Transcription
I'm not saying it can't go higher. I'm just saying you look for alternatives. That environment and cryptos are great. Gold has been really great this year, and now it's getting a little expensive. But I just look at what I see as indications of the next big trade.
Um, and gold being up on this year right now, as we speak, 52%. At the same time, crude oil is down 16%. That disparity, which is almost 70% of gold up, crude oil down. This is the world's ancient store of value. It ain't supposed to go up that much unless there's something wrong.
But let's talk about the spectrum, if you were, or where we're at today. And I'm going to throw something at you that I'm just thinking about and considering, because a normal correction and even deflationary time, and give that three, six, nine months, whatever should happen. And I put "should" in as air quotes here. Um, what if it doesn't? Meaning, what if the Fed just prints a ton of money, or continues to print a ton, ton of money, and it's just that money, has that liquidity, has to go somewhere? I guess my question is, have you considered that? And what does that look like?
That's gold, right away. The default for that is gold. Any other option is gold. First of all, that's what happened in Japan until recently. It took like 30 years. That's what's happening in China right now, second largest economy. It's happening right now. The massive liquidity pumping in that country. Nowhere near that. I mean, like I said, it's two to three times US money supply running and debt to GDP running 300%. In this country, at least 130%. It's only going up. So, but the key thing that happens is, that's the key thing is what's missed. Um, one bridge at a time. I'd say, say, you know, in a binary model, there's one iteration, and you take a choice, and you go to the next iteration. The first iteration is what happened in 1933. Well, how did we bottom that deflation, bottom of the stock market? FDR devalued versus gold. It took, it took a 90% correction in the stock market. So, that's my point. Is we go through the first iteration, and that's, to me, is the next big trade. Stock market drops, and we'll get the printing, sure, but it'll be a cat, you know, chasing, like the cat chasing a dog chasing its tail forever. Just, if any history is an example, when you get this expensive, and people start shutting down, you know, we've way overdue for a little bit of retracement of consumer spending. Um, particularly when everybody starts losing on the value of their home and their assets, which hasn't happened like, forever.
Mike Mcloone, Bloomberg Intelligence. Good afternoon to you, my friend. How are you?
Good afternoon to you. Thanks for having me on. And I say, I enjoy, yes, talking to you. And I think we look like good bookends.
We do. And as I said off-camera, you're, camera, you're a very handsome man. My wife might confuse us. We look very similar.
So, let me get to it here. So, last time I had you on, it was about, I want to say, eight weeks, well, six to eight weeks ago. Uh, I think you made a great analysis, a tie into it, where you talked about, uh, the S&P, well, you didn't specifically say the S&P 500, from what I remember, but you said stocks, uh, their correlation between Bitcoin. Uh, Bitcoin has had this, uh, correction. We've had a bounce. Stocks have not. But I want you to talk about that. Where are we at with all of that? Do you potentially see a blow-off top here in stocks, or just, I guess, how does this work in your thesis?
Well, and as some of our long-term, or my long-term listeners and readers have known, I've been looking for blow-off stocks, top stocks for too long. And we're clearly in a blow-off part. Question is, how far it can go. The key thing I like to point out is, it's great to put Bitcoin in that same bucket, because I just look at pretty significant divergent weaknesses from cryptos versus stock market. Now, and this is stuff I pointed out last year. And as soon as Bitcoin went $100,000, reached $100,000, to me, that was a sign that the bell was ringing. And now we've had classic signs of peak, late-stage bull markets, massive euphoria, pile-on, and into very poor performance relatively. So, on the year, as we speak on October 29th, right after the Fed made their announcements, announcement, Bitcoin's up almost the exact same amount as S&P 500, about 19%. For an asset that trades two to three times the volatility of beta, that's real bad. And it's also at happening in a time of the year that's real bad, and happening when everybody's, you know, the masses are piling into it at the wrong levels, for the wrong reason. So, I also look at other indications like the Bloomberg Galaxy Crypto Index. It's up only about 10% this year, and it trades almost three to four times the volatility of the S&P 500, and it's lagging divergent weakness. And then I can tilt over to one other thing that's showing, I would say, divergent strength. Look at, um, the Bloomberg US Treasury 20+ year T-bond index. It's up almost 10% on this year, and that's up despite this pretty significant inflationary force in the stock market going up. So, I'm looking for the next big trade. And in the past five to 10 years, it was clearly cryptos. Certainly for the last few years, it was, and certainly this year, it was gold. And now I'm worried that the next big trade is just going to be good old US Treasuries, which means that would be triggered by one simple thing, a minor 10% correction in the stock market. And I think you can easily drop 40 basis points in the 10-year note yield, which right now is at 40% at 4%.
Yeah. So, um, I would agree with you here. You could easily see a 10% very easily. And I might add, and again, this is not investment advice, but a 10% correction in the stock market here. Um, but talk to me a little bit about, you said a key word, I think, is liquidity here. Is this, and I think Bitcoin, correct me if I'm wrong, as well as gold, is showing this a liquidity problem or a crisis here in the economy where money is becoming out and money is hard to find? Correct?
Well, I, I, it's, it's one thing I, I, it's massive liquidity now because of one main thing. All risk assets are going up. So, I do one point when people point out, um, things like money supply and inflation and everything. But when you get to 2 point, almost 4 times GDP, stock market cap to GDP, the stock market is the economy. And I'm not saying it can't go higher. I'm just saying, you, you look for alternatives that environment. And cryptos were great. Gold has been really great this year, and now it's getting a little expensive. But I, I just look at what I see as indications of the next big trade. Um, and gold being up on this year right now, as we speak, 52%. At the same time, crude oil is down 16%. That disparity, which is almost 70% of gold up, crude oil down. This is the world's ancient store of value. It ain't supposed to go up that much unless there's something wrong. And this is the world's most industrial significant commodity going down that much. It ain't supposed to go down that much unless something's wrong. But that disparity, Andy, is the greatest ever on an annual basis. Now, we only go back 100 years, but, you know, gold wasn't even on, we, we've only been off the gold standard since 1971, and crude oil hasn't, didn't really matter as much 100 years ago. And the most significant disparity on the annual basis was about 60%, and that was in 2008. So, to put two, 2025 into the same year as 2008, and the stock market still being up 20% for something like what I'm looking at in a commodity standpoint, is just very, I just use the word scary. Now, as we're getting towards Halloween, how about frightening?
Yeah. No, I would share. I lived through 2008. And actually, I was managing a ton of money in 2008. And I was afraid that I was going to have to go buy a cabin out in the woods and haul water with some buckets. I'm not kidding. We used that analogy back then. So, are we going into that? Is that what your opinion is? Or how do you see work that out for me? How do you see that?
Well, we sure hope not. And if we can, time, I'd love to hear part of your 2008 story, because it was, I was just a trader. Um, I worked at Standard and Poor's, S&P, and it was my best trading year ever, only because I just saw it coming. I was tipped off by volatility dropping to the lowest level ever, the VIX, in 2006. And I just looked for alternatives, and I just overweighted Treasuries and just found ways to short the stock market. Now, kind of done similar in the last year, just by buying gold and overweight Treasuries. But that's not, it's just similar signals. But the key thing I see different now is, when we started at 2007, let's put this, we'll start with one simple thing. People talk about high levels of cash. Now, it's the opposite. If you look at the standard money market, um, amount on Bloomberg terminal, so about $7 trillion, that's about 10% of the stock market cap. In 2014 and 2007, before the great financial crisis, was closer to 15%. So, market's up so high, and also stock market cap to GDP versus the rest of the world, we're almost 1:1. I mean, it was, you just look at the S&P 500 divided by the MSCI XUS index. It was a 1:1 ratio. Now it's about 2:1. So, we've doubled versus the rest of the world in that period. And also US stock market cap to GDP. Back then, it was maybe 1.3 or so. Now it's 2.3. So, things are, and then the housing market, everything is just the most expensive in history. The world's more dependent on the US wealth creation machine. And I mean, the world than any time in history. And it's just got to keep going up. And that, to me, is part of why gold is doing so well. And that's why I just have to look at is, you never, I mean, trying to short the stock markets is really difficult. I came up with that. Um, but finding alternatives was great. I mean, I, I really got into cryptos for a while because I thought that was a better alternative.
And I've been really, way I over, just was so bullish gold for too long. But let's just remember how this works as a, as a trader, as an investment manager, and a strategist. I got beat up by gold in 2000, and 20, 21, 22, and 23. In 20, start after 20, I kept calling for it to break above 2000, and it stayed below 2000 until '24. By the end of '23, I was making, I use, I was using a quote from Roger Babson that he used at the end of 1929, when he said he gave a speech, and, you know, he was doing the opposite in the stock market. And he says, "I'll tell you what I told you the year before, and the year before that, that the stock market is going to go down." So, I use the opposite, and I kept saying, "I'm going to tell you what I told you there before. Gold's going to go up." But now it has a lot. And on a, you know, you just look at versus most moving averages, I can go out to five years, 60 months. It's so stretched. I'm just really scared by what it means. And that's why I look over that stock market. It just has to stay up. And I just mentioned, just 10% correction. We both know, used to be nothing, but it's so completely out of the mainstream media, and now the mainstream expectations. Now, I just look at some of the chats on Bloomberg. They say, "Yeah, well, earnings are going to be strong, the Fed's easing, you got to get, you got to be long the stock market, and the greater risk is not being in it." And the kind of things you hear, you've read about in 1929. I remember hearing in 1999. I remember hearing in 2007. And when I started in business in 1989, I remember that in Japan. So, um, I, I just look for alternatives, and I'm just, I have to say, just frightened by what's happening. There's certain times you're supposed to just say, "Thank you," maybe just go to Treasuries. And I think this is one of those. You know, I, I'm really glad that you put that up. Uh, I, I don't, people are tuning in to listen to you, but so I won't go too long, but I do want to give a little bit of my story. We, I was running a hedge fund in 2007. And I, again, this is memory, so my memory is a little bit foggy, but I want to say in 2006-ish, 2007, the yield curve inverted. That was our signal. When we went to a lot of cash, and we bought the short end of the curve. And why not? Because that's going to flatten and go down. So we're going to make money on that. And then number two, is we'll just hold and be safe, right? So, it's a time to be safe. So, that is the time to buy bonds. We had an inversion 12 months ago-ish. I'm going to say, a ballpark, that. Um, but I certainly don't see the issue or problem going short-term bonds here. Again, not investment advice, but I see the value in that. What confuses me, that confuses me is, I've been long gold exactly when you were started in, again, started again in 2021. Didn't happen, but then it happened all at once. So, what I'm confused, and I expect it to go higher, just for all of our viewers and listeners. Again, not investment advice, but it has gotten so frothy. And I get frothy. I get phone calls from friends that I've never heard of about the gold market. And, you know, that is a big red flag. We've had this correction here. I went 50% cash here about two months ago, three months ago. Not saying I'm some kind of brilliant genius here, but I'm just saying I find problems when I get friends that I've never heard from call me about the gold market. So, I don't know specifically what to do. And I find a good place when I don't know is to do nothing, if you would. And that is to park your money in short-term T-bills. Go ahead.
Well, no. I, I, I, I think it was important for our viewers and listeners to hear that story, because that's so important. And the key thing I think happening now is, it's the graduated and suddenly factor. Like, I was a complete idiot in crude oil for at least a year, expecting to go back to, to, to $40. I still expect that. Right now, it's $59. Um, but I had to get thrown on the mat for a while. And I got to get thrown down on the mat for a while on, uh, on gold. You and I were both in, in that. For me, just as a strategist, as an investor, I'm in Bloomberg. Everything's pre-comply, you know, pre-cleared, and everything. And I just have been overweight gold for too long. But that's beating the stock market. That's a problem. The key thing that really has been throwing me down in the mat since about this time last year, and actually a little bit earlier, was stopping. I stopped my bullishness in, in Bitcoin and cryptos, because typically early, but usually that's, that's they've been the tip of the risk assets iceberg. And once I saw that pile-on after ETFs, and certainly with Mr. Trump getting elected, all my indications there were early. I was wrong. But now they're all kicking in that this is classic peak euphoria, pile-on, a poor performance, late-stage bull cycle stuff. So, just by watching one key indicator, I've really been watching, and we're always looking for indications. I'm looking for the broad markets. One thing I've been really watching is MicroStrategy. Now, it's just strategy. And that stock, um, I, I have to say, it's completely on the center of my radar. Because anecdotal matter sometimes, in his business, I think it was 24, 24 in 2009. Last year, I had two fathers at two conferences ask me, you know, my sons are about 30, and they both had sons invested heavily in the stock. And two, in different places, in different parts of the world, ask me to, to speak to their sons and maybe talk to them about getting out of this stock. I'm like, "That's never happened before." Now, I was invested in the stock too, myself, pretty carefully by the firm. And when it gave me a 10x, I'm like, "Okay, this is a lot." But now I see this tip of the tip of the iceberg rolling over. It's below its 50-week moving average. It's below its 200-day moving average. It's bouncing on good support. And if it doesn't hold this $280 level, to me, it's a matter of time it breaks out. At the same time, I see that old T-bond, the US Treasury T-bond, US1 is what it is in the Bloomberg terminal. It used to be the most widely traded future on the planet. It's where I started in the business in the 1980s. It's starting to tick higher, which means deflation potentially from the top of the iceberg of risk assets kicking in, and deflation from bond yields potentially bottoming, bond prices going. So, I see that getting started. And you have to look at what's going to trip it up. Sure, if I'm a trader, if I'm in a trade, something's going to trip me up. And that's one thing, you know, certainly as being at a hedge fund, and I'm sure a lot of our viewers and listeners can relate to it. But me as a strategist, I just look for the indications. That's why I'd say, just one little trigger to be. So, we had one 5.3% down day in the, um, S&P 500, approximately on October 10th, and the crypto market collapsed that weekend. I mean, that was just normal. And that was just normal. It's like, what if we get, >> 10%? And I'm not saying in a day. I'm not saying if, when we do, you're just seeing the tip of the iceberg ready to drop. And I think the whole space is ready to drop 90%. And that's just >> 90%. Wow.
Go ahead.
You should. So, so I'll repeat. Uh, so I, I'm glad you did. Um, and I fully get pushback. So, here's, I'll give, I'll quote myself in 2018, talking about Bitcoin. It was around $10,000. I said, "I can easily lose a zero." Um, I got lot much less pushback then than I'm saying the exact thing. Same thing now. What's different? First of all, I was wrong. It only lost 70%. It went from around $10,000 to $3,000. So, but, you know, as a trader, okay, a lot of people got hammered on that move. And as a trader, if you can get the two-thirds within that bell curve of a move, you're happy. And it depends how you manage it. I see the same thing now. Just a normal risk. And to me, the risk is at some point we're going to get the third potential 50% draw down in the US stock market since 2000. We've had two.
We're more expensive now than history. We're more dependent on this on this wealth creation machine continuing than any time in history. And all my signals are are giving me really big warnings, particularly just one simple thing. As a commodity guy, when you see gold up this much and crude oil down this much, more so than any time in history, something's going on. And I just can't look back. And this, so I can't wait to write the book about this period, just like you told the story about 2008. And I just can't see how it, this type of disparity is not going to matter. And this type of weakness in cryptos and downline, and things that are happening in China. So, here's one thing I like to point out. So, normal deflation's happening in China. The 10-year yield in China is 1.81%. Now, people know if I've been pointing out this for too long, but the US is starting to go that way. We're at 4%. The CPI, PPI in China is running between two and minus 3%, depending lately. That's despite stock market cap, I'm sorry, that's despite debt to GDP running around 300%. Now, that's not my estimate, by some estimates, including Goldman Sachs, and money supply running $45 to $50 trillion. That's more than double the US. Um, so that's what happened. Japan in the, uh, late in the early '90s. It's what's happening in China now. And just the only thing holding the whole world back from a normal deflation, a post-inflation deflationary cycle, which is normal, is the US stock market. And that's why I say the inherent risk here is just amazing. And that's why you have to just be very careful being overweight that kind of high-risk asset.
100% agree here. And I'm going to share a little bit more with you if you don't mind. But then I also want to, and this is not a pushback, but this is another scenario. And I think, like, I read this, and this was around, I don't know, 2004, 2005. I read this article in Fortune magazine called the Rainwater Prophecy. I don't know if you know who Rainwater was or is, um, but it really stuck out to me. It's like, you got to consider, as a trader, investor, whatever, you have to consider the entire spectrum here. And I, that's one of the things I don't think people are doing, if you would. But I want to work that through, through with you. What is astounding to me, especially with crypto, is how much leverage is involved with crypto. And so, if that goes down, and you're going to have funds blowing up, you're going to have ETFs blowing up, you're going to have, uh, banks blown up, blah, blah, blah. Correct me if I'm wrong with that. And then I want to work out, um, the spectrum, if you would, comment about that.
So, I, I want to point out, I think the systematic risk, not systemic, systematic risk of Bitcoin and cryptos is enormously, um, elevated, partly because not only we, here's, first of all, and us pushing back or disagreeing, I think is very important, because sometimes it helps hone our own views. It helps our audience make their own decisions. So, to me, that's an important part of discourse. Can't do it in China. Um, but I wrote a, I wrote about that in June, that the next recession might be led by cryptos. I got a lot of pushback, particularly from the people from cryptos. And that once you get the pushback, you know what their position is. I'm like, "Okay, they're getting angry. So, I know you're way overweight this space." Like, "Sorry, but this is." And then, so I rewrote it. I just republished it about a couple weeks ago, pointing out when you have stock market cap to GDP, high GDP, this high, I mean, it's like almost unprecedented historically. 1989 Japan, 1929 US, and only two examples. It is the economy. And the, the next recession will be led by one key thing, just what happened in 1929 in US and 1980 in Japan, 999 Japan, just a little bit of reversion, those prices. But the tip of that iceberg are cryptos. And most of these 25 million now listed in coinmarketcap.com track nothing. Now, Bitcoin tracks nothing, but it's, it's a number on the screen. At least $300 billion of this space, which is, I'm sorry, $4 trillion, tracks the dollar. Crypto dollars. I'm still very bullish the proliferation of stablecoins, as I call them, or I call them crypto. Um, but it's just full faith and credit. I like to use just one simple example. I keep using this, but Doge, Dogecoin, number nine is worth $29 million. It was a joke. It was launched as a joke. It tracks nothing, and it's worth that much. So, at some point, that's going to go to zero. I just, at some point, maybe it's going to go to $29 billion. It just needs a trigger. And that, to me, is where the whole, where it's, this is part of the massive wealth creation. This is what's going to be put in the books of the future, telling the story of this period. I can't wait to write them. And I just looking for the signals. It's almost a guarantee it's going to happen. So, I have to look at that as the tip of the iceberg. But it's looking at the whole space that I understand and I know, um, and that's why I, I look at, you have to watch this Bitcoin closely. So, one thing I've been watching a lot is the Bitcoin to gold ratio. Right now, it's about 28 ounces of gold per one Bitcoin. Now, I, I started watching that over 10 years ago. And one of first, it was, I had a son who's now, um, over 30, tell me about it first in 2011. And my first thought is, "H, silly internet money." Then I started watching, understanding, getting involved, got bullish, got bearish, but mostly bullish. I don't, I got really bearish starting getting bearish last year. And this ratio has been stuck at the same level, 28 ounces, since 2021. Now, so it's gone up, and then it got stuck. So, it should go back up again, right? Why isn't it doing that? And I point out because it's probably the sign of an end of the cycle. It has no directional quality and attributes anymore. People are piling in in this asset space expecting it to beat gold in the stock market, and it's not doing it anymore. It's classic what happens. You know, it's the classic when you, you pile on when the trade's already over. So, that ratio, I'm very concerned is going to tip back low. It's been trading between 25 and basically, uh, 35 this year, but it's going to go back down. And one key indication is stock market volatility going up, stock market going down, because that's one thing that's changed is we know that, you know, everything has been going up. But historically, gold has zero correlation in the stock market, and cryptos and that whole space are very more highly correlated to the stock market than ever. So, there's that whole scene. But I look at gold versus everything. Certainly, when every major asset on the planet underperforms this ancient store of value, something's wrong. Like I mentioned, crude oil, silver, even just look at silver this year. That silver to gold ratio has been very disconcerting. First, it popped to 105, then back down to 80. 80 has been support forever. Now it's kind of inching back higher again. If stock market goes down and volatility picks up, that silver to gold ratio will probably go back to 100. That's a statement, because it's never closed on an annual basis above 91. Um, so this is historic stuff going on. And I can only think of what can make legitimize these historic moves, and that's just a little bit of normalization in equity prices. And, you know, just to mention that to some people, it's, it's just amazing how far we've come, how it's so unexpected. So, about that, I remember very well, as you do, uh, 20% correction in the stock market, and was, uh, almost very much expected, if you would. That was a bare market, and that was the time to start buying and finding value, if you would, around a 20% correction. Now, I just see the pain, and all the, and I'll use the word systematic risk, that a 10% correction poses. Just imagine all the hedge funds and all the leverage play that would blow up at a 10% right, >> correction. So, again, to me, just speaking for myself, I'm very scared, afraid of that. Exactly that. But let's talk about the spectrum, if you were, or where we're at today, spectrum. And I'm going to throw something at you that I'm just thinking about and considering, because a normal correction, and even deflationary time, and give that three, six, nine months, whatever should happen. I put "should" in as air quotes here. Um, what if it doesn't? Meaning, what if the Fed just prints a ton of money, or continues to print a ton, ton of money, and it just start that money, has that liquidity, has to go somewhere? I guess my question is, is have you considered that? And what does that look like?
That's gold, right. The default for that is gold. Any other option is gold. First of all, that's what happened in Japan until recently. It took like 30 years. That's what's happening in China right now, second largest economy. It's happening right now. The massive liquidity pumping in that country. Nowhere near that. I mean, like I said, it's two to three times US money supply running and debt to GDP running 300%. In this country, at least 130%. It's only going up. So, but the key thing that happens is, that's the key thing is what's missed. Um, one bridge at a time. I'd say, say, you know, in a binary model, there's one iteration, and you take a choice, and you go to the next iteration. The first iteration is what happened in 1933. Well, how did we bottom that deflation, bottom the stock market? FDR devalued versus gold. It took, it took a 90% correction in the stock market. So, that's my point. Is we go through the first iteration, and that's, to me, is the next big trade. Stock market drops, and we'll get the printing, sure, but it'll be a cat, you know, chasing, like the cat chasing a dog chasing its tail forever. Just, if any history is example, when you get this expensive, and people start shutting down, you know, we've way overdue for a little bit of retracement of consumer spending. Um, particularly when everybody starts losing on the value of their home and their assets, which hasn't happened like, forever. Um, that is, yeah, we're going to get the money pump. So, I do like Larry Leard. He just wrote the book, "The Big Print," and I just point out that's a great book. Said he should have published in 2019, because it's exactly what happened. So, let's look at another book, "The Price of Time" by Edward Chancellor. "Boom and Bust" by Quinn was one of the authors. Those are just two of the books that point out what always happens in history after you have massive liquidity pumps and inflation inflated risk assets. You always get the post-inflation deflation. Getting it in China, in many ways, they are now to the point they're buying their own stock market, just like the Japanese have been for 20 years. Why? Because they've had to. Sure, it might come in this year, but it'll come after you get that first, at least normal decline in the stock market that stays down. Um, and we're just overdue for that. I mean, can we just have, we outlawed recessions in bare markets? Maybe. Um, but then if we have, are we going to get all the printing? That keeps me defaulting to gold. The problem I have with gold is like, you and I have been so bullish on it for so long. Finally, when you get a year like this, that is of the past 100 years, which includes a period when the US was, you know, on the gold standard, only 1979, 1972, and 1973 had better performing years than what we. Yeah. And the thing, and, and you right away put that in the context of history. That was massive inflationary periods. But we've never had a pump and go like this with stock market volatility this low. 90-day volatility is running 10%. That's wonderful. Just a month ago, it bottomed at 8.9%. That was lowest since 2020. It's a wonderful situation if we can sustain it. And that's why I'm, I can't be bullish gold when it's overbought. I'm not bearish. I can't short it. But I can't write about it like I was for the last four years, that's going to go up a lot. I have to wait. Um, and that's, it's, I have to point out sometimes it's prudent to take profits.
So, that is a great, a great answer, actually. And I mean that not to stroke your ego, but I think that's great advice to all of our viewers and listeners. I've been on the record for the past two months, and this is not advice either. I have taken a lot of money off the table and just parked it. That being said, that being said, I still own a lot of gold, still own a lot of mining stock, so I'm still relatively heavily invested. But if we do have another draw down here, or even going nowhere, I have funds or capital to redeploy. But I, I'm not under this pressure or FOMO, if you would. Um, Mike, you're going to have to leave here. So, um, I do appreciate your time. But really quickly here, do you see value, or is there any, is it even worth looking for value in the commodity sector with everything again, with all this liquidity and possibly deflationary inflection point?
Well, we're getting there. So, let's mention crude oil. Crude oil is at $60 a barrel. The low for the last 20 years have been around $40. I started calling for $40 three years ago. Was an idiot for a while. You got to feel the pain. And now it's somewhat more consensus, which kind of concerns me. But, you know, the next $20, I don't see it really getting above $80, because they'll just incentivize more, more supply and pressure demand. And what's normal is $40. Um, but what's really happened every single time in the last 20 years, we've gone to that level three times, is the US was during that period, pretty much a net importer. Now, we're net exporter. Okay, the world's shifted. So, that one's getting towards low price corn. You look at price cure, and you look at all the other commodities, most know the elastic commodities like corn, soybeans, wheat, natural gas. You know, natural gas is still elastic. They're all probably getting to those low price cures. Typically, when you get a pump like we got to the peak in 2022, it takes a period of enduring period below average cost of productions. In crude oil, that's around $55. So, you got to get below there, $40. In corn, that's around $3.75. Right now, above four. Um, it usually takes a period below these average break-even costs to put in a long-term trial. Now, I can't predict, you know, some kind of invention event like the Russian invasion of Ukraine. But on the back of that, we're still heading there. The bottom line is, it's the metals. Historically, the metals are the best performing of all commodities, unless you're investing in, um, particular, if you're investing in the, in the outright. So, you can buy metals, you can buy gold, silver, platinum, and platinum, and store it. There's ETFs that track it, and they're easy. But, and all the other commodities are better off buying equities. The point is, those, I think I'm still quite bullish, but I'm just very concerned that, um, the industrial metals are much more like copper. It's very subject to a decline in the stock market, which I'm very risky, so I have to be concerned about. So, I stick with the precious metals. Uh, I think they're still going to do well. It's just not a level to be overweight, long waiting for better location, other times for me to write something bullish about them. But overall commodities, I think it's going to be a while. The key thing to remember, and I point out this year, is the commodity markets being completely driven by metals. They're the least elastic commodities, and they're all being driven. Gold's leading them all. So, when gold's the leading, um, the top leading commodity on the planet, and crude oil's leading the lagards, that's not a good sign. So, that's when I like to say, pull back, focus on, like you said, just bowing your general direction for having been invested in the miners this year. What a great trade. But you took a lot of pain for a while, man. They underperformed this for for years.
Couple years.
Finally catching up. So, but it gives you that back. So, that's why I just point out to me, the next big potential trade.
Is good old US Treasury long bonds. I look at that 10-year note, or that US long bond right now is like 4.58. In China, it's around two. And if we just get a little back up in the stock market, a little bit of normal reversion, that's going to probably potentially drop, uh, 200 basis points, just catching up to what's happening in the whole world, going to face a recession. Now, if I'm wrong on that, everything's fine. Um, but to inflate, it's just the key thing is when you see things that are not, people talk about the debasement trade. The debasement trade makes is silly when crude oil is declining, bond yields are declining. That's not that's deflation.
Yep. So, Mike, I am afraid, and I mean this with respect, but I'm afraid you're right, because that means we're going into recession here. And also, I want all of our viewers and listeners just to think about that. If, if we do see a $40 crude, which we very well could, we are in severe deflation in my book. So, um, that's how I see it. Mike, I want to thank you so much for your time. I'm very grateful to you and all of your insights, and we'll have you on again soon. I want to thank you so much.
Oh, thank you. I appreciate being on. I'm looking forward to the next time.
Yep. All right. Thank you.