TRACK COMMODITY LAG

“The view I've had and the view I'm sticking with is, Hormuz is all that matters, and every day that it stays closed, it brings us closer to a non-linear break in supply chains. And my view has been that that's not going to be good for markets, if slash when that happens. That's why I highlighted that Japanese Toilet Maker today, down 7% on the day. If they had gone up 7% or up 10% on announcing that they couldn't make anything anymore because of supply chains, I probably would have to say, all right, well, maybe I'm just not getting this.”

“When it started, my worst case scenario was that this could end up being a US Suez 1956 moment. And now, seven weeks in, Hormuz is still closed. Supply chain issues are just now really starting to stack up. I think where this is all headed is forcing the US into a choice. I think it means we're forced to pull back or we're forced to print money into an oil spike to contain the bond market, or we let rates rise in a recession and an oil spike and let the economy take the hit.”

“I think what people don't understand is the last tanker to transit successfully on February 28th before all of this stuff started, that Hormuz oil will arrive at its destination next week. That's how long it takes for oil that's flowing through the Strait of Hormuz to get to where it's going. So there hasn't been any supply disruption yet. And the actual disruption of supply hasn't even started yet. You don't just call up the captains of those VLCCs and say, hey, engage your warp drive and get to Asia in a week instead of a month and a half.”

“I've been doing this 30 years in investment research and I've only seen two other times like this that I can recall and the first is in 4Q07, where I was seeing the US economy and financial system collapse in real time. Yet, the equity markets hit an all-time record on the S&P in the fourth quarter of 07. It also reminds me of 1Q20 when obviously with COVID, markets were just sort of blissfully complacent. And then Tom Hanks said he had COVID, and then they shut things down, and the markets absolutely had a fit.”

“People in finance are just sort of, well, hey, just hit control P and we'll print oil, or the oil will be where it needs to be, and the fertilizer will be where it needs to be. Because, oh, by the way, on fertilizer, as I'm sure you know, Erik, we're on the clock for a growing season. Like, you're not gonna be throwing fertilizer down in June or July. It's too late at that point. If that happens, like hundreds of millions of people could starve to death.”