WEBVTT - Man Group’s Chu On Dispersion in Commodities 0:00:13.880 --> 0:00:17.040 Welcome to Inside Active, a podcast about active managers that 0:00:17.079 --> 0:00:19.959 goes beyond sound bites and headlines and looks deeper into 0:00:20.000 --> 0:00:25.159 their processes, challenges, and philosophies and security selection. I'm David cone, I, 0:00:25.239 --> 0:00:29.000 lead mutual fund and active Research at Bloomberg Intelligence. Today 0:00:29.320 --> 0:00:32.320 my co host is Brian Dherty, head of Thematic Strategy 0:00:32.320 --> 0:00:35.600 at Bloomberg Intelligence. Bri, thank you for joining me today. 0:00:36.400 --> 0:00:38.360 Thanks for having me David. This is one of my 0:00:38.400 --> 0:00:40.440 favorite things to do when it gets put on my calendar, 0:00:40.560 --> 0:00:41.680 so always a pleasure. 0:00:42.560 --> 0:00:43.879 So one of the things I wanted to talk to 0:00:43.880 --> 0:00:46.920 you about is so you have about thirty three themes 0:00:47.000 --> 0:00:50.840 and the bi Thematic Strategy data set, you know, twenty 0:00:50.880 --> 0:00:54.480 three hundred unique entities. And we've heard a lot about 0:00:54.520 --> 0:00:59.680 big tech themes this year AI Modern Defense, but I 0:00:59.760 --> 0:01:02.920 noticed your multi theme analysis calls particular at tension to 0:01:02.920 --> 0:01:06.160 the physical environment ones. Can you tell us more about that? 0:01:07.880 --> 0:01:10.720 Yeah, you've got that absolutely correct. So I've spent a 0:01:10.760 --> 0:01:13.880 lot of my twenty twenty four talking tech, which is 0:01:13.920 --> 0:01:17.360 interesting for somebody who's spent nearly twenty years in energy. 0:01:17.080 --> 0:01:20.840 But anyways, it is what it is. We do have 0:01:20.840 --> 0:01:21.520 thirty three. 0:01:21.319 --> 0:01:24.480 Themes what we have done, and the energy themes, So 0:01:24.520 --> 0:01:27.200 those physical environment themes which hold a lot of different 0:01:27.480 --> 0:01:32.600 energy themes such as hydrogen, biofuels, nuclear CCUS, decentralized energy. 0:01:33.120 --> 0:01:36.759 There's twelve themes in that category. In general, those themes 0:01:36.800 --> 0:01:38.560 haven't been at the top of the leaderboard this year. 0:01:38.600 --> 0:01:41.360 Our top of the leaderboard has been pretty dominated, especially 0:01:41.400 --> 0:01:42.920 as of laid off the last couple of weeks, with 0:01:42.959 --> 0:01:48.040 some future finance and frontier tech. But what is interesting 0:01:48.360 --> 0:01:52.440 is we have this unique cohort of thirty one global 0:01:52.680 --> 0:01:55.080 stocks that happen to be names that are in four 0:01:55.240 --> 0:01:57.280 or more BI themes. So again we've got thirty three 0:01:57.280 --> 0:02:01.320 themes over twenty three hundred Union equities. There's thirty one 0:02:01.440 --> 0:02:04.240 stocks within that data set that are in four or 0:02:04.280 --> 0:02:06.920 more BI themes, which is what we call them our 0:02:07.000 --> 0:02:10.600 high thematic breadth or high theme profile names. In those 0:02:10.639 --> 0:02:14.360 thirty one names, the ones that are physical environment names, 0:02:14.480 --> 0:02:16.760 so we're predominantly the themes that they're exposed to. Our 0:02:16.760 --> 0:02:21.400 physical environment themes have outperformed those tech names dramatically, so 0:02:21.440 --> 0:02:24.800 they've returned like ninety nine percent year to date versus 0:02:24.880 --> 0:02:27.520 the tech names have returned thirty percent. So we've got 0:02:27.560 --> 0:02:30.960 ten physical environment multi theme names. Siemens Energy top of 0:02:31.000 --> 0:02:34.240 that list. It's performance this year outstanding. But we've also 0:02:34.280 --> 0:02:40.720 got Ihi, Mitsubishi Heavy Industries, Kawasaki, Angie, Honeywell, We've got 0:02:40.720 --> 0:02:43.600 a few other interesting names in there. And as a group, 0:02:43.800 --> 0:02:46.440 those physical environment multi theme names have just been gangbusters 0:02:46.480 --> 0:02:48.720 this year when compared to these accelerating tech names, which 0:02:48.840 --> 0:02:52.200 those accelerating tech names, to be clear, include the likes 0:02:52.240 --> 0:02:56.040 of Apple, Microsoft, Navidia, So it's not like they don't 0:02:56.080 --> 0:02:58.200 they don't have a lot of you know, big big 0:02:58.240 --> 0:03:00.160 power behind them. So the fact that we're seeing that 0:03:00.200 --> 0:03:02.840 out performance has really been tremendous for us, and again 0:03:02.919 --> 0:03:04.880 brings us to our conversation today where I know we're 0:03:04.919 --> 0:03:09.639 talking natural resources and energy focused themes, and so I'm 0:03:09.680 --> 0:03:11.120 interested to delve into that conversation. 0:03:11.800 --> 0:03:14.200 Oh it's great, So I think, actually this is a 0:03:14.200 --> 0:03:17.760 great time to welcome our guest, Albert Chu to the podcast. 0:03:18.080 --> 0:03:21.480 Al is a portfolio manager at Man GLG, where he 0:03:21.520 --> 0:03:25.959 focuses on natural resource strategies. He's actually the portfolio manager 0:03:26.000 --> 0:03:30.240 for the American Beacon GLG natural Resources ETF, which as 0:03:30.280 --> 0:03:33.680 a ticker MG and R actually a fun we really 0:03:33.760 --> 0:03:36.000 wanted to talk about today. So Al, thank you for 0:03:36.080 --> 0:03:36.600 joining us. 0:03:36.920 --> 0:03:38.480 Hi David, thank you for having me. 0:03:39.520 --> 0:03:41.800 So i'd actually like to begin by hearing how you 0:03:41.840 --> 0:03:43.720 got your start in the investment industry. 0:03:44.280 --> 0:03:47.720 Oh, that was a long, long time ago. It started 0:03:47.720 --> 0:03:51.640 from a book I was doing my getting into my 0:03:51.680 --> 0:03:54.440 B school internship and I like to read a lot, 0:03:54.480 --> 0:03:56.080 and one of the books I was reading that time 0:03:56.800 --> 0:04:01.560 was Hot Commodities Jim Rogers, the the SOLS partner at Quantum, 0:04:01.840 --> 0:04:04.600 and just the book really resonated with me, talking about 0:04:04.600 --> 0:04:08.520 the undersupply and the development that's the needs that's coming out. 0:04:08.600 --> 0:04:11.720 And then I remember at my internship, you know, they 0:04:11.760 --> 0:04:14.840 put a list of different sectors and analysts looking for 0:04:16.600 --> 0:04:18.800 summer associate and at the bottom of the list was 0:04:18.920 --> 0:04:20.839 Energy and when I signed up for it, they said 0:04:21.000 --> 0:04:23.359 it's yours because nobody asked for it. I think Oil 0:04:23.480 --> 0:04:26.320 was treating about thirty dollars at that point, and they 0:04:26.320 --> 0:04:28.080 were like, yeah, out of an interim class of one hundred, 0:04:28.440 --> 0:04:30.520 you're the only guy that asked for Energy. And you know, 0:04:30.720 --> 0:04:34.240 right time, the right place. So I asked for you know, 0:04:34.360 --> 0:04:37.280 the Energy group. And then so I've always been investing 0:04:37.320 --> 0:04:41.799 in commodities ever since then. So it's a book that's great. 0:04:42.640 --> 0:04:45.280 So I actually we wanted to talk specifically about m 0:04:45.440 --> 0:04:47.800 m g R. You know, as I mentioned the American 0:04:47.800 --> 0:04:51.559 Beacon GLG Natural Resources ETF. Can you walk us through 0:04:51.600 --> 0:04:54.560 the investment process for that fund? You know how securities 0:04:54.560 --> 0:04:55.200 are selected? 0:04:56.400 --> 0:04:59.600 Sure? When when we when I think about the investment 0:04:59.600 --> 0:05:02.440 process in the commodities world, I always like to take 0:05:02.440 --> 0:05:06.560 a step back, right, let's tick the sector. And you 0:05:06.600 --> 0:05:08.680 can do this from a numerous perspective, right from the 0:05:08.720 --> 0:05:11.919 equities or from the futures. Take the index right, and 0:05:11.960 --> 0:05:14.000 you take it one year back, five year back, ten 0:05:14.080 --> 0:05:16.720 year back, good market, bad market, It really doesn't matter. 0:05:16.800 --> 0:05:19.279 It still holds true. And you chop it right in 0:05:19.360 --> 0:05:22.800 half the top fifty percent tileent return versus the bottom 0:05:22.839 --> 0:05:27.039 fifty percent tile in return. That that dispersion on average 0:05:27.200 --> 0:05:31.039 is between forty five to fifty percent. Now, I think 0:05:31.080 --> 0:05:34.200 the average. You know, a common investor tends to think 0:05:34.200 --> 0:05:36.839 of commodities as one. It's oh, it's a beta play 0:05:37.200 --> 0:05:39.720 and it's a correlation of one. But that is just 0:05:39.760 --> 0:05:42.000 not the case. Right if you look at even just 0:05:42.040 --> 0:05:46.160 this year alone, right, to the biggest commodities, oil versus gold. Right, 0:05:46.200 --> 0:05:48.359 goal is up between twenty five to thirty percent this 0:05:48.480 --> 0:05:52.560 year oil again, integrald to to our everyday use an 0:05:52.560 --> 0:05:56.520 economy is down this year, right and every year. You 0:05:56.520 --> 0:05:58.440 can pretty much go through and look at that, you know, 0:05:58.560 --> 0:06:01.640 natural gas the last several years versus iron ore. There's 0:06:01.839 --> 0:06:04.560 huge dispersion now within and this is actually one of 0:06:04.560 --> 0:06:08.960 the widest dispersion within all the SMP sectors right now. 0:06:09.000 --> 0:06:12.160 Within this dispersion, this the wideness of this really implies 0:06:12.160 --> 0:06:14.520 that there's a lot of alpha to be generated, right, 0:06:14.520 --> 0:06:16.800 that it doesn't all go up and down together. And 0:06:16.839 --> 0:06:19.000 it's not just a beta play right there. They're very 0:06:19.000 --> 0:06:23.239 atosyncratic supplying demand drivers, and and that that simple premise 0:06:23.400 --> 0:06:26.560 drives the entire investment process. Right, is that this is 0:06:26.600 --> 0:06:30.120 not a passive product. We don't you know, track and 0:06:30.240 --> 0:06:32.159 have to maintain a certain amount of Well, this is 0:06:32.160 --> 0:06:34.800 what the index does, so we have to do this. 0:06:34.800 --> 0:06:37.560 This is purely a look, we think this commodity is 0:06:37.600 --> 0:06:40.000 going to go into a bull cycle. This one is 0:06:40.040 --> 0:06:43.160 not you want to be positioned here versus somewhere else. 0:06:43.640 --> 0:06:45.119 It doesn't we don't have to be in every single 0:06:45.160 --> 0:06:49.000 commodity or every commodity companies. Now this is also equity products, 0:06:49.000 --> 0:06:51.719 so it's the commodity companies. And I think there's actually 0:06:51.720 --> 0:06:54.880 a natural advantages to to having the equities as well. 0:06:55.000 --> 0:06:57.360 But that's what drives it, right, It's a research first, 0:06:57.839 --> 0:07:00.480 back by you know, demand group. We have a lot 0:07:00.520 --> 0:07:03.480 of data and technology that we apply, but it's a 0:07:03.560 --> 0:07:06.760 human process, right, very fundamentally driven picking the best companies 0:07:06.839 --> 0:07:08.440 within the best commodity school. 0:07:09.600 --> 0:07:10.960 Now, I kind of want to go back to you know, 0:07:11.000 --> 0:07:13.720 you mentioned dispersion. It's something I've looked at quite a bit, 0:07:14.080 --> 0:07:18.080 especially with stocks. What exactly are you measuring? You looking 0:07:18.120 --> 0:07:20.240 at you know, are you focusing on a commodity and 0:07:20.280 --> 0:07:22.840 looking at the top in bottom and then you know, 0:07:22.880 --> 0:07:23.760 looking at the difference. 0:07:24.480 --> 0:07:27.920 Oh that's a good question. No, it's actually if if 0:07:27.960 --> 0:07:31.320 the the think of the research process as having three pillars, right, 0:07:31.360 --> 0:07:34.120 the first pillar the three levers of alpha, right, the 0:07:34.480 --> 0:07:39.080 first real real, the filter or the subset is understanding 0:07:39.120 --> 0:07:41.760 the commodity. Right where are we in the commodity cycle? 0:07:41.840 --> 0:07:44.360 If the commodity is about to go enter into a 0:07:44.400 --> 0:07:47.800 prolonged downturn, I'm not picking the best stock in that sector. 0:07:47.840 --> 0:07:50.360 I'm saying, if something is going to if the commodity 0:07:50.400 --> 0:07:52.600 is going to underperform, we're going to go down. Do 0:07:52.720 --> 0:07:54.480 I need to be in any of these names or 0:07:54.800 --> 0:07:57.280 in my investors right? My answer is no, because I'm 0:07:57.280 --> 0:07:59.880 an active product, I don't need to be in any 0:08:00.080 --> 0:08:01.760 bit right versus a Oh way, if I think of 0:08:01.800 --> 0:08:04.800 commodity is going up, do I need to be well 0:08:04.840 --> 0:08:06.800 I only buy one or two names. No, in that case, 0:08:06.840 --> 0:08:09.360 I want to buy as big of a basket. You 0:08:09.360 --> 0:08:13.200 know that that within my broader populiar construction will allow. Right, 0:08:13.680 --> 0:08:16.240 there's a there's always a bull and bear market gone somewhere. 0:08:16.240 --> 0:08:18.640 So you want to be very selective when what you're buying. 0:08:18.880 --> 0:08:20.960 You know, the old real estate saying, oh, you want 0:08:20.960 --> 0:08:23.360 to buy the worst house in a good you know block. 0:08:23.920 --> 0:08:25.760 The way I look at it is, if it's a 0:08:25.760 --> 0:08:27.840 bad block, you don't want to buy any house you know, 0:08:27.920 --> 0:08:29.400 not a good house, not a bad house. And if 0:08:29.440 --> 0:08:31.360 it's a good block, you want to buy all the 0:08:31.400 --> 0:08:34.000 houses right, good bad. You want to get as many 0:08:34.920 --> 0:08:37.520 exposure to that block. So that that's the general framework. 0:08:40.160 --> 0:08:44.080 I think music to my ears. So I was in 0:08:44.120 --> 0:08:46.800 commodities for a very long time, natural gas specifically, So 0:08:46.800 --> 0:08:48.520 I always appreciate when someone gives a shout out to 0:08:48.600 --> 0:08:52.800 natural gas, which you did, as as you're looking at this, 0:08:52.840 --> 0:08:57.079 and I'm really interested in US commodity's viewpoint being really 0:08:57.120 --> 0:09:00.560 at the core foundational aspect of your investment process. When 0:09:01.000 --> 0:09:04.480 I'm looking at your current you know, holdings, how what 0:09:04.559 --> 0:09:07.439 is your current commodities view and how has that translated 0:09:07.440 --> 0:09:10.000 into the current equities that you've got in there, or 0:09:10.040 --> 0:09:12.520 how are you feeling generally about the commodity's environment right now? 0:09:13.400 --> 0:09:16.760 Right, I think it's it's actually very very attractive. Right 0:09:16.960 --> 0:09:18.800 if we look at if we take a step back 0:09:19.960 --> 0:09:22.600 and we look at what's going on in the world. 0:09:23.080 --> 0:09:26.040 You know, the US, the biggest economy. We just had 0:09:26.040 --> 0:09:28.960 our first rate cut. You know, regardless of the duration 0:09:29.120 --> 0:09:31.959 or magnitude, we are in a rate cut cycle. If 0:09:31.960 --> 0:09:34.199 you look at the past, you know, last twenty years, 0:09:34.200 --> 0:09:37.360 the past three rate cut cycles. Thirty six months after 0:09:37.400 --> 0:09:42.160 the first rate cut, Commodities, copper, gold, a lot of 0:09:42.160 --> 0:09:45.040 the basic inputs tend to do very very well. There's 0:09:45.040 --> 0:09:48.280 actually never really been a sustained period where you have 0:09:48.320 --> 0:09:50.520 a rate cut cycle and then two three years later, 0:09:51.120 --> 0:09:55.000 you know, the commodities didn't participate, and then you've thrown 0:09:55.040 --> 0:09:57.959 to that a red sweep on the government where it's 0:09:58.080 --> 0:10:02.240 very pro growth. You're setting up fairly strongly on that. 0:10:02.800 --> 0:10:04.640 But then if you look at the second biggest economy 0:10:04.679 --> 0:10:07.600 in the world China, now they went through a four 0:10:07.760 --> 0:10:11.960 year downturn right first with COVID, trade wars and a 0:10:12.000 --> 0:10:15.520 property bus there, but again from the from the top 0:10:15.559 --> 0:10:20.079 down economy over the last month or two coordinated fiscal 0:10:20.120 --> 0:10:22.680 monetary stimulus. Right now, there are a lot of secular 0:10:22.720 --> 0:10:27.480 issues in China, right population, demographics, bomb, credit, real estate. 0:10:27.600 --> 0:10:30.080 But again, when the government is stimulating or when they 0:10:30.120 --> 0:10:34.760 have pulled that switch to stimulate, it's a pretty powerful tailwind. 0:10:34.880 --> 0:10:39.520 And even in Europe, you know, hopefully the war and 0:10:40.160 --> 0:10:43.080 physical altercations like subsiding, and you know, if you're start 0:10:43.080 --> 0:10:45.959 thinking about twenty twenty five and twenty six, they will 0:10:45.960 --> 0:10:48.800 start getting a wave of LNG so power will get 0:10:48.880 --> 0:10:52.600 cheaper for Europe as well. So the three big economies 0:10:52.600 --> 0:10:54.360 in the world over the next several years are actually 0:10:54.400 --> 0:10:56.679 getting a lot of tailwind. You know, with the markets 0:10:56.679 --> 0:11:00.320 that basically all time highs, something is being mispriced and 0:11:00.360 --> 0:11:02.680 This isn't a value comment or a growth comment, right, 0:11:02.920 --> 0:11:05.560 It is just that you know, the markets is baking in. Oh, 0:11:05.640 --> 0:11:10.360 things are pretty okay, yet they're also baking in Well, 0:11:10.400 --> 0:11:14.200 we're going to have a recovery in global economy, but 0:11:14.320 --> 0:11:16.920 not in commodities, and honestly, that's just not gonna be 0:11:16.920 --> 0:11:19.400 the case. Right. A lot of times people forget that 0:11:19.440 --> 0:11:23.040 you can't really have economic recoveries without a restopping cycle, 0:11:23.280 --> 0:11:25.760 and that's what we've been seeing. We look at manufacturing 0:11:25.800 --> 0:11:31.079 PMI obviously dropped very, very sharply in twenty twenty, had 0:11:31.080 --> 0:11:33.880 a nice rally in twenty twenty one, but global manufacturing 0:11:33.920 --> 0:11:37.360 PMI has been coming down pretty much every quarter since 0:11:37.400 --> 0:11:42.000 twenty twenty one. Every CEO out there have been anticipating 0:11:42.040 --> 0:11:44.800 while there's a shutdown in China, there's going there's a 0:11:44.800 --> 0:11:48.560 great high cycle. Europe is still at war. You don't 0:11:48.600 --> 0:11:51.400 want to be overly investing in in manufacturing in the 0:11:51.440 --> 0:11:53.839 hard stuff, so we've been de stopping. And that's the 0:11:53.920 --> 0:11:57.640 interesting thing is that for the past two three years, CEOs, 0:11:58.040 --> 0:12:01.960 despite your corporate spreads bring very health, the corporate profits 0:12:02.160 --> 0:12:04.560 and morgins being very strong, is that they have been 0:12:05.160 --> 0:12:09.160 recycling the money back into dividends and buybacks and not rebuilding, 0:12:09.280 --> 0:12:12.080 not restalking. But again, is that if we started looking 0:12:12.080 --> 0:12:15.480 in twenty twenty five a rate cut cycle and a 0:12:15.679 --> 0:12:20.640 coordinated stimulus environment in China. Is that it's in my 0:12:20.800 --> 0:12:24.280 mind at the likelihood of a global restalking cycle is 0:12:24.320 --> 0:12:28.280 fairly high or being severely underestimated. In that case, a 0:12:28.320 --> 0:12:30.559 lot of the things in my sector, the stuff if 0:12:30.559 --> 0:12:34.679 you if you, if you call it, it's understated how 0:12:34.720 --> 0:12:35.559 much stuff we will need. 0:12:35.760 --> 0:12:39.480 So and so you guys look at natural resources and 0:12:39.559 --> 0:12:45.760 natural resources related equities, are they're currently so in that 0:12:45.840 --> 0:12:51.719 I'm assuming obviously traditional energy in their metals, mining, the 0:12:51.800 --> 0:12:55.880 usual suspects, possibly even some new energy. Can you walk 0:12:55.920 --> 0:12:58.480 us through maybe some of those sub industries that you 0:12:58.559 --> 0:13:01.480 guys are particularly focus on, or even sub industries that 0:13:01.520 --> 0:13:05.200 you're veering away from right now at this moment with 0:13:05.280 --> 0:13:07.200 this general view that you do think that there's going 0:13:07.240 --> 0:13:10.400 to be a broad uplift and demand across the board 0:13:10.480 --> 0:13:11.679 for natural resources. 0:13:12.000 --> 0:13:15.320 Absolutely, and I think that's really important to highlight too, 0:13:15.400 --> 0:13:19.080 right that things don't participate with the correlation of one 0:13:19.440 --> 0:13:23.120 even if there's a strong macro trend. You know, particular 0:13:23.160 --> 0:13:26.440 subsectors or areas that we're very you know, bullish on. 0:13:26.840 --> 0:13:29.160 You know, we continue to like copper. Copper is a 0:13:29.320 --> 0:13:33.240 unique right, It's a very cyclical metal, meaning you know, 0:13:33.280 --> 0:13:38.120 it does well in economic upturns and poorly in downturns. 0:13:38.240 --> 0:13:41.559 But there's also a very strong structural issue to the 0:13:41.920 --> 0:13:45.120 demands of it, right in terms of hyper scalers, in 0:13:45.200 --> 0:13:49.400 terms of energy transition, you just cannot electrify without copper. 0:13:50.400 --> 0:13:52.520 If you look at the supply response, you know, copper 0:13:52.559 --> 0:13:54.800 minds are not shell wells, right, you can't bring it 0:13:54.800 --> 0:13:57.959 on in thirty days. Oftentimes it takes decade decade and 0:13:58.000 --> 0:14:00.800 a half to bring on these megaminds. So we know 0:14:00.920 --> 0:14:04.480 that you know, supply is going to get increasingly difficult 0:14:04.559 --> 0:14:06.840 or you need higher and higher prices to bring forth 0:14:07.120 --> 0:14:10.360 the volumes that we need for one a basic economic 0:14:10.640 --> 0:14:14.680 inflection and manufacturing PMI, And two it's just renewables, renewables 0:14:14.679 --> 0:14:19.480 and power. Right. If we think about holistically, power is energy, right, 0:14:19.640 --> 0:14:23.480 Energy is which is oil or coal, natural gas is electricity, 0:14:23.680 --> 0:14:26.360 it's it's power, it is renewables. So we like to 0:14:26.400 --> 0:14:29.160 think holistically through that whole value and supply chain so 0:14:29.200 --> 0:14:33.160 that's one commodity that we still really like. Another one 0:14:33.200 --> 0:14:36.600 that we get basic chemicals the tip of the spirit. Right, 0:14:36.760 --> 0:14:40.640 you really cannot go into manufacturing restock cycle without the 0:14:40.640 --> 0:14:44.920 basic inputs simple things container boards. Right, If you go 0:14:44.960 --> 0:14:48.240 into a manufacturing cycle, you cannot ship it without container boards. 0:14:48.240 --> 0:14:51.280 It's it's actually one of the more obscure commodities that 0:14:51.440 --> 0:14:55.080 really does well and in an economic upturn, we also 0:14:55.200 --> 0:14:58.160 like really like gold and silver still. It's one of 0:14:58.200 --> 0:15:01.520 those things where I think there's been break consolidation with 0:15:01.520 --> 0:15:03.520 with a stronger dollar. But if we look at a 0:15:03.520 --> 0:15:07.160 lot of the longer term trends, central banks trying to 0:15:07.200 --> 0:15:11.400 diversify that divers fly away from US dollar. Then you 0:15:11.440 --> 0:15:15.200 have geopolitical tensions and just escalated government spending. These are 0:15:15.240 --> 0:15:20.240 not reversing any time school anytime soon. Political fragmentation, I 0:15:20.280 --> 0:15:23.040 think it's a mega trend that's going to be with 0:15:23.120 --> 0:15:26.760 us for decades to come. So I think physical and 0:15:27.360 --> 0:15:30.600 paper gold and silver is very attractive, continue to be 0:15:30.680 --> 0:15:33.360 very attractive. And then one of the points we previously 0:15:33.360 --> 0:15:35.680 touched on is that it might take a look at 0:15:35.680 --> 0:15:39.760 the next several years things that potentially will be in 0:15:39.800 --> 0:15:42.680 a shorter or tighter supply will be powered, particularly in 0:15:42.720 --> 0:15:45.720 the US, so we have we're invested in that theme 0:15:45.760 --> 0:15:47.880 as well. One of the names you mentioned earlier is 0:15:47.920 --> 0:15:52.120 one of our larger holdings. It's across the board, right, equipment, 0:15:52.400 --> 0:15:57.040 the grid, battery storage, these are all themes that it's 0:15:57.040 --> 0:15:59.040 going to be very integral. It's going to be if 0:15:59.040 --> 0:16:01.920 we look back at twenty years from now, the energy 0:16:01.920 --> 0:16:04.480 picture is going to look very different from the past 0:16:04.480 --> 0:16:06.280 twenty years. The next twenty years is going to look 0:16:06.360 --> 0:16:08.800 very different. So where we're invested in those Some of 0:16:08.800 --> 0:16:11.840 the areas where you know, probably a little bit more 0:16:11.880 --> 0:16:16.040 cauti or you know, a little bit more wary, will 0:16:16.120 --> 0:16:20.120 be something like agriculture. Agriculture demand wise, of course, you 0:16:20.120 --> 0:16:22.880 know we don't really eat less. Demand is fine, it 0:16:22.960 --> 0:16:25.720 really is. Just the yields have been incredibly strong for 0:16:25.760 --> 0:16:28.880 the last several years, right, Planting conditions have been great. 0:16:29.920 --> 0:16:32.480 You know Russia there was there was actually not that 0:16:32.560 --> 0:16:36.280 much physical disruptions. So we're looking at very very healthy yields, 0:16:36.960 --> 0:16:41.480 you know, with all the soft commodities, and then you know, 0:16:41.680 --> 0:16:45.760 energy defining it more on the on the oil side, right, 0:16:46.280 --> 0:16:49.480 probably a little bit more cautient there Again, demand is 0:16:49.760 --> 0:16:53.120 is fine, but you know in certain countries we are 0:16:53.160 --> 0:16:56.240 starting to see at the tip of the demand certainly 0:16:56.360 --> 0:17:00.000 sees some substitution, meaning in terms of ev and China 0:17:00.400 --> 0:17:03.440 or compress natural gas, they are starting to take away 0:17:03.440 --> 0:17:05.040 a little bit of market share. So you're starting to 0:17:05.080 --> 0:17:08.560 see that that transition is happening in certain regions faster 0:17:08.640 --> 0:17:14.160 than others. But on on that side, mainly it's the supply, 0:17:14.560 --> 0:17:18.200 right if we look at how much capacity OPEC really 0:17:18.280 --> 0:17:20.719 is holding back on the market right now, and these 0:17:20.720 --> 0:17:23.320 are this is not capacity that they really need to develop. 0:17:23.440 --> 0:17:27.200 It's there ready. And then you think about just the 0:17:27.240 --> 0:17:30.320 logistical de bottlenecking in the US and the premium basin 0:17:30.760 --> 0:17:34.359 it's been happening. There's actually not really a shortage of oil. 0:17:34.800 --> 0:17:37.800 I think a lot of oil bowls will point it. Well, 0:17:37.880 --> 0:17:40.640 look at how low inventory is, and I think that's 0:17:40.640 --> 0:17:43.199 just the function of if the market is perceived to 0:17:43.200 --> 0:17:45.320 be that well supplied, you don't need to carry a 0:17:45.320 --> 0:17:47.680 lot of inventory, right, So I think it's a false signal. 0:17:48.480 --> 0:17:51.080 But that's something that again I don't belong in the 0:17:51.119 --> 0:17:53.679 camp where I think oil demand or oil is going 0:17:53.760 --> 0:17:56.800 to fall off the cliff and we've completely transitioned to 0:17:56.920 --> 0:18:01.040 a renewable economy. We're going to need oil for years 0:18:01.040 --> 0:18:02.679 and years to come. It's going to be inteval. But 0:18:02.760 --> 0:18:05.800 right now the balance looks like we have enough. 0:18:06.760 --> 0:18:08.960 You mentioned a couple of things that I can't help 0:18:09.000 --> 0:18:14.280 up myself. Help myself, but pounce on there because specifically 0:18:14.320 --> 0:18:17.520 your conversation around oil and then you mentioned shale a. 0:18:17.560 --> 0:18:18.840 Little earlier, and. 0:18:20.440 --> 0:18:22.320 That was just such a huge disruption to the supply 0:18:22.440 --> 0:18:26.440 dynamics of both natural gas and oil. As you mentioned obviously, 0:18:26.440 --> 0:18:29.160 so much of it being in the US. When you 0:18:29.200 --> 0:18:33.240 look at and you flagged power generation as being a 0:18:33.240 --> 0:18:36.040 core theme that you're looking at over the near terms, 0:18:36.119 --> 0:18:39.080 you continued growth and need for power generation. Do you 0:18:39.280 --> 0:18:45.520 see any of these natural resources related exposures really ripe 0:18:45.600 --> 0:18:49.080 for that same type of disruption that happened what shale, 0:18:49.640 --> 0:18:53.159 what cracking that shale technology technology did for oil and 0:18:53.240 --> 0:18:56.560 natural gas. Do you see anything that you feel is 0:18:56.560 --> 0:19:00.399 at the precipice over the next five years that that 0:19:00.480 --> 0:19:03.960 could get cracked and then we're in a different regime 0:19:04.040 --> 0:19:06.320 with respect to some of these natural resources. 0:19:06.720 --> 0:19:11.160 That's a great question. Yeah, I mean, I'm not one 0:19:11.160 --> 0:19:15.360 of the Malthusians where we're running out of commodities and technology. 0:19:15.880 --> 0:19:17.320 You know, I believe in technology. 0:19:17.400 --> 0:19:19.560 I believe in technology too. It's amazing what it's done 0:19:19.600 --> 0:19:20.439 for us in the post. 0:19:21.920 --> 0:19:26.600 But the punch line for technology is price right. Technology 0:19:26.640 --> 0:19:30.520 doesn't get developed without price even. Lets you say something 0:19:31.080 --> 0:19:34.600 like copper that we mentioned earlier, Now there are competing 0:19:34.600 --> 0:19:37.920 technologies for copper, right, you can actually get production from 0:19:38.280 --> 0:19:43.000 lower grades. Our biggest copper resource is actually our trash pile. Right, 0:19:43.280 --> 0:19:46.920 Because unlike energy, every kind of copper, every producer, every 0:19:46.920 --> 0:19:50.080 problem with copper produce is theoretically still somewhere on Earth. 0:19:50.240 --> 0:19:54.119 It's not a consumable right, once we figured out the 0:19:54.160 --> 0:19:58.080 circular economy for it, theoretically we have enough copper that 0:19:58.119 --> 0:20:01.720 will last whatever economic position or energy transition that we 0:20:01.720 --> 0:20:06.280 can think of. But again, you need price right, price calves, 0:20:06.920 --> 0:20:10.639 you know, basically all cycles. And the fortunate and fortunate 0:20:10.680 --> 0:20:13.199 answer is that it's not a four dollars a pound, right, 0:20:13.240 --> 0:20:16.480 A lot of these technology you really need higher recycling 0:20:16.880 --> 0:20:20.680 is actually very uh it's it's a costly thing to do, right. 0:20:20.680 --> 0:20:23.800 It's hard to recycle profitably at four dollars, So you 0:20:23.880 --> 0:20:26.359 need materially higher price. So and that that's a lot 0:20:26.400 --> 0:20:29.040 of different things too, right, you know things that we 0:20:29.200 --> 0:20:31.240 were looking at that may be at the precipice of 0:20:31.280 --> 0:20:34.840 new technology. Lithium is a perfect example. Right. One of 0:20:34.840 --> 0:20:37.399 the funny things about lithium is that you know you 0:20:37.560 --> 0:20:40.800 need cheat lithium. Right, If you build a giga factory 0:20:40.920 --> 0:20:44.040 and you can't source lithium or it's too high, like 0:20:44.040 --> 0:20:47.240 like a several years ago where oh you couldn't get cobalt, well, 0:20:47.280 --> 0:20:50.240 that will derail the whole demand profile of it. Right. 0:20:50.800 --> 0:20:53.720 So there, I think you will actually get look for 0:20:53.840 --> 0:20:58.720 more supply and more technology, different forms of extraction, different 0:20:58.760 --> 0:21:03.119 resources that would actually bring down the supply curve so 0:21:03.160 --> 0:21:06.280 that the more you need something and then the higher 0:21:06.359 --> 0:21:09.639 price that the price spikes is actually you typically the 0:21:10.560 --> 0:21:12.640 precipice will bringing on new technology. 0:21:12.720 --> 0:21:17.080 Right, somebody's gonna arbit right, Yeah, somebody's gonna figure it. 0:21:17.160 --> 0:21:19.040 I mean if we saw it with shale. 0:21:19.160 --> 0:21:21.359 I mean people forget this, but back in two thousand 0:21:21.359 --> 0:21:23.920 and five, two thousand and six natural gas prices, we're 0:21:23.960 --> 0:21:26.760 running fourteen dollars perm BTU, right, that's and so with 0:21:26.800 --> 0:21:28.960 those types of prices, they could drive into the technology 0:21:29.000 --> 0:21:31.439 to crack that shale code, and then that's what drove it. 0:21:31.920 --> 0:21:34.800 And I look at things like daily right, we know 0:21:34.880 --> 0:21:37.240 Exxon's now you know, picked up a company around direct 0:21:37.280 --> 0:21:41.879 litheum extraction. I look at what they're trying to do 0:21:42.000 --> 0:21:45.000 around nuclear. I'm quite interested if anybody can crack to 0:21:45.040 --> 0:21:48.800 you a thermal. I think there's just as you say, 0:21:48.840 --> 0:21:54.160 there's just as history has proven to us, innovation can 0:21:54.240 --> 0:21:56.919 lead to some very significant disruption when it comes to 0:21:57.240 --> 0:22:01.560