50,000 --> 00:27:53,399
Speaker 1: why that it was five years binehole accumulate, never trade

545
00:27:54,000 --> 00:27:56,560
Speaker 1: five years bine hole accumulate, never tried. I think the

546
00:27:56,640 --> 00:27:59,680
Speaker 1: upside is many exes and GBTC and glitter might be

547
00:27:59,720 --> 00:28:02,879
Speaker 1: a but to me and and your risk obviously is

548
00:28:02,920 --> 00:28:05,760
Speaker 1: appropriate and you might lose more too. But I see

549
00:28:05,760 --> 00:28:09,600
Speaker 1: the upside is, like I said, it's unlikely. Um it's

550
00:28:09,640 --> 00:28:12,520
Speaker 1: like say, many exes and and for the trends to continue.

551
00:28:12,960 --> 00:28:16,480
Speaker 1: G BTC, Yeah, I love it, I've I've exposed it

552
00:28:16,520 --> 00:28:18,919
Speaker 1: in the past. I liked it, but it's already had

553
00:28:18,920 --> 00:28:22,120
Speaker 1: a pretty good run. And I think those together paired

554
00:28:22,160 --> 00:28:25,360
Speaker 1: would be good too also. But again, when you're looking

555
00:28:25,400 --> 00:28:28,200
Speaker 1: at your portfolio, wouldn't glitter or goal g l D

556
00:28:28,400 --> 00:28:31,600
Speaker 1: be better to put in the commodities section and g

557
00:28:31,760 --> 00:28:35,840
Speaker 1: BTC or bitcoin should be you should replaced maybe some

558
00:28:35,920 --> 00:28:38,479
Speaker 1: tech stocks with that. Well, you could do that, but

559
00:28:38,720 --> 00:28:41,600
Speaker 1: we're getting that divergence now. Eric I would say theium's

560
00:28:41,640 --> 00:28:45,800
Speaker 1: more associated with tex stox, maybe a Bloomberg Galaxy crypto

561
00:28:45,840 --> 00:28:48,200
Speaker 1: index or an index and EATF. Eventually we're gonna be

562
00:28:48,200 --> 00:28:52,280
Speaker 1: talking about someday that attracts, you know, an index of cryptos.

563
00:28:52,360 --> 00:28:55,200
Speaker 1: But um bitcoin has become a global digital claddals, so

564
00:28:55,280 --> 00:28:57,320
Speaker 1: I think what's transition this year. It's already showing up

565
00:28:57,320 --> 00:29:00,240
Speaker 1: in the tape is bitcoins transition again from that risk

566
00:29:00,320 --> 00:29:03,280
Speaker 1: on to a risk off asset, and UM it's we're

567
00:29:03,320 --> 00:29:05,400
Speaker 1: seeing that with I see bids coming in below on

568
00:29:05,440 --> 00:29:07,520
Speaker 1: all dips, and it's going institutional. And here's a good

569
00:29:07,520 --> 00:29:10,000
Speaker 1: fact about it. It's still less than one percent of

570
00:29:10,400 --> 00:29:14,040
Speaker 1: most institutional portfolios. And I think most you know Fiducier

571
00:29:14,080 --> 00:29:17,120
Speaker 1: has realized there great risk is UM not being allocated

572
00:29:17,120 --> 00:29:18,720
Speaker 1: to this space. They might as well have some rather

573
00:29:18,800 --> 00:29:21,640
Speaker 1: than being able to tell their grandkids, why did you

574
00:29:21,680 --> 00:29:23,840
Speaker 1: miss the best performing acid in history versus who lose one?

575
00:29:24,600 --> 00:29:28,360
Speaker 1: You know, it's not important, and I'm sensing that everywhere. Okay, Mike,

576
00:29:28,400 --> 00:29:36,120
Speaker 1: thanks so much, Thanks for having Thanks for listening to trillions.

577
00:29:36,440 --> 00:29:38,640
Speaker 1: Until next time. You can find us on the Bloomberg Terminal,

578
00:29:38,720 --> 00:29:43,080
Speaker 1: Bloomberg dot com, Apple Podcasts, Spotify, and Wearber else you'd

579
00:29:43,120 --> 00:29:45,480
Speaker 1: like to listen. We'd love to hear from you. We're

580
00:29:45,520 --> 00:29:49,120
Speaker 1: on Twitter. I'm at Joel Webber Show. He's at Agriculturists.

581
00:29:49,480 --> 00:29:52,840
Speaker 1: This episode of Trillians was produced by Magnus Hendrickson. Francesca

582
00:29:52,880 --> 00:30:02,000
Speaker 1: Leady is the head of Bloomberg podcast fe and the

583
00:30:03,120 --> 00:30:08,360
Speaker 1: Sister Ter. The sister