WEBVTT - Oil Prices Surge, Supply Chain Outlook 0:00:02.440 --> 0:00:09.119 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:09.160 --> 0:00:13.320 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:13.360 --> 0:00:17.040 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:17.079 --> 0:00:20.320 Listen on demand wherever you get your podcasts, or watch 0:00:20.360 --> 0:00:23.000 us live on YouTube. 0:00:22.680 --> 0:00:24.919 Now Every week around this time, we also bring your 0:00:24.960 --> 0:00:28.479 research from Bloomberg and EF. It is new Energy finance 0:00:28.520 --> 0:00:30.800 and it's powered by data sets and models, and it 0:00:30.840 --> 0:00:34.640 looks at things like commodities, power, transport, industry, buildings, AG 0:00:34.760 --> 0:00:38.640 sectors and talks about how businesses and governments can finance 0:00:38.760 --> 0:00:43.000 and navigate change and as we transition to a green 0:00:43.159 --> 0:00:45.839 energy future. And so today we're going to take a 0:00:45.840 --> 0:00:50.640 look at US oil supply and basically global oil supply. 0:00:50.800 --> 0:00:53.280 Really there is a falling rig count and the question 0:00:53.360 --> 0:00:55.800 is does that mean we're going to see falling oil production? 0:00:55.840 --> 0:00:58.480 And if not why Joining us now at the Interactive 0:00:58.480 --> 0:01:02.400 Broker Studio is Tylou, global oil supply specialist over at 0:01:02.400 --> 0:01:05.760 Bloomberg BNF. So Ty walk us through sort of the 0:01:05.800 --> 0:01:08.840 picture when it comes to how many wells we have 0:01:09.120 --> 0:01:10.480 just at this stage for US. 0:01:10.959 --> 0:01:14.720 Yeah, yeah, So I think the declining recont in the 0:01:14.800 --> 0:01:16.760 US that we've seen, it's not going to have that 0:01:16.880 --> 0:01:19.520 much that bigger for an impact as it seems as 0:01:19.600 --> 0:01:22.240 much as the headline number suggests. And part of the 0:01:22.319 --> 0:01:24.760 reasons that is because like if you look at the Permian, 0:01:25.760 --> 0:01:29.039 where we have the biggest all production region in the 0:01:29.160 --> 0:01:33.080 US the world, completions is only done about four and 0:01:33.120 --> 0:01:35.959 a half percent compared to the recount which is done 0:01:35.959 --> 0:01:38.960 about fifteen percent, and so and on top of that, 0:01:39.000 --> 0:01:41.480 you have a lot of efficiency gains in the sector, 0:01:41.600 --> 0:01:43.880 so you are able to complete a lot more wells 0:01:44.120 --> 0:01:47.760 with much fewer freight crews across the industry. So I 0:01:47.760 --> 0:01:50.440 think the recon number could be a little bit misceeding 0:01:50.480 --> 0:01:51.760 if you're focusing too much on that. 0:01:52.640 --> 0:01:55.840 So I'm spres just just looking at your report here 0:01:55.880 --> 0:01:58.840 and seeing how production in the US continues to increase, 0:01:58.840 --> 0:02:00.360 but maybe at the slower rate. 0:02:01.080 --> 0:02:01.480 I don't know. 0:02:02.560 --> 0:02:05.040 I got WTI coroyal seventy seven bucks. Why don't I 0:02:05.120 --> 0:02:06.840 drill some more? I can make money. I mean, it 0:02:06.840 --> 0:02:08.760 only costs those guys for the bucks to get it 0:02:08.800 --> 0:02:09.519 out of the ground. 0:02:09.360 --> 0:02:11.160 Right, Yeah, yeah, for sure. Yeah, So when we look 0:02:11.160 --> 0:02:14.720 at brick evens, especially in the Perman it's probably around 0:02:14.720 --> 0:02:17.160 in the low to mid forties for their Miden basin, 0:02:17.639 --> 0:02:19.680 and then for the Darrow basins probably even lower than 0:02:19.720 --> 0:02:22.040 that because they produce a lot more gas. But part 0:02:22.080 --> 0:02:24.639 of the reason is because the us L patch has 0:02:24.760 --> 0:02:28.920 really pivoted and transformed itself in the past couple of years. Now, 0:02:29.000 --> 0:02:33.640 before the pandemic, all producers were very much focused on 0:02:33.720 --> 0:02:37.680 production growth. But after the pandemic, the industry has changed 0:02:37.919 --> 0:02:41.839 and now they're focusing on financial returns. Now, in order 0:02:41.880 --> 0:02:44.960 to improve the financial returns, they have to become more efficient. 0:02:45.600 --> 0:02:47.280 So in the past few years you have seen a 0:02:47.360 --> 0:02:51.480 lot of cost cutting initiatives, a lot of optimizations on 0:02:51.560 --> 0:02:55.280 logistics and supply chains, a lot of investments in infrastructures. 0:02:55.480 --> 0:02:58.000 So the entire industry has become a lot more efficient 0:02:58.320 --> 0:03:00.840 in the past couple of years. And on top of that, 0:03:01.000 --> 0:03:04.440 they have also become a lot more resident And what 0:03:04.480 --> 0:03:08.400 that means is that nowadays the USL industry can produce 0:03:08.440 --> 0:03:12.360 a lots more oil with much lower capital investments compared 0:03:12.360 --> 0:03:13.720 to like just five years ago. 0:03:14.240 --> 0:03:16.799 Also, what are the cool things that oil companies are 0:03:16.800 --> 0:03:19.920 doing to extract more oil out of rock. At the 0:03:20.000 --> 0:03:21.280 end of the day, I mean I went to a 0:03:21.320 --> 0:03:23.639 conference but a year ago and everyone was like, ooh, 0:03:23.680 --> 0:03:25.680 three mile laterals. And what that means is that you 0:03:25.680 --> 0:03:27.920 basically drill a pipe down and then you drill it 0:03:27.960 --> 0:03:32.800 across the rock basically lateral, and you fracture it. And 0:03:32.880 --> 0:03:35.720 the longer you go, in theory, the more rock you'll 0:03:35.760 --> 0:03:38.120 be able to access, and then in theory, the more 0:03:38.160 --> 0:03:41.880 oil you'll get out of that rock. Wow, is that 0:03:41.920 --> 0:03:42.360 too nerdy? 0:03:43.040 --> 0:03:43.120 No? 0:03:43.160 --> 0:03:46.840 Okay, cool, I've learned that frackening is short for fracturing. Yes, 0:03:46.880 --> 0:03:47.360 I didn't know that. 0:03:47.400 --> 0:03:51.520 Good job, we learned things here at Boomberg Intelligence. So 0:03:52.160 --> 0:03:54.280 based on that, what are the cool technologies that are 0:03:54.280 --> 0:03:56.480 coming up that's going to enable even more oil to 0:03:56.480 --> 0:03:57.200 come out of the rock? 0:03:57.720 --> 0:04:00.520 Yeah, So during these longer letters, it's definitely like a 0:04:00.560 --> 0:04:04.520 big part of these efficiency games because you're reducing a 0:04:04.520 --> 0:04:07.240 lot of the service costs when you're during longer letters, 0:04:07.440 --> 0:04:09.440 and like you said, Alex, you're making a lot more 0:04:09.480 --> 0:04:13.080 contact with the source rock, so you can pull out 0:04:13.120 --> 0:04:16.160 a lot more resources from the same well. Had some 0:04:16.240 --> 0:04:20.000 of these, like I guess, better practices would be having 0:04:20.000 --> 0:04:24.160 a lot more building out the water handling infrastructure. Some 0:04:24.240 --> 0:04:26.800 of them will be optimizing your frag designs. Some of 0:04:26.839 --> 0:04:29.440 them would be let me see what else, I'm optimizing 0:04:29.480 --> 0:04:32.520 your spacing between the wells. So a lot of these 0:04:32.560 --> 0:04:36.120 like see many small things on individually, when they act together, 0:04:36.360 --> 0:04:39.799 they can have a big impact, especially over time. For example, 0:04:39.800 --> 0:04:42.840 one of the big producers in the perman I was 0:04:42.880 --> 0:04:44.880 looking at the data and they were able to reduce 0:04:44.960 --> 0:04:48.480 them costs per the well cause per letter foot by 0:04:48.480 --> 0:04:53.120 about thirty percent between twenty yes, between twenty nineteen and 0:04:53.400 --> 0:04:56.120 twenty twenty four. So there's a huge gains in terms 0:04:56.160 --> 0:04:57.000 of percentage. 0:04:57.400 --> 0:04:59.599 All right, So I thought, if you go into like 0:05:00.360 --> 0:05:03.120 you find some shale somewhere, don't you do you? Don't 0:05:03.160 --> 0:05:06.120 you do your good wells, your easy wells first, and 0:05:06.160 --> 0:05:08.320 then shouldn't the productivity decline over time? 0:05:08.640 --> 0:05:08.839 Yeah? 0:05:08.880 --> 0:05:12.279 That's exactly pretty muchre what we've seen, like you said, 0:05:13.040 --> 0:05:15.320 in the US, the oil and gas companies. So they 0:05:15.320 --> 0:05:17.040 do is they drew their best say which first, because 0:05:17.040 --> 0:05:18.680 they want to realize that that person why you have 0:05:19.760 --> 0:05:22.760 better weals. And when we look at the data for 0:05:22.760 --> 0:05:26.480 the past five years, what we're seeing is that all 0:05:26.520 --> 0:05:29.360 production on a well level basis has been declining every 0:05:29.400 --> 0:05:31.400 year for the past three or four years, pretty much 0:05:31.440 --> 0:05:34.839 across the board. But what's interesting is that in twenty 0:05:34.880 --> 0:05:36.919 twenty four, the data that are coming in so far 0:05:37.040 --> 0:05:38.320 is they're looking different. 0:05:39.600 --> 0:05:39.840 Well. 0:05:39.880 --> 0:05:43.000 Production again, sorry i'm aill. Production on a well level 0:05:43.040 --> 0:05:45.960 basis is actually better for the weals the camera line 0:05:45.960 --> 0:05:48.720 in twenty twenty four compared to those last year. So 0:05:48.760 --> 0:05:51.599 what that means is that technology improvements could be turning 0:05:51.600 --> 0:05:54.760 back to tide. For this production declined on a well level. 0:05:54.560 --> 0:05:57.920 Basis, which is why it's so cool when you when 0:05:57.920 --> 0:06:00.920 you talk about laterals. Now we're talking about three miles. 0:06:01.040 --> 0:06:03.960 That's all lot, and a lot can go wrong in 0:06:04.080 --> 0:06:04.919 three miles. 0:06:05.240 --> 0:06:05.400 Now. 0:06:05.440 --> 0:06:07.719 Just about five years ago, the talk was like, oh, well, 0:06:07.760 --> 0:06:10.360 if you frag here, then you're gonna hurt the rock 0:06:10.440 --> 0:06:12.599 over here, and then it's gonna mess up the oil 0:06:12.640 --> 0:06:14.520 distribution and all that kind of stuff. What are the 0:06:14.560 --> 0:06:17.359 problems that are emerging the longer out we go in 0:06:17.400 --> 0:06:18.000 these rocks. 0:06:18.279 --> 0:06:20.440 I think one of the biggest risk rep factors, Like, 0:06:20.440 --> 0:06:22.960 like you said, if something goes wrong on Alex, you 0:06:23.080 --> 0:06:27.279 lose production from three mile worths worth of flattro. So 0:06:27.320 --> 0:06:30.760 that's going to be a big opportunity. Opportunity costs for you. 0:06:31.279 --> 0:06:33.320 But at the same time, if things go right, you 0:06:33.320 --> 0:06:36.400 can save potentially save a lot of money. I think 0:06:36.640 --> 0:06:39.760 not only during longer ladros. Some of these companies they're 0:06:39.800 --> 0:06:43.880 actually making U turns under the ground so they can yeah, 0:06:43.920 --> 0:06:46.280 so they can stay within the acreage and so they 0:06:46.279 --> 0:06:48.120 can make more contact with the source rock. 0:06:48.360 --> 0:06:50.360 So if you do that, do they you turn into 0:06:50.400 --> 0:06:52.240 another layer of the rock or do they you turn 0:06:52.279 --> 0:06:53.280 in the same layer. 0:06:53.320 --> 0:06:54.440 The you turn in the same layer. 0:06:54.880 --> 0:06:56.560 Oh my god, that feels like a lot can go 0:06:56.600 --> 0:06:58.960 wrong there. Yeah, well what companies are doing that? 0:07:00.040 --> 0:07:02.800 Remember method of resources in the permit is doing our 0:07:02.960 --> 0:07:05.080 U turns on the letters, and there are a couple 0:07:05.080 --> 0:07:06.719 other ones. I don't be on top of my head. 0:07:07.160 --> 0:07:09.400 Oh man, is this nerdy enough for you? 0:07:09.520 --> 0:07:10.520 Yeah, it's really cool. 0:07:10.960 --> 0:07:13.880 Well, here's my dumb question of today, never other than 0:07:13.960 --> 0:07:17.000 shale oil coming from shale? Do we still drill old 0:07:17.040 --> 0:07:18.960 fashioned rigs and produce oil that way? 0:07:19.200 --> 0:07:19.480 We do? 0:07:19.600 --> 0:07:19.840 We do? 0:07:19.920 --> 0:07:20.120 We do. 0:07:20.320 --> 0:07:23.440 We still do that quite a bit. But the but 0:07:23.480 --> 0:07:27.760 if you're talking about on shore the productivities of these wells, 0:07:27.760 --> 0:07:30.760 it is probably like ten percent or maybe twenty percent 0:07:30.920 --> 0:07:34.120 of these horizontal wells, so the impact is probably it 0:07:34.200 --> 0:07:36.360 is definitely a lot smaller than the horizontal ones. 0:07:37.400 --> 0:07:40.640 Really confused, Well, No, I'm just saying, if I'm jab 0:07:40.840 --> 0:07:44.000 Clampe and you start drilling under my property. 0:07:43.600 --> 0:07:44.880 See I doesn't get that reference. 0:07:45.320 --> 0:07:47.880 Can I like, can you do that? Can you go 0:07:47.960 --> 0:07:50.000 under my property with your what? 0:07:50.360 --> 0:07:50.560 Yeah? 0:07:50.600 --> 0:07:51.400 You can pay for it? 0:07:52.000 --> 0:07:54.560 No, But I'm just saying, can a big oil company 0:07:54.600 --> 0:07:55.760 go under my lane? 0:07:55.960 --> 0:07:56.440 You for it? 0:07:56.520 --> 0:07:59.760 They have to pay, yes, but actually also makes shale. 0:07:59.840 --> 0:08:01.840 But that's what makes shales so unique in the US 0:08:01.960 --> 0:08:04.360 is because they have to pay you. Like other areas 0:08:04.400 --> 0:08:07.640 of the world, the people don't make the money, they 0:08:07.640 --> 0:08:09.840 don't own the mineral rights, and therefore they don't have 0:08:09.880 --> 0:08:13.880 the same kind of investment in making shale developed versus you. 0:08:13.880 --> 0:08:15.640 You're like, yeah, you can have it, but you got 0:08:15.680 --> 0:08:17.520 to pay me, and then you're actually invested in it. 0:08:17.920 --> 0:08:18.600 But I digress. 0:08:18.680 --> 0:08:20.960 All right, clamp it was from Feberleyfieldville. 0:08:21.000 --> 0:08:24.600 Like still thanks a lot, Tyler. We appreciate it being 0:08:24.640 --> 0:08:27.360 at a global oil supply specialist joining us on US 0:08:27.400 --> 0:08:28.160 oil production. 0:08:32.800 --> 0:08:36.679 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:08:36.760 --> 0:08:40.280 weekdays at ten am Eastern on Applecar Play and Android 0:08:40.320 --> 0:08:43.079 Auto with the Bloomberg Business app. You can also listen 0:08:43.200 --> 0:08:46.280 live on Amazon Alexa from our flagship New York station. 0:08:46.640 --> 0:08:49.400 Just say Alexa playing Bloomberg eleven thirty. 0:08:50.320 --> 0:08:52.319 So all right, we've got that brank crude here. We've 0:08:52.320 --> 0:08:54.040 been calling it out this morning. Eight one dollars and 0:08:54.040 --> 0:08:57.440 fifty cents here up about three point one percent, So 0:08:57.480 --> 0:08:59.079 a big move. So whenever we see big moves and 0:08:59.080 --> 0:09:01.280 commodities we like, you got to get Mike mcgloan on 0:09:01.320 --> 0:09:06.080 the phone. He's a senior commodity strategist for Bloomberg Intelligence. Mike, again, 0:09:06.480 --> 0:09:07.840 like a lot of us, we woke up this morning 0:09:07.880 --> 0:09:09.640 and we had to read up and read in on 0:09:09.679 --> 0:09:12.240 what's happening in Libya. How much is the Libya situation 0:09:12.720 --> 0:09:15.160 responsible here for this move in global crude? 0:09:16.200 --> 0:09:19.600 It's much more positions. Libya exports about a million barrels 0:09:19.600 --> 0:09:22.840 a day. Their average since two thousand was less than that. 0:09:23.240 --> 0:09:25.640 If they shut off completely its way offset what what 0:09:25.880 --> 0:09:30.120 Alex meant and mentioned earlier, massive oversupply of spare capacity 0:09:30.160 --> 0:09:32.640 and OPEC and just look at the US and Canada, 0:09:32.760 --> 0:09:36.200 our excess of liquid fuels supply over demand, which is 0:09:36.280 --> 0:09:39.000 six million barrels a day I was compared to two 0:09:39.000 --> 0:09:42.679 thousand and eight was ten million deficits. So it's in significant. 0:09:42.720 --> 0:09:44.679 It's positions that matter, So I look at it as 0:09:45.160 --> 0:09:49.280 manage money net positions, futures positions, Kruda which drives at market. 0:09:50.280 --> 0:09:53.199 We're at least a week ago the most sold out 0:09:53.200 --> 0:09:55.320 in our database going back at least ten years. I mean, 0:09:55.600 --> 0:09:58.640 brank crude hardly ever gets short and it was so 0:09:58.800 --> 0:10:01.320 there's no room for anything but those positions that go 0:10:01.400 --> 0:10:04.560 up from buyers to go higher. So to me, that's 0:10:04.640 --> 0:10:06.520 much more significant. What's happening is we're just kind of 0:10:06.520 --> 0:10:09.360 normalizing the positions a little bit. And the reason they're 0:10:09.360 --> 0:10:11.320 sold out is because it's a bear market, and it's 0:10:11.320 --> 0:10:13.320 just a bear market that's reading I think, a short 0:10:13.360 --> 0:10:13.920 term bottom. 0:10:14.320 --> 0:10:17.240 Not to get too nerdy, but what about differentials? So 0:10:17.440 --> 0:10:20.360 Libya has a lot of light sweet crude, and there's 0:10:20.360 --> 0:10:22.760 also dark, and there's medium and all that stuff. They 0:10:22.760 --> 0:10:25.160 have light sweet, right, so are we going to see 0:10:25.200 --> 0:10:28.840 some differential movement in terms of Libya? Like I appreciate 0:10:28.880 --> 0:10:31.080 the fact that OPEC plus has a lot of spare capacity, 0:10:31.120 --> 0:10:32.599 et cetera. But what do you think we're going to 0:10:32.640 --> 0:10:33.040 see there? 0:10:34.040 --> 0:10:36.440 So, Alex, you know that area a lot better than 0:10:36.480 --> 0:10:39.280 I do. To me, it's more the macro and the 0:10:39.400 --> 0:10:42.280 light or heavy doesn't make much difference. I mean, one 0:10:42.280 --> 0:10:45.200 thing that's been significant is that narrowing spread between BRENT 0:10:45.360 --> 0:10:48.559 and WTI. That's one thing that's news. Brent positions are 0:10:48.600 --> 0:10:51.080 way sold out. In WTI. Pieces are normal ten percent 0:10:51.120 --> 0:10:54.199 of open interest, our net lungs and those are specs. 0:10:54.280 --> 0:10:56.800 So to me, it's much more the macro, and the macro, 0:10:56.880 --> 0:10:58.960 to me, is overwhelming, and I'll bring in an uber 0:10:59.000 --> 0:11:01.960 big macros. What's happening in China. We've seen declining demand 0:11:02.360 --> 0:11:04.520 and their bond yilds are just plunging for a reason. 0:11:05.240 --> 0:11:07.760 So if this move in, if this move and crude 0:11:07.760 --> 0:11:10.800 feels a little bit more technical, when did the fundamentals 0:11:10.840 --> 0:11:11.959 reassert themselves? 0:11:12.360 --> 0:11:13.840 Good question. I don't know. I think it's a matter 0:11:13.880 --> 0:11:16.040 of time it falls. Natural gas. Natural gas got to 0:11:16.080 --> 0:11:18.400 that low price cure a level that was first traded 0:11:18.440 --> 0:11:20.800 in nineteen ninety in futures. Now it's around two. That's 0:11:20.840 --> 0:11:23.720 just hovering there. Corn's there now. Front corn at three 0:11:23.720 --> 0:11:27.160 point sixty two is first traded in nineteen seventy three, 0:11:27.320 --> 0:11:29.760 seventy four. It's getting plowed. It's got to shut off 0:11:29.760 --> 0:11:33.440 that access supply. It's coming out. Copper's probably tilting lower. 0:11:33.520 --> 0:11:35.360 I don't know how long, and when it takes I'm 0:11:35.400 --> 0:11:37.400 surprised it's lasted this long. But one thing that's the 0:11:37.440 --> 0:11:40.559 bottom line palls the US stock market has to go up. 0:11:40.720 --> 0:11:42.640 And that's one thing we've noticed about Crudel in the 0:11:42.720 --> 0:11:45.240 last maybe ten years or so. When we have a 0:11:45.280 --> 0:11:48.080 normal correction in beta, crude all goes down a lot harder. 0:11:48.120 --> 0:11:50.320 It's just much more correlated with the stock market now, 0:11:50.400 --> 0:11:53.080 particularly what's happening in China. So I look at it 0:11:53.080 --> 0:11:55.360 as a risk as to the downside. It's a matter 0:11:55.400 --> 0:11:58.000 of time right now. We have to offset these positions. 0:11:58.000 --> 0:12:02.480 But the headlines are just overwhelming lead tilting now towards 0:12:02.800 --> 0:12:05.520 the opposite they were two years. One is recently oil's 0:12:05.559 --> 0:12:08.800 hot summer's ending, posing risks for majors in opek. Those 0:12:08.840 --> 0:12:11.600 are macro, which the big shifts, it's the big pendulum 0:12:11.679 --> 0:12:14.920 shift and commodities is unfamble for Crudell, and it's on 0:12:14.960 --> 0:12:16.200 the back of the high price cure. 0:12:16.480 --> 0:12:18.360 So when you say that the stock market has to 0:12:18.360 --> 0:12:20.000 go up. Do you mean that it just will go up, 0:12:20.120 --> 0:12:22.320 or you're saying in order for oil to catch a bit, 0:12:22.400 --> 0:12:24.000 it has to go up exactly. 0:12:24.040 --> 0:12:26.600 So prerequisite I started writing about this a few years ago, 0:12:26.640 --> 0:12:29.640 is it's the inordinate burden on commodities for stocks go 0:12:29.800 --> 0:12:32.040 up because the correlations are just going up and up 0:12:32.040 --> 0:12:35.440 and up, and at least historically they are. So though, 0:12:35.480 --> 0:12:37.480 I look at right now, if you're managing Crudell, if 0:12:37.520 --> 0:12:39.840 you have positions on Crudell, you know, okay, this is 0:12:39.880 --> 0:12:41.439 our short It's okay to be I don't want to 0:12:41.480 --> 0:12:43.360 run a positions are sold out. I can be long 0:12:43.400 --> 0:12:45.120 here a little bit, but you have to look over 0:12:45.160 --> 0:12:46.920 in your value at risk model. You have to say, okay, 0:12:46.960 --> 0:12:49.240 as long as the SMB five hundred stay stable, I'll 0:12:49.240 --> 0:12:51.800 stay stable. If you get a little ten five percent correction. 0:12:52.000 --> 0:12:54.360 Crude oil dropped twenty percent. Now it didn't done that 0:12:54.440 --> 0:12:56.760 last thing in October fifth because they were sold out. 0:12:56.960 --> 0:12:58.800 But now it's starting to normalize. So it's just the 0:12:58.800 --> 0:12:59.800 way markets work. Now. 0:13:00.640 --> 0:13:02.960 Hey, Mike kew about gold. Earlier this morning, we were 0:13:03.000 --> 0:13:05.440 speaking with Dennis Gartman, the former editor the Gartman Letter, 0:13:05.440 --> 0:13:08.439 and an a vowed gold bull for a long period 0:13:08.440 --> 0:13:11.640 of time. Here give us your gold call here, which 0:13:11.640 --> 0:13:13.480 I'm sure is gonna be very consistent with what I've 0:13:13.480 --> 0:13:14.960 known you for for these many years. 0:13:15.400 --> 0:13:17.520 I would consider Dennis a friend, and I do appreciate 0:13:17.520 --> 0:13:19.080 in the past you remember one of the few things 0:13:19.080 --> 0:13:21.439 I've been getting right, and that's gold. The problem is, 0:13:21.520 --> 0:13:23.560 and so I'm still quite bullish gold. It's the only 0:13:23.600 --> 0:13:25.960 major commodity go up. And I think the notable mention 0:13:26.040 --> 0:13:28.680 is a Bloomberg commodity index is down thirty percent since 0:13:28.679 --> 0:13:31.240 it's peaking twenty twenty two, and gold's up thirty percent 0:13:31.280 --> 0:13:33.160 over the same frame. But it's the fundamentals that are 0:13:33.160 --> 0:13:35.760 still very bullish for gold. Deepest pockets on the planet. 0:13:35.800 --> 0:13:39.280 Central banks are still buying ETFs, which events significant outflows 0:13:39.280 --> 0:13:41.320 are STI just starting to turn upward. And then you 0:13:41.440 --> 0:13:43.559 just look at the very expensive US stock market and 0:13:43.720 --> 0:13:46.880 US debt to GDP. It's just fiscal spending is off 0:13:47.280 --> 0:13:50.040 off the charts, and neither of the candidates are dressing that. 0:13:50.160 --> 0:13:52.760 So to me, gold is that trade that's looking for 0:13:52.840 --> 0:13:56.760 the normal recession to kick in. The eield curve, the 0:13:56.880 --> 0:13:59.240 US eel curve, that's disinvert at some point, just the 0:13:59.280 --> 0:14:01.880 normal cycles unemployment going up, and gold's kind of just 0:14:01.920 --> 0:14:02.840 ahead of that trade. 0:14:02.960 --> 0:14:05.000 You know, when I was covering gold back in the day, though, 0:14:05.200 --> 0:14:09.200 it was very much of a inflation goes up, you 0:14:09.240 --> 0:14:11.280 want to buy gold, it goes down, you want to 0:14:11.320 --> 0:14:13.880 sell gold. Es Central banks are buying not because of 0:14:13.920 --> 0:14:16.319 the macro, but because they have like a percentage they 0:14:16.360 --> 0:14:20.440 need to diversify, which is not necessarily based on macro 0:14:20.600 --> 0:14:23.280 headwinds or tailwinds. Is that still true. 0:14:23.880 --> 0:14:26.320 The questions out of sam Alex, the answers have changed. 0:14:26.680 --> 0:14:29.000 And in terms of any other currency, I think that 0:14:29.080 --> 0:14:32.120 was initially from Einstein coupling one time ago, but it's 0:14:32.280 --> 0:14:36.200 it's the in terms of any melting currency. Sure, goal 0:14:36.280 --> 0:14:38.920 is a great place to park your wealth, but in 0:14:39.000 --> 0:14:41.960 terms of you as dollars, it's the world's shifting now 0:14:42.080 --> 0:14:45.360 and it has a high correlation between that rising debt 0:14:45.360 --> 0:14:48.240 to GDP. I just published that tomorrow this morning. And 0:14:48.320 --> 0:14:50.800 key thing I'm concerned about is the number six forty three, 0:14:51.120 --> 0:14:53.040 six hundred and forty three, here's one for you. Is 0:14:53.080 --> 0:14:55.880 the number of bushels of corn equal to an ounce 0:14:55.880 --> 0:14:57.600 of gold. That's the highest ever that's where we are 0:14:57.680 --> 0:15:00.680 right now, So goals getting the expensive. But it's showing 0:15:00.680 --> 0:15:03.640 you what happens with the store of value global liquid 0:15:03.680 --> 0:15:08.440 assets going upward, and that's gold and elastic commodities like 0:15:08.520 --> 0:15:11.800 crudel and corn going down because humans can create more 0:15:11.800 --> 0:15:13.600 of it with less of it every day. So gold 0:15:13.600 --> 0:15:16.320 to me is running ahead of what I see happening 0:15:16.320 --> 0:15:19.840 with Ira Jersey says, a hard landing, lower US interest rates, 0:15:19.840 --> 0:15:22.560 probably falling China, and at some point a little bit 0:15:22.560 --> 0:15:24.520 of back and fill US stock market, which used to 0:15:24.560 --> 0:15:25.600 happen in bull markets. 0:15:25.880 --> 0:15:28.560 All right, here's the dumb question you get of the day, 0:15:28.600 --> 0:15:31.920 No question, how do you value a commodity? Like on 0:15:31.960 --> 0:15:33.920 a stock, I can say price to earnings ratio, on 0:15:33.960 --> 0:15:36.000 a bond, I can say relative to treasuries? 0:15:36.840 --> 0:15:37.280 Is gold? 0:15:37.320 --> 0:15:39.440 When are you say gold's expensive or gold's cheap? 0:15:40.400 --> 0:15:42.840 So gold's different from all most commodities of use stocks 0:15:42.840 --> 0:15:44.760 to use. What are the stocks versus the use? So 0:15:44.800 --> 0:15:47.360 stock's the use for all the grains and particularly crudels 0:15:47.480 --> 0:15:49.000 very high. There's a lot of stocks, there's more and 0:15:49.080 --> 0:15:51.720 more creative. What's that trend? Gold typically sticks with the 0:15:51.760 --> 0:15:54.760 more macroeconomic I like to use to me right now, 0:15:54.800 --> 0:15:57.800 it's interest rates, US interests, the trend in interest rates, 0:15:57.960 --> 0:16:01.080 debt to GDP, and much more. How is it relative 0:16:01.080 --> 0:16:02.640 to the stock market. And here's what I like to 0:16:02.720 --> 0:16:04.800 end with. One of my most enduring charts I've looked 0:16:04.800 --> 0:16:08.200 at free decades is that S and P five hundred 0:16:08.360 --> 0:16:11.400 divided by the pronouncis prices of gold. Historically, gold's just 0:16:11.520 --> 0:16:14.240 very cheap, and historically when you go to recessions that 0:16:14.320 --> 0:16:17.480 fedieses un deployment goes up. That why this parriage just 0:16:17.560 --> 0:16:20.360 kind of narrows a little bit. And that's the thing. 0:16:20.440 --> 0:16:22.760 It hasn't narrow too much because gold's catching up. And 0:16:22.800 --> 0:16:24.480 actually it is narrowing a little bit because gold on 0:16:24.520 --> 0:16:26.360 a one, two and three year basis is outperforming the 0:16:26.440 --> 0:16:28.760 S and P five hundred total return. The risk is 0:16:28.800 --> 0:16:29.760 it just catches. 0:16:29.560 --> 0:16:31.600 Up more bitcoin. 0:16:31.920 --> 0:16:37.080 How you feeling, it's the end. It's the last big 0:16:37.120 --> 0:16:39.560 trade and it's not the next big trade. So the 0:16:39.680 --> 0:16:43.080 LBT is no longer the NBT. It's Bitcoin is overdone. 0:16:43.080 --> 0:16:45.880 It's stretched. Everything that's happening in bigcoin where things we're 0:16:45.880 --> 0:16:48.480 hoping would happen, that is, it's into the mainstream. We 0:16:48.560 --> 0:16:51.120 have a former president who has embraced it because he 0:16:51.160 --> 0:16:54.120 wants to get elected. We have the ETFs and now 0:16:54.160 --> 0:16:56.520 everybody it's in the mainstream. The thing is also it's 0:16:56.520 --> 0:17:00.240 showing divergent weakness versus what it should versus beta since 0:17:00.240 --> 0:17:03.800 it made its peak in March, it's declining versus gold 0:17:03.920 --> 0:17:05.919 versus stock market. So that's the problem. I think the 0:17:05.960 --> 0:17:08.240 fastest horse in the race is telling us by showing 0:17:08.280 --> 0:17:10.960 divergent weakness is a race might be over. So I'm 0:17:11.000 --> 0:17:13.800 somewhat more defensive on bitcoin. A key thing I think 0:17:13.800 --> 0:17:16.400 to remember of bitcoin it trades three times of voltuli 0:17:16.480 --> 0:17:18.680 of gold and the SCDB five hundred. When the people 0:17:18.720 --> 0:17:20.920 tell you that, oh, when the stock mark goes down 0:17:20.960 --> 0:17:23.119 and we have a recession, bitcoin of our performance, well, 0:17:23.119 --> 0:17:25.600 it usually doesn't work that way with very high voltuli 0:17:25.640 --> 0:17:27.440 assets that are very speculative. 0:17:28.240 --> 0:17:35.080 All right, Bitcoin to cold to corn, corn to gold ratio. 0:17:35.320 --> 0:17:37.640 Oh okay, yeah, you got it. Just it's a it's 0:17:37.680 --> 0:17:39.640 a lot, Hey, Mike, we appreciate it. Thank you so much. 0:17:39.640 --> 0:17:43.600 Mike mcglohon Bloomberg Intelligence, a senior commodity strategist joining us 0:17:43.600 --> 0:17:45.320 on all the things commodity related. 0:17:46.760 --> 0:17:50.639 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:17:50.720 --> 0:17:53.359 weekdays at ten am Eastern on Apple car Play and 0:17:53.359 --> 0:17:56.439 Android Auto with the Bloomberg Business App. Listen on demand 0:17:56.480 --> 0:18:00.000 wherever you get your podcasts, or watch us live on YouTube. 0:18:01.240 --> 0:18:03.520 All right, let's go back to the trade situation here. 0:18:03.600 --> 0:18:06.320 So the latest news is that Canada is going to 0:18:06.400 --> 0:18:10.159