Forget Tech: Why Hard Assets Will Win The Decade | Jeff Currie

There's only one thing you'd call that is they didn't like the price that the market was providing. And in any other terminology, I call that financial repression. They want the yields lower. And the reason why we pound at the table on gold, we have financial repression. It creates inflationary pressures. It's intentionally done to lower the value that debt so the debt holders want out. What's going to protect you in that kind of environment? It's going to be owning the hard asset. We have a problem in diesel. And that's an affordability problem. And we go back to our problem on interest rates, interest rates, that 10 years sets mortgages. It's an affordability problem. And we think about gasoline prices retail. So everybody's thinking about oil is at 94. It's not at 150. You're 189 on diesel. You have an affordability problem. So it's not something we're waiting for. It's here. Welcome to the Master Investor Podcast with me, Wilfred Frost, where we celebrate and learn from the success of the greatest investors, business leaders and politicians in the world giving you our listeners an edge. The Master Investor Podcast is sponsored by the World Gold Council, BMI investments, LSEG and interactive brokers. Please do remember the views expressed in this podcast are for general information purposes only. Nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation, more on that in the show notes. My guest today is Jeff Curry. He's one of the world's four most experts on commodities. He spent three decades at Goldman Sachs building and then leading their commodities team. He left Goldman in 2024, spent two years at Carlisle before deciding to go out on his own. He's the founder of Rail macro and of A-Backs markets looking forward to discussing both of those new ventures with him later on in the conversations. But Jeff, it is an absolute pleasure to see you. Welcome to the Master Investor Podcast. It's a pleasure to be here. I've been waiting to do this, Wilfred. I've done this with you going back from when you were at CNBC for literally decades. It's a pleasure to be reunited in this kind of format. Well, I couldn't agree more. Particularly, I would say, in this format because it gives us plenty of time to explore the key factors. Obviously, we're going to get into all the commodities, but I feel like we have the start with the yield picture, which is the story of the last couple of weeks. What is your quick snapshot on the rising yields before we get to some of the actions that we've seen from policymakers in response? I mean, this has been really at the core of our thesis is that the debasement pressures from public debt being so large at this point and the lack of investment in hard assets and the inflationary pressures creating a sharp rise in yields. And I think we're beginning to see that take place, and I would expect it to be a theme. We go back to, you know, we turn bullish on commodities in October 2020. And that's when you look at yields, that's pretty much where they dropped yields, commodities, hard assets, all of that. And the view was that these things were just going to be a straight line up for decades. And by the way, if you look at the picture, it was a straight line down for what's while nearly four decades. And so I think that we are in that, you know, call it a super cycle on hard assets and commodities and yields are going to be a part of that. And I think this is where we're not in the first inning of this. This is like we're in like the second or third inning of it. And I think we're going to see more of it. And for our non-American listeners, you're referring to the second or third inning of nine of a baseball game there. Yeah, so I agree with him. Being based in Spain now, Jeff, you're going to have to adapt some of your analogies. So it going for a true European that you are now. Let's let's touch on the intervention, then. I mean, obviously Scott Bess and the Astrosary Secretary announced his buyback or the size of the buyback going forward and his intention to try and dampen the rise in yields at the long run in the curve. Talk us through your reaction to that. You know, I don't, you know, whatever you want to call it maturity swaps or whatever, you know, people have termed it. There's only one thing you call that is they didn't like the price that the market was providing. And if we put it in the broader context of intervention, you know, they started it with oil intervention oil, you know, through the SPR and other methods. Why they want to get that term, the term structure down and the term premium down. Then they intervened in the end market. Why because they wanted to prevent the Japanese from selling, then they intervene with FEMA, you know, swap lines, the places like the UAE to prevent them from selling. In other words, they're very concerned with yields going higher. And the question is, why are they concerned with yields going higher? Right now, if the interest rate at which most of the US debt is priced it is somewhere around 3.2%. If they have to roll in the maturities, it goes up to 4.2. And if the interest rate bill is 1.1 trillion now, we estimate to go to around 1.5 trillion. That's a huge jump. So you can understand the urgency of keeping the interest rates lower. Because where are they going to come up with all that money to be able to pay that interest rate payments. And we look at what really changed over the last couple of years is when you look at where interest rate payments sit in, you know, the cap structure of the US budget. Number one is Social Security Medicaid. And then number two is the interest rate payments that are above defense costs. So it's really moved up there. And you probably all have heard once interest rate payments go above defense, the country has a problem. And if anything, the concern, what happened was we spent 20 years with low interest rates that really hit this. And then all of a sudden around 22, 23, we popped up. And that's why it's become an urgent. And I mean, on one level, you could argue, you know, it's understandable if it's just a temporary move that he wants to kind of smooth out the market. But what do you kind of make of the timing of and the way in which it came out, it wasn't really a sort of structured announcement. And that's why I say it's financial repression and not a maturity swap because it came out, you know, a day after we hit record levels on on the 30 year. And after two to three weeks after the normal announcement and long before the announcement that they would have normally so it was completely out of the blue. And it was very aggressive after a string of interventions in other markets like oil, yen and swap lines through FEMA to to other big owners of US Treasury. So the timing of it, I think, is the tail that tells you this was not a normal action. This was an action to push down this longer term yield so that, hey, you can lower the cost of funding at a time when they need to roll some of this debt. So I think it's meaningful, very meaningful. Do you think it's going to work for long term yields because it's interesting the open you mentioned the long term correlation or relationship between yields and the broad commodity index. Will they successfully cap those long term yields and could that therefore cap commodity prices? I mean, that was always the view that we had taken is that you financial repression is preventing yields from going high enough that clear the market. So then you end up with inflationary pressures that eventually erode the debt. So that's why it's repression called financial repression is it's not good in terms of the owners of these assets because ultimately it deteriorates the value of these assets, which is why the Japanese, the Emirates and the rest want out of these positions because they're very aware that this is what the goal is. And you look at the reason why we pound at the table on gold, by the way, I may sound like I'm picking on the US, I'm picking on the last more generally and by the way, China has been the same boat is that all of these, in fact, I think everyone goes, well, the dollar is the dominant one, it's going to be the way. Yes, it may end up being I rather own dollar than pound sterling, you know, sorry, well heard, but the, but the reality is I want to go gold over the dollar in the pound sterling. And I think that that's the message here is that hard assets, which are independent of central banks and treasuries and other policy makers are where the value is going to be generated. And that's why, and a lot of people asked, where do I come up with the $10,000 gold forecast? And by the way, I didn't do a side it is rough to get you back to the levels of gold as a percentage of shares of reserves pre 1971 before Nixon took us off the gold standard. But so I think the key message here is, yes, we have financial repression, it creates inflationary pressures, it is, you know, it's an intentionally done to lower the value of that debt and so the debt holders want out. It's going to be owning the hard assets. It's a really interesting point, Jeff. And by the way, I'd refer people back to our episode with Luke Groman recently, who echoed a similar point that all of the currencies look like cells. against gold, but they might all move together. I just want to kind of highlight, though, or get you to highlight, Jeff, the significance of your call on gold, because this is, you've been a bull on energy for a while and we'll come to that. But your loud banging the table by case on gold was a late August call and it is a pronounced one. Just remind people of the price action. We got up to what 5,400 on gold in January have come back and you now think now is the time to get in and establish a long time position. Yeah, I mean, we've been long-term bulls. By the way, when I made this, we went short in March of this year and when I made the case, I, you know, I'm a permable on commands, hard assets. They go, no, no, actually, you know, probably talk about it later. I was a bear up until October 2020. And that's when we shifted very bullish across all hard assets in gold in particular. And so, you know, we look at gold. By the way, I want to emphasize, you put these commodity, these hard assets. People don't realize this since October 2020, they are the best performing asset class bar none across all, even including crypto. And, you know, between energy, because you don't either rotation may change across the hard assets, but the trend is the same when you look at the broader indices. And gold was one of the biggest drivers early on, you know, at your point is January went with 5,500, 400. In March, when the war started, we go, hey, you got to take a step back and get out of that. And by the way, I'll be honest with you, I'm kind of a little concerned right here right now. And the reason why we said to get out in March was that when you look at the Middle East countries, they were going to have to sell gold to be able to fund themselves through this because they couldn't sell the oil. And then there's many of the emerging markets, places like Poland and Turkey, we're going to have to sell gold to pay for the high or energy prices. Now, for the most part, and paid for defense, I think Poland's outright set it. So, you know, we saw the selling of gold, it came off down to 4,000. That's when we thought, hey, the coast is clear. And it was clear that we were starting to see the rise and interest rates. And we took the view, it's time to get back in and we were sending around 42, 4,300. We brought it back up. And now with the hostilities in the Middle East and concerns around worse wanting to raise rates, gold took a back seat. But no way, I mean, these are little blips in the daily movements, longer term, you know, whether you ask me, what, you know, the actions by Bessons is just the beginning of something that we're going to see on a much longer term basis. By the way, you know, I think is that, you know, you look at yellow and did the same thing back. And I think it was in 24. So it's not every time those interest rates get back up to that high, it's not a partisan issue. It's whoever's sitting there realizes, how do I make the budget balance is my interest payments goes up so much I better intervene in these markets to get them down. And again, so that's the whole idea of debasement and financial repression, which is really the basis of we wanting to own gold right here. And this is a very compelling long term case for gold. And one sort of final quite basic question, if you'll allow it on gold is if you step back and look at the chart of gold, it's not dissimilar from stepping back and looking at the chart of Nvidia that the rise in recent years looks unbelievably pronounced. And one wonders whether, you know, without being a chart expert or anything like that, those levels of sort of 4,000 were quite crucial support. Is there any part of you that worries if you fall below whatever that kind of relatively close level is that they could really pull back or is that a low probability in your eyes? I would view it as a low probability. And here's the reason why in the power one of the key reasons why we were so bullish on gold, you know, back in 2020. And it started in 2018 when the ferry for, by the way, Minuchin is the only one who used secondary sanctions. And he used him in March of 2018 when they punished Rousseau and Oleg Daripaska for meddling in U.S. politics. And by the way, that morning, I remember I was at Goldman the time, but that was March 28. We woke up, oh my god, financial systems froze up. That's why when Bessett threatened it was at this week or last it was last last Monday when he threatened that nobody goes, he's not going to do it. It's just too disruptive. But the point me and why I bring this up when he did it. And by the way, it was like, it was a shock through the global system. Don't touch it. We don't know who's going to get sanctioned. You're going to get taken out of the market forever. What did the Russians learn from that? Do not own dollar assets. That was first lesson. And by the way, they had something like 93 billion U.S. treasuries. They sold them down incredibly quickly. And they replaced it with gold. And by the way, paperback, green backs, they fly them in and these super jumbo 747s plates of gold and green backs. If they ever had to deal with dollars, they'd do it in something that couldn't be sanctioned. And so it began there. And then then you had the war in Ukraine occur. And that's when they sanctioned the rest of the portfolio of the Russian central bank. The rest of those, whether it's Chinese and all the emerging markets, look, they can go, we're not owning dollars anymore. We are done. And you look at the normal relationship between gold and interest rates, you can see the day they did that, they disconnected. You just saw gold shoot up. And if you are a central bank in an emerging market right now, particularly given the fact that the best thing goes out and threats secondary sanctions, are you going to own any dollars? Absolutely not. And so the buying, usually look at this one place like China, somewhere around four and a half, five percent, they're going to continue to de-dollarize. Because something like gold leaves you in a place where you don't have to worry about sanctions. And by the way, on crypto, everyone goes, well, crypto is a good, no, it's not, because it leaves a footprint. You got to go in and you got to get out. Gold, you can sneak it around sometimes. By the way, how do they go with all these ships going to straights of hormones? It's a big old tanker. You know, you can see it. You got salad. You can move gold. And you can lose billions of dollars of gold, really quietly in trucks and everything like that, because it's so dense versus other commodities and other assets, so that your ability to hide dollars in wealth in an environment in which you have governments trying to do sanctions or taxes or whatever it is, the demand for gold is not going to stop. And as a share of reserves sitting in these central banks, it's still too small in places like China and the emerging markets. I guess gold is heavier than a thumb drive though, but I take your point about the trend. But the whole line actually on the thumb drive, I learned this from a Russian oligarch once. And he goes, you know, you're running down out in the woods and bad guys coming after you. And you got your fob with your Bitcoin on it. And you got your golden platinum in here. And your partner, he wants to go a different way. And you got to take out your axe. And what are you going to do? You can break open and split the diamond, the gold, the platinum and split it. You can't take a fob and split it in half. And then he goes, the other thing, if you're swimming across the river and you got your fob in there, you can't get it wet because you're going to lose all your crypto. But hey, you know, gold diamonds and platinum, it will survive the river swim. So, you know, it goes down to why there's no substitute for these things have been around for three millennia. They're not going to change as being in the store value. You'll have to tell me who that the Russian was off over a beer another time. This episode is sponsored by BNY investments. BNY investments is part of BNY, a global financial services company supporting investors and institutions around the world. This sponsorship does not constitute investment advice. This episode is sponsored by the World Gold Council, the global experts on gold. They champion gold as a trusted strategic asset provided market leading research to help investors understand gold's role and modernize how gold is owned, traded and used, developing industry standards and market infrastructure. Learn more at goldhub.com. Let's move on and talk about energy and as you've been alluding to, you've been successfully accurately bullish in 2020. It's had a phenomenal run particularly this year. Before we talk about the action this year, just outline for us one of the key reasons I think you've been bullish in the lead-up, which is a very long-term point about under-investment in the space for decades. I'm not going to say it's been a decade. Last time we invested, it was 2014. That was when oil fell off the cliff. I want to put this in the context of technology. Actually, the same thing was in 2020. When you say last time, we invested, you mean as a collective? Western, global economy, even the Chinese. The reason why? Because the price gave you the signal. It was $120, $130 a barrel and in refineries and all of those hard assets. In fact, I just got back from Hong Kong and I was sitting in a same place. I was sitting in 2014-15 talking about commodities and I go, "Last time I was sitting here. I think it was in 2013 and all you guys wanted to home was BHP and Rio or Exxon Chevron and Petro China. If I would have brought you Microsoft or Google you wouldn't touch it with a 10-foot pole, and it was interesting because the mentality was so commodities. In fact, I think that's when I first met you, Wilford, was talking commodities back then. And during that environment, people thought, in fact, you had peak PC demand, tech is terrible. By the way, they were spending 15 to 25% of their free cash flow. There's no investment. They were just the worst of the bunch. By the way, the metals guys, the oil guys, in fact, the term I used were spending like drunken sailors then. In fact, they were spending 120% of free cash flow. And by the way, the investors are going, "Rah, rah, rah, more, more, more, more, go, go, go." And then all of a sudden, as we all remember, it ended badly. Oil prices, collapse, metals prices, collapse, the dollar ripped. And that's when we transitioned out of that commodity super cycle into that tech super cycle. By 2015, 2016, they're going, "Mm, Microsoft and Google look pretty interesting." And by the way, then they went on a tarot. But I think there's a couple takeaways that come out of this. People go, "When are these oil guys going to spend again?" I go, "They won't." Remember, we fired all the CEOs and management teams and those metals and mining and those energy and oil companies in 2013 and 2014 because they spent too much. These guys were weaned on the idea you don't spend. And so, in fact, I like to call it the "meanificent seven." "Meanificent means gifting lavishly." When you look at the big energy companies put together the top seven of them, they have a free cash flow yield of 15.5%. The Mag seven is two and the hyperscalers are zero. They don't, because they're spending. And by the way, those tech guys are now spending like the drunken sailors of the metals guys back in 2014. They're in the 100% of free cash flow. And everybody at this conference were all, what do they want to do? They just want to get along the Mag seven, the tech, the AI guys. And they go, "No, we don't want to touch these oil guys." And so when I go back to the point, this under-investment theme, so you had that going on. By the way, the investors do not. In fact, the one thing I've learned is growth is a, it's a, even though it's five letters, it's like a four letter dirty word. You don't grow in this space. And so that's one of them and tell you the other one, let's remember, people forgot about ESG. People were wondering, why are we having diesel prices go to the moon? We haven't built refineries because they were considered off-limits because we assumed we would never need them again because of peak oil demand, which is something that's thrown out the door. And people have forgotten about it. But the overall incentive was not to spend. And I think that, when we think about those two put together, that's why we don't have the investment and we have all the problems we're witnessing to hear today. But I also, and by the way, the first time I discovered it was in, with February 2002, we called it the Revenge of the Old Economy because they called it.com guys, new economy and the, you know, the axons of the world where we're all economy, but it's something that we see here. But that's not the only reason, you know, we can talk about it later while I want it on the space. But there's a lot of demand reasons. Also, that play, coming to play. Let's stick on the supply just for a minute longer. And I kind of almost, it's the question I would have asked three weeks ago before hostilities picked up again, because even before they picked up again in the Middle East, you were making a point, which you were looting to just there, that even if crude prices, Brent or WTI had paired back some of their gains, albeit still up on the year, you were watching closely the prices of the refined products, the products that we actually all use, that actually will feed into CPI and other inflation prints. And those were spiking regardless of crude softening its rise. Yeah, and I think it goes to underinvestment and refineries. And going into this, there was expected to be zero investment in refineries after 2027. And I was just in a big refining thing yesterday in Hong Kong. And it made the point, we got a little bit more coming in 27 and 28, but that's delays from 24. There has been no new investment. I wait, cracks, all right. They're normally somewhere around $15, $20 a barrel. They're $105 a barrel. That's four times, five times more than normal. These refineries are printing cash. Again, the magnificent, magnificent, seven versus magnificent. Unificent means giving you money. And these things just print the money right now because there's not of them. And we can't build them. It takes you seven years to build one. So you're not going to, you know, actually was entering and I was asking Claude the other day, who is richer, JD Rockefeller or Elon Musk? And he goes, well, as a share of GDP, US GDP, they're about the same. But Rockefeller was a different kind of rich, i.e. cash. These assets spin out cash, which goes in magnificent. They give you cash. But I can't get anybody who want to own them. They've some reason they don't want cash. They want something, you know, building data centers on the moon as opposed to getting cash today. But I think the key point there is we had the underinvestment of these refineries. The other factor that comes into play is you had people are focused on the Straits of Hormuz and don't have their eye on the ball on Ukraine. Ukraine has gone in and taken out somewhere around three to four million barrels per day of Russian refining capacity. And that was 10% of the global supply of diesel. Also, when we think about the Straits of Hormuz, there's another three million barrels per day of refining capacity trapped behind the Straits. And when we think about it, if you're gonna sneak a tanker out, are you gonna sneak a tanker of product out or a tanker of crude? You're gonna do the crude. Why if you get hit by a bomb, you have a good chance of surviving it. But if you're on a gasoline tanker, you're not surviving that if you get hit. So nobody's gonna take the risk of taking the gasoline out. So those refineries stay offline. And that's where the shortage is. And I don't understand why everybody's so focused on counting the barrels of oil getting out. When you got a crisis in products, and you look at the price of diesel, it's like four dollars and 68 cents on nine max, which means it's near six dollars at the pump. If not higher, I haven't looked at it lately. This is where the real concern is. I think what it is is people don't have any way to assess the four dollars and 68 cents they see on their screen and they don't think about it. I don't understand why they can't, but they don't look at it. - And just a couple other areas to round this up. I mean, hypothetically, if you did get a lasting peace deal with Iran and maybe not full peace, but something more peaceful with Russia, Ukraine, would that remove your significant bullishness on energy-related products? - Actually, I think we're at that turning point right now today. China is coming back. And the other point that people, in fact, somebody asked me today, oh China's the reason why energy prices are low. I go, no, China, the reason why energy prices are high. Nobody in this world that's listening to this unless you want to refinery or if you own an oil company cares about the price of oil. The other 99% of the world only care about the price of products and I don't understand this one. They tell me, oh China's the reason why oil prices are energy prices down. The reason why oil prices are down because they're not buying the oil and exporting the product. China's a net export and we think about what is China do? It's strategy, whether it's in steel, aluminum, AI, control the processing, control the processing, you control the processing, you control the cost, you control the geopolitics and you end up controlling where the value is in the supply stream. And so when we think about what China does, whether it's in copper or oil or steel or whatever, it buys the input and then trades what that processing margin is. And so for security reasons, for reasons around the price of wanting to control the price of energy domestically, they cut back on their runs and they cut back export of product. They're coming back. So if right now I'm not ready to go, hey, I'm going to short diesel cracks and I do want to be long oil. You can see it, by the way, it do buy as a thing called backwardation. It's like the spread between the spot and the forward. It's super bullish formation. It's telling you the Chinese are buying oil again, which means what's going to happen right now? Diesel prices are 189 oil is what? 94, actually it's 96 right now. What's going to happen is you're going to see oil go up and the refineries get less. And that's because the Chinese are likely to come back. That's very interesting. And how much does where strategic reserves are globally feed into that case as well that that crude stocks are lower than they were when the war started? I'm, you know, look at the US. It's really slowed down here like 280 something. I'm not, you know, this is a million barrels. You know, but going into this, if you would have asked me, where do you get the problems? I'm just citing research of engineering experts. It'd be somewhere around 270 million barrels. You know, Amos Hockstein, who was, you know, in the Biden administration, he's harping on somewhere, you know, below 300, he's got to know because he was the guy sitting there, you know, taking this. thing down during the Biden administration. We're at that point where we're going to start to become dangerous and where you're going to find it. And by the way, this whole idea that you can just take Venezuela, turn it on and refill it. It's a different kind of oil. It's going to take a long time. This is not going to happen tomorrow. And whether or not, you know, you know, and we, and here's the other thing too. People sit there and go, oh, you know, you know, they're up to two thirds. Yeah, coming out of the straits. Let me just remind everybody that seven million barrels per day of oil still shut in. I don't care if it's, you know, 12 to 13 or 14 or seven million shut in versus eight million. That's seven percent of global supply that shut in. These markets run on very thin margins. We are going to have a problem eventually. By the way, we don't, it's not eventually. And we go, go back to our problem on interest rates, interest rates, that 10 years sets mortgages. So everybody's thinking about, oh, oil is at 94. It's not at 150. It's here. On, on that note, Jeff, I mean, I, I discussed this very regularly on on sky news that there's not, I guess no one's optimistic at the moment, particularly about the outlook for the economy. But there is a calmness that the, the tepid growth of recent years will continue. Do you think whether it's the US, whether it's Europe, we underestimate underestimating global recession risks? Absolutely. And you know, I have a term for that is the abundance illusion. And I want to go back to Jimmy Carter, 1977. He did give what's now called the sweater speech. And he was in this cardigan sweater. And he's on on on TV. And you can see the thermostat in the back. And it's turned down. And he's a bird. It's cold. He goes, you know, tell the public, you know, we have an energy crisis. You're going to have to do conserve energy because we have scarcity. And what do you think happened the minute he finished that panic set in by admitting the problem it created hoarding a lot of other problems. And me, what would you do? Oh my god, the president just told us we're out of oil running down. And you're going to be, in fact, I remember, I'm old enough to remember, my father put a diesel tank in our backyard. And that's not the reaction you want. And when you think about from that point forward, it started with Reagan never had a problem with it. So he didn't do it with George Bush senior in the Iraqi war in 91 from that point forward, released the strategic reserves and talked the price down. Everybody thinks Trump's being different. No Biden did this. Obama did it. George W did it. Clinton did it. And George HW did it. They all did it. And so when we think about it, that abundant solution, the Europeans do it because what happened to Carter? He created, he was a one-termer and it was done and over with. But I want to go one other point that Carter had another speech. And it was in April of 1977. It's called a meow speech, M-E-O-W, moral equivalent of war. And by the way, the press killed him. They called it meow. I go, he's an idiot blah, blah, blah. You know what he proposed? He proposed energy transition. Energy transition was never an environmental movement. It was all about energy security. He put solar panels on the roof of the White House and said, we need a quick, consuming oil because it's portable and store-to-wall. We need to consume non-fossil fuels because they're secure. We have sun, we have solar, and let's go nuclear power. And I like to point this out during that time period. France has 90% of its power come from nuclear power. And it has the lowest carbon footprint in the world. How did it get there? It didn't get there because it wanted to save the planet. It got there because Charles De Gaulle was afraid of exactly what is happening today with the Straits of Hormuz shutting down. So at that point, I want to say you asked me, you know, are we underestimating it? It's done on purpose in the West. And one last point I know I'm rambling on here is China heated Carter. They did energy transition. It never about saving the planet. It was about being protected in an environment just like today. Of course, you guys, the US is obviously at least energy independent today, particularly with the help of some of the dirtier crew from Venezuela and not some of you can say about the UK. And I kind of agree, I think recession risks are significantly underpriced in places like this. Before we move on to AG and other commodities, I just want to check. So the munificent setting is what the global majors, who are the seven? XOM, XOM mobile, Chevron, kind of go Phillips, BP, Shell, Total, and Saudi Aramco. Okay. So not any from Italy and not the Asian, the Asian names because you want people who pay big cash flow. The, I mean, that's the thing. The friends, well, Total, love a good dividend, but I'm not sure that their execution is always the best. Actually, you know, I'm going to disagree with you on that. I would say Patrick Poovese, he does what we talk about as being the new jewel order. The new jewel order is diversify, do it from, you know, oil, gas, solar, wind, nuclear, do the whole, you know, he has in East Texas, he has, you know, solar and wind going into the power with the gas underneath and then he has, you know, oil and gas and places like, you know, I actually, I can't take this back. I think it, I think he does in Germany. It's actually, he has, I actually think he has oil in Germany. But I think the key message about Total is that it is, it has a little, he cares about the jewel, which is why we call it the new jewel order. And he, he focuses on creating jewels from all the available sources because you do not know which one is going to have a problem. And all seven of those, is there an ETF that merges them or you just think people should establish positions in, right? I'm working on, I'm working on the ETF right now as, as we speak. So hi guys. It's a wealth. I hope you're enjoying this episode. Just a quick reminder to please hit follow or subscribe on your podcast or video app so that you never miss an episode. And if you've got time, please do give us a five-star rating and leave us a comment. It really helps other people find the podcast too. Now back to the episode. Let's, let's move on to Ag, Jeff, because this is again a slightly more recent call, at least the extent to which you've been pounding the table. Again, in late August, you, you were loud and clear that you expected the Ag commodities to pick up. Indeed, they have. Yeah, and when we look at the motivation behind that call again, we've been long the whole complex going back to 2020. And if you look at Ag, it's the one that's been the most explosive. And it was in the tree commodities first. And tree commodities are like coffee, cocoa, and cotton and rubbers in there as well. They were, the reason why they've been impacted the most is they're at the equator. And the global warming has had a really significant impact on. Remember, you saw that was, it was the Hondurans that were, you know, the immigrants that were coming into the US in like 22 and 23 because they couldn't, the coffee was being taken out. And when we look at what's going on right now, it's two factors. It's a record El Nino. And you have war. Ukraine is going into the Black Sea grain corridor and taking out Russian exports. Also taking out Russian oil. So I'm kind of shocked that market is only focused on the streets of hormones. Is it open? Is it closed? You know, what, what is the president going to tweet today? Yet nobody's paying his, I've always today the first time. And nearly this has been going on for about two months. You know, Secretary Besent actually brought it up that's going on in the Black Sea with the, with the Russians taking out refining capacity. And I think one of the reasons why the CIA sent their representative to Moscow was tell the Russians stop this because you're starting to really impact inflationary pressure. So you have war plus weather combined. And let's think about what the weather is doing. You know, the Ryan River is at, is at record low levels of the Panama Canal is being shut down to things with only a 47 and a half foot draft. So we are lot more choke points than straights of hormones. You got the straights of hormones. You have the Red Sea, which is war with the hoodies. You have Black Sea on oil, Black Sea grain corridor, Russian refinery capacity, Ryan River, and the Panama Canal. Those are a lot of choke points. And they're all out of reach of the toolkit that Washington has from its policy perspective. And we're beginning to see it on a screen. So I actually had all those calls that we made back in August. And it's been about two and a half, three weeks ago. The best performers are the, is the agriculture. I just, everybody go back and look at the price graph of weed. It's a line going straight up. And also when we think about, last but not least, I want to say, and it metals too around fire right now is most commodities are dirt and diesel. I hate to make it boil it down to that being that simple. If diesel is at an all time high, you're putting a lot of pressure on everything else at the same time you have all these weather shocks going on. So the risk here I think is substantial, particularly on the grain side. And if we go back to everybody likes to take inflation and strip out food and fuel, but that's throwing the baby out with a bath water. From an affordability perspective, food and fuel are essential to the overall inflation expectations going forward. So again, why are we going back to where we started this conversation? The higher interest rates are being driven by the risk here that are getting increasingly more important day by day. This podcast is sponsored by Interactive Brokers. Building wealth starts with the right broker. An interactive broker helps you reach your goals with powerful tools, global market access, low costs, and unmatched financial strength. That's why the best informed investors choose IBKR. Learn more at IBKR.com/masterinvestor. This episode is brought to you by LSEG, the leading global financial markets infrastructure, data, and analytics provider. To learn more about how LSEG connects businesses, investors, and markets worldwide, visit LSEG.com. I guess as we sum up all of these commodity positive outlooks, I have to ask the extent to which it's already priced in. I get that some commodities are only responding more recently than others, but this year has already been a great year for those magnificent seven stocks that you mentioned, even if on price-to-free cash flow yield, that they're still relatively cheap. And as you kind of just outlined, it's hard to see many more choke points emerge in the global sort of shipping lanes that already exist. So to what extent do you worry that some of these things are already priced in? Very little. And the reason why is commodities are spot assets. Financial assets are anticipatory assets. And what does that mean is that commodities, they're physical assets that's cleared today's supply and demand. Not tomorrow's, even the futures are not tomorrow's. They're a cash and carry relative to today's prices. Financial markets like stocks and bonds, they price expectations on growth rates. In fact, the way I like to say it, why do you get a negative correlation between commodities and financial assets? Is that when the inflation happens like it is right now, and Worsh expresses his concerns in Jackson Hole about raising rates. And that's what took some of the steam out of gold. And if he begins to start to raise rates, the financial assets go down. Because why growth expectations go down? Commodities will still go. Because think about this. Commodity is demand is up here, supply is down here. You got to deficit whether it's oil grains or whatever it. So you got that spread. Let's say they raise rates and they slow the demand down. You're still in a deficit. The markets are still going to die. The only way commodities go down is if the demand goes down like that. Below the supply. And that's not likely to happen. And when we think about with financial markets, all they're, they start going down because the higher rates says you have a lower growth rate and that's why they go down. And so when we think about why you want to own commodities in this kind of environment, is there going to be the ones that are going to power ahead as your financial markets get hit with the inflationary pressures? By the way, you know, US Labor Day is next week. I think when people come back and sit in their desk and they look at the situation and see record diesel prices and who knows, oil will probably be over 100 by then. And we see metals prices, you know, copper is at an all time high. The zinc is getting there, you know, aluminum. They can look at this go, hey, you know, the risk and inflation is probably pretty high right now. I better get out of the financials and start, you know, out of the, you know, the equities out of the bonds and start looking at these hard assets. So just finally on that then to push it a bit further. I mean, I guess the question is how long is the lead time with which your confident commodities will still rise? But we all know the old adage that the cure for high commodity prices is high commodity prices that draws investment in. You've already touched on the very long lead time to build out more refining capacity. So I guess there's some breathing room there. But to your point on if demand is here and supplies here, if you do feel that there's risks of a recession, that would be a trigger to pull demand down. - And by the way, that happened in '08 '09. But you know, commodities, high oil prices help facilitate that credit crisis. 'Cause you know, you get higher yields and it compounded on itself. Communities collapsed here and there. But the structural bull story, the super cycle kept playing out in 9, 10, 11 and 12. And it wasn't until late October 12 that we became neutral on there because it became apparent Shell was gonna solve the problem. And you had too much, again, going back to these guys were, spending way too much in 12 and 13. And eventually everybody goes, enough is enough. And you couldn't stop those managements from spending because that's what they knew how to do. Kind of like the AI guys today. But I think the, so we think about where are we in this? I'm comfortable that this super cycle, there may be a recession will come down but it's gonna go back up really quick. I don't think there's gonna be a catastrophic recession 'cause we don't have the same in, but we do think about where the imbalances in the global economy today. Everybody wants a point at private credit. It's nothing like what we had in '08, no, not in this, not systemic or anything like that. The problem is in the sovereigns this time. That's where the imbalances is not in public credit markets or anything like that. It's with the sovereigns, it's with the United States government, the British government, you know, it's with the Chinese government. Why the only ones that are actually, it's the German speaking countries that are actually, the continent, actually here in Spain, they're in pretty good shape. Actually, Europe is actually in really good shape, take the UK out of it and Italy out of it. The rest of it's actually relatively, and you take, in general, there are 81% including the UK. And when you get into places like Germany and Spain, you get into the 60% perspective. The US is 125 Japan and China, the 200s, 300s. So these are real serious problems in terms of looking at these sovereigns. So that's why even if you do have one of these problems, it's not like '08, '09, it's very, very different. - Yeah, those are obviously referring to the debt to GDP percentages there. So as we kind of start to kind of broaden that and conclude, Jeff, I'm interested in terms of are there any moments in your career or other parts of economic history that you really feel like today where that kind of echo of history stands out to you? - Well, I originally, if you would have asked me this question in January, here's what my answer would be. Oh, it's just another, it's another hard asset cycle. And here's the model I think about the world as being, is there's two industries that matter. One is energy and commodities. If you can't turn the lights on, nothing happens. The other one is technology. If you don't innovate, you never progress. And you look at it history since the post-war era. It's either hard assets like commodities or let's say like the axons of the world or it is, the world's being led by the technology guys. Let's say like IBM, Microsoft, NVIDIA, Google, it's always one of those sitting at the top. And if we go back to the 50s coming out of the second world war, we had a big physical capex boom cycle to rebuild everything coming out of the war and the commodity guys led. But eventually they overdid it. You're swimming in the capacity and we go to the nifty 50. The 60s was all about low and stable inflation and low industries, very similar to 2010s in the early part of this decade. But eventually you ended up starving off the capital to the hard assets and you went into the 70s and then that was the boom. And so you look at IBM Kodak, actually Coca-Cola's as long-term growth type brands at same thing as technology, they led the nifty 50. And then they got crushing the 70s, the 80s, axons at the top of the king of the mountains. Then they get crushed and then the tech leads, the dot com and Microsoft's at the top of the mountain and 2000 and axons down here in the bottom. And then they get crushed by 2010 axons at the top and Microsoft, you couldn't give it away in 2011. And here we are, Microsoft, NVIDIA, Google at the top. Nobody really likes these oil companies right now. Where do you think we're gonna be in 10 years? That's the way I looked at the world. Post Iran, this is bigger, this is way bigger. And the reason I say that is, let's start looking at the bookends of what's changing here. And let's start going about the globalization story that occurred, I'm using this from Robert Pave to professor at Chicago. He goes, in 1991, two things happened. The Soviet Union collapsed and the United States goes to a rack with 10,000 body bags and used 147 and the word was shock and awe of the Americans. They became the hedgemen to the world. And that unleashed that globalization. What's happening here? The US is being challenged by China. I came back from Hong Kong. Hong Kong has the mojo back. China is like, hey, yeah, we're the big guy on the street. Now, and the US is not doing too well in Iran. So those are the two bookends. That's globalization. That's done. And then let's think about Bretton Woods, 1945, you know, what was the deal was the grand bargain. We're going to give you the World Bank, all this money, rebuild yourself, use the dollar. And we're going to use our big gigantic Navy to protect the world and free trade and globalization. Guess what? The United States is breaking the grand bargain today in the Middle East. And they're being with Bach Ray and they go, you know, are they going to walk away? They can't. What are they going to do, excuse me, Mr. Itola, can I bring my, you know, my superpower, Abraham Lincoln into, into the streets and parking at Bach Ray, which is my big, you know, naval base there. This is huge. This is not, you don't take a big L and walk away like everybody thinks, this is huge. This is game changing. And then I want to put this in the perspective bigger for 400 years. Bach Ray was founded by the Portuguese in 1602, it was called Fort Portugal. And when we think about that US Navy, it's not the ships and the technology. In 1941, the Americans inherited it from the British. It got Diego Garcia. Think about that name. Who founded that? It was the Spanish and the Portuguese. Bach Ray. The British got it from the Spanish and the Portuguese, the Spanish and Portuguese founded all this stuff. Why? Because the Ottomans cut them off from the spice route going across Asia land. They had to figure out how to do this with ships. They created deep sea navigation. They're the ones who founded all that. Then the British inherited it and then the Americans inherited it from the British. This is Western Dominists for 400 years. By the way, I was making these arguments in China when I was there this week. They're like, raw, raw, raw. This is our first time in 400 years. We can push the West out. What do the world look like before Britain? Because when the British defeated Napoleon, that's when we got a hegemon. After Britain, it became the Americans. The Anglos have controlled all of those islands. Diego Garcia, Bach Ray and everything had been the global hegemon for 200 years. What did it look before? It was sovereign, backed corporates like the Dutch East India Company with their gunships and in fact, what do they trade, golds and silver? I think that, are we going to go back to a world where you have sovereign, backed corporates that are running around the world? Are we going to be trading gold and silver in tokens? It's something you really need to think about because if the US is not the hegemon, we're going into a very different world. It's fantastic food for thought with some great historical context, Jeff. Let's have that forward-looking kind of follow-on on crypto. A very bullish gold, you've made that clear. Where are you on Bitcoin and other crypto assets? Crypto, I think Bitcoin did more damage to digital ledger technology, DLT, than I think we can fathom. The technology is incredible. When I think about where we are on the product stress of Web, Web 1.0 was HTML. You read it. That was 1990. Web 2.0 was social media that was in the 2010s. I had to point out, Goldman figured out how to do HTML with Inron Online was a force in trading. We created a liquidity explosion and actually with Goldman became the vampire squid by 11 and 12. What did President Trump figure out Web 2.0, how to read it or write it? That was understanding social media and everything like that. The MAGA movement all came out of that and took over the world. Web 3.0 is DLT, read it, write it, and was crypto ever made for humans? No, it was made for AI. Because now you can think about what this. You create your AI agent, arming with his wallet. A wallet is a token and you run them down the rails and let's take baseball cards. They're really far down in terms of getting down into the downstream. They trade at 20 to 30 percent bid aspects. Now I earn my AI agent with his token, he can go down there and arb that out and close that arbitrage. We're going into the possibilities here huge, but the problem is everybody's stuck with crypto. Now, what's my view on crypto? It's not going to replace gold. It's been around for 17 years. It's about a $1.25 trillion market cap industry. Gold is 30 trillion. It's been around through three millennia. You can hide it. You're not hiding crypto. Everybody calls it crypto. You got to buy it. You're going to leave a footprint going in. I'm super bullish on the technologies. I think when we look at the Genius Act and the Clarity Act, I think it's going to create another liquidity explosion like what we saw with Goldman in the 2000s where they've just went downstream and started to trade. I like to point out that Web On.0 allowed us not trade WTI and Brent, but the trade gasoline and jet fuel and all these things further downstream. So I'm a big believe in the technology. I'm not a fan of Bitcoin and the crypto itself. Tell us a little bit more about what you're doing now with real macro. Of course, two years after you left gold. No macro, I like to call it real macro. You'll Spanish presence now. Spanish, my Spanish presence and I named it after Real Diocho. What is the Real Diocho? It was the first silver coin. It was the first reserve currency that the Spanish developed. By the way, that's where the dollar size is. Real Diocho means pieces of eight. It was in eight units and that's part of where the dollar sign and the coin was silver. But the point being is here, we're going back to a world of hard assets. I go back to the world before, during the Real Diocho, is that hard assets were at the key. We talked about the world before the British. It was gun boats and you traded in silver and gold and I think we're going back to a world of that. One last but I want to make here, one of my predictions is the sovereigns or the corporates are going to trade through the sovereigns, meaning Apple's debt is going to trade at a tighter yield than the US treasuries. And that was what the world existed back in the Real Diocho world that we lived in. Really, really interesting that, Jeff, we are pretty much out of time. This has been fascinating. I've loved it. We'll have to get you back on, but I flag this to you at the start. We like to end by asking what the overriding piece of advice you have for our listeners. So what is it? Don't try to get too fancy in these hard assets and I like to call it halo. Hard asset local operations because we're going to, we're going to deglobalize and fragment. And you don't know which commodities are going to be the ones that are going to go up. So own the broader indices. Don't try to be smart and cute here. Own the basket of miners, oil producers, you know, uranium, critical minerals, food guys own just a batch. Don't try to actually pick which one I can remember I was saying before, why do I like total strategy is because they own a little bit of all of it. We don't want to just concentrate on one thing. So whether it fits a, you know, like an end to see, like, you know, like the, you know, the old part of why what I'm going to try to do is create new indices because the only ones out there are like the, you know, the, you know, the V comms and then the Goldman Sachs commodity index, quantics has one of them, but, you know, ultimately, that's where my focus is going to be is creating new best made vehicles because we haven't done this for 20 years since, you know, '06 in that time period. Jeff, that was absolutely fantastic. Great to have you with us. Keep us posted when you launch those ETFs, we'd love to have you back. And thank you again for joining us here on the Master Investor Podcast. Great. Thank you for having me, well, for that I've really enjoyed it. That was Jeff Curry, of course, of rail macro, former Goldman Sachs head of commodities. Next week on the Master Investor Podcast, we will be joined by Thomas Pettyv, the founder and chairman of Interactive Brokers. So please do hit follow or subscribe on your podcast output to make sure you get that one too. We'll see you next time. The Master Investor Podcast is sponsored by the World Gold Council, BNY Investments, LSEG and Interactive Brokers. Please do remember the views expressed in this podcast are for general information purposes only, nothing in the podcast constitutes a financial promotion, investment advice or a personal recommendation, more on that in the show notes. This podcast is produced by parody productions and Master Investor Limited in association with bird line media. 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