OWN GOLD

“The most, striking one reason has been cocoa prices, which went from 2 and a half thousand to 12,000 only took utterly collapse back to where we came from simply because there was a response both from the demand side, which slowed, and the supply side, which increased. Chocolate manufacturers, they start to look at reducing the number of cocoa content. That makes, obviously, the chocolate bar a bit cheaper to produce. In some places, we also have shrinkflation, so the bar is suddenly not the size that you were used to. So the combination of these things basically had a major impact on demand in Europe.”

“So first of all, you're absolutely right that from a physical dislocation perspective, what we're seeing right now is pretty clearly the largest disruption in the global energy markets that we've ever seen. But we're not necessarily feeling or experiencing all of that dislocation just yet. As everyone now knows, about 20% of the world's crude market passes through the Strait Of Hormuz and about 20% of the LNG trade as well. By most estimates, you're talking about somewhere between at the absolute low end, 10,000,000 and the absolute high end, 15. Split the difference, call it 12,000,000 barrels a day of impacted oil that's essentially not making it to market, which is huge.”

“The reason everyone was so pessimistic on the oil markets right up until this conflict started, was that people like the IEA and others, but most notably the International Energy Agency or the IEA, were saying that the global crude market was in the biggest surplus in oil market history. It had never been in a bigger surplus. And in fact, they were saying that supply was running about two and a half to 3,000,000 barrels ahead of demand. There's only one problem. We weren't seeing any evidence of that surplus. Notably, if in fact supply was running so much ahead of demand, inventories around the world should be surging.”

“Reason we just come to know as well that, miners in South America then need sulfuric acids in order to break down the copper from the from their mines. And that basically means with 50% of that coming out of The Middle East, then we also suddenly face a potential shortage in in that area. We talked about we we helium has been mentioned prior to the chips industry.”

“Gone are the days where we look at the chairman's words, parse every comma and every syllable that the chairman says to divine what policy is gonna be. Chairman is now one of 12 voters. And right now, what you're seeing out of this is confusion as to what this means in terms of whether or not the Fed should be cutting rates because it might be slowing down the real economy or they should be raising rates because it might be adding to inflation.”

“The reason I chose the September contract rather than June is I think that the excessive backwardation that we've seen so far during this crisis has been rooted in the market's assumption that this would be a short lived conflict. My view is that it's likely to drag on longer than most people think. So I have a 15 to one maximum payoff for my entry price below $2. I was looking for an extreme right tail risk hedge. And while it sounds like a speculation on oil prices, it's actually much more of a risk hedge for my equity and gold portfolio.”

“And and and, this is getting a little bit long, Harry. But I think also interesting to note that in the last six weeks, how much has The US crude oil production risen by zero barrels? How many additional rigs has been employed in in The US shale area? Zero rigs. Basically, where are The US producers? Why why are we not seeing any response? And I think part of that is is clearly the fact that the curve is very backwardated.”

“But we've had so far what has been called the debasement trade. I think the next shoe to drop, which to be clear, I don't think is gonna happen for a year or two or three, will be the insolvency trade, the fact that a lot of these governments are in really, really tough shape. That hasn't happened yet. We've had a debasement trade. I think the next step is the insolvency trade, and that'll be good for gold.”

“People ask me all the time, you know, when does this really become a problem? How many years out until you really hit a severe deficit in the world's uranium market? And I tell people it's here already. It has been largely obfuscated by these massive Japanese stockpiles that were accumulated post Fukushima. Those are now gone. Those are all into the market. And so the market is trading pretty much heads up supply and demand. That's why prices just keep creeping higher and higher and higher.”

“We have to remember hedge funds, if there's one thing they're not, they're never ever married to their positions. If something goes wrong, if there's a technical change or fundamental change, they'll seek a divorce as soon as possible, whereas the rest of us potentially can sometimes get bumped into a position where we we think we're right and the market is is wrong.”

“I think the best investments right now remain in the oil equities, believe it or not, because many of them have moved, but they've moved, like, 30 or 40%. They haven't had the kinda two to three x move that the spot price of oil has had. I think you can buy oil stocks, and you can get that same exposure, essentially, the same type of exposure as trying to play for a move higher in the $75 December dated contract. You know, if December contract goes from 75 up to 100, a basket of oil stocks, certainly offshore drilling stocks, will do very, very, very well.”

“I think there's no doubt that even though the the market is behaving relatively benignly, especially if you're just watching front bonds, the futures price in the crude oil market, you were kind of just saying, what's the whole fuss about? But this disruption we're seeing right now is just so profound because it's not only the energy space that we are seeing being impact. And one thing is crude oil, but another thing is the old refined products where we're really seeing the the tightness right now, diesel, jet fuel, petrochemicals, and so on.”

“Everything I'm reading says that American farmers, and I'm sure it's probably the same in Europe, the farmers can't afford or can't get their hands on enough fertilizer to fertilize the crops as much as they normally would want to. So they're planting under fertilized crops, seems to me like that can only mean undersized yields that presumably results in higher prices. Am I right about that?”

“We started we traded the year in the 60 to $75 range looking at Brent. And I think there there is an argument that once the dust settles and we're on the other side of this, we should expect prices to settle in at least $10 higher level, maybe even to $15 higher. So the floor has moved higher for for this. And that basically means if you're looking at Brent crude for December at $80, that's potentially where the the new floor should be.”

“We are five years without the Fed hitting their 2% inflation target. So I've been of the case of the opinion that we're not in a 2% inflation world. We're in a three ish percent inflation world. As I like to joke with you and others, I like to say, I didn't say eight times in Zimbabwe. I don't think I'm saying it's gonna be runaway inflation. But if we're in a three ish percent inflation world and a world of greater uncertainty, I would still argue that interest rates are probably going to go higher just to hit their fair value, maybe closer to 5%.”

“JPMorgan says that Iran can only withstand about two more weeks of having its crude oil exports blockaded by The United States. If that US blockade continues to be successful for more than about two more weeks, Iran will be forced to begin shutting in its oil production. And after about one more month, Iran would be forced to substantially shut in most, if not all, of its oil production because of a lack of any place to store the oil. Once shut in, those wells take a long time and cost a lot of money in order to bring back online.”

“Simply because if you are a passive long investor, Eric, almost no matter how you invest into a commodity space, whether it's through an ETF or through a swap, whoever provides you the ETF for the swap will always go back to the clean market, and the clean market in this this case is the futures market. And if you have a market where which is backwardation, I. E. It's a signal of a relatively tight supply, and you're holding a futures position to, as a to hedge your exposure to the ETFs and the swaps that you have issued, Every time you roll that position, if we are in backwardation, you'll be selling an expiring contract at a higher price than where you buy the next. That is giving you a positive roll yield over time.”

“The market panicked. And, when the market panics, it's a question of just getting out of positions or getting reduced, getting your exposure down to levels that you find that's manageable. And, so gold to a certain extent, some of the other metals will suffer from the success they've had in the previous months. So they've become a very widely held investment, meaning that they were also exposed when that situation unfolded.”

“And so today, we approach every year, every growing season, almost like we're going down this razor's edge. On the one hand, demand is off the charts. On the other hand, yields are off the charts. And we said to ourselves every year, if anything happens to disrupt that growing season, if anything happens to impact the yields, this market will be very tight in a hurry. And I think that this fertilizer issue could be that. You've needed perfection in your crop year in and year out to meet demand. And I'm worried that finally, with this impact on fertilizer supply, we're not going to be able to get another record yield.”

“Back late last year, NATO had some exercises. They were called Operation Hedgehog. It was with UK and Estonia. And they were simulations of two brigades. That's 2,000 soldiers. They invited 10 Ukrainian drone operators to simulate battle against 2,000 NATO soldiers using NATO techniques, which is the same techniques The US uses. The 10 Ukrainian soldiers wiped them all out. They're killing about 30 to 35,000 Russians a month this year. 90% of the casualties are being caused by drones right now. The war has changed.”