Speaker 1This is the Commodity Culture Podcast, where we interview prominent investors, fund managers, analysts, and company CEOs to give you an edge when it comes to investing in the commodity space. Melody Wright, great to have you on Commodity Culture. I want to start with the overall picture of the US economy as you see it today. What are the main data points that you're watching right now, and how wide is the delta right now between what's officially being reported and what's actually going on in the
Speaker 2real economy? Well, Jesse, I don't even know how to begin to talk about how wide that gap is, but what's going on right now, obviously, is just a continuation of events from February 28th. That's the biggest deal in terms of the conflicts in the Middle East. But of course, it's not just the conflicts in the Middle East, it's the conflict between Russia and Ukraine. It's the refinery in Juliet, Illinois. It's all of the infrastructure that's being hit. It's these diesel prices that are skyrocketing up. You know, diesel, obviously, we got completely addicted, and I think we'll talk about this later, to kind of ordering online and getting everything delivered. That's all going to get incredibly more expensive. And then let's talk about private credit, private equity. You know, people say private credit, $1.8 trillion. The problem is, is that's all wound up together. Private credit, private equity, and private equity is, you know, much larger, as well as all of the derivatives that are feeding off this giant shadow banking monster. And so I'm watching that very carefully. And of course, private credit got into commercial real estate. They got into commercial real estate on multifamily. Suddenly, you know, I've been. I've been talking about multifamily for some time, especially throughout the spring, because I was going into these securitizations and just my mind was being blown. But suddenly today, the Wall Street Journal has woken up with two stories on the disaster that is multifamily. But I think, you know, even on your show last time, we talked about the commercial real estate hard maturity wall crashing into the fall. And we're seeing that right now. And that's just going to get worse. And so I'm watching all of that. And then, of course, we're going to talk about the real estate. And then, of course, the bond market, which is just, I mean, it's just puked. It has decided it's in charge. And so there's so much going on, which all impacts the housing market. And what you can really see in the August data and what you can really see from all of my. Or hear from all my followers across the country, on the one side, I'm hearing demand has just. It just evaporated overnight. What everybody has to realize is. When we talk about those closed sales for existing homes, those are contracts that were signed 60 days ago. And so what it looks and feels like is everything just kind of came to a screeching halt. And then on the other hand, all the people that follow me that are in the default world are telling me, are echoing what I saw in my client books in August, which was just this incredible increase in foreclosure referrals. And that's what I'm hearing from appraisers. From property inspectors across the country. And so we're about to see sort of this increase in delinquency. So I know you asked me, what am I watching? But I will say to you, the gap is very wide. Like right now, we're living on headlines. I think oil is coming down right this second because some stupid. I mean, the algos have not been completely trained yet to understand that these headlines mean absolutely nothing. And so the gap is enormous. People still think we have an inventory shortage out there. And we absolutely do not. So sorry, that was a lot. But we can go wherever you want to from there.
Speaker 1Yeah, some great information you just laid out for us. The situation certainly looks dire. But if you look at the stock market, it's like we're in bizarro world. The NASDAQ surging yesterday, looking like today we could possibly. We just started trading not too long ago, but possibility of closing at a new all-time high today on the NASDAQ. The broad indices all holding up very well. So if you looked at the stock market, you would think that we're in a golden age of new economic growth in America. What gives here? Because this is something that, especially for the gold and silver bugs in the audience, has kind of made them frustrated in terms of we're all waiting for this big correction in the broad market. And then we believe that hard assets are then going to take off. Now, it should be noted commodities have been doing very well over the past few years. So no complaints there. However, as you mentioned, we're seeing the oil price get hit. We're seeing gold equities get hit and we're seeing the NASDAQ potentially surging to all-time highs amidst multiple massive global conflicts that only seem to be accelerating. Why do you think that disconnect exists?
Speaker 2Well, what it feels like to me, Jesse, is that those that can are just looting the system. And this is the last gasp of this. You know, it could be a double top like what, you know, but it's everybody who has the wherewithal. They are extracting everything. They possibly came from the system, you know, setting this up. So I think anybody that thinks the stock market is actually the economy is it's kind of nuts. I will give you a quick antidote talking about kind of Joe Sixpack or the, you know, I was having a conversation with a family member last night. They're like, you know, it's not really a big deal to me if gas. And this is someone, by the way, who has a lot of leverage. It's not really a big deal. It's not really a big deal to me, you know, I'm paying $15 more for a tank of gas and I'm like, well, hey, fella, it ain't going to be just $15 more for a tank of gas is going to be all of the goods that you buy and it's going to be, you know, all these companies that rely on these inputs are going to have to increase costs or they're going to go out of business that's going to cause job losses like so people just can't think this through, Jesse, because they've been trained by tick tock. And so, you know, that's, that's the only reason I do what I do is try to just save one more person from making a terrible mistake. And I think that there are many people that have made terrible mistakes and they're finally coming back. So the stock market to me with the passive flows with, you know, everything that's going on there, it's a matter of time, but that time could still take, you know, another six months. But I do think that we are setting up for a very funky fall and it's, you know, if it doesn't impact the stock market, it'll be a little crazy, but everything else is going to, we're going to have an earnings like it'll either start really happening Q3. Or Q4, that is just going to be God awful for like your consumer staples, you know, travel is even, I don't know, I retweeted this morning, the TSA numbers, you know, Delta and those guys can kind of fly on the top of the K for a little while, but that's not going to sustain them long term. And by the way, the top of the K is getting hit because a lot of their investments are getting hit. You know, we've just recently seen Blackstone and Vesco, all these people are there. They're in trouble. They want people to stop, you know, kind of doing those redemptions. But so if the top of the K can't get their money out, or they're losing on their investments, I don't even care about the stock market. You know, their behavior is going to change as well.
Speaker 1Yeah, sticking to that theme, you pointed out recently that delinquencies are piling up in buy now, pay later, auto loans, credit cards, and more. Now, those prime borrowers, people with strong credit, that top end of the K, when they start missing payments, you've mentioned that's. When the real trouble starts. Do you think we're entering that territory yet?
Speaker 2Oh, we are. We are. And I've seen it all spring. And so delinquency is a very interesting. It has its own season. It has its own kind of behavior. And what we're seeing right now is all spring, we should have seen delinquency go down due to tax refunds, bonus payouts that come in the spring. That didn't happen. At the same time, it wasn't just FHA that was going into that early stage. Delinquency. Now, ICE, and this goes back to your question about what is that gap of what you know and don't know. Well, ICE very smartly, I mean, to their Machiavellian credit, they don't really call out early delinquency. They talk about headline. They talk about late stage. And late stage is always impacted by your loss mitigation. But early stage is your clue. It's where you're going to see your smoke before the fire gets there. And what. What we have been seeing in early stage is that Fannie and Freddie, that's your prime borrowers, have been going early delinquency. Now, what hasn't been happening at scale yet is what we call roll forward or rolling delinquency. People will stay around that 30. So let's say I have like, you know, 50 early 30 days. I'm only seeing a few of those roll to a later stage delinquency. But that pace will start to pick up. up in the fall because the fall is when you're going to see delinquency. But Black Knight's very crafty about their charts, their schedules, and also their headline delinquency. Guess what they exclude? Well, you probably won't guess, but it's foreclosures. They exclude foreclosures from their headline delinquency numbers. Does that make any sense to you? No. But these are the games. These are the tricks. But what we're going to see from here is FHA is just crapping the bed right now. And the servicers I'm talking to are already overwhelmed. And this is going to be a big problem. And so that's happening and will continue to happen through the year and onward. We'll see more material delinquency probably Q4, Q1. But Fannie and Freddie from here is going to build. And I don't care if we don't even have any more job losses. It's the increases in property taxes and insurance and HO fees. And replacement costs in energy. People just simply can't afford it. And so I give Fannie and Freddie about 18 months before it is at a very material level. But it will be joining FHA, which is already under a significant amount of stress.
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Speaker 2Well, we're all going to be killed by AI, Jesse, so we don't have to worry about it, right? No, it's going to get really bad. And, you know, the bottom of the K wasn't even holding on. I they're getting absolutely crushed, but the middle of the K and all of this, and I mean, it's just beginning. And so we're, we, I mean, all of this is just beginning and already, you know, we were, I mean, my money means nothing anymore. Like you can't walk out of the house these days without in the U S spending a hundred dollars. I used to be $10, you know, it's like, and, and, and like you buy your groceries and you're like, this cannot be real. Like and so consumer is just, I mean, they, they were in terrible shape. Um, but what's really going to change the narrative on that is when the top of the K really starts to feel it. And I think that you're starting to see that. Um, and because of these failed investments, because of the real is realization that, Oh, that investment that I had and that real estate investment trust is gone. Or I was an LP on a multifamily deal and I've been wiped out completely. As these things start kind of pushing through, I would say kind of like this part of the K, like not the very tippy top, like we're definitely going to start to have more of an understanding of where we are, but most consumers are already just completely stretched them.
Speaker 1You mentioned e-commerce earlier. I want to read a quote from your sub stack. Uh, you wrote according to the census Bureau e-commerce sales in Q2, 2026 were 17.1%. If diesel prices stay elevated and the shortage in trucking persists, companies will be forced to raise prices or subsume the costs impacting margins. Walk us through how you see this weakness in e-commerce bleeding into the economy. Yeah. I
Speaker 2mean, the reason e-commerce kind of really took a front seat, right. It's because we weren't allowed to go to stores. And so then what you saw is like a hollowing out of target and other stores, like, you know, stores that people used to go to, to get their goods. Um, and so people, a lot of people really rely on e-commerce. That's how they do a lot of their shopping. Well, that's going to change because Amazon will absolutely pay, you know, pass those costs to us. And I just think that, you know, this, this could be a huge, we could, we could actually be seeing Jesse, the unwind, the true unwind of that COVID sort of behavior change, right? Like we could actually start to see people are going to have to start sourcing locally because it's not going to be more cost effective to order something online, um, you know, and, and, and try to get it. So we shall see, but that is, I really do believe that e-commerce is probably going to take a significant hit here. And so we could actually be seeing, um, the beginnings of a real behavior change in our shopping habits again.
Speaker 1You touched on the housing market earlier. Maybe we can dive a little bit deeper. What other stats have you been looking at? What data have you been observing when it comes to real estate in America and what is it telling you about where things are headed?
Speaker 2Yeah. So we're at the point, I mean, we are in year four of the worst sales. I mean, last year was the worst sales since 1995 and we've increased population by 20%. That doesn't even make sense. Okay. So we're in year four of that. And so really what I'm watching are these things, uh, are, have been the same for some time for many places, prices have been going down. Um, some places have not, but basically kind of what I'm watching now, Jesse is narrative. And, uh, we got another narrative signal this week with a wall street journal, basically saying to boomers, you better get out there and sell now because rates aren't coming down. And so I think you and I have talked about, we need some sort of narrative shift to really spark the change, but let's say, uh, the forces are so great. It's happening under the surface anyway. So for instance, I track 86 cities altogether, but 29 of them, I look at them in isolation, some as well as an aggregate, but because of their populations over 500 K. And so these are going to be very impactful cities, uh, just from sheer volume. And so, uh, this month, 14 out of that 29 had year over year price declines. That's compared to nine last year and seven. And so we are seeing the shift. It's just taking an inordinate amount of time. And really your last two holdouts are the Northeast and the Midwest. And we're seeing big cities in both of those places start to roll over in the Midwest is Indianapolis, Detroit, Kansas city in the Northeast. It's like Boston, a little bit of Pittsburgh, um, Philly. And so that like we're, we're getting to the point where narrative is really going to roll over. And so we're seeing big cities in both of those places starting to run out of the narrative of, Hey, prices are always going up. It's running out of gas. And in fact, we have mainstream media telling these people, um, now, and this is, has, has been their guide. So this is a very important shifts. The narratives at this point are the most important thing to watch.
Speaker 1And how does the narrative of the fed and what they're doing impact things from here? Because we had the recent FOMC meeting, of course, rates raised by 25 basis points. There's indications that will probably be one more hike ahead. And then a pause. That's at least a, the consensus that people are looking at. Um, assuming we do see another rate rise, how could this impact both the housing market and the overall economy? Does it even matter that much? Does it play a significant role when it comes to the real economy in your
Speaker 2view? Well, it doesn't matter really from like a operational perspective, the bond market had already decided what they wanted and it's basically in charge and it's telling the fed what to do. It matters from a performance perspective, because now you've got every multifamily operator out there, every commercial real estate operator, every single family rental operator out there going, holy cow buckets. Like we all thought that, you know, uh, rates were coming down. That's what we were. We were staying alive until 25 when rates would come down, they're not coming down. And that's what the fed is saying, even though they're very late to the party. Um, and so, um, you know, the bond market had already said that. So their role is performance only. But it's a big role. And again, it's, it's a narrative and that narrative has changed and it's scaring the bejesus out of
Speaker 1everybody. So given all of this we've outlined, is there anywhere in markets today that you're seeing any opportunity in? Because obviously the broad market looks overstretched by any metric that you look at. Although I have had some guests on this show say we're still headed towards some kind of parabolic blow off top. But I mean, playing that is a bit tough to know when to jump in and jump out without getting burned. Where else are you looking at assets like gold? Are you looking at commodities or any other areas of the market for potential value up ahead?
Speaker 2Yeah, I'm definitely looking at gold and silver. And I'm looking at commodities, but I'm looking at it with a suspicious eye. Because I, you know, especially I have a colleague who has been schooling me in copper recently, for instance. And just you have to be careful about these shortage narratives, because a lot of them are just BS. And so I just think, I'm bullish due diligence. I mean, I think anybody could find a good investment if they took the time to really understand. But I'm personally, you know, I'm kind of like getting more bullish, anything energy. It seems to me, I said this when the BBB came out, and it seems to be proving true that I thought a lot of what was in there was about, you know, they're going to pretend it's about AI investment, but really what it's about is shoring up the grid. And so that we could potentially bring manufacturing, you know, back here to many places. And so I'm kind of, I am, I am kind of seeing all the moves being made that maybe these data centers, and this is a view from Michael Every that I've sort of kind of taken from, that these data centers might end up becoming sort of, you know, robot factories or drone factories. I mean, we're definitely going to war. I mean, that's, and if not, going to a full conflict, we, we, we have, we have decided that war is the way we're going to get out of this mess. And so whatever that means, you know, building weapons, creating drones, whatever it is. And so I think that these data center sites might actually turn into manufacturing sites. And so, you know, anything that sort of is touching on that, you know, I think you could do some due diligence, but I'm a fan, as you say, of commodities of gold and silver, but just, you know, just be careful because narratives always kind of get out of control.
Speaker 1Yeah. I wonder if you have any thoughts there on, on energy markets, you know, the oil space, as well as precious metals in terms of how much price seems to be disconnected from reality. I mean, I touched on this earlier, but, you know, it's interesting to note, I've seen a lot of short-term traders lamenting on X because they thought this is the most obvious setup in the world. Here we are, the Strait of Hormuz is closed. And this war is not going to be ending anytime soon, go all in on oil on these short-term bets. And then they end up getting crushed and complaining about it. Obviously I take a more long-term view in that I was already heavily invested in energy before the war began since 2021. It seems to me like an obvious long-term setup in terms of the supply demand fundamentals and then precious metals as well. Everybody expected, well, if a war breaks out, gold's going to go to the moon because it's that safe haven asset. Now, some have argued, well, times of conflict, there's a flight to liquidity. And so people are often selling their gold to get dollars. We saw Turkey sell a large portion of its gold. Yeah, exactly. But the war has been going on for some time now, and we're still kind of seeing both gold and silver grind sideways as opposed to going higher. So energy and precious metals, what's the disconnect there in your view?
Speaker 2Yeah, I just, I think people got a little overexcited. I think that's on both things. And so like you, I'm long on energy, but the short-term is just too crazy. Like I just, it's, and I don't know, short-term bets just, in my opinion, I'm sure they work out for young, young folk. You know, that is just not the way I live my life. And because I've seen too many people get burned. Now, I don't want to keep somebody from becoming a millionaire because they're a brilliant trader. I got to tell you, I haven't met a lot of brilliant traders in my life. And so I'm just more conservative, but I think it's just all that over excitement. But, but Jesse, I don't think we can trust anything that's happening. You know, I think all of this is being manipulated. You know, people are making money, like your big citadels, like your people, you know, your big market makers are out there doing stuff that we have no idea what it is. I mean, we have, and there's no one human could possibly even know all these tricks. And so we're, it's again, it's late stage. It's a collateral, a lot, it's loan obligations is derivative. It's there is, I guarantee you, Jesse, when people got super excited about gold, there were all kinds of sort of derivative products, trading products that were created. That's going to impact these prices. And so to me, this is all just noise to ignore. But I wouldn't go all in either. You've just, you just have to be cautious and do your due diligence and also think about what you want long-term. And personally, you know, I, at this point, and what do I know? We know that they confiscated gold before, but I mean, at this point, it looks to me to be the safest place, you know, for a good chunk of your money. So anyway, that's my perspective. And that is not investment advice. That's Melody. That's what Melody, right? Thanks. Of course.
Speaker 1And I'll make the audience roll their eyes by bringing out the Ben Graham quote in the short term, the market is a voting machine in the longterm. It's a weighing machine. You need to have a long-term perspective. These types of things. There was another quote I wanted to bring up, and that was by Peter Lynch, who said more money is lost in anticipation of a correction than in the correction itself. So my question there is, is this a time where you think it's worth keeping extra cash on the sidelines, given these overstretched valuations to potentially take advantage of bargains? Or do you think, well, nobody really knows when that drawdown is going to come. So might as well continue dollar cost averaging or. Committing capital to the market along the way.
Speaker 2Yeah. Nobody maybe knows, but I think I personally would be like Buffett. I would, you know, although he's just, you know, sit down, but I would have that cash on the sidelines, ready to go, ready to be deployed for what's next. Cause I do think that, yeah, this could be pretty ugly what we're looking at for the next few years, but there is always a way to make money in these situations. And so, but you can't make any, if you're over levered and you're completely out of cash. And so to me, this is exactly the setup that you would want to be saving that cash, you know, doing T bills or whatever, just to get a little bit on it. I wouldn't do anything past the year myself, you know, in the treasury market, but just, you know, sit on your cash. Why not? And then get ready. Cause I do believe as, you know, whatever this AI thing, is there is some technology there that could be implemented you know, more proprietary type stuff and different. And so who's going to be the winner. And I think it's going to be the balance sheet that's in the best shape. And so, you know, you can be getting ready, doing your due diligence and getting ready for those buying opportunities. And there's a certain, I mean, the point of one of the articles in wall street journal today was that be on the lookout because there's going to be a lot of apartments for cheap. And what I would say to that is, yeah, I do agree, but be careful if you don't understand that location, like, I mean, really understand it. You could still be catching a falling knife at this point.
Speaker 1Before I let you go, we have to touch on the AI is going to kill us all stuff that's been bouncing around. I mean, we had this guy, he looks like Harry Potter, apparently worked for anthropic for like six weeks or something like that. And suddenly he's this star whistle blower and Cooper's there and everybody's interviewing him and wants his take. And supposedly he's so scared that AI is going to kill us all. I see various people being rolled out on different podcasts. And, and with these sensational titles, we have, you know, whatever, however many years before AI kills us all. Now it's kind of come out that it looks like a lot of that was these big AI giants trying to force regulation that works in their favor from the government. You've had Jason Wong from NVIDIA come out and say, no, this isn't a thing. Trump himself has said it's nonsense. What, what are your thoughts on this? Is this kind of a show how dire the AI space currently is in terms of the potential for future cash flows?
Speaker 2Yeah, I was, I was pretty sure at least one of the frontier models would disappear by the end of the year. We'll see, you know, or the leader would, I mean, I, I just, I don't believe any of this nonsense. I'm sorry. Like I, you know, I've trained models, like it's just, so I think this was all an operation. It was likely, you know, this guy is going to work at meter, which is, I think Amadai has just invested in that company. This was probably all a complete act. I mean, it's just, it's a psyop to distract us from the Iran war. That's, and these psyops typically have multiple purposes. It's not just one, you know, one was to scare everybody to death. But the other, was likely, like you say, to create some sort of regulatory mode that would help them out of this situation, you know, another is likely to, you know, make money. I mean, it's just they use these things, but it's just ridiculous. It's Y2K. It's I mean, it's everything. It's just so dumb. Like I can't. And but what's crazy is so many people fall for it. And it's just like, but it seems to me that these leaks, whistleblowers are really just a grand marketing campaign. Yeah, I would
Speaker 1tend to agree with you there as well. Tell us about the M3 Melody Substack and anywhere else people can follow you online.
Speaker 2Sure. So the M3 Melody Substack is where I publish all of my analysis. And I encourage everybody even just to sign up to the free version because I put a ton of data above the fold because this is mission oriented for me. So that's M3 Melody Substack. You can also find me on Twitter at M3 underscore Melody. And I will be coming back to my own. YouTube channel in the late fall because I do believe we're going to need some play by play of all that's going on. And that's M3 Melody YouTube.
Speaker 1Great. Well, I'll put links to all of that in the description below for those who want to follow along Melody. Once again, thank you for coming on the show and sharing your insights.
Speaker 2My pleasure. Thank you for having me.
Speaker 1Thank you for joining us today on Commodity Culture. Earn up to a 4% annual yield on your physical gold paid in gold ounces through monetary metals. Go to monetary-metals.com slash commodity to find out how to put your gold to work for you. Link is in the show notes below.
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