Foreign.

And so that's, I think what's a little bit of the paradox of inflation is that in the near term it's very formulaic and I can paint a picture that if energy prices go up, you're almost sure to get relatively sharp inflationary pressures.

You have a lot of dovishness.

You have a lot of money that's already been printed, quite frankly, and a lot of dovishness I think in the future.

And psychology right now, I think is really going down a razor's edge and could very easily tip into inflationary psychology.

So I think all those things together means the risk is quite high that you're going to get an inflationary bout.

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Here's your host, veteran hedge fund manager Niels Kostrup.

Lark.

Welcome or welcome back to another edition of the Global Macro series where today, as usual, I'm joined by my co host Jim Kassang, as well as a returning and very popular guest to the show, namely Adam Rosenzweig, whom we last spoke to about eight months ago.

Adam, it's always a pleasure to have you back.

How are you doing?

Very well.

Nice to talk to you both.

So happy to be here.

Yeah.

And you, Jim.

I know it seems like so long since we've done one of these global macro episodes.

It's really wonderful to be back with you in the seat.

Amazing to see you, Niels.

Adam, great to be back with you and beautiful fall here in Chicago.

Excellent.

Well, we've got a lot to cover.

I mean, it is a time where things change dramatically and not least in the area of natural resources.

Really had an interesting year so far.

Now, Adam, like to start maybe a little bit differently, you know, instead of going deep straight into the big sort of natural resource framework you're thinking of right now.

And I've heard you talk a little bit and write about something that I think might be useful for, for people just to be aware of and that is we often talk about things are unprecedented at the time, that this is like things that has never happened before, whether it's Fed independence being challenged or whatever.

And I think you've got a very good historical perspective on these things and I thought that could be a place to start the conversation today.

Maybe you give us a little bit of context to what is going on in a bigger picture before we go straight down to the more niche sort of natural resource area.

Sure, no, happy to do that.

And I've said to other people that you should always beware a commodity expert talking about macroeconomics and geopolitics because we probably know just enough to be dangerous.

But with that caveat we can certainly talk about some of the longer term historical developments and where it sort of fits in.

Because you know, while history does not repeat, it certainly does rhyme.

And that's definitely taking place today I think in, in global macro.

So what do I mean by that?

Well, and, and I think we actually talked about it here and I think you're the ones who first put me on to the rise of carry, which I'm not sure if I should thank you or be upset because it's basically consumed a lot of my waking hours in the last eight or nine months.

But commodity markets move in big cycles.

We've also noticed that carry trades, so called carry trades, move in these big cycles as well.

And what is a carry trade?

Well, for your listeners, in case they, they haven't been up on it, you know, a carry trade according to Li Le and Coldiron, is when you have a short volatility, a levered short volatility trade that gets put on so effectively, you know, the one that everyone thinks about is you borrow in yen and you invest in Australian high higher yielding assets, you make the cost of capital differential and you lever it up to whatever your risk tolerance is.

And so long as volatility stays low, so long as the FX rate stays basically in line and you can hedge some of that out even and get an all but guarantee risk free rate of return in excess of the risk free rate.

And, and that's a carry trade, that is a leverage short volatility trade.

But it's just one in a whole series of these.

And what we see as opposed to let's say value investing or real asset investing, where they're naturally, they naturally have a modulator to them in the sense that if, if all this money flows into value investing, then values stop existing and the thesis for the investment goes away.

And so it has a natural, you know, negative feedback loop or a modulator.

And so it could still move in cycles, but it kind of moves around a mean and carry trades naturally have a positive reflexivity.

They have a positive feedback loop that takes place because as more money chases into these levered short volatility trades, it creates distortions that feed on themselves.

What do I mean by that?

Well, it means that momentum works.

Momentum's literally means what worked yesterday works tomorrow.

So that's of course going to work very well in this kind of an environment.

Large cap tends to work well because what has been working continues to work.

And that means the big gets bigger.

There's no natural modulator there, regulator.

So you know, trees grow to the sky, so to speak, things like that.

And growth investing does very very well in that environment and seemingly to no end.

And the better it does, the more money it attracts, the more capital goes in, the more they can grow, the better the growth, the more they go up and the thing just just goes and goes and goes until eventually obviously the distortions become so big that you can't go any farther.

And again, if I'm paraphrasing here, but if the trade works so long as tomorrow looks like yesterday, when does it stop working?

When tomorrow looks very different than yesterday.

And I can't have a simpler pithier sentence to describe how really the entire world around me feels right now than to say tomorrow is likely to look a little bit different than yesterday.

We have administrations, notably in the United States, but not exclusively, that seem determined to really change.

A lot of institutions change a lot of long held beliefs about how things ought to be run and how things are set up at present.

And that I think will create a sector rotation that, that effectively ends the carry trade and begins a rotation back in.

Now one thing that the authors of that book didn't really touch upon was past carry trades.

Because I read all that and I said my goodness, that sounds like a lot like the other side of the commodity and resource trade, right?

Where in that kind of an environment where interest rates are low, volatility and inflation are benign, growth is working values out of favor.

Know why do you want to own a 10 year life of mine copper asset or gold asset or or 20 year development oil field where you can pass on price and whatever that has no interest.

I'd rather own a 60 year growing stream of cash flows in a hyperscaling tech company discounted back at Effectively zero, you know, so I said, I get it now, the resource market is the other side of this carry trade.

But we know that there's been three or four resource cycles in the past 150 years, and have there been three or four carry bubbles?

And that's where the authors and I don't fault them, it just wasn't the topic and scope of their book.

But they don't go into those old ones.

We did, and we found where we could get the right data that a lot of the symptoms of today's carry bubble were present in the late 1960s, in the mid-20s and the late 90s.

And so I think all of these cycles carry on one side, resources on the other are fairly predictable.

They're following the same rules they always have been.

And, and one of the big catalysts and triggers to end them has always been fairly large discord and eventually shocks and changes in central banking and monetary systems.

And so I think that what we're seeing today is not unprecedented, but rather a very, very important signal.

And actually, before you jump in, Jim, one thing that, because you've spoken a lot about this and really made people aware of it, but one thing I picked up in your writing, Adam, was that even to the point politicians get very, let's call it physical with central bank chairmans is not unprecedented either.

Do you.

Could you remind us of the history there?

Yeah.

And so this comes by way of a book called the Great Society by Amity Schley, which is a very, very interesting, I think, underappreciated book that you don't hear too many people talk about.

But it's excellent and very, very informative.

And one of the things that she talks about was an event that allegedly took place in the late 1960s where President Johnson, Lyndon Johnson, actually took the Fed chairman, who was William McKinley Martin, and slammed him against a wall at his ranch in Texas and took him by the collar and slammed him against a wall and said, you know, my boys are in Vietnam dying, and you're not giving me the money I need to finish the job.

And you can imagine the huge amount of tension and the huge amount of, you know, emotion that was in that conversation.

And you kind of flash forward to today, and I don't want to undermine what's happening between President Trump and Chairman Powell, but as far as I know, you know, the worst that Trump has done is to call him an idiot, untruth, social and things of that nature.

And I don't think that he's accosted him.

I Suspect we'd have heard of that if he had, you know, cold clocked them coming out of the men's room in the White House or something like that.

I don't think that has taken place.

And so not to say that Fed independence isn't nearing an all time low in terms of risk that it might change, but you know, we have been here before and another one that's even less spoken about and far less dramatic.

But Benjamin Strong, who is the president of the New York fed in the 1920s, pursued radical monetary policy through the 20s, including the first quantitative easing that the US ever experienced.

And mind you, you know, the US established the, the Federal Reserve following the crash of 1907.

In the early, you know, I think it was 1913 and it was by 1925 that they had discovered money printing.

So it didn't take them very, very long at all.

And nobody attacked him.

And we didn't have social media, but he just did the, you know, a much less dramatic thing.

He just, you know, died suddenly.

And so his, his policies were reversed that way.

But there's huge debate and consternation then too.

So to address that, to add to what you're saying, 100%, Adam, William McChesney Martin was the Fed president for 20 years at that point and was respected by all as like a steward, a responsible steward of things.

And to be clear, Nixon, who came after LBJ not only fired him, but put in Arthur Burns who was a long standing supporter of his.

And really starting in 71, they did a 4% interest rate reduction granted into a recession, but it was a very mild recession and it was a stagflation recession where inflation was very sticky.

I mean this stuff sounds familiar to anybody.

And that led to the major spike and eventually an inflation spiral.

Right, that came in many ways.

That is why Federal Reserves have two mandates, not just one, which is growth.

And if we just favor growth and we do that remove the politicization of it and the short term kind of incentives, that is more stable, but the short term incentives are, and the political incentives are to go for growth in the short term and not worry about the future.

So yes, we are.

These cycles repeat.

And this is not the first time, by the way.

Arthur Burns, even though he was a political supporter of Nixon and was very close, there are tapes and the Nixon tapes of Burns and Nixon in yelling matches over this.

He was strong armed into it.

And then lastly you Talk about Milliam McChesney Martin being pinned against the wall.

Well, metaphorically, that's what's happening with the Fed governors right now.

Coogler resigned.

If you think that's a coincidence, I, I got news for you, like there's an intent by the administration to get four governors on board so they can plot and all of a sudden Coogler, who's a, has a 14 year term, resigns for no reason.

I'm guessing there's something that was going to come out about Coogler if you know she didn't resign and then all of a sudden following that there is a firing.

Right.

And this mortgage stuff coming out about Cook.

So, so you know, whether it's pinning them against a wall physically or metaphorically pitting them against a wall, that is happening again.

So I couldn't agree with you more.

I think that's exactly right.

And I, I think you're in the right zip code in history or postal code for the European listeners in history for these big dramatic changes and shifts in monetary systems.

And you know, we had identified that commodity bare markets end and new bull markets begin with shifts in the monetary system.

And you know, 29, it was the end of the classic gold standard.

6971 was the end of Bretton Woods.

99 was the end of the Asian currency pegs.

And as early as 2020 we were out saying to people look, if you need a timing on when the commodity bull market's really going to get going, look to changes in the monetary system.

And you know, I'll be perfectly honest, and we said it at the time that was entirely observational.

I didn't have a particularly good explanation for why Bretton woods ending and commodities rallying needed to go together, why the British gold standard ending and commodities rallying needed to go together.

But it was just observational.

It had happened every time.

It was a perfect predictor of the end of the bare market and the beginning of a new bull market.

But I think the carry trade begins to explain why.

I think that that explains what exactly is, is taking place.

And so we're in that right zip code now.

I think you're, you have an administration that's telling you that they want to change things sharply and dramatically.

And I think you'd be foolish not to kind of listen to that signal.

Yeah.

And to pat ourselves on the back, you know, we've come together are kind of the things Niels and I talk about and you in a fortuitous way.

And part of the reason we keep doing this and it's been so profitable and useful for people out there is because I think the Ideas of connecting this commodity cycle to the big macro kind of realities has, has been incredibly valu.

You know, I think you'll remember, I think it was in 22, you know, we were talking about when gold was really out of favor.

We were together talking about how that was going to be a convex move and one of the best performing assets the next decade.

So a 3x since then is, is pretty good.

I just, I just want to say one, one other thing, you know, about Martin and Burns and then obviously Volker, you know, a lot has been written and people that I know that no Chairman Powell will confirm that on some level he's very aware, as I think all central bankers are, that you don't want to be the next Arthur Burns, you want to be Volker.

And I sort of say a little bit tongue in cheek, they have a picture of Volker on the wall that they kind of look up to every day and probably a picture of Burns on the desk.

That's like their warning and their reminder and stuff like that.

And of course nobody left open the third option.

It was a false die, a false choice.

And the third option is that he's going to go down as Martin.

Somebody who tried his best to toe the line and somebody who tried to, and, and there's lots of reasons to say he's not Martin also, but tried his best to keep inflation in check and to do the right thing, but ultimately was sort of pressured and eventually pushed aside.

So I wrote a paper, this is about three years ago now, called Worshiping False Prophets.

And it talks about these different governors, these different Fed presidents.

I recommend if people are interested in this, that they read it.

But one of the things that I, I really discovered through my analysis was that Volker, who is really lauded as this savior right, is really no different than William McChesney Martin.

It was just a function of when they came in to, to their roles and, and Volker was the right person at the right time.

If you read Arthur Burns, and by the way, Arthur Burns isn't really all that different except that he, you know, kowtowed to the political side.

But the pressures that caused Burns to be put in that situation is what's important.

That didn't exist while McChesney Martin was there and by the time Volker came in had run their course.

I think that's the important part.

It's really that if you, when Arthur Burns by the way, spoke and wrote, I encourage people, what Arthur Burns is writing, he wasn't the clown that he's been made out to be or the political kind of animal he's been made out to be at all.

He simply was put in a situation where the political and fiscal pressures forced certain outcomes upon him.

And I just think that they tried to control the inflation, by the way, once it got going.

No, listen, Burns got a real short end of the stick in terms of history, to the extent that history is written by the victors and things like that.

And Burns was a very, very sophisticated guy and wrote, like you said, extensively on the subject.

And look, somebody, a very smart, an influential macro economist said to me, and I don't know, maybe for all I know you're going to tell me that he was paraphrasing from your paper.

So if I quote your own paper back to you, don't, don't, don't, don't kill the messenger.

But he said that, you know, the path to Volcker has to run through Burns.

You know, you can't have Volcker without Burns because the pressures need to get so bad in order for the economy to be willing to withstand the medicine.

And that's the problem, right, is that we had this first taste of inflation, but we didn't have the fire really stoked yet.

And so we put today policies in place that could help really break inflationary expectations and really kind of try to put the genie back in the bottle.

But it's untolerable because there's pain associated with that and the pain of the inflation wasn't bad enough that no one's willing to take the medicine yet.

Yeah, the big idea here for people to simplify it is stagflation and stagflationary policy which becomes inevitable at the end of a, a cycle of massive, just growth focused, you know, zero interest rates, growth focus, corporate growth as a function of inequality going too far right.

These policies that say, okay, we need something that's more fair.

These types of policies are stagflationary and they're inevitable at some point because the cohesion of society gets to a point where they have to, to be addressed.

And once you head into a stagflationary policy environment globally, which is where we are, you get to a point where the Fed is stuck because do they deal with inflation or do they deal with growth?

And you get to a point where politicians are stuck and the short term incentive is to say, screw it, we will deal with growth and inflation isn't, you know, we'll deal with inflation tomorrow.

But inflation becomes a spiral and that can unlock, you know, make the whole system kind of fall apart basically.

And it really is this growth, you know, corporate growth, profits versus fairness.

It's really left and right when you start to really think about it, that drive these big cycles.

And this is also a reason why we make the same mistakes over and over again and why they run 40 to 80 years and you know, human life cycles.

This is, this is the big picture.

Maybe we can unpack two things actually.

One is inflation because I know Adam, I think in your Q2 letter you wrote about inflation and how you think it's actually about to show up again meaningfully.

And I know Jim has lots of thoughts on that as well.

So I think maybe we should stay with that before we get into the markets that I know people will love to hear about.

But the other thing I was just curious about, and I do remember that conversation where you talked about, Adam, that usually the commodity super cycle, which many people have predicted many times, you found that there was a link to this change in monetary policy.

And so or not monetary policy, but monetary systems essentially.

I was just curious whether we think that it's the bitcoin acceptance even at the highest level of the US administration, so to speak, if we call it that, or whether it's this new stablecoin initiative, if we call it that, to fund the US deficit or whatever it's going to be doing that is that trigger or don't we know just yet what, what that change in monetary system will look like?

I'm just curious to know and then I'd love to hear why you think inflation is coming back and then hear Jim's views on, on that as well and then go, go into the markets.

I, I think if I'm being truthful, I don't have the foggiest idea of what the new system will look like.

And you know, I read recently was who wrote it but it's the book on why was it Rogoff that wrote why no other currency is going to take over for basis of global trade and things like that.

And I think sort of displaced the dollar as the global reserve currency.

And he goes currency by currency and talks about the problems.

And I agree with all of those problems and I don't think that the renminbi and I don't think that the euro is going to do it.

And I forget he has maybe one other that's in there that could be a possibility, maybe as Bitcoin, maybe as gold.

But I think that that is all very true and good analysis, but it neglects, I think the unsaid current through that reasoning is that so the system will stay the way it is today.

And I don't think that that last bit is true.

I think it's going to change dramatically.

How it changes, I haven't the foggiest idea.

One thing that I think is fairly likely, and we're seeing already, is that the dollar will devalue relative to gold.

And that's what we're seeing today, that that will continue.

Does it mean that the US becomes dethroned as the global reserve currency?

I suspect not.

And, and for that I think you just have to look back to the end of Bretton Woods.

You know, if you canvassed all these economists after the US single handedly ended the entire world's global monetary system, upended it by severing the US convertibility into gold, you would say, well what do you think the future for the dollar as a reserve currency looks like?

Is it pretty bad by 79 if you canvas them again, it's a really bad.

And by, you know, 95 the dollar hegemony was much stronger than it had ever been before and today even more so.

So I don't think we can know all the knock on effects.

Does crypto play a role?

Look, I'm not a crypto investor and I'm not a huge crypto believer, so I don't in my heart of hearts think that that is going to be the trigger.

But you never know.

I reserve the right to, you know, change my mind as the facts change.

You know, I think that a couple years ago you thought bricks countries would do it.

Today I think it's more along the lines of what Bessant and Mirin are talking about when they talk about their Mar a Lago accords.

Something in that vein.

Yeah, I, I, I agree.

Another kind of Bretton woods or I'm pinning from gold, right.

Is, is, is likely here.

Not just likely.

I think it's inevitable I'll go that far because there's, there is a unsustainability to the US debt as it stands.

And so quite simply we have to monetize our debt.

And you know, there are a few ways, there are only a few ways to do that.

Right, without an actual default.

And so to your point, this is why gold is running and, and this is why it ran last time.

And when it did last time it wasn't a 3X, it was, you know, a 20, 25, 50X.

Right.

I forget what the final number was somewhere between 25 and I think 40.

So this is, it won't be a straight line.

But that's what's happening underneath the hood and how that's going to play out, whether it's through crypto.

I mean, I think the bringing in of the stablecoins is not a coincidence.

I think they need demand from somewhere, some other source, and crypto is a great place for that.

But I agree, the, the playing out of how crypto performs in this context is going to be complicated given that it's become millennial gold.

The belief, which is what gold really, gold's value is a matter of belief.

If a certain generation believes enough in crypto, it can become gold.

And so I think that's what's happening.

But again, hard to tell given the short timeline relative to gold.

Right.

And so I think that's, that's critical to this picture.

But I do believe that we are much like we saw last time around in a macro commodity cycle because of just whether it's gold or anything else.

Hard assets.

Hard assets are going to be in favor.

I will say one last thing about this, which I think is incredibly important.

We talk in generalities and macro.

I want to put some numbers on something that I think is incredibly valuable, important to think about.

Markets operate on supply, demand.

That's where the rubber meets the road.

And if you think about the long asset world, if you will not, I'm not talking about commodities specifically everything else.

We're talking about stocks, we're talking about bonds, we're talking about private equity, private credit.

I throw real estate in there, even though you could argue hard asset, et cetera, but because there's so much financialization in there, you're talking $500 trillion globally.

Adam, what's the precious metals?

What's gold's value?

Not the underground.

I know the number, but not the amount underground, but the actual amount in the, in the world.

Oh, gosh.

Or maybe you don't know, six or seven trillion.

That's exactly right.

Six and a half or so trillion dollars.

And most of that is in sovereign vaults under the ground, untouchable.

The float on, on gold, like the actual amount trading hands is 2 trillion.

And so you tell me, you know, if people, and this is before, these are early adopters, these are people, before the door, you know, starts opening, you know, when people need to get out that door, and that door is not very big is the point.

So you tell me where that $2 trillion in float is going relative to 500 trillion if stuff happens.

I think that's a big, big aha.

Crypto is now four and a half.

I Think you could argue that's going to benefit as well, maybe in different ways, depending on how you feel about that.

There are other non correlated assets.

They're not really assets.

I would say strategies think about like hedge funds.

Hedge funds are only four and a half trillion.

Structured products are two trillion.

You put these together, it's still 10 to 15 trillion dollars in the context of a $500 trillion correlated world.

And so I think once you start putting in that perspective, you start to see the scale and possibilities of what may be in the first, second innings.

Really.

I was about to say that if you look at market moves this year, you would think that gold is the new bitcoin, but maybe we're not quite there yet.

But it's not a coincidence that in that timeframe, in about three years, gold has tripled, but Bitcoin is also essentially tripled.

And that the assets, by the way, in structured products have quadrupled and the assets and hedge funds have 2x'd after basically fairly stable inflows.

Before that, all those things are correlated because they are non correlated to the other major pool of assets.

Before we dive into all the individual markets, I think people would love to hear about.

I think we still have a little bit of time to maybe you already mentioned, you know, how do we deal with deficits?

Well, one way is inflate.

And as I said, Adam, you wrote a piece about this a few months ago and maybe you can give us some of the highlights as to why you think.

Because I think people have thought about inflation as something that difficult to get rid of.

But on the other hand, it's not going up too badly right now, but you think it might actually take off at some point.

So can you talk a little bit more about that?

Well, yeah, I think that if you look and it gets back to the cycle that we talked about before with Martin and Burns and Volcker and where we are today.

I think in a very simplistic sense, there's a very strong likelihood of a more dovish Federal Reserve in the coming months and years.

And I think that the amount of money that's been printed and the inflationary pressures that still bubble underneath the surface, which mind you, you look at inflation, inflation spiked during, it kind of normalized, came back down, and it's been moving in an upwards, fairly insidious trend ever since.

So the people that look at that and say that they've sort of vanquished inflation, I'm not entirely sure what data that they are looking at.

You combine that with the Potential for a more dovish Fed going forward, more liquidity being put into the system, which I think is an all but foregone conclusion at this point.

And I think that you have the recipe, the kindling, at least for inflation, as far as what could then trigger it.

I think one thing is that the level of inflation that we have seen in the last two or three years has been with a very, very benign energy tape.

And so that could end up actually being the catalyst, the underlying catalyst to bring back at least some of the prints.

And here's kind of a bit of a paradox on inflation.

I listened to a gentleman speak a couple years ago and he said, look, all you guys, all you traders sit there, you try to predict inflation and it's this touchy feely thing.

And he's like, it's very formulaic and I can calculate it in the next month or quarter, whatever it is, with really good precision.

And no one really does that.

It's kind of like how people think about GDP growth and they forget their macroeconomics, that it's C plus I plus G plus net imports, right?

You just look at those line items and say, well, what could actually drive it?

Are we in the right magnitude or expectations off?

And inflation in the very, very near term is very, very formulaic.

But then the paradox is that in the medium and longer term, it's entirely psychological because what ends up happening is once inflationary psy builds in a system, in an economy, people actually change their behavior to take advantage of the expected higher prices.

And just a very simple example is they pull forward their purchases.

And what happens when they pull forward their purchases because they figure it's cheaper today than it'll be in a year from now, you end up straining the supply chain which creates more inflation.

So that's where these.

And then you have wage price spirals and things of that nature.

And the psychology becomes embedded into the system.

And so that's, I think what's a little bit of the paradox of inflation is that in the near, it's very formulaic.

And I can paint a picture that if energy prices go up, you're almost sure to get relatively sharp inflationary pressures.

You have a lot of dovishness, you have a lot of money that's already been printed, quite frankly, and a lot of dovishness I think in the future.

And the psychology right now, I think is really going down a razor's edge and could very easily tip into inflationary psychology.

So I think all those things together means the risk is quite high.

That you're going to get an inflationary boat.

I would add to that too, as Adam said, well documented, the psychological components that drive this kind of spiral.

But I think that that's the part that's not talked about as much is the important role of negative real interest rates.

If we have a.

Right now we're at 3% inflation as measured if it goes to 4.

And if they're going to lower interest rates, which I believe with the tariffs and whatnot, if we're going to support growth in the stagflation environment, you're going to get an uptick in inflation given the tariff policy.

And so if we start to see an uptick, even if it's marginal to let's say three and a half, 4%, and then we're going to cut rates down to, you know, two and a half percent, you create a situation where it's easy to borrow money to buy anything pinned down.

And it's natural for institutional money to start doing that at scale.

And the great thing here is like they can try and hold the long term rate lower, they can try and force it lower.

They've been doing that through the stable coin policy.

All kinds of, they're going to do probably Project Twist at some point if they have to.

But the reason they will lose control ultimately is if you keep negative real interest rates that way, then that buying of those assets with leverage starts to push up the assets and drives a more negative real rate which is becomes a spiral.

So the actual supply and demand dynamics of negative real interest rates will drive a spiral.

If the politicization forces a non biased Fed, that's one of the biggest drivers of these loops.

And I think that's where we're heading because at the end of the day, the policymakers are stuck.

Well, they're very stuck.

And I think that's a good way of putting it.

I mean, think about this from a totally different perspective of.

And then we can talk all about commodity markets because like I said, no one, no one's interested in my view on macroeconomics.

But listen, you know, I, I think if you take a really like 10 steps back, the United States has a very, very big debt problem.

And we've always known that they have a big debt problem.

And now the big debt problem seems bigger and it seems more of a problem.

And it's one of those things that, you know, anyone would look at and say it's not sustainable.

But yet that doesn't mean it can't go on another day, week, month or year and we're into year 15 of that now.

And some of the numbers that seemed like they were unsustainable after the GFC seem quaint, but it does seem like perhaps now, and at risk of having called this maybe 50 times in the last 15 years now it might be too much.

And you remember the old saying where you go broke slowly at first and then very quickly.

It seems like we're really testing the system's ability to even properly function and clear.

So I'll give you sort of a simple, not, not simple but a, but a clear example.

And this comes, this is not my work but you know, it is, I think, very insightful.

You go back US debt to GDP crosses 100%.

So if you start issuing 10 year bonds with an interest rate that's above nominal growth rates, you're going to have a debt spiral, right?

If your debt to GDP is 10% then you can have higher interest rates.

But if it's 100%, then the interest, aka just what you're paying to service the debt becomes as much as the nominal growth.

And so you end up in a debt spiral regardless.

Right?

So there became a bit of a fascination and fixation on saying, well, we have to keep the 10 year rate below long term growth.

And every time it got up to about 5% you started to see Yellen freak out and she basically began to move into shorter durations and she stopped issuing 10 years altogether and she moved into bills and the yield curve inverted and everyone said when a recession's coming, but it, but it wasn't.

What was happening was that in a very unusual move, the treasury just stopped issuing 10 year bonds.

Someone's going to say, well maybe they didn't stop, but they dramatically shift the term structure into bills.

Now the problem with bills, which nobody I don't think fully appreciated, I certainly didn't, is that it's a different buyer than a bond.

And a bill is bought by a money market fund, a bond is bought by an asset management company or an insurance company matching a long term liability.

And money market funds for clearing reasons don't buy bills, they buy bill futures.

And so on the other side of that, a relative value hedge fund sells them a bill future and buys the bill and for that service collects, I don't know, some infinitesimally small carry return which they then lever up a gazillion times to one to make it worth their while.

And that is now the system that we have in place.

Right?

So it's like two layers of dis of not disintermediation, of intermediation, where, you know, treasury auctions these things to JP Morgan, JP Morgan sells them to a hedge fund, the hedge fund sells a future to, to the money market fund and then they go and borrow money from JP Morgan to fund the trade.

And you know, do you have any idea how much money is tied up in that right now?

You know, estimates are that it's at like $1.2 trillion.

So you have taken, by going from 10 years to bills, you have taken over a trillion dollars of liquidity out of the system.

It still shows up in the numbers, it's still in the monetary aggregates, but it's no longer productive.

It's just tied up up.

Right.

And so you have a problem now like this thing is breaking down.

You can't lower rates because of inflation, you can't raise rates or tighten liquidity because you actually don't have that much liquidity out in the system because it's all tied up making sure the 10 year doesn't hit 5%.

And that's why the takeover of the Fed is being done so aggressively.

They could control it in the short term this year.

By the way, Trump administration is not the first to do this.

Yellen et al were also doing it, I want to be clear.

But they basically from 08, the creation of reverse repo and all of the liquidity at the front of the curve, overnight lending, which is basically unlocked to banks.

You put JP Morgan at the end, JP Morgan does, at the end of that, the US Government does.

But by backing the banks and then creating reverse repo and all these other facilities, you've essentially created infinite liquidity at the front end of the very, very front of the curve or the overnight rate which at some point connects all the way out to nine months and people will trade that part of the curve because it's very tight, which to your point is very different than a long term asset buyer.

And so they have to your point moved about $2 trillion which is just QE essentially by drawing from, you know, reverse repo.

Well, what's happened, reverse repo had $2 trillion, now it's zero.

And, and so there's a, there's a cost to that in the sense that now that buffer is not there and they've had to slow down the, this issuance, not to mention once you move issuance to the short end of the curve, now you just have to start rolling that over much more frequently.

And at some point that's also demand and weight for the Long term because it's presumably at some point, you know, you, you would think you can't do this forever.

I mean you could probably re revolve it for many years but at some point it becomes a problem and the market has a way of saying, well, you guys are stuck.

Well we're going to run this and good luck getting back in.

And so I think, I think that's a major issue underneath the hood that most people don't understand.

Can they create more reverse repo and more funding and more facilities and help keep things in so they can.

Yes, and they will, to be clear.

But the real problem is the long end of the curve and at some point they cannot bring any more issuance to the front of the curve.

There is a limit and that means at some point they have to find buyers for the debt.

Maybe not today, maybe not next year, but at some point somebody's got to buy the debt of the United States.

And again the Federal Reserve by the way, is who's going to buy the debt.

Much like in Japan, we are going to monetize our debt that by printing money and making it go away.

And, and that's the big, the big story.

And I get why gold and precious metals and commodities etc are, are due for a nice run.

But to your point, let's move on to commodities because we're 40 minutes in and then we could in wonderful conversations and by the way such an important conversation, maybe the most important and again made a lot of people a lot of money I think over the years as, as a result of it.

Niels, did you want to dive in?

I have a couple different commodity conversations I definitely want to dive into.

So yeah, no, I mean I think we're going, I mean obviously the big story this year is precious metals.

I think we're going to get to that.

Before we get to that, you mentioned Adam, energies and I think you've did as well.

Maybe Jim, maybe it was before we press record.

I just want to put it a little bit into perspective here.

If inflation indeed is going to come back with more of a vengeance.

Adam, don't we need energy or oil to respond in an upward market move?

And how do you see the clearly active policy of drill, drill, drill in that?

Because that seems to me to be a little bit of sort of counter forces at play or maybe it's something completely different.

I know like a year ago you mentioned, or maybe it was earlier this year you mentioned that for example shale production in the US had peaked.

And that's probably not going to help.

On the other hand, it's not like oil prices have gone up a lot in the past eight months.

So can you bring all of this in a much more sensible way than I can?

So look, you said, you know, you said if you're going to have a higher inflation print, do we need to have oil prices alongside that?

I don't know if you need to, I think you will.

And I think that just comes to its own supply and demand fundamentals more than more than anything else.

Do I think that oil be a driver of inflation?

I do.

Can you have inflation without it?

I suspect you probably can.

There's lots of ways that you can get to changes in aggregate supply and aggregate demand which ultimately leads to your inflation levels and stuff like that.

But I think that an oil shock is fairly a high probability event and less than a shock, I think a rally is an even higher probability event, I guess by definition.

So why is it that we think that?

So yeah, we did say that, that we thought the US shale production was going to roll over and it did last October.

And if we spoke eight months ago, it probably was, you know, January or February.

So the data was coming in October, November, December with a couple months lag and it had shown a rollover and I'd have to go back and listen to the tape, but probably what we were saying back then, and I know we're saying it elsewhere and on this podcast as well, is that it seems as though it's rolled over, but you know, don't discount the ability for it to pop back up again.

Monthly data can be notoriously volatile.

But going all the way back to 2019, we built these very sophisticated geological models and they predicted 2025 would be the year on a monthly basis.

It rolled over October 24th did.

And we said we feel confident that it's going to continue, although it could change.

Now here we are and we're in October with data out through at least August, maybe September.

I have to go and check my models.

And US shale production has continued to fall.

So it's not huge volumes that it's down.

So 150,000 barrels a day off the Octo 24 peak, notably through August.

It's still up year on year and that seems to be what energy market watchers are focused on.

But you know, people then say, well, according to your sophisticated models, when does that turn negative year on year as it'll absent a big increase in production by October.

If last October was the peak, then by this October you'll be down Year on year, by definition.

I think I'm still trying to figure out if there's, there's any issue with that math, but I think that that's how that works and.

Yeah, sorry, go ahead.

No, I just have one question which is obviously, you know, you made these models, you know, a couple years ago, you're following them.

The big disruptive piece, as Neil's kind of alluded to, is kind of the drill baby drill policy.

And psychologically people are really like, if he's, you know, it's kind of like don't fight the Fed, don't fight the administration when they, you know, when they decide to do X.

Right.

And, and so my question to you, and this is to be polemical, I'm also broadly an energy bull, is what are the actual policies and how big an effect are they having?

And are you concerned about the.

Not concerned, but is the supply increase that could potentially be coming from that big enough to change those models?

It's an interesting question.

We've been very, very skeptical about the success of Drill Baby Drill and so far, year in we've seen no impact whatsoever.

I mean you couldn't point to the production trends and say, oh, that's built drill baby drill.

When people, you know, when it was originally best sent with his three arrows, which became 3 million barrels of oil equivalent production growth which then became Drill Baby Drill.

You know, that, that, that's the progression of how that went.

You know, we said we just don't see it happening.

And we went back and again looking back to history, said that in the early 1970s when the US also experienced a rollover, then it was conventional production and it was a rollover.

I mean it fell for the next 30 years and conventional production continues to fall.

So I mean if, but for the shales, that was a correct call.

That production was peaking in the United States in 1971.

And, and as that happened in the first year, production was down a little bit.

It had only gone up since oil was first discovered.

Basically only went up and production is, that is, and the first or second year that production kind of stagnated.

Nixon got on TV and announced Project Independence, which was a huge political realignment towards the US energy industry.

And the idea was we had just been neglecting this industry for too long and it was the lifeblood of American success.

And now we're dependent on all this foreign Middle Eastern oil coming from opec and they were starting to exert pressures and things of that nature.

So we're going to bring back US Energy dominance is called Project Independence.

And until the shales, that was always like bandied about is a really embarrassing name.

It was kind of like George W. Bush's Mission Accomplished ban or Project Independence because our reliance on foreign crude only went up and up and up from the minute that he gave that announcement.

And the problem was he was trying to fight geological problems and pressure with political solutions.

And that's quite difficult to do.

And I think you're in the same situation now.

So we've spoken to people and expressed our views and stuff.

And the administration at the beginning of their term was very much of the opinion that they could get production up.

And really there's two sides here.

Right.

Which makes it even more challenging.

Production up and prices down.

And certainly at today's prices you're not getting production up.

And to get production up you probably need much higher oil prices, certainly not lower from where they are today.

And that's interesting because back in the 70s, Nixon really didn't care about price.

If anything, he was willing to raise some regulated prices higher to avoid physical shortages.

They avoid the gas lines and stuff like that.

Right.

So he was willing to use price as a lever.

The American consumer wasn't worried about the price at the pump.

They were worried about waiting in those gas lines today.

They, they want more production and lower prices.

That they're trying to solve a geological problem with a political solution.

And that's been hard.

So you've seen the administration pivot a little bit frankly away from domestic production growth towards trying to get OPEC on side to raise production.

And I think part of that's an admission that it's been very challenging to get U.S. production to grow.

Yeah.

And I think this leads us right into our next topic, which is Venezuela.

Talk about trying to find other solutions.

It's probably, I don't think it's a coincidence that Machado, who by the way has been at work, which she's doing for decades now, was suddenly made the, the Nobel Prize winner in the context of, you know, the US moving 10000 troops to Puerto Rico, flying B2 bombers now, you know, into the region, literally extrajudicially bombing drug boats without any proof along the coast.

And so what are your thoughts on, on Venezuela?

You know, again, I think the odds of it are.

Something happening there is much bigger.

I think it's also tied to the bigger global.

You know, China has obviously created a foothold and is propping up Maduro.

There's a lot of back and forth that's increasing between The China and the US but going for a while, but starting to heat up a bit also in Russia.

Russia a bit more heating up.

Right.

So I think Venezuela is another front on that war.

And I think if this is a game of risk, I think, you know, you see Russia take Ukraine and you say, you see China kind of doing this over Taiwan.

What is the biggest asset near our shores?

That's, you know, so no matter how you feel about it, emotionally, politically, whatever, I think that is what's going through a Trump administration's head.

And he said as much in his last administration.

So given that, that, hey, what would an opening up of Venezuela look like?

Who would the biggest winners be?

How much effect would that have on oil and other commodities in the, in the short to medium term?

How long would it take to.

I understand that Venezuela oil is much heavier and different.

Talk to me a little bit about all that, if you don't mind.

Yeah, absolutely.

Look at it.

And there's a lot of question marks and unknowns to say the absolute least.

And you know, one thing that I would say in general is you look at U.S. foreign policy, which a lot of people will talk about in terms of getting control of foreign sources of commodities and oil and stuff like that.

I mean, we all remember that very clearly Cheney and Bush were going in to Iraq in order to get all the oil out of Iraq.

And here you are, you know, 25 years later, and I'm not sure where these big Iraqi American oil fortunes that have been made are.

And of course, you know, just didn't amount to anything.

So I think you have to have a serious dose of humility when you try to project out.

So I'll talk sort of in more real terms and less hypotheticals because I don't claim to know anything about any, you know, plans or let alone plans, to say nothing of how those plans would eventually play out.

But Venezuela is a massive, massive oil reserve.

It's very heavy.

As you mentioned, it's more akin to the Canadian oil sands and heavy oils than it is to light sweet crude crude coming out of the Permian or the Bakken or the Eagle Ford.

In fact, there was such a prevalent view that the United States would be importing massive amounts of Venezuelan crude.

That actually most of the refining system in the United States is much better suited to process and refine Venezuelan crude than it is our own domestic crude.

Because no one saw the shales coming.

Everyone thought Venezuela would be the future.

And we built a system to reflect that.

And, you know, we've been In a suboptimal situation really ever since because of that swapping out of Venezuelan heavies for shale, light tight oil, you know, and that's why for those really kind of nerds in the weeds or whatever here, that's why there's a long time when we would import a lot of crude oil and export a lot of crude oil.

You're like, well that just seems silly.

Why don't you net those things out and just stop the boats from going back and forth.

But it's because we were, you know, importing heavier crudes and exporting lighter, sweeter crudes to make our refined binary systems a little bit more efficient.

So there's a huge asset there.

We've known about it for a long, long time.

It's very real, it's productive and it's heavy, it's fine.

Leave that aside.

As far as the ability to come back online, you know, there was a period of time maybe 15 years ago where Venezuelan production came offline, sanctions were put on, they were lifted and production came back.

And so the big question is can you, can you kind of do that again now?

Because now Venezuelan production is a trickle and if it went back to its peaks would be material number.

And the read that, you know, most people have said is that that infrastructure has been fully cannibalized at this point.

You know, it was not like that last period where it sort of short lived a reduction in supply and then it came right back online within a year or so after that.

Now, you know, the vast majority of that steel and copper and whatever has all been stripped out of these facilities and you really would have to rebuild that from scratch.

And so that's going to be a longer term process.

And of course you need to have the right frameworks and structures in place to convince western and western US oil companies to take the risk and go back into Venezuela, which in the right market some will certainly do that.

I'm fortunate, I don't think I've ever told you this to have.

I grew up in Texas, in Houston, which is Energy Capital USA and my father was a PhD structural engineer, designed offshore oil platforms.

So I grew up around the energy industry and 40 some years ago, you know, Venezuela was a big part of the conversation and ConocoPhillips who my father worked with had contracts with PVDSA that I've been, I don't know if you know this or not, I'm sure you do, but most people don't that were that still hold as good in international courts, you know if something was to happen in Venezuela, those contracts would be, be either made good or, or repaid in the form of new contracts.

As you know, Chevron has a massive foothold in Venezuela and, and they're a person.

Haliburton obviously would be critical, as would Schlumberger in that process.

All of these names, if you go look at them, trade at relatively low PS and if something was to happen there, which you make your own probability, you know, ChatGPT says 35%.

I, I think it's, it's that are higher, you know, that could amount to a lot of these names.

I just said about a 100, 200% revenue growth over the next several years in Venezuela primarily, if not alone.

And so I think the market has not yet woken up to this fact.

I think there are some significant opportunities given what we're seeing.

I think that I'll, I'll make it even simpler.

Oil is the most hated asset in the whole world.

World.

It's the most hated asset in the whole world.

You don't have to go to Venezuela to find cheap oil assets.

They're abundant.

You have offshore drill rigs in these US traded companies that all went through bankruptcy, have no debt on their balance sheet and they trade for 10 cents on the dollar, their replacement cost.

And that's a hypothetical replacement cost because no shipyard will build you an offshore drill ship.

And at the same time we hear talks every day about how, how you know, you can't be bullish on oil because the shells might be rolling over.

But the offshore industry is about to have this big resurgence in Brazil and Guyana and Namibia and Angola.

But I hate to break it to you, you can buy the assets that go in and drill those things for effectively the value of the scrap steel on their decks.

Amen.

So something doesn't really give, doesn't make sense and it's just a hugely, hugely hated asset class.

And I, you know, passes the kind of smell test and stomach test or whatever, you know, I, I, if I, I'm lucky enough to get invited to speak at a conference and we'll talk about whatever is they've invited me to speak on.

And then they say, what are you excited about now?

And I tell them something else.

And you know, for a long time after 2022, Russia invaded Ukraine.

People wanted me to talk on oil.

And then they said, what do you really like?

I said gold.

And you just hear this groan from the room.

And you know, in 2018 again, around then it was, you know, oil had had a good run from 27 and 16 up to 87 by late 1718.

And people said, what do you like now?

I said uranium.

And they said what are you talking about?

Like we're not using that anymore.

It's going to zero.

And, and so today, you know, they want me to talk about gold.

And I still think that gold has a bull run ahead of it.

I don't think the run's done.

But what's the most exciting, what's the most out of favor?

What's the cheapest?

It's probably oil.

And they definitely grown.

When I say oil.

Yeah, I think, I think like a lot of investments, you know, there was a period where energy was more interesting to people and that and, and for good reason.

Reason doesn't mean the macro picture has changed, but people have left it for dead.

And that's when, that's when, when those two things align.

Which doesn't happen often, which happened with gold, by the way.

You know, we were talking about nuclear similar.

I think.

I couldn't agree more.

I think also chronologically, if you look at the 70s and stuff, same thing, right?

Gold ran first and then eventually geopolitical conflict led to some other issues and eventually oil ran as well.

And I do think that that's stuff rhymes.

And I think the geopolitical conflict is coming too.

So I think there is definitely, especially given pricing there just incredible opportunities.

And again, just to reiterate your last point, everybody's focused on the drill, baby drill and oil prices and supply.

But to your point, there are companies that at these prices still make a tremendous amount of money.

And that doesn't even take into consideration the call option on all the potential things that we're talking about that could come, come with meaningfully higher prices over time.

And I think once the market starts to wake up to that, which they will, and then it starts to run and then it becomes a mania at some point.

Right.

I think there's a tremendous, I mean I think there are two, three X's out there right now in the energy space.

Easily, easily, easily.

And more than that.

I mean look, I think by 1980 Schlumberger was the second largest company in the world by market cap.

Basically number one is kind of tied for number one.

And you know, today it has $48 billion of market cap.

Yeah.

3 Energy was 3% of the S&P 500 in 1968.

In 1982 it was 33%.

That's right.

Which is a mind blowing right statistic.

Today it's two, two and a half Right.

Not a coincidence.

Now, before we wrap up our conversation, we've spoken a lot about energy.

We've touched on precious metals, mainly gold.

A lot of people think that gold is really the, the, the, the shiny metal of the year, up about 54% or so, at least based on futures.

However, it has been surpassed by silver, up 73%, palladium of 78%, and platinum, up 82%.

Can you talk to us a little bit, Adam, about how you view the precious metal space right now?

And just to give people a little bit of sort of further details that they may not because everybody's focused on gold, but there's obviously other things going on, clearly.

Sure.

So look, you know, I think that precious metals are not unfollowed or unloved anymore.

I don't think they're expensive.

You can look at different aggregates.

Like you were talking about all the world's financial assets and all the world's gold, and you were talking about, you know, it being at 6 trillion versus 500 trillion.

You know, I'd be curious to know.

And we did this a number of years ago, but I need to update it.

The data is more sporadic.

You know, how does that track with other periods right before gold had these big rallies?

And when gold was done, their rally, you know, is that still relatively cheap?

And I suspect that it is.

I suspect it follows the trends that we see in other aggregates, which is about one to one and a half standard deviations below average, as opposed to bottoming at two and a half standard deviations below average.

Right.

So you're still on the right side of that.

It's not expensive, it's not as cheap as it was.

I mean, you don't need to be a PhD in economics to say, well, where's gold today?

Well, it's more expensive than it was, but might not be more expensive than where it's going.

So somewhere on its trajectory, when I look at who's doing the buying and who's doing the selling, I think that speaks to a fairly robust bull market out in front of us.

But there's some signs to be a little bit cautious.

Maybe it's near term, I don't know.

One is that the companies.

So this is really fascina, you know, money invested in gold stocks has been, has been, I don't know, basically flat.

But of course, the gold stocks are up a lot.

So people have been redeeming assets out of those funds like crazy.

The GDX, which is the big ETF that tracks gold shares has redeemed 30% of its shares so far this year.

And the other active managers that we see, it's not dissimilar.

So their assets are holding in but it's not because they're seeing flows.

In fact, it's the opposite.

They're making it the hard way through performance and then seeing money go out.

But we are starting to see an uptick in gold equity deals.

You know, normally I like areas where they really shut out of capital markets.

We're getting a lot of deals.

And Zijin mining, which is the big Chinese SOE gold company just did a $4 billion IPO last month.

And that pushes us on a trailing twelve month basis to basically a new high in terms of gold equity issuance on a trailing 12 months.

So, so you know, capital seems to be coming in.

I don't really know who's buying that stuff because it's not the gold funds.

They're seeing redemptions but someone's buying it.

And, and silver is staging a catch up rally here.

It's underperformed gold for a long time.

Both, both a long time, three years, a long time, 30 years.

You know, it's been underperforming and it's staging a catch up.

And what we noticed is that historically you do get periods where, when gold, when silver C stages like a fairly large catch up rally to gold that marks kind of a pause in both gold and silver for rallies going, going forward for sometimes at short term, sometimes a little longer term.

But we saw it in 1980, we saw it in 2011, we saw it in 2021.

I don't know that we're quite there yet.

You know, the gold silver ratio still says that, that that silver's, you know, quite, gold's quite expensive.

So you haven't caught up to the point where I think you're at the end of a rally but it's something to pay attention to.

And again a little historical context.

Context could be helpful.

Lots was made this past weekend that silver made an all time high.

They surpassed the Hunt brothers trying to corner the silver market in 1980 and they, they surpassed that and they made an all time high.

You know in 1980 gold was 800 bucks and today it's 4,000.

So gold is, has clearly made a new all time high and then some platinum usually trades at $1,000 premium to gold, gold $2,000 discount.

So it's caught up this year.

But I mean none of these things have gotten to the stretched levels on the other side that might suggest the Bull market's ending, so we remain very convicted.

We think that this has room to run.

Some of our gold stocks have run a lot and some of our gold exposure and aggregate's gotten a bit big, so you might use it to trim if we wanted to roll into some oil and stuff like that.

But I think, I think it still has legs.

When we talk before, I think a couple years ago you were really bullish of the gold miners.

Given the valuation gap that has played out.

You know, that has been a good trade.

My question to you now is, is where do you still see the best way to play precious metals at this point for the next year?

No, it's a, listen, it's, it's an interesting question.

I, I think so we in the fund, you know, if you want to own gold, you want to own silver physically, that's, that's perfectly fine.

I think they're going to go up.

I think the miners will give you the beta.

And we are equity managers and we focus on the equities.

Right.

I think there's some good reasons for that, but different people have different preferences.

I don't think owning gold is a bad idea.

As opposed to gold shares.

I think gold shares will go up more, but I don't think you're in a impaired asset class by owning the physical instead of owning the equities.

And gold stocks, look, in the past 12 months they're up a lot, but gold price is up quite a bit on an earnings basis and a price to nav basis.

They're still very cheap and undervalued because they have beta.

Right.

A fixed operating cost.

And so yeah, they're up more than the gold price but they lagged a lot the couple years before that.

So they're, they're not expensive by any measure.

Yeah, I like it.

After the run now in particular, right, because they perform, they continue to make income.

Right.

In the context of these, these prices.

We don't need higher prices necessarily for.

Certainly don't need higher prices.

And look, you know, a year ago, right.

A year ago you were in the situation where real interest rates were still kind of up and elevated and whatever.

A year, 18 months.

And that was the sign for western investors to sell everything gold related, both bars and shares.

And the central banks were buying the bars, so no one was buying the shares.

So you developed a big wedge between gold and gold stocks and into that wedge formed a narrative.

And the narrative was that the companies were misallocating capital so badly and their costs were going up so that even if gold prices rise, gold stock profitability goes down and the stocks won't respond, there's never a reason to own them.

And that was a very, very, very prevalent narrative as recently as a year ago.

And agree with that at all.

We said no, look, you just need someone to step in to buy them and if no one buys them then, I mean I'm a long term investor.

I think of it as owning a business.

I mean I don't really care if anyone comes and buys it.

I'll just take the cash, you know, it'll buy itself, its share count down to zero or whatever.

And, and that was correct.

You know, that narrative that the company's profitability was somehow impaired was, was nonsense.

Now they're generating a ton of cash and I mean some cases, yes, there's always going to be stock specific, specific stories but in general the industry has not lost its profitability.

And, and I think gold remain, gold stocks remain a good, a good viable asset class.

Yeah, I couldn't agree more.

Yeah.

Which would you rather own?

The hard asset, you know, in my opinion or a company that makes money, owns the hard asset and makes some money on, on selling it in a margin.

And I think at the end of the day it's nice to have both, right?

Yeah, yeah, both.

I agree.

I think we covered a lot of ground, not as much as we possibly could.

And maybe before we wr.

I'll just give all of us a little bit of homework because one of the previous guests on our show that Jim and I spoke to a few years ago, Dr. Pippa Malmgren, who she wrote a blog post very recently talking about another and I guess you could call it a natural resource and it was about the race for Helium 3.

I don't know if you ever heard about Helium 3.

Helium 4 is apparently what makes your voice funny if you inhale, inhale it.

But helium 3, you know, is like a superpower type gas and it's lighter, it's non radioactive and it can fuel nuclear fusion.

So apparently if we're going to find really cheap clean energy, Helium three is the one.

And apparently there's lots of it on the moon.

So if we do see a race to the moon suddenly show showing up, we all know why.

And I want to give credit to Pippa for bringing that to our attention.

But lots more to talk about, no doubt.

Any final words, Adam?

Any final words, Jim?

No, I just that I like to go on site visits whenever I can.

So if they offer a site visit to the moon, I'll be the first to go.

I will say that to the helium.

Note just one point there.

Not just helium 3, but helium in general has been a major lever for the US that's not talked about.

China had its equivalent of Project Warp Speed to help control helium production for themselves, which many are saying has been a major lever against the rare earths issue and has put that off as long as it has.

But that that production and that opening of helium production for their for themselves has now allowed them geopolitically to now flex this rare earth muscle.

And so there's some interesting dynamics going on there with with helium that that connects to some of this geopolitical global conflict as well.

And you know what?

It's also useful as far as I understand, cooling down magnetis when you do an MRI scan and cooling down AI servers.

So that's why it's so important, I guess.

Anyways, guys, this was fantastic.

Adam, as usual, super delightful, insightful.

You as well, Jim.

It's really great that we can come together a couple of times a year to discuss all these major issues.

Make sure you follow subscribe to Adam's and Jim's work because of course you can tell from this episode these are some of the really important drivers of the global macro world right now.

You can find links in the show notes for this episode, of course, from Jim, Adam, me, thanks so much for listening.

We look forward to being back with you as we continue our global macro series.

And in the meantime, as usual, take care of yourself and take care of each other.

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