WEBVTT - Jeff Currie on the Crazy Surge in Metals, And Why The Supercycle Has Years to Run 0:00:02.720 --> 0:00:16.520 Bloomberg Audio Studios, Podcasts, radio News. 0:00:18.720 --> 0:00:22.280 Hello and welcome to another episode of the Odd Lots podcast. 0:00:22.320 --> 0:00:26.680 I'm Joe Wisenthal and I'm Tracy Alloway, Tracy Medals. 0:00:27.680 --> 0:00:28.000 That's it. 0:00:28.120 --> 0:00:29.880 That's that's that's it. It's the title. 0:00:30.000 --> 0:00:33.559 No, there's a lot happening in the metals space. So 0:00:33.680 --> 0:00:37.360 we have gold above five five hundred announce, which is 0:00:37.400 --> 0:00:40.280 a record. We have silver above one hundred and twenty 0:00:40.320 --> 0:00:43.559 dollars announce, also a record, and now we have copper 0:00:43.800 --> 0:00:47.600 at over fourteen four hundred dollars a ton. 0:00:47.960 --> 0:00:50.440 Yeah, so this is something that's super interesting to me, 0:00:50.440 --> 0:00:52.240 and I think it is a very important to mention, 0:00:52.440 --> 0:00:56.560 which is that copper is the ultimate industrial metal, right, 0:00:56.600 --> 0:00:59.600 and for you know, doctor Copper tells us about the 0:00:59.720 --> 0:01:02.680 common probably a little overstated its reputation by just the 0:01:02.760 --> 0:01:06.679 ultimate industrial metal. Gold is the ultimate medal with no 0:01:06.760 --> 0:01:10.200 industrial uses, right, It's primarily a store of value, a 0:01:10.319 --> 0:01:13.200 sort of a form of money that's existing SAE for 0:01:13.280 --> 0:01:15.640 thousands of years. And then silver is a little bit 0:01:15.640 --> 0:01:17.280 in the middle, more of a safe haven. But we 0:01:17.360 --> 0:01:20.200 know it has it's used in solar it's used in photography, 0:01:20.720 --> 0:01:22.560 not that that really exists anymore. But you know what 0:01:22.600 --> 0:01:24.800 I'm saying. So it's like it's interesting to see, like, 0:01:24.920 --> 0:01:26.840 why are they all flying at the exact same time. 0:01:26.959 --> 0:01:29.080 Yeah, I was going to say the exact same thing. 0:01:29.360 --> 0:01:33.919 So each of these medals historically would tell you something 0:01:34.040 --> 0:01:37.600 very specific about the state of the economy. And copper 0:01:37.640 --> 0:01:42.240 certainly would be screaming people are bullish on economic growth. Silver, 0:01:42.560 --> 0:01:46.399 you know, something kind of in the middle. And gold. 0:01:46.640 --> 0:01:51.560 Gold soaring is something that you traditionally associate with stress points, 0:01:51.600 --> 0:01:55.040 either in the financial system or the broader global economy. 0:01:55.080 --> 0:01:56.080 And yet here we are. 0:01:56.240 --> 0:01:58.880 Yeah, it's all happening in once and like you know, 0:01:59.560 --> 0:02:02.000 you know, you could say, like, oh, dollar debasement, right, 0:02:02.120 --> 0:02:04.600 and we know the dollar has been week against other currencies. 0:02:04.840 --> 0:02:07.920 It's not like inflation is measured, you know, is like 0:02:08.120 --> 0:02:11.360 raging hot. So it's not just a simple story of 0:02:11.400 --> 0:02:14.440 like the dollar becoming worthless. So the you know, the 0:02:14.520 --> 0:02:17.440 denominator whatever going up or whatever the other way around is, 0:02:17.440 --> 0:02:20.040 et cetera. There's something going on with metals. Maybe they're 0:02:20.080 --> 0:02:24.200 just the new memestocks, et cetera. But we have to 0:02:24.240 --> 0:02:24.560 dig in. 0:02:24.639 --> 0:02:26.440 Yeah, let's do it all right, Well, I have. 0:02:26.400 --> 0:02:29.880 To say we really do have the perfect guest on 0:02:30.280 --> 0:02:32.919 the perfect day. Again. We're recording this the morning of 0:02:33.000 --> 0:02:34.920 January twenty ninth. We're going to try and get it 0:02:34.919 --> 0:02:39.440 out asap. But there's headline Copper surging ten percent, unbelievable 0:02:39.680 --> 0:02:42.600 headlines We've had them on multiple times in the past. 0:02:42.720 --> 0:02:47.320 A believer in super cycles, a vindicated man in many 0:02:47.560 --> 0:02:50.680 respects with many of his calls, who's like Goldman a 0:02:50.680 --> 0:02:52.760 long time. We're going to be speaking with the one 0:02:52.800 --> 0:02:55.600 and only Jeff Curry, who is now a partner at 0:02:55.720 --> 0:02:59.919 Carlisle Nose Commodities, as well as anyone else we talked to. So, Jeff, 0:03:00.000 --> 0:03:01.760 thank you so much for coming back on the Oud 0:03:01.840 --> 0:03:02.639 Laws podcast. 0:03:02.840 --> 0:03:06.400 Great well, thank you having me. Commodities are up and 0:03:06.960 --> 0:03:09.440 back in favor. It was a rough last couple of years, 0:03:09.440 --> 0:03:10.200 to say the least. 0:03:10.320 --> 0:03:12.400 What do we should just ask? Is this going to 0:03:12.400 --> 0:03:12.840 be the peak? 0:03:13.040 --> 0:03:14.200 Is this the peak? Did we is? 0:03:14.280 --> 0:03:14.400 Uh? 0:03:15.000 --> 0:03:16.720 Yeah, that's the question? Is this the peak? 0:03:16.840 --> 0:03:19.240 You're back on? Everyone's going to ask, is this the did. 0:03:19.200 --> 0:03:21.120 Odd Laws get the peak? Because they called? They ring 0:03:21.160 --> 0:03:22.760 Jeff Curry? So let's just get this out. 0:03:22.639 --> 0:03:24.560 Of the way. By the way, I love that we're 0:03:24.600 --> 0:03:28.000 in the foothills of the Himalayas right now. So we're 0:03:28.040 --> 0:03:30.680 not even close to the real mountain peaks. 0:03:30.720 --> 0:03:33.840 Yeah really yes, Okay, So I'm going to ask the 0:03:33.840 --> 0:03:36.520 obvious question, which we alluded to in the intro, but 0:03:36.640 --> 0:03:39.920 why are all three of these things moving in the 0:03:39.960 --> 0:03:41.240 same direction all at once? 0:03:41.680 --> 0:03:45.400 When you look at the commodity complex, you take anything 0:03:45.520 --> 0:03:48.280 that has an atomic number to it, that's in the 0:03:48.280 --> 0:03:52.000 periodic table, it's going up right now. Even nicol and 0:03:52.080 --> 0:03:55.600 zinc have joined the party. If it is a molecule 0:03:55.680 --> 0:03:58.480 and it has a carbon in it, a carbon hydrogen, 0:03:58.480 --> 0:04:01.640 a CCH in it, it's been struck. So that includes 0:04:02.080 --> 0:04:06.640 hydrocarbons as well as carbon hydrates like corn wheat and 0:04:06.680 --> 0:04:10.760 so forth. So that space, the molecules have been struggling. 0:04:11.200 --> 0:04:14.880 Yet you have the things that are primarily critical minerals, 0:04:14.920 --> 0:04:17.080 things that are in the periodic table. The atomic number 0:04:17.080 --> 0:04:21.960 have all done well, and the fundamentals and copper are 0:04:22.000 --> 0:04:25.240 not that much tighter than what you have in oil. 0:04:25.960 --> 0:04:28.799 So what's going on in the metal space is hoarding 0:04:29.000 --> 0:04:33.000 given the concerns over having availability of these critical minerals, 0:04:33.440 --> 0:04:36.719 And you throw out the idea of debasement, and I 0:04:36.760 --> 0:04:41.480 want to throw in three other d's d dollarization and 0:04:41.520 --> 0:04:45.800 diversity to your debasement. So debasement, de dollarization, and diversity 0:04:46.240 --> 0:04:50.080 is what's driving all of these different metals. And when 0:04:50.120 --> 0:04:53.480 we think about the de dollarization, and that goes back 0:04:53.520 --> 0:04:57.800 to twenty twenty two, when the US and Europeans froze 0:04:57.839 --> 0:05:02.000 the central bank assets of Russia, every emerging market goes uh, oh, 0:05:02.040 --> 0:05:05.360 I don't want to be owning any dollar denominated assets 0:05:05.440 --> 0:05:09.040 because look what happens through the Russians. And as a result, 0:05:09.080 --> 0:05:11.119 they're movement as fast as they can out of dollar 0:05:11.200 --> 0:05:16.960 assets into assets that cannot be seized and precious metals 0:05:16.960 --> 0:05:19.880 and metals are part of that. And then when you 0:05:20.040 --> 0:05:22.880 have the geopolitical risk as high as they are right 0:05:22.920 --> 0:05:26.880 now on a global basis, whether it was US cutting 0:05:26.920 --> 0:05:31.720 off Venezuelan oil supply to China, India and Europe, or 0:05:31.839 --> 0:05:35.000 it was the Chinese cutting off critical mineral supply to 0:05:35.080 --> 0:05:38.440 the US and its allies, or it's Russia cutting off 0:05:38.480 --> 0:05:41.760 supplies and natural gas, it's a dangerous time to be 0:05:41.839 --> 0:05:45.640 dependent upon foreign commodity supply and as a result, we 0:05:45.720 --> 0:05:48.760 have stockpiling and everybody talks about the squeeze in silver, 0:05:49.160 --> 0:05:51.599 running it up to one hundred and twenty dollars an ounce. 0:05:51.920 --> 0:05:54.640 The reality is this is a squeeze by the population 0:05:54.760 --> 0:05:57.599 of the people in China. You know, they're hoarding the 0:05:57.680 --> 0:06:02.280 silver over concerns around export controls and things of that nature. 0:06:02.839 --> 0:06:05.839 So you mentioned China just then, and this is exactly 0:06:05.880 --> 0:06:07.840 what we wanted to ask you about, which is, if 0:06:07.839 --> 0:06:12.600 you've stripped out what's going on in China, how much 0:06:12.640 --> 0:06:15.280 of the rally would disappear in something like gold. 0:06:15.920 --> 0:06:18.760 I mean, the vast majority of it is not just China, 0:06:19.160 --> 0:06:24.839 but emerging market central bank buying basically reduced their holdings 0:06:24.960 --> 0:06:28.359 of Western bonds that can be frozen, similar to what 0:06:28.440 --> 0:06:31.520 happened with the Russian So you know, do not underestimate 0:06:31.600 --> 0:06:35.480 the impact that China's had. In fact, if anything, China 0:06:35.520 --> 0:06:38.279 and the other emerging markets have squeezed other participants in 0:06:38.320 --> 0:06:40.480 the gold market out. And do you still have a 0:06:40.560 --> 0:06:42.960 long ways to go? I like to point out that 0:06:43.480 --> 0:06:47.960 in nineteen seventy, when Nixon took the US off the 0:06:47.960 --> 0:06:52.000 gold standard, central bank reserves and gold stood at around 0:06:52.040 --> 0:06:54.800 forty percent. Last time I calculated late day in the 0:06:54.880 --> 0:06:57.240 last year. Wasn't that twenty seven to twenty eight percent, 0:06:57.600 --> 0:06:59.240 but the run up in the last couple of days 0:06:59.279 --> 0:07:01.279 could be as high as thirty by now. But I 0:07:01.279 --> 0:07:03.880 think the key message is there's still a lot more 0:07:03.920 --> 0:07:07.159 buying by essential banks who diversify themselves out of dollars. 0:07:07.839 --> 0:07:10.880 I'm still a little bit confused. What is it about 0:07:10.920 --> 0:07:15.800 silver particularly that's so desirable right now from the population 0:07:16.160 --> 0:07:18.880 in China, Because just let's talk about hoarding and some 0:07:18.920 --> 0:07:23.120 of these issues. It's totally understandable why China wants to 0:07:23.120 --> 0:07:26.760 hold certain strategic assets, right It wants to accumulate a 0:07:26.760 --> 0:07:30.200 lot of oil in part because of defense purposes, because 0:07:30.240 --> 0:07:33.080 in the event of a war for whatever reason, they 0:07:33.080 --> 0:07:35.200 may get shot out of oil, so they need a lot. 0:07:35.400 --> 0:07:39.240 What is it about silver in the population context that 0:07:39.360 --> 0:07:41.920 makes it so desirable? And by the way, I'm looking 0:07:41.960 --> 0:07:44.200 at a chart is from two days ago. But the 0:07:44.240 --> 0:07:47.600 Shanghai silver premium buyers in China panng more than five 0:07:47.640 --> 0:07:49.680 dollars an ounce versus everyone else in the rest of 0:07:49.720 --> 0:07:52.680 the world. But explain what is it this driving this 0:07:52.800 --> 0:07:54.640 purchase from the public in China. 0:07:54.760 --> 0:07:57.800 Okay, first, let's talk about its role as a critical manalk. 0:07:58.000 --> 0:08:04.320 It goes into the production solar PV and that makes it, 0:08:04.480 --> 0:08:07.320 as you pointed out the beginning, fifty percent an industrial 0:08:07.400 --> 0:08:10.760 metal and then fifty percent of a store value like gold. 0:08:10.920 --> 0:08:13.560 So the fact that it has these dual uses, it's 0:08:13.600 --> 0:08:17.040 a critical mineral and important to the electrification process on 0:08:17.080 --> 0:08:20.640 a global base. Remember, it's a superconductor. Actually, let me 0:08:20.680 --> 0:08:24.280 go back to answer your question. Tracy said, what do gold, silver, 0:08:24.360 --> 0:08:27.080 and copper all have in common? They're superconductors. I know 0:08:27.160 --> 0:08:31.160 people say, well, Jeff, copper isn't exactly a definition of 0:08:31.160 --> 0:08:34.960 a superconductor. It's not as strong as silver and gold, 0:08:35.120 --> 0:08:37.960 but it sits up there in that electrification process. And 0:08:38.000 --> 0:08:41.920 so when we think about silver, it's critical for the 0:08:42.400 --> 0:08:47.520 industrial base of China given the importance of solar panels 0:08:47.920 --> 0:08:51.040 as a part of the industrial manufacturing process in China. 0:08:51.120 --> 0:08:53.440 So you know, when if you're the PBOC or somebody 0:08:53.440 --> 0:08:56.160 like that, you're going to be very focused on making 0:08:56.240 --> 0:09:00.840 sure there's adequate silver supplies inside of China. So the 0:09:00.840 --> 0:09:03.840 fact that it also then has the store of value 0:09:03.960 --> 0:09:07.240 like gold and accessible by many parts of the population. 0:09:07.320 --> 0:09:10.040 Because even at one hundred one hundred dollars an hour, 0:09:10.080 --> 0:09:12.480 one hundred and twenty dollars an ounce as wherever this morning, 0:09:12.760 --> 0:09:17.440 it still makes it a much more affordable a store 0:09:17.440 --> 0:09:19.640 of value. So I think that two key points for 0:09:19.840 --> 0:09:25.199 China and why silver is so important is its role 0:09:25.400 --> 0:09:29.000 as a critical mineral and as a superconductor. And given 0:09:29.040 --> 0:09:35.400 the importance of solar panels and other types of renewable 0:09:35.480 --> 0:09:39.320 investments to the Chinese industrial base, having a secure supply 0:09:39.760 --> 0:09:43.600 of silver is absolutely critical to the Chinese economy. Second 0:09:43.640 --> 0:09:46.280 of all, is when you look at the price of silver, 0:09:46.440 --> 0:09:49.000 even at one hundred and twenty dollars an ounce, it 0:09:49.080 --> 0:09:52.600 is still very affordable to many of the population as 0:09:52.640 --> 0:09:55.439 a store of value similar to gold. And also given 0:09:55.440 --> 0:09:58.880 the recent price trends, people feel comfortable in holding it. 0:09:59.160 --> 0:10:02.200 So it has those two components that make it critical 0:10:02.200 --> 0:10:03.360 to the Chinese economy. 0:10:03.840 --> 0:10:06.319 Some people would say that, like, all right, you can 0:10:06.320 --> 0:10:10.440 look at all these things surging and tell a story 0:10:10.600 --> 0:10:15.080 about debasement and electrification and what the future world is 0:10:15.120 --> 0:10:17.480 going to look like. Some other people would say, well, 0:10:17.480 --> 0:10:19.960 you could tell an even simpler story, which is that 0:10:20.240 --> 0:10:23.559 one of these markets is wrong. Right, So maybe copper 0:10:23.640 --> 0:10:27.079 sees economic growth going to the moon, although it seems 0:10:27.160 --> 0:10:31.040 kind of unlikely to me, maybe silver is somewhere in between. 0:10:31.280 --> 0:10:35.240 Maybe gold is wrong about the debasement thesis. Whatever, how 0:10:35.240 --> 0:10:39.040 do we know that We're just not seeing investors get 0:10:39.080 --> 0:10:43.560 this one wrong. People are just going from a mentoreame. 0:10:42.679 --> 0:10:44.920 Clanification of pressures of metal. 0:10:45.400 --> 0:10:49.400 Well, I do think when we talk about a commodity 0:10:49.679 --> 0:10:52.679 supercycle the s words, which by the way, is nothing 0:10:52.720 --> 0:10:56.600 other than a commodity capac cycle or a big global 0:10:56.640 --> 0:10:58.800 capac cycle, and we're seeing that, you know, whether it's 0:10:58.800 --> 0:11:02.839 an investment in defend, investment into AI data centers. The 0:11:02.880 --> 0:11:07.120 list goes on. This is a world scale capex boom 0:11:07.120 --> 0:11:09.840 we're now entering. And that typically is when you see 0:11:10.000 --> 0:11:12.920 the big commodity supercycles. One in the seventies, one in 0:11:12.960 --> 0:11:15.560 the two thousands, and where I mean, just take the 0:11:15.640 --> 0:11:19.400 defense spending in Europe alone, it's likely to be nine 0:11:19.480 --> 0:11:23.160 trillion euros over the next decade. To put that in perspective, 0:11:23.200 --> 0:11:27.280 the Chinese boom in the two thousands was ten trillion 0:11:27.440 --> 0:11:30.560 US today it's about fifteen. So even just Europe on 0:11:30.640 --> 0:11:33.200 a loan, we haven't even factored in data centers in AI. 0:11:33.840 --> 0:11:37.880 So when that occurs, typically what we see is a 0:11:38.000 --> 0:11:44.120 repricing and rerating towards asset heavy industries in commodities, or 0:11:44.160 --> 0:11:47.600 another way to think about it as short duration. Strangely 0:11:47.679 --> 0:11:49.880 is when interest rates are low, everybody thinks, oh, you 0:11:49.880 --> 0:11:52.160 would be doing capex cycles. No, you do them when 0:11:52.200 --> 0:11:55.720 their interest rates are high. Because the interest rates are high, 0:11:55.760 --> 0:11:58.200 they're telling you you need to put money into the ground. 0:11:58.640 --> 0:12:02.439 And so we're moving into to one of these repricing 0:12:02.559 --> 0:12:06.840 towards asset heavy industries, which is why it will ultimately 0:12:06.880 --> 0:12:10.880 be sustainable across the entire commodity complex. And I just 0:12:10.880 --> 0:12:12.559 want to take a step back and talk about these 0:12:12.600 --> 0:12:15.600 repricings because in my career, I've lived through two. The 0:12:15.640 --> 0:12:18.720 first one was in that call it two through like 0:12:19.080 --> 0:12:22.200 four time period, and that's what we coined the term 0:12:22.400 --> 0:12:26.080 revenge of the old economy. Old economy is asset heavy, 0:12:26.440 --> 0:12:31.080 New economy is asset light. And that asset light in 0:12:31.120 --> 0:12:35.319 the late nineties two thousands was really about the scalability 0:12:35.320 --> 0:12:38.199 of software. You don't need to have put a lot 0:12:38.240 --> 0:12:41.920 of money into the ground to be able to create growth, 0:12:41.960 --> 0:12:45.479 and that was the whole asset light model. But eventually 0:12:45.840 --> 0:12:49.000 we ran out of all of these heavy industries that 0:12:49.040 --> 0:12:51.640 you need to make the investments in and then China 0:12:51.720 --> 0:12:53.520 came on the scene and became clear we need to 0:12:53.520 --> 0:12:56.280 make those investments. And that happened over that decade. But 0:12:56.360 --> 0:13:00.240 that repricing, rerating was a violent process as you moved 0:13:00.240 --> 0:13:03.679 out of new economy or into the old economy. The 0:13:03.720 --> 0:13:07.160 next time we saw that was in fourteen fifteen, where 0:13:07.160 --> 0:13:09.680 we moved out of the old economy and into the 0:13:09.720 --> 0:13:12.679 new economy. Why because it was clear China was at 0:13:12.679 --> 0:13:15.200 the end of the track. And if you remember that 0:13:15.240 --> 0:13:17.800 time period we go through there, the euro went from 0:13:17.800 --> 0:13:20.360 like one point fourd to parody in the course of 0:13:20.480 --> 0:13:23.240 like eighteen months. I remember the period oil was coming 0:13:23.280 --> 0:13:25.720 down seven dollars a barrel, like every other day, everybody, 0:13:25.840 --> 0:13:28.959 what's going on? What's going on? I want to make 0:13:29.000 --> 0:13:31.520 a point here to get to your point about why 0:13:31.600 --> 0:13:34.840 is this sustainable across all these commodities. And when we 0:13:34.960 --> 0:13:37.720 look at I'm going to take a like a private 0:13:37.720 --> 0:13:42.760 equity pitch book in twenty twelve of a Canadian oil asset. 0:13:43.600 --> 0:13:46.840 They value the asset at one hundred and ten dollars 0:13:47.280 --> 0:13:50.840 of barrel. The IRR of that asset that this oil 0:13:50.920 --> 0:13:53.520 field was twenty five percent at one hundred and ten. 0:13:53.880 --> 0:13:57.720 Now fast forward to twenty sixteen, after the macro repricing, 0:13:57.920 --> 0:14:00.920 oil was sitting around forty dollars a barrel. Now, let's 0:14:00.960 --> 0:14:04.120 go reprice the IRR of that asset. What do you 0:14:04.160 --> 0:14:06.320 think it is immediate responsibles? He would go, oh, it 0:14:06.400 --> 0:14:10.600 was negative. Rr. No, it was around eighteen nineteen percent. 0:14:10.640 --> 0:14:15.079 It didn't come down much. Why is because the Canadian 0:14:15.120 --> 0:14:18.479 dollar reprice, so wages went down, you had a repricing 0:14:18.679 --> 0:14:22.440 of the cost of capital, you had a repricing of copper, 0:14:22.640 --> 0:14:25.440 iron ore. They all came down, and so your cost 0:14:25.520 --> 0:14:28.440 bass came down, such as the IRR was far more 0:14:28.480 --> 0:14:32.080 stable over that repricing. And that's ultimately what we're starting 0:14:32.080 --> 0:14:34.360 to see happen across this space right now. And I 0:14:34.400 --> 0:14:36.960 believe we're in one of these repricings. We're going to 0:14:37.000 --> 0:14:40.480 move back into the asset heavy space. I want to 0:14:40.520 --> 0:14:43.240 make one last point before moving on this. During this 0:14:43.520 --> 0:14:46.160 it's going to make this one really different from ones 0:14:46.200 --> 0:14:48.920 in the past. Is I want to go back to 0:14:49.360 --> 0:14:54.320 the nineteen sixties because it's similar to today. And that was that, 0:14:54.640 --> 0:14:58.240 at least in the modern data the first big commodity supercycle, 0:14:58.880 --> 0:15:03.120 the asset light space back in the sixties was companies 0:15:03.240 --> 0:15:05.480 like Coca Cola. In fact, all the nifty to fifty 0:15:05.520 --> 0:15:09.040 were brands. What do brands have similar to Let's say Microsoft, 0:15:09.400 --> 0:15:13.680 infinitely scalable at zero marginal cost. And so Coca Cola 0:15:13.800 --> 0:15:16.400 was the world's darling right now, and all of the 0:15:16.440 --> 0:15:19.520 big commodity producers, the miners, the oil companies were at 0:15:19.520 --> 0:15:22.920 the bottom. And then you had the Arab oil embargo 0:15:23.400 --> 0:15:28.280 create that catalyst to reprice. Now what happened here is 0:15:28.400 --> 0:15:32.280 that that's different today. So you think about that asset 0:15:32.360 --> 0:15:36.520 light space was Coca Cola, and then in two thousand 0:15:36.640 --> 0:15:40.520 it was Microsoft, and today it is Google and the hyperscalers. 0:15:40.520 --> 0:15:43.080 Now here's where it gets really different in the power 0:15:43.160 --> 0:15:46.960 what's going to happen now is the asset light space 0:15:47.080 --> 0:15:50.480 is getting into the asset heavy space, i e. These 0:15:50.560 --> 0:15:54.720 hyperscalers are putting steel into the ground. And by the way, 0:15:55.160 --> 0:15:59.560 you're no longer a asset light infinitely scalable software company, 0:15:59.600 --> 0:16:03.040 You're a you're an oil company, you are a commodity producer, 0:16:03.120 --> 0:16:05.680 You're multiple is going to get rerated. And so what 0:16:05.720 --> 0:16:08.080 we have is the asset light space this time is 0:16:08.200 --> 0:16:11.480 moving into the asset heavy space and putting steel in 0:16:11.480 --> 0:16:13.400 the ground. So this is going to be a real 0:16:13.480 --> 0:16:16.720 violent transitions. To ask about copper and silver and the 0:16:16.760 --> 0:16:19.560 rest of these things. What are the restrictions on their 0:16:19.920 --> 0:16:23.440 big CAPEX budgets? Is the availability of transformers? What are 0:16:23.440 --> 0:16:27.000 transformers big chunks of copper? And so we have a 0:16:27.040 --> 0:16:29.160 difference in this cycle than once in the past is 0:16:29.200 --> 0:16:32.320 the asset light space is colliding in the physical space 0:16:32.360 --> 0:16:34.560 at the exact same time, which is what I thind 0:16:34.640 --> 0:16:37.560 to think that this repricing is going to be more violent, 0:16:37.640 --> 0:16:40.440 more sustainable, and what you're going to see, and it 0:16:40.440 --> 0:16:43.040 goes to a simple point that I observed in the 0:16:43.080 --> 0:16:45.240 two thousands was when oil first went out because oh 0:16:45.240 --> 0:16:47.960 it's a bunch of investors buying oil, it sits at 0:16:48.000 --> 0:16:52.520 sixty dollars a barrel, that supernatural returns. No, you actually 0:16:52.600 --> 0:16:56.720 had capital rotate out of the asset light space and 0:16:56.800 --> 0:17:00.600 into the oil space during four to five such as 0:17:00.600 --> 0:17:04.280 the cost basis actually rose and there was no supernatural return. 0:17:04.400 --> 0:17:08.040 So go, Tracy back to your point, how sustainable is this? Well, 0:17:08.040 --> 0:17:10.359 what we're seeing is all the capital flowing into this 0:17:10.440 --> 0:17:12.679 asset heavy space and it's going to build the ground 0:17:12.760 --> 0:17:16.560 underneath these prices and support them from a relative cost basis. 0:17:16.560 --> 0:17:18.960 And so when we think about fourteen thousand dollars a 0:17:18.960 --> 0:17:22.360 ton comper, doesn't mean these guys are earning supernatural returns 0:17:22.560 --> 0:17:24.960 because we see so much capital movements in the space. 0:17:41.000 --> 0:17:44.760 I absolutely love that comparison of the software companies to 0:17:44.840 --> 0:17:47.919 the Coca Colas and this idea that there are certain 0:17:47.960 --> 0:17:53.919 business models that can scale incredibly with very little physical needs. 0:17:53.960 --> 0:17:56.640 And the way you framed that I thought was very 0:17:56.640 --> 0:17:59.000 helpful to understand. And we've certainly talked a lot on 0:17:59.040 --> 0:18:02.400 the podcast about the hyperscaler is getting into the real 0:18:02.440 --> 0:18:05.800 business of things and you know, going up the chain 0:18:05.920 --> 0:18:08.520 and in some cases getting getting into the power production, 0:18:08.600 --> 0:18:11.880 investing in their own nuclear plants and hiring power traders. 0:18:11.880 --> 0:18:14.240 So all of this feels very real. Let's just like 0:18:14.880 --> 0:18:16.680 you say we're in a super cycle, you say we're 0:18:16.680 --> 0:18:19.800 at the foothills of the Himalayas. What is history or 0:18:19.840 --> 0:18:22.119 your work say about how big and how far this 0:18:22.200 --> 0:18:22.439 can go? 0:18:23.000 --> 0:18:27.280 Well, I mean, historically these cycles last summer around twelve years. 0:18:27.400 --> 0:18:29.159 The one in the seventies did, the one in the 0:18:29.160 --> 0:18:32.440 two thousands did one of the seventies from sixty eight 0:18:32.440 --> 0:18:35.600 to nineteen eighty, the one in the two thousands, from 0:18:36.000 --> 0:18:39.280 essentially two thousand and two to twenty and fourteen. A 0:18:39.280 --> 0:18:41.359 lot of people say, oh, the world's different today than 0:18:41.480 --> 0:18:43.920 in those other points. Time Putting steel in the ground 0:18:43.960 --> 0:18:46.480 still takes about the same amount of time, technology or 0:18:46.480 --> 0:18:49.159 no technology. I like to point out, where do you 0:18:49.200 --> 0:18:51.880 get the twelve years you know, were the first three years, 0:18:51.920 --> 0:18:54.800 or getting people to believe it before they start to 0:18:54.960 --> 0:18:58.440 really invest earnestly. And I would say this one started 0:18:58.480 --> 0:19:02.000 in twenty twenty and so the fact that we lost 0:19:02.040 --> 0:19:04.040 two years in twenty three and twenty five, whether it 0:19:04.119 --> 0:19:06.080 was copper oil and part of the reason for that 0:19:06.760 --> 0:19:10.280 was the rally and prices was so steep after that 0:19:10.400 --> 0:19:16.679 Russian Ukrainian invasion. The policy response globally was incredibly swift. 0:19:17.240 --> 0:19:20.119 I want to point out that policy response in twenty 0:19:20.160 --> 0:19:23.320 two and twenty three was not so much the rise 0:19:23.359 --> 0:19:26.800 in interest rates but the creation of supply. And I 0:19:26.920 --> 0:19:31.280 say that is because you had inflation come down everywhere 0:19:31.280 --> 0:19:34.560 in the world in a synchronous manner, and it did 0:19:34.600 --> 0:19:38.720 it against record commodity demand and really strong GDP growth 0:19:38.720 --> 0:19:41.119 in the United States wasn't I tell you, it simply 0:19:41.160 --> 0:19:44.160 could not have been interest rates in the demand side. 0:19:44.200 --> 0:19:46.080 It had to come from a supply side. Where did 0:19:46.080 --> 0:19:51.439 they get new supply? Russia, Iran, Venezuela, you know, some 0:19:51.480 --> 0:19:53.520 of the issues that are faceing to say. They got 0:19:53.560 --> 0:19:56.879 it through increased immigration on the labor side. There was 0:19:56.960 --> 0:19:59.479 a lot of ways they created supply all over the 0:19:59.520 --> 0:20:01.680 world to be able to deal with that. Now the 0:20:01.720 --> 0:20:04.920 point this time around, and everybody's bought into this oil 0:20:05.000 --> 0:20:08.320 supply lot, we don't have a problem is that those 0:20:08.359 --> 0:20:11.560 easy fixes are not going to be available next time around. 0:20:11.800 --> 0:20:14.159 So this one's going to take longer than normal. But 0:20:14.280 --> 0:20:16.359 I also want to go why I'm comfortable with this 0:20:16.520 --> 0:20:20.879 being a supercycle is all of these things are all 0:20:21.119 --> 0:20:24.560 policy driven. The one in the seventies was due to 0:20:24.640 --> 0:20:29.120 the lbj's War on poverty, the big defense spending sound familiar, 0:20:29.440 --> 0:20:33.240 and then you had the air of oil embargo. If 0:20:33.240 --> 0:20:35.480 you look at what happened in the two thousands, it 0:20:35.720 --> 0:20:39.840 was the decision to admit China, the wto a policy decision. 0:20:40.520 --> 0:20:43.200 Here the policy decisions is the war on free trade, 0:20:43.520 --> 0:20:46.320 and it's not just the US doing everybody's doing it. 0:20:46.600 --> 0:20:49.760 You know, curtailing commodity supply around the world. In fact 0:20:49.800 --> 0:20:52.480 that the three points we laid out in twenty twenty, 0:20:52.480 --> 0:20:54.080 in fact, it was on this show we laid them out. 0:20:54.280 --> 0:20:57.480 There's still very much valid today. And they were all 0:20:57.560 --> 0:21:01.840 policy decisions. One was deglobalization, the war on free trade. 0:21:02.280 --> 0:21:05.000 I mean, if anything, it's been turbo charged now from 0:21:05.040 --> 0:21:07.600 five years ago. And when we think about it, it's 0:21:07.600 --> 0:21:11.200 all policy decisions. It's not just inside the United States 0:21:11.240 --> 0:21:14.000 where we're seeing this. You know, the Chinese cutting critical 0:21:14.000 --> 0:21:18.200 mineral supply. You know, Europeans focused on, you know, protecting themselves, 0:21:18.240 --> 0:21:20.359 defense spending. The list goes on. Let's go to the 0:21:20.400 --> 0:21:25.320 second one at the time, decarbonization or electrification. And I 0:21:25.320 --> 0:21:27.120 know a lot of people are going to look at, oh, well, 0:21:27.320 --> 0:21:29.959 didn't the US backtrack on that with it, you know, 0:21:30.000 --> 0:21:33.840 the recent political shifts. The answer is absolutely not. The 0:21:33.840 --> 0:21:36.520 rest of the world is doubling down on electrification. For 0:21:36.640 --> 0:21:40.399 both when we think about the electrification of the world, 0:21:40.520 --> 0:21:44.000 where it wasn't decarbonization was not the motivator today, it 0:21:44.080 --> 0:21:45.960 wasn't then. And then going back in time, why do 0:21:46.040 --> 0:21:50.520 I say that, why did China build cutting edge technologies 0:21:50.560 --> 0:21:54.760 and nuclear power, solar wind batteries and the rest of it. 0:21:55.080 --> 0:21:57.840 They did it for energy security. Kind of goes into 0:21:57.840 --> 0:22:01.600 the deglobalization point. They want their own secure energy supply. 0:22:01.640 --> 0:22:06.120 In fact, Carter coined the term energy transition and want 0:22:06.200 --> 0:22:10.800 to transition out of oil into renewables in nineteen seventy seven, 0:22:10.880 --> 0:22:12.840 not because they wanted to save the world, but because 0:22:12.880 --> 0:22:15.639 of energy security. One last point on this is France 0:22:15.840 --> 0:22:18.760 lowest carbon footprint in the world. It didn't get there 0:22:18.760 --> 0:22:20.720 because it wanted to save the planet. It got there 0:22:20.760 --> 0:22:24.399