Transcription
Is trading $75 and some of the easier miners you can pick up Penisquido or Pen American or Heckler or something like that have AISC of 15. You know that, right? Maybe 16. So, they are and they are in an environment now where uh they're going to continue to make just an insane amount of money for quite a while.
Welcome back to Metals and Miners. I'm its founder and its host Gary Bow. Today we have a very timely and important discussion to work through on energy, the metals, and the markets. And we're fortunate to have with us John Johnston. He goes by JJ. So JJ was a member of the New York ComX for more than 37 years. He brings amazing experience to the industry and currently shares his thoughts on what's going on in the world on his Substack under the name JJ Aliosha. JJ, it's a privilege to have you back on Metals and Miners. Welcome to the show.
>> Nice to be here, Gary. Thanks.
>> All right. So JJ, you have, like I've just mentioned, you have a lot of experience with the commodities markets. You've been through many cycles and wars as well. You've seen quite a bit. We're currently in this next great precious metals bull cycle. We're seeing some things that are extremely unprecedented right now, especially with the impacts of the Iran war, much higher oil prices, and overall market volatility all thrown into the mix. It's leaving many extremely concerned about what's coming next. There's a lot to discuss here today, but before we do, what's the big takeaway for those tuning in that you hope that they walk away with after listening to this conversation?
Oil is not that high. It's It's nominally lower today than it was in 2022. It's nominally 20% lower than its highs in 2008. Uh if we were to use a constant dollar adjustment oil, the barrel is about 40% lower than it was in 2008. A gallon of gasoline in 2008 is worth about two bucks. And those are good numbers. BLS uh source statistics.
>> Okay. Well, let's dig in here. Uh JJ, with the US being the largest producer of oil in the world by a wide margin and now controlling essentially Venezuelan oil, which is beginning to ramp up as they exported more than 1 million barrels per day in March, and they have the largest proven reserves in the world. It would seem that the US is in a very solid position for years and years to come as it pertains to energy. Do you expect that to be the case? And with the fracturing of the global economy into what seems to be competing blocks, do you expect pricing for energy to follow suit and go from this global pricing structure to more of where where you get it from and who you get it from kind of a pricing?
>> So, oil has always been a regional commodity. WTI is a is a storage market and Brent is a cargo market. So making that clear, brand is loaded on ships, stored on ships, can go anywhere, but almost all of it as we have learned and if you trade oil, you know, uh goes east. So this Iranian thing is really more much more important to to uh to the east. It's made Russia um a very important provider. So there's no sanctions on Russia anymore. Um the last barrel of oil uh coming from the straight of Hormuz arrived on uh April 1st in in Asia. So they're drawing down their their strategic reserves and what they can get from the global market and Russia is is really the provider uh in in the in the best location. Eight days from Japan uh 10 days to China. So you know it's a fairly long trip. Um what's happened is you know that Clausitz the famous Prussian said uh no plan can uh survive first contact with the enemy. So, you know, what we thought was going to happen in in Israel more from an ancient uh sort of feud, I guess is a good way to call it, between Israel and Iran into an oil war because the most leverage that Iran has after the United States pummeled the crap out of them uh was to say, "Okay, I can control a straight of hormoons with a handful of tubros. pockets and you can't do anything about it cuz uh no one is going through there until we say you know we're okay with what's going on. So um all the dynamics are pretty well known what's happening to the GCC shutins oil behind the straight all of that is is hyperritical because a bunch of it is going to start to become irreversible soon if not now. Saudi had about 300 million barrels in country that they could use to store. They have pipes to the west where they can get five million a day out. Everybody else is pretty much, you know, screwed. And uh so it's a very important region. So they, you know, they've been selling off um sovereign wealth reserves, selling uh bonds and stocks. They need to raise at least a billion a day as a group to meet cash flow. I think more than that uh because they're not they don't have any cash flow and they haven't had any cash flow for about 30 days and so that becomes a financial problem for everybody. I don't know how it's solved. You know, I really don't. Um I think Trump has got very very few options. Um but we'll find out. You know, the obvious one is to to impose the utter complete destruction on Iran as a nation for which if I were a president or I were a leader of a country, I would be loathed to do. I, you know, if I, if it really came to that, I would back off. I wouldn't go far, let everything chill, and then try to get some help from everybody else and say, "Let's listen. Let's talk to these guys. Let's get them down off the ledge because I see Iran as a hostage situation. I don't see it as a war. There's no blood. Nobody died. Uh more people died yesterday in Ukraine than died in the whole war. Israel has less than 20 KAS. We have 15. I think Iran has 1500. Uh so there's about 2500 killed in Ukraine. Uh I think I check it every day. uh I think on Friday. So it's think of it like it's like a boxing m match with referees Europe, China, you know, and Russia. They're they're all watching. Don't do that. Don't go there. Stay away from that. And and uh and a hostage situation. So it's not a war yet.
>> Okay. It was recently reported that Oman and Iran are drafting a protocol to manage the straight of Hormuz, presumably once the US military leaves the area. The EIA data shows that the US imports 500,000 barrels of crude oil per day via the straight. That's 7% of overall crude imports. So, US total daily petroleum consumption is about 20 and a half million barrels a day. So the US import that's coming from the strait makes up less than 2 and a.5% of total consumption.
>> We're an exporter of 3 million a day.
>> Yeah. I mean, it's very small, right?
>> Yeah.
>> Is there a scenario where the US can 100% leave the stability of the strait in the collective hands of Oman and Iran presumably with the main buyers you just mentioned Europe and uh Asia, China, etc. presumably with those main buyers of that oil being present to help bring balance and equilibrium to the area and the economy is not negatively affected.
>> Yeah. If the the rest of the GCC countries agree to it, I don't think Saudi Arabia is going to go for that. Um, that the the fact is and I don't think I don't think Trump will do it either. There are uh there are there are the laws of the high seas. It is it is an international waterway. Um, if Iran is going to start charging tolls for for the straighter hormuz why don't we start charging tolls for the bearing straits. Why don't why don't the channel uh the English say okay well nobody can go through the channel unless they pay us a toll. It's a form of piracy which you know no one can really allow in terms of international law. So I would say that's a very very low probability.
>> Okay, let's move over here JJ. How dependent is Europe and the UK on oil and LG transiting the straight of Hormuz of course compared to the US and what short-term economic and industrial impacts would a prolonged or partial or full closure have on European energy prices which is already you know their their energy resources are strained on their manufacturing and even on their green transition goals. I know this is I'm not a specialist at this, but I've done enough reading as I'm sure you have is that they are in a really really bad way. They have no uh they have no energy resources of their own. The best thing they could do if they weren't so proud, I guess would be the word, is make a deal with Russia, end the war, stop the killing, and reopen uh the Nordstream. I mean, Putin said it, you know, over and over again, you know, just all I really want is a Crimea. I want the Donbos. You guys back off. We just go back to like 2014. Everything is like, okay. But, uh, the people who are really in I I don't understand it. uh intent on pursuing the war are the E3 especially Starmer and uh Emer is like hey we are so going the wrong way here you know the United States is pulling out of NATO that's bad for us right we should we need to step back everybody needs to step back everybody to step back
>> so yeah so the US has been you know shouldering the load financially militarily um on the seas protecting everybody's cargo um you know jumping to in to help from a military standpoint, economic standpoint, and it's clearly been a bone of contention for Trump since even before he ran the first time in 2015. So, building on what we were just talking about there with Europe, it really seems like President Trump is not in any great rush to force the straight back open militarily. I'm sure there's some options that they have that they're holding back on. Um, does President Trump's apparent approach of delaying full US intervention in the strait and telling Europe in his speech the other night that you need the oil more than we do? Why don't you go and take it? Should this be viewed as representing a strategic shift to end the decades of free riding that the those allies have had on American naval power, American economic power, etc.
>> What do I think Trump is going to do? Is that what you're asking me?
>> Well, I'm I'm asking if there's a correlation. If there's something here that goes beyond America and Iran and includes Europe in some capacity here that isn't as easy to decipher through the general news or through what people are talking about out there because it feels like he's speaking he spoke directly to Europe about going to take the oil in his speech. Why would he do that? I I agree the speech which was you know he he looked weary uh although you know we knew we knew much of what he said um wasn't anything new to me because I watch the markets every day as you do uh what he did say was directly to the world and what I think if I understand him is he is trying to explore virtually every bloodless option possible and pointing out the consequences of what will happen if they force him by their inaction non-participation and silence to solve this his own way because I think be watching the way he he's he's managed this so far with the precision technology that the military has they have done everything in their power to avoid killing people, but they have done what they had to do to remove the military threat. So, the amount of collateral damage from what they've achieved is stunning. It really is. Uh I've I've seen estimates of what the equivalent bombardments might be as much as like one or two Hiroshimas. um thousands and thousands of bombing runs with. And these aren't the, you know, World War II blitz bombs. These are state-of-the-arm art uh precision accuracy instruments that are taking out. It it's almost beyond belief that a handful of of people in power in Iran could do this to their nation knowing the stakes when they said, you know, no, we're going to walk away. But I don't want to get into the politics of that because it's not my real specialty. And um the let's go back to this. If Trump is forced to do it his own way, it we're looking at like one of the great human calamities in history where uh the innocent people who really, you know, are not involved, don't care, don't want to be involved. They just want to like bake bread, take their kids to school, do what we do, are being forced to be hostages to these two great forces because of a tiny uh straight with which if it is closed, the whole world is now hostage. We've got a madman, right? Or mad men who are willing, I believe, to die for their theocratic beliefs. They certainly have. Many of them have died. I told have died. Leaderships have died. They have no banking system. You know they I don't know their hospitals are overwhelmed. I saw a thing in Alazer the other day. 20,000 people were trying to figure out. So the whole country is in a condition of triage and um there's no time. See, we don't have time to like deal deal with this. We've been 30 days behind the straight. There could be 400 ships in there. 350 million barrels. All the storage is full. If we leave it like that, it will it will begin to go through a kind of a death process where there'll be impairment of the fields. Uh restarts will take months, weeks, months. Like Saudi said, "Yeah, okay, we can get started in a few weeks." A lot of geologists say maybe that's true. But in the older fields, some of the wells won't restart. they will die. So this is what I've read. There's no time days. Yeah. So you're expecting Well, I mean, you know, for Trump the other day to give two to three weeks or two weeks or whatever he said um as his timeline. Um I'm sure would you would you expect he and his administration to be completely up to date on what you just described uh with the you know with Saudi and Bahrain and andQatar all talking to him telling him you know telling them the situation how much time they have um and therefore there's going to be some kind of you some some kind of big move here uh you know in the coming days to week or whatever uh to hopefully bring an end to this. Is that what you're expecting?
I think that there's, you know, this is this is a real, this is a perfect example of contingency planning where uh if if if the worst case unfolds where he has to take out all of the power and all of the strategic uh utilities and so forth and put Iran into a primitive state of darkness for many months, maybe a year, maybe longer. Put 100 million people or 90 million people into that condition. And it's going to be really bad. And Iran has enough military power if if they see it going that way, as I understand it, that they can, you know, loose the dogs as well and take out all of the all of the utilities and the deselination plants where they get 90% of their water and millions of people. uh you know it'll it'll be a step down in a period of weeks but there be mass migrations dislocations of millions of people. Forget the oil. Uh that's we we're going to transition from do we have enough oil from these guys to how do we save how do we save lives? How do we save you know innocent lives? That's really the scope of it.
>> Yeah. I I I mean, I I know this is a real possibility. I don't know the probabilities. I'm not in these war room discussions. I don't know.
>> But, you know, in my me
>> I'm thankful that I'm not in the the seat of power to make those calls. Um, you know, based on my 50some years of of time on the earth and
>> my reading of history, humanity in the modern times has a way of pulling back from the brink. And I'm holding out hope that they will come to their senses at some point and even if it's in the in the midnight hour uh and they will pull back from the brink. But let me ask you this. It takes it takes weeks for those oil and LG tankers to arrive at their destinations. For this last several weeks, oil and LG's been making its destinations making it to its destinations all over the world from deliveries that left the area before the war started. Since the straight has been effectively closed, as you've pointed out, really nothing of material has gotten out. Although I did read today that it was a it was down to about two tankers, two ships a day um until the last uh 48 to 72 hours. It's up to almost 10 on average per day. So, there is a little bit of progress. There's a 5x progress that's taken place, but it's still incredibly well short of what it was prior to the war starting. But therefore, you know, over the coming weeks, uh, the tankers that were supposed to be arriving from these March deliveries, they're not going to make it to their destinations. What's the damage from this? What are you expecting and bracing for? How longasting are you expecting this part to be?
>> Well, okay, let's start with the good case. The best case is that is that uh is that Iran and and Trump can make a deal which would include utter and free uh uh
>> movement be no interdiction whatsoever you know period that's that's the most important thing right now whatever's going on with Arabs and and and and Israel or Iran and Israel or something it's really a sideshow. Um, a step down from there would be a slow, methodical demonstration of what what could happen with, you know, the United States doing a gradual campaign of taking Iran to a point where they may say, "Uncle, um, or in the meantime, logistically, I'm sure the Saudis, you know, they have six 7 trillion dollars of sovereign wealth. So they can muscle up a lot of stuff like fresh water for their people and supplies at the ready and in and other places. I haven't heard anything about that, but if I were them, I would be I would be doing that. Um, getting food, medicine, water, mo mobile, uh resources in case, you know, things things get really crazy. Um, as far as oil is concerned, if we get there, there will probably be an embargo of United States oil to the rest of the world. We will cut them off. Everybody has to do what they have to do.
>> What does that look like?
>> I don't know. It looks like we have like $100 oil and the rest of the world has 300, $400 oil. That's what that was basically my my question number one was are you expecting a scenario where we have multi-tier oil pricing
>> so only only under only only under extreme circumstances is what
>> so oil oil is you know always been you know uh regional market the Brent TI is always been you know $45 ARB you know and when it's six or seven the ARB is wide open you know we're losing oil to the rest of the world when It's tight at two. Nothing's moving. Right. So, um, and I don't know about the other grades and so forth. Uh, I don't really watch them that much. I watch, you know, I watch Brent and TI. That's that's
>> Let's look at the flip side. Let's say, you know, humanity gets pulled back from the brink. There's a deal. um you know you have I don't even know how much hundreds of millions maybe up to a billion uh gallons that are stored in tankers over there that are in onshore uh storage facilities. There's um 400 million or so that's being released by countries. So there's quite a bit of oil. What happens in that scenario where yeah, there's this gap of time where uh tankers didn't get out but now you have this massive amount of volume that's going to be hitting the world market all at once. What does that look like?
So the floating storage I guess in mid-March when Bent lifted sanctions on Iranian and Russian uh was about about 110 million of Iranian and 140 million of Russian all floating storage. So floating storage is great because as soon as it has a place to go it goes. So that 240 million 250 million barrels which is moving to the Asian region right now. We don't need it you know we really don't. Uh so that's you know it's a hefty amount two and a half days of stuff. Uh
>> but then there's other floating storage out there that's from the GCC nations right that are producers
>> that's behind the straight. Yeah that that's an unknown but it's you've got 30 days. I don't know how much they put into storage and what they could put in ships or how many ships were available. I've heard as much as like 200 maybe more. So call it, you know, I don't know, a million a ship as an average because you got VCC's and boats. Uh so 200 million there. Saudi has 300 million in in storage. I I understand it's filling up or it is filled. There's a moderate amount of storage in in the other GCC nations. Iran, Iraq has none. that filled up in like three or four days outside. Uh the United States is great. We took in almost 50 million barrels in the last six weeks. We had about 440. So we got to be pretty close to 490 which puts us into the COVID zone, right? Uh even there's probably tattoos even filling up. And no, people haven't put oil and Cushing and I don't know how long. Everybody's worried that they're going to they don't have enough. So,
>> do prices do prices collapse uh because of all that storage when when things resume? If you know,
>> they're not going to collapse. I mean, there's definitely there's a deep spec market that would that would step in and and and begin to do what specs are supposed to do. Right now, the specs are all one way, so there's a lot of paper length, so that'll crash. I think the organic price uh for oil really should be in the 60s. That's where it was when when uh before this started. I mean, we had a really healthy balanced oil industry where margins were acceptable. Uh, you know, you could drill for oil and make enough money. Although some of the guys in Houston were quacking all the time. Diamondback was saying, you know, it's too cheap. We need a higher price. But
>> So, you think 60s 60s7s is where you think it'll come?
>> Yeah. should be more like closer to 70, but yeah, 607.
>> And and you know, there's been a lot of discussion um since this broke out and the straight was closed down and Lloyds of London insurance pulled out that the well, I'm going to call it the hostage premium that Iran has on there from an insurance perspective is somewhere in the 20 to $30 per barrel range. Um, if there is a true agreement where Iran says, "Yeah, we're not going to hold the place hostage anymore, is there additional price depreciation because of that?
Yeah. So, okay, the longer picture, uh, if we have a if you have a quick piece, oil is going to dump and two ways about it. It's a lot of, you know, there's moderate amount of open interest on the NYX. Um, They're very low open interest almost incredibly low open interest in NMX products. So there's not a great short position in products to buy stuff and there's a pretty hefty long position which is I think heavy in spec spreads spreads are wildly long. Uh, so that stuff, you know, it's it's going to pop like a balloon and we're probably going to drop very very quickly back into the 16 range if we get a quick deal from there. The supply that you're talking about, Venezuela is not going to be a factor for a year or two, but um, you know, Exxon's going to pump 5 million a day this year. Uh, run half of that. the other the other big oil majors, you know, they're they're not going to give back their market share. The GCC's biggest problem is where they were once the swing producer and the most dominant force in in daily supplies, daily consumption of oil is now they have to figure out a way to get their market share back. And in order to do that, you know how it goes, right? We ymanied it in the 80s. we've seen, you know, ABS do it. Try to do it a few times, sticking around, you know, postco and everything like that. The only way you're going to achieve that is to undercut the guy next to you. So, there could be a very quick and you know, Putin, he's he's come he's he's got his own fish to fry and he owns China now. That's that's pretty much it. He has pipes into them. China needs oil although they have a lot of reser reserves I think 1.2 to 1.5 billion. Uh they don't want to let that go, you know, so it's going to be and then of course Trump, you know, we're selling leases on the North Slope. Canada's going to send us 4 million a day. They can't get a pipe to get to the West Coast coast. So they're really they they need us to buy their oil, right? And uh so Trump is going to sell oil, too. He's going to say, "Hey, and LG." So it's going to have a very very competitive environment.
>> So long-term get onto the other side improved competitiveness, people undercutting, trying to recapture um old market positions, insurance costs dropping sounds very favorable for the consumer. If we if if we can get to a place of agreement and and ultimately that agreement means Iran's no longer holding the straight hostage. Let me ask you this JJ base case, what does the world look like when we get to the other side of this war? And it could be it you could be gloomy or you could be positive. I I I want to hear what your what your personal base case is.
I think we figure it out. I I uh you know there's a lot of smart people around. The problem is is the the people, it's this it's a little dangerous for me to say, but Trump has has changed the world in a way which you it's not incremental. Big long-term changes can only succeed in an incremental way. Radical changes rarely last. So the rest of the world, you know, is both angry with him because they don't like what he's doing politically. Half of the establishment in in the United States is secretly thinking, gee, it would be nice if he would fail over there, right? And uh we you know it's not the end of the world to finish it up no matter how it works out, right? If it gets really bad, if things go really sideways and we have, you know, a human catastrophe or something like that, the world will step up. They're not going to step back then. They'll everybody's going to going to bring their best game and that'll be the path out. So maybe that's necessary. The middle ground is everybody has to swallow their pride. The best best uh sign of a of a good deal is a lot of unhappy people. Uh and the other side of that, the good for America side is uh $30 oil. Uh and and we kind of have to we have AI. So we have a we have to deal with a a very steep and and difficult period of of contraction and deflation. So the bad bad could be very good on the other side and good good could be
>> worse. The middle is good.
>> Okay. Yeah. and and um from what I'm hearing you say the good good side means everything works out okay here we get we we have all this free flowing energy at much lower cost which means AI then explodes and AI exploding means deflation which means problems in other ways is that what you're saying okay
>> I would rather not have that
>> yeah no I hear you so
>> I don't know what the other thing too. You know, I'm hoping that somebody's going to say, "Let's let's let's make a deal."
>> Yeah. Yeah. And I'm hoping I'm hoping that there's um on the AI side on on that progress that there is going to be enough good thinking people as this continues to expand that they are going to try to figure out ways to ensure humans don't get locked out here in the economy. But let's move over to gold here for a moment.
>> Sure. gold dropped 16% since the start of the war. Um, was it liquidity? Was it a liquidity issue even, you know, due to the war that led to the drop? Was it an opportunity to work off the froth that had built up to the runup to 5600 which was super stretched from the 200 day moving average?
>> What do you I you know, I know you spoke earlier about assets being sold by the GCC countries. I think there's reports that Turkey sold 120 tons of gold. Um, you know, is is that ultimately what drove the decline? And shouldn't have shouldn't Turkeykey's sale of 120 tons alone uh taking it down further? That means there's buyers on the other side. So, you know, what do you believe drove the decline ulti ultimately and who's stepping in here to be the buyer?
Well, there's a lot of organic balance in gold no matter what happens. So, uh, gold gold has many many faces and many hats, but the primary faces that we've seen recently were narratives of safe asset, safe haven assets and inflation protection. So you have a financial side to gold which is dollar related, inflation related and so forth, interest rates and all that stuff. It could be sensitive to that. So that's right now what is what gold is reacting to. The other side of it is, you know, I'm freaked out. Uh I I I don't trust anything that's going on right now, so I'm going to put all my money in gold. So I don't think we've ever we we have come anywhere near that at all. even in the 23 24 25 runup, right? We silver kind of confused the issue. We'll talk about silver in a minute. Stay with gold. Uh gold doesn't always go up. Uh, you know, after the 1991 Schwarzoff Desert Storm thing, you know, gold went up to like 400, came down in the middle of January that year. I wrote about it recently and after you know they call it quits and so forth. Gold went down for the next few years uh and stayed down for another six years. Uh bottomed in 99 with the Yani blow up. I don't know probably remember that. And uh didn't actually take out its its desert storm highs until 2003. So for that entire period of time after a pretty big war, a a blowup war, and I wouldn't I I wouldn't categorize this Iranian conflict as greater than Desert Storm. Now it that was a controlled military oper operation. It had a mission. It achieved its mission and everybody went home. They complained, "Ah, you didn't go to Baghdad, blah blah blah." But Bushwan said no. Trump may do that. So we'll have a similar situation in gold that we had in 1991. There if if we take out this this this geopolitical tumor in the Middle East, there's not a re a real case for safe haven anymore. There's a financial case, but the end of the world story, which never really did hunt it, that's going to go away for a long time, I think. So, that's that's a big risk for people who are, you know, still thinking tinfoil hat, all that stuff. The fin
>> unless unless, you know, China, you know, there's plenty plenty of of cases being made for China, although it appears that their their case has been weakened. uh during this exercise as well because their uh defense structures and whatnot didn't hold at all uh to our military uh you know capability, our bombardments, they they were destroyed fairly easily. But um what what is gold's movements telling you? You know, we saw gold go up to 5600. We saw gold come down to 4,100, the 200 day moving average. Five trading sessions later, it's up to 4,800. What is what is what is gold movements telling you now on payroll? Right.
>> Right.
>> Down 130 up 90, you know. I mean,
>> okay. So, I'll tell you what I think. Uh, you have anchor length, which is really central bank length. That's been the primary driver of demand. You have portfolio length which is pretty much passive where you have you know people who had 5% of their portfolio in 2024 25 it's 20% of their portfolio just because the market went up right I don't think they're going to adjust that I don't think they're going to buy more so you have a very balanced supply demand like the WGC said it's like 5,000 uh new ounces plus scrap and 5,000 of of offtake and the wild part of the plug and the variable there is really the ETF business and that's you know that's that's really the secondary above ground stocks that is used to kind of you know be mobilized. If prices really go up they'll sell. If prices really go down they're going to buy. So uh I think gold's going to stay rangebound. Um depending on how this thing shakes out. I think it's possible the dollar could go up for a few months. Wars, if he gets in, I think there's going to be a lot of pressure on long rates in order to make the AI buildout uh feasible from an interest rate perspective. You know, you're not going to have a lot of they need to borrow long-term money and it's going to be hard to get this done at 5%. Right? So, they want to try to get those rates down. Uh,
>> not to mention there's like $10 trillion that in maturing bonds that need to be rolled over. So, you know, you and you have this complication and that's Powell. He's not leaving. He's saying that until the lawsuit against him is dropped or settled.
>> I would he's not getting out of the way. He's supposed to exit in May, but he he could technically stay on till the end of the year. There's a lot of moving parts here at the Fed and and and all and and you got this freight train of of spending that needs to be done and and and the refinancing of all this massive amounts of of old debt and the rates are too high for our budget, aren't they?
>> They're too high. You know, um I think CPI is coming in at like 24 and three depending on what you're looking at, right? month, month over month and annualized and so forth. Um, a lot of stuff is going to have a hump because of what happened with this war, but I don't think it's going to last. The the uh
>> you're saying that with inflation from an inflation
>> and and you know, like they said as soon as uh NFP came out today, oh, forget about rate hikes, you know, which I think is really dumb. uh the the world is if the world economy is is is is healthy enough to sustain this kind of like gut punch. If it's just a gut punch, it's not a knockout blow. And and you know, Iran is is uh you know, he's kind of forcing this dirty hairy situation where you know, it it could be a knockout blow if you let it go too long. But but back to your point about Worsh, what uh you know, whether it's Powell or Worsh uh or somebody else, some something needs to be done kind of soon to get rates down. How are they going to do that?
>> Well, it's up to Trump. He's going to have to get off his horse and say, "Okay, Jay, you know, four billion is not that big a deal, right? It's really small beer." So Jay spent an extra billion and a half on his palace. Okay? You know, let's let's move on, man. You know, we're talking about we're talking about 330 million people in America. They're, you know, they want jobs. They want to go on with their lives. They don't need
>> Does Jay does Jay ride off into the sunset or does he hang around?
>> You know, if if the right these are gentlemen. These are also uh they these are warriors. They've been around for a long time. They know how to make a deal. Shake hands, move on. This is this is
>> so you're confident in a deal.
>> I I think you know it's got to be a deal and uh I would make a deal. I mean I worked in the pits for years, right? And I hated some guys but I traded with them every day and I had a supreme faith that if I sold them 50 or two they were going to write those on their cards and if we were trading, you know, 10 bucks lower 10 minutes later they were going to honor those trades. That's just the way it is, right? That's what you
>> These are grown-up guys. They're going to figure it out. I'm not
>> So, you're confident um just like you are in them figuring out the ending to this war at some point uh that's not going to destroy the world economy. You're also confident that at some point here, they're going to figure out not just the transition, but how to get these rates down in time in order to uh handle the big print that they have to do and the rollover of all those bonds that they have to take care of um in order to keep our budget deficit in check at two at two trillion under par. Right. I I actually, you know, since since I've been trading, I mean, they put the debt clock up in in 1986. Everybody ran over their hair on fire saying it was the end of the world. You know, that we we the government does bad things and then they do good things. You know, it's everything tends to to to have its vertical periods and then it falls into ranges. markets get resolved, healed, and they, you know, wash, rinse, repeat, blah, blah, blah. I think we we came out of uh a pretty crazy four years with Joe Biden into an opposing, volatile reaction with Trump. She's going to be around for another couple of years. You know, we're by and large, the world's at peace. I I'm I'm not afraid of China. I I covered the Chinese at ICBC for six years at Center Bank, African FX, Gold and Silver. I got to know them pretty well. They're intelligent, ordinary people, different uh they have their own views and so forth like that, but I don't see, you know, the hegemony that people are always accusing them of. they have um they've they've done a lot of good things um and they have their own issues to work out. So, you know, this surprises me that they haven't taken a more active role. Maybe that's a good thing. I don't understand, you know, global politics, but I believe that they're definitely involved and nothing's going to happen unless they agree to it. So your default base case is is a move towards equilibrium across almost all of these issues or what could be looked at as a crisis that we're experiencing. Do you feel the same about markets? You know, they've dropped the S&P has dropped 6% since the start of the war. The Dow has dropped about 9%. Many people are worried about it being in a bubble. AI, you know, AI, it's gone too fast. and they're worried about a a 2000 style.com implosion or a 2008 deflationary crash here, you know, very soon and that this is the start. What's your read on the markets?
>> Okay, ranges is what I see and we haven't really established those ranges, but I think oil is is is going to have it's it's going to return to what we would call it previous equilibrium somewhere in the 60s. It'll probably be overs supplied because of these high prices and uh that could last for a while, but you know, oil is really it's it's it's a great commodity market because if you take it down to a low like demand explodes, you know, and and we'll find a place to use it and the cheaper it is, the higher the quality of life is going to be for people who don't have a very high quality of life. So low energy prices for a couple of years particularly in Africa where I think the average age is like 19 or 20 for all the people in Africa average age right that would be that would be great right so um I've I've traded stocks for years um the 90s were probably the best couldn't lose money in the 90s um although I did Um long
>> you defied logic
>> right? I had my moments but you know uh long periods there are long periods of ranges in in markets uh the 70s were a very long long period of range 60s were were were hot uh early 80s were really slow boom so you know we've had probably the most extraordinary stock market ever in history so to have some kind of consolidation range for for a few years while we sort out this a AI thing that's That means what do you want to do? I I I think you want to focus on high quality dividend paying stocks and stay away from the big growth stocks that don't pay anything because people are getting wise to that. Um gold,
>> but you're not worried about a crash. You're just you're thinking more of a consolidation.
>> I'm not worried about a 29. No, nothing like that, you know. Thanks.
>> What about a 2000 or 2008?
>> No. No. that could go there but right now you know I mean the stocks could go down 20%. You know that
>> but you're not in the camp of 50 to 80% like 2008 or you know 200 2000 I believe the S&P dropped about 50some percent but the NASDAQ dropped 82%.
>> Well not with not with $50 oil. I don't see that right and not not with uh the amount of investment we've had coming into the United States. I mean, there'll be mistakes. There probably be some unfortunate mistakes. Uh, you can't throw, you know, 10 trillion dollars around and have people, you know, get it perfect. But, uh,
>> but a lot of the money is finding its way into the markets. Um, and so that's another thing that's kind of propping them propping them up. I'm I'm in your camp. I I don't you know with with the the the government spending the the um the challenge of investing you know in other places around the world this is still the best place to invest in the world
>> right so it it's
>> yeah so it just seems like we're in a really you know from from that standpoint there's some buffers there you you've talked about AI a couple times before we before we wrap up I want to ask you this so Oracle just eliminated did 30,000 jobs citing AI and data centers. A few weeks ago, Block led by Jack Dorsey who also founded Twitter. He cut 40% of the workforce for similar reasons. And over the last several months, other large companies have been doing the same. All of these people that have lost their jobs to AI efficiencies. They have mortgages, they have bank loans, they have health care needs, etc. Do you expect this workforce elimination at the hands of AI efficiencies that we've been being told to become a larger trend? And if so, what second layer of effects are you expecting on the economy and the banking system?
>> Well, an obvious thing is robots don't vote. So, and the power of of the vote and and actually we still live in a very free society. Uh, and we're constantly recorrecting some of those things. So, whatever happens with AI, you can't you can't call it a victory if you put everybody else out of work. Now, how do you solve that, right? What are they going to who's going to buy it? What is their product? You know, if you if you know I really an important example of AI is I used to pay 30 grand a year for a Bloomberg. So I've been able to recreate my Bloomberg for like a grand thousand a year with different perplexity and and grock and things like that. So u that that kind of hadonic deflation is is going to hit very hard on almost everything. I was thinking in my mind the other day of a bunch of robots in a in a um Optimus vehicle going out onto the fields in the Perian or in Midland, Texas. And within that vehicle would be everything, the drill rigs, the geology, all the technology. And these robots would get out and do what the uh wildcatterers would do. Now guys that you have to pay, right? And they don't get tired. they'd
recharge their batteries, and we'd be able to find, fund, and bring oil online with, oh, I don't know, a month. Where, you know, now it's maybe three months. It used to be three years, right? So that's going to solve a lot of problems. Uh, but it's not going to solve the problems of what the people are going to do. You know, people, and you know, I was talking to someone the other day about what iPhones have done to our children. It has stopped them from being curious. It stopped them from saying, you know, "How's that work?" "What, what'd you do there?" "Oh, what was that?" "I want to try that." "Let me have this." "Let's do that." All they do is look at their phones, and whatever truth comes out of that phone, it is now the new, the new grammar school, high school, and and university is an Apple, uh, appliance. So that, I don't, I don't know where that takes us. I, I, I, I feel sad that, uh, you know, I, I can't, I, I can't find, I can't see it. I just, I don't know.
Well, I think what you just described is that we're moving into a different world, an unknown world, and there's a lot of questions that need to be answered. And the big one is, if AI does replace humans in mass, if AI and robotics do replace humans in mass, what happens to the humans? What happens in terms of being able to afford to live? What happens to them finding purpose? What happens to their curiosity and continuing to pursue achievement and new, new things? So, I mean, there's a lot of unknowns here, but, um, it's, you know, this is the future we're, we're moving towards whether we like it or not. It's so much bigger than us. We can't stop it.
And, and, and just one last thing, you know, you, you, you changed your, you recreated your Bloomberg terminal that costs 30 grand a year for about a thousand bucks.
Yeah. Exactly.
You're not turning that back. You're going to keep that. You found your own personal utilizations. So these kids that are using it today, whether they're high school, college, or early on in their careers, or people, you know, in the middle part of their careers, people are already using AI to meet the needs, to save money, to do things better, faster, quicker, more efficient. They're not willing to turn that back and give it back in. So, um, because of that, they're going, everyone's going to have to deal with what the future brings. It's coming whether we like it or not.
Absolutely. You know, that's not my problem. Uh, it is here. You know, I could do this forever. You have to probably tell me to shut up. But, you know, one of my daughters, one of my daughters graduated magna cum laude at the University of Arizona in Tucson. Triple major. This is a muscular thing to do on an academic level, right? Then she ran around the world, climbed Mount Kilimanjaro solo, did skydiving, jumping out of planes and everything like that. Went, decided this. She went to Vandy, graduated in the upper third of her class, clerked for two federal judges, two in Trenton. She's barred in three states. She can't get a job.
What?
Yeah. She's overqualified.
Well, you know, she's looking at, she's looking at the jobs that are available to her, and there are thousands of really, really smart lawyers at her level competing for a job as as a lawyer. So, she said, "Screw it. I'm, I'm just going to take the knowledge, go out in life, figure out what I can do." And she's, uh, she's thinking of being a truck driver. That's amazing. But I'll tell you this, she's obviously a winner. You don't do, you don't accomplish what she's accomplished that you just described, um, at at such a young age without being a winner. So, she'll figure it out. But it's going to be interesting to see what the future holds. I've got three kids, um, you know, one is in the workforce, another one is in her masters, and another one is, uh, finishing up his bachelor's. So, it's going to be interesting to see. You know, I understand that the early graduates are the biggest strugglers, uh, in the job market. They have like a, a high teens to high 20s, um, unemployment rate as far as I understand.
So, I want to correct one thing. She could get a job. The job. She did get a job with a high-level law firm, and they, she was working 16 hours a day in the very, very lower floors getting all the crap work, and she, her career path would have taken her to where she might have made partner in 15 years, and she just said, "Screw this, man. This just ain't worth it, right?" So, you know, baggage. I, I'm, I'm doing my own thing. You have to let your kids. We have to let our kids figure this out, right?
Yeah. It's true. I fought my battles when I was young, and I don't feel like doing it again.
No, it can be difficult, um, as a parent to to watch it, but I do agree with you. Well, this has been an incredible discussion with JJ. Before we wrap up, I just want to direct everyone interested in the metals and mining sector to dive into our Substack at metalsanders.substack.com. Join our quickly growing community and receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio, and that's the name of the report you'll receive. I'm positive that you've been enjoying the conversation that JJ and I have been having. Please let them know, hit the like and subscribe button, and leave a comment below the video. All right, so JJ, this is the time when I ask you to leave, to share a key takeaway that you want, uh, the viewers to keep in mind as we wrap up. You were going to talk about silver. You never did get the opportunity to talk about silver. If you want to, if you have some kind of specific takeaway that you want to leave everybody with, that's great. If you want to talk to them about silver, that's great. But then after that, let everybody know, um, how they could connect with you and find your Substack, etc.
Okay, so silver is trading $75, and some of the easier miners, you can pick up, Pan American, or Pan American, or Hecla, or something like that, have AISC of 15, you know that, right? Maybe 16. So they are, and they are in an environment now where, uh, they're going to continue to make just an insane amount of money for quite a while. So, you know, as the unknowns, you know, that we're approaching, and you're trying to figure out, you know, where, where can I park some money where I've got a good chance over time to make money on what I'm doing, earn money. Uh, the silver miners, as we said two years ago, when he closed trading four bucks, uh, are still a really a good place. I'm not saying, you know, sell a farm and pile in or anything like that, but it's a place to, to, to keep your eye on it because it has great fundamentals that aren't going to change. They may be changing over time, but that is going to be time in terms of years where you get capex and you start getting miners that are going to actually say, "We're going to just mine silver and compete there." So, uh, I would say that, I would say as far as the profits that people have made in stocks, gold, you know, always leave a party when you're having fun, right? It just, it's not a problem. You, I'm personally bullish on bonds, uh, United States bonds, because there's nothing quite like them. You know, we have, we have tremendous transparency. We have a financial system, great financial system, a little crazy people in Washington, but that comes and goes. Uh, the American bond market is always going to be a place where people are going to want to put money because we have a strong legal system. We have futures. We have deep liquid markets. Nobody else has this stuff, you know, and so you, yeah, they can get pissy and say, "Oh, I'm going to sell all my bonds," but they'll regret it. So, uh, I'll, I'll leave you with those thoughts.
Okay. And let everybody know, JJ, where they can connect with you, how they could find you.
Oh, yeah. I, so I write under the handle of Aliosha, uh, on on Substack, and, uh, you can find me at jj745.substack.com.
Wonderful. I'll have that information up on the screen for those who are paying attention, who are digging in. Go to the description area, and you'll find the direct links. You can get over to JJ and his work. He does incredible writing. I twice a day, right? Morning and evening. I read, I read your stuff all the time. I absolutely love your writing style. Um, and so I do appreciate it. And I, guys, I think you'll really enjoy it as well. JJ, thanks for coming on to Metals and Miners. It's been way too long. I'm going to have to have you on more frequently. Uh, but man, you've been so generous with your analysis and ideas. We all appreciate it. I look forward to having you on sometime soon. Everybody else who's tuning in, thanks for watching.
Thanks, Gary. See you soon.
I just want to direct everyone interested in the metals and mining sector to dive into our Substack at metalsanders.substack.com. Join our quickly growing community and receive a free report. It's titled, "If you don't own gold, you know neither history nor economics." That's a famous quote by investing legend Ray Dalio. And that's the name of the report you'll receive.