Grizzle’s Post

Transcript

War and brother welcome, great to see you. Thank you. Thank you for starting the marathon. You always great with this stuff. You run so fast. You set the pace. You set the pace. Yeah, your stamina is incredible, man. Six hours is man. Hats off to you. Absolutely. 10 AM, 44 PM doesn't matter. Got it. First off, 1, thank you so much for always you always starting this off right. Warren 314 research shock collar as a commodity shot caller, it doesn't get more elite than 314. Heading into 2024, your outlook for oil was a wide range bound market. That's what we got. And a bullish gold tape clocking through 2500, that's what we got. Let's first tackle oil. We entered the we entered 2024 at $70.00 per barrel. Strategist. Strategists were uniformly bullish. As they always are. And that's why we, that's why we lean on 3/14 a ton because you, you bring that balance to two oil outlooks. So you guys foresaw the highball, the others couldn't. Could you take us through the framework of analyzing oil, right? Because I think that's very different than others because you really do take a balanced view. Yeah, absolutely. Um, coming into the year, our view was that to be very specific, yeah, we saw a way a wide range. We thought oil would top out around 90. We saw that as a soft ceiling. You go back and check the tape on that, we saw that as a soft ceiling that we would hit at the end of Q1. And the other, the downside of that range, we thought we could get as low as below 60 on Brent by the around this time of the year. So in this last month of the year, we thought would be pretty, pretty rough. For oil, that was our outlook. But like always at 3:14, we try to lean on models and indicators and stay objective, let the data guide us. And so that was the framework we used to be bullish entering the year was that we saw there's so much hedge fund short positioning in the market. OPEC, the the deal that all the emergency cuts over in place was were still in place. And that's kind of what I think is the big issue in 2025 is how that comes back. And so our view is just very basic meat. Potatoes, you know, the market was in a was in a deficit, a prompt deficit. We saw that through backwardation. We thought the economic recovery would continue. So you'd see a a decent demand recovery year. We got decent demand recovery, throw in some geopolitical risk and that's kind of how we got to that 90 number at the end of Q1. But since that time, it's really going back to June with OPEC coming together and saying, look, we need to get this oil back onto the market. So they basically said starting in October, we're gonna, we're gonna put roughly 200,000 barrels per day increase every month starting in October. And that has been the, the, the real issue the, the dark cloud hanging over the market in the, in the months since that. So for the second-half of the year, and I still think that's. Just to give you a little bit, I know you only asked to say what's the framework going forward, but to me that's the big, big issue that we have to deal with in 2025. Fantastic. And so with respect to demand, Warren, you know, I think this is kind of one of those interesting bits where where we're seeing China, you know, it's, it's really softening. Maybe you want to talk about the structural outlook because this is critical, right? How do we think about China? Is it a clean baton handoff to India? Like how, how should investors think about this because that's clearly an area of concern. Yeah, I think the demand is, uh, well, the problem with with China is something we talked about before is you have so much EV adoption and penetration there, which has taken an edge off demand. So if there was on the demand side, I think everyone's kind of been waiting for China demand to resume the linear just path that it was on pre COVID and we haven't seen that just hasn't come back as strongly. And so it is, it is increasing, but again, it's just, it's been tepid. And that's what got OPEC, I think wrong footed really is 2 things. Number one, I think that OPEC increased production after the Russia, Ukraine war kicked off. And I think almost everybody expected to see more declines out of Russian production back following that. And we haven't really, really seen that. And then you also OPEC also expected to see China demand come through and bail them out because of the EV adoption and really just structural changes that you're referencing, we haven't gotten that. So now what? We have going to to 2025 is a situation where I think it's really dangerous for for people who want to be long oil. Now, I'm not a person that says oil dead. It's like my it's my background. It's my, you know, starting point for my career. But I mean, like you said, I have to call it how I see it and I think it's going to be a rough. What Warren like that's that's, you know, we've always respected that. And I'll be honest, you know, like, you know, we're you know, we're you you've nailed it. We've really leveraged that view it. We're gonna make this super interactive. Got guys on YouTube asking questions. So Owen Anderson, how Warren, how does your framework account or your oil framework account for geopolitical risks? See, you know, is there a way you think about, you know, mixing that in the framework? Yeah. I mean our, our, our model has physical market indicators that inventory indicators, futures positioning and technicals, those are 4 broad categories. So you don't see geopolitical risk expressly listed there. So I, I always say, and this goes for every market that I, we, we build conviction on fundamentals and we manage risk on technicals at 314 Research. And so that technical component of the oil models where geopolitical stuff, quote UN quote shows up in my opinion. So you see it through price. If if price is starting to behave in a bullish way due to a geopolitical issue, then you know, we will we'll see that through that part of the model. And but what I would say is this is that if you go back through the history of geopolitics, most of those spikes are fades. You fade those spikes because it's in less, there's a actual hit to supply, which is like maybe one out of every 10. Geopolitical spikes is actually something that you get a supply reduction you, you just fade it and that's, that's kind of so and that's how you with that is built into the technical component of the models. There's some mean reverting factors that show up in those in those issues in those periods. Great sage insight right there. With respect to gold, again, you know this top 2, these are the top 2 commodities. You nailed them both for 2024 gold absolutely got it on how, how are you positioned heading into 2025? How do you think about the Fed and you know, global central banks and, and you know, get what, what would it be as good of a year as 2024? Uh, I don't think it's going to be as good, but I still bullish on gold. You know, we, we thought that gold would get blow past 2500. It did in 20 in 2024. I think we're getting easily get to 3000. I do believe that we've entered into a new secular bull market. These bull markets, if you study them historically, gold becomes like a, a, a must have fixture in balanced portfolios. That's the message of history. Like if you go through the whole history. There are a lot of periods where gold's kind of dead money, but once you enter one of these secular bowls, which I think we have, you know, pro cyclical deficits unlike anything we've ever seen, so many different issues coming to a head globally. I think you need a debasement asset like gold to be in your portfolio. The only thing, the only fly in the ointment to me, which I know you're gonna ask me about for gold is is the competition it's getting from Bitcoin. I do think they fight for the same spot and portfolios. And so it's the it's the one reason why you. Might hear a little bit more hesitation in my voice versus last year when, uh, when I'm, I'm forecasting gold for 2025 yeah when I, I gotta kind of hit on that because that's actually like, let's talk about the biggest difference when you think about that competitive landscape is these plethora of ETS and they blow them by 60 billion Like this is legit. Like, you know, I'm just thinking big picture, you know? You come into your advisor and now he's gotta before I'd be like 2% put it in GLD and now he's like, well, why don't do 5050? I'm just not sure on a big level do central banks just kind of clips all that stuff like maybe just how you guys are thinking about that competition, so to speak. Yeah, I think that, uh, that for the most part, you know, central banks are, are going to tend towards gold in my view. But and we've seen central bank buying was really the first leg of this bull market. But I think at this point we're starting to see GLD flows and things like that. Like that was that baton handoff was, was taking place and then now, you know, Bitcoin has just blown up obviously. And so with all of the new adoption of ETFs, I think it's safe to say Bitcoin it's, it is now. Becoming, it's, we're right here in the midst of it becoming an institutional asset. Institutional asset means that advisors, the risk is not owning Bitcoin, the risk is not owning it. So like before it was, I'm afraid to touch this thing because there's downside risk and now I'm going to underperform if I don't own it. And so once you start plugging into 1% allocation and all these portfolios, yeah, it starts to crowd things out. And I think gold's going to be one of those assets that, you know, it takes a little bit of the edge. Of this secular bull doesn't make me negative on gold, I just think that it could be a little bit less than previous secular bowls. Well, like in, you know, there's this aspect of Bitcoin that's kind of funny, right, Where you get things like kerosene, like micro strategy that simply don't exist. Yeah, there's not a good goal. It's it's fascinating, right? Yeah, I mean the new the the younger generation that's just getting into investing, they probably think gold is just boring. Don't get it, you know, so there is a generational divide, you know, but I don't think I think that the younger generations winning. Honestly, me and me personally, I'm partial to gold. If you're looking at My Portfolio would probably be more I would I would have more more space for gold than Bitcoin, but I also would have some Bitcoin very a small allocation there as well. So I mean, I get it. I'm I'm probably more of a boomer in that way, but the the young kids just doesn't. Like it goes not doing anything for them, you know, they, they, they want the, they want the real games. Yeah, exactly. The and the kids wouldn't even know what to do if you told them go pump gold. They were like what? You know, they would know how to pump those back. Yeah. What do I, what do I say? Bitcoin that's like that, that's a tried and true pump man. They they know how to push that. Yeah, for sure, for sure. My just real quick Thanksgiving last week. Now this is a sentiment check for Bitcoin. My 11 year old son announced that the Thanksgiving dinner table Dad the best investment in my mind he said, dad, I think the best investment is crypto because it never goes down and I was like. Well, you know what it's better to be a bag holder young. I always believe that. I just believe like, you know, it's like you just need to take all you take a loss once in awhile and then and then you kind of you just you you know what risk assets are, but I'm like. I totally encouraged him like I'm like, look, because he's been the, the kids all know This is why I do so they all want to invest and learn to invest. So I teach them like just basic stuff like how to read a chart, all the basics and give him a little bit some paper trading accounts and let them blow it up, you know, and maybe even a little bit of real money. Let them blow it up. The best tuition you can spend is that that money you lose when you're young in the market.