YouSaid · the spoken record

Mike McGlone

lines on the record: 62
first: 2022-11-10
most recent: 2022-11-10
sittings or episodes: 1
sources: podcast

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“Thanks, Jack. I'm on LinkedIn too, and I'm happy if people reach out and happy to ask Adam to my distribution list. And I'm looking forward to our next conversation.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Thanks so much I have to give a shout out this year to Ira Jersey. He's our chief rates strategist. He crushed it. He nailed it. He was right. We had some disagreements last year. I was way too early, still I'm too early, and he was right. And now he's calling for lower yields. So got to give credit to the hot hand he's nailed it this year. And I'm sticking, we're both agreeing. Also, my colleague Anna Wong, her quotes is 100% chance of recession in the U.S. And we're all kind of, you know, I think the term I learned from IRA was plausible deniability. I'm like, Ira, I'm happy to admit when I'm wrong because that's some of the best ways to get over and move on. Why were you wrong? What can we do to move on from that?”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Votes pushes against China jobs, some of the smartest people on the planet going into this space. And it's completely positive adopted the dollar as its base case. If the US messes up that up, only US can be blamed. I don't think we're just not that dumb.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“In those gears. And the thing is what's more significant is what happens to the stock market and the Fed. And the good news is this might help finally lower the plateau for all risk assets, notably commodities. As we're speaking real time, Crudell is one of the first markets to go down. I mean, it's just a risk asset. I mean, I remember you had a hedge fund. We didn't always come here about even the trading pits. You don't always compare about the fundamentals. What's that guy doing? Is he selling? Okay, why is he selling? Okay, I'll sell too. It's just the way markets work. So that's why I've seen the macro. And in terms of what you mentioned, my colleague wrote this article, but I think overall my bias remains the same as far as US regulation is the US will not mess this up. What does the space have? Money.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“TX was not as stalwart of a firm as we thought. Sand Bankman Fried, I went to the salt conference in the Bahamas. I think that was in March, and he was up on stage with Bill Clinton and Tony Blair. And it was quite profound. I guess that might have been his peak. That was quite the statement that this is in the space. Now that's being pushed away. So to me, this is part of the tide's gone out. We're seeing who's wearing clothes and cryptos are just the fastest, most unique space. And it's showing the weaknesses in all markets. And that's why I think it's triggering this hit your stops in all assets. If this fastest horse in the race, which looked like it was bottom, Ethereum still might hold around $1,000, but Bitcoin billing that base around $20,000 looks like it might go a little lower now. This is a big wrench in that.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Well, the good news is my colleague Nathan Dean based in Washington, D.C. just wrote a headline story about this. He said the Binance FTX deal will, I mean, may throw a wrench into new U.S. regulatory framework, and partly because FTX was very kind of U.S. centric and positive and obviously a big donator to U.S. political parties. And Binance is considered a little bit outside the US. But it's the key thing I pointed earlier. This space is so U.S. positive, particularly if trying to push in back, particularly with the space organically adopting dollar crypto dollars. People call them stale coins. But my colleague Nathan Dean wrote this, so he thinks it's a bit of a pushback. I can't do all the details now, but it was good timing to put it on. The key thing I look at is this deal is it really was a shock that F.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Dollar tokens, crypto dollars made possible by Ethereum and some other blockchains too, but you can't mess with that. Why join? Why just join it? Massacre and Visa R, and particularly as the US regulators and legislators are figuring it out that the world base for all currency is increasingly becoming the dollar, particularly through cryptos. The US is not going to mess it up. China and Russia have a problem with it, but the world's organically gone to this space through this technology with the dollar as the base layer. Bitcoin is kind of the gold, and Ethereum tokens, tracking crypto dollars is the major source of the transaction currency.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“EFTs exchange ETFs, exchange-rated funds. Sorry, I'm just a little brain fire there for a second. And it's just that rapidly into ECTEN technology. The key thing I like to point out from this space is getting to the end here is what is this space making happen? Bitcoin becoming global digital cloud in the world going the way, but look at Ethereum. I mean, it's made possible the most widely traded cryptos on the planets are...”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“So, first, to explain this chart, this is a lead, one of the best leading indicators that David Rosenberg. I'm a big fan of his pointed out and a Twitter is the prices paid for manufacturing PMI. It's a good leading indicator of inflation. It's plunging. I mean, it's below 50. That means prices are going negative. Yet the inflation measures are still very high. They're very much lagging. They measure things like owner's equivalent rent, which will plunge once housing prices plunge, which they started to do. It's just such a lagging factor. The thing about Bitcoin is it's really not a direct factor of Bitcoin. We don't have data going back far enough. So when people say like Bitcoin is not a good inflation hedge, okay, well, it's outperformed every single asset on the planet since its lifetime, and it's only been around for, what, 14 years. So that's kind of not long enough. You need a good 34.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Just importer on the planet. Now, the average cost of crude oil, the average cost to produce crude oil in this country is about $40 a barrel. I data only goes back to 2017, it was $70 a barrel back then. That's just rapidly advancing technology, creating more. We use less. And that's just a basic, the most significant commodity. Crypto is to me represent that rapidly advancing technology, particularly Bitcoin and Ethereum. But right now we're in that stage where, as I said earlier, GMTFO.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Yes, so I do. Ira has. I've been early. I've been wrong. But I do think this is going to be one of the most enduring, bullish bond market buy opportunities ever. Bitcoin, gold, and long bonds. I'll put that in the other order. Long bonds, gold and Bitcoin. I think Bitcoin's eventually going to break away from that risk on asset towards a risk-off asset like bonds and gold. And I think there'll be some of the best performing assets as we head to an enduring deflationary period. A lot of people are looking for stagflation. They would not do in a stagflation environment by fully discredit. I think it's very unlikely. That's way underestimating technology and what's been happening in the 10 years before COVID, which I don't think changed. And that's just technology is such a pressure factor for inflation. I like to use the example of, let's just look at the world's most significant commodity. Right now on the screens, it's $89 a barrel. The first time it traded that price was in 2007, 15 years ago. U.S.'s was the largest.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“That's what it always does. Futures markets are showing that what that shows you is short covering. It doesn't show you new bull market, new positions, enduring positions, people getting in and getting long. And so usually, that's just a rule I learned in the trading pits. It's not a healthy market when you see that. And you know where I see a healthy market? There's only one market, a significant market with pretty significant increasing listed futures open interest, and that's Bitcoin. Now, because if you measure from 2019, it's still very new and listed, but it's nowhere near the amount of open interest that trades off the listed exchanges, the crypto exchanges. But there, what I see there is what has been a good bounce in Brent that's more likely to go lower. And the white line is the open interest showing you that there's less and less participation, there's really not endorsement of these higher prices.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Is the open interest Oh, volatility. Bear markets always more volatile. Volatility. And also uncertainty. But what you see there is one thing that's never happened really in my timeframe in trading bull markets and bear markets and commodities almost always the mantra is when markets are trending particularly when they're trending higher futures open interest is always following or leading that that's what's different this year is you see that big drop that's just futures open interest for Brent crude the global benchmark it plunged last week now yes there was an absent there was an expiration a contract rolled over over we went from deast to jan but you know everybody knew that and so that's part of the reason i wrote that article that okay i think this is a sign 100's resistance is where i have a battle sometimes with the fundamental guys versus the technical guys i'm everything and that is just a sign to me of a market that's going to revert and go down hard as fast as it went up maybe faster that's not profound”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“But oftentimes you don't get enduring down markets until you flush out, you take out those shorts because that's the key thing that's been happening in U.S. stock market. Virtually everybody I speak to now a year ago was not bearish. And now everybody gets it. We're heading towards recession. The Fed's tighten. You got to sell rallies or you have structured positions that'll make money if you're short. So that position gets overloaded. That short position will create the bid. You got to flush them out and then you go down. It has to be as difficult as possible. Never one thing to remember about markets is if it's easy, something's wrong.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“That's one thing you remember about trading and being in a trading pitch is it's not, I love how funnel analyst analysts always try to explain each move. It's positions. The market was so short. I was pointing this out in crude oil and open interest dropped so much last week in Brent is because people were short. So it just triggered shorts. Sometimes you just need a trigger. That's hopium. Also remember sometimes a lot of people are out to support their own positions. If you can start a rumor to support your position and make money, I mean that never happens in cryptos. Just don't underestimate how people will try to manipulate things to make money, at least in the short term. The macro big picture is oftentimes it never forget this bear markets take money from everybody and the biggest rallies come in bear markets. They need to rip your face off. They make you lose your hair, ex-trader. And then they go back to the trend.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“I mean, it's not an open, there's no dialogue, it's when you the minute I'm ever reading this years ago, when Z came in and said, we're going to complete, you know, eliminate corruption, you know what that means. Anybody who disagrees you is gone So that's not just my view, that's his statement of view from the economists, most of our economic team. The property crisis was classic and how they're going to get out of it. Good luck. You can see the required reserve Rachel has been declining forever. Interest rates declining currency is starting to roll over. And it's just right now it's a cycle. I don't know, see what stops it. And what do they typically do? They're an export-driven economy. Where are they going to export? Europe, US, both heading towards recession. It's lose-lose-lose for asset prices.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Plateau, classic plateau. Getting from average per capita income around $3,000 to almost $30,000 plateau. And the system is completely shifted now. I mean, unemployment is picking up. Average, I think it was 20, Bloomberg New Energy Finance team pointed out there was 20% of automobile sales last year were EVs. I mean, they're not using as much petroleum, but it's also the peak system. The stuff we saw with the Soviet Union that collapsed, it didn't work out. The stuff we saw with the peak with the DK when it peaked around 40,000 in 1990. It's all just classic normal stuff, normal cyclical stuff. And in the bottom line is the leadership.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Do we've been pointing out this declining incremental demand for a while our economists are all point out VM maybe we'll get lucky maybe a change of leadership maybe a complete shift to a more capitalist system that can respond but there's no way I mean why do they steal intellectual property why don't they have vaccines because their system does not allow it it's all completely driven by one person now and one person more every day it's just not the not an engine of economic growth and demand pool for commodities that we saw last 20 years. So where's that demand pull coming from? Not the US, not Europe. I ask an open question.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“That's what Z has pointed out. Okay, fine. We'll move on. But that demand, the bottom line is the Communist Party in China pushed a billion people into poverty. And then pull them out. Dang was one of the main persons, took people, the average per capita income was $3,000 and it jumped up to $30,000. But getting to the same as Taiwan, which is around $55,000 per capita income, is a big hurdle now. Getting from $3 to $30, that was okay. It was just logical because people are just in poverty. But now it's the next stages. And it reminds me of a combination of the Soviet Union and collapses and peak Japan in 1990, all combined in one. And clearly the case is that China leadership is going more towards the model of North Korea than the model of Singapore. That's just a fact of what's happening. But it's also been over.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Potential enemy. And the key thing I think that really was the trigger this year when President Z cozed it up with Potent right before the war in support of the war, that was a key trigger for every single Western business to say we don't want to do anything with China. And they shouldn't. I mean, it's just a classic question from your six-year-old daughter if you're doing business in China. They get it. So that changed. That trend since the last 20 years is over. I think every company in this country that's doing business is trying to not do business and finding other ways for supply chain. And it's just their shift from global economic expansion to security.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Commodity prices and what stops that from happening? Maybe significant global economic expansion in Fed easing and central banks breaking off and providing tons of liquidity done is not happening. So I don't see any upside. Now covering from oversold, sure, you got to bounce that, you know, had the recent bounce in, I think we're showing which Chinese index is at MSCI China. Sure, we had a bounce recently, but what's going to save that other than the Chinese government? I mean, the whole world knows you can't invest there anymore. And that was a key thing that happened with the Trump wars in China. When we heard how Z traded the US as an enemy, I think anybody in the world who does business with China realized, okay, you're going to treat us as an enemy, fine. We can find other places to get labor cost-effectively. Remember the Makliadoros in Mexico, and we can use technology. We don't need to be dealing with an unreliable.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“What's going on? My Bloomberg intelligence team, the latest on Chinese property crisis, it needs to drop another 25%. It's very rare that we all kind of align as strategists. And this was a big issue I had. Starting in 2008, my signals for this, what's happening now started in 2008. And I'm sorry, 18. And I had some pushback from some of my fellow colleagues. They were right. I was too early. But now we're all aligned, almost completely, our jersey, our interest rate strategy specs yields have peaked. Our key Chinese strategies, Tom Orc, who wrote the book, The Bubble Never Pops that China says, it's popping. Our latest strategists point out that 25% correction. We are all aligned now that this is something significant. Yes, they might come out of COVID, but remember we have China as one person running that country. And that's the key thing. You look at that chart. What's the sore thumb?”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“That's part of the This gray chart you have shows the Chinese stock market in white relative to the Bloomberg commodity index in orange, and that 2001 to 2008, I mean, it just fits like a glove where China joins the World Trade Organization and China starts demanding tons of coal, oil, copper, as much as it can get its hands on huge commodity bull markets. And yeah, it remains somewhat correlated. Now this chart is showing that the Chinese stock market has collapsed, but commodities remain well bid, admittedly from a peak a few months ago. Yeah, tell us how bad you think the demand situation in China is. And then also, what do you see it going forward? Because if the demand situation is bad now, but it's at the bottom, demand is bottom, then it's pretty bullish for commodities. But yeah, I mean, how, you know, you speak to a lot of smart folks at the Bloomberg intelligence team who are very plugged into China. What's going on?”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, well, two years ago, we didn't even have vaccines. Now we do. Who didn't do that well? China. Why? Because their system doesn't allow it, and ours did, and just the checks and balances and the discourse we have allowed it to happen. Their system is one person tells everybody what to do more and more and every day. It's not shining more. It's Mr. Z. And that's part of the bear's case for commodities.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“China, the form of source of the biggest demand, is in a major property crisis, and its leaders becoming more and more dictatorship, more autocratic, which is pushing things backwards, is becoming more like the Mao dynasty or the Ming dynasty, and the Fed's tightening as we head towards recession. So that's where at this stage right now it's hopium. I just point out facts is acids probably have to go lower to reduce these inflation expectations. It wouldn't really push them all up. Remember, we had a good reason for inflation. We pumped so much liquidity in the system because of the fear of this plague pandemic. Plague sounds easier.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Measure there, but it's that what remember what got us here is going away. And that's the key thing to remember is the pump followed by the dump, and we're in the middle of the dump stage. The difference this time. And that chart's a pretty good one, I think. This is showing commodities going down in Fed rate hike expectations going up. That means, so commodities are going down because they're heading global economic growth, supplying demand, elasticity is pushing them lower. They got too expensive. Despite that, the Fed is actually increasing tightening. That's just not happened in our lifetimes. It's not happened. I think I went back in the 70s, early 70s, a few cases.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Bloomberg Mod Index. That's all 24 commodities in the Bloomberg Commodity Nix on average. Most backward data ever rolling over at the same time prices and CPI were. And then you see typically it's in container. The average container for Bloomberg commodity index is around 2 to 3 percent. That means on average it's going to cost you actually four to five percent to hold Bloomberg commodities over time. You can't get over the storage. That's the key thing to remember about commodities other than gold. That's where Bitcoin is really attractive. There's no cost of storage. But that's what you see in the chart. And I fully expect we're going to go down as fast as we went up. And why shouldn't we? Here's one reason we should, and that is because I'm not showing on this chart, but we've had the biggest pump in liquidity ever. Money supply in US dumped 40%. Now it's collapsing. Global money supply is actually down almost 5% on a five-year basis. It's the lowest in our measure in a long time. You see some of that.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Because, well, the reason I published it on a few months ago, and it's one of those things that I deliberately take the risk of being very early, because this is what I see coming, and I don't think the market sees it yet. It's made me lose my hair, but that's my job. You need to look forward to this. I mean, I was pointing out in 2019 the potential that we're going to get to that point where unleaded gas is going to get too expensive and do what it did before create the demand destruction way too early. And this chart, which you might be bringing, there you go. This one I actually published on this a few months ago, and I just reiterated and republished it because, hey, it's one of those things I have to, when I get things wrong, I try to, you know, not repeat it. When I get it right, I want to, you know, and it's going that way. I want to remind and see where it's going, what it matters. When you get things wrong, you have to think out as a trader. Stop yourself out, move on. What does it mean and try to readjust? In this case, what you see there is the most backward.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Part of that trigger that flips commodities back to what they always do. They're one of the most mean reverting assets on the planet because of supply and demand elasticity. Like I said, why is crude oil right now the same price as 2007? It's got as high as 145. It's got as high as low as negative 30. And here we are back. We just fluctuate. It's just trying to measure that pendulum. And streams in backgradation container are sometimes good ways to help try to pick tops or pick bottoms, which is kind of my job. Where's the extremes? Where's the extreme of that bell curve of trading? And right now we're kind of near the apex. I think the apex is going a little bit. Actually, the apex of the bell curve of trading since 2015 has been $50 a barrel. That's the highest volume traded price. That's what I look at is where's the bell curve trading? And then you look at the wings and try to determine we got to a pretty good wing this year. We got to a really low wing two years ago. Got to a really high wing this year.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“When people talk about When you're running up in prices into backgradation, that's your bullish sign. But typically, as I point out, when you get to an extreme in vacation, which we did this year, Bloomberg Commodity Index, I think it was the most backgradated ever if you took an average of all the prices. Crude oil is like the most backgraded in 20 years. Natural gas is pretty backgrated. When you get to those extremes, that's the trigger. And that was what I started writing about a few months ago. Yeah, it was early, but that's my job in Berlin. My job is to think a year ahead minimum. And right now, think about next few months. Because as we speak, Bitcoin just broke below $1,800. But yeah, so that's the key thing. I mean, Dennis Garman used to never say Dennis Garman is a really astute commodity researcher. I read his stuff forever. I know him. He's a friend. But he used to say never sell backgraded market. I like to point out here's how I can sell where backward.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“So, the key thing, remember, backwardation is not normal. There used to be this narrative called the normal background. Well, that maybe was before commodity indices came out and ruined that. But the key thing to remember is Kentango is normal. When you have the current price at, say, $100 a barrel and the price a year from now at $106 a barrel, that represent what it cost to store that and to finance it. That is normal. And that's not a prediction of higher price. But when you have backgradation, particularly when you get very extreme backgradation, which we saw this year, very often it's a sign of peak prices. And I've pointed this out a lot. This happens a lot in natural gas. It's clearly happening in crude.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“And even selling forward a year or two in the futures curve, you can do that lack in profits and be very profitable. So don't ever ignore the rules of Adam Smith and free markets. And that's the lesson I learned from being told that crude oil supply peaked. And that's the lessons the Malthusians got wrong.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“That's the key thing. Dislike the lessons we learned in too much liquidity, prices, too much inflation, too much pushing back on free markets and fossil fuels and the ability to drill and create fossil fuels and just to keep ourselves from dying in the winter is pushing back a little. And that's why you're going to see a major push towards Republicans and drill at will and back to those steps. So just don't forget there's hundreds of independent oil companies most notably in this country. And they just want to make money obviously within laws and within environmental constrictions. And prices on the screen right now will allow them to be very profitable.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“It works in the short term, but I do enjoy that narrative. Oh, Mike, enjoy, completely ignore those rules of free markets and Adam Smith, and I won't. It's just a simple fact, is once you get that heating oil bill, that's three times the price from the year before and what's happening in Europe, you go say, okay, yeah, fine, so much for global warming. We might have to lay low a little bit. And yes, technology will help that, but we kind of need some fossil fuels. And we can do it here cheaply like the, you know, by the time we air this, I think one of the key races will be the governor's race in the state of New York. And one of the issues is maybe we can open up our land to natural gas and drilling and fracking and pipelines because we're sounding like Europe and they have a problem. And by the way, there's a war on and just opening up some of our natural resources might prevent a lot of people from dying and starving and freezing. We're at that stage now.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“And don't worry about like they would have a similar outlook to it in growth tech now where it's like profit don't worry about profit. It's all about growth and now the narrative has shifted and the priorities of hydrocarbon exploration companies are on profitability rather than growth and that that will as a result the supply will be more inelastic. In other words, when the prices of oil is at $120 companies could double their production from year to year, now they wouldn't be so quick to do so because they're more conservative. So it sounds like you think that there's something to that narrative, but you're not entirely convinced.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“And how so the ESG narrative, the bullish case for oil based on the ESG narrative, is that many investors are investing in funds that will not touch oil, natural gas, let alone coal, anything, in some cases not even nuclear. And as a result, maybe Exxon has enough money to drill a well, but any oil company that's needs to get bank funding or issue stock is going to have a really tough time to do so so that investors are looking for shareholder discipline. So they're looking to get some dividends, some buybacks instead of using it for exploration. When you were working at S&P, the 2009 to 2013, that period was marked by money from private equity. We're going to get money from Wall Street. And we are going to get as much natural gas and oil out of this we can possibly can.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“To produce a barrel of crude oil is about a half as much as you see on the screen. So, sure, in the short term, you're going to see limits because of EST and some of these silly things from the Biden administration limitability for people to drill and then complaining why they won't drill. But from the farm background, when you own land, you find ways to produce crude oil. The problem is it's also the macroeconomic. Right now, demand destruction is overwhelming. And that's just kicking in.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, so global crude oil demand has been rising, as you'd expect, but at a declining pace for quite a while. And this is something I pointed out in China, global GDP. And yes, part of when you have emerging markets, sure, they're going to shift more from riding and walking and ox carts and bicycles to motor vehicles. But that incremental demand has been declining at a greater pace than supply. Now, the key thing is, yes, we're at a bit of a bottleneck this year. People point out how supply is not coming back on because ESG, things like that and stuff, but it kind of misses out the major rules of Adam Smith and the free market hand, and that's I'll point out the fact is right now in the world's largest producer of crude oil, which is the US, include Canada, it's a massive surplus, US and Canada versus production versus consumption. The price”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“So we have in the US. So here's one thing I enjoy about maybe having used to have when I used to have hair. I was running commodities at SP 2000, what was it, I think 7 through 12. And I remember the narrative back through like the big run up before the clunge in 2008 was peak supply. You know what peak? U.S. liquid fuel consumption peaked in 2005. Now it bounced up a little bit, but it's been declining regularly since on the back of one key fact efficiency and demographic shifts. Now we have this major shift towards EV. I have an EV. I ride my electric bike to work. I had solar panels in my house. It's early days. The rest of the world, yes, India and China are catching it, but China is switching EVs really fast.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Bitcoin and Ethereum have definable, diminishing supply, and there have increasing demand and adoption. Something has to change. It can't change the supply because it's by code and certainly with the upgrade to Ethereum, but you can change the adoption and demand. And I don't think that's going to increase. So by definition, price must go up over time. Prices will continue to go back up. It's just question of when that happens. Right now we're in that GM3FO stage.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Towards recession. So that's just part of the narrative. That's just one of those sore thumbs I look at and I see, well, there's a problem that should go down. And I look at Bitcoin. Bitcoin is quite low now relatively. It's just a question where that bottoms and goes back to then during upward trend. That's the key difference. So the key thing I like to point out is elasticity of supply and demand. Inversely, all commodities, there's this factor of elasticity. Prices go up. You create more of it. You use less of it. Now, I come from a farm background. I own farms actually from Chicago, but just always had access to farms and farmers. And that's the key thing you learn there is, you know, and prices really will dictate what you plant and when and where. That elasticity of supply and demand is very much of a pressure factor for commodities, most notably crude oil. As you pointed out, it should be much higher on justice basis. But it's not the case in the two key cryptos.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“I think globally, yes. Can't really trust China. Europe, clearly, US not. We're kind of bouncing around, but we're clearly heading there. And would you describe about crude oil as that massive deflationary force of the world's most significant commodity? And yes, an inflation dust and basis, CPI or PPI should be much higher. And that's what I'd like to point out to people. This is a bear market that just bounced. The peak was 145 in July 2008. The peak this year was 130. That's a lower price, but no one's 14 years later, and we use, you know, it's more significant. And the peak, the bottom is probably going to be, who knows where, but I think it's going to be similar to past bottoms. It has to get cheap. The point is if it doesn't, it's going to accelerate this process of the world tilt.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Do, and it's just classic. Classic historic pomp, then dump, boom, then bust. They always come on the back of too much liquidity that's taken away. I just recently read the book. Just as a reminder of stuff I've known anyhow. And a key question I ask myself is what stops this? And the number one thing you need to see first of all is lower plateau. And we know once markets really get oversold and they're clearly just going lower orderly, at least to see the Fed to start pumping liquidity and they're nowhere near that. But typically the problem is at this stage all that really matters from those of us who talk about running money is risk assets probably have to go lower. I don't see what's saved to them.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Indicat I think by this time next year our narrative when we have this conversation Jack will be talking about enduring deflation when is the Fed going to ease how much they're going to ease if we can ever you know when's the uptick in unemployment going to stop and how are we going to save this but we still might have you know high inflation numbers the key thing is the key bottom line at this stage is the leading indicators of markets should kick in and by the end of this year if we get through this phase and compared to where we are right now the S&P 500 at 3800 if it's higher and then Nasdaq at 1100 amen that would be wonderful it's very unlikely they can drop another 20% that's not me saying that's a fed I mean if and if they don't drop that's going to keep tightening it's just that's the lose lose now so far as how long it's going to take this is part of to me the enduring period of more of an economic growth they're way over”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“But to me, that's the problem, and that's what's changed, since I've been in the trading pit since the 80s, the Fed's not here to save you anymore. When things get bad, at least for now, but we're not into the bad stage yet. We need to have, as I heard one economist say we need to have maybe a good year of average non-farm payrolls dropping 100,000 a month, you know, we start losing jobs. And unfortunately, the Fed has made that clear. We need pain. And this is just the beginning.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Rate strategies, Iris Jersey, who has been spot on this year, who does think yields have peaked and are going lower. Didn't say that about rates. There's a big difference between bond yields and rates. He thinks that these expectations of lower rates in the future are a little bit optimistic. I don't disagree with Ira, but I think what's going to happen is the market's going to force the Fed with deflationary tendencies, plunging commodities, unemployment. lower stock market and lower assets that the federal say, oh, well, these are deflationary forces in a leading way versus the problem is CPI and all the measures and PPR are all lagging. The leading measures are breaking down hard. Just look at housing, five-year, five-year forwards, the curve, unleaded gas demand, everything is pointing to missing link is still commodities are still expensive.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“That's part of my base case for this global enduring long dated global economic contraction that's going to be the worst of our lifetimes because the ease of easing we've seen from the Fed since the 1987 stock market crash and most notably since the financial crisis is over. We've learned the lessons of too much liquidity and inflation. And that's not going to happen. So the next time we hear people like Kramer jumping on TV and saying, offense got to do something. The Fed will say, sorry, we learned that lesson. We will not be easing until whites are the eyes of deflation is clear. Norio Rominia says they're going to wimp out. I agree with them, but I like Fed funds futures. I used to trade these in the pits. I see Fed fund futures for right now. It's 4%. You look at no decent next year. It's just the peak is around 5% around July. And then it looks like they're supposed to be declining to 2024. Now our chief.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Right, Mike, if you look at the forward interest rate curve, so right now on November 8th after last week's FOMC meeting, interest rates are basically at 4%. 4% is the ceiling for rates. The forward projection implies that by spring of next year in 2023, the highest we'll get to is maybe 5%, maybe 25%, but that it's not going to interest rates are not going to crash back to zero. By 2024 or 2025, interest rates will still be in the mid to high 4%. In other words, higher for longer. That's the sort of short way to put it. Do you buy higher for longer or do you think that if this, we have this steep global recession, that the Fed will eventually need to cut if we have a deflationary recession?”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“And that's what we're facing as we head towards the end of this year. And with Bitcoin breaking down and with more problems showing up in cryptos, which we oftentimes see in markets that get overleveraged, that's just indication of everything, the whole dominoes trickling down and just crypto's a leading indicator. So the key question is, how do we get out of this? Right now, I don't know. But in the bigger picture, I have to always end in a pause and note. The way I see this in the macro is we're going to look back at this. Finally, we're out of those days where every time the stock market was down 20%, you had to be bullish because the Fed was there to save you. And the only thing that mattered was the Fed. We're going to go back to those good old days for an enduring period where good news will be good news and bad news will be bad news. We're still in that period like, oh boy, if, you know, unemployment comes out weaker than expected. We're not losing enough jobs, then that's bad. It's just part of the reset.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT
“Because it's making the world say, Oh, we don't need it anymore. We're in the biggest retooling of automotive manufacturers ever towards EVs. But the key thing to remember is the world's most significant demand importer of crude oil 10 years ago. The US is now a net exporter of energy, LNG, and a major competitor to OPEC. We used to be a customer. So that's what's shifted in the world. And it's just one of those things that takes a while. But right now, I think the bottom line, my base case is I think we are in the midst of one of the biggest global economic resets of our lifetimes. It's just getting started. It happened on the back of the biggest pump in liquidity, on the back of a hundred year plague. Now we're in the biggest dump in liquidity. And there's no signs of that stopping at the moment until we reach a lower plateau and something at least makes the Fed stop tightening. No, we're even near that. That's the problem.”
2022-11-10 · Forward Guidance · Commodity Prices Are Due For A Severe Correction, Says Mike McGlone · IDENTIFIED FROM THE TRANSCRIPT