Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Wisnal and I'm Tracy all Away. Tracy, So, obviously markets have been really fun and wild and crazy lately.
You know. I think that, um, when we started talking about some of the stuff with game Stop and everything and a liquid small small stocks being pushed on message boards, we didn't expect it to move to a major commodity market, no, And I have to say, I'm reminded of the post you wrote a week or two ago about how it can always get crazier, and I think what we're seeing right now is proof that it can indeed always get crazier.
But what started with a relatively small single stock game Stock migrated to a bunch of other stocks like AMC and Nokia, and then it seemed to go to the silver market. And I think silver future has jumped quite a bit, although as we're recording this, uh, let's see, it is February second, and they are starting to come back down a bit. But the notion that retail money would go after a market as large as silver is pretty intense. Like that is a big market, certainly multiples
of game Stop. Now it should be noted that there is some ambiguity about where this silver trade emanated from. There are people on the subrettit Wall Street bets to say, hey, this isn't us. We never said anything about silver. That's
not clear. What is clear is that something happened and in a span of just a few days, starting at the end of the last week, maybe Thursday, Friday through the weekend, basically every retail silver coin site was just instantly out of inventory, some of them saying, um that they got as many sales in two days as they would expect to get for an entire month. So something happened. They just sent silver demand both through physical demand and also plays on the e t F and then into
the future of market. Absolutely wild. Yeah, this is why I find some of the reddit or Wall Street bets pushed back on this really weird. Like they're all saying that it's hedge funds buying silver and its bots trying to push the price of silver up on the subreddit. But the fact that all the coin stores are sold out of American eagles kind of makes me think that there is a retail component here. And I'm sure you know, Ken Griffin isn't going down to his local coin store
to load up on Philharmonic coins or something like that. Now, Tracy, we're gonna get to our guests in a second, But have you um posted a video yet of you stacking silver? You promise you were going to do that. I did, but then I got really a side tracked and um tired by the podcast recording schedule. I will do it. I will try it this week. I promise again. Maybe maybe you could, maybe you could time the release of the video for this episode. So, unfortunately, we're not interviewing
your dad because we've been talking about that forever. We know your dad is a big silver bug, but we're not getting him. But I'm extremely excited about our guests. In fact, we booked him before all the silver mania happened because there is actually so much more to talk about in the broader world of commodities, and it was originally we're going to talk about all that. So there's so much going in commodities, silver, oil, the broader macro picture,
industrial commodities, copper, etcetera. All wild stuff this year. So we have the perfect guest for it. We're going to be speaking with Jeff Curry. He has the Global Head of Commodities Research at Goldman Sex or role he's occupied the two thousand and six longtime veteran at Goldman Sex, been there for twenty five years and really just sort of knows more about the commodities world than almost anyone you'll speak to. So the perfect guest today, So um,
Jeff Curry, thank you so much for joining us. Great thanks for having me. Jeff. I don't want to get you in trouble or have you say anything bad about people who buy commodities, But honestly, what is the deal with people who go who buy silver? Because I will say that in my career following markets for the last ten or so years, there's something about silver people. They're just like wired a little bit different silver people, And I'll just leave it at that, silver bug, silver people.
What is the deal with silver? And why does stuff like this happen? Well, you know, you know the piece we put out this this morning was silver is remains the Populist medal, And you go back in history for you know, hundreds of years. Silver has always been associated with populist movements, and so the market today is focused on the Hunt brothers cornering at the silver market as
the his oracle analog. We think the appropriate historical analog is actually William Jennings Bryan's Cross of Gold speech, where essentially he argues that the government in the banks, um, we're suppressing inflation and economic potential, which is similar to the rhetoric that the you know, the Wall Street veterate hedit Um group was advocating. And the key here is that,
you know, take somebody like Brian. He was advocating silver coinage as a way of getting around this, and so it has that historical populist element to it, and I think that's really what it's at play here, and the way we view the Wall Street Vets group is this is just a continuation of the rise of populism or it's just you know crescendo occurring um, you know, week after week. That's representing I think this need for governments to address some these issues around income inequality and other
social needs. So we alluded to this in the intro. But trying to force a squeeze in a commodity market is very very different to trying to force a squeeze in a single stock with high short interest. How how effective do you think retail could be. And again we should just repeat the Wall Street butts is refuting the idea that they're behind all of this. But how effective do you think retail could be in moving the price
of silver? At this point, again going back to the Hunt Brothers, there was significant regulatory changes in these markets, in particular position limits that makes it almost nearly impossible to be able to squeeze these markets on the same scale that we saw forty one years ago. Um, you know, and also in terms of thinking about the magnitude the size of these macro markets versus let's say game stock.
You know, the size of the silver market in terms of what's being produced and all out there is you know, somewhere around three hundred billion US dollars. You know, it's three hundred times the size of the original market cap of games. And so when we and by the way, that's a in our world, silver is one of the smallest markets we deal with. You put something like gold, you know, in term you include everything in the central banks,
it's just like a seven trillion dollar market. But I think you know, the key point here is that if you take the what five million Wall Street Bets subscribers, they would imply that each one of them would have to own somewhere around forty two hundred ounces of silver to be able to replicate what the Hunt brothers did.
Then the ability for them to do it, given position limits, means that you would have to split the position fifty three ways, with each position representing two hundred and seventeen million dollars um, and they would all need to be coordinated. So, in other words, it's nearly impossible to do in the current environment, and that's one of the smaller commodities. I think Wall Street Cuts is now seven or eight million subscribers,
so the number keeps going up. But point taken about the amount of firepower that would be needed, yeah, it still seems very unlikely that they're going to do what would be needed to really corner this market. Jeff, you know, there's this persistent myth or this thing that people say, and I don't really understand it, but I guess it gets back, you know, to some of the William Jennings
Bryan populism. There's this persistent myth out there that the Wall Street banks and in particular JP Morgan for some reason, and I never understood why, what the what the story is they're like, oh, they're sitting on this huge naked short position, and if we just jack up the price of silver enough, they're gonna have to cover and then that's the way we're going to take down the bankers and get them back and all that stuff. Do you know,
like what do what? Can you walk us through the origin of this notion that for some reason banks Like where did they get this idea that banks are sitting on these huge unhedged short silver positions. If you look at the c TC positioning reports, what you see is that the U, the swap dealers, the banks are have
very large short positions in um precious metals. Now, the thing that's forgotten is that these are typically hedges to the physical positions and like the E T s And that's the one thing that makes commodity markets very different from financial markets or the long only markets is that there's zero sum, meaning that for every long is a short, and I think people forget that. And also, you know, it goes to a broader point about the ability for
um speculators to impact these markets. Uh, when you have a speculator coming and buy the share of a company, the only way you create more supply of those shares is through the SEC approval and then you issue new shares, so if the speculator buys those shares, they can drive up the price. Now, when you think about a commodity market like let's say, you know oil or something like that, where you have the the you know every long there is a short, you're adding more loans means you're adding
the short. Now, what separates silver and gold from all the other commodity markets is that E t F is physically backed. And so to answer your question, what they're observed is the fact that the lights of the entities that are supporting those e t F s are using the comac silver market as a hedge mechanism. And hint,
that's why you see the shorts in that market. But I actually always want to quickly go to a point about the physical aspect of those e t F gold and silver is if you take the the the current size of the of the gold et F, you know it's somewhere around a hundred and fifty billion dollars of gold. You could put the hundred and fifty billion dollars into your office. It may break the floor, it's so heavy it falls through. But the key point is that you
don't need a lot of space to store it. Now, in contrast, if you take the oil et F, which is all paper, not physical, and you look at the total amount in there, it's something like a hundred and eighty million barrels. By the way, don't quote me on these numbers I made. They changing quickly. But the point I want to illustrate here is that if you take a hundred and eighty million barrels, one BLCC carries two million barrels. So think about this, A hundred and eighty
million barrels is ninety blccs. Now, why don't you even envision in your head parking ninety b LCCs in the East River, New York or the Thames here in London. It becomes incredibly difficult. Now, in contrast, you take that hundred eighty million barrels at fifty dollars a barrel, that's nine billion dollars parked out on the Thames River. And if you can think about the gold et F, I've just stored a hundred and fifty billion dollar dollars in my office. I'm gonna get you need to concrete floor
to be able to store. But the key message here is you can do it, you can't do it in oil. Hence why you have physical e t s in both gold and silver. Yeah, don't take physical delivery of oil, something I learned from first hand experience. So so what's your what's your take on why the price of silver actually moved this week? If if we're saying that retail probably doesn't have enough firepower to do it by themselves, what's going on here? Well, I mean in terms of
looking at you know, near term volatility. Absolutely, they can create volatility by moving uh, you know, in and out of the market and creating velocity and changes in open interest, which they are doing because you know, we're down again today similar to this we were up. But in terms of thinking about a long term structural shift, you need to have physical demand for those coins and real physical silver.
It's increased. What but is they going to create a squeeze or anything of that, Megan to The answer is no. And I so I don't want to dismiss the inability to move markets, because clearly they did. Yesterday's silver was up eight percent. But the question is are they going
to stay in this market and maintain those positions. That becomes a much more difficult task because the one thing about commodities that separates them from again from financial markets is not only are they long short, but also there's an expiration that they mean the financial market expires into the physical, which means at some point they have to roll these positions back out onto the financial market to avoid taking delivery like our example with oil, and because
of that need to roll, they prefer, you know, these financial instruments like the E t F, which is where most of the retailer activity remains. So regardless of where the uh the idea to go crazy to buy silver originated, it did happen. Obviously we saw the buying and the s l V E t F. I mentioned that the the coin dealers all had to put out put up signs saying we can't sell coins right now because we're
out of inventory. As an analyst, now now that you've seen this happen in the silver market, how do you think about it going forward? Because maybe okay, this is gonna die down and maybe silver in a week or two weeks we'll be back to where it was. But now that this can happen and we're aware that they sort of like flash mob buying can happen in a
physical commodity. How does that make you think about sort of like volatility in the space going forward, the risk of it happening um again and sort of changing the ability for the market to get at least short term disrupted so quickly, so fast us all these markets, the volatility has started to rise substantially, and this represents a significant departure from you know, let's say two to three
years ago. UM. And I think it, you know, has to do with the fact that you have these markets running at much lower inventory levels, which goes into this more structural story, you know, because you know, I think, as you you're aware, we're advocating we're entering a new supercycle.
And the evidence that we're you know, in you know, this transition between a tactical bowl market and structural bowl market is that every single one of these markets, with the exception of zinc and coco, is in a deficit right now. That's a very rare dinam, which means that, um, when you have volatility of positions going in and out of a market that has tight physical fundamentals is going
to manifest itself in greater volatility. You know, we like to say that the biggest shortage facing silver today is the ability to give the physical to the exchanges, whether if it's the Leemy or the COMAX. And that's the type of volatility that's being generated. Because if you have more than adequate inventory everywhere, getting into an exchange is pretty easy. When you're short, it becomes much more difficult
and creates, you know, much more volatility. On that note, walk us through your structural both thesis, because I think for a lot of people, many people are going to still be thinking about and we have this big hit to economic growth. We saw oil prices collapse, and a lot of people are thinking also that we're getting the
screen energy revolution, which might be bad for oil. So the notion that we're entering a long term up cycle in commodities might be counterintuitive to some what's your line of thinking here, Well, we think about oil itself, it actually benefits from the green stimulus in the very near term, long before the energy transition begins to hurt its demand. And let's say, and so when we put oil into the mix we're talking about over the next let's say, you know, three to five years, we would see that
that tipping point is somewhere around four. But let's talk about what we think is creating that the structural bull market. And we like to emphasize that while the vaccine represents tactical upside, the pandemic itself creates the structural catalyst for a supercycle type of bull market. And we would use analogy more like the seventies in the two thousand's, but it is back to see a bull market along those lines of either like the nineteen seventies or two thousand's.
And there's three themes that we're focused on. One is structural under investment in supply, and historically we've termed that the revenge of the old economy, meaning that the new economy has capital away from the old economy because they have much better returns starved the old economy of the
building the ability to grow out the production capacity. That then creates a problem once we see a recovery and demand as we're witnessing today and why nearly every single one of these markets is in a deficit, and then we overlay E s G concerns on top of that, you know, you see a very tight supply picture going forward, particularly in oil second big theme that we're focused on is policy driven demand and we like to call that revving commodity demand r E D. And what is the
r E V and for redistributional policies environmental policies as well as versatility and supply chains. And you can think about comparing this to seventies. Redigital redistributional policies are like the War on poverty in the night late sixties. In seventies, the environmental policies again like the seventies, are like the war are on acid rain where he took all the sulfur out of out of the fuels. And then the versatility and supply chains would be like the Cold War
with the Soviets. This time we have a Cold War with the Chinese. And by the way, that Cold War type dynamic immediate play today. The Chinese are buying grains at a very torrid pace right now. One of the key reasons they want to create security and supply, just like the Americans and Europeans did back in the late sixties and seventies against the Cold War with the Soviets, build up these strategic stockpiles at these critical commodities. So again that's why we kind of like in the current
environment more being more like the seventies is fascinating. I mean, talks us a little bit more about the under investment we've seen in commodities. I mean in the post grade financial crisis era. I think like in the immediate way twenty nine we saw this pretty big oil spike and jump in other commodities, but basically it was just all down downhill in a lot of industrial commodities, in particular
for the last decade. Talk to us about what that did, that long decade long bear market in commodities did to um investment, how much under investment created and really what we're talking about when we talk about various industrial commodities being indeficit. Yeah, I think the bottom line is that the companies in these industries had very poor returns, and those poor returns um you know, basically we're you know, reached a peak or you know, they capitulated when we
reached negative oil prices in April of last year. And so when we look at the willingness of investors to come into this space, you know it's gonna take a significant track record before they show any interests. And you know the reason why we termed it the revenge of the Old economy. Goes back to the dot com boom in the late nineties and early two thousand's a period in which you know, the tech sector was attracting all the capital because of you know, the much better prospects
and outlook. And essentially what occurred over that time period is investors abandoned the space. That's when you created the Exxon mobils, the vps, the shells because they had to reduce costs to survive in an environment with very poor returns. I don't know if they come back this time because you have the e S G overlay, Because you got to ask yourself, even if we went to a hundred dollar barrel hall, are you interested investing in oil when you know it's only a to three year, maybe five
year proposition at best. I want to go back to that, the notion that there's a sort of arms race in commodities and in securing things like food and oil. One thing I've never quite understood is I understand why you would want to build a stock pile of something like grains in the short term, but I'm trying to think how to phrase this. This is kind of a stupid question,
But how long would that stockpile actually last? Like if you're buying a boatload of grains because you're worried about food security way out in the future, Like, how useful is that to you? What exactly is the strategy here? Is it about actually accumulating physical commodities in case you run out? Or is it about building relationships and securing supply lines with suppliers and countries and partners for the future.
To answer that question, you just go back to biblical times and you ask where does that seven year number come from? That you hear over and over. But when we think about the strategic reserves in oil and the US has you know, six hundred seven hundred million barrels of oil that was built up during those nineteen seventies. Um, the oil lasts a lot longer, and they they recycle it in and out and they make sure that it is you know, up to par in terms of being
able to create products. Um. But I think you know, going to to your your broader question here is that you know, when you look at China, there's a lot of different motivations here, and we talk about versatility and supply chains. You know, we're talking about duplicate five G networks responding to the trade war with you know, manufacturing UM supply lines. You've heard Biden talk about made in America.
That's part of this dynamic that we're talking about. It means, you know, if if Biden wants to go out and promote evs that are made in America and using unionized labor, it means you need to build different supply chains in America and that's going to take time and require more commodities.
So that's what we mean by this versatility and supply chains, is this need to create your own secure domestic supply chains to deal with you know, host of different issues, whether if it were concerns around COVID, you know, people realize supply chains were vulnerable, concerns around climate change, you know, do you have enough firefighting capabilities in places like California?
UM And so I think you get the point here is it's a more of a broader type of comment here than it is specific like it was like it was in the nineteen seventies. But it's kind of that same dynamic. And when you look at capex, you look at global capex cycles since the nineteen fifties. We've seen two big capex cycles, one that started in the late sixties and ended somewhere around sight and then another one that started around two thousand and one and ended around
two thousand eleven. And both of those corresponded to big bullmarkets and commodities, because commodities ultimary reflection of a capex cycle. So I love this idea that you know, the Biden administration could be great for oil because obviously it's kind of intuitive, but the way you describe it is fairly Uh, it does make a lot of sense, and it's interesting.
I mean, you have to sort of figure the Trump administration was pretty oil friendly with its policies, but that was a brutal for years for oil stocks, Uh, the companies, the whole industry. How much of an effect um does this have? Like you know, say, okay, like the Biden administration is going to have a less generous approach to new permitting, drilling and so forth. What does that mean for sort of domestic the domestic industry and then therefore
the upward pressure that that puts on prices. Well, you know, first of all, the one thing about the policy here is that it wants to use a carrot more than a stick. Um. You know, you look at Europe and now the blueprint and China, it looks more to using a stick get rid of the dirty technologies and replace them with the um the following defined technologies. At least a ministration here is using more of a carrot and
incentive approach. Now, when we think about, you know, raising the cost of oil, um, the way I like to think about it is on the Federal lands, which represents you know, nearly three million barrels per day a production, they can actually create an implied well head carbon tax there that raised the marginal cost of producing the barrel
of oil. And because that shale barrel and these barrels in the US are the marginal barrel that sets the price to the rest of the world, it effectively creates a carbon tax that is imposed on the rest of the world. UM. So you can, if you think about it in that context, and that he has a unilateral capability to do it, takeaway drilling credits, tax credits, raise
royalty rates and so forth of that nature. So it is a way to get at this which then in turn and sentivises investment in other types of clean energy. Let's say, like you know, he's proposing you know, doubling capacity offshore. He can do that through you know, unilateral credits on the tax side, as well as you know, improving learning standards for for that type of investment. So so I do think that the one thing that's different about this approach is it's focusing on the carrot as
opposed to the stick. Because one of the problems historically with the US is if you use the stick, you're going don't make these investments in these technologies. It gets tied up in the courts. And if it's tied up in the courts, um, you know, you can see Obama's clean air policy is still tied up in the courts today. I would feel very remiss if we talked about oil and didn't mention OPEX. So when we talk about oil getting structurally more incentive through um, what's the word I'm
thinking of a inadvertent carbon tax? I guess, um, Sorry, it's late and my vocabulary isn't as good as it really is. But how how would we expect OPEC to respond to that? Why wouldn't they like it? Because ultimately you're raising the price of oil? Um, And they're the
you know, so you're basically they're the two bookends. In fact, when you look at the ability to grow supply, is that the only short cycle production that can be brought on in the world if we see a big spike and price sometime in the next of months, it's the Middle East in the United States, and there are the two bookends on. Middle East is the lowest cost, in the US is the highest cost. Everything else in between
is unlikely to be invested in. In fact, actually, when you look at part of the reason why Saudi is willing to do a unilateral cut is that Nigeria Angola can't even produce at their quota right now because production is dropping due to a lack of investment. In decline rate sitting in Mexico another example of declining production. So when we look at non opact production there, even some of the non golf OPAC producers, they're struggling to be able to maintain production where it is in the face
of a lack of investment. Goes back to that theme of under investment. You know. Another thing that you said in terms of like identifying the big pillars of the structural bull market in commodities, redistributionist policies, and it seems like the new administration is definitely going to you know, something in the air. More people are into it, the idea of actually, uh redistributing wealth downward, giving more households
buying power, and you liken that to the seventies. Talk to us a little bit more about how that plays into your broader thesis. Absolutely critical and it's it's and it's hard to distinguish between the redistributional policies and the environmental policies because you know, to use a term from the UK green leveling, using green capex to level income is you know, a policy initiative. So the two begin
to blend in with with one another. Now in terms of thinking about how this differs from the previous ten to fifteen years is following the financial crisis. Policy was focused on financial stability and as a result, it went into banks that systematically created a decline in interest rates, which mechanically raised equity valuations and created a wealth effect. So stimulus work through the wealth channel. Who owns financial assets?
The higher income households, now they have a very low marginal propency to consume, you give them a dollar, they're going to save it. They only spend three cents on each dollar. In contrast, today we look at most of the stimulus goes directly into the hands of the lower income households who have a marginal propensity to consume of meaning you give them a dollar, they'll consume one pennies of it versus the higher income household that will consume three.
That is significant because what that tells you is that going forward, and you already see it in the postcode level data in the US, is that you're seeing a mechanical words shifting consumption. So that's point one. Point two is that the consumption is more commodity intensive. High income guy, he can he drives a tesla, his house is well insulated, and he eats fish. The lower income guy drives a a SUV with poor gas mileage, a poorly insulated house,
and he most likely eats beef. The beef consumes four times or excuse me, eight times more grains in the fish. And then there's more consumption going into the SUVs and into the houses. And you put this together and then you know, you look at the at the margin, the lower income households, you give them a dollar, fifty cents of it goes to commodities. In contrast, the lower income households, you give them a dollar, thirty five cents of it
goes to commodities. So not only do you get the upwards shift in commodity or in overall consumption, it's more commodity intensitive. And then one last point, you look at the colation between UM these transfer payments in commodity prices going back to the sixties, they're very highly correlated. You know. I go back to the point about Milton Freeman made the point that, you know, inflation is a monetary phenomena.
I think he needed a close to it. Now we've learned after oh eight oh nine, provided that the money gets into the hands of the people who will spend it. I love the idea of measuring direct payments in terms of impact on commodities. UM. So you mentioned inflation at the very end of that, and I wanted to get into this because the dollar also factors into your structural boal case. Can you walk us through how you're seeing the dollar and what it means for commodities and also
how that would feed into inflation. Let's start with the reflation feedback loop. How does it work? It is the call it petro dollar recycling story, or whatever you want to call it is. Let's take you know, US spends money that weekends the dollar um similar to what we saw on the second half of last year. A week er dollar mechanically raises the cost of produce oil and commodities.
Take copper and chili. The cost of producing copper is denominated in local currency like wages for the truck drivers UM. So a decline in the dollar and increase in the Chilean pay so it just pushes up the dollar price of copper. So then we get to higher commodity prices. Higher commodity prices then in term increase the terms of trade for those different countries and they now start building
global liquidity. Hence they're even Saudi Arabian. The month of November December saw a rise in their liquidity because prices we got into that fifty five dollar range, and so the global liquidity then in turns gets lent out creates more dollars, which does two things. Weekends the dollar of further increases the demand for commodities, and then you cycle back over again. So that's how you get that reflation
feedback loop. But I want to go into tying this into kind of the bigger theme here and got back to the redistributional policies. If we look at you know, the current issues, you know, the populism and so forth, I would argue they're mostly tied to this whole idea
of income inequality. And I challenge you to take a picture and look at income inequality over the last hundred years, and when we look at when it's at its lowest point or when the world was the most equal in terms of wealth and income, it was in nineteen seventy nine nineteen eighty, a period in which we had the
highest real commodity prices and you know, substantial inflation. And the reason why I bring this in with the discussion of the dollar is that you take you know, July four, two thousand and eight, we reached peak oil prices of a hundred and forty seven dollars. It was also the weakest dollar ever observed, one point six one against the euro, the exact same hour that that oil spiked to those
higher or higher prices. So when you see that dynamic between commodity prices in the dollar, it really does feed on itself. But we now I go back to that whole point about redistribution. If the policy aim here is to try to solve income inequality over a longer period of time, um, you're probably going to end up with higher commodity prices as being a call it a collateral
damage of it because ultimately get more consumption. You know, I really didn't expect this conversation to go there, but it's interesting because it's such a recurring theme on this podcast of the conversations that Tracy and I have, which is, are we essentially at the end of the vulgar era?
And so if you think about the early eighties and when the war on inflation really started to take off, of this monetary policy dominance and the sort of forty year cycle, and we always sort of come back to this in different ways of is this the turn or are we coming to the end of this idea? It's sort of really interesting to hear you put that in the commodity context, but when you say that, uh, you know,
makes it makes a ton of sense. Yeah, I just like to emphasize that when you think about these dynamics there, they're really these longer terms that you're talking about, they're really political choices. And the political choice back in the the late nineteen sixties is very similar to the one we have today now. Social unrest was high, racial tensions were running high, and you had the War on poverty. You had, you know, at that point, you had you know,
the environmental situation was terrible. You had smog, and so you had to have that War on acid rain. By the way, on that War on acid rain, taking the sulfur out of the out of the fuels, and out of the sky to get rid of the smog actually accelerated the carbon problem. And he did the atmosphere because sulfur is a coolant. Suit is heats the atmosphere. Um. But I think the key point is we had all those similar type of social dynamics at play in the
sixties and we had to solve them. And as we chose to solve them, one of the implications of that were higher commodity prices. Joe, I'm waiting for you to bring up M M T and ask what it means. No. Tracy always always told me with that, but I didn't. I wasn't gonna I wasn't gonna go there. I have to sort of lightning round question type, and then I'll let you go first. I'm just curious, what were you doing when the price of oil hit negative forty list I'll tell you you guys don't want to know. I
was on CNBC UM talking about oil price. Okay, yeah, we know that's fine, all right, No, actually I do have a lot. But this is and this relates to the silver question, the precious metals angle, and this is something I'm curious about. We don't need to go too into it, but there is this meme out there that somehow the rise of crypto is um eating into some demand from the very rich who might otherwise have been putting their money into gold and silver as a store
of wealth. Is that something that you observe at all from your perch? Very small at the margin. And the reason why I say that is right now, you look at let's say the cryptome or bitcoin. You know, the overall crypto market is roughly a trillion dollar market, bitcoin around six hundred billion. The institutional involvement in there is somewhere around seven to ten billion dollars. It's still relatively
small magnitude of about one percent. So what's left over are the specult retail investors, and they behave um in a very risk on fashion. They're not treating bitcoin and cryptocurrency as a defensive asset like gold. Instead knit like a turbo charged risk on asset that trades very much like copper or iron ore, which trades off of positive growth news. And so if the current environment means do I want to own crypto as a defensive asset, the answer is not really no. And then there's also the
inherent transparency issues. Do big institutional players in you know, high net worth individuals want to own crypto? Given those issues, the answer is probably unlikely. They're still gonna have to use a custodial bank to purchase this stuff. And then the custodio bank actually owns the crypto. So why do we have crypto? And I like to go to the point, what are the physical properties of bitcoin that make it a commodity? It's the very first time in the history
of digital money. You can take it off the grid. You can put fort Knox onto the key fob, put it in your pocket and walk away. Why do you want to take it off the grid? Maybe they should find James stop Stock is a store of value instead it's true. Oh, thank you. Thank you for clarifying that as a joke. Jeff. This was so great. Jeff, this was so great, Uh to chat with you. Um, I really appreciate you coming on. Super fascinating, love the big
big picture thoughts as well as the specific mechanics. Thanks for coming on the show. Great. Thanks for having me about that was really great, Jeff. Thank you, Tracy. I really did not expect this conversation, as I mentioned, to sort of like fit in so well with some of our like other broader macro conversations. But just the way like Jeff rounded that out that was so good. I could He's another one. I could listen to him for
very long time. Yeah, for sure. And I gotta say his point about the redistributive effects of direct payments being different to quantitative easing like we saw after the two thousand eight financial crisis. I thought that was really interesting and something that I hadn't considered before. The idea of you're putting money directly into people's pockets, they're probably going to go out and spend it on things that use
a lot of commodities to come into being. That was interesting. Yeah, and just this whole idea of like the sort of backloaded or front loaded effects on commodities from green spending. So at some point the internal combustion engine may come to an end and we really might have structurally lower oil prices forever. But in the meantime that is a lot of capex spending right now and all kinds of things and more money in people's hands that then increases
the demand. And then if you at on top of that, it's like, okay, well, like who is going to invest in expanding oil supply when in the long term oil demand really will collapse due to everyone having an electric vehicle. You could see how you could have the real makings of a sustained spike. It may not last forever, but you could see how you could have several years of
extremely elevated prices. It makes a lot of sense. I think the thing that comes through really clear here is the idea that we're in a transition phase from some sort of old economy to some sort of new economy.
So you know, call it whatever you want, Like the baby boomer economy that was focused on returns and financial assets and didn't really care about things like the environment or fairness, or equitable distribution of wealth, and then maybe the new economy starts to look a little bit different, tech heavy, very E s G focused, looking at fuzzy
concepts like fairness and things like that. And the transition period is going to be volatile to Jeff's point, but you can see how it might throw up weird oddities like commodities prices, the oil price getting higher in the interim, even though the place we're eventually going to is a place where oil is used much much less. No, it's weird, but it makes sense. And again, you know, I go
back to the last four years. It's like literally the opposite of the Trump administration, which was super oil friendly but in the end terrible for oil given look if you just look at oil prices, in the price of oil company stocks, and so you can see how this sort of like a very big irony, the ultimate irony of how like E. S G and redistribution of wealth and all this stuff could lead to. Also, that was
super interesting. I did not realize and he described it again, so well, what Biden can do unilaterally by placing that essentially the de facto carbon tax. Super interesting, clients, So thank you. That was the word I was looking for. Um, yeah, no, that was really interesting. The idea that Biden could sort of lead a global defacto virtue of the US being the sort of pricing benchmark for oil. That's a big change, so much that I learned a ton in just in
that period of conversation with Jeff. That was great. Yeah, Jeff's good. All right, Um, should we leave it there? Let's see it there. This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Wisntal. You can follow me on Twitter at the Stalwart. Follow
our producer Laura Carlson. She's at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesco Levi at Francesca Today, and check out all of our podcast at Bloomberg under the handle add Podcasts. Thanks for listening to