Oil Prices Are Surging — Is Inflation Next?

Tech is down, but energy and basic materials are up, Tiltities are off, flat, industrials are okay, the headline index doesn't speak to the fact that we have a major conflict in one of the most important areas in the world. Equity should be down 10% or more based on what's happening around the world and the fact that it isn't, maybe by next week. Canada is quote, "urgently exploring options with provinces and the energy industry to boost oil supply as trade disruptions caused by the war and then the Middle East spur huge volatility in global crude markets." Who's writing that? - I'm Bloomberg. - I'm gonna get angry. We've been talking about this for years. Possible field demand is not going anywhere and we have a moral imperative to build out our supply chain and this is exactly the point. - So we're doing a bank account at Twinkie Pet? - Oh yeah, let's do it. (upbeat music) ♪ We're having a shortness and race ♪ ♪ What it comes to be just a game ♪ ♪ She's in the bank point ♪ - Hey, there's a bubble. What does it look like when two leaders each defined by experience, innovation, and performance unite to elevate Canadian real estate lending? With nearly a decade of serving the needs of investors, boroughs, and mortgage brokers in the alternative market, neighborhood holdings has now taken a major step forward by acquiring fizz guard asset management. Forming one of the largest alternative mortgage lenders in Canada. Together, they manage nearly 800 million of mortgages across more than 2000 boroughs and over 3000 investors nationwide. Through the neighborhood banner, the team works directly with mortgage brokers across Canada providing short-term mortgages for quality boroughs who may not fit traditional bank criteria. Every loan is backed by real assets ensuring a measured conservative approach seeking to provide investors with stable income while preserving invested capital. Whether you're mortgage brokers seeking flexible financing options or an advisor looking for regular income solutions, neighborhoods expanded reach brings track record, transparency, and opportunity. Now even stronger with fizz guard's 30 year legacy. To learn more about the neighborhood, visit neighborhood.com to view the offering memorandum or speak to your financial advisor today. This is not advice and consult the professional advisor for investing aid, loony, and any of these investments. Welcome back to the loony, our episode 232. As always, Jonathan, the three megos got the boomer over in Dominican Republic, Rich Diaz, and Montreal. Welcome back, Richard. Hello, how's it going? Yeah, you. It was a, I don't know if some of you guys are familiar, but the 1998, I think, or maybe it was 1994, whatever. In the '90s, there was a humongous ice storm that basically froze the city for two weeks. And as a child, it was glorious, basically, because right after Christmas, we got an extra couple of weeks of vacation. Well, a tiny version of that happened last night, basically. And it was like, which was-- And one of the only things that Quebec is really good at, we used to be good at producing hockey players. We no longer do that. But we're really good at snow removal. And yet, yesterday, it was crazy. The whole city was just blanketed with an inch thick layer of ice on all the cars, all the roads, all the sidewalks. And for the first-- it was like almost-- it was my mom and my sister, who were obviously older than me, had PTSD. They had flashbacks of this ice storm from the '90s. But yeah, the whole city was kind of locked down for half a minute, but thankfully, we've thought out. So there you go. I remember that. That was one of the biggest catastrophe of Canadian natural resource catastrophes. You want natural disasters, yeah. Yeah, it was enormous back then. Yeah, it was-- Oh, do you remember a Keith? Yeah, yeah, absolutely. Yeah. Yeah. Anyway, there you go. That's it for me. But I wasn't a little kid either. I'll be dead. I remember. Will there any ice over there? No ice. Look at my party shirt, guys. I like it, Rich. I have a palm tree turf boards. And I think that's some water, I think. For anyone that doesn't have the visual, it's just the ultimate dad vacation shirt. Yeah, that or Mr. Smithers. Yeah, something like that. Yeah, hanging out with Mrs. Icecapp for a few days down to the stunt. It's been real nice down here. Oh, Rich, I got something for you. You know when you're over in Portugal, you have the super bucks that we called them? I love super bucks. Yeah, they have little beer here. The call. What is that? President Trump. I put it up to the screen. I can't see. If I put my head forward in the beer bag, it looks really tiny. Yeah, it's true. How big is it? Oh, look how tiny it is. Yeah, it's kind of tiny. It's 237 mil. Oh, that's even bigger than the super buck. Yeah, it's the president day. The president. President day. OK, good. Well, let's go for the taste test of the president day. Taste like beer. Steve, what's going on there? Your neck and the woods selling houses this week? Yeah, no, it's a grind out there. It's it's a-- Can anyone get credit anymore? Or are they all shut down? Well, the developers can't, but everybody else seems least. The banks are still lending. The banks are still lending, actually speaking of which, funny enough, there's actually an article out this week from Osvie, our banking regulator, which-- so you remember we talked about a story that's been happening. We mentioned on the pod probably over a year ago now where there was sort of this theme that was developing, which is all these people that bought these pre-sale condos in '21, '22, '23 that were coming up for completion, let's say in '25, '26, et cetera. The values had changed, right? So let's just say you bought a condo for a million dollars. Well, like everyone knows the value. Isn't a million dollars anymore. You bought a pre-sale to peak of the market. You know, that million dollar condo was really worth, let's say, 800,000. But the banks were still lending on the basis that it was worth a million dollars. Because basically what was really happening was the banks were ultimately involved on the construction side of the loan as well with the developer. So it's either you-- if you have a whole bunch of your pre-sale buyers that can't complete because they're units donor braze, and they can't come up with the equity, the shortfall, to close, then you have a problem with the-- obviously, the construction loan. So what the banks and the office we have effectively been doing is they've basically been turning a blind eye and they've been issuing-- not all banks, but a lot of the banks, a lot of the big ones-- have been issuing, you know, in many cases, loans at 100% LTV, or even greater than that, because they'd rather sort of kick the ball down the row, which is to say, let's get rich to close on this pre-sale. He's underwater today, but let's just hope that he makes his mortgage payments. And if he defaults in three years, we'll figure it out then. And so that's kind of what they've been doing is they've been calling them blanket appraisals. Well, there's this article out in the media this week saying, Canada's banking regulator warns major lenders about appraisal practices as condo prices crash. And so effectively, Reuters says that obtained meetings through access to information requests, they show how the office of the OSFee, the regulator, responsible for the stability of Canada's financial sector, is scrutinizing sub-mortgage approval practices more closely amid growing concern of the potentially broad economic impact of a collapse in Canada's housing market. Of course, the OSFee declined to comment on meetings with the banks, but people were starting to share those articles saying, oh, yeah, you know, OSFee, they finally figured it out. They're going to shut down this practice. And this was good. And the only thing I can tell you is someone that is in the industry that talks to these bankers regularly. This is all bullshit. The OSFee's known about it for a long time. They've more or less-- yes, they've talked to the banks. They've given them that stern warning. But it's kind of what's the old saying, Rich? Like, everybody's just sort of-- Everyone just took an agreement that this is going on. And everyone is just-- Don't ask, don't tell. Yeah, don't ask, don't tell. Hey, guys, maybe you guys shouldn't do this. Can you tighten up the requirements a little bit? That's pretty ironic with this, though, C. because you brought this up well over a year ago that it was happening. It just said, everyone is aware of it, and familiar with it. And now, finally, you're getting-- finally, a regulator is coming out with a stern warning about it. Years later. Yeah. Years later. Yeah, no, it's-- But who are they warning? Why does the warning, though? Are they warning people not to get a warning-- No, they're warning the-- The warning the banks-- The banks not to do it. Yeah, they're warning the banks, the big banks, that this practice can't be going on. It shouldn't be going on. Please don't do it. But we don't really do anything if you do it. It is kind of the gist. Because again, what's happening? I'll give you an example. I was chatting with a lender this week, which is like, he's like, oh, yeah, we had this pre-sale. And the came across our desk. And the guy had paid 1.4 million pre-sale just to praise at a mill. Right? There's a $400,000 shortfall. Yeah, X. Right? But if you have a blanket appraisal with one of these big banks, like hopefully they've got a blanket on there, and you can still get an 80% loan potentially on 1.4. So then you don't have to come up with that extra cash to close. You just close. Yeah, you're under water. But at least you haven't defaulted. And at least the developer isn't now stuck with Inventory. That's coming back on the books. So it's like the Emperor's new clothes if everybody agrees that he's wearing something. And he is. Yeah. And all it takes is for one. Well, I think there are a green he's wearing something but he's clearly not wearing anything. Exactly. That's what I mean. I garbled that. But you get the idea. I mean, yeah, yeah. So. Okay. This Brian, as long as he's sure the practice is still happening, fade the news article headlines that Osspies actually going to do something about it. This practice is almost certainly going to continue for the foreseeable future because the pre-sale condo space is it is a disaster. It is still a disaster. And yeah, the BC housing minister says housing data is strong, suggests strong interest from the development community. Oh, yeah. I got a kick out of that one. Yeah. I don't know. I don't think it's a disaster. I think it's a gully. That's a gully. Yeah, the BC housing minister was like, I did what was she saying, the housing data suggests that the developers are still excited about construction or something along those lines. And I was like, man, like you couldn't be further off the pulse. It's crazy. Yeah. It's just false. And we were, there's a insolvency that came up in Vancouver a couple days ago actually where it's like one developer, but he had two buildings that are like fully complete, completed units and they're like, you know, going bust. It's just, you know, inability to pre-sale. I think so many developers held too much inventory back, thicken the good times to continue. And then the building completes and you still have 30% of the units that are sitting on your books that you can't sell. Okay. But I have a question about this. Sure. Surely at one point there will be a pool of capital that will swoop in and be happily with like a long enough timeline sufficiently well capitalized. I'd say the Steve Syretzky real estate investment fund. We're starting to raise capital for that by the way. I'm joking, but you know what I mean? Like you just have like there are pools of capital. Let's say the Canadian pension fund that could be like, oh, we'll buy these condos at 40 cents on the dollar or 30 cents on the dollar. Yeah. And now possible. I mentioned that on the pod was it like three, four weeks ago. Keith is kind of paying attention on the podcast. Yeah, that happens if you know. So I mentioned there's that that group anyways that I was made aware of. Let's put it that way where they are. Yes, they're doing what you say. They effectively are raising money. And one of the investors in that is actually the Ontario government. So the Ontario government has like a housing affordability effectively slush fund. And so they're they're coming in with capital and saying yes, we'll partner with you on this. We'll buy up, you know, whatever 100 units. And if you make whatever 20% of them affordable rents, we will we will basically, you know, cut you the check. So yeah, I always freaks me out when the public gets involved. As demonstrated by years and years of abject failure and incompetence. But I'm more more curious about like the like, you know, like not black rocks, but you know, there are there are large companies that just buy up. Like, for example, I rent from a Dutch from a Danish company called acreus. That's the flat that I'm renting. They own lots of different apartment building. They own the apartment building to my right. They own this one. They own the one down the street. I mean, at what point do these sort of large rental unit, sorry, rental companies find it lucrative to purchase these condos at 40, 50, 60 cents on the dollar and just start renting them out or I don't think you'll see. Yeah, I don't think you'll see. I don't know. I'm surprised if you saw like a apartment and a reed style company go in there because I think, you know, as an a reed, do you really want to own 12% of the building and then you're part of a strata where you know, you have to deal with the 88% owners that are our mix of people. So you know, these typically, these people typically want to own a control via set and obviously you know, okay, okay. Beyond 12% of the building and just, you know, it's not attractive. It's too much of a pain. Okay, I didn't realize that that makes me. But yeah, so that's kind of what's going on. Fade off. Following rents, we got that is still continuing. Rental's dot CA with the report out this week showing that rents have now fallen for what are they at now? 17 consecutive months. So national rents, national rents are down 7.4% over the past two years falling for the 17th consecutive month. So the trend is in place, not in Winnipeg. The peg, not in Winnipeg. We always mentioned a red deer and then we got an email from somebody who was like, why are you guys always ragging on red deer? We're not ragging on red deer. Hopefully one day we'll have a loony hour meetup in red deer. We hear it's lovely. I think it's more of an affectionate, exactly. It's an affectionate ribbing. So to the gentleman who wrote a sustained warning about making fun of red deer, it was not to mock you. It was just we need to sprinkle, we always talk about Vancouver and Toronto. We got to mix it up. But one thing that's good here, I always talk about the trend and can you reconcile what's happening. But if the real estate market is grinding lower, rents should be as well. So because that's happening, I do think Steve and if someone will come in eventually, the market will work its way out. I mean, down here right now, everyone's talking about JP Morgan, Morgan Stanley, Black Rock, Blackstone. The time of the Christmas bar? Is that what they know at the buffet? There are some pretty big credit concerns taking place right now. So I think it would take a brave pool of capital to go into that world this week. We'll see what we can do. It's just interesting. See where we look, there's another credit story blowing up again. Yeah, we're going to get to that. But this kind of segues on the housing front. Obviously the weakness, the trend is in place. This kind of leads to the Bank of Canada rich, I think, is next week. What are the market odds right now for the BOC? All right. Excuse me, sorry. So it's a 93% probability of no change. The meeting is March 18th. I think. And probably the size of moving higher towards the hike. Yeah, so that's what's really, that's what I think is really cool. Remember, we always like, we warn people about putting too much emphasis on the like next December meeting. But that has moved up from 23% a couple of weeks ago to now 80% chance of a hike in December of 2026. And so right now we've got hikes being priced in for mid-summer. So now it's 40% chance of a hike in July. So keep the tell us why that's happening. But it is interesting that the curve, remember, the overnight index swap curve that predicts the future path of interest rates is starting to bend higher and higher. I'm going to say this Keith, before you step in, if you get a hike from the BOC this summer, fall, I think that's going to throw a lot of homeowners for a loop. I think people are still of the view. I mean, I'm probably somewhat of that view, but that rates are going to get cut or move lower. I think that would really throw people off guard. I think people haven't even mentally thought about the idea of a hike from the BOC. I think the challenge here is, again, you have the industry, and by the way, pricing rate moves out into the late summer and into December. I wouldn't put a lot of weight on that at all. But you had the theoretical world of finance where, really, if it's showing you that rates are going higher, it's telling you inflation is going higher. That's what all this is about. I would agree completely. We've been in the sticky inflation camp for a while. With the war in the Middle East now, I think prices are just going to skyrocket here. Based on that, the theoretical guys on base street or ball street wherever, rich, thread needle street, is that the big one over there? That's the thread needle street. That's where Park Cardi kept interest rates. Way too low for way too long. I don't believe, well, inflation going higher, we have to hike rates. No matter how high the rate, it's not going to control that kind of inflation. The inflation will be created from the energy world, and everything that goes upstream and downstream from it. If rates are higher or lower, it's not going to matter with that. I would take the under on both of those probabilities that you just shared with us, Rich. I think they're going to be. At some point, the bank of Canada, Steve, they'll make a decision. Are we going to be true to our goal, a mandate to fight inflation? Are we going to try to bail out the economy in the housing market? Eventually, they always change. If rates go lower, what does that mean for your mortgage rate? Where else, Steve? That's the rate to move lower? Yeah. Lower rates obviously help housing demand. People buy mortgage payments, right? Do you hear that on the audit? I think so many of these examples. You had the private credit thing happening at the same time. It is what we're going to do. Well, I think you can see central banks cut race, but credit spreads, the state where they are, or they go higher even. I don't think mortgage rates are gonna go lower at all in this scenario. - Keep credit spreads, they're finally moving. - I'm like this much? Is it, though, if you squint the size of my beer, is that getting a little tiny? - I say the chart, I say the chart, I tell you. You know people, we talk a lot about corporate credit spreads and the reason that they're not moving, or the non-moving anywhere near as much as they, our views, excuse me, are extinguished in the discerning views that they should be rising, and they have in fact moved a little bit. They're now up to almost 700 basis points. - Just a little bit. - From where were they, though? - They were, you know, maybe 50, 50, 50. - Like 75? - Oh, well, okay. - Okay, that's what I'm, on the chart, you can barely see. I had to zoom in on the chart to see, just to give you an idea, they were like 1200 basis, like 12%, it was like 12% at the end of 2023. So it came all the way down, and I've started to creep up with all this stuff. - Still very low. - Question. - So we're doing a bank account at Twinkie Bet. - Keith, you go first. - Keith was frozen. - I didn't hear any questions. - President Dante. - Go ahead. - It's a lot of Presidente. I didn't hear any questions, I apologize. I was, I was, I was, I was, I was, - You'll see. - From the, - Oh. - No, no move, no move. - For me. - Reggie. - Yeah, my, my bet is, is no, I'm, you can see the Twinkies back there. Fresh box. No, no move. I'm not gonna go against 93%. - Well, I'm not gonna take the reputational damage either. So, - Let's make another bet. Let's bet on how many questions there will be about, - No, I don't know. I'll think of something better, something else we can bet on, the press conference or something. - But the response. - So it's gonna be, you know, there's, you know, used to be, you know, the, the tariffs was creating all this uncertainty. And now it's gonna be about, you know, the wars creating all these uncertainties. - Yeah, I know. - And it's gonna be interesting though, if they do get the real question they should get, you know, or will the bank of Canada hike rates because of inflation data that's being driven by the, by the energy world. In which you would also comment whoever's listening to this is gonna be in the room. As you know, you know, Jeff or Carolyn, you know, Rich's friend. - Keep your, keep her name out of your mouth. - Oh, sorry, Will Smith. What, what? Again, it is no central bank in the world can change rates to affect inflation caused by the energy market. Let's see if we get that question everyone. Let's keep score with that one. - Keith, I'll kind of side with you on that. I think that, yeah. I mean, clearly inflation is gonna be moving higher, given energy prices, but I have to think about that. - Because didn't we just have inflation data just from the Americans was it this week, Rich? - Yeah, yeah, I came out. - And that was for the last month, you know, before the war started. So that number doesn't mean anything right now. You know, this is the next one. - What did it come in at, Rich? - 2.4% year on year. It was in line with expectations, 0.3 on the month. - And core is 2.5. I told you, 3 is the new two. - Man, yeah. - Yeah, well, I still think we gotta put a little bit of weight on trueflation. 1.2%. Going and going down? - Wow, and won't go down anymore. - No, that's true. - Yeah. - $100 oil, Keith. Good, nice call, buddy. - Yeah. - Yeah. - Do you want to do war stuff next? Or do you want to do the other big world? - Yeah, well, I mean, yeah, I think, I don't know, maybe just to touch the last thing on the BOC, I don't know if they're gonna look at Go Easy. But, hey, sorry to interrupt the show. I just want to let you guys know. We have two Lune Hour events coming up on March 23rd and March 25th, one in Calgary and one in Vancouver. The Lune Hour investor series with special guest, Ben Rabdu basically doing a presentation plus Q&A on the Canadian housing markets, global markets, and outlining investment strategies to protect and grow your wealth. The first one is in Calgary on March 23rd at the Ranchman's Club and as well to the event in Vancouver March 25th at the Vancouver Law and Test Club. There'll be tickets in the description, shown out below to an event break page where you can buy tickets for $40. Open bar, we'll take care of all that, food as well. So good opportunity to come out. Meet the guys, engage, ask a few questions, learn about the markets and look forward to meeting you all there. So once again, there is a link in the description in the show and it's blog to event break pages for both of those events before the scene. - So what happened there? - Yeah, go through that story, Steve. First for everyone. It's pretty spectacular in whether it's a legitimate or non-agitimate way. - Yeah, so go easy shares, which is effectively a subprime lender. The shares fell 57% on surging loan losses as they suspended their dividend. So it's a personal lender for subprime borrowers, shocked investors by announcing surging loan losses and suspending its dividend earlier this week. Shares fell 57%. Based in Mississauga, Goezy made its name by lending to lower quality borrowers during a credit boom fueled by ultra low interest rates between 2015 and 2025. The company shares stored more than 1,000% and investors salivated over Goezy's breakneck loan growth coupled with 11 consecutive years of dividend hikes. Lately though, there have been growing concerns with the quality of Goezy's loans. So there you go. - It's starting. - Yeah. The question is whether or not if we do get, let's say we get continued weakness in the Canadian economy, unemployment does go up and interest rates do get cut. Do you get a rebound in these stocks? That's, I don't think so personally, but it'll be interesting to see maybe we've been wrong before and we'll be wrong again. The interesting is how they react. - I just don't think this is all played out yet. I mean, there are a number of air pockets in financial markets right now. So on the surface, it means you can't see them. Everything still feels okay, but we start looking under the hood a bit deeper and then you say, oh wow, yeah, this is a big one. So the whole sort of subprime debt lending should that blow up? Based on the trends that we've been talking about. Yeah, absolutely. So it's not a surprise. Is it go easy? Is that what you call them Steve? - Yeah, go easy. Go easy on them Keith. - They're changing. It's go hard now. I think they're difficult. It's gonna be tough to play it out. But I guess with the trend, normally you get credit deterioration at the lower end first. So that is happening. And we saw it in a lot of Canadian, private credit real estate focus areas about a year ago. And now it's starting to spill over to the other parts of private credit. So again, I don't think we're at the end of this at all. And the fact that now Wall Street is involved with this, JP Morgan, Morgan Stanley and all this stuff. You know, we're doing this on Thursday on Friday afternoon, you know, there could literally be a big credit event. And everyone's gonna say, hey, you guys missed the biggest story, but that's how fast this is moving. 'Cause you're gonna talk about the, so if you're in a private credit fund, now like the US focused ones, by the way, there are a lot of great private credit funds out there. They really are, it's just the bad ones. The one that gets stretched, you know, they're losing like level three accounting. Sorry, that the value, the value things, you know, that's what's breaking first. But as soon as you get a bit of a whiff, that something is bad, and you're holding something close to that space, I mean, like what are you gonna do, Rich? - Sell it. You just, you don't wanna, you just do risk. It's as simple as that. It doesn't matter if you're specifically tied to that. You just, you just do risk. - Yeah, you get what's right. And obviously, then you sort of create the mini bank run yourself. And, but the other interesting thing, like a lot of institutional money out there, you know, they're locked into private credit as well. And they can't get out. They know, they just can't do it. But they would have to de-risk in other parts of the fixed income world. So that's when you see them, you know, reducing what they can sell. So whether it's investment grade or below investment grade, you know, things like that. So this is getting really interesting. I know the war gets all the news right now, like all day long. But these credit stories, again, I think air pocket is the word or the term to use. And so you just fly it along and you know, you're down 10, 20%. Then you'll be out to it. Usually when you're on a plane and it drops that much, what are people doing? Eating snacks. Grang. Grang. Grang. Yeah. Keith, Keith, like you know, we talked about the big ones out of the US, Aries, KKR, Blackstone, Blue Owl. That's Blue Owl's Steve's favorite. And then Apollo, my favorite, because I love the Apollo space mission. But all of those are continuing to decline. That there's no bounce. Whereas we've seen, we know, we remember we talked about software as a service. Well, actually looks like a bunch of those that actually stopped falling. So it's funny that those two stories are sort of going in different directions. Private credit is getting worse and worse. And for the software as a service is a theme we talked about a lot. And I'm sure. And I butchered and then was reminded of my ignorance and many, many emails. Thanks for that, by the way. But those stalkers are so far away. Steve. - O-L, Cobal. I think that's what you did. - Yeah, I got to ask you that up. But anyway, it is interesting how those two stories are going in different directions now. - And that's like with the financial market response, since the war has started, it's two weeks, right? That's it, that's what we're into. I think a lot of people would agree that, energy is doing what it should be doing because of where the war is. But we're surprised by the reaction from equities, for example. Some parts of the market are down a bit more aggressive than others, but overall, it hasn't been their response. So if I said to you guys a year ago, hey, a year from now, this is going to happen in the Middle East and Steve's favorite spot on Earth these days, the straight-up. - Or moose. - Or moose, it's getting in mind and stuff like that. Where would equity markets be? I think everyone on the planet said, oh, they're down 20% at this point. That's not happening. So it's a bit odd with the, no, this is insensitive but the financial market response from this. But yeah, I think the longer it goes on and the longer energy prices do what they should be doing because that is where we are. All of a sudden it's getting priced from being a short incident or a crisis or whatever. It's getting stretched out further and further as we speak. Eventually, what you're going to start to see next, these all these higher energy prices that are going up and down through the daisy chain, companies will start warning. Anyone that's heavy industrialized and they need their input costs or effect apply that. So maybe that will create an air pocket somewhere we don't know. But again, we're getting some really unusual responses. But I think if there is an air pocket, it'll come to the credit side right now. You're not from the, - He just put some numbers on it. Just to put some number, if you like rebate, I'm the serious, I like to look at us, I look at lots of stuff. But anyway, but the one is like broad market, X financials. So for the US, just to give you an idea. So we're basically exactly where we started on January 1st. So it is basically, we've done a round trip of like, we're basically only down maybe four or five percent from the highs. Which is really incredible. Just to put it. - So since the war started this down four or five percent, is that what you mean? - Yeah, and that's just like, and then I excluded financials because financials getting dragged down by all those private credit names that we know. But yes, so- - And how is that market looking from the high issue? - The financials are down quite, but almost 10% from the high, or 12% from the highs. Financial services are down 12% from the highs, banks are down 10% from the highs. But the market X those financials, again, the prop, because it's right, it's a weighted average of all these different industries. Tech is down, but energy and basic materials are up. You know, utilities are flat, industrials are okay. But it's just that your point is right, which is the headline index is actually basically, you can barely see that the change or it's just a normal sort of, it doesn't speak to the fact that we have a major conflict in one of the most important areas in the world, really. And we have to continue to watch the US banks, especially, right here, because, you know, again, we mentioned J.P. Morgan earlier, you know, the biggest damage, - Morgan Stanley as well. - And yeah, Morgan Stanley as well. I mean, as soon as these guys see these things, you know, they tend to retrench, you know, as well. So, I mean, your economy can't grow without credit. That's just the way things work. So, you know, financials are moving that direction. So we'll see if there's, you know, get it. Maybe the rest of the market, you know, is the air pocket comes down to the financial side. Again, like equity should be down 10% or more right now, based on what's happening around the world. And the fact that it isn't is just, okay, again, maybe by next week we're at that point, but I think the biggest story, though, coming up, I mean, we've been talking about energy market, you know, for a while. And, you know, I think most people now are aware with what is happening with oil. But the other big market underneath that we're starting to see movement with is the food agriculture industry in business. And again, that makes perfect sense. So, fertilizing price going on higher, you'd expect to see food going higher as well. So we're starting to see that, you know, feed through what we're holding. So that is making sense. The credit side does so much. - You're the, you're, you're, you're a monium nitrate granular from New Orleans. If you want to be, if you want to be a dick about it. No, there's like loads and loads of different futures contracts for different parts of the world, China, West Coast, East Coast, Canada, whatever. But anyway, the one that I like, I look at as the one from New Orleans is up 34, 35% over the lot since the beginning of the year, which is crazy. - Wow, that's a big move. That's a big move. - Yeah. - Rich, can you say that again? - So, urea, which is a monium nitrate, which is the input to the fur, like, which is fertilizer, basically, just keeping simple is up 30%. That's from that specific port. Each, each port will have a slightly different price because of transportation costs and where they get it from in blah, blah. So I can't track them all. It's, it's too cumbersome. So the one I just chose is the urea from New Orleans and the one, and the natural gas price series that I track is called TTF, which is out of the Netherlands. And the one, if you're curious about the US, it's called Henry Hub, which is far less volatile, but the one natural gas, and that, that's up like almost 50% from the lows at the end of last year. And they moved to, how's the European number looking? - Yeah, that's the TTF. That's from the Netherlands, that's 30%. Well, sorry, sorry, that's almost 60% from December 31st. So now it's almost doubled. It's like 70%. So it went from 30, went from like 30 something dollars per megawatt hour to 50 bucks per megawatt hour euro, excuse me, per megawatt hour. It's crazy. - Yeah. - So yeah, fertilizer prices up to 70. 77% over the last 12 days. - Yeah. - Oh yeah, so I should say that the prices from yesterday, it's not incorporating today's action, excuse me. - Straight of her most. Chokepoint handles roughly 20 to 30% of global traded fertilizer. - Yeah. - Shipping has dropped, of course, over 70%. - See that chart, it's actually chart circulating online showing the oil tankers crossing through the straight of her most. - Yeah. - Did you see the one that was like going? And then like, - Yeah, yeah. - Yeah, yeah. - Yeah, yeah. I mean, I'm smiling because only it's just so kind of preposterous what's going on. But it was, you can literally track all these ships and literally just did a U-turn in the middle. And you can't blame them. It was one that was bombed yet, or two of them were bombed yesterday, or they're starting to mine in the straight of her most. - That's not, this is not going to go well. - That's not great. Keith, I don't wanna say how do you see this shaping up? But I mean, it feel, I don't know, maybe from outside observer, obviously, you know, the US administration leaks to the public probably what they want to hear or see, but Twitter being relatively unfiltered, it feels like this has escalated well above anyone's expectations. - Yeah, I would agree. I think, you know, when this first started, it was a Saturday, like late Friday night, Saturday morning, over an hour side of the world. I mean, I think a lot of people were expecting it could be over my Monday, you know? They would have some kind of agreement. Now, a lot of people were concerned, well, they're not gonna get the price movement. They thought they were gonna get on Monday. And now we are, you know, almost two weeks later. So the longer it grinds out. And Rich, with the, is energy infrastructure being permanently destroyed over there? Or is it just the flow? - The thing is, like, what I understand, is like so many of these refineries rely on constant egress. So they don't have storage on site. Excuse me, they do have some storage on site, but the whole premise, the whole way that these refineries, remember, some of these refineries are hundreds and hundreds of meters long. There's probably tens of thousands of kilometers of piping that go up and down and this and around. And you've got like, you know, the distillery, 'cause that's what it is, you effectively distill crude oil and get the different types of cracked hydrocarbons for all the different applications. And so when you're, when you have the, and so you have like these pump jacks in the oil field, that oil gets put in through a pipeline. It goes to the refinery. And then that refinery then distills the product and turns it into different, and then they get put on the ships and then it goes out to the straighter from moose and around the corner and whatever. The problem is if you, if you have a bottleneck, you can't just keep producing, right? Because then you have no, you have like, you know, I don't explain it. Think of it like, you know, like a company that makes whiskey. You need people to keep drinking, or else you basically just have a buildup of product. And that's also dangerous, right? Because if that gets attacked or whatever, you know, you have spillover. It might be similar to your explanation, you know, when the Germans shut down their nuclear power plant. So I remember I asked you, well, can they just turn it back on? Right. And you said, no, you know, it takes a lot of more to get it up running. So I think out of an excess of caution, which makes sense, because these buildings effectively are worth billions and billions of dollars, a lot of them are shutting down because you can't just put product on a ship that can't get out. And so that's what I think. think is happening. Yes, there's been some damage to some infrastructure for sure. You can't that that's for that's true. But I think the real thing is that they they're shutting down the production because they can't then ship it out. I think that's what's really going on. That I don't know again, there's pro is that does do burger alluded to this tons of propaganda, but that's really what I think the issue is unless you can put it on the boat and then the boat leaves and then you start to remember that process those these processes are continuous. They don't they never turn off. They run 24 hours a day, seven days a week in perpetuity. And so if you can't just keep producing product unless you have a mechanism to basically release that inventory into the market. I think the what we're going to see here is that the energy story is going to spill over into the rest of the global economy. So input costs are going to rise, margins will get squeezed and that's going to affect the credit world as well because I think you're increasingly going to see private boards are just not going to be able to keep up with with payments. And by the way, like people are thinking, well, like is that like the dude in red deer? No, no, no, no, no, I take that back. The dude in the wood effect, you know, boring. I don't mean that. I mean these small, medium-sized businesses that are boring. And they're they're getting squeezed with their input cost with whatever doing and they're not able to pass it along to their end market. But again, I think all of this is going to be intertwined. And at some point that will start coming out as the story. And then that's when the air pockets, you know, they just get off. There's also like so many input costs that we don't even think about, you know, like you guys asked me to look up helium and thank God for cloud cloud, you know, helium is a so helium is helium. So helium, I just learned five seconds ago, the helium helium is an exceptional exceptional thermal conductivity makes it ideal for cooling during the process of ion implantation and plasma etching. I have no idea what any of that means. But the key point to take away is that it's vital for the production of semiconductor manufacturers. Low and behold, helium is a non-ruble resource extracted as a byproduct of natural gas. The same thing that there was no business case for. And I think what we're real like, you know, you know, is it fool me once? Fool me, you just can't get fooled again, you know what I mean? And so we learned from the invasion of Russia, of UK and from Russia that obviously energy is extremely important. No fossil fuels are not going away. Natural gas is a vital, is an input to fertilizer and now we're understanding an input to the production of semi-conductors. Hopefully the lesson to take away from this is that all the people who have been screaming from the rooftops to destroy our global energy infrastructure were wrong and should be flogged. But the key thing is that like there's going to be loads and loads of sort of second and third order effects that we really don't even appreciate right now and it could take months, not years to sort of shake out. Rich, there's an interesting thing on the, so I guess the Department of Energy says they're going to release 172 million barrels from their million. 172 million barrel release. We'll take approximately 120 days to deliver based on plan discharge rates. But there's an interesting commentary. I think it was, I can't remember where he was from. I was Jeff Curry there. He's the, and he runs the energy fund there at one of the big banks. But I was listening to the interview with him. Uh, works as a basis, like listen to everyone's making a big deal about this, but it's, it's really about, called 1.4 million barrels a day. He's like right now, you know, you've lost about three to five million barrels per day, three to five million, uh, due to obviously these, the war that is ongoing. And so he's like, this is like a one-time release, right? Like, so depending on how long this war goes on, um, you know, his, his view anyway, his commentary was the move for oil price. This is ultimately higher. Yeah. It's Flow versus Stock, which is a story I stole from Tracy, friend of the show. She wrote a, I wish I had thought of that myself, but like, she wrote a really, really interesting piece about how this release of barrels into the market. It'll patch things up for five seconds, basically. I mean, this is like what's infuriating about the politicians who have tried to convince humanity that we don't need fossil fuels is that, you know, in economics and frankly, all of our lives are live at the margin. Human beings consume 105 million barrels of oil per day, not because of some, like, you know, conspiracy. It's because it's super, super, super useful. And if you just screw with that supply and demand dynamic, you can have massive, massive, massive consequences to the lives of everyday people. And that's exactly what we're seeing. Yeah. So we're seeing obviously, um, I think the Chinese now have halted exports of diesel gasoline fuel for the, for airplanes there. Yeah, fuel. And, yeah, so I mean, the implications are significant. I think we're, I think it was reading the news today that like airlines are all raising their fuel surcharge taxes. Cathay Pacific just raised it. I think $400 per trip. Yeah. So I mean, it's not, it's not insignificant. And yeah, I think there is there's actually that's right. That's a really good point. Yeah, just to mention that for a second. So if it's, you know, the airlines for the bucks per trip, that's a big. Yeah. I got pulled up right now, but it was, it was a significant, uh, significant job. But if you're a yank in that out of everyone who's traveling, so say a family's traveling once a year, family for, New New York math, 16, 100, uh, but again, it's all, and, but companies are traveling and stuff like that. It's all less money available for your economy to grow productively, you know, instead of these higher costs. By the way, the airlines, they first, you know, created the, um, they can oil, temporary oil tax for something back in the O's when oil went up significantly. And they all claim it was temporary. We'll withdraw, they had special permission for it, you know, 15 years later, this thing is still there. Yeah, like GST. Yeah, it is not going to get taken away once what's he do again. Guys, I just, just to clear why so for catapasific, so they've doubled, uh, they doubled the increase. So it used to be oil, uh, the old search charge was about 73 U.S. is now 149 starting in, um, starting next week. So it's 149 U.S. 200 Canadian roughly, um, per, per flight. Since the charges per segment, a round trip long haul will add about 300 to $400 in fuel search charges. There you go. Great. At the end of the day, it's always like the dude who pays for everything. Yeah. Rich, that airline index is down about 15% now. You're to date. Yeah, that's priced. So by the way, we're not the biggest trades we ever did. Uh, it was back during, I think it was oh six or seven. Is that when oil spiked to 147? Uh, yeah. Yeah, 147. I think I shared this story before, but just, you know, sharing this is because I think we're going to make, we're going to get these opportunities again coming up. So when you get us, we had a super spike in oil, you know, we are realized, hey, this is not going to last. This will turn. And so we started researching very quickly, you know, which sectors, subsectors, stocks had the biggest negative correlation to oil. And it was the airlines, of course, you know, that's what you're looking at. So then we said to the guy that was covering that sector force, okay, which is the best one to buy? It's funny. He said, he's a key. They're all crap. It just close your eyes. We bought four. We would have been like American airlines when they're united. I think dealt it at the time. And then sure enough, after oil, you know, they did that, you know, water spout spike and came up. Those things bounced about 20, 30% afterwards. So when you get these, I don't think we've had this super spike long enough yet for energy. But if we continue to do this, the airline stocks should go down. So anyone that's really, you know, they're, they're energy intensive into their input costs. So you can just keep thinking, you know, just use your mind and which ones get hurt by that. Through the ones that are going to bounce the hardest. And then the other same, the other ones that gone up high, like they will bounce the other direction. Yeah. So speaking of bouncing in directions, I just received an email then it's, I'm invited to a, a webinar session is going to provide a comprehensive introduction into private credit. Why do this? How it works? And how can fit into your investment portfolios? They're looking for some liquidity key. Yeah, they are. Yeah, they're the, you're the Patsy at the table. Yeah. Yeah. I'm not a Patsy at this table. No, no way. But talk about like that reading a room, you know, this is from, you know, an industry group email, like just you can sense the sense of these podcasts. Yeah, these guys are sending it out. They're thinking, I don't know, I don't know who's buying this stuff. As you said, Steve, it would be the Patsy right now. And again, that doesn't mean that it's all wrong, but everyone else is trying to get out. So maybe that's what they're doing. - Hey, well speaking of energy prices and obviously the knock on effects of course hitting hitting markets of course that are more reliant dependent on it. There's been gasoline. Have you seen those like videos of the long lines of the gas stations in China, Rich? There definitely seems to be an element of like hoarding going. - That's pretty cool. - Yeah, rationing hoarding. I don't know. It feels like almost like the toilet paper thing during the pandemic. - Thank you, boy. - Yes. Thank you for reminding me about a very interesting time. - So that's going on. There's been price caps on gasoline in Korea and in Thailand. - To Thailand? - I mean, I imagine. - Taiwan. - Taiwan. - I mean, country that has a massive energy deficit will be vulnerable from this kind of price shock. Guess which country has a massive energy surplus, Keith? - USA. - Oh no, they're about basically balanced. Neither here nor there. - Canada has a massive energy surplus. - No, but if you look at it from the strategic petroleum reserve perspective, I don't think we have anything. - No, we don't have resources. - We don't have anything in. - Sorry, go ahead. Sorry. - Well, I'm waiting for you to waffle on about. - Well, we don't have reserves, but we don't need reserves. We have 160 billion barrels of reserves. We have two. You know, we put this is a conversation where we serve. That's an equal reserve. - It does. - If I go to the kinds of reserves. - How quickly can you ramp up those oil sands? They'll realistically. - We do. We produce 5 million barrels of oil a day. We only consume about 2.5 million barrels a day. We're connected. We're inextricably connected to the US energy system. - Chris, there's not enough incremental pipeline capacity. - I'm sorry. Canada is not quote unquote vulnerable to these bikes. The way other countries are. You cannot compare. - Your point is fair. So I think like Japan is incredibly vulnerable. - Right. - Is probably one of the most vulnerable countries in Japan. - They import every drop of I think they're in trouble. - Go ahead. Sorry. Go ahead. - Well, yeah, there's an article out that says, you know, Canada is quote, urgently exploring options with provinces and the energy industry. DeBoost oil supply as trade disruptions caused by the war in the Middle East spur huge volatility in global crude markets. - I guess that's an article from. Who's writing that article? - Bloomberg. And who's holding this? I'm going to get angry. - So Tim Hodgson, our energy minister is obviously out use tweeting and saying, you know, I spoke to provincial energy ministers from BC, Alberta, Saskatchewan about energy market and the IEA's coordinated action to support global energy security team Canada is prepared to do our part and are actively exploring options with our oil and gas industry to support like, you know, I mean, it's just the irony. - Oh man. - It's the irony. Yeah. - This is just fluff. It's fluff that should infuriate every red blooded Canadian like we've been talking about this for years. Fuel fossil fuel demand is not going anywhere and we have a moral imperative to build out our supply chain and this is exactly the point and exactly the reason. - So I can't wait to hear the urgent response from this. - We need one of those carbon capture pipelines. Anyways, I feel like, you know, I feel like old man yelling at cloud that's how I feel cute. Oh, Rich, you like this. Speaking of yelling at clouds. Ursula Vonderley. - Oh, yeah. - Oh, sorry. - She was out. So for those that aren't familiar, she is the president of the EU commission. So she says Europe needs homegrown low carbon energy sources, nuclear and renewables together have a key role to play. Nuclear energy is available around the clock, providing electricity to all year. Europe has been a pioneer in nuclear technology and we can lead again. All of that is true. So I'll let you take it from here. - Well, just like she voted, she was like, so what's great about Twitter is community notes. I think that that is like one of the best inventions ever. And what they did was they literally, so she was giving this speech at the nuclear European nuclear summit, you know, with all the flags behind her and the pomp and the circumstances and then underneath, they basically wrote like Ursula Vonder said, voted to close when she was in parliament or the Reichstag. I can always forget the name of the German parliament. But basically she was, she voted to close to shut down the nuclear power plants in Germany. Remember Germany used to create the generate 23 gigawatts. It was the one of the biggest producers of nuclear energy in the world. And now they're producing exactly zero gigawatts to give you an idea. Canada produces 14 and Canada is one of the biggest in the world. And yeah, so underneath it had like a screen shot of the voting record on that specific piece of legislation. And if you screen down, I mean, it was like hundreds of them had voted to close it and her name Ursula Vonder said, well, she can change her mind. - That's true. - She can change her mind. But like we need to hold these people to account for having horrific views on things that are demonstrably stupid is what I'm trying to. - There is. - And I get excited. - I agree with that part. Absolutely. - No sense of shame. No sense of shame. I would have more respect for her if she just came out and said, you know what? I'm sorry. I was wrong. Clearly that was a mistake. I'm changing my mind. Like, you know, like anyone who is married, who has said that at least five times on this trip. Oh, sorry. - Just like, let's we should be right. - Anyway, similar. This is my beach read. - Newly or. - Is that a novel or a prophecy? - It is. I want to reach out. Her name is Annie Jacobson. The book is called Nuclear War. She was interviewed on Rogan a few months ago. And it's just. - What's it about? - It covers the process, what happens when the US, they believe they are attacked by an enemy with a nuclear warhead and what goes through that entire process and how it develops. And so she, you know, you just, you learn as a couple of very severe potential events. Like how powerful, you know, they marry in Russian, what they've accumulated in nuclear arsenals, but also the process and place where actually you're launching them. It's not as really as sophisticated as you think. It's, well, and also like these sort of defense systems. I mean, we're here, but that of course, for the reason. - Thanks for the opportunity, then. - Yeah, but this, this is an outstanding book. I want to see if I can get Annie on as a guest. It's really interesting. - There's something for you, Rich, if Wyoming was a country on its own, you'd probably be the third or fourth most powerful nuclear state on the planet. - I don't know if that's comforting or not, Keith. - That's where they hold them, you know. I was in the doors. The doors and some farmers back there, they open up and this thing goes. - Yeah, the live Lunar event there. - Keith, they do talk about the, there's always one guy that's always next to the president at all times. You never notice him, but he's carrying the football. That's what they call it. - It's not. - It's actual with the codes in everything. Yeah, anyway, it's a bit of a pretty reason. - Do they talk about mutually shared destruction and like how that plays into the psychology? - Yeah, absolutely. So in this scenario, going through, everyone agrees. So the Russians and the Chinese and the Americans, they all agree that, you know, you just don't launch because it means you're also going to be. The amount of time, it's immediately picked up by satellites as soon as some rocket burns on the platform. They can tell immediately that, oh, wow, this is not good. And then other things develop. And so, you know, everyone's going to die when it happens. So in this example, is the Koreans who initiate something? Rich, you would love the submarine stories. Is that the battleships that you want or you got to be worried about? Is these submarines that they're amazing? But yeah, the whole thing is about, you know, the theory is deterrence, you know, to keep someone from attacking you or attacking each other. And it's just this agreement, you know, but you just take one guy to sort of move off course. The deluni hours over. - Is that surprising? - So the bad news is the world, the whole world gets to like, it's iterated. Very, you know, the whole world gets to iterate. That's the bad news. Well, the good news is we get Star Trek 3 and warp drives. Because that's a premise for Star Trek 3 or 4, which everyone. - Well, the good news is it happens very quickly. So you don't have to worry about it. - Yeah, that's right. Hopefully we want to stay with you. - That's interesting. - That's what happens. Well, thanks Keith for. are really putting some cold water. - Something other, let's talk about nuclear concept in a much softer way. But it's gonna go back to what policy is going to be. So if we get to say the war continues, air pocket, pops from private credit and all that stuff, everyone should be prepared to see all central banks cutting rates. I don't think the Western world are gonna raise rates to try to offset inflation. They're gonna be cutting rates to try to, unless the currency goes in the toilet, which would happen to Europe by the way. But you're gonna see fiscal stimulus to the moon. So everyone thinks Canada has a lot of deficit spending right now. What was it, 70 billion for the last? - 79 was the projection, but I will bet you a twinkie that it will not be 20, 79. It will be much higher than that. - Yeah, absolutely. And so you're gonna see this thing increase like 50%, 100%, and everyone's doing it. Which could create this explosive upside in equity markets. So you can see equity markets going up when everything else is sort of crumbling. Especially if you get the bond world crumbling, because then money would run away. So money will run away from that sector into equities. It's all fascinating where we are. - I mean, we've just talked about the wall of debt issuance over the years. And I just think about how costly this war is going to be. And as you're suggesting, right? I mean, you could actually end up a scenario with where fiscal stimulus ramps higher from here. And I have to wonder who's gonna be buying all the debt. - I know. Richest lady friend in-- - Girl of Rogers. - Yeah. - Darryl and DeFed, E-Math, ECB is gonna get drunk on Kiwi. They gotta buy a ton of it. - Yeah, so Steve, it'll be Kiwi instead of, we need a private sector, you know, buying the debt. - Maybe that'll give you the liquidity you need to buy those pre-cons again. - And your private credit funds. - Yeah, that's true. - Playbook is clear. They've done it over and over again, 2008, 2016, 2020. - They got all the air cover. - I mean, they need an air cover. - By governments running extreme deficits in this scenario and cutting rates and doing Kiwi, again, it's just trying to maintain a continuance of the, you know, the Bretton Woods agreement that everyone made. And, you know, I've been saying now for a while, that experience is over. With all the policy tools they created and they wanna agree to use, there's no longer effective anymore. So ultimately, I mean, when you're doing Kiwi, you're just delaying, you know, debt destruction. That's all it is. So, you know, we are gonna eventually hit this, you know, the soft debt crisis that people talk about. You know, ironically, you know, maybe it's on energy markets that blow up, you know, with the war, maybe it's someone's bond market. We can go there. So, again, everyone, like, no, don't think everything is nice and calm and quiet now. There's a lot of stuff happening underneath the surface. - Thinking about the Canadian economy again, Rich, I can't think of a better scenario in terms of like, having the political air cover today, to be building pipelines. Like, before the war broke out, right? We're, the Carnegie administration has been using, you know, old Trump, Orange Band bad, perfect air cover to basically go and build a, you know, a pipeline to the West Coast there. And now you layer on like this war in the Middle East. And you're like, man, like, if you can't rally a country to support the building out of a pipeline or multiple pipelines today, it's never gonna happen. - I agree, I agree. But I mean, Canadians, I'm sorry, I'm gonna get blowback for this, but brainwashed. We're not, we just, we have not, there's still people who just insist, you know, whether it's, I'm not gonna name their names, I don't wanna give them the oxygen, but there's loads of people who work for the major media corporations in our country who are still under the impression that we don't need fossil fuels. And I submit to you that Canada has a lot of them. And we are an ethical and relatively sustainable producer. And of course we should be doing it. We have a moral obligation to do it. - I think that makes it easier though Rich. - They'll just be told which way to walk and talk. - I'm serious. - I believe you. - I believe that this is broadcast, you know, across the media's and everyone will go, oh, well yeah, you know, it's a good idea. And then they can go full on into it. I think you're right, Steve. I think this will happen. - So how easy is it to sell publicly today? I'm like, God, you know, you like-- - Oh man, one CBC news story, they'll do it. - I mean, it should have been easy when Ukraine was invaded. - Yeah. - But I guess fool me once. You just can't, you can't fool me again. - Rich, we fooled you a lot of times. - I know. - I'm very foolish. - I have a lot to do. - Well, that's true. - Well, that's a good spot. If you want to come and fool Rich in person, we have two events coming up. March 23rd in Calgary, the Lunar Investors Series with special guests, Bob, Sakamoto, Ben Rabadoo, March 23rd in Calgary, March 25th in Vancouver. Still some tickets available in the description below. There'll be a link to an event break page where you can go and pick up tickets. And yeah, come hang out and have a beer, have some food. Shoot the breeze and yeah, Rich will be loading up the chart deck and should be a good time. There you go. Well, Boomer, enjoy your time over there. Thank you everyone for the sport. All we ask again, if you found this episode of any value, entertainment, all we ask that you share with one friend or family member and help us continue to build a Lunar Community. And as always, we'll see you next week. (upbeat music) [BLANK_AUDIO]